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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
CATHERINES STORES CORPORATION
(Name of Subject Company)
ROSE MERGER SUB, INC.
CHARMING SHOPPES, INC.
(Bidders)
COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
-----------------------
14916F100
(Cusip Number)
Colin D. Stern, Esq.
450 Winks Lane
Bensalem, PA 19020
Telephone: 215-245-9100
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
Copies to:
Dennis S. Hersch, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
CALCULATION OF FILING FEE
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Transaction valuation* Amount of filing fee**
- --------------------------------------- ----------------------------------
$166,023,480 $33,205
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* Estimated solely for the purpose of determining the registration fee.
Based upon $21.00 cash per share for 7,905,880 shares on a fully-diluted
basis as of November 17, 1999 (includes 3,400 shares that may be issued
under Catherines Stores Corporation's Employee Stock Purchase Plan).
** The amount of the filing fee, calculated in accordance with Rule 0-11 of
the Securities Exchange Act of 1934, as amended, equals 1/50 of one
percent of the aggregate of the cash offered by the bidders.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
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<PAGE>
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CUSIP No. 14916F100
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1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Rose Merger Sub, Inc.
I.R.S. Employer Identification No.23-3021034
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Tennessee
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
None
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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<PAGE>
- ------------------------
CUSIP No. 14916F100
- ------------------------
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Charming Shoppes, Inc.
I.R.S. Employer Identification No. 23-1721355
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Pennsylvania
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
None
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
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10 TYPE OF REPORTING PERSON
CO
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<PAGE>
Item l. Security and Subject Company
(a) The name of the subject company is Catherines Stores Corporation, a
Tennessee corporation (the "Company"), and the address of its principal
executive offices is 3742 Lamar Avenue, Memphis, Tennessee 38118.
(b) This Statement relates to the offer by Rose Merger Sub, Inc., a
Tennessee corporation ("Purchaser") and a wholly owned subsidiary of Charming
Shoppes, Inc., a Pennsylvania corporation ("Parent"), to purchase all
outstanding shares of Common Stock, $0.01 par value (the "Shares"), of the
Company at $21.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(l) and (a)(2) (which are herein collectively
referred to as the "Offer"). The information set forth in the introduction to
the Offer to Purchase (the "Introduction") is incorporated herein by reference.
(c) The information set forth in Section 6 "Price Range of Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d), (g) This Statement is filed by Purchaser. The information set
forth in the Introduction, Section 8 "Certain Information Concerning Purchaser
and Parent" and Schedule I of the Offer to Purchase is incorporated herein by
reference.
(e)-(f) Except as set forth in the paragraph below, neither Purchaser nor
Parent, nor, to the best knowledge of Purchaser or Parent, any of the persons
listed in Schedule I of the Offer to Purchase, has during the last five years
(i) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
In February 1997, Jo-Ann Stores, Inc. (formerly Fabri-Centers of America,
Inc.) ("Jo-Ann Stores") reached a settlement with the Securities and Exchange
Commission (the "Commission"), without admitting or denying the allegations,
concerning alleged violations of the securities laws primarily in connection
with certain inventory reserve estimates in Jo-Ann Stores' 1992 financial
statements and their use in a 1992 securities offering. Concurrently, Mr.
Rosskamm, a director of Parent and Chairman of the Board of Directors,
President and Chief Executive Officer of Jo-Ann Stores, consented to a separate
Commission administrative cease and desist order against violations of the
federal securities laws, without admitting or denying the Commission's
allegations. The Commission contended that Mr. Rosskamm violated certain
federal securities laws in connection with the 1992 offering by not making
adequate inquiries of his financial staff before signing representation letters
to Jo-Ann Stores' auditors and by signing a Quarterly Report on Form 10-Q which
was filed following the offering.
Item 3. Past Contacts, Transactions or Negotiations with the Subject
Company.
(a)-(b) The information set forth in the Introduction, Section 8 "Certain
Information Concerning Purchaser and Parent", Section l0 "Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company" and
Section 11 "The Merger Agreement; Other Arrangements" of the Offer to Purchase
is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in Section 9 "Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
<PAGE>
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Purchaser.
(a)-(e) The information set forth in the Introduction and Section 12
"Purpose of the Offer; Plans for the Company" of the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth in Section 13 "Effect of the Offer on
the Market for the Shares; Stock Exchange Listing(s); Registration Under the
Exchange Act" of the Offer to Purchase is incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the Introduction, Section 8 "Certain
Information Concerning Purchaser and Parent" and Schedule I of the Offer to
Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships
with Respect to the Subject Company's Securities.
The information set forth in the Introduction, Section 8 "Certain
Information Concerning Purchaser and Parent", Section 10 "Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company" and
Section 11 "The Merger Agreement; Other Arrangements" of the Offer to Purchase
is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in Section 18 "Fees and Expenses" of the Offer
to Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Purchasers.
The information set forth in Section 8 "Certain Information Concerning
Purchaser and Parent" of the Offer to Purchase is incorporated herein by
reference.
Item 10. Additional Information.
(a) None.
(b)-(c) The information set forth in Section 17 "Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 13 "Effect of the Offer on the
Market for the Shares; Stock Exchange Listing(s); Registration under the
Exchange Act" of the Offer to Purchase is incorporated herein by reference.
(e) The information set forth in the Introduction and Section 17 "Certain
Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated
herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
Item 11. Material to be Filed as Exhibits.
(a)(l) Offer to Purchase dated November 19, 1999.
(a)(2) Letter of Transmittal.
<PAGE>
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Text of press release issued by Parent dated November 15, 1999.
(a)(8) Summary advertisement as published in The Wall Street Journal on
November 19, 1999.
(b) None.
(c)(1) Agreement and Plan of Merger dated as of November 15, 1999 by
and among the Company, Parent and Purchaser.
(c)(2) Confidentiality Agreement dated as of October 12, 1999 between Parent
and Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 19, 1999
CHARMING SHOPPES, INC.
By: /s/ Eric M. Specter
--------------------------------------
Name: Eric M. Specter
Title: Executive Vice President and
Chief Financial Officer
ROSE MERGER SUB, INC.
By: /s/ Eric M. Specter
--------------------------------------
Name: Eric M. Specter
Title: President
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Catherines Stores Corporation
at
$21.00 Net Per Share
by
Rose Merger Sub, Inc.
a wholly owned subsidiary
of
Charming Shoppes, Inc.
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THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON THURSDAY, JANUARY 6, 2000, UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES") OF CATHERINES
STORES CORPORATION (THE "COMPANY") WHICH, TOGETHER WITH THE SHARES THEN OWNED
BY ROSE MERGER SUB, INC., A WHOLLY OWNED SUBSIDIARY OF CHARMING SHOPPES, INC.
(THE "PARENT"), AND PARENT WOULD REPRESENT AT LEAST A MAJORITY OF THE TOTAL
NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS AND (2) ANY WAITING
PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED, HAVING EXPIRED OR TERMINATED.
-----------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER AND MERGER,
DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS TENDER THEIR SHARES PURSUANT TO THE OFFER.
-----------------------
Any shareholder desiring to tender Shares should either (1) complete and
sign the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it with the
certificate(s) representing tendered Shares and all other required documents to
the Depositary or tender such Shares pursuant to the procedures for book-entry
transfer set forth in Section 3 or (2) request his or her broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him or her. A shareholder having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
person if he or she desires to tender such Shares.
Any shareholder who desires to tender Shares and cannot deliver such
Shares and all other required documents to the Depositary by the expiration of
the Offer or who cannot comply with the procedures for book-entry transfer on a
timely basis must tender such Shares pursuant to the guaranteed delivery
procedure set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent, brokers, dealers,
commercial banks or trust companies.
-----------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (Call Collect)
November 19, 1999
<PAGE>
-----------------------
TABLE OF CONTENTS
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Page
----
1. Terms of the Offer; Expiration Date......................................2
2. Acceptance for Payment and Payment.......................................3
3. Procedure for Tendering Shares...........................................3
4. Withdrawal Rights........................................................5
5. Certain Tax Considerations...............................................6
6. Price Range of Shares; Dividends.........................................7
7. Certain Information Concerning the Company...............................7
8. Certain Information Concerning Purchaser and Parent......................9
9. Source and Amount of Funds..............................................11
10. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company.........................................11
11. The Merger Agreement; Other Agreements..................................13
12. Purpose of the Offer; Plans for the Company.............................23
13. Effect of the Offer on the Market for the Shares;
Stock Exchange Listing(s); Registration
under the Exchange Act................................................24
14. Dividends and Distributions.............................................25
15. Extension of Tender Period; Termination; Amendment......................25
16. Certain Conditions of the Offer.........................................26
17. Certain Legal Matters; Regulatory Approvals.............................28
18. Fees and Expenses.......................................................29
19. Miscellaneous...........................................................29
Schedule I Directors and Executive Officers of Parent
<PAGE>
To the Holders of Common Stock of
CATHERINES STORES CORPORATION:
INTRODUCTION
Rose Merger Sub, Inc., a Tennessee corporation ("Purchaser") and a
wholly-owned subsidiary of Charming Shoppes, Inc., a Pennsylvania corporation
("Parent"), hereby offers to purchase all outstanding shares of Common Stock,
$0.01 par value (the "Shares"), of Catherines Stores Corporation, a Tennessee
corporation (the "Company"), at $21.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute
the "Offer"). Tendering shareholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
Purchaser will pay all charges and expenses of Lazard Freres & Co. LLC (the
"Dealer Manager" or "Lazard Freres"), ChaseMellon Shareholder Services, L.L.C.
(the "Depositary") and Georgeson Shareholder Communications Inc. (the
"Information Agent") incurred in connection with the Offer. See Section 18.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER AND THE
MERGER, DETERMINED THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS TENDER THEIR SHARES PURSUANT TO THE OFFER.
J.C. BRADFORD & CO., LLC ("J.C. BRADFORD"), FINANCIAL ADVISOR TO THE
COMPANY, HAS DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN
OPINION TO THE EFFECT THAT, AS OF NOVEMBER 12, 1999, THE $21.00 IN CASH TO BE
RECEIVED BY THE HOLDERS OF SHARES IN THE OFFER AND THE MERGER IS FAIR TO SUCH
HOLDERS FROM A FINANCIAL POINT OF VIEW. THE FULL TEXT OF THE WRITTEN OPINION OF
J.C. BRADFORD CONTAINING THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE
SCOPE OF THE REVIEW UNDERTAKEN IN RENDERING SUCH OPINION AS WELL AS THE
LIMITATIONS OF SUCH OPINION IS INCLUDED WITH THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING MAILED
TO SHAREHOLDERS CONCURRENTLY HEREWITH. SHAREHOLDERS ARE URGED TO READ THE FULL
TEXT OF SUCH OPINION IN CONJUNCTION WITH THIS OFFER.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the Expiration Date (as hereinafter
defined) a number of Shares which, together with the Shares then owned by
Purchaser and Parent, would represent at least a majority of the total number
of outstanding Shares on a fully diluted basis (the "Minimum Tender Condition")
and (2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), having expired or terminated.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of November 15, 1999 (the "Merger Agreement") among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things and in accordance
with the applicable provisions of the Tennessee Business Corporation Act
("Tennessee Law"), that as soon as practicable after the consummation of the
Offer, Purchaser will be merged with and into the Company (the "Merger"), with
the Company continuing as the surviving corporation (the "Surviving
Corporation"). Pursuant to the Merger, each outstanding Share (other than
Shares held by the Company as treasury stock and Shares held by Parent or any
subsidiary) will be converted into a right to receive $21.00 in cash or any
higher price per Share that may be paid in the Offer, without interest. See
Section 11.
According to the Company, as of the close of business on November 17,
1999, there were outstanding 6,821,196 Shares and options to purchase 1,081,284
Shares. Based upon the foregoing, there were approximately 7,902,480 Shares
outstanding on a fully diluted basis. Neither Parent nor Purchaser nor any
person listed on
<PAGE>
Schedule I beneficially owns any Shares. Accordingly, Purchaser believes that
the Minimum Tender Condition would be satisfied if approximately 3,951,241
Shares are validly tendered pursuant to the Offer and not withdrawn.
Under Tennessee Law, if Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the outstanding Shares, Purchaser will be able to
effect the Merger without a vote of the Company's shareholders. In such event,
Parent, Purchaser and the Company have agreed to take, at Parent's request, all
necessary and appropriate action to cause the Merger to be effective as soon as
practicable after the acceptance for payment and purchase of Shares pursuant to
the Offer without a meeting of shareholders of the Company in accordance with
Tennessee Law. There can be no assurance that Purchaser will acquire 90% of the
outstanding Shares.
Under Tennessee law, holders of Shares do not have dissenter's rights as a
result of either the Offer or the Merger.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. Terms of the Offer; Expiration Date. Upon the terms and subject to the
conditions set forth in the Offer, Purchaser will accept for payment and pay
for all Shares that are validly tendered by the Expiration Date and not
withdrawn as provided in Section 4. The term "Expiration Date" shall mean 5:00
P.M., New York City time, on Thursday, January 6, 2000, unless Purchaser shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by Purchaser, shall expire.
The Offer is subject to certain conditions set forth in Section 16,
including satisfaction of the Minimum Tender Condition and expiration or
termination of the waiting period applicable to Purchaser's acquisition of
Shares pursuant to the Offer under the HSR Act. If any such condition is not
satisfied, Purchaser may (a) terminate the Offer and return all tendered Shares
to tendering shareholders, (b) extend the Offer and, subject to withdrawal
rights as set forth in Section 4, retain all such Shares until the expiration
of the Offer as so extended, (c) waive such condition and, subject to any
requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered by the Expiration Date and not withdrawn
or (d) delay acceptance for payment or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions to the Offer.
For a description of Purchaser's right to extend the period of time during
which the Offer is open and to amend, delay or terminate the Offer, see Section
15.
Purchaser is required to give oral or written notice of any extension,
delay, termination or amendment of the Offer to the Depositary. Any such
extension, delay, termination or amendment will also be followed as promptly as
practicable by public announcement thereof, such announcement in the case of an
extension to be made no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which require that
material changes be promptly disseminated to shareholders in a manner
reasonably designed to inform them of such changes) and without limiting the
manner in which Purchaser may choose to make any public announcement, Purchaser
will have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to the Dow Jones News
Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act.
Under no circumstances will interest be paid on the consideration to be
paid for the Shares, regardless of any extension of the Offer or delay in
making such payment. During any extension of the Offer, all Shares previously
2
<PAGE>
tendered and not withdrawn will remain tendered pursuant to the Offer, subject
to the rights of a tendering shareholder to withdraw his or her Shares. See
Section 4.
The Company has provided Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares and will be furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear
on the shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. Acceptance for Payment and Payment. Upon the terms and subject to the
conditions of the Offer, Purchaser will accept for payment and pay for all
Shares validly tendered by the Expiration Date and not withdrawn as soon as
practicable after the later of the Expiration Date and the satisfaction or
waiver of the conditions set forth in Section 16. In addition, Purchaser
reserves the right, in its sole discretion and subject to applicable law, to
delay the acceptance for payment or payment for Shares in order to comply in
whole or in part with any applicable law. For a description of Purchaser's
right to terminate the Offer and not accept for payment or pay for Shares or to
delay acceptance for payment or payment for Shares, see Section 15.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment tendered Shares when, as and if Purchaser gives oral or written notice
to the Depositary of its acceptance of the tenders of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price with the Depositary, which will act as agent for the
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or of a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (as defined in Section 3)), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents. For a description of the procedure
for tendering Shares pursuant to the Offer, see Section 3. Accordingly, payment
may be made to tendering shareholders at different times if delivery of the
Shares and other required documents occur at different times.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), without
expense to the tendering shareholder, as promptly as practicable following the
expiration or termination of the Offer.
3. Procedure for Tendering Shares. To tender Shares pursuant to the
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) certificates
for the Shares to be tendered must be received by the Depositary at one of such
addresses or (ii) such Shares must be delivered pursuant to the procedures for
book-entry transfer described below (and a confirmation of such delivery
received by the Depositary including an Agent's Message (as defined below) if
the tendering shareholder has not delivered a Letter of Transmittal), in each
case by the Expiration Date, or (b) the guaranteed delivery procedure described
below must be complied with. The term "Agent's Message" means a message,
transmitted by a Book-Entry Transfer Facility (as hereinafter defined) to and
received by the
3
<PAGE>
Depositary and forming a part of a book-entry confirmation which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares that
are the subject of such book-entry confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
Book Entry Delivery. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase, and any financial institution that is a participant in
the system of any Book-Entry Transfer Facility may make delivery of Shares by
causing such Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the procedures of such Book-Entry
Transfer Facility. However, although delivery of Shares may be effected through
book-entry transfer, the Letter of Transmittal (or facsimile thereof) properly
completed and duly executed together with any required signature guarantees or
an Agent's Message and any other required documents must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase by the Expiration Date, or the guaranteed delivery
procedure described below must be complied with. Delivery of the Letter of
Transmittal and any other required documents to a Book-Entry Transfer Facility
does not constitute delivery to the Depositary.
Signature Guarantees. Except as otherwise provided below, all signatures
on a Letter of Transmittal must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses)
which is a member of a recognized Medallion Program approved by The Securities
Transfer Association Inc., including the Securities Transfer Agents Medallion
Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York
Stock Exchange, Inc. Medallion Signature Program (MSP) (an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed (a)
if the Letter of Transmittal is signed by the registered holder of the Shares
tendered therewith and such holder has not completed the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on
the Letter of Transmittal or (b) if such Shares are tendered for the account of
an Eligible Institution. If the certificate for Shares is registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made, or certificates for Shares not tendered or accepted for
payment are to be issued, in the name of a person other than the registered
holder(s), then the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear on the certificates, with the signature(s) on the
certificates or stock powers guaranteed by an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and cannot deliver such Shares and all other required documents to
the Depositary by the Expiration Date, or such shareholder cannot complete the
procedure for delivery by book-entry transfer on a timely basis, such Shares
may nevertheless be tendered if all of the following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by Purchaser is received by
the Depositary (as provided below) by the Expiration Date; and
(c) the certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee or an Agent's Message and any other documents required
by the Letter of Transmittal, are received by the Depositary within three
NASDAQ trading days after the date of execution of the Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
4
<PAGE>
The method of delivery of Shares and all other required documents,
including through the Book-Entry Transfer Facility, is at the option and risk
of the tendering shareholder and the delivery will be deemed made only when
actually received by the Depositary. If certificates for Shares are sent by
mail, registered mail with return receipt requested, properly insured, is
recommended.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain shareholders
pursuant to the Offer. In order to avoid such backup withholding, each
tendering shareholder must provide the Depositary with such shareholder's
correct taxpayer identification number and certify that such shareholder is not
subject to such backup withholding by completing the Substitute Form W-9
included in the Letter of Transmittal. If a shareholder is a non-resident alien
or foreign entity not subject to back-up withholding, the shareholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payment.
By executing a Letter of Transmittal, a tendering shareholder irrevocably
appoints designees of Purchaser as such shareholder's proxies in the manner set
forth in the Letter of Transmittal to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by Purchaser (and any and all other Shares or other securities issued
or issuable in respect of such Shares on or after November 15, 1999). All such
proxies shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment is effective only upon the acceptance for payment of
such Shares by Purchaser. Upon such acceptance for payment, all prior proxies
and consents granted by such shareholder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given nor subsequent written consents executed by such shareholder (and,
if given or executed, will not be deemed to be effective). Such designees of
Purchaser will be empowered to exercise all voting and other rights of such
shareholder as they, in their sole discretion, may deem proper at any annual,
special or adjourned meeting of the Company's shareholders, by written consent
or otherwise. Purchaser reserves the right to require that, in order for Shares
to be validly tendered, immediately upon Purchaser's acceptance for payment of
such Shares, Purchaser is able to exercise full voting rights with respect to
such Shares and other securities (including voting at any meeting of
shareholders then scheduled or acting by written consent without a meeting).
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the Offer, as well as
the tendering shareholder's representation and warranty that (a) such
shareholder owns the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act, (b) the tender of such Shares complies with
Rule 14e-4, and (c) such shareholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by Purchaser, in its sole discretion, which determination
shall be final and binding. Purchaser reserves the absolute right to reject any
or all tenders of Shares determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to
waive any defect or irregularity in any tender of Shares of any particular
shareholder, whether or not similar defects or irregularities are waived in the
case of other shareholders. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of Purchaser, the Dealer Manager, the Depositary, the Information Agent or
any other person will be under any duty to give notification of any defect or
irregularity in tenders or incur any liability for failure to give any such
notification. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding.
4. Withdrawal Rights. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after January 17, 2000
unless theretofore accepted for payment as provided in this Offer to Purchase.
If Purchaser
5
<PAGE>
extends the period of time during which the Offer is open, is delayed in
accepting for payment or paying for Shares or is unable to accept for payment
or pay for Shares pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, on behalf of
Purchaser, retain all Shares tendered, and such Shares may not be withdrawn
except as otherwise provided in this Section 4.
To be effective, a written or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase and must specify the name of the
person who tendered the Shares to be withdrawn and the number of Shares to be
withdrawn and the name of the registered holder of Shares, if different from
that of the person who tendered such Shares. If the Shares to be withdrawn have
been delivered to the Depositary, a signed notice of withdrawal with (except in
the case of Shares tendered by an Eligible Institution) signatures guaranteed
by an Eligible Institution must be submitted prior to the release of such
Shares. In addition, such notice must specify, in the case of Shares tendered
by delivery of certificates, the name of the registered holder (if different
from that of the tendering shareholder) and the serial numbers shown on the
particular certificates evidencing the Shares to be withdrawn or, in the case
of Shares tendered by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered at any time prior to the Expiration Date by again
following one of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding. None of Purchaser,
the Dealer Manager, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defect or irregularity in
any notice of withdrawal or incur any liability for failure to give any such
notification.
5. Certain Tax Considerations. Sales of Shares by shareholders of the
Company pursuant to the Offer will be taxable transactions for federal income
tax purposes and may also be taxable transactions under applicable state and
local and other tax laws.
In general, a shareholder will recognize gain or loss equal to the
difference between the tax basis of his or her Shares and the amount of cash
received in exchange therefor. Such gain or loss will be capital gain or loss
if the Shares are capital assets in the hands of the shareholder and will be
long-term gain or loss if the holding period for the Shares is more than one
year as of the date of the sale of such Shares.
The foregoing discussion may not apply to shareholders who acquired their
Shares pursuant to the exercise of stock options or other compensation
arrangements with the Company or who are not citizens or residents of the
United States or who are otherwise subject to special tax treatment under the
Internal Revenue Code of 1986, as amended.
The tax discussion set forth above is included for general information
only and is based upon present law. Due to the individual nature of tax
consequences, shareholders are urged to consult their tax advisors as to the
specific tax consequences to them of the Offer, including the effects of
applicable state, local or other tax laws.
6
<PAGE>
6. Price Range of Shares; Dividends. The Shares are traded on the
National Market System of the National Association of Security Dealers, Inc.
Automated Quotation System (the "NASDAQ National Market System"). The following
table sets forth for the periods indicated the high and low sale prices per
Share as reported on the NASDAQ National Market System. Bid prices represent
quotations by dealers, do not reflect mark-ups, mark-downs or commissions and
may not represent actual transactions.
High Low
------ ------
Fiscal Year Ended January 30, 1998
First Quarter........................................$6.000 $4.641
Second Quarter....................................... 5.000 3.125
Third Quarter........................................ 6.875 4.250
Fourth Quarter....................................... 7.375 5.688
Fiscal Year Ended January 30, 1999
First Quarter........................................10.750 6.250
Second Quarter.......................................10.875 6.875
Third Quarter........................................ 9.500 6.000
Fourth Quarter.......................................12.375 6.875
Current Fiscal Year
First Quarter........................................10.500 7.000
Second Quarter.......................................14.500 9.281
Third Quarter........................................14.500 11.656
Fourth Quarter (through November 12, 1999)...........13.125 12.125
On November 12, 1999, the last full day of trading prior to the public
announcement of the Merger Agreement and the transactions contemplated thereby,
the reported closing sales price per Share on the NASDAQ National Market System
was $12.375. On November 18, 1999, the last full day of trading prior to the
commencement of the Offer, the reported closing sales price per Share on the
NASDAQ National Market System was $19.813.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
The Company has not heretofore paid cash dividends.
7. Certain Information Concerning the Company. The Company is a Tennessee
corporation with its principal executive offices located at 3742 Lamar Avenue,
Memphis, Tennessee 38118.
According to the Company 10-K (as defined below) and the Company's press
release dated November 15, 1999, the Company, through its wholly-owned
subsidiaries, Catherines, Inc., Catherines of California, Inc. and Catherines
of Pennsylvania, Inc., and through a limited partnership, Catherines Partners,
L.P., is a leading specialty retailer of large-size women's apparel, operating
436 stores in 40 states and the District of Columbia. The Company operates four
separate divisions with distinct merchandising concepts and marketing
strategies.
The following selected consolidated financial data relating to the Company
and its subsidiaries has been taken or derived from the audited financial
statements contained in the Company's Annual Report on Form 10-K for the fiscal
year ended January 30, 1999 (the "Company 10-K") and the unaudited financial
statements contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1999 (the "Company 10-Q"). More comprehensive financial
information is included in such 10-K and 10-Q and the other documents filed by
the Company with the Commission, and the financial data set forth below is
qualified in its entirety by reference to such reports and other documents
including the financial statements and notes contained therein. Such reports
and other documents may be examined and copies may be obtained from the offices
of the Commission in the manner set forth below.
7
<PAGE>
CATHERINES STORES CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
Twenty-Six Weeks Ended Fiscal Year Ended
----------------------------- ---------------------------------------------
July 31, August 1, January 30, January 31, February 1,
1999 1998 1999 1998 1997
------------- ------------- ------------- ------------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Income
Net Sales........................... $ 158,633,264 $ 151,279,005 $ 295,278,011 $ 277,152,476 $ 268,001,571
Cost of sales, including buying
and occupancy costs.............. $ 102,835,948 $ 100,317,466 $ 201,188,781 $ 195,093,555 $ 188,520,002
Gross Margin........................ $ 55,797,316 $ 50,961,539 $ 94,089,230 $ 82,058,921 $ 79,481,569
Selling, general and administrative.
expenses......................... $ 40,949,568 $ 39,745,501 $ 79,099,690 $ 75,432,159 $ 73,944,644
Amortization of intangible assets... $ 502,714 $ 529,380 $ 1,046,193 $ 1,037,363 $ 1,167,700
------------- ------------- ------------- ------------- -------------
Operating income before write-down
of store assets and store closing
costs............................ $ 14,345,034 $ 10,686,658 $ 13,943,347 $ 5,589,399 $ 4,369,225
Write-down of store assets and
store closing costs.............. $ 237,132 $ 199,755 $ 506,792 $ 3,665,478 $ 956,231
------------- ------------- ------------- ------------- -------------
Operating income.................... $ 14,107,902 $ 10,486,903 $ 13,436,555 $ 1,923,921 $ 3,412,994
Interest and other, net............. $ 194,923 $ 433,787 $ 737,299 $ 1,295,224 $ 1,127,020
------------- ------------- ------------- ------------- -------------
Income before income taxes.......... $ 13,912,979 $ 10,053,116 $ 12,699,256 $ 628,697 $ 2,285,974
Provision for income taxes.......... $ 5,565,000 $ 4,123,000 $ 5,072,000 $ 585,000 $ 1,000,000
------------- ------------- ------------- ------------- -------------
Net income.......................... $ 8,347,979 $ 5,930,116 $ 7,627,256 $ 43,697 $ 1,285,974
============= ============= ============= ============= =============
Net income per common share......... $ 1.19 $ 0.82 $ 1.05 $ 0.01 $ 0.17
============= ============= ============= ============= =============
Diluted net income per common
share............................ $ 1.16 $ 0.80 $ 1.03 $ 0.01 $ 0.17
============= ============= ============= ============= =============
</TABLE>
<TABLE>
July 31, January 30, January 31,
1999 1999 1998
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
Consolidated Balance Sheet Data
Working capital.............................................. $ 32,070,785 $ 28,501,948 $ 22,566,525
Total current assets......................................... 75,363,747 71,975,385 61,931,674
Long-Term Bank and Other Debt, less current Maturities....... 9,518,758 9,517,067 10,788,920
Deferred income taxes........................................ 378,000 378,000 969,000
Total Shareholders' equity................................... 81,237,526 77,752,475 70,128,967
</TABLE>
The information concerning the Company contained herein has been taken
from or is based upon reports and other documents on file with the Commission
or otherwise publicly available. Although neither Purchaser nor Parent has any
knowledge that would indicate that any statements contained herein based upon
such reports and documents are untrue, none of Purchaser, Parent or the Dealer
Manager takes any responsibility for the accuracy or completeness of the
information contained in such reports and other documents or for any failure by
the Company
8
<PAGE>
to disclose events that may have occurred and may affect the significance or
accuracy of any such information but that are unknown to Purchaser, Parent or
the Dealer Manager.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company. Such reports, proxy
statements and other information may be inspected at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and should also be available for inspection and
copying at the regional offices of the Commission in New York (Seven World
Trade Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Such
material may also be obtained from the Commission's web site at
http://www.sec.gov. Copies of such material should be obtainable by mail, upon
payment of the Commission's customary charges, by writing to the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
In the course of the discussions between representatives of Parent and the
Company (see Section 10), certain projections of future operating performance
were furnished to Parent's representatives. These projections, and the
assumptions underlying such projections, were not prepared with a view to
public disclosure or compliance with published guidelines of the Commission or
the guidelines established by the American Institute of Certified Public
Accountants regarding projections, and are included in this Offer to Purchase
only because they were provided to Parent. None of Parent, Purchaser, the
Company, any of their financial advisors or the Dealer Manager assumes any
responsibility for the accuracy of these projections. While presented with
numerical specificity, these projections are based upon a variety of
assumptions relating to the businesses of the Company which may not be realized
and are subject to significant uncertainties and contingencies beyond the
control of the Company. There can be no assurance that the projections will be
realized, and actual results may vary materially from those shown. None of the
Company, Parent or Purchaser intends to update, revise or correct such
projections if they become inaccurate (even in the short term).
Set forth below is a summary of the projections. These projections should
be read together with the financial statements of the Company referred to
herein.
Projected Income Statement Summary
(in thousands)
<TABLE>
Projected Year Ending January 31
----------------------------------------------------------------------
1999 2000 2001 2002 2003 2004
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales.......................$ 308,868 $ 321,773 $ 337,969 $ 354,631 $ 371,793 $ 389,469
Gross Margin.................... 101,451 107,018 113,412 120,307 127,509 135,824
EBIT............................ 19,711 22,244 24,436 27,052 30,065 34,018
Net Income...................... 11,660 13,395 15,059 17,089 19,434 22,431
</TABLE>
8. Certain Information Concerning Purchaser and Parent. Purchaser is a
newly-incorporated Tennessee corporation and a wholly-owned subsidiary of
Parent organized to acquire the Company. The principal executive offices of the
Purchaser are located at 450 Winks Lane, Bensalem, PA 19020. Since its
incorporation on November 12, 1999, Purchaser has not conducted any business
other than incident to its formation, the execution and delivery of the Merger
Agreement and the commencement of the Offer. Until immediately prior to the
time Purchaser purchases Shares pursuant to the Offer, it is not anticipated
that Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and
the transactions contemplated by the Offer or the Merger. Because Purchaser is
a newly-formed corporation and has minimal assets and capitalization, no
meaningful financial information regarding Purchaser is available.
9
<PAGE>
Parent is a Pennsylvania corporation, with principal executive offices
located at 450 Winks Lane, Bensalem, PA 19020. The principal business of Parent
is the operation, through its subsidiary corporations, of women's specialty
apparel stores throughout the country. Parent's Fashion Bug stores specialize
in selling, at moderate and popular prices, a wide variety of junior, misses,
large-size and girls-size sportswear, dresses, coats, lingerie, accessories and
casual footwear. Parent's "Fashion Bug Plus" stores specialize in similar
merchandise for the large-size customer. In August 1999, Parent purchased the
Modern Woman chain of 137 retail stores, which specialize in large-size women's
apparel. Parent's stores sell both brand-name merchandise and specially
manufactured garments under one of Parent's private labels.
The name, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of
Parent and Purchaser and certain other information are set forth on Schedule I
hereto.
The following selected consolidated financial data relating to Parent and
its subsidiaries has been taken or derived from the audited financial
statements contained in Parent's Annual Report on Form 10-K for the fiscal year
ended January 30, 1999, and the unaudited financial statements contained in
Parent's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999.
More comprehensive financial information is included in such Annual Report and
Quarterly Report and the other documents filed by Parent with the Commission,
and the financial data set forth below is qualified in its entirety by
reference to such reports and other documents including the financial
statements and notes contained therein. Such reports and other documents may be
examined and copies may be obtained from the offices of the Commission in the
same manner as set forth with respect to the Company in Section 7.
CHARMING SHOPPES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per Share amounts)
<TABLE>
Six Months Ended
Fiscal Year Ended (unaudited)
--------------------------------------------- ----------------------------
January 30, January 31, February 1, July 31, August 1,
1999 1998 1997 1999 1998
-------------- -------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.................... $ 1,035,160 $ 1,016,537 $ 1,016,297 $ 570,718 $ 523,189
Restructuring charge
(credit).................. 54,246(1) 0 0 (2,834)(4) 34,000(1)
Non-recurring gain from
asset securitization...... 0 13,018(2) 0 0 0
Net income (loss)............ (20,135) 19,334 (7,237) 28,227 (10,574)
Basic net income (loss) per
Share..................... (.20) .18 (.07) .29 (.11)
Net income (loss) per Share,
assuming dilution......... (.20) .18 (.07) .27 (.11)
Cash dividends per common
share(3).................. .00 .00 .00 .00 .00
Balance Sheet Data:
Total assets................. $ 684,649 $ 709,738 $ 710,397 $ 730,040 $ 736,121
Current portion - Long-term
debt...................... 16 16 16 16 16
Long-term debt............... 119,475 138,116 138,128 96,140 135,112
Working capital.............. 192,274 163,208 224,144 103,282 146,184
Stockholders' equity......... 383,572 416,810 421,035 409,860 402,686
- ---------
(1) During the first quarter of Fiscal 1999, Parent's Board of Directors
approved a restructuring plan in conjunction with elimination of Parent's
men's business, which resulted in a pre-tax charge of $34,000,000. During
the fourth quarter of
10
<PAGE>
Fiscal 1999, Parent's Board of Directors approved a restructuring plan in
conjunction with the decision to consolidate Parent's distribution center
operations, which resulted in a pre-tax charge of $20,246,000.
(2) During Fiscal 1998, Parent recorded a non-recurring gain of $13,018,000 as
a result of the adoption of SFAS No. 125 as related to the sale of credit
card receivables during Fiscal 1998.
(3) On October 2, 1995, Parent's Board of Directors announced an indefinite
suspension of dividends on Parent's Common Stock.
(4) During the first quarter of Fiscal 2000, Parent completed the sale of the
Bensalem facility and revised its estimate of cost relating to the
distribution center restructuring.
</TABLE>
-----------------------
Parent is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Parent is required to disclose in such proxy statements
certain information, as of particular dates, concerning its directors and
officers, their remuneration, stock options granted to them, the principal
holders of its securities and any material interests of such persons in
transactions with Parent. Such reports, proxy statements and other information
should be available for inspection and copying at the offices of the Commission
in the same manner as set forth with respect to the Company in Section 7.
Except as described in this Offer to Purchase, (a) neither Parent nor
Purchaser nor, to the best knowledge of Purchaser, any of the persons listed in
Schedule I to this Offer to Purchase or any associate or majority-owned
subsidiary of Parent or any of the persons so listed beneficially owns or has
any right to acquire, directly or indirectly, any Shares and (b) neither Parent
nor Purchaser nor, to the best knowledge of the Purchaser, any of the persons
or entities referred to above nor any director, executive officer or subsidiary
of any of the foregoing has effected any transaction in the Shares during the
past 60 days.
Except as described in this Offer to Purchase, neither Parent nor
Purchaser nor, to the best knowledge of Purchaser, any of the persons listed in
Schedule I hereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
but not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or voting of such securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees of profits, guarantees against loss, division of profits or loss or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, since February 4, 1996, neither Parent, Purchaser nor, to the best
knowledge of Purchaser, any of the persons listed in Schedule I hereto, has had
any business relationship or transaction with the Company or any of its
executive officers, directors, or affiliates that is required to be reported
under the rules and regulations of the Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, since February 4, 1996, there
have been no contracts, negotiations or transactions between Parent, Purchaser
or any of their subsidiaries or, to the best knowledge of Parent and Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the
Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
9. Source and Amount of Funds. The total amount of funds required by
Purchaser to purchase Shares pursuant to the Offer and to pay related fees and
expenses is estimated to be approximately $156 million. Purchaser will obtain
such funds through a capital contribution or loans from Parent or Parent's
subsidiaries. Parent or such subsidiaries will obtain such funds from general
corporate funds.
10. Background of the Offer; Past Contacts, Transactions or Negotiations
with the Company.
In July 1998, management of Parent and Lazard Freres engaged in a review
of strategic alternatives for Parent, including a review of possible
acquisitions. At a regular meeting of Parent's Board of Directors on September
22, 1998, management and representatives of Lazard Freres outlined for the
Board the strategic benefits of a combination with the Company. Following the
discussion, the Board of Directors authorized management to commence
preliminary discussions with the Company regarding a possible business
combination.
11
<PAGE>
On October 15, 1998, Dorrit J. Bern, Chairman of the Board, Chief
Executive Officer and President of Parent, and a representative of Lazard
Freres met with Bernard J. Wein, Chairman of the Board and Chief Executive
Officer of the Company, and one other member of senior management of the
Company to discuss a potential combination. Representatives of Parent expressed
their interest in an acquisition of the Company, and discussed Parent's desire
to expand its large-size women's retail apparel business and the strategic
advantages of a combination with the Company. Representatives of the Company
indicated that the Company was not interested in pursuing a combination at that
time.
On October 19, 1998, Ms. Bern sent a letter to Mr. Wein reiterating
Parent's interest in acquiring the Company and stating that Parent would be
prepared to purchase all the outstanding shares of the Company at a price per
share of $11.00 to $12.00 in cash, subject to the satisfactory completion of
legal and business due diligence, the approval of the Boards of Directors of
both companies, the receipt of necessary approvals and the satisfaction of
other customary conditions. The Company responded again that it was not
interested in pursuing Parent's proposal.
In July 1999, at Parent's request, a representative of Lazard Freres
contacted a member of the Company's board of directors to discuss a potential
acquisition, and was referred to Mr. Wein. Mr. Wein informed Lazard Freres that
although the Company was not interested in pursuing a transaction at that time,
it would seriously consider an offer in the range of $22.00 to $24.00 per
share.
On September 15, 1999, at a regular meeting of Parent's Board of
Directors, Ms. Bern and representatives of Lazard Freres briefed the Board on
the recent discussions with the Company. Members of Parent's management made
presentations to the Board regarding the strategic benefits of a combination
with the Company and representatives of Lazard Freres made a presentation
regarding their financial analysis of the Company. The Board expressed support
for a potential combination with the Company and authorized management to
continue discussions.
On September 23, 1999, Ms. Bern sent a letter to Mr. Wein indicating that
Parent would be prepared to purchase all the outstanding shares of the Company
at a price per share of $20.00 in cash, subject to the satisfactory completion
of legal and business due diligence, the approval of the Boards of Directors of
both companies, the receipt of necessary approvals and the satisfaction of
other customary conditions. The letter also stated that if supported by its due
diligence investigation, Parent would consider paying a higher per share price.
On October 4, 1999, representatives from Parent and Lazard Freres met in
Tennessee with representatives from the Company and J.C. Bradford, the
Company's financial advisor. The Company indicated it would be willing to
consider Parent's offer if Parent raised its per share price to a price within
the $22.00 to $24.00 range. Parent stated it would not increase its offer above
$20.00 per share at that time, but that it would be open to the possibility of
raising its offer based on the outcome of its due diligence review.
On October 12, 1999, Parent and the Company entered into a confidentiality
agreement pursuant to which the Company agreed to give Parent access to
non-public information. The Company also agreed to deal exclusively with Parent
with respect to a potential sale of the Company for a four-week period.
On October 12, 1999, the Parent's Board of Directors held a special
telephonic meeting at which the potential transaction was reviewed.
On October 12, 1999, Ms. Bern and Mr. Wein met in New York City to discuss
the potential combination of the companies.
On October 14 and October 15, 1999 representatives of Parent, Lazard
Freres and Parent's outside legal counsel conducted due diligence and met in
Memphis with David C. Forell, Chief Financial Officer of the Company, and other
representatives of the Company. Over the course of the next several weeks,
representatives of Parent and the Company (including financial and legal
advisors) participated in meetings and telephone
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conversations to discuss due diligence matters and aspects of a potential
transaction, including the terms of the merger agreement.
On October 20, 1999, Ms. Bern met in Memphis with Mr. Wein and Diane V.
Missel, President of the Company. The parties discussed the potential
combination of the companies and the manner in which the Company would be run
in the future, including the possibility of retaining members of the Company's
existing senior management.
On November 10, 1999, Ms. Bern and Mr. Wein met in New York City and
agreed to present to their respective Board of Directors Parent's offer to
purchase all the outstanding shares of the Company at a price per share of
$21.00 in cash.
On November 11, 1999, a special meeting of Parent's Board of Directors was
held to consider the transaction and the terms of the proposed merger
agreement. Ms. Bern and other senior management of Parent reviewed the course
of discussions and negotiations with the Company. Representatives of Lazard
Freres indicated that Lazard Freres was prepared to deliver an opinion to the
Board that the consideration to be paid in the Offer was fair to Parent from a
financial point of view. Representatives of Davis Polk & Wardwell, outside
counsel to Parent, reviewed the draft merger agreement. After due
consideration, the Board unanimously approved the Merger Agreement and the
transactions contemplated thereby.
On November 12, 1999, the Company's Board of Directors held a special
meeting to consider Parent's proposal and the proposed merger agreement. After
due consideration, all directors present unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger.
On November 15, 1999, the parties executed the Merger Agreement and Parent
and the Company issued press releases announcing the Offer.
11. The Merger Agreement; Other Arrangements.
The following is a summary of certain provisions of the Merger Agreement,
a copy of which is filed as an exhibit to the Tender Offer Statement on
Schedule 14D-1 filed by Purchaser pursuant to Rule 14d-3 of the General Rules
and Regulations under the Exchange Act with the Commission in connection with
the Offer (together with any amendments, supplements, schedules, annexes and
exhibits thereto, the "Schedule 14D-1") and other arrangements among Purchaser,
Parent and/or the Company. Such summary is qualified in its entirety by
reference to the Merger Agreement.
The Merger Agreement
The Offer. The Merger Agreement provides for the making of the Offer by
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Tender Condition and certain other conditions that are described in Section 16.
Purchaser has agreed that, without the prior written consent of the Company, no
change in the Offer may be made which (a) changes the form of consideration
payable in the Offer, (b) reduces the price per Share to be paid pursuant to
the Offer, (c) reduces the number of Shares subject to the Offer or (d) imposes
conditions to the Offer that are broader than or in addition to those set forth
in the Offer.
The Merger. The Merger Agreement provides that, as soon as practicable
after satisfaction or, to the extent permitted under the Merger Agreement,
waiver of all conditions to the Merger, the Company and Purchaser will file
articles of merger with the Secretary of State of the State of Tennessee and
make all other filings or recordings required by Tennessee Law in connection
with the Merger, whereupon Purchaser will be merged with and into the Company
in accordance with Tennessee Law. The Merger will become effective (the
"Effective Time") at such time as the articles of merger are duly filed with
the Secretary of State of the State of Tennessee or at such later time
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as is specified in the articles of merger. As a result of the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the surviving corporation (the "Surviving Corporation").
Company Action. The Company's Board of Directors has (a) determined that
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, are fair to and in the best interests of the Company's
shareholders, (b) approved and adopted the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, in
accordance with the requirements of Tennessee Law and (c) resolved to recommend
acceptance of the Offer and approval and adoption of the Merger Agreement and
the Merger by the Company's shareholders. J.C. Bradford has delivered to the
Company's Board of Directors its written opinion that the consideration to be
paid in the Offer and the Merger is fair to the holders of Shares from a
financial point of view. The Company has been advised that all of its directors
and its three top executive officers who own Shares intend either to tender
their Shares pursuant to the Offer or to vote in favor of the Merger.
Directors. The Merger Agreement provides that effective upon the
acceptance for payment of any Shares pursuant to the Offer, Parent will be
entitled to designate the number of directors, rounded up to the next whole
number, on the Company's Board of Directors that equals the product of (a) the
total number of directors on the Company's Board of Directors (giving effect to
the directors elected pursuant to this provision) and (b) the percentage that
the number of Shares owned by the Parent, Purchaser or any other subsidiary of
Parent (including the Shares accepted for payment and paid for by the
Purchaser) bears to the number of Shares outstanding. The Company will take all
action necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such time, the Company will also use its best efforts to cause
individuals designated by Parent to constitute the number of members, rounded
up to the next whole number, on (x) each committee of the Board and (y) each
board of directors of each subsidiary of the Company (and each committee
thereof) that represents the same percentage as such individuals represent on
the Board of Directors of the Company.
Following the election or appointment of Parent's designees and until the
Effective Time, the approval of a majority of the directors of the Company then
in office who were not designated by Parent will be required to authorize (a)
any termination of the Merger Agreement by the Company, (b) any amendment to
the Merger Agreement requiring action by the Board of Directors, (c) any
extension of time for performance of any obligation or action under the Merger
Agreement by Parent or Purchaser and (d) any enforcement of or any waiver of
compliance with any of the agreements or conditions contained herein for the
benefit of the Company. Parent's designated directors will leave any Board of
Directors meeting for the period during which such matters are being
considered.
Conversion of Shares. The Merger Agreement provides that at the Effective
Time, each of the following will occur automatically by virtue of the Merger
and without any further action by Parent, Purchaser, the Company or holders of
Shares: (a) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in clause (b) below, be converted into the
right to receive $21.00 in cash or any higher price per Share that may be paid
pursuant to the Offer, without interest (the "Merger Consideration"); (b) each
Share held by the Company as treasury stock or each Share held by Parent or any
of its subsidiaries immediately prior to the Effective Time shall be canceled
and retired, and no payment shall be made with respect thereto; and (c) each
share of common stock of Purchaser outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation. The Surviving Corporation will, thereupon,
become a direct, wholly-owned subsidiary of Parent.
Stock Options. The Merger Agreement provides that at or immediately prior
to the Effective Time, each outstanding employee stock option issued by the
Company to purchase Shares, whether or not vested or exercisable, will be
canceled, and the Company will pay each holder of any such option at or
promptly after the Effective Time for each such option surrendered an amount in
cash determined by multiplying (a) the excess, if any, of the Merger
Consideration over the applicable exercise price of such option by (b) the
number of Shares such holder could have
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purchased (assuming full vesting of all options) had such holder exercised such
option in full immediately prior to the Effective Time.
Employee Stock Purchase Plan. The Merger Agreement provides that after the
date thereof, no new offering period shall commence under the Company's 1992
Employee Stock Purchase Plan (the "ESPP") and after December 31, 1999, no
further payroll deductions will be made under the ESPP. At the end of the
current payment period, existing options will be exercised in accordance with
the ESPP. As of the Effective Time, the ESPP shall be terminated. The Company
will pay each participant in any current offering period under such Plan in
cash at or promptly after the Effective Time, in cancellation of all rights
under such Plan, the amount of such participant's account balance under such
plan, including interest to the extent required under the terms of the ESPP.
Prior to the Effective Time, the Company will take all actions (including,
if appropriate, amending the terms of the ESPP) that are necessary to give
effect to the transactions contemplated by the immediately preceding paragraph.
Surviving Corporation. The Merger Agreement provides that the charter and
bylaws of Purchaser in effect at the Effective Time will be the charter and
bylaws, respectively, of the Surviving Corporation until amended in accordance
with applicable law, except that the name of the Surviving Corporation shall be
"Catherines Stores Corporation." The Merger Agreement also provides that the
directors of Purchaser at the Effective Time will be the directors of the
Surviving Corporation and the officers of the Company at the Effective Time
will be the officers of the Surviving Corporation until successors are duly
elected or appointed and qualified in accordance with applicable law.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties, including
representations by the Company with respect to its corporate existence and
power, corporate authorization, governmental authorization, non-contravention,
capitalization, subsidiaries, Commission filings, financial statements,
disclosure documents, absence of certain changes, no undisclosed material
liabilities, compliance with laws and court orders, material contracts,
non-compete agreements, litigation, title to properties, intellectual property,
Year 2000 readiness, finders' fees, taxes, employee benefit plans, labor
matters, environmental matters, other information and anti-takeover statutes.
Certain representations and warranties in the Merger Agreement contain
exceptions for matters that would or could, as the case may be, not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company. The Merger Agreement provides that "Material Adverse
Effect" means, with respect to any person, a material adverse effect on (a) the
condition (financial or otherwise), business, properties, assets, liabilities
or results of operations of such person and its subsidiaries, taken as a whole,
except to the extent resulting from (i) any change in general economic
conditions, (ii) any changes affecting the retail clothing industry or the
women's wear retail industry in general, or (iii) the public announcement of
the Merger Agreement or consummation of the transactions contemplated thereby,
it being agreed that, without limiting the generality of the foregoing, a
Material Adverse Effect will not be deemed to have occurred if the cost of
remediating such material adverse effect or the reduction in net income from
the net income projected in the Company's financial plan for the fiscal year
ending January 2000 previously disclosed to Parent resulting from such material
adverse effect, individually or in the aggregate, does not exceed (x)
$2,000,000 in the case of the Company or (y) $10,000,000 in the case of Parent;
provided that, without regard to remediation costs or any such reduction in net
income, if 20% or more of the Company's stores are not operating in the
ordinary course for any three-day period commencing on or after January 1, 2000
as a result of any Y2K related failure or other Y2K related problem, there
shall be a Material Adverse Effect with respect to the Company, or (b) the
ability of such person to perform its obligations under or to consummate the
transactions contemplated by the Merger Agreement.
Interim Agreements of the Company. Pursuant to the Merger Agreement, the
Company has agreed that, during the period from the date of the Merger
Agreement to the Effective Time, the Company and its subsidiaries will conduct
their business in the ordinary course consistent with past practice and will
use their best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, except with the prior written
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consent of Parent or as contemplated by the Merger Agreement, including the
disclosure schedules thereto, from the date of the Merger Agreement until the
Effective Time, the parties have agreed that:
(a) (i) the Company will not, and will not permit any of its
subsidiaries to, declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by any wholly-owned subsidiary of the Company
to the Company or a wholly-owned subsidiary of the Company, (ii) split,
combine or reclassify any of its capital stock or (iii) purchase, redeem
or otherwise acquire any shares of capital stock or options to acquire any
such shares or other securities;
(b) the Company will not, and will not permit any of its subsidiaries
to, issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than, in the case of
the Company, the issuance of Shares upon the exercise of stock options
outstanding on the date of the Merger Agreement in accordance with their
current terms or the issuance of Shares in connection with the ESPP in
accordance with its current terms);
(c) the Company will not adopt or propose any change to its charter
or bylaws;
(d) the Company will not, and will not permit any of its subsidiaries
to, merge or consolidate with any other person, adopt a plan of complete
or partial liquidation of the Company or any of its subsidiaries, or
acquire a material amount of stock or assets of any other person;
(e) the Company will not, and will not permit any of its subsidiaries
to, sell, lease, license, mortgage, pledge or grant a Lien on or otherwise
encumber or dispose of any material subsidiary or material amount of
assets or property except (i) pursuant to existing contracts or
commitments or (ii) in the ordinary course consistent with past practice;
(f) the Company will not, and will not permit any of its subsidiaries
to, incur, assume or guarantee any indebtedness for borrowed money, except
for such borrowings (i) under the Company's existing letters of credit for
purchases of merchandise inventory in the ordinary course of business
consistent with past practice, (ii) under the Company's existing credit
facilities (other than letters of credit) that would not result in total
outstanding indebtedness of the Company and its subsidiaries on a
consolidated basis in excess of $1,000,000 at any one time and (iii) in
connection with new capital leases for data processing software and
hardware not in excess of $1,000,000;
(g) the Company will not, and will not permit any of its subsidiaries
to, increase the compensation or benefits of any director, officer or
employee, except for normal increases in the ordinary course of business
consistent with past practice or as required by applicable law or any
existing agreement or commitment;
(h) the Company will not, and will not permit any of its subsidiaries
to, change any method of accounting or accounting principles used by it,
except for any such change required by reason of a concurrent change in
GAAP or Regulation S-X under the Exchange Act;
(i) the Company will not, and will not permit any of its subsidiaries
to, make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended
return, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a tax refund, offset or other
reduction in tax liability, consent to any extension or waiver of the
limitations period applicable to any tax claim or assessment or take or
omit to take any other action, if any such action or omission would have
the effect of increasing the tax liability or reducing any tax asset of
the Company, any of its subsidiaries, Parent or any affiliate of Parent,
other than a settlement or settlements relating to certain pending state
tax disputes that do not exceed, in the aggregate, $325,000;
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(j) the Company will not, and will not permit any of its subsidiaries
to, conduct any unusual liquidation of inventory or going out of business
sale or any discount or other sale other than in the ordinary course of
business consistent with past practice, including with respect to time of
year, pricing, location and goods sold;
(k) the Company will not, and will not permit any of its subsidiaries
to, enter into or make any contract or commitment (including in respect of
capital expenditures) or series of related contracts or commitments
involving payments in excess of the amounts set forth in the contracts or
commitments contemplated by the Company's 1999 and 2000 capital
expenditure plans previously provided to Parent;
(l) the Company will not, and will not permit any of its subsidiaries
to, fail to maintain insurance upon all its properties and with respect to
the conduct of its business of such kinds and in such amounts as is
currently in effect;
(m) the Company will not, and will not permit any of its subsidiaries
to, take any action that would make any representation and warranty of the
Company under the Merger Agreement inaccurate in any material respect at,
or as of any time prior to, the Effective Time or omit to take any action
necessary to prevent any such representation or warranty from being
inaccurate in any material respect at any such time; and
(n) the Company will not, and will not permit any of its subsidiaries
to, agree or commit to do any of the foregoing.
Shareholder Meeting; Proxy Material. Pursuant to the Merger Agreement, the
Company will cause a meeting of its shareholders (the "Company Shareholder
Meeting") to be duly called and held as soon as reasonably practicable after
consummation of the Offer for the purpose of voting on the approval and
adoption of the Merger Agreement and the Merger unless a vote is not required
under Tennessee Law. The Merger Agreement provides that if required by
applicable law, the Company will (a) promptly prepare and file with the
Commission, will use its best efforts to have cleared by the Commission and
will thereafter mail to its shareholders as promptly as practicable a proxy
statement relating to the Company Shareholder Meeting and all other proxy
materials for such meeting, (b) use its reasonable best efforts to obtain the
necessary approvals by its shareholders of the Merger Agreement and the
transactions contemplated hereby and (c) otherwise comply with all legal
requirements applicable to such meeting. Subject to their fiduciary duties, the
Board of Directors of the Company will recommend approval and adoption of the
Merger Agreement and the Merger by the Company's shareholders.
No Solicitation; Other Offers. In the Merger Agreement, the Company has
agreed that the Company, its subsidiaries and their respective officers,
directors, employees, investment bankers, attorneys, accountants, consultants
or other agents or advisors shall not directly or indirectly (a) take any
action to solicit, initiate, facilitate or encourage the submission of any
Acquisition Proposal, (b) engage in negotiations with, or disclose any
nonpublic information relating to the Company or any of its subsidiaries or
afford access to the properties, books or records of the Company or any of its
subsidiaries to, any person who has made or, to the Company's knowledge, is
considering making, an Acquisition Proposal or (c) grant any waiver or release
under any standstill or similar agreement with respect to any class of equity
securities of the Company. Notwithstanding the foregoing sentence, pursuant to
the Merger Agreement, the Company was permitted, in the press release
announcing execution of the Merger Agreement, to include the following
sentence: "Under the Agreement, the Company may furnish information and hold
discussions with third parties in appropriate circumstances." Parent and the
Company have agreed that the issuance of a press release containing the
foregoing sentence will not constitute solicitation, initiation, facilitation
or encouragement by the Company or its subsidiaries of the submission of an
Acquisition Proposal in violation of the no-solicitation provision of the
Merger Agreement. The Company will notify Parent promptly (but in no event
later than two business days) after receipt by the Company (or any of its
advisors) of any Acquisition Proposal, any indication that any person is
considering making an Acquisition Proposal or any request for nonpublic
information relating to the Company or any of its subsidiaries or for access to
the properties, books or records of the Company or any of its subsidiaries by
any person who has made or, to the Company's knowledge, is considering making,
an Acquisition Proposal. The Company will provide such notice orally and in
writing and will identify the person making, and the terms and conditions of,
any such Acquisition Proposal, indication or request.
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The Company will keep Parent fully informed, on a current basis, of the status
and details of any such Acquisition Proposal, indication or request. The
Company has agreed to, and to cause its subsidiaries and the directors,
employees and other agents of the Company and its subsidiaries to, cease
immediately and cause to be terminated all activities, discussions and
negotiations, if any, with any persons conducted prior to the date of the
Merger Agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, the Company may negotiate or otherwise
engage in substantive discussions with, and furnish nonpublic information to,
any person who delivers a written Acquisition Proposal if (a) the Company has
complied with the preceding paragraph, including, without limitation, the
requirement that it notify Parent promptly after its receipt of any Acquisition
Proposal, (b) the Board of Directors of the Company determines in good faith,
based on the terms of such Acquisition Proposal, including the proposed
consideration per Share, that such Acquisition Proposal could reasonably be
expected to result in a Superior Proposal, (c) the Board of Directors of the
Company determines in good faith that such action is in the best interests of
the Company's shareholders, (d) such person executes a confidentiality
agreement with terms no less favorable to the Company than those contained in
the Confidentiality Agreement and (e) the Company has delivered to Parent a
prior written notice advising Parent that it intends to take such action.
Except as provided in the next sentence, the Board of Directors of the
Company will recommend approval and adoption of the Merger Agreement and the
Merger by the Company's shareholders. The Board of Directors of the Company
will be permitted to withdraw, or modify in a manner adverse to Parent, its
recommendation to its shareholders and recommend or authorize the Company to
enter into an agreement with respect to a Superior Proposal, but only if (a)
the Company has complied with the terms described under this "No Solicitations;
Other Offers" section, (b) a Superior Proposal is pending at the time the Board
of Directors of the Company determines to take any such action, (c) the Board
of Directors of the Company determines in good faith that such action is in the
best interests of the Company's shareholders, (d) the Company has delivered to
Parent at least five business days prior written notice advising Parent that it
intends to take such action and (e) Parent does not make, within such five
business day period following receipt of such notice, an offer that the Board
of Directors of the Company determines in good faith (after consultation with
its financial advisors) to be as favorable to the Company's shareholders as
such Superior Proposal.
"Superior Proposal" means any bona fide, unsolicited written Acquisition
Proposal to acquire at least a majority of the outstanding Shares or all or
substantially all the assets of the Company, on terms that the Board of
Directors of the Company determines in good faith (based on, among other
things, the advice of a financial advisor of nationally recognized reputation)
to be more favorable to the Company's shareholders than the transactions
contemplated by the Merger Agreement, taking into account all the terms and
conditions of the Acquisition Proposal, the financing therefor and after giving
effect to any revised proposal made by or on behalf of Parent prior to the end
of the five business day period referred to above.
"Acquisition Proposal" means any offer or proposal for, or any indication
of interest in, a merger, consolidation, share exchange, business combination
or other similar transaction involving the Company or any of its subsidiaries
or any proposal or offer to acquire, directly or indirectly, any equity
interest in, any voting securities of, or a substantial portion of the assets
of, the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
Access to Information. Between the date of the Merger Agreement and the
Effective Time and subject to applicable law and the Confidentiality Agreement
described below, the Company will (a) give Parent, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of the Company and its subsidiaries, (b)
furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such persons may reasonably request and (c) instruct the
employees, counsel, financial advisors, auditors and other authorized
representatives of the Company and its subsidiaries to cooperate with Parent in
its investigation of the Company and its subsidiaries.
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Bonus Acceleration. Pursuant to the Merger Agreement, the Company has
agreed to prepay, prior to December 31, 1999, to Mr. Wein a portion of his 1999
annual bonus in an amount equal to $545,000 and to Mr.
Forell a portion of his 1999 annual bonus in an amount equal to $230,000.
Director and Officer Liability. For six years after the Effective Time
(and to the extent Parent has been notified in writing that a third party has
made a claim that is the subject of indemnification under the Merger Agreement
before the expiration of such period, for so long thereafter as such claim is
not finally adjudicated, settled, time-barred or otherwise subject to an
applicable statute of limitations), the Surviving Corporation will indemnify
and hold harmless the present and former officers and directors of the Company
in respect of acts or omissions occurring at or prior to the Effective Time to
the fullest extent permitted by Tennessee Law or any other applicable laws or
provided under the Company's charter and bylaws in effect on the date of the
Merger Agreement; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For six years after
the Effective Time, the Surviving Corporation will provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such person currently covered by the
Company's officers' and directors' liability insurance policy on terms with
respect to coverage and amount no less favorable than those of such policy in
effect on the date of the Merger Agreement; provided that, in satisfying its
obligation described in the first clause of this sentence, the Surviving
Corporation will not be obligated to pay premiums in excess of 150% of the
amount per annum the Company paid in its last full fiscal year, which amount
Company disclosed to Parent prior to the date of the Merger Agreement.
The rights of each such indemnified person will be in addition to any
rights such person may have under the charter or bylaws or other organizational
documents of the Company or any of its subsidiaries, or under Tennessee Law or
any other applicable laws. These rights will survive consummation of the Merger
and are intended to benefit, and will be enforceable by, each such person.
Reasonable Efforts. The Merger Agreement provides that, subject to the
terms and conditions thereof, the Company and Parent will use their reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by the Merger
Agreement. In furtherance and not in limitation of the foregoing, each of
Parent and Company agrees to make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated by the Merger Agreement as promptly as practicable and in any
event within ten business days of the date of the Merger Agreement and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and to take all other
actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
In connection with the efforts referenced in the foregoing paragraph to
obtain all requisite approvals and authorizations for the transactions
contemplated by the Merger Agreement under the HSR Act or any other Antitrust
Law (as defined below), each of Parent and Company will use its reasonable
efforts to (a) cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (b) keep the other party
informed in all material respects of any material communication received by
such party from, or given by such party to, the Federal Trade Commission (the
"FTC"), the Antitrust Division of the Department of Justice (the "Antitrust
Division") or any other governmental authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated by the
Merger Agreement and (c) permit the other party to review any material
communication given by it to, and consult with each other in advance of any
meeting or conference with, the FTC, the Antitrust Division or any such other
governmental authority or, in connection with any proceeding by a private
party, with any other person. For purposes of the Merger Agreement, "Antitrust
Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the Federal Trade Commission Act, as amended, and all other federal, state
and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition.
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Conditions to the Merger. The obligations of each of Parent, Purchaser and
the Company to consummate the Merger are subject to the satisfaction of certain
conditions, including: (a) if required by Tennessee Law, the approval and
adoption of the Merger Agreement by the shareholders of the Company; (b) the
expiration or termination of any applicable waiting period under the HSR Act;
(c) the consummation of the Merger not being prohibited by any applicable law,
regulation, judgment, injunction, order or decree; and (d) Purchaser's purchase
of the Shares pursuant to the Offer.
The obligations of Parent and Purchaser to consummate the Merger are
subject to the satisfaction of the following further conditions: (a) the
Company's performance in all material respects of its obligations under the
Merger Agreement required to be performed by the Company at or prior to the
Effective Time and (b) the receipt by Parent of all documents it might
reasonably request relating to the existence of the Company and any of its
subsidiaries and the authority of the Company for the Merger Agreement, all in
form and substance reasonably satisfactory to Parent.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of the Merger Agreement by the shareholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Offer has not been consummated on or before February
29, 2000; provided that the right to terminate the Merger
Agreement pursuant to this provision will not be available
to any party whose breach of the Merger Agreement results
in the failure of the Offer to be consummated by such time;
or
(ii) there is any law or regulation that makes acceptance for
payment of, and payment for, the Shares pursuant to the
Offer or consummation of the Merger illegal or otherwise
prohibited or any judgment, injunction, order or decree of
any court or governmental body having competent
jurisdiction enjoining Purchaser from accepting for payment
of, and paying for, the Shares pursuant to the Offer or the
Company or Parent from consummating the Merger and such
judgment, injunction, order or decree has become final and
nonappealable;
(c) by Parent, if, prior to acceptance for payment of the Shares
under the Offer:
(i) (A) the Board of Directors of the Company has failed
to recommend or withdrawn, or modified in a manner
adverse to Parent, its approval or recommendation of
the Merger Agreement, the Offer or the Merger, or has
recommended, or entered into, or publicly announced
its intention to enter into, an agreement or an
agreement in principle with respect to a Superior
Proposal or (B) the Company has breached any of its
obligations described under "No-Solicitation; Other
Offers" or "Shareholder Meeting; Proxy Materials"
above;
(ii) any person or "group" (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent or any of its
affiliates, has acquired or proposed to acquire
beneficial ownership of more than 50% of the Shares or
more than 50% of the assets of the Company and its
subsidiaries, taken as a whole, through the
acquisition of stock, the formation of a group or
otherwise, or has been granted any option, right or
warrant, conditional or otherwise, to acquire
beneficial ownership of such Shares or assets; or
(iii) Parent and Purchaser have terminated the Offer as a
result of the occurrence of any of the events set
forth in Section 16 of this Offer to Purchase;
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(d) by the Company, if (i) the Board of Directors of the Company
authorizes the Company to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal
and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version
of such agreement to such notice, (ii) Parent does not make, in
accordance with the no-solicitation provision described above,
within five business days of receipt of such written
notification, an offer that the Board of Directors of the
Company determines in good faith (after consultation with its
financial advisors), is at least as favorable, from a financial
point of view, to the shareholders of the Company as the
Superior Proposal and (iii) the Company pays to Parent in
immediately available funds, prior to such termination, the fees
required to be paid pursuant to the expenses provision of the
Merger Agreement, described below; provided however that if at
the time of such termination the Company has not entered into an
agreement with respect to a Superior Proposal, the Company will
not be obligated to pay such fees at such time but will
acknowledge in writing to Parent the Company's obligation to pay
to Parent such fees at such time as the Company does enter into
such an agreement; or
(e) by the Company, if (i) Parent has failed to commence the Offer
within five business days following the date of the Merger
Agreement or (ii) Parent has terminated the Offer without having
accepted any Shares (or all Shares validly tendered pursuant to
the Offer) for payment thereunder; provided that the right to
terminate the Merger Agreement under either clause (i) or clause
(ii) will not be available to the Company if (A) the Company's
breach of any provision of the Merger Agreement results in the
failure of the Offer to be commenced or consummated or (B) such
failure to so commence the Offer or to accept any Shares (or all
Shares validly tendered pursuant to the offer) for payment will
have resulted from the existence of any of the conditions
specified in paragraphs (e) or (f) of Section 16 of this Offer
to Purchase.
In the event of the termination of the Merger Agreement, the Merger
Agreement will become void and have no effect, without any liability on the
part of any party (or any shareholder, director, officer, employee, agent,
consultant or representative of such party) thereto other than certain
provisions of the Merger Agreement relating to director and officer liability,
termination, survival of representations and warranties, expenses, governing
law, jurisdiction and waiver of jury trial; provided that a party will not be
relieved from liability for willful (a) failure to fulfill a condition to the
performance of the obligations of the other party, (b) failure to perform a
covenant or (c) breach of any representation or warranty or agreement in the
Merger Agreement.
Termination Fee. Pursuant to the Merger Agreement, if (a) Parent
terminates the Merger Agreement pursuant to clause (c)(i) or (c)(ii) under
"Termination" above, or (b) the Company terminates the Merger Agreement
pursuant to clause (d) under "Termination" above, the Company will pay to
Parent a fee of $5.5. million, by wire transfer of immediately available funds
not later than the date of termination of the Agreement; provided however that
if at the time of such termination the Company has not entered into an
agreement with respect to a Superior Proposal, the Company shall not be
obligated to pay such fee at such time but shall acknowledge in writing to
Parent the Company's obligation to pay to Parent such fee at such time as the
Company does enter into such an agreement.
If (a) Parent terminates the Merger Agreement pursuant to clause (b)(i)
under "Termination" above and (b) the condition in section (f) in Section 16 of
this Offer to Purchase relating to the Company's obligations, representations
and warranties shall exist, then the Company will pay to Parent an amount up to
$750,000 for Parent's reasonable expenses, by wire transfer of immediately
available funds not later than three business days after the date of
termination of the Merger Agreement.
If (a) Parent commits a breach of the Merger Agreement that results in
failure of the Offer to be consummated, the condition in section (f) in Section
16 of this Offer to Purchase relating to the Company's obligations,
representations and warranties shall not exist, and the Company terminates the
Merger Agreement pursuant to clause (b)(i) under "Termination" above, or (b)
the Company terminates the Merger Agreement pursuant to clause (e) under
"Termination" above, then Parent will pay to the Company an amount up to
$750,000 for Company's
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reasonable expenses, by wire transfer of immediately available funds not later
than three business days after the date of termination of the Merger Agreement.
If either the Company or Parent fails promptly to pay any amount due to
the other party as described in the preceding paragraphs, it shall also pay any
costs and expenses incurred by such other party in connection with a legal
action to enforce the Merger Agreement that results in any judgment or
settlement against either the Company or Parent, as the case may be, for such
amount.
Expenses. Except as discussed above, the Merger Agreement provides that
all costs and expenses incurred in connection with the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
costs and expenses.
Amendments; No Waivers. Except as described in this Offer to Purchase, any
provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each of the Purchaser, Parent and
Company or, in the case of a waiver, by each party against whom the waiver is
to be effective.
No failure or delay by any party in exercising any right, power or
privilege under the Merger Agreement will operate as a waiver thereof nor will
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided in the Merger Agreement will be cumulative and not exclusive
of any rights or remedies provided by law.
Employment Matters
In connection with the Merger, Ms. Diane V. Missel will enter into an
employment agreement pursuant to which she will serve as president of the
Surviving Corporation. The agreement will provide for an annual base salary of
$350,000, a target bonus opportunity of 50% of base salary, the grant of
options to purchase 60,000 shares of Parent at their fair market value on the
grant date, and certain other benefits. The agreement will also contain
noncompetition and other customary provisions, and provide for severance
benefits upon certain employment terminations following a change of control.
In connection with the Merger, Mr. David C. Forell will enter into an
employment agreement pursuant to which he will serve as chief operating officer
and chief financial officer of the Surviving Corporation. The agreement will
provide for an annual base salary of $340,000, a target bonus opportunity of
40% of base salary, the grant of options to purchase 60,000 shares of Parent at
their fair market value on the grant date, and certain other benefits. The
agreement will also contain noncompetition and other customary provisions, and
provide for severance benefits upon certain employment terminations following a
change of control.
Confidentiality Agreement
On October 12, 1999, Parent and the Company entered into a Confidentiality
Agreement containing customary provisions pursuant to which, among other
matters, Parent agreed to keep confidential all non-public, confidential or
proprietary information furnished to it by the Company relating to the Company,
subject to certain exceptions (the "Evaluation Material"), and to use the
Evaluation Material solely in connection with evaluating a possible transaction
involving the Company and Parent. In consideration of Parent commencing due
diligence and entering into good faith negotiations with the Company regarding
a possible transaction, the Company agreed to deal exclusively with Parent in
connection with a sale of the Company or any of its subsidiaries or assets for
four weeks from the date of the Confidentiality Agreement. The parties agreed
to be bound by the terms of the Confidentiality Agreement for two years from
the date thereof.
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<PAGE>
12. Purpose of the Offer; Plans for the Company.
Purpose of the Offer. The purpose of the Offer is to acquire for cash as
many outstanding Shares as possible as a first step in acquiring the entire
equity interest in the Company. The purpose of the Merger is to acquire all
outstanding shares not tendered and purchased pursuant to the Offer. Purchaser
currently intends, as soon as practicable after consummation of the Offer, to
seek proportional representation on the Company's Board of Directors and
consummate the Merger.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions
and which may under certain circumstances be applicable to the Merger or
another business combination following the purchase of Shares pursuant to the
Offer in which Purchaser seeks to acquire the remaining Shares not held by it.
Purchaser believes, however, that Rule 13e-3 is not applicable to the Merger.
Rule 13e-3 requires, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority shareholders in
such transaction, be filed with the Commission and disclosed to shareholders
prior to consummation of the transaction.
Shareholder Approval. Under Tennessee Law, the approval of the Company's
Board of Directors and the affirmative vote of the holders of a majority of the
outstanding Shares are required to approve and adopt the Merger Agreement and
the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement and
the consummation by the Company of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the approval and adoption of the Merger by the shareholders
of the Company in accordance with Tennessee Law. In addition, the Company has
represented that the affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any of the Company's
capital stock necessary in connection with the consummation of the Merger.
Therefore, unless the Merger is consummated in accordance with the short-form
merger provisions under Tennessee Law described below (in which case no action
by the shareholders of the Company will be required to consummate the Merger),
the only remaining corporate action of the Company will be the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the affirmative vote of the holders of a majority of the Shares. The Merger
Agreement provides that Parent will vote all Shares beneficially owned by it in
favor of the adoption of the Merger Agreement at the Company shareholder's
meeting. If the Minimum Tender Condition is satisfied, Purchaser will have
sufficient voting power to approve the Merger Agreement at the shareholders'
meeting without the affirmative vote of any other shareholder.
Short-Form Merger. Under Tennessee Law, if a parent corporation owns at
least 90% of the outstanding shares of each class of a subsidiary corporation,
the merger of the parent corporation into the subsidiary corporation may be
effected without the approval of the shareholders of the subsidiary
corporation. If Purchaser acquires, pursuant to the Offer or otherwise, at
least 90% of the outstanding Shares, Purchaser will be able to effect the
Merger without a vote of the Company's other shareholders. In such event,
Parent, Purchaser and the Company have agreed to, at the request of Parent,
take all necessary and appropriate action to cause the Merger to be effective
as soon as practicable after the acceptance for payment and purchase of Shares
pursuant to the Offer without a meeting of shareholders of the Company in
accordance with Tennessee Law.
Dissenters' Rights. Under Tennessee Law, holders of Shares do not have
dissenters' rights as a result of either the Offer or the Merger.
Plans for the Company. In connection with its consideration of the Offer,
Parent has made a preliminary review, and will continue to review, on the basis
of available information, various possible business strategies that it might
consider in the event that it acquires control of the Company. Parent intends
to operate the Company as a separate business unit of Parent and to consolidate
Parent's Modern Woman chain of retail stores into the Company's concept,
resulting in a nationwide chain of approximately 540 women's large-size
specialty apparel stores. Parent currently estimates that up to $5 million, $8
million and $10 million of cost saving synergies may be achieved in fiscal
years 2000, 2001 and 2002, respectively, as a result of the transaction.
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Except as described above or elsewhere in this Offer to Purchase, Parent
has no present plans or proposals that would relate to or result in an
extraordinary corporate transaction involving the Company or any of its
subsidiaries (such as a merger, reorganization, liquidation, relocation of any
operations or sale or other transfer of a material amount of assets), any
change in the Company's Board of Directors or management, any material change
in the Company's capitalization or dividend policy or any other material change
in the Company's corporate structure or business.
13. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing(s); Registration under the Exchange Act. The purchase of Shares
pursuant to the Offer will reduce the number of Shares that might otherwise
trade publicly and may reduce the number of holders of Shares, which could
adversely affect the liquidity and market value of the remaining Shares held by
shareholders other than Purchaser. Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or marketability
of, the Shares or whether such reduction would cause future market prices to be
greater or less than the Offer price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in the NASDAQ
National Market System. If, as a result of the purchase of Shares pursuant to
the Offer, the Shares no longer meet the criteria for continuing inclusion in
the NASDAQ National Market System, the market for the Shares could be adversely
affected. According to NASDAQ's published guidelines, the Shares would not meet
the criteria for continued inclusion in the NASDAQ's National Market System if,
among other things, the number of publicly-held Shares were less than 200,000,
the aggregate market value of the publicly-held Shares were less than
$2,000,000 or there were less than two market makers for the Shares. If these
standards were not met, quotations might continue to be published in the
over-the-counter "additional list" or one of the "local lists" unless, as set
forth in NASDAQ's published guidelines, the number of publicly-held Shares
(excluding Shares held by officers, directors and beneficial owners of more
than 10% of the Shares) were less than 100,000, there were fewer than 300
holders in total, or there were not at least one market maker for the Shares.
If the Shares are no longer eligible for NASDAQ quotation, quotations might
still be available from other sources. The extent of the public market for the
Shares and availability of such quotations would, however, depend upon such
factors as the number of holders and/or the aggregate market value of the
publicly-held Shares at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the
Commission if the Shares are neither listed on a national securities exchange
nor held by 300 or more holders of record. Termination of the registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the requirement
of furnishing a proxy statement pursuant to Section 14(a) in connection with a
shareholder's meeting and the related requirement of an annual report to
shareholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares.
Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or eligible for listing or NASDAQ
reporting. Purchaser intends to seek to cause the Company to terminate
registration of the Shares under the Exchange Act as soon after consummation of
the Offer as the requirements for termination of registration of the Shares are
met.
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14. Dividends and Distributions. If on or after November 15, 1999, the
Company should split, combine or otherwise change the Shares or its
capitalization, acquire or otherwise cause a reduction in the number of
outstanding Shares or issue or sell any additional Shares (other than Shares
issued pursuant to and in accordance with the terms in effect on November 15,
1999 of employee stock options outstanding prior to such date), shares of any
other class or series of capital stock, other voting securities or any
securities convertible into, or options, rights, or warrants, conditional or
otherwise, to acquire, any of the foregoing, then, without prejudice to
Purchaser's rights under Section 16, Purchaser may, in its sole discretion,
make such adjustments in the purchase price and other terms of the Offer as it
deems appropriate, including the number or type of securities to be purchased.
If, on or after November 15, 1999, the Company should declare or pay any
dividend on the Shares or any distribution with respect to the Shares
(including the issuance of additional Shares or other securities or rights to
purchase of any securities) that is payable or distributable to shareholders of
record on a date prior to the transfer to the name of Purchaser or its nominee
or transferee on the Company's stock transfer records of the Shares purchased
pursuant to the Offer, then, without prejudice to Purchaser's rights under
Section 16, (a) the purchase price per Share payable by Purchaser pursuant to
the Offer will be reduced to the extent of any such cash dividend or
distribution and (b) the whole of any such non-cash dividend or distribution to
be received by the tendering shareholders will (i) be received and held by the
tendering shareholders for the account of Purchaser and will be required to be
promptly remitted and transferred by each tendering shareholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of such exercise will
promptly be remitted to Purchaser. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as
owner of any such non-cash dividend or distribution or proceeds thereof and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Purchaser in its sole discretion.
15. Extension of Tender Period; Termination; Amendment. Purchaser reserves
the right to waive the Minimum Tender Condition and the other conditions to the
Offer and to make any change in the terms or conditions of the Offer, except
that, Purchaser shall not, without the consent of the Company (a) change the
form of consideration payable in the Offer, (b) reduce the price per Share to
be paid pursuant to the Offer, (c) reduce the number of Shares subject to the
Offer or (d) impose conditions to the Offer that are broader than or in
addition to those set forth in the Offer. Notwithstanding the foregoing,
Purchaser may, without the consent of the Company, extend the Offer (x) from
time to time if, at the scheduled or extended expiration date of the Offer, any
of the conditions to the Offer shall not have been satisfied or waived, until
such conditions are satisfied or waived; provided that if any of the conditions
to the Offer is not satisfied or waived on any scheduled expiration date of the
Offer, Purchaser shall extend the Offer, if such condition or conditions could
reasonably be expected to be satisfied, for one additional period of 20
business days, (y) for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer or any period required by applicable law and (z) on one or more
occasions (all such occasions aggregating not more than 10 business days)
beyond the latest expiration date that would otherwise be permitted under
clause (x) or (y) of this sentence, if, on such expiration date, the number of
Shares tendered (and not withdrawn) pursuant to the Offer, together with the
Shares then owned by Parent, represents less than 90% of the outstanding Shares
on a fully-diluted basis.
If, with the prior written consent of the Company, Purchaser decreases the
percentage of Shares being sought or increases or decreases the consideration
to be paid for Shares pursuant to the Offer and the Offer is scheduled to
expire at any time before the expiration of a period of 10 business days from,
and including, the date that notice of such increase or decrease is first
published, sent or given in the manner specified below, the Offer will be
extended until the expiration of such period of 10 business days. If Purchaser
makes a material change in the terms of the Offer (other than a change in price
or percentage of securities sought) or in the information concerning the Offer,
or waives a material condition of the Offer, Purchaser will extend the Offer,
if required by applicable law, for a period sufficient to allow shareholders to
consider the amended terms of the Offer. In a published release, the Commission
has stated that in its view an offer must remain open for a minimum period of
time following a material change in the terms of such offer and that the waiver
of a condition such as the Minimum Tender Condition is a material change in the
terms of an offer. The release states that an offer should remain open for a
minimum of five business days from the date the material change is first
published, sent or given to security holders, and that if material
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changes are made with respect to information that approaches the significance
of price and share levels, a minimum of 10 business days may be required to
allow adequate dissemination and investor response. The term "business day"
shall mean any day other than Saturday, Sunday or a federal holiday and shall
consist of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
Purchaser also reserves the right, in its sole discretion, in the event
any of the conditions specified in Section 16 shall not have been satisfied and
so long as Shares have not theretofore been accepted for payment, to delay
(except as otherwise required by applicable law) acceptance for payment of or
payment for Shares or to terminate the Offer and not accept for payment or pay
for Shares.
If Purchaser extends the period of time during which the Offer is open, is
delayed in accepting for payment or paying for Shares or is unable to accept
for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under the Offer, the Depositary may, on
behalf of Purchaser, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in Section 4. The reservation by
Purchaser of the right to delay acceptance for payment of or payment for Shares
is subject to applicable law, which requires that Purchaser pay the
consideration offered or return the Shares deposited by or on behalf of
shareholders promptly after the termination or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which Purchaser may choose to make any public announcement, Purchaser
will have no obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service. In the case of an
extension of the Offer, Purchaser will make a public announcement of such
extension no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
16. Certain Conditions of the Offer. Notwithstanding any other provision
of the Offer, Purchaser shall not be required to accept for payment or pay for
any Shares, and may terminate the Offer as provided in Section 15, (A) at any
time after the date that is 20 business days from the initial scheduled
expiration date, if (x) the Minimum Tender Condition has not been satisfied by
the expiration date of the Offer or (y) the applicable waiting period under the
HSR Act shall not have expired or been terminated by the expiration date of the
Offer, and (B) at any time on or after the date of the Merger Agreement and
prior to the expiration date of the Offer, if any of the following conditions
exist:
(a) there shall be instituted or pending any action or proceeding by
any government or governmental authority or agency, domestic or foreign,
or by any other person, domestic or foreign, before any court or
governmental authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, to delay materially or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, the acceptance
for payment of or payment for some of or all the Shares by Parent or
Purchaser or the consummation of the Merger, seeking to obtain material
damages or otherwise directly or indirectly relating to the transactions
contemplated by the Offer or the Merger, (ii) seeking to restrain or
prohibit Parent's ownership or operation (or that of its respective
subsidiaries or affiliates) of all or any material portion of the business
or assets of the Company and its subsidiaries, taken as a whole, or of
Parent and its subsidiaries, taken as a whole, or to compel Parent or any
of its subsidiaries or affiliates to dispose of or hold separate all or
any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or of Parent and its subsidiaries, taken
as a whole, (iii) seeking to impose or confirm material limitations on the
ability of Parent, Purchaser or any of Parent's other subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or
owned by Parent, Purchaser or any of Parent's other subsidiaries or
affiliates on all matters properly presented to the Company's
shareholders, (iv) seeking to require divestiture by Parent, Purchaser or
any of Parent's other subsidiaries or affiliates of any Shares or (v) that
otherwise, in the good faith judgment of Parent, is likely to have a
Material Adverse Effect on the Company or Parent; or
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<PAGE>
(b) there shall have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by
any court, government or governmental authority or agency, domestic or
foreign, other than the application of the waiting period provisions of
the HSR Act to the Offer or the Merger, that, in the good faith judgment
of Parent, is likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a)
above; or
(c) there has been any event, occurrence or development or state of
circumstances or facts which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on the
Company; or
(d) it shall have been publicly disclosed or Parent shall have
otherwise learned that any person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or any of its affiliates,
shall have acquired or proposed to acquire beneficial ownership of more
than 50% of the Shares or more than 50% of the assets of the Company and
its subsidiaries, taken as a whole, through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted any option,
right or warrant, conditional or otherwise, to acquire beneficial
ownership of such Shares or assets; or
(e) the Board of Directors of the Company shall have failed to
recommend or withdrawn, or modified in a manner adverse to Parent, its
approval or recommendation of the Merger Agreement, the Offer or the
Merger, or shall have recommended, or entered into, or publicly announced
its intention to enter into, an agreement or an agreement in principle
with respect to a Superior Proposal (or shall have resolved to do any of
the foregoing) or the Company shall have breached any of its obligations
described under "Shareholder Meeting; Proxy Material" or "No Solicitation;
Other Offers" above; or
(f) the Company shall have breached or failed to perform in all
material respects any of its obligations under the Merger Agreement, or
any of the representations and warranties of the Company contained in the
Merger Agreement (i) that are qualified by materiality or Material Adverse
Effect shall not be true when made or at any time prior to consummation of
the Offer as if made at and as of such time and (ii) that are not
qualified by materiality or Material Adverse Effect shall not be true in
all material respects when made or at any time prior to the consummation
of the Offer as if made at and as of such time; or
(g) there shall have occurred any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or
in the over-the-counter market, any declaration of a banking moratorium by
Federal or New York authorities or general suspension of payments in
respect of lenders that regularly participate in the U.S. market in loans
to large corporations, any material limitation by any Federal, state or
local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency in the United States
that materially affects the extension of credit generally by lenders that
regularly participate in the U.S. market in loans to large corporations,
any commencement of a war involving the United States or any commencement
of armed hostilities or other national or international calamity involving
the United States that has a material adverse effect on bank syndication
or financial markets in the United States or, in the case of any of the
foregoing occurrences existing on or at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(h) the Merger Agreement shall have been terminated in accordance
with its terms;
which, in the sole good faith judgment of Parent in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
27
<PAGE>
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Parent and
Purchaser in whole or in part at any time and from time to time in their
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right that may be asserted at any time
and from time to time prior to the Effective Time.
17. Certain Legal Matters; Regulatory Approvals.
General. Based on its examination of publicly available information filed
by the Company with the Commission and other publicly available information
concerning the Company, Purchaser is not aware of any governmental license or
regulatory permit that appears to be material to the Company's business that
might be adversely affected by Purchaser's acquisition of Shares as
contemplated herein or, except as set forth below, of any approval or other
action by any government or governmental administrative or regulatory authority
or agency, domestic or foreign, that would be required for the acquisition or
ownership of Shares by Purchaser as contemplated herein. Should any such
approval or other action be required, Purchaser currently contemplates that
such approval or other action will be sought. Except as described under
"Antitrust" below, there is, however, no current intent to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions
or that if such approvals were not obtained or such other actions were not
taken adverse consequences might not result to the Company's business or
certain parts of the Company's business might not have to be disposed of, any
of which could cause Purchaser to elect to terminate the Offer without the
purchase of Shares thereunder. Purchaser's obligation under the Offer to accept
for payment and pay for Shares is subject to certain conditions. See Section
16.
State Takeover Statutes. A number of states have adopted laws that
purport, to varying degrees, to apply to attempts to acquire corporations that
are incorporated in, or which have substantial assets, shareholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws. Except as
described herein, Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer or any merger or other business combination
between Purchaser or any of its affiliates and the Company and has not complied
with any such laws. To the extent that certain provisions of these laws purport
to apply to the Offer or any such merger or other business combination,
Purchaser believes that there are reasonable bases for contesting such laws.
If any government official or third party should seek to apply any state
takeover law to the Offer or any merger or other business combination between
Purchaser or any of its affiliates and the Company, Purchaser will take such
action as then appears desirable, which action may include challenging the
applicability or validity of such statute in appropriate court proceedings. In
the event it is asserted that one or more state takeover statutes is applicable
to the Offer or any such merger or other business combination and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or any such merger or other business combination,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities or holders of Shares, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer or
any such merger or other business combination. In such case, Purchaser may not
be obligated to accept for payment or pay for any tendered Shares. See Section
16.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The purchase
of Shares pursuant to the Offer is subject to such requirements.
Pursuant to the requirements of the HSR Act, Purchaser will file a
Notification and Report Form with respect to the Offer with the Antitrust
Division and the FTC on or about November 19, 1999. As a result, the waiting
28
<PAGE>
period applicable to the purchase of Shares pursuant to the Offer is expected
to expire at 11:59 P.M., New York City time, fifteen (15) days after such
filing. However, prior to such time, the Antitrust Division or the FTC may
extend the waiting period by requesting additional information or documentary
material relevant to the Offer from Purchaser. If such a request is made, the
waiting period will be extended until 11:59 P.M., New York City time, on the
tenth day after substantial compliance by Purchaser with such request.
Thereafter, such waiting period can be extended only by court order.
A request is being made pursuant to the HSR Act for early termination of
the waiting period applicable to the Offer. There can be no assurance, however,
that the 15-day HSR Act waiting period will be terminated early. Shares will
not be accepted for payment or paid for pursuant to the Offer until the
expiration or earlier termination of the applicable waiting period under the
HSR Act. See Section 16. Subject to Section 4, any extension of the waiting
period will not give rise to any withdrawal rights not otherwise provided for
by applicable law. If Purchaser's acquisition of Shares is delayed pursuant to
a request by the Antitrust Division or the FTC for additional information or
documentary material pursuant to the HSR Act, the Offer must be extended, as
necessary, through February 3, 2000 and thereafter, may, but need not, be
extended.
The Antitrust Division and the FTC frequently scrutinize the legality
under the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant to
the Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Purchaser or the Company. Private parties (including
individual states) may also bring legal actions under the antitrust laws.
Purchaser does not believe that the consummation of the Offer will result in a
violation of any applicable antitrust laws. However, there can be no assurance
that a challenge to the Offer on antitrust grounds will not be made, or if such
a challenge is made, what the result will be. See Section 16 for certain
conditions to the Offer, including conditions with respect to litigation and
certain governmental actions.
18. Fees and Expenses. Lazard Freres is acting as financial advisor to
Parent in connection with the proposed acquisition of the Company and is acting
as Dealer Manager in connection with the Offer. Purchaser has agreed to pay
Lazard Freres as compensation for its services as financial advisor and as
Dealer Manager in connection with the Offer a fee of $1,750,000. Purchaser has
also agreed to reimburse Lazard Freres for certain reasonable out-of-pocket
expenses incurred in connection with the Offer (including the fees and
disbursements of outside counsel) and to indemnify Lazard Freres against
certain liabilities, including certain liabilities under the federal securities
laws.
Purchaser has retained Georgeson Shareholder Communications Inc. to act as
the Information Agent and ChaseMellon Shareholder Services, L.L.C. to act as
the Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone and personal interviews and may request
brokers, dealers and other nominee shareholders to forward materials relating
to the Offer to beneficial owners. The Information Agent and the Depositary
each will receive reasonable and customary compensation for their respective
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities in connection therewith,
including certain liabilities under the federal securities laws.
Neither Parent nor Purchaser will pay any fees or commissions to any
broker or dealer or any other person (other than the Dealer Manager, the
Information Agent and the Depositary) for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by Purchaser for reasonable and necessary costs and
expenses incurred by them in forwarding materials to their customers.
19. Miscellaneous. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares in any jurisdiction in which
the making of the Offer or acceptance thereof would not be in compliance with
the laws of such jurisdiction. However, Purchaser may, in its discretion, take
such action as it may
29
<PAGE>
deem necessary to make the Offer in any such jurisdiction and extend the Offer
to holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the offices of the Commission in the manner set forth in Section 7 of this
Offer to Purchase (except that such information will not be available at the
regional offices of the Commission).
Rose Merger Sub, Inc.
November 19, 1999
30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
1. Directors and Executive Officers of Parent. The name, business
address, present principal occupation or employment and five-year employment
history of each director and executive officer of Parent and certain other
information are set forth below. Unless otherwise indicated below, the address
of each director and officer is 450 Winks Lane, Bensalem, PA 19020. Where no
date is shown, the individual has occupied the position indicated for the past
five years. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Parent. All directors and officers
listed below are citizens of the United States, except for Erna Zint, who is a
citizen of Austria. Directors are identified by an asterisk.
<TABLE>
Name and Business Address Present Principal Occupation or Employment and Five-Year Employment History
- ------------------------- ---------------------------------------------------------------------------
<S> <C>
Dorrit J. Bern* Chairman of the Board of Directors since January 1997. Prior to that, Ms. Bern
served as Vice Chairman of the Board of Directors from September 1995 to January
1997. She has also served as President and Chief Executive Officer since
September 1995. Prior to that, she served as Group Vice President of Women's
Apparel and Home Fashions at Sears, Roebuck & Co. from December 1993 to August
1995.
Joseph L. Castle, II* Chairman of the Board of Directors for the period March 21, 1996 through
January 30, 1997. Mr. Castle has served as Chairman of the Board of Castle
Energy Corporation ("CEC") since December 1993. He has also served as
President, Chief Executive Officer and a Director of CEC since December
1985 and was President and Chairman of the Board of Directors of its
predecessor (which merged with a subsidiary of CEC in December 1985) from
February 1981 through December 1985. He is also a Director of Comcast
Corporation.
Charles T. Hopkins* Mr. Hopkins was associated with KPMG LLP, a public accounting firm, from
1966 until his retirement in March 1999. During his term at KPMG, Mr.
Hopkins served as an audit partner and a Securities and Exchange Commission
reviewing partner. From 1993 until 1998, he served as the Managing Partner
of KPMG's Philadelphia business unit. Mr. Hopkins is a Director of the
Pennsylvania Economy League.
Pamela S. Lewis* Professor of Management and Dean of the Bennett S. LeBow College of
Business at Drexel University since June 1997. From 1987 to 1997, Dr. Lewis
served as Chairman of the Department of Management at the University of
Central Florida. Dr. Lewis is a Director of C & D Technologies, Inc.,
Transitional Work, Inc. and the Pennsylvania Economy League.
Marjorie Margolies-Mezvinsky* Chair of the Women's Campaign International since March 1998. Ms.
Margolies-Mezvinsky has also served as President of the Women's Campaign
Fund and the Women's Campaign Research Fund from March 1996 to
February 1998. In 1995 she served as Director of the United States Delegation
to the United Nations Fourth World Conference on Women. From 1992 to
1994, she served as the United States representative from Pennsylvania's 13th
Congressional District in the 103rd Congressional Session. From 1971 to
1991, Ms. Margolies-Mezvinsky was a television journalist with NBC and its
owned and operated stations in both New York and Washington, D.C.
I-1
<PAGE>
Kenneth S. Olshan* Member of the Board of Directors of Footstar, Inc. and Saatchi & Saatchi PLC.
Mr. Olshan served as Chairman and Chief Executive Officer of Wells Rich Greene
BDDP from 1990 until 1995. He also served as Chairman of Wells Rich Greene
Advertising from 1982 to 1990 when the agency was acquired by BDDP, a
Paris-based global communications group.
Alan Rosskamm* Chairman of the Board of Directors, President and Chief Executive Officer of
Jo-Ann Stores, Inc. (formerly Fabri-Centers of America, Inc.).
Marvin L. Slomowitz* Chief Executive Officer, President and Chairman of the Board of Directors of
Mark Development Company, a shopping center developer. Mr. Slomowitz
also served as Chairman of the Board, President and Chief Executive Officer
of Mark Centers Trust (the "Trust"), which is the general partner of Mark
Centers Limited Partnership (the "Partnership"), from June 1993 until August
1998 when the Trust and Partnership combined their real estate interests with
the real estate interests of certain other entities and changed their names to
Acadia Realty Trust and Acadia Realty Limited Partnership, respectively. Mr.
Slomowitz has continued as a member of the Board of Trustees of Acadia
Realty Trust, which is principally engaged in the development of shopping
centers.
Anthony A. DeSabato Executive Vice President and Corporate Director of Human Resources.
Carmen Monaco Vice President - Marketing since May 1997. Prior to that, Mr. Monaco served
as Vice President - Marketing/Advertising at Goody's Family Clothing Inc.
from August 1992 to May 1997.
Eric M. Specter Executive Vice President - Chief Financial Officer since January 1997. Mr.
Specter has also served as Treasurer since February 1998. Prior to that he
served as Vice President - Chief Financial Officer from December 1995 to
January 1997. Prior to that, he served as Vice President - Corporate
Controller. Mr. Specter is a Director of the Pennsylvania Economy League.
Colin D. Stern Executive Vice President and General Counsel. Mr. Stern has also served as
Secretary since February 1998.
John J. Sullivan Vice President - Corporate Controller since October 1998. Prior to that, Mr.
Sullivan served as Senior Vice President and Chief Financial Officer of National
Media Corp. from January 1998 to October 1998 and from September 1991 to April
1995, and as Senior Vice President of Administration from April 1995 to January
1998.
Elizabeth Williams Executive Vice President - Merchandising since October 1995. Prior to that, Ms.
Williams served as Divisional Vice President - Misses Sportswear and Special
Sizes at Sears, Roebuck & Co. from February 1994 to October 1995 and as
Divisional Merchandise Manager from August 1990 to February 1994.
Erna Zint Executive Vice President - Sourcing since January 1996. Prior to that, Ms. Zint
served as Corporate Vice President - Southeast Asia Operations for Leslie Fay
Companies, Inc. from December 1990 to December 1995.
</TABLE>
I-2
<PAGE>
2. Directors and Executive Officers of Purchaser. The name, business
address, present principal occupation or employment and five-year employment
history of each director and executive officer of Purchaser and certain other
information are set forth below. Unless otherwise indicated below, the address
of each director and officer is 450 Winks Lane, Bensalem, PA 19020. Where no
date is shown, the individual has occupied the position indicated for the past
five years. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Purchaser. All directors and
officers listed below are citizens of the United States. Directors are
identified by an asterisk.
<TABLE>
Name and Business Address Present Principal Occupation or Employment and Five-Year Employment History
- ------------------------- ---------------------------------------------------------------------------
<S> <C>
Eric M. Specter* President of Purchaser since the company was founded. Mr. Specter has been
Executive Vice President - Chief Financial Officer of Parent since January 1997.
He has also served as Treasurer of Parent since February 1998. Prior to that he
served as Vice President - Chief Financial Officer of Parent from December 1995
to January 1997. Prior to that, he served as Vice President Corporate Controller
of Parent. Mr. Specter is a Director of the Pennsylvania Economy League.
Colin D. Stern* Vice President and Secretary of Purchaser since the company was founded.
Mr. Stern is the Executive Vice President and General Counsel of Parent. He
has also served as Secretary of Parent since February 1998.
</TABLE>
I-3
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop-Reorg New York, NY 10271
Attn: Reorganization Department Ridgefield Park, NJ 07660 Attn: Reorganization Department
Attn: Reorganization Department
By Facsimile Transmission
(for Eligible Institutions only):
(201) 296-4293
Confirm By Telephone:
(201) 296-4860
</TABLE>
Questions or requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth below. Shareholders may also contact their broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
GEORGESON
SHAREHOLDER
COMMUNICATIONS INC.
17 State Street
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
Call Toll-Free: (800) 223-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717
Exhibit (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
CATHERINES STORES CORPORATION
Pursuant to the Offer to Purchase
Dated November 19, 1999
by
ROSE MERGER SUB, INC.
a wholly owned subsidiary of
CHARMING SHOPPES, INC.
at
$21.00 NET PER SHARE
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON THURSDAY, JANUARY 6, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To: ChaseMellon Shareholder Services, L.L.C., Depositary
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop-Reorg New York, NY 10271
Attn: Reorganization Department Ridgefield Park, NJ 07660 Attn: Reorganization Department
Attn: Reorganization Department
By Facsimile Transmission
(for Eligible Institutions only):
(201) 296-4293
Confirm By Telephone:
(201) 296-4860
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions to a facsimile number other than the
ones listed above will not constitute a valid delivery.
<TABLE>
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Shares Tendered
(Please fill in, if blank) (Attach additional list if necessary)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Number of Shares Number of
Certificate Represented by Shares
Number(s)* Certificate(s)* Tendered**
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Total Shares
- ----------------------------------------------------------------------------------------------------------------------
- ---------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
</TABLE>
<PAGE>
This Letter of Transmittal is to be used if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery of Shares (as defined below) is to be made by
book-entry transfer to the Depositary's account at The Depository Trust Company
(the "Book Entry Transfer Facility") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase.
Shareholders who cannot deliver their Shares and all other documents
required hereby to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) must tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account No. at The Depository Trust Company
---------------------------------
Transaction Code No.
-------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Shareholder(s)
----------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------
Name of Institution which Guaranteed Delivery
------------------------------
If delivery is by book-entry transfer:
Name of Tendering Institution
-----------------------------------------
Account No. at The Depository Trust Company
---------------------------------
Transaction Code No.
-------------------------------------------------------
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Rose Merger Sub, Inc., a Tennessee
corporation (the "Purchaser") and a wholly owned subsidiary of Charming Shoppes,
Inc., a Pennsylvania corporation, the above-described shares of Common Stock,
$0.01 par value (the "Shares"), of Catherines Stores Corporation, a Tennessee
corporation (the "Company"), pursuant to the Purchaser's offer to purchase all
outstanding Shares at a price of $21.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated November 19, 1999, receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer"). Tendering
shareholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. Purchaser and Parent will
pay all charges and expenses of Lazard Freres & Co. LLC (the "Dealer Manager"),
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") and Georgeson
Shareholder Communications Inc. (the "Information Agent") incurred in connection
with the Offer. Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of its affiliates the right to
purchase Shares tendered pursuant to the Offer.
Upon the terms and subject to the terms and conditions of the Offer and
effective upon acceptance for payment of and payment for the Shares tendered
herewith, the undersigned hereby sells, assigns and transfers to or upon the
order of the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares or other securities
issued or issuable in respect thereof on or after November 15, 1999 and appoints
the Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and all such other Shares or securities), with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (a) deliver certificates for such Shares
(and all such other Shares or securities), or transfer ownership of such Shares
(and all such other Shares or securities) on the account books maintained by the
Book-Entry Transfer Facility, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser,
(b) present such Shares (and all such other Shares or securities) for transfer
on the books of the Company and (c) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares (and all such other Shares or
securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Eric M. Specter, President of
Purchaser, and Colin D. Stern, Vice President and Secretary of Purchaser, and
each of them, the attorneys and proxies of the undersigned, each with full power
of substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his sole
discretion deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Purchaser prior to the time of any vote or
other action (and any and all other Shares or other securities issued or
issuable in respect thereof on or after November 15, 1999), at any meeting of
shareholders of the Company (whether annual or special and whether or not an
adjourned meeting), by written consent or otherwise. This proxy is irrevocable
and is granted in consideration of, and is effective upon, the acceptance for
payment of such Shares by the Purchaser in accordance with the terms of the
Offer. Such acceptance for payment shall revoke any other proxy or written
consent granted by the undersigned at any time with respect to such Shares (and
all such other Shares or securities), and no subsequent proxies will be given or
written consents will be executed by the undersigned (and if given or executed,
will not be deemed to be effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after November 15, 1999 and that when the same
are accepted for payment by Purchaser, Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby (and all such other Shares
or securities).
3
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned (and, in
the case of Shares tendered by book-entry transfer, by credit to the account at
the Book-Entry Transfer Facility designated above). Similarly, unless otherwise
indicated under "Special Delivery Instructions", please mail the check for the
purchase price of any Shares purchased and any certificates for Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the check for the purchase price of
any Shares purchased and return any Shares not tendered or not purchased in the
name(s) of, and mail said check and any certificates to, the person(s) so
indicated. The undersigned recognizes that Purchaser has no obligation, pursuant
to the "Special Payment Instructions", to transfer any Shares from the name of
the registered holder(s) thereof if Purchaser does not accept for payment any of
the Shares so tendered.
4
<PAGE>
<TABLE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7) (See Instructions 5, 6 and 7)
<S> <C>
To be completed ONLY if the check for the Purchase To be completed ONLY if the check for the Purchase
Price of Shares purchased (less the amount of any Price of Shares purchased the amount of any
federal income and backup withholding tax required to federal income and backup withholding tax required to
be withheld) or certificates for Shares not tendered or be withheld) or certificates for Shares not tendered or
not purchased are to be issued in the name of someone not purchased are to be mailed to someone other than
other than the undersigned. the undersigned or to the undersigned at an address
other than that shown below the undersigned's
signature(s).
Mail [ ] check Mail [ ] check
[ ] certificates to: [ ] certificates to:
Name Name
................................................ ................................................
(Please Print) (Please Print)
Address Address
............................................. .............................................
.................................................... ....................................................
(Zip Code) (Zip Code)
....................................................
(Taxpayer Identification No.)
(Also Complete Substitute Form W-9 on Page 7)
</TABLE>
5
<PAGE>
- -------------------------------------------------------------------------------
SIGN HERE
(Please complete Substitute Form W-9 on page 7)
..........................................................
..........................................................
Signature(s) of Owners
Dated ,
.......................................... ..........
Name(s)
....................................................
..........................................................
(Please Print)
Capacity (full title)
.....................................
Address
...................................................
..........................................................
(Include Zip Code)
- --> Area Code and Telephone Number <--
............................
(Must be signed by registered holder(s) exactly
as name(s) appear(s) on stock certificate(s) or
on a security position listing or by person(s)
authorized to become registered holder(s) by
certificates and documents transmitted herewith.
If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent,
officer of a corporation or other person acting
in a fiduciary or representative capacity, please
set forth full title and see Instruction 5.)
Guarantee of Signatures(s), if required
(See Instructions 1 and 5)
Name of Firm
.............................................
Authorized Signature
.....................................
Dated ,
....................................... ............
- -------------------------------------------------------------------------------
6
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Payer: ChaseMellon Shareholder Services, L.L.C.
<S> <C> <C>
SUBSTITUTE
FORM W-9 Part I Taxpayer Identification No.-- For All Accounts Part II For Payees Exempt
....................................................................... From Backup With-
holding (see
enclosed Guidelines)
Department of the Treasury Enter your taxpayer identification ------------------------------
Internal Revenue Service number in the appropriate box. For
most individuals and sole proprietors, ------------------------------
this is your Social Security Number. Social Security Number
For other entities, it is your Employer
Payer's Request for Identification Number. If you do not OR
Taxpayer Identification No. have a number, see "How to Obtain a
TIN" in the enclosed Guidelines. ------------------------------
Note: If the account is in more than
one name, see the chart on page 2 of ------------------------------
the enclosed Guidelines to determine Employee Identification Number
what number to enter.
- -----------------------------------------------------------------------------------------------------------------------------------
Certification -- Under penalties of perjury, I certify that:
<S> <C>
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me)
and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer identification number within (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been notified
by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and
(3) Any information provided on this form is true, correct and complete.
SIGNATURE________________________________________________________ DATE______________________________________________,____
- -----------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
</TABLE>
7
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is
a member of a recognized Medallion Program approved by The Securities Transfer
Associations, Inc. (an "Eligible Institution"). Signatures on this Letter of
Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed
by the registered holder(s) of the Shares (which term, for purposes of this
document, shall include any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered herewith and such holder(s) have not completed the instruction
entitled "Special Payment Instructions" on this Letter of Transmittal or (b) if
such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if delivery of Shares is to be made
by book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof or, in the case of a book-entry transfer, an Agent's Message) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter
of Transmittal by the Expiration Date. Shareholders who cannot deliver their
Shares and all other required documents to the Depositary by the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a)
such tender must be made by or through an Eligible Institution, (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by the Purchaser must be received by the Depositary by the
Expiration Date and (c) the certificates for all physically delivered Shares,
or a confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantee (or, in the case of a book-entry
delivery, an Agent's Message) and any other documents required by this Letter
of Transmittal, must be received by the Depositary within three NASDAQ trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase.
The method of delivery of Shares and all other required documents is at
the option and risk of the tendering shareholder and the delivery will be
deemed made only when actually received by the Depositary (including, in the
case of a book-entry transfer, by a timely confirmation). If certificates for
Shares are sent by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or facsimile thereof), the tendering shareholder waives any right to receive
any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by
book-entry transfer). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
8
<PAGE>
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby is held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
Shares not tendered or not purchased are to be returned, in the name of any
person other than the registered holder(s). Signatures on any such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), or if a transfer tax is imposed for
any reason other than the sale or transfer of Shares to Purchaser pursuant to
the Offer, then the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted herewith.
7. Special Payment and Delivery Instructions. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other
than the person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that
shown on page 1, the appropriate boxes on this Letter of Transmittal should be
completed. Shareholders tendering Shares by book-entry transfer may request
that Shares not purchased be credited to such account at any of the Book-Entry
Transfer Facilities as such shareholder may designate under "Special Payment
Instructions". If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facilities
designated above.
8. Substitute Form W-9. Under the federal income tax laws, the Depositary
will be required to withhold 31% of the amount of any payments made to certain
shareholders pursuant to the Offer. In order to avoid such backup withholding,
each tendering shareholder, and, if applicable, each other payee, must provide
the Depositary with such shareholder's or payee's correct taxpayer
identification number and certify that such shareholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth on
page 7. In general, if a shareholder or payee is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Depositary is not provided with the correct taxpayer identification number, the
shareholder or payee may be subject to a $50 penalty imposed by the Internal
Revenue Service. Certain shareholders or payees (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order to satisfy the Depositary that
a foreign individual qualifies as an exempt recipient, such shareholder or
payee must submit a statement, signed under penalties of perjury, attesting to
that individual's exempt status. Such statements can be obtained from the
Depositary. For further information concerning backup withholding and
instructions for completing the Substitute Form W-9 (including how to obtain a
taxpayer identification number if you do not have one and how to complete the
Substitute Form W-9 if
9
<PAGE>
Shares are held in more than one name), consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the Offer. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained provided that the required information is furnished to
the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE
SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS
MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
9. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal
may be obtained from the Information Agent or the Dealer Manager at their
respective addresses or telephone numbers set forth below.
10
<PAGE>
The Information Agent for the Offer is:
GEORGESON
SHAREHOLDER
COMMUNICATIONS INC.
17 State Street
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717
Exhibit (a)(3)
NOTICE OF GUARANTEED DELIVERY
For
Tender of Shares of Common Stock
of
CATHERINES STORES CORPORATION
to
ROSE MERGER SUB, INC.
a wholly owned subsidiary of
CHARMING SHOPPES, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent to
this form, must be used to accept the Offer (as defined below) if the shares of
Common Stock, $0.01 par value, of Catherines Stores Corporation and all other
documents required by the Letter of Transmittal cannot be delivered to the
Depositary by the expiration of the Offer. This Notice of Guaranteed Delivery
may be delivered by hand, facsimile transmission or mail to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services, ChaseMellon Shareholder
L.L.C. L.L.C. Services, L.L.C.
P.O. Box 3301 120 Broadway, 13th Floor 85 Challenger Road - Mail Drop - Reorg
South Hackensack, NJ 07606 New York, NY 10271 Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission
(for Eligible Institutions only):
(201) 296-4293
To Confirm Facsimile Transmission Only:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE)
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Rose Merger Sub, Inc., a Tennessee
corporation ("Purchaser") and a wholly owned subsidiary of Charming Shoppes,
Inc., a Pennsylvania corporation, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 19, 1999 and the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, _______________ shares of Common Stock, $0.01 par value
(the "Shares"), of Catherines Stores Corporation, a Tennessee corporation,
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase.
Certificate Nos. (if available) SIGN HERE
- ----------------------------------- ----------------------------------------
Signature(s)
- ----------------------------------- ----------------------------------------
Name(s) (Please Print or Type)
If Shares will be tendered by book-entry transfer:
Name of Tendering Institution
----------------------------------------
Address
- ----------------------------------- ----------------------------------------
Zip Code
Account No.
------------------------ ----------------------------------------
at The Depository Trust Company Area Code and Telephone No.
Dated:
--------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., or
a commercial bank or trust company having an office or correspondent in the
United States, guarantees (a) that the above named person(s) "own(s)" the
Shares tendered hereby within the meaning of Rule 14e-4 under the Securities
Exchange Act of 1934, (b) that such tender of Shares complies with Rule 14e-4
and (c) to deliver to the Depositary the Shares tendered hereby, together with
a properly completed and duly executed Letter(s) of Transmittal (or
facsimile(s) thereof) or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery and any other required
documents, all within three NASDAQ trading days of the date hereof.
- -------------------------------------- ---------------------------------------
Name of Firm Authorized Signature
Name:
- -------------------------------------- -----------------------------------
Address (Please Print or Type)
Title:
- -------------------------------------- ----------------------------------
Zip Code (Please Print or Type)
Area Code and
Telephone Number: Dated:
--------------------- ----------------------------------
NOTE: Do not send Share certificates with this Notice of Guaranteed Delivery.
Share certificates should be sent with your Letter of Transmittal.
3
Exhibit (a)(4)
Lazard Freres & Co. LLC
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CATHERINES STORES CORPORATION
by
ROSE MERGER SUB, INC.
a wholly owned subsidiary
of
CHARMING SHOPPES, INC.
at
$21.00 NET PER SHARE
November 19, 1999
To Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees:
We have been appointed by Rose Merger Sub, Inc., a Tennessee corporation
(the "Purchaser") and a wholly owned subsidiary of Charming Shoppes, Inc., a
Pennsylvania corporation, to act as Dealer Manager in connection with its offer
to purchase all outstanding shares of Common Stock, $0.01 par value (the
"Shares"), of Catherines Stores Corporation, a Tennessee corporation (the
"Company"), at $21.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase dated
November 19, 1999 and the related Letter of Transmittal (which together
constitute the "Offer").
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated November 19, 1999;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer; and
5. Return envelope addressed to the Depositary.
<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5 P.M., NEW YORK CITY TIME, ON
THURSDAY, JANUARY 6, 2000, UNLESS THE OFFER IS EXTENDED.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager, the Information Agent or the
Depositary as described in the Offer to Purchase) for soliciting tenders of
Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse
brokers, dealers, commercial banks and trust companies for reasonable and
necessary costs and expenses incurred by them in forwarding materials to their
customers. Purchaser will pay all stock transfer taxes applicable to its
purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
In order to accept the Offer, a duly executed and properly completed
Letter of Transmittal and any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
delivery of Shares, and any other required documents, should be sent to the
Depositary by 5 P.M., New York City time, on Thursday, January 6, 2000.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover of the Offer to Purchase.
Very truly yours,
LAZARD FRERES & CO. LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF ROSE MERGER SUB, INC., CHARMING SHOPPES, INC., THE DEALER MANAGER,
THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON
TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
2
Exhibit (a)(5)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CATHERINES STORES CORPORATION
by
ROSE MERGER SUB, INC.
a wholly owned subsidiary
of
CHARMING SHOPPES, INC.
at
$21.00 NET PER SHARE
November 19, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated November
19, 1999 and the related Letter of Transmittal (which together constitute the
"Offer") in connection with the offer by Rose Merger Sub, Inc., a Tennessee
corporation (the "Purchaser") and a wholly owned subsidiary of Charming
Shoppes, Inc., a Pennsylvania corporation (the "Parent"), to purchase for cash
all outstanding shares of Common Stock, $0.01 par value (the "Shares"), of
Catherines Stores Corporation, a Tennessee corporation (the "Company"). We are
the holder of record of Shares held for your account. A tender of such Shares
can be made only by us as the holder of record and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares held by us for your
account.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal.
Your attention is invited to the following:
1. The tender price is $21.00 per Share, net to you in cash.
2. The Offer and withdrawal rights expire at 5 P.M., New York City time,
on Thursday, January 6, 2000, unless the Offer is extended.
3. The Board of Directors of the Company has approved the Offer and the
Merger, determined that each of the Offer and the Merger (each as
defined in the Offer) is fair to, and in the best interests of, the
Company and its shareholders and recommends that the Company's
shareholders tender their Shares pursuant to the Offer.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as
defined in the Offer) a number of Shares which, together with the
Shares then owned by the Purchaser and the Parent, represents at
least a majority of the total number of outstanding Shares on a
fully-diluted basis.
<PAGE>
5. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser,
except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing, detaching and returning to us the
instruction form on the following page. An envelope to return your instructions
to us is enclosed. If you authorize tender of your Shares, all such Shares will
be tendered unless otherwise specified on the instruction form. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf by the expiration of the Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") of (a) Share certificates or timely confirmation of the
book-entry transfer of such Shares into the account maintained by the
Depositary at The Depository Trust Company (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering shareholders
at the same time depending upon when certificates for or confirmations of
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility are actually received by the Depositary.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
of
CATHERINES STORES CORPORATION
by
ROSE MERGER SUB, INC.
a wholly owned subsidiary
of
CHARMING SHOPPES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated November 19, 1999 and the related Letter of Transmittal
(which together constitute the Offer), in connection with the offer by Rose
Merger Sub, Inc. to purchase for cash all outstanding shares of Common Stock,
$0.01 par value per share (the "Shares"), of Catherines Stores Corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered: SIGN HERE
Shares*
- ------------------------------ ----------------------------------------
Signature(s)
Dated ,
------------------ ------ ----------------------------------------
----------------------------------------
----------------------------------------
Please print name(s) and address(es) here
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by
us for your account are to be tendered.
3
Exhibit (a)(6)
FORM OF GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
For this type of account: Give the TAXPAYER
IDENTIFICATION
number of--
- -------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, the first
individual on the
account(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or guardian
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
8. Sole proprietorship account The owner(4)
<PAGE>
For this type of account: Give the TAXPAYER
IDENTIFICATION
number of--
- -------------------------------------------------------------------------------
9. A valid trust, estate, or The legal entity (do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title) (5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district, or prison) that
receives agricultural
program payments
- ---------
(1) List first and circle the name of the person whose number you furnish.
(2) the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also your business name. You may use
either your Social Security Number or Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), or Form W-7, Application for International
Taxpayer Identification Number (for U.S. resident aliens), at the local office
or Website of the Social Security Administration or the Internal Revenue
Service and apply for a number.
Payees Exempt from Backup Withholding
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except those identified in item (9). For broker transactions,
payees listed in items (1) through (13) and a person registered under the
Investment Advisors Act of 1940 who regularly acts as a broker are exempt.
Payments subject to reporting under Sections 6041 and 6041A of the Internal
Revenue Code (the "Code") are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a) of the Code, an IRA,
or a custodial account under Section 403(b)(7) of the Code if the account
satisfies the requirements of Section 401(f)(2).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States, the District of Columbia or a possession of the
United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all items during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under Section 584(a) of the Code.
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of
Corporation Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under Section 664 of the Code or described in
Section 4947 of the Code.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding
under U.C. Section 1441.
o Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one
nonresident partner.
o Payments of patronage dividends where the amount
received is not paid in money.
o Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-
interest dividends under U.C. Section 852).
o Payments described in U.C. Section 6049(b)(5) to
nonresident aliens.
o Payments on tax-free covenant bonds under U.C.
Section 1451.
o Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to
avoid possible erroneous backup withholding. FILE THIS
FORM WITH THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under U.C. Sections 6041,
6041A(a), 6045, and 6050A.
Privacy Act Notice.--Section 6109 of the Code requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer. Certain penalties
may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
2
Exhibit (a)(7)
CHARMING SHOPPES, INC. AGREES TO ACQUIRE
CATHERINES STORES CORPORATION
Bensalem, PA, November 15, 1999 - Charming Shoppes, Inc. [NASDAQ: CHRS]
announced today that it has entered into a definitive merger agreement to
acquire Catherines Stores Corporation [NASDAQ: CATH]. The boards of directors
of both companies have approved the transaction. Closing is expected to occur
during January, 2000, subject to the fulfillment of certain conditions.
Pursuant to the agreement, a subsidiary of Charming Shoppes will make a cash
tender offer for all outstanding shares of common stock of Catherines Stores
Corporation at $21.00 per share. The cost of acquiring the outstanding shares
of common stock of Catherines Stores Corporation, on a fully diluted basis, is
approximately $150 million.
Catherines operates 436 retail apparel stores in 40 states and the District of
Columbia, specializing in large-size women's apparel, under the names
Catherine's, PS...Plus Sizes, Plus Savings, Added Dimensions, and The Answer.
The stores are primarily located in strip shopping centers, in the Southeast,
Mid-Atlantic and the Eastern Central regions of the United States.
Charming Shoppes plans to operate Catherines Stores Corporation as a separate
division, and to consolidate its Modern Woman chain of retail stores into the
Catherines concept, resulting in a nationwide chain of women's large-size
specialty apparel of more than 500 stores. After the acquisition, Charming
Shoppes, Inc. will operate over 1,700 stores throughout the United States with
revenues in excess of $1.4 billion. Charming Shoppes expects accretion to
earnings in the fiscal year ending February 3, 2001, as a result of the
acquisition of Catherines.
Dorrit J. Bern, CEO and President of Charming Shoppes, said, "The benefits of
this acquisition are many. Charming Shoppes immediately becomes a leading
provider of large-size fashion, a segment that continues to outpace the overall
growth of the women's apparel market. This combination provides us with an
enhanced platform to strengthen and accelerate our large-size growth strategy.
In addition to synergies and efficiencies in our buying and administrative
functions, we also achieve improved geographic diversity of our store base and
resulting revenue stream."
The offer is conditioned upon, among other things, at least a majority of the
shares being properly tendered and not withdrawn prior to the expiration of the
offer. The tender offer is scheduled to expire at 5:00 p.m., New York time, on
January 6, 2000, unless otherwise extended.
Charming Shoppes expects that the necessary filings with the Securities and
Exchange Commission in connection with the tender offer will be made later this
week and that offer documents will be mailed to Catherines shareholders
promptly thereafter. Lazard Freres & Co. LLC represented Charming Shoppes in
this transaction.
Charming Shoppes, Inc., operates over 1,300 stores in 47 states under the names
"Fashion Bug", "Fashion Bug Plus", and "Modern Woman."
<PAGE>
Please note: Charming Shoppes will accelerate its release of 3rd Quarter 1999
earnings to tomorrow, Tuesday, November 16, 1999. The 3rd Quarter earnings
release was previously scheduled to be on Thursday, November 18, 1999.
This release may contain certain forward-looking statements concerning the
Company's operations, performance, and financial condition including, in
particular, certain forward-looking statements regarding sales performance,
store openings and closings, and other matters. Such forward-looking statements
are subject to various risks and uncertainties that could cause actual results
to differ materially from those indicated. Such risks and uncertainties may
include, but are not limited to, failure to realize merger-related synergies,
rapid changes in or miscalculation of fashion trends, extreme or unseasonable
weather conditions, economic downturns, a weakness in overall consumer demand,
disruption to operations as a result of Year 2000 compliance issues, and
competitive pressures. Certain of these, and other risks and uncertainties, are
detailed in the Company's filings with the Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999.
CONTACT: Gayle M. Coolick
Director of Investor Relations
(215) 638-6955
Exhibit (a)(8)
This announcement is not an offer to purchase or a solicitation of an offer to
sell Shares. The Offer is made solely by the Offer to Purchase dated November
9, 1999 and the related Letter of Transmittal and is not being made to, nor
will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or acceptance thereof
would not be in compliance with the laws of such jurisdiction. In
those jurisdictions where the applicable laws require that the
Offer be made by a licensed broker or dealer, the Offer shall
be deemed to be made on behalf of Purchaser by Lazard Freres
& Co. LLC, the Dealer Manager, or one or more registered
brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Catherines Stores Corporation
at
$21.00 Net Per Share
by
Rose Merger Sub, Inc.
a wholly owned subsidiary of
Charming Shoppes, Inc.
Rose Merger Sub, Inc., a Tennessee corporation (the "Purchaser") and a
wholly owned subsidiary of Charming Shoppes, Inc., a Pennsylvania corporation
(the "Parent"), hereby offers to purchase all outstanding shares of Common
Stock, $0.01 par value (the "Shares"), of Catherines Stores Corporation, a
Tennessee corporation (the "Company"), at $21.00 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated November 19, 1999 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
THURSDAY, JANUARY 6, 2000, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of November 15, 1999 (the "Merger Agreement") among the Company, the Parent
and the Purchaser. The Merger Agreement provides, among other things, that as
soon as practicable after the consummation of the Offer and satisfaction or
waiver of all conditions to the Merger, the Purchaser will be merged with and
into the Company (the "Merger"), with the Company surviving. Pursuant to the
Merger, each outstanding Share (other than Shares held by the Company as
treasury stock or Shares held by the Parent or any of its subsidiaries) will
be converted into and represent the right to receive $21.00 in cash, without
interest.
The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the Expiration Date (as defined in
the Offer to Purchase) a number of Shares which, together with the Shares then
owned by Purchaser and Parent, would represent at least a majority of the
total number of outstanding Shares on a fully diluted basis (the "Minimum
Tender Condition") and (2) any waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), having expired
or terminated.
The Board of Directors of the Company has approved the Offer and the
Merger, determined that each of the Offer and the Merger is fair to, and in
the best interests of, the Company and its shareholders and recommends that
the Company's shareholders tender their Shares pursuant to the Offer.
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. The Offer is subject to certain conditions set forth
in the Offer to Purchase, including satisfaction of the Minimum Tender
Condition and expiration or termination of the waiting period applicable to
Purchaser's acquisition of Shares pursuant to the Offer under the HSR Act. If
any such condition is not satisfied, except as provided in the Merger
Agreement, Purchaser may (a) terminate the Offer and return all tendered
Shares to tendering shareholders, (b) extend the Offer and, subject to
withdrawal rights as set forth in the Offer to Purchase, retain all such
Shares until the expiration of the Offer as so extended, (c) waive such
condition and, subject to any requirement to extend the period of time during
which the Offer is open, purchase all Shares validly tendered by the
Expiration Date and not withdrawn or (d) delay acceptance for payment or
payment for Shares, subject to applicable law, until satisfaction or waiver of
the conditions to the Offer.
Subject to the terms of the Merger Agreement, the Purchaser reserves the
right, at any time or from time to time, to extend the period of time during
which the Offer is open by giving oral or written notice of such extension to
ChaseMellon Shareholder Services Inc., L.L.C. (the "Depositary"). The
Purchaser will make a public announcement of such extension no later than 9:00
A.M., New York City time, on the next business day after the previously
scheduled expiration date.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment Shares tendered when, as and if Purchaser gives oral or written notice
to the Depositary of its acceptance of the tenders of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase)), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after January 17, 2000 unless theretofore accepted
for payment as provided in the Offer to Purchase. To be effective, a written
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth in the Offer to Purchase and must
specify the name of the person who tendered the Shares to be withdrawn and the
number of Shares to be withdrawn and the name of the registered holder of the
Shares, if different from that of the person who tendered such Shares. If the
Shares to be withdrawn have been delivered to the Depositary, a signed notice
of withdrawal with (except in the case of Shares tendered by an Eligible
Institution (as defined in the Offer to Purchase)) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering shareholder) and the serial numbers shown on the particular
certificates evidencing the Shares to
<PAGE>
be withdrawn or, in the case of Shares tendered by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the awithdrawn Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided the Purchaser with the Company's shareholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and Letter of Transmittal contain important
information which should be read before any decision is made with respect to
the Offer.
Requests for copies of the Offer to Purchase and the related Letter of
Transmittal and other tender offer materials may be directed to the
Information Agent or the Dealer Manager as set forth below, and copies will be
furnished promptly at the Purchaser's expense.
The Information Agent for the Offer is:
GEORGESON
SHAREHOLDER
COMMUNICATIONS INC.
17 State Street
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
Call Toll-Free: (800) 223-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (call collect)
November 19, 1999
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
dated as of
November 15, 1999
among
Catherines Stores Corporation
Charming Shoppes, Inc.
and
Rose Merger Sub, Inc.
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
ARTICLE 2
THE OFFER
SECTION 2.01. The Offer......................................................6
SECTION 2.02. Company Action.................................................8
SECTION 2.03. Directors......................................................9
ARTICLE 3
THE MERGER
SECTION 3.01. The Merger....................................................10
SECTION 3.02. Conversion of Shares..........................................10
SECTION 3.03. Surrender and Payment.........................................11
SECTION 3.04. Stock Options.................................................12
SECTION 3.05. Employee Stock Purchase Plan..................................12
SECTION 3.06. Adjustments...................................................13
SECTION 3.07. Withholding Rights............................................13
SECTION 3.08. Lost Certificates.............................................13
ARTICLE 4
THE SURVIVING CORPORATION
SECTION 4.01. Charter.......................................................13
SECTION 4.02. Bylaws........................................................13
SECTION 4.03. Directors and Officers........................................14
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01. Corporate Existence and Power.................................14
SECTION 5.02. Corporate Authorization.......................................14
SECTION 5.03. Governmental Authorization....................................14
SECTION 5.04. Non-contravention.............................................15
SECTION 5.05. Capitalization................................................15
i
<PAGE>
PAGE
- ----
SECTION 5.06. Subsidiaries..................................................16
SECTION 5.07. SEC Filings...................................................17
SECTION 5.08. Financial Statements..........................................18
SECTION 5.09. Disclosure Documents..........................................18
SECTION 5.10. Absence of Certain Changes....................................19
SECTION 5.11. No Undisclosed Material Liabilities...........................21
SECTION 5.12. Compliance with Laws and Court Orders.........................21
SECTION 5.13. Material Contracts............................................22
SECTION 5.14. Non-Compete Agreements........................................22
SECTION 5.15. Litigation....................................................22
SECTION 5.16. Title to Properties...........................................22
SECTION 5.17. Intellectual Property.........................................23
SECTION 5.18. Year 2000 Readiness...........................................24
SECTION 5.19. Finders' Fees.................................................24
SECTION 5.20. Taxes.........................................................24
SECTION 5.21. Employee Benefit Plans........................................26
SECTION 5.22. Environmental Matters.........................................29
SECTION 5.23. Other Information.............................................29
SECTION 5.24. Antitakeover Statutes and Rights Agreement....................30
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 6.01. Corporate Existence and Power.................................30
SECTION 6.02. Corporate Authorization.......................................30
SECTION 6.03. Governmental Authorization....................................30
SECTION 6.04. Non-contravention.............................................31
SECTION 6.05. Disclosure Documents..........................................31
SECTION 6.06. Finders' Fees.................................................31
SECTION 6.07. Financing.....................................................32
ARTICLE 7
COVENANTS OF THE COMPANY
SECTION 7.01. Conduct of the Company........................................32
SECTION 7.02. Shareholder Meeting; Proxy Material...........................34
SECTION 7.03. No Solicitation; Other Offers.................................35
SECTION 7.04. Access to Information.........................................36
SECTION 7.05. Bonus Acceleration............................................37
ii
<PAGE>
PAGE
- ----
ARTICLE 8
COVENANTS OF PARENT
SECTION 8.01. Obligations of Merger Subsidiary..............................37
SECTION 8.02. Voting of Shares..............................................37
SECTION 8.03. Director and Officer Liability................................37
ARTICLE 9
COVENANTS OF PARENT AND THE COMPANY
SECTION 9.01. Reasonable Efforts............................................38
SECTION 9.02. Certain Filings...............................................39
SECTION 9.03. Public Announcements..........................................40
SECTION 9.04. Further Assurances............................................40
SECTION 9.05. Notices of Certain Events.....................................40
SECTION 9.06. Merger Without Meeting of Shareholders........................41
ARTICLE 10
CONDITIONS TO THE MERGER
SECTION 10.01. Conditions to Obligations of Each Party......................41
SECTION 10.02. Conditions to the Obligations of Parent and
Merger Subsidiary.................................41
ARTICLE 11
TERMINATION
SECTION 11.01. Termination..................................................42
SECTION 11.02. Effect of Termination........................................44
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Notices......................................................44
SECTION 12.02. Survival of Representations and Warranties...................45
SECTION 12.03. Amendments; No Waivers.......................................45
SECTION 12.04. Expenses.....................................................46
SECTION 12.05. Successors and Assigns.......................................47
SECTION 12.06. Governing Law................................................47
SECTION 12.07. Jurisdiction.................................................47
SECTION 12.08. WAIVER OF JURY TRIAL.........................................48
iii
<PAGE>
PAGE
- ----
SECTION 12.09. Counterparts; Effectiveness; Benefit.........................48
SECTION 12.10. Entire Agreement.............................................48
SECTION 12.11. Captions.....................................................48
SECTION 12.12. Severability.................................................48
SECTION 12.13. Specific Performance.........................................48
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 15, 1999 among
Catherines Stores Corporation, a Tennessee corporation (the "Company"),
Charming Shoppes, Inc., a Pennsylvania corporation ("Parent"), and Rose Merger
Sub, Inc., a Tennessee corporation and a wholly owned subsidiary of Parent
("Merger Subsidiary").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" means any offer or proposal for, or any indication
of interest in, a merger, consolidation, share exchange, business combination
or other similar transaction involving the Company or any of its Subsidiaries
or any proposal or offer to acquire, directly or indirectly, any equity
interest in, any voting securities of, or a substantial portion of the assets
of, the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (whether or not written) providing for compensation, bonus,
profit-sharing, stock option, or other stock-related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits)
that (i) is not an Employee Plan, (ii) is entered into, maintained,
administered or contributed to, as the case may be, by the Company or any of
its Affiliates and (iii) covers any employee or former employee of the Company
or any of its Subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of January 30, 1999 and the footnotes thereto set forth in the
Company 10-K .
"Company Balance Sheet Date" means January 30, 1999.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended January 30, 1999.
"Employee Plan" means any "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by the Company or any of its
Affiliates and (iii) covers any employee or former employee of the Company or
any of its Subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company or any of its Subsidiaries
as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"First American Credit Facility" means the Amended and Restated Credit
Agreement dated as of February 27, 1998, among the Company, Catherines Stores
Corporation, Inc., Catherines of California, Inc., Catherines of Pennsylvania,
Inc., Catherines Partners, L.P., First American National Bank, individually and
in its capacity as Agent, Hibernia National Bank and Bank One, N.A., as amended
by the First Amendment to Amended and Restated Credit Agreement dated as of
January 12, 1999, and as further amended by Second Amendment to Amended and
Restated Credit Agreement dated as of June 3, 1999.
2
<PAGE>
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Intellectual Property" means domestic and foreign patents, trademarks,
servicemarks, trade names, jingles, phrases, symbols, labels, copyrights and
registrations and applications for any of the foregoing, and any other
intellectual property and proprietary information, including rights in
software, firmware, computer programs and data.
"Knowledge" means the actual knowledge of Bernard J. Wein and David C.
Forell, after reasonable inquiry.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on (i) the condition (financial or otherwise), business,
properties, assets, liabilities or results of operations of such Person and its
Subsidiaries, taken as a whole, except to the extent resulting from (a) any
change in general economic conditions, (b) any changes affecting the retail
clothing industry or the women's wear retail industry in general, or (c) the
public announcement of this Agreement or consummation of the transactions
contemplated hereby, it being agreed that, without limiting the generality of
the foregoing, a Material Adverse Effect will not be deemed to have occurred if
the cost of remediating such material adverse effect or the reduction in net
income from the net income projected in the Company's financial plan for the
fiscal year ending January 2000 previously disclosed to Parent resulting from
such material adverse effect, individually or in the aggregate, shall not
exceed (x) $2,000,000 in the case of the Company or (y) $10,000,000 in the case
of Parent; provided that, without regard to remediation costs or any such
reduction in net income, if 20% or more of the Company's stores are not
operating in the ordinary course for any three-day period commencing on or
after January 1, 2000 as a result of any Y2K related failure or other Y2K
related problem, there shall be a Material Adverse Effect with respect to the
Company, or (ii) the ability of such Person to perform its obligations under or
to consummate the transactions contemplated by this Agreement.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
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"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Post-Closing Tax Period" means any Tax period beginning after the
Effective Time; and, with respect to a Tax period that begins on or before the
Effective Time and ends thereafter, the portion of such Tax period beginning
after the Effective Time.
"Pre-Closing Tax Period" means any Tax period ending on or before the
Effective Time; and, with respect to a Tax period that begins on or before the
Effective Time and ends thereafter, the portion of such Tax period ending on
the Effective Time.
"SEC" means the Securities and Exchange Commission.
"Shares" means the shares of common stock, $0.01 par value, of the
Company.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at any time directly or
indirectly owned by such Person.
"Superior Proposal" means any bona fide, unsolicited written Acquisition
Proposal to acquire at least a majority of the outstanding Shares or all or
substantially all the assets of the Company, on terms that the Board of
Directors of the Company determines in good faith (based on, among other
things, the advice of a financial advisor of nationally recognized reputation)
to be more favorable to the Company's shareholders than the transactions
contemplated by this Agreement, taking into account all the terms and
conditions of the Acquisition Proposal, the financing therefor and after giving
effect to any revised proposal made by or on behalf of Parent prior to the end
of the five business day period referred to in Section 7.03(c).
"Tax" means (i) any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
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amounts paid to or by any Person), together with any interest, penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign), (ii) in the case of the Company or any of its Subsidiaries, liability
for the payment of any amount of the type described in clause (i) as a result
of being or having been before the Effective Time a member of an affiliated,
consolidated, combined or unitary group, or a party to any agreement or
arrangement, as a result of which liability of the Company or any of its
Subsidiaries to a Taxing Authority is determined or taken into account with
reference to the activities of any other Person, and (iii) liability of the
Company or any of its Subsidiaries for the payment of any amount as a result of
being party to any Tax Sharing Agreement or with respect to the payment of any
amount of the type described in (i) or (ii) as a result of any existing express
or implied agreement or arrangement (including, but not limited to, an
indemnification agreement or arrangement).
"Tax Asset" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
without limitation deductions and credits related to alternative minimum
Taxes).
"Tennessee Law" means the Tennessee Business Corporation Act.
"Title IV Plan" means an Employee Plan subject to Title IV of ERISA other
than any Multiemployer Plan.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
------- -------
Antitrust Law......................................... 9.01
Certificates.......................................... 3.03
Company............................................... 5.22
Company Disclosure Documents.......................... 5.09
Company Proxy Statement............................... 5.09
Company SEC Documents................................. 5.07
Company Securities.................................... 5.05
Company Subsidiary Securities......................... 5.06
Company Shareholder Meeting........................... 7.02
Company's Reasonable Expenses......................... 12.04
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Term Section
---- -------
Confidentiality Agreement............................. 7.04
DOJ................................................... 9.01
Effective Time........................................ 3.01
ESPP.................................................. 3.05
Exchange Agent........................................ 3.03
FTC................................................... 9.01
GAAP.................................................. 5.08
Indemnified Person.................................... 8.03
Merger................................................ 3.01
Merger Consideration.................................. 3.02
Minimum Condition..................................... 2.01
Offer................................................. 2.01
Offer Documents....................................... 2.01
Parent's Reasonable Expenses.......................... 12.04
Preferred Stock....................................... 5.05
Returns............................................... 5.20
Schedule 14D-1........................................ 2.01
Schedule 14D-9........................................ 2.02
Surviving Corporation................................. 3.01
System................................................ 5.18
Subsidiaries.......................................... 5.22
Year 2000 Ready....................................... 5.18
ARTICLE 2
THE OFFER
SECTION 2.01. The Offer. (a) Provided that nothing shall have occurred
that would result in a failure to satisfy any of the conditions set forth in
Annex I hereto, as promptly as practicable after the date hereof, but in no
event later than five business days following the public announcement of the
terms of this Agreement, Merger Subsidiary shall commence an offer (the
"Offer") to purchase all of the outstanding Shares at a price of $21.00 per
Share, net to the seller in cash. The Offer shall be subject to the condition
that there shall be validly tendered in accordance with the terms of the Offer,
immediately prior to the expiration date of the Offer and not withdrawn, a
number of Shares that, together with the Shares then owned by Parent and its
Subsidiaries, represents at least a majority of the Shares outstanding on a
fully-diluted basis (the "Minimum Condition") and to the other conditions set
forth in Annex I hereto. Merger Subsidiary expressly reserves the right to
waive the Minimum Condition or any of the other conditions to the Offer and to
make any change in the terms or conditions of the Offer; provided that no
change may be made that changes the
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form of consideration to be paid, decreases the price per Share or the number
of Shares sought in the Offer or imposes conditions to the Offer which are
broader than or in addition to those set forth in Annex I. The initial
scheduled expiration date of the Offer is January 6, 2000. Notwithstanding the
foregoing, without the consent of the Company, Merger Subsidiary shall have the
right to extend the Offer (i) from time to time if, at the scheduled or
extended expiration date of the Offer, any of the conditions to the Offer shall
not have been satisfied or waived, until such conditions are satisfied or
waived; provided that if any of the conditions to the Offer is not satisfied or
waived on any scheduled expiration date of the Offer, Merger Subsidiary shall
extend the Offer, if such condition or conditions could reasonably be expected
to be satisfied, for one additional period of 20 business days, (ii) for any
period required by any rule, regulation, interpretation or position of the SEC
or the staff thereof applicable to the Offer or any period required by
applicable law and (iii) on one or more occasions (all such occasions
aggregating not more than 10 business days) beyond the latest expiration date
that would otherwise be permitted under clause (i) or (ii) of this sentence,
if, on such expiration date, the number of Shares tendered (and not withdrawn)
pursuant to the Offer, together with the Shares then owned by Parent,
represents less than 90% of the outstanding Shares on a fully-diluted basis.
Subject to the foregoing and to the terms and conditions of the Offer, Merger
Subsidiary shall, and Parent shall cause it to, accept for payment and pay for,
as promptly as practicable after the expiration of the Offer, all Shares
properly tendered and not withdrawn pursuant to the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Parent and Merger Subsidiary shall file with the SEC a Tender Offer Statement
on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which will
contain the offer to purchase and form of the related letter of transmittal and
summary advertisement (such Schedule 14D-1 and such documents included therein
pursuant to which the Offer will be made, together with any supplements or
amendments thereto, the "Offer Documents"). Parent, Merger Subsidiary and the
Company each agrees promptly to correct any information provided by it for use
in the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect. Parent and Merger
Subsidiary agree to take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given an opportunity to review and comment on the Offer
Documents (and any amendments thereto) prior to their being filed with the SEC
or disseminated to the holders of Shares. Parent and Merger Subsidiary shall
provide the Company and its counsel with any comments or other communications
that Parent, Merger Subsidiary or their counsel may receive from time to time
from the SEC or its
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staff with respect to the Offer Documents promptly after receipt of such
comments or other communications.
SECTION 2.02. Company Action. (a) The Company hereby consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held
has (i) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to and in the best
interests of the Company's shareholders, (ii) approved and adopted this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the requirements of the Tennessee Law and (iii)
subject to Section 7.03(c), resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement and the Merger by its shareholders. The
Company further represents that J.C. Bradford & Co. has delivered to the
Company's Board of Directors its written opinion that the consideration to be
paid in the Offer and the Merger is fair to the holders of Shares from a
financial point of view. The Company has been advised that all of its directors
and its three top executive officers who own Shares intend either to tender
their Shares pursuant to the Offer or to vote in favor of the Merger. The
Company will promptly furnish Parent with a list of its shareholders, mailing
labels and any available listing or computer file containing the names and
addresses of all record holders of Shares and lists of securities positions of
Shares held in stock depositories, in each case true and correct as of the most
recent practicable date, and will provide to Parent such additional information
(including, without limitation, updated lists of shareholders, mailing labels
and lists of securities positions) and such other assistance as Parent may
reasonably request in connection with the Offer.
(b) As soon as practicable on the day that the Offer is commenced, the
Company shall file with the SEC and disseminate to holders of Shares, in each
case as and to the extent required by applicable federal securities laws, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "Schedule 14D-9") that, subject to
Section 7.03(c), shall reflect the recommendations of the Company's Board of
Directors referred to above. The Company, Parent and Merger Subsidiary each
agree promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect. The Company agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Parent and its counsel shall be
given an opportunity to review and comment on the Schedule 14D-9 (and any
amendments thereto) prior to its being filed with the SEC. The Company shall
provide to Parent and its counsel with any comments or other communications
that the Company or its counsel may
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receive from time to time from the SEC or its staff with respect to the
Schedule 14D-9 promptly after receipt of such comments or other communications.
SECTION 2.03. Directors. (a) Effective upon the acceptance for payment of
any Shares pursuant to the Offer, Parent shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the product of (i) the total number of directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of Shares beneficially owned by Parent and/or Merger Subsidiary
(including Shares accepted for payment) bears to the total number of Shares
outstanding, and the Company shall take all action necessary to cause Parent's
designees to be elected or appointed to the Company's Board of Directors,
including, without limitation, increasing the number of directors, and seeking
and accepting resignations of incumbent directors. At such time, the Company
will also use its best efforts to cause individuals designated by Parent to
constitute the number of members, rounded up to the next whole number, on (i)
each committee of the Board and (ii) each board of directors of each Subsidiary
of the Company (and each committee thereof) that represents the same percentage
as such individuals represent on the Board of Directors of the Company.
(b) The Company's obligations to appoint Parent's designees to the Board
of Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f- 1
promulgated thereunder. The Company shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors, as Section 14(f) and Rule 14f-1 require in order to
fulfill its obligations under this Section. Parent shall supply to the Company
in writing and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1.
(c) Following the election or appointment of Parent's designees pursuant
to Section 2.03(a) and until the Effective Time, the approval of a majority of
the directors of the Company then in office who were not designated by Parent
shall be required to authorize (and such authorization shall constitute the
authorization of the Board of Directors and no other action on the part of the
Company, including any action by any other director of the Company, shall be
required to authorize) any termination of this Agreement by the Company, any
amendment of this Agreement requiring action by the Board of Directors, any
extension of time for performance of any obligation or action hereunder by
Parent or Merger Subsidiary and any enforcement of or any waiver of compliance
with any of the agreements or conditions contained herein for the benefit of
the Company (and the
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directors designated by Parent shall leave any Board of Directors meeting for
the period during which such matters are being considered).
ARTICLE 3
THE MERGER
SECTION 3.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged (the "Merger") with and into the Company in accordance with
Tennessee Law, whereupon the separate existence of Merger Subsidiary shall
cease, and the Company shall be the surviving corporation (the "Surviving
Corporation").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file articles of merger with the Tennessee Secretary of State
and make all other filings or recordings required by Tennessee Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the articles of merger are duly filed with the Tennessee
Secretary of State or at such later time as is specified in the articles of
merger.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Tennessee Law.
SECTION 3.02. Conversion of Shares. At the Effective Time, each of the
following shall occur automatically by virtue of the Merger and without any
further action by Parent, Merger Subsidiary, the Company or holders of Shares:
(a) except as otherwise provided in Section 3.02(b), each Share
outstanding immediately prior to the Effective Time shall be converted into the
right to receive $21.00 in cash or any higher price paid for each share in the
Offer, without interest (the "Merger Consideration");
(b) each Share held by the Company as treasury stock or owned by Parent or
any of its Subsidiaries immediately prior to the Effective Time shall be
canceled and retired, and no payment shall be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
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and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 3.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") for the purpose of
exchanging certificates representing Shares (the "Certificates") for the Merger
Consideration. Parent will make available to the Exchange Agent, as needed, the
Merger Consideration to be paid in respect of the Shares. Such funds
constituting Merger Consideration shall be invested by the Exchange Agent as
directed by Parent or the Surviving Corporation. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each
holder of Shares at the Effective Time a letter of transmittal and instructions
(that shall specify that the delivery shall be effected, and risk of loss and
title shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) for use in such exchange.
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration will be entitled to receive, upon surrender to
the Exchange Agent of a Certificate, together with a properly completed letter
of transmittal, the Merger Consideration payable for each Share represented by
such Certificate. From and after the Effective Time, all Shares which have been
so converted shall no longer be outstanding and shall automatically be canceled
and retired, and each Certificate shall, after the Effective Time, represent
for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Article.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 3.03(a) (and any interest or other income earned
thereon) that remains unclaimed by the holders of Shares six months after
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the Effective Time shall be returned to Parent, upon demand, and any such
holder who has not exchanged Shares for the Merger Consideration in accordance
with this Section prior to that time shall thereafter look only to Parent for
payment of the Merger Consideration in respect of such Shares without any
interest thereon. Notwithstanding the foregoing, Parent shall not be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. To the extent permitted
by applicable law, any amounts remaining unclaimed by holders of Shares two
years after the Effective Time (or such earlier date immediately prior to such
time when the amounts would otherwise escheat to or become property of any
governmental authority) shall become the property of Parent free and clear of
any claims or interest of any Person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 3.03(a) to pay for Shares for which appraisal rights
have been perfected shall be returned to Parent, upon demand.
SECTION 3.04. Stock Options. At or immediately prior to the Effective
Time, each employee stock option to purchase Shares outstanding under any
employee stock option or compensation plan or arrangement of the Company,
whether or not vested or exercisable, shall be canceled, and the Company shall
pay each holder of any such option at or promptly after the Effective Time for
each such option an amount in cash determined by multiplying (i) the excess, if
any, of the Merger Consideration per Share over the applicable exercise price
of such option by (ii) the number of Shares such holder could have purchased
(assuming full vesting of all options) had such holder exercised such option in
full immediately prior to the Effective Time.
SECTION 3.05. Employee Stock Purchase Plan. (a) After the date hereof, no
new offering period shall commence under the Company's 1992 Employee Stock
Purchase Plan (the "ESPP") and after December 31, 1999 no further payroll
deductions will be made under the ESPP. At the end of the current payment
period, existing options shall be exercised in accordance with the ESPP. As of
the Effective Time, the ESPP shall be terminated, and the Company shall pay
each participant in any current offering thereunder, in cash at or promptly
after the Effective Time, in cancellation of all rights under the ESPP, the
amount of such participant's account balance under such plan, including
interest to the extent required under the terms of the ESPP.
(b) Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of the ESPP) that are necessary
to give effect to the transactions contemplated by Section 3.05(a).
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SECTION 3.06. Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding Shares shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of Shares, or stock dividend
thereon with a record date during such period, the cash payable pursuant to the
Offer, the Merger Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted.
SECTION 3.07. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article such amounts as it is
required to deduct and withhold with respect to the making of such payment
under any provision of federal, state, local or foreign tax law. If the
Surviving Corporation or Parent, as the case may be, so withholds amounts, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which the Surviving Corporation or
Parent, as the case may be, made such deduction and withholding.
SECTION 3.08. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
ARTICLE 4
THE SURVIVING CORPORATION
SECTION 4.01. Charter. The charter of Merger Subsidiary in effect at the
Effective Time shall be the charter of the Surviving Corporation until amended
in accordance with applicable law; provided that, at the Effective Time,
Paragraph 1 of such charter shall be amended to read as follows: "The name of
the corporation is Catherines Stores Corporation."
SECTION 4.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance with applicable law.
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SECTION 4.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that:
SECTION 5.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Tennessee and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not have, individually or in
the aggregate, a Material Adverse Effect on the Company. Except as set forth in
Schedule 5.01, the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on the Company. The Company has heretofore delivered to Parent
true and complete copies of the charter and bylaws of the Company as currently
in effect.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby are within the Company's corporate powers and,
except for the affirmative vote of the holders of a majority of the outstanding
Shares in connection with the consummation of the Merger (if required by law),
have been duly authorized by all necessary corporate action on the part of the
Company. The affirmative vote of the holders of a majority of the outstanding
Shares (if required by law) is the only vote of the holders of any of the
Company's capital stock necessary in connection with the consummation of the
Merger. This Agreement constitutes a valid and binding agreement of the
Company.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, domestic or foreign, other than (i) the filing of articles of merger
with respect to
14
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the Merger with the Tennessee Secretary of State and appropriate documents with
the relevant authorities of other states in which the Company is qualified to
do business, (ii) compliance with any applicable requirements of the HSR Act,
(iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act
and any other applicable securities or takeover laws, whether state or foreign,
and (iv) any actions or filings the absence of which would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
SECTION 5.04. Non-contravention. Except as set forth on Schedule 5.04, the
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene, conflict with, or result in any violation or breach of any
provision of the charter or bylaws or other organizational documents of the
Company or any of its Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 5.03, contravene, conflict with, or result in a
violation or breach of any provision of any applicable law, statute, ordinance,
rule, regulation, judgment, injunction, order or decree, (iii) require any
consent or other action by any Person under, constitute a default, or an event
that, with or without notice or lapse of time or both, would become a default,
under, or cause or permit the termination, cancellation, acceleration or other
change of any right or obligation or the loss of any benefit to which the
Company or any of its Subsidiaries is entitled under any provision of any
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Company and its Subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries,
except for such contraventions, conflicts and violations referred to in clause
(ii) and for such failures to obtain any such consent or other action,
defaults, terminations, cancellations, accelerations, changes, losses or Liens
referred to in clauses (iii) and (iv) that would not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 5.05. Capitalization. (a) The authorized capital stock of the
Company consists of 50,000,000 Shares and 1,000,000 shares of preferred stock,
$0.01 par value per share (the "Preferred Stock"). At the close of business on
November 10, 1999, there were outstanding 6,794,133 Shares, and employee stock
options to purchase an aggregate of 1,108,347 Shares (of which options to
purchase an aggregate of 714,725 Shares were exercisable). There are no
outstanding shares of Preferred Stock. Schedule 5.05(a) identifies (i) the
holders of each of the options, (ii) the number of options vested for each
holder, (iii) the option plan under which each option was issued, (iv) the
number of options held by such holder and (v) the exercise price of each of the
options. All outstanding shares of capital stock of the Company have been, and
all Shares that may be
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issued pursuant to the exercise of stock options will be, when issued in
accordance with the respective terms thereof, duly authorized and validly
issued and are fully paid and nonassessable.
(b) Except as set forth in Section 5.05(a) and on Schedule 5.05(b) and for
changes since November 10, 1999 resulting from the exercise of employee stock
options outstanding on such date, there are no outstanding (i) shares of
capital stock or voting securities of the Company, (ii) securities of the
Company or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock or voting securities of the Company, (iii) options, warrants,
calls, subscriptions, securities or other rights to acquire from the Company or
any of its Subsidiaries, and no preemptive or similar rights, subscriptions or
other rights, redemptive rights, repurchase rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
capital stock of the Company, obligating the Company or any of its Subsidiaries
to issue, transfer or sell, or to cause to be issued, transferred or sold, any
shares of capital stock, other equity interest, voting securities or securities
convertible into or exchangeable for shares of capital stock, other equity
interest or voting securities of the Company or obligating the Company or any
of its Subsidiaries to issue, grant, extend or enter into any such option,
warrant, call, subscription, security or other right, preemptive or similar
right, redemptive right, repurchase right, convertible security, agreement,
arrangement or commitment (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"), (iv) voting trusts,
proxies or other similar agreements or understandings to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound with respect to the voting of any shares of capital stock
of the Company or any of its Subsidiaries, or (v) contractual obligations or
commitments of any character restricting the transfer of, or requiring the
registration for sale of, any shares of capital stock of the Company or any of
its Subsidiaries. There are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company
Securities.
SECTION 5.06. Subsidiaries. (a) Each Subsidiary of the Company is a
corporation or partnership duly incorporated or organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has all corporate or partnership powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Except as set forth on Schedule 5.06(a), each such Subsidiary is duly qualified
to do business as a foreign corporation or partnership and is in good standing
in each jurisdiction where such
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qualification is necessary, except for those jurisdictions where failure to be
so qualified would not have, individually or in the aggregate, have a Material
Adverse Effect on the Company. Except for Catherines of Nevada, Inc., a Nevada
corporation, all Subsidiaries of the Company and their respective jurisdictions
of incorporation or organization are identified in the Company 10-K.
(b) Except for its Subsidiaries and 21 shares of common stock, par value
$.01 per share, of Trans World Airlines, Inc., a Delaware corporation, and
warrants for five such shares exercisable at $14.40 per share, the Company does
not own, directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise.
(c) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary of the Company is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests) other than the Lien granted in favor of First American
National Bank in connection with the First American Credit Facility. There are
no outstanding (i) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary of the Company or (ii)
options, warrants, calls, subscriptions, securities or other rights to acquire
from the Company or any of its Subsidiaries, and no preemptive or similar
rights, subscriptions or other rights, redemptive rights, repurchase rights,
convertible securities, agreements, arrangements or commitments of any
character, relating to the capital stock of any Subsidiary of the Company,
obligating the Company or any of its Subsidiaries to issue, transfer or sell,
or to cause to be issued, transferred or sold, any shares of capital stock,
other equity interest, voting securities or securities convertible into or
exchangeable for shares of capital stock, other equity interest or voting
securities of any Subsidiary of the Company or obligating the Company or any of
its Subsidiaries to issue, grant, extend or enter into any such option,
warrant, call, subscription, security or other right, preemptive or similar
right, redemptive right, repurchase right, convertible security, agreement,
arrangement or commitment (the items in clauses (i) and (ii) being referred to
collectively as the "Company Subsidiary Securities"). Except as set forth in
Schedule 5.06(c), there are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company
Subsidiary Securities.
SECTION 5.07. SEC Filings. (a) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 31,
1997 (such documents, together with all exhibits and schedules thereto and
documents incorporated by reference therein, the "Company SEC
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Documents"). No Subsidiary of the Company is required to file any reports,
schedules, forms, statements or other documents with the SEC.
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the 1933 Act and
the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing prior
to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not, and each such Company SEC Document
filed subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such statement or amendment became effective, did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
SECTION 5.08. Financial Statements. (a) The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present, in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements). The books and records of the
Company and its Subsidiaries have been, and are being, maintained, in all
material respects, in accordance with GAAP and any other applicable legal and
accounting requirements.
(b) All inventory of the Company and its Subsidiaries is valued on the
Company's books and records at the lower of cost or market as determined by the
retail method, and at least 98% of such inventory is saleable in the ordinary
course of business consistent with past practice.
SECTION 5.09. Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC or required to be distributed or otherwise
disseminated to the Company's shareholders in connection with the transactions
contemplated by this Agreement (the "Company Disclosure Documents"),
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including, without limitation, the Schedule 14D-9, the proxy or information
statement of the Company (the "Company Proxy Statement"), if any, to be filed
with the SEC in connection with the Merger, and any amendments or supplements
thereto, when filed, distributed or disseminated, as applicable, will comply as
to form in all material respects with the applicable requirements of the 1934
Act.
(b) (i) The Company Proxy Statement, as supplemented or amended, if
applicable, at the time such Company Proxy Statement or any amendment or
supplement thereto is first mailed to shareholders of the Company and at the
time such shareholders vote on adoption of this Agreement and at the Effective
Time, and (ii) any Company Disclosure Document (other than the Company Proxy
Statement), at the time of the filing of such Company Disclosure Document or
any supplement or amendment thereto and at the time of any distribution or
dissemination thereof, will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section
5.09(b) will not apply to statements or omissions included in the Company
Disclosure Documents based upon information furnished to the Company in writing
by Parent specifically for use therein.
(c) The information with respect to the Company or any of its Subsidiaries
that the Company furnishes to Parent in writing specifically for use in the
Offer Documents, at the time of the filing thereof, at the time of any
distribution or dissemination thereof and at the time of the consummation of
the Offer, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
SECTION 5.10. Absence of Certain Changes. Since the Company Balance Sheet
Date, the business of the Company and its Subsidiaries has been conducted in
the ordinary course consistent with past practices and except as set forth in
Schedule 5.10 there has not been:
(a) any event, occurrence, development or state of circumstances or facts
that has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its Subsidiaries;
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(c) any amendment of any term of any outstanding security of the Company
or any of its Subsidiaries that would increase the obligations of the Company
or such Subsidiary under such security;
(d) any incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices;
(e) any creation or other incurrence by the Company or any of its
Subsidiaries of any Lien on any asset other than in the ordinary course of
business consistent with past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital contributions to
or investments in its wholly-owned Subsidiaries made in the ordinary course of
business consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any of its
Subsidiaries that has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
modification, amendment, termination or relinquishment by the Company or any of
its Subsidiaries of any contract, license or other right, in either case,
material to the Company and its Subsidiaries, taken as a whole, other than
transactions and commitments in the ordinary course of business consistent with
past practices and those contemplated by this Agreement;
(i) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company or any of its Subsidiaries,
except for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the 1934 Act;
(j) any (i) grant of any severance or termination pay to (or amendment to
any existing arrangement with) any director, officer or employee of the Company
or any of its Subsidiaries, (ii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iii)
any entering into any employment, deferred compensation or other similar
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agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any of its Subsidiaries, (iv)
establishment, adoption or amendment (except as required by applicable law) of
any collective bargaining, bonus, profit-sharing, thrift, pension, retirement,
deferred compensation, compensation, stock option, restricted stock or other
benefit plan or arrangement covering any director, officer or employee of the
Company or any of its Subsidiaries, or (v) increase in compensation, bonus or
other benefits payable to any director, officer or employee of the Company or
any of its Subsidiaries, other than in the ordinary course of business
consistent with past practice; or
(k) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any of its Subsidiaries, which employees were
not subject to a collective bargaining agreement at the Company Balance Sheet
Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees.
SECTION 5.11. No Undisclosed Material Liabilities. There are no
liabilities or obligations of the Company or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances that could reasonably be expected to result in such a
liability, other than:
(a) liabilities or obligations disclosed and provided for in the Company
Balance Sheet or in the notes thereto or in the Company SEC Documents filed
prior to the date hereof; and
(b) liabilities or obligations incurred since the Company Balance Sheet
Date and that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
SECTION 5.12. Compliance with Laws and Court Orders. The Company and each
of its Subsidiaries is and at all times since January 1, 1998 has been in
compliance with, and to the Knowledge of the Company is not under investigation
with respect to and has not been threatened to be charged with or given notice
of any violation of, any statute, law, rule, regulation, judgment, decree,
order, permit, license or other governmental authorization or approval
applicable to the Company or any of its Subsidiaries or by which any property,
asset or operation of the Company or any of its Subsidiaries is bound or
affected, except for failures to comply or violations that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
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SECTION 5.13. Material Contracts. Except as set forth in Schedule 5.13,
from the Company Balance Sheet Date through the date hereof, neither the
Company nor any of its Subsidiaries has entered into any contract which, if
entered into prior to the Company Balance Sheet Date, would have been required
to be disclosed in the Company 10-K. Neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any other party, is in
material breach of or default under any such contract or any contract filed as
an exhibit (or incorporated by reference as an exhibit) to the Company 10-K.
SECTION 5.14. Non-Compete Agreements. Except as set forth in Schedule
5.14, neither the Company nor any of its Subsidiaries is a party to any
agreement that limits the ability of the Company or any of its Subsidiaries (or
after the Merger, Parent or any of its Subsidiaries) to compete in, or conduct,
any line of business or to compete with any Person, in any geographic area or
during any period of time.
SECTION 5.15. Litigation. Except as set forth in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or threatened in writing
received by the Company or any of its Subsidiaries against, or, to the
Knowledge of the Company, otherwise threatened against or affecting, the
Company, any of its Subsidiaries, any present or former officer, director or
employee of the Company or any of its Subsidiaries or any other Person for whom
the Company or any such Subsidiary may be liable or any of their respective
properties before any court or arbitrator or before or by any governmental
body, agency or official, domestic or foreign which (i) individually or in the
aggregate, if determined or resolved adversely in accordance with the
plaintiff's demands, could reasonably be expected to have a Material Adverse
Effect on the Company, (ii) except as set forth on Schedule 5.15, involves
damages in excess of $50,000, (iii) seeks injunctive relief or (iv) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated hereby. Except as set
forth in the Company SEC Documents filed prior to the date hereof, neither the
Company nor any of its Subsidiaries is subject to any outstanding judgment,
order, writ, injunction or decree that has had or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
SECTION 5.16. Title to Properties. (a) Except as set forth in Schedule
5.16(a), each of the Company and its Subsidiaries has good and defensible title
to, or valid leasehold interests in, all its assets and properties described in
the Company SEC Documents, except for assets and properties (i) no longer used
or useful in the conduct of its businesses and (ii) disposed of in the ordinary
course of business. Except as set forth in Schedule 5.16(a), all such assets
and properties,
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other than assets and properties in which the Company or any of its
Subsidiaries has leasehold interests, are free and clear of all Liens, other
than those assets and properties set forth in the Company SEC Documents filed
prior to the date hereof and other than Liens, that, in the aggregate, do not
and will not materially interfere with the ability of the Company or any of its
Subsidiaries to conduct business as currently conducted.
(b) Each of the Company and its Subsidiaries has complied in all material
respects with the terms of all leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect. Each of the
Company and its Subsidiaries enjoys peaceful and undisturbed possession under
all such leases. The Company has heretofore (or on or before the Effective Time
will have) delivered to Parent true and complete copies of each such lease
containing all agreements or understandings between the Company or its
Subsidiaries, on the one hand, and the applicable third party landlord, on the
other hand, with respect to such lease.
(c) The buildings and premises of the Company and each of its Subsidiaries
that are used in its business are in reasonably good operating condition and in
a state of good maintenance and repair, normal wear and tear excepted, are
suitable for the purpose for which they are currently being used and have
access to utility services necessary for the conduct of the business. No tenant
repairs are required with respect to any leased stores other than (i) normal
and routine repairs consistent with past practice or (ii) repairs which, in the
aggregate, would not cost in excess of $300,000 to complete. Except as would
not have, individually or in the aggregate, a Material Adverse Effect on the
Company, there are no zoning law changes or similar restrictions that would
adversely impact any of the stores operated by the Company or any of its
Subsidiaries.
SECTION 5.17. Intellectual Property. The Company and its Subsidiaries own
all Intellectual Property that is material to the condition (financial or
otherwise) or conduct of the business and operations of the Company and its
Subsidiaries taken as a whole. The Company and any of its Subsidiaries have not
infringed or misappropriated and do not infringe or misappropriate any item of
Intellectual Property of any Person, except for infringement or
misappropriation that would not, in the aggregate, have a Material Adverse
Effect on the Company. No Person has infringed or misappropriated, or is
infringing or misappropriating, any item of Intellectual Property that is owned
by or licensed to the Company or any of its Subsidiaries, except for
infringement or misappropriation that would not, individually or in the
aggregate, have a Material Adverse Effect with respect to the Company. There
are no pending or, to the Knowledge of the Company, threatened, claims relating
to infringement, misappropriation, unenforceability,
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invalidity, misuse, ownership, right to use, or other violation asserted by or
against the Company or any of its Subsidiaries relating to any item of
Intellectual Property, except as would not have, individually or in the
aggregate, a Material Adverse Effect on the Company. Schedule 5.17 sets forth a
list of all of the Intellectual Property owned by the Company and its
Subsidiaries.
SECTION 5.18. Year 2000 Readiness. The Company has conducted a review of
each System used in the conduct of the business and operations of the Company
and its Subsidiaries to determine whether such System is Year 2000 Ready, and
is currently implementing a compliance plan that the Company believes will
result in each material System being Year 2000 Ready in all material respects
no later than December 31, 1999. Each action to have been taken prior to the
date of this Agreement under such plan has been substantially completed and, as
of the date of this Agreement, the Company has no Knowledge indicating that any
action to be taken under such plan after the date of this Agreement will be
materially delayed or will fail to accomplish its purpose under the plan.
"System" shall mean all software, hardware and firmware, including without
limitation any devices with embedded electronics. A system is "Year 2000 Ready"
if it is able to accurately process date and time data from, into and between
the years 1999 and 2000, and any other year through the year 2049.
SECTION 5.19. Finders' Fees. Except for J.C. Bradford & Co., a copy of
whose engagement agreement has been provided to Parent and whose fees are to be
paid by the Company, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries, or any of their respective officers or
directors, who might be entitled to any banking, broker's, finder's or similar
fee or commission from the Company or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement. The Company has no
obligations or commitments to any investment banker or financial advisor in
connection with any transactions that may be entered into by the Company after
the Effective Time. The engagement agreement between the Company and J.C.
Bradford & Co. provided to Parent constitutes the entire understanding of the
Company and J.C. Bradford & Co. with respect to the matters therein and has not
been amended or modified, nor will it be amended or modified, prior to the
Effective Time.
SECTION 5.20. Taxes. As of the date hereof and as of the Effective Time:
(a) Filing and Payment. Except as set forth on Schedule 5.20(a), (i) all Tax
returns, statements, reports and forms (including estimated tax or information
returns and reports) required to be filed with any Taxing Authority with
respect to any Pre-Closing Tax Period by or on behalf of the Company or any of
its Subsidiaries (collectively, the "Returns"), have, to the extent required to
be filed on or before the date hereof, been filed when due in accordance with
all applicable
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laws; (ii) as of the time of filing, the Returns were true and complete; and
(iii) all Taxes shown as due and payable on the Returns that have been filed
have been timely paid, or withheld and remitted to the appropriate Taxing
Authority.
(b) Financial Records. Except as set forth on Schedule 5.20(b), (i) the
charges, accruals and reserves for Taxes with respect to the Company and its
Subsidiaries for any Pre-Closing Tax Period reflected on the books of the
Company and its Subsidiaries (excluding any provision for deferred income taxes
reflecting either differences between the treatment of items for accounting and
income tax purposes or carryforwards) are adequate to cover Tax liabilities
accruing through the end of the last period for which the Company and its
Subsidiaries ordinarily record items on their respective books; (ii) since the
end of the last period for which the Company and its Subsidiaries ordinarily
record items on their respective books, neither the Company nor any of its
Subsidiaries has engaged in any transaction, or taken any other action, other
than in the ordinary course of business; and (iii) all information set forth in
the Company Balance Sheet (including the notes thereto) relating to Tax matters
is true and complete.
(c) Procedure and Compliance. Except as set forth on Schedule 5.20(c), (i)
all Returns filed with respect to Tax years of the Company and its Subsidiaries
through the Tax year ended February 3, 1996 have been examined and closed or
are Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired; (ii)
neither the Company nor any of its Subsidiaries is delinquent in the payment of
any Tax or has requested any extension of time within which to file any Return
and has not yet filed such Return; (iii) neither the Company nor any of its
Subsidiaries (or any member of any affiliated, consolidated, combined or
unitary group of which the Company or any of its Subsidiaries is or has been a
member) has granted any extension or waiver of the statute of limitations
period applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired; (iv) there is no claim, audit,
action, suit, proceeding, or investigation now pending or threatened in writing
received by the Company or any Subsidiary against or with respect to the
Company or any of its Subsidiaries in respect of any Tax or Tax Asset; (v)
there are no requests for rulings or determinations in respect of any Tax or
Tax Asset pending between the Company or any of its Subsidiaries and any Taxing
Authority; (vi) neither the Company nor any of its Subsidiaries has received a
tax opinion with respect to any transaction relating to the Company or any of
its Subsidiaries, other than a transaction in the ordinary course of business;
and (vii) during the five-year period ending on the date hereof, neither the
Company nor any of its Subsidiaries has made or changed any tax election,
changed any annual tax accounting period, or adopted or changed any method of
tax accounting (to the extent that any such action may materially affect the
Company or any of its Subsidiaries, taken as a whole), nor
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has it, to the extent it may affect or relate to the Company or any of its
Subsidiaries, filed any amended Return, entered into any closing agreement,
settled any Tax claim or assessment, or surrendered any right to claim a Tax
refund, offset or other reduction in Tax liability.
(d) Taxing Jurisdictions. Schedule 5.20(d) contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is properly
payable by the Company or any of its Subsidiaries, except for those
jurisdictions in which the failure to pay would not have, individually or in
the aggregate, a Material Adverse Effect on the Company. No Taxing Authority in
a jurisdiction where the Company or any of its Subsidiaries does not file Tax
returns has claimed, in writing received by the Company or any of its
Subsidiaries, that the Company or any of its Subsidiaries is or may be subject
to taxation by that jurisdiction.
(e) Tax Effects of Transactions. Except as set forth on Schedule 5.20(e),
(i) neither the Company nor any of its Subsidiaries owns an interest in real
property in any jurisdiction in which a Tax is imposed on the transfer of an
interest in real property and which treats the transfer of an interest in an
entity that owns an interest in real property as a transfer of the interest in
real property and (ii) neither the purchase of Shares tendered in the Offer nor
the consummation of the Merger will result in any material increase in the Tax
liability of the Company or any of its Subsidiaries.
(f) Certain Agreements and Arrangements. Except as set forth on Schedule
5.20(f), (i) neither the Company nor any of its Subsidiaries is a direct or
indirect beneficiary of a guarantee of tax benefits or any other arrangement
that has the same economic effect (including an indemnity from a seller or
lessee of property, or other insurance) with respect to any transaction or tax
opinion relating to the Company or any of its Subsidiaries; (ii) neither the
Company nor any Subsidiary is a party to any understanding or arrangement
described in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code; (iii)
neither the Company nor any of its Subsidiaries is a party to a lease
arrangement involving a defeasance of rent, interest or principal; and (iv)
neither the Company nor any of its Subsidiaries, nor any other person on behalf
of the Company or any of its Subsidiaries, has entered into any agreement or
consent pursuant to Section 341(f) of the Code.
SECTION 5.21. Employee Benefit Plans. (a) Schedule 5.21(a) sets forth, and
the Company has provided Parent with, copies of the Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and summary
plan descriptions together with the three most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) and the most recent actuarial
valuation report prepared in connection with any Employee Plan. Neither the
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Company nor any of its Affiliates has at any time entered into, maintained,
administered, contributed to or been obligated to contribute to any
Multiemployer Plan, Title IV Plan or plan maintained in connection with any
trust described in Section 501(c)(9) of the Code.
(b) As of September 1, 1999, the Company and its Subsidiaries had no
unfunded liability in respect of all Employee Plans or Benefit Arrangements
described under Sections 4(b)(5) or 401(a)(1) of ERISA, except for (i) claims
not yet paid from funds contributed under the Company's "cafeteria" plan and
(ii) the Company's matching contribution to the Company's "401(K)" plan.
(c) No transaction prohibited by Section 406 of ERISA or Section 4975 of
the Code has occurred with respect to any employee benefit plan or arrangement
that is covered by Title I of ERISA, which transaction has or will cause the
Company or any of its Subsidiaries to incur any liability under ERISA, the Code
or otherwise, excluding transactions effected pursuant to and in compliance
with a statutory or administrative exemption.
(d) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
since its adoption; each trust created under any such Plan is exempt from tax
under Section 501(a) of the Code and has been so exempt since its creation. The
Company has provided Parent with the most recent determination letter of the
Internal Revenue Service relating to each such Employee Plan. Each Employee
Plan has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.
(e) Schedule 5.21(e) sets forth, and the Company has provided Parent with
copies or descriptions of, each Benefit Arrangement (and, if applicable,
related trust agreements) and all amendments thereto and summary plan
descriptions. Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations and has been maintained in
good standing with applicable regulatory authorities.
(f) Neither the Company nor any of its Subsidiaries has any current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired, former or current employees of
the Company or any of its Subsidiaries, except as required to avoid excise tax
under Section 4980B of the Code. No condition exists that would prevent the
Company or any of its Subsidiaries from amending or terminating any Employee
Plan or Benefit Arrangement providing health or medical benefits in respect of
any active
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employee of the Company or any of its Subsidiaries other than limitations
imposed under the terms of a collective bargaining agreement.
(g) All contributions and payments under each Employee Plan and Benefit
Arrangement, determined in accordance with prior funding and accrual practices,
will be discharged and paid or accrued on or prior to the Effective Time. There
has been no amendment to, written interpretation of or announcement (whether or
not written) by the Company or any of its Subsidiaries relating to, or change
in employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
(h) Except as set forth in Schedule 5.21(h), no employee or former
employee of the Company or any of its Subsidiaries will become entitled to any
bonus, retirement, severance, job security or similar benefit or enhanced such
benefit (including acceleration of vesting or exercise of an incentive award)
as a result of the transactions contemplated hereby. There is no contract, plan
or arrangement (written or otherwise) covering any employee or former employee
of the Company or any of its Subsidiaries that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
(i) There has been no failure of a group health plan (as defined in
Section 5000(b)(1) of the Code) to meet the requirements of Code Section
4980B(f) with respect to a qualified beneficiary (as defined in Section
4980B(g)). Neither the Company nor any of its Subsidiaries has contributed to a
nonconforming group health plan (as defined in Section 5000(c)) and no ERISA
Affiliate of the Company or any of its Subsidiaries has incurred a tax under
Section 5000(a) that is or could become a liability of the Company or any of
its Subsidiaries.
(j) Neither the Company nor any of its Affiliates has at any time employed
any person other than in the United States.
(k) Except as set forth in Schedule 5.21(k), neither the Company nor any
of its Subsidiaries is a party to or subject to, or is currently negotiating in
connection with entering into, any collective bargaining agreement or other
contract or understanding with a labor union.
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SECTION 5.22. Environmental Matters. (a) Except as set forth in the
Company SEC Documents filed prior to the date hereof:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed, and no investigation, action, claim, suit,
proceeding or review (or any basis therefor) is pending or, to the
Knowledge of the Company, is threatened by any governmental entity or
other Person relating to or arising out of any Environmental Law;
(ii) the Company is in compliance in all material respects with all
Environmental Laws and all Environmental Permits; and
(iii) there are no material liabilities of or relating to the Company
or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising under
or relating to any Environmental Law, and there are no facts, conditions,
situations or set of circumstances that could reasonably be expected to
result in or be the basis for any such liability.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has Knowledge in
relation to the current or prior business of the Company or any of its
Subsidiaries or any property or facility now or previously owned or leased by
the Company or any of its Subsidiaries that has not been delivered to Parent at
least five days prior to the date hereof.
(c) For purposes of this Section 5.22, the terms "Company" and
"Subsidiaries" shall include any entity that is, in whole or in part, a
predecessor of the Company or any of its Subsidiaries.
SECTION 5.23. Other Information. None of the documents or information
delivered to Parent in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
financial projections relating to the Company or any of its Subsidiaries and
the Company's preliminary third quarter earnings results delivered to Parent
are made in good faith and are based upon reasonable assumptions, and the
Company is not aware of any fact or set of circumstances that would lead it to
believe that such projections or preliminary results are incorrect or
misleading in any material respect.
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SECTION 5.24. Antitakeover Statutes and Rights Agreement. (a) The Company
has taken all action necessary to exempt the Offer, the Merger, this Agreement
and the transactions contemplated hereby from the provisions of Section
48-103-201, et. seq. of the Tennessee Code Annotated and any other antitakeover
or similar statute or regulation (it being understood that the Company makes no
representation regarding the impact (if any) on such exemptions of any
subsequent actions taken in accordance with Section 7.03).
(b) The Company has not entered into, and its Board of Directors has not
adopted or authorized the adoption of, a shareholder rights or similar
agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
SECTION 6.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not have, individually or in the aggregate, a Material
Adverse Effect on Parent. Since the date of its incorporation, Merger
Subsidiary has not engaged in any activities other than in connection with or
as contemplated by this Agreement.
SECTION 6.02. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary.
SECTION 6.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic or foreign, other than (i) the
filing of articles of merger with respect to the Merger with the Tennessee
Secretary of
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State and appropriate documents with the relevant authorities of other states
in which Parent is qualified to do business, (ii) compliance with any
applicable requirements of the HSR Act, (iii) compliance with any applicable
requirements of the 1933 Act, the 1934 Act and any other applicable securities
or takeover laws, whether state or foreign, and (iv) any actions or filings the
absence of which would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent.
SECTION 6.04. Non-contravention. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby do not and
will not (i) contravene, conflict with, or result in any violation or breach of
any provision of the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, (ii) assuming compliance with the matters referred to in Section
6.03, contravene, conflict with, or result in any violation or breach of any
provision of any law, rule, regulation, judgment, injunction, order or decree
or (iii) require any consent or other action by any Person under, constitute a
default under, or cause or permit the termination, cancellation, acceleration
or other change of any right or obligation or the loss of any benefit to which
Parent or Merger Subsidiary is entitled under any provision of any agreement or
other instrument binding upon Parent or Merger Subsidiary, except for such
contraventions, conflicts and violations referred to in clause (ii) and for
such failures to obtain consent or other action, defaults, terminations,
cancellations, accelerations, changes or losses referred to in clause (iii)
that would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
SECTION 6.05. Disclosure Documents. The information with respect to Parent
and any of its Subsidiaries that Parent furnishes to the Company in writing
specifically for use in any Company Disclosure Document will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (i) in the case of the
Company Proxy Statement, as supplemented or amended, if applicable, at the time
such Company Proxy Statement or any amendment or supplement thereto is first
mailed to shareholders of the Company and at the time such shareholders vote on
adoption of this Agreement and at the Effective Time, and (ii) in the case of
any Company Disclosure Document other than the Company Proxy Statement, at the
time of the filing of such Company Disclosure Document or any supplement or
amendment thereto and at the time of any distribution or dissemination thereof.
SECTION 6.06. Finders' Fees. Except for Lazard Freres & Co. LLC, whose
fees will be paid by Parent, there is no investment banker, broker, finder or
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other intermediary that has been retained by or is authorized to act on behalf
of Parent who might be entitled to any banking, broker's, finder's or similar
fee or commission from the Company or any of its Affiliates upon consummation
of the transactions contemplated by this Agreement.
SECTION 6.07. Financing. Parent has, or will have prior to the expiration
of the Offer, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to purchase all of the Shares
outstanding on a fully-diluted basis and to pay all related fees and expenses
pursuant to the Offer.
ARTICLE 7
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 7.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use their best
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, except with the
prior written consent of Parent or as contemplated by this Agreement or as set
forth in Schedule 7.01 (except with respect to the Proposed Amended First
American Credit Facility (as defined in Schedule 5.10), which the Company will
not enter into without Parent's prior written consent) from the date hereof
until the Effective Time:
(a) (i) the Company will not, and will not permit any of its Subsidiaries
to, declare, set aside or pay any dividends on, or make any other distributions
in respect of, any of its capital stock, other than dividends and distributions
by any wholly owned Subsidiary of the Company to the Company or a wholly owned
Subsidiary of the Company, (ii) split, combine or reclassify any of its capital
stock or (iii) purchase, redeem or otherwise acquire any shares of capital
stock or options to acquire any such shares or other securities;
(b) the Company will not, and will not permit any of its Subsidiaries to,
issue, deliver, sell, pledge or otherwise encumber any shares of its capital
stock, any other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible securities (other than, in the case of the Company, the issuance of
Shares upon the exercise of stock options outstanding on the date of this
Agreement in accordance
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with their current terms or the issuance of Shares in connection with the ESPP
in accordance with its current terms);
(c) the Company will not adopt or propose any change to its charter or
bylaws;
(d) the Company will not, and will not permit any of its Subsidiaries to,
merge or consolidate with any other Person, adopt a plan of complete or partial
liquidation of the Company or any of its Subsidiaries, or acquire a material
amount of stock or assets of any other Person;
(e) the Company will not, and will not permit any of its Subsidiaries to,
sell, lease, license, mortgage, pledge or grant a Lien on or otherwise encumber
or dispose of any material Subsidiary or material amount of assets or property
except (i) pursuant to existing contracts or commitments or (ii) in the
ordinary course consistent with past practice;
(f) the Company will not, and will not permit any of its Subsidiaries to,
incur, assume or guarantee any indebtedness for borrowed money, except for such
borrowings (i) under the Company's existing letters of credit for purchases of
merchandise inventory in the ordinary course of business consistent with past
practice, (ii) under the Company's existing credit facilities (other than
letters of credit) that would not result in total outstanding indebtedness of
the Company and its Subsidiaries on a consolidated basis in excess of
$1,000,000 at any one time and (iii) in connection with new capital leases for
data processing software and hardware not in excess of $1,000,000;
(g) the Company will not, and will not permit any of its Subsidiaries to,
increase the compensation or benefits of any director, officer or employee,
except for normal increases in the ordinary course of business consistent with
past practice or as required by applicable law or any existing agreement or
commitment;
(h) the Company will not, and will not permit any of its Subsidiaries to,
change any method of accounting or accounting principles used by it, except for
any such change required by reason of a concurrent change in GAAP or Regulation
S-X under the 1934 Act;
(i) the Company will not, and will not permit any of its Subsidiaries to,
make or change any Tax election, change any annual Tax accounting period, adopt
or change any method of Tax accounting, file any amended Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any right to
claim a Tax refund, offset or other reduction in Tax liability, consent to
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any extension or waiver of the limitations period applicable to any Tax claim
or assessment or take or omit to take any other action, if any such action or
omission would have the effect of increasing the Tax liability or reducing any
Tax Asset of the Company, any of its Subsidiaries, Parent or any Affiliate of
Parent, other than a settlement or settlements relating to pending state tax
disputes specified on Schedule 5.20(c) that do not exceed, in the aggregate,
$325,000;
(j) the Company will not, and will not permit any of its Subsidiaries to,
conduct any unusual liquidation of inventory or going out of business sale or
any discount or other sale other than in the ordinary course of business
consistent with past practice, including with respect to time of year, pricing,
location and goods sold;
(k) the Company will not, and will not permit any of its Subsidiaries to,
enter into or make any contract or commitment (including in respect of capital
expenditures) or series of related contracts or commitments involving payments
in excess of the amounts set forth in the contracts or commitments contemplated
by the Company's 1999 and 2000 capital expenditure plans previously provided to
Parent;
(l) the Company will not, and will not permit any of its Subsidiaries to,
fail to maintain insurance upon all its properties and with respect to the
conduct of its business of such kinds and in such amounts as is currently in
effect;
(m) the Company will not, and will not permit any of its Subsidiaries to,
(i) take any action that would make any representation and warranty of the
Company hereunder inaccurate in any material respect at, or as of any time
prior to, the Effective Time or (ii) omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any
material respect at any such time; and
(n) the Company will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
SECTION 7.02. Shareholder Meeting; Proxy Material. The Company shall cause
a meeting of its shareholders (the "Company Shareholder Meeting") to be duly
called and held as soon as reasonably practicable after consummation of the
Offer for the purpose of voting on the approval and adoption of this Agreement
and the Merger, unless Tennessee Law does not require a vote of shareholders of
the Company for consummation of the Merger. Subject to Section 7.03(c), the
Board of Directors of the Company shall recommend approval and adoption of this
Agreement and the Merger by the Company's shareholders. In connection with such
meeting, the Company will (i) promptly prepare and file with the SEC,
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will use its best efforts to have cleared by the SEC and will thereafter mail
to its shareholders as promptly as practicable the Company Proxy Statement and
all other proxy materials for such meeting, (ii) use its reasonable best
efforts to obtain the necessary approvals by its shareholders of this Agreement
and the transactions contemplated hereby and (iii) otherwise comply with all
legal requirements applicable to such meeting.
SECTION 7.03. No Solicitation; Other Offers. (a) From the date hereof
until the termination hereof, the Company will not, and will cause its
Subsidiaries and the officers, directors, employees, investment bankers,
attorneys, accountants, consultants or other agents or advisors of the Company
and its Subsidiaries not to, directly or indirectly, (i) take any action to
solicit, initiate, facilitate or encourage the submission of any Acquisition
Proposal, (ii) engage in negotiations with, or disclose any nonpublic
information relating to the Company or any of its Subsidiaries or afford access
to the properties, books or records of the Company or any of its Subsidiaries
to, any Person who has made or, to the Company's knowledge, is considering
making, an Acquisition Proposal, or (iii) grant any waiver or release under any
standstill or similar agreement with respect to any class of equity securities
of the Company. Notwithstanding the foregoing sentence, the Company may, in the
press release announcing execution of this Agreement, include the following
sentence: "Under the Agreement, the Company may furnish information and hold
discussions with third parties in appropriate circumstances." Parent and the
Company agree further that the issuance of a press release containing the
foregoing sentence shall not constitute solicitation, initiation, facilitation
or encouragement by the Company or its Subsidiaries of the submission of an
Acquisition Proposal in violation of this Section 7.03(a). The Company will
notify Parent promptly (but in no event later than two business days) after
receipt by the Company (or any of its advisors) of any Acquisition Proposal,
any indication that any Person is considering making an Acquisition Proposal or
any request for nonpublic information relating to the Company or any of its
Subsidiaries or for access to the properties, books or records of the Company
or any of its Subsidiaries by any Person who has made or, to the Company's
knowledge, is considering making, an Acquisition Proposal. The Company shall
provide such notice orally and in writing and shall identify the Person making,
and the terms and conditions of, any such Acquisition Proposal, indication or
request. The Company shall keep Parent fully informed, on a current basis, of
the status and details of any such Acquisition Proposal, indication or request.
The Company shall, and shall cause its Subsidiaries and the directors,
employees and other agents of the Company and its Subsidiaries to, cease
immediately and cause to be terminated all activities, discussions and
negotiations, if any, with any Persons conducted prior to the date hereof with
respect to any Acquisition Proposal. Nothing contained in this Agreement shall
prevent the Board of Directors of the Company from complying with its fiduciary
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duties or Rules 14d-9 and 14e-2 under the 1934 Act with respect to any
Acquisition Proposal.
(b) Notwithstanding the foregoing, the Company may negotiate or otherwise
engage in substantive discussions with, and furnish nonpublic information to,
any Person who delivers a written Acquisition Proposal if (i) the Company has
complied with the terms of this Section 7.03, including, without limitation,
the requirement in Section 7.03(a) that it notify Parent promptly after its
receipt of any Acquisition Proposal, (ii) the Board of Directors of the Company
has determined in good faith, based on the terms of such Acquisition Proposal,
including the proposed consideration per Share, that such Acquisition Proposal
could reasonably be expected to result in a Superior Proposal, (iii) the Board
of Directors of the Company determines in good faith that such action is in the
best interests of the Company's shareholders, (iv) such Person executes a
confidentiality agreement with terms no less favorable to the Company than
those contained in the Confidentiality Agreement and (v) the Company shall have
delivered to Parent a prior written notice advising Parent that it intends to
take such action.
(c) Except as provided in the next sentence, the Board of Directors of the
Company shall recommend approval and adoption of this Agreement and the Merger
by the Company's shareholders. The Board of Directors of the Company shall be
permitted to withdraw, or modify in a manner adverse to Parent, its
recommendation to its shareholders referred to in Section 7.02 hereof and
recommend or authorize the Company to enter into (and the Company may enter
into) an agreement with respect to a Superior Proposal, but only if (i) the
Company has complied with the terms of this Section 7.03, (ii) a Superior
Proposal is pending at the time the Board of Directors of the Company
determines to take any such action, (iii) the Board of Directors of the Company
determines in good faith that such action is in the best interests of the
Company's shareholders, (iv) the Company shall have delivered to Parent at
least five business days prior written notice advising Parent that it intends
to take such action and (v) Parent does not make, within such five business day
period following receipt of such notice, an offer that the Board of Directors
of the Company determines in good faith (after consultation with its financial
advisors) to be as favorable to the Company's shareholders as such Superior
Proposal.
SECTION 7.04. Access to Information. From the date hereof until the
Effective Time and subject to applicable law and the Confidentiality Agreement
dated as of October 12, 1999 between the Company and Parent (the
"Confidentiality Agreement"), the Company shall (i) give Parent, its counsel,
financial advisors, auditors and other authorized representatives full access
to the offices, properties, books and records of the Company and its
Subsidiaries, (ii)
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furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such Persons may reasonably request and (iii) instruct the
employees, counsel, financial advisors, auditors and other authorized
representatives of the Company and its Subsidiaries to cooperate with Parent in
its investigation of the Company and its Subsidiaries. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the Company and its
Subsidiaries. No information or knowledge obtained by Parent in any
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty made by the Company hereunder.
SECTION 7.05. Bonus Acceleration. Prior to December 31, 1999, the Company
shall prepay to Mr. Wein a portion of his 1999 annual bonus in an amount equal
to $545,000 and shall prepay to Mr. Forell a portion of his 1999 annual bonus
in an amount equal to $230,000.
ARTICLE 8
COVENANTS OF PARENT
Parent agrees that:
SECTION 8.01. Obligations of Merger Subsidiary. Parent will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
SECTION 8.02. Voting of Shares. Parent agrees to vote all Shares
beneficially owned by it in favor of adoption of this Agreement at the Company
Shareholder Meeting.
SECTION 8.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) For six years after the Effective Time (and to the extent Parent has
been notified in writing that a third party has made a claim that is the
subject of indemnification hereunder before the expiration of such period, for
so long thereafter as such claim is not finally adjudicated, settled,
time-barred or otherwise subject to an applicable statute of limitations), the
Surviving Corporation shall indemnify and hold harmless the present and former
officers and directors of the Company (each an "Indemnified Person") in respect
of acts
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or omissions occurring at or prior to the Effective Time to the fullest extent
permitted by Tennessee Law or any other applicable laws or provided under the
Company's charter and bylaws in effect on the date hereof; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts
or omissions occurring prior to the Effective Time covering each such
Indemnified Person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date hereof; provided
that, in satisfying its obligation under this Section 8.03(b), the Surviving
Corporation shall not be obligated to pay premiums in excess of 150% of the
amount per annum the Company paid in its last full fiscal year, which amount
Company has disclosed to Parent prior to the date hereof.
(c) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 8.03.
(d) The rights of each Indemnified Person under this Section 8.03 shall be
in addition to any rights such Person may have under the charter or bylaws or
other organizational documents of the Company or any of its Subsidiaries, or
under Tennessee Law or any other applicable laws. These rights shall survive
consummation of the Merger and are intended to benefit, and shall be
enforceable by, each Indemnified Person.
ARTICLE 9
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 9.01. Reasonable Efforts. (a) Subject to the terms and conditions
of this Agreement, the Company and Parent will use their reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
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consummate the transactions contemplated by this Agreement. In furtherance and
not in limitation of the foregoing, each of Parent and the Company agrees to
make an appropriate filing of a Notification and Report Form pursuant to the
HSR Act with respect to the transactions contemplated hereby as promptly as
practicable and in any event within ten business days of the date hereof and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and to take all other
actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
(b) In connection with the efforts referenced in Section 9.01(a) to obtain
all requisite approvals and authorizations for the transactions contemplated by
this Agreement under the HSR Act or any other Antitrust Law, each of Parent and
the Company shall use its reasonable efforts to (i) cooperate in all respects
with each other in connection with any filing or submission and in connection
with any investigation or other inquiry, including any proceeding initiated by
a private party, (ii) keep the other party informed in all material respects of
any material communication received by such party from, or given by such party
to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the
Department of Justice (the "DOJ") or any other governmental authority and of
any material communication received or given in connection with any proceeding
by a private party, in each case regarding any of the transactions contemplated
hereby and (iii) permit the other party to review any material communication
given by it to, and consult with each other in advance of any meeting or
conference with, the FTC, the DOJ or any such other governmental authority or,
in connection with any proceeding by a private party, with any other Person.
For purposes of this Agreement, "Antitrust Law" means the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission
Act, as amended, and all other federal, state and foreign, if any, statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
SECTION 9.02. Certain Filings. The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Company Disclosure
Documents, (ii) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official, or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (iii) in taking such actions or
making any such filings, furnishing information required in connection
therewith
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or with the Company Disclosure Documents and seeking timely to obtain any such
actions, consents, approvals or waivers.
SECTION 9.03. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and will
not issue any such press release or make any such public statement prior to
such consultation. Notwithstanding the foregoing, any such press release or
public statement (i) by either Parent or the Company, as may be required by
applicable law or any listing agreement with any national securities exchange
or (ii) by the Company (A) following a change, if any, of the recommendation of
this Agreement by the Company's Board of Directors or (B) relating to an
Acquisition Proposal, which, in the case of either (A) or (B), the Company's
Board of Directors has determined in good faith that it is in the best
interests of the Company's shareholders to issue, may be issued prior to such
consultation if the party making such press release or public statement has
used its reasonable efforts to consult with the other party.
SECTION 9.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
SECTION 9.05. Notices of Certain Events. Each of the Parent and the
Company shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting Parent, the Company or any of its Subsidiaries that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant
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to Article 5 or Article 6, as the case may be, or that relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 9.06. Merger Without Meeting of Shareholders. If Parent, Merger
Subsidiary or any other Subsidiary of Parent shall acquire at least 90% of the
outstanding Shares pursuant to the Offer or otherwise, the parties hereto
agree, at the request of Parent, to take all necessary and appropriate action
to cause the Merger to be effective as soon as practicable after the acceptance
for payment and purchase of Shares pursuant to the Offer without a meeting of
shareholders of the Company in accordance with Tennessee Law.
ARTICLE 10
CONDITIONS TO THE MERGER
SECTION 10.01. Conditions to Obligations of Each Party. The obligations of
the Company, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) if required by Tennessee Law, this Agreement shall have been approved
and adopted by the shareholders of the Company in accordance with such Law;
(b) any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger; and
(d) Merger Subsidiary shall have purchased Shares pursuant to the Offer.
SECTION 10.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time; and
(b) Parent shall have received all documents it might reasonably request
relating to the existence of the Company and any of its Subsidiaries and the
41
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authority of the Company for this Agreement, all in form and substance
reasonably satisfactory to Parent.
ARTICLE 11
TERMINATION
SECTION 11.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Offer has not been consummated on or before February 29,
2000; provided that the right to terminate this Agreement pursuant to this
Section 11.01(b)(i) shall not be available to any party whose breach of
any provision of this Agreement results in the failure of the Offer to be
consummated by such time; or
(ii) there shall be any law or regulation that makes acceptance for
payment of, and payment for, the Shares pursuant to the Offer or
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction enjoining Merger Subsidiary from accepting
for payment of, and paying for, the Shares pursuant to the Offer or the
Company or Parent from consummating the Merger and such judgment,
injunction, order or decree shall have become final and nonappealable;
(c) by Parent, if, prior to acceptance for payment of the Shares under the
Offer:
(i) (A) the Board of Directors of the Company shall have failed to
recommend or withdrawn, or modified in a manner adverse to Parent, its
approval or recommendation of this Agreement, the Offer or the Merger, or
shall have recommended, or entered into, or publicly announced its
intention to enter into, an agreement or an agreement in principle with
respect to a Superior Proposal (or shall have resolved to do any of the
foregoing), or (B) the Company shall have breached any of its obligations
under Sections 7.02 or 7.03;
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(ii) any Person or "group" (as defined in Section 13(d)(3) of the
1934 Act), other than Parent or any of its Affiliates, shall have acquired
or proposed to acquire beneficial ownership of more than 50% of the Shares
or more than 50% of the assets of the Company and its Subsidiaries, taken
as a whole, through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of such Shares
or assets; or
(iii) Parent and Merger Subsidiary shall have terminated the Offer as
a result of the occurrence of any of the events set forth in Annex I;
(d) by the Company, if (i) the Board of Directors of the Company
authorizes the Company, subject to its complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and the Company notifies Parent in
writing, in accordance with Section 7.03(c), that it intends to enter into such
an agreement, attaching the most current version of such agreement to such
notice, (ii) Parent does not make, in accordance with Section 7.03(c), within
five business days of receipt of such written notification, an offer that the
Board of Directors of the Company determines in good faith (after consultation
with its financial advisors), is at least as favorable, from a financial point
of view, to the shareholders of the Company as the Superior Proposal and (iii)
the Company pays to Parent in immediately available funds, prior to such
termination pursuant hereto, the fees required to be paid pursuant to Section
12.04; provided however that if at the time of such termination the Company has
not entered into an agreement with respect to a Superior Proposal, the Company
shall not be obligated to pay such fees at such time but shall acknowledge in
writing to Parent the Company's obligation to pay to Parent such fees at such
time as the Company does enter into such an agreement; or
(e) by the Company, if (i) Parent shall have failed to commence the Offer
within five business days following the date of this Agreement or (ii) Parent
shall have terminated the Offer without having accepted any Shares (or all
Shares validly tendered pursuant to the Offer) for payment thereunder; provided
that the right to terminate this Agreement under either clause (i) or clause
(ii) shall not be available to the Company if (A) the Company's breach of any
provision of this Agreement results in the failure of the Offer to be commenced
or consummated or (B) such failure to so commence the Offer or to accept any
Shares (or all Shares validly tendered pursuant to the offer) for payment shall
have resulted from the existence of any of the conditions specified in
paragraphs (e) or (f) of Annex I.
43
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The party desiring to terminate this Agreement pursuant to this Section
11.01 (other than pursuant to Section 11.01(a)) shall give notice of such
termination to the other party.
SECTION 11.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any shareholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto; provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance
of the obligations of the other party, (ii) failure of either party to perform
a covenant hereof or (iii) breach by either party hereto of any representation
or warranty or agreement contained herein, such party shall be fully liable for
any and all liabilities and damages incurred or suffered by the other party as
a result of such failure or breach. The provisions of Sections 8.03, 11.02,
12.02, 12.04, 12.06, 12.07 and 12.08 shall survive any termination hereof.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Parent or Merger Subsidiary, to:
Colin D. Stern
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
Telephone: (215) 245-9100
Facsimile: (215) 638-6648
with a copy to:
Dennis S. Hersch
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telephone: (212) 450-4000
Facsimile: (212) 450-4800
44
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if to the Company, to:
David C. Forell
Catherines Stores Corporation
3742 Lamar Avenue
Memphis, Tennessee 38118
Telephone: (901) 363-3900
Facsimile: (901) 794-9726
with a copy to:
Samuel D. Chafetz
Waring Cox, PLC
50 North Front Street, Suite 1300
Memphis, Tennessee 38103
Telephone: (901) 543-8000
Facsimile: (901) 543-8030
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a business day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
SECTION 12.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement, except for the agreements
set forth in Sections 8.03, 11.02, 12.02, 12.04, 12.06, 12.07 and 12.08.
Disclosure of a specific item herein or in any schedule hereto shall not be
limited to the section as to which such disclosure is listed if the disclosure
is such that a reasonable person would recognize that the disclosure modifies a
disclosure made elsewhere herein or in any other schedule hereto.
SECTION 12.03. Amendments; No Waivers. (a) Except as set forth in Section
2.01(a), any provision of this Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement or, in the
case of a waiver, by each party against whom the waiver is to be effective.
45
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(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 12.04. Expenses. (a) Except as otherwise provided in this Section,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.
(b) If (x) Parent shall terminate this Agreement pursuant to Section
11.01(c)(i) or Section 11.01(c)(ii) or (y) the Company shall terminate this
agreement pursuant to Section 11.01(d), then the Company shall pay to Parent a
fee of $5.5 million, by wire transfer of immediately available funds not later
than the date of termination of the Agreement; provided however that if at the
time of such termination the Company has not entered into an agreement with
respect to a Superior Proposal, the Company shall not be obligated to pay such
fee at such time but shall acknowledge in writing to Parent the Company's
obligation to pay to Parent such fee at such time as the Company does enter
into such an agreement.
(c) If (x) Parent shall terminate this Agreement pursuant to Section
11.01(b)(i) and (y) the condition in section (f) of Annex I relating to the
Company's obligations, representations and warranties shall exist, then the
Company shall pay to Parent an amount equal to Parent's Reasonable Expenses, by
wire transfer of immediately available funds not later than three business days
after the date of termination of the Agreement. "Parent's Reasonable Expenses"
shall mean all of the reasonable out-of-pocket expenses that are reasonably
documented and incurred by Parent or Merger Subsidiary in connection with this
Agreement and the transactions contemplated hereby; provided that the maximum
aggregate expenses for which the Company is responsible shall not exceed
$750,000.
(d) If (x) Parent commits a breach of this Agreement which results in
failure of the Offer to be consummated, the condition in section (f) of Annex I
relating to the Company's obligations, representations and warranties shall not
exist, and the Company shall terminate the Agreement pursuant to Section
11.01(b)(i), or (y) the Company shall terminate this Agreement pursuant to
Section 11.01(e), then Parent shall pay to the Company an amount equal to the
Company's Reasonable Expenses, by wire transfer of immediately available funds
not later than three business days after the date of termination of the
Agreement. "Company's Reasonable Expenses" shall mean all of the reasonable
out-of-pocket expenses that are reasonably documented and incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby;
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provided that the maximum aggregate expenses for which the Parent is
responsible shall not exceed $750,000.
(e) Each of the Company and Parent acknowledges that the agreements
contained in this section are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, the other party would
not enter into this Agreement. Accordingly, if either the Company or Parent
fails promptly to pay any amount due to the other party pursuant to this
Section 12.04, it shall also pay any costs and expenses incurred by such other
party in connection with a legal action to enforce this Agreement that results
in a judgment against either the Company or Parent, as the case may be, for
such amount.
SECTION 12.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to
one or more of its Affiliates, the right to purchase all or a portion of the
Shares pursuant to the Offer, but no such transfer or assignment will relieve
Parent or Merger Subsidiary of its obligations under the Offer or prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
SECTION 12.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Tennessee.
SECTION 12.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Pennsylvania or any
Pennsylvania state court, and each of the parties hereby consents to the
nonexclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably
waives, to the fullest extent permitted by law, any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient form. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 12.01 shall be deemed effective service of process on
such party.
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SECTION 12.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 12.09. Counterparts; Effectiveness; Benefit. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 8.03, no provision of this Agreement is intended
to confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.
SECTION 12.10. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
SECTION 12.11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 12.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Upon such a determination, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
SECTION 12.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof,
in addition to any other remedy to which they are entitled at law or in equity.
48
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CATHERINE STORES CORPORATION
By: /s/ Bernard J. Wein
-------------------------------------
Name: Bernard J. Wein
Title: Chairman and Chief Executive
Officer
CHARMING SHOPPES, INC.
By: /s/ Eric M. Specter
-------------------------------------
Name: Eric M. Specter
Title: Executive Vice President and
Chief Financial Officer
ROSE MERGER SUB, INC.
By: /s/ Eric M. Specter
-------------------------------------
Name: Eric M. Specter
Title: President
49
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ANNEX I
Notwithstanding any other provision of the Offer, Parent and Merger Subsidiary
shall not be required to accept for payment or pay for any Shares, and may
terminate the Offer (A) at any time after the date that is 20 business days
from the initial scheduled expiration date, if (x) the Minimum Condition (as
defined in this Agreement) has not been satisfied by the expiration date of the
Offer or (y) the applicable waiting period under the HSR Act shall not have
expired or been terminated by the expiration date of the Offer, and (B) at any
time on or after the date of this Agreement and prior to the expiration date of
the Offer, if any of the following conditions exist:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by any
other Person, domestic or foreign, before any court or governmental authority
or agency, domestic or foreign, (i) challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly to restrain or prohibit
the making of the Offer, the acceptance for payment of or payment for some of
or all the Shares by Parent or Merger Subsidiary or the consummation of the
Merger, seeking to obtain material damages or otherwise directly or indirectly
relating to the transactions contemplated by the Offer or the Merger, (ii)
seeking to restrain or prohibit Parent's ownership or operation (or that of its
respective Subsidiaries or Affiliates) of all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Parent and its Subsidiaries, taken as a whole, or to compel Parent or any of
its Subsidiaries or Affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and its Subsidiaries,
taken as a whole, or of Parent and its Subsidiaries, taken as a whole, (iii)
seeking to impose or confirm material limitations on the ability of Parent,
Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or owned by Parent,
Merger Subsidiary or any of Parent's other Subsidiaries or Affiliates on all
matters properly presented to the Company's shareholders, (iv) seeking to
require divestiture by Parent, Merger Subsidiary or any of Parent's other
Subsidiaries or Affiliates of any Shares or (v) that otherwise, in the good
faith judgment of Parent, is likely to have a Material Adverse Effect on the
Company or Parent; or
(b) there shall have been any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic or foreign,
other than the application of the waiting period provisions of the HSR Act to
the Offer or the Merger, that,
<PAGE>
in the good faith judgment of Parent, is likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) there has been any event, occurrence or development or state of
circumstances or facts which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect (as defined in
this Agreement) on the Company; or
(d) it shall have been publicly disclosed or Parent shall have otherwise
learned that (i) any Person or "group" (as defined in Section 13(d)(3) of the
1934 Act), other than Parent or any of its Affiliates, shall have acquired or
proposed to acquire beneficial ownership of more than 50% of the Shares or more
than 50% of the assets of the Company and its Subsidiaries, taken as a whole,
through the acquisition of stock, the formation of a group or otherwise, or
shall have been granted any option, right or warrant, conditional or otherwise,
to acquire beneficial ownership of such Shares or assets; or
(e) (A) the Board of Directors of the Company shall have failed to
recommend or withdrawn, or modified in a manner adverse to Parent, its approval
or recommendation of this Agreement, the Offer or the Merger, or shall have
recommended, or entered into, or publicly announced its intention to enter
into, an agreement or an agreement in principle with respect to a Superior
Proposal (or shall have resolved to do any of the foregoing) or (B) the Company
shall have breached any of its obligations under Sections 7.02 or 7.03; or
(f) the Company shall have breached or failed to perform in all material
respects any of its obligations under this Agreement, or any of the
representations and warranties of the Company contained in this Agreement (i)
that are qualified by materially or Material Adverse Effect shall not be true
when made or at any time prior to consummation of the Offer as if made at and
as of such time and (ii) that are not qualified by materiality or Material
Adverse Effect shall not be true in all material respects when made or at any
time prior to the consummation of the Offer as if made at and as of such time;
or
(g) there shall have occurred any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange or in the
over-the-counter market, any declaration of a banking moratorium by federal or
New York authorities or general suspension of payments in respect of lenders
that regularly participate in the U.S. market in loans to large corporations,
any material limitation by any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency in the United States that materially affects the extension
of credit generally by lenders
2
<PAGE>
that regularly participate in the U.S. market in loans to large corporations,
any commencement of a war involving the United States or any commencement of
armed hostilities or other national or international calamity involving the
United States that has a material adverse effect on bank syndication or
financial markets in the United States or, in the case of any of the foregoing
occurrences existing on or at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(h) this Agreement shall have been terminated in accordance with its
terms;
which, in the sole good faith judgment of Parent in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may, subject to the terms of this Agreement, be waived by Parent
and Merger Subsidiary in whole or in part at any time and from time to time in
their discretion. The failure by Parent or Merger Subsidiary at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time prior to the Effective Time.
3
Exhibit (c)(2)
[Letterhead of Catherines Stores Corporation]
October 12, 1999
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
Attn: Mr. Colin Stern
Gentlemen:
Catherines Stores Corporation (the "Company") and Charming Shoppes, Inc.
("Charming") intend to enter into good faith negotiations for the purpose of
exploring a possible transaction between the Company or its stockholders and
Charming. In connection therewith, Charming has requested and the Company will
furnish certain non-public information about the business and operations of the
Company. As a condition to your being furnished such information, you agree to
treat any information (whether prepared by the Company, its advisors or
otherwise, and whether oral or written) that is furnished to you or your
representatives (which term shall include your directors, officers, partners,
employees, agents and advisors) by or on behalf of the Company (herein
collectively referred to as the "Evaluation Material") in accordance with the
provisions of this letter and to take or abstain from taking certain other
actions herein set forth. The term "Evaluation Material" does not include
information that (i) is already in your possession, provided that such
information is not known by you to be subject to another confidentiality
agreement with or other obligation of secrecy to the Company or (ii) becomes
generally available to the public other than as a result of a disclosure by you
or your representatives or (iii) becomes available to you on a non-confidential
basis from a source other than the Company or its advisors, provided that such
source is not known by you to be bound by a confidentiality agreement with or
other obligation of secrecy to the Company.
A. Confidentiality and Non-Disclosure.
<PAGE>
Charming Shoppes, Inc.
October 12, 1999
Page 2
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company or its
stockholders and you, and will be kept confidential by you and your
representatives; provided, however, that any of such information may be
disclosed to your representatives who need to know such information solely for
the purpose of evaluating any such possible transaction between the Company or
its stockholders and you and who agree to keep such information confidential
and to be bound by this agreement to the same extent as if they were parties
hereto. You will be responsible for any breach of this agreement by your
representatives.
You hereby acknowledge that you are aware, and that you will advise your
representatives who are informed as to the matters which are the subject of
this letter, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information concerning the matters
which are the subject of this letter from purchasing or selling securities of
such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
In the event that you or your representatives receive a request to
disclose all or any part of the information contained in the Evaluation
Material under the terms of a valid and effective subpoena or order issued by a
court of competent jurisdiction or by a governmental or regulatory body, you
agree to (i) promptly notify the Company about such a request, so that it may
seek an appropriate protective order and/or waive your compliance with the
provisions of this agreement (and, if the Company seeks such an order, to
provide such cooperation as the Company shall reasonably request) and (ii) if
disclosure of such information is required in the opinion of your counsel,
exercise your reasonable best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such of the disclosed
information which the Company so designates.
In addition, without the prior written consent of the Company, you will
not, and will cause your representatives not to, disclose to any person either
the fact that discussions or negotiations are taking place concerning a
possible transaction between the Company or its stockholders and you or any of
the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof, except that disclosure of such
information may be made if required by legal or regulatory process to the
extent, in the opinion of your counsel, you are required to make such
disclosure; provided that prior to any such disclosure,
<PAGE>
Charming Shoppes, Inc.
October 12, 1999
Page 3
you shall first give the Company a reasonable opportunity to review the
proposed disclosure and to comment thereon.
Although the Company has endeavored to include in the Evaluation Material
information which it believes to be relevant for the purpose of your
investigation, you acknowledge and agree that neither the Company nor any of
its representatives or advisors have made or make any representation or
warranty as to the accuracy or completeness of the Evaluation Material. You
agree that neither the Company nor its representatives or advisors shall have
any liability to you or any of your representatives resulting from the use or
contents of the Evaluation Material or from any action taken or any inaction
occurring in reliance on the Evaluation Material.
Upon the request of the Company, you and your representatives shall
promptly redeliver to the Company all written Evaluation Material and any other
written material containing or reflecting any information in the Evaluation
Material (whether prepared by the Company, its advisors, agents or otherwise)
and will not retain any copies, extracts or other reproductions in whole or in
part of such written material. All documents, memoranda, notes, and other
writings whatsoever prepared by you or your representatives based on this
information in the Evaluation Material shall be destroyed, and such destruction
shall be certified in writing to the Company by an authorized officer.
<PAGE>
Charming Shoppes, Inc.
October 12, 1999
Page 4
B. Exclusive Period.
In consideration of Charming commencing due diligence and entering into
good faith negotiations with the Company regarding a possible transaction, the
Company agrees to deal exclusively with Charming in connection with the sale of
the Company or any of its subsidiaries or assets such that, until the date
which is four weeks from the date hereof (so long as Charming's due diligence
inquiry and negotiation of a definitive agreement are continuing in good faith
during that period), neither the Company nor any of its subsidiaries, nor any
of its or their officers, employees, representatives or agents, will, directly
or indirectly, solicit, encourage, or initiate any offer or proposal from, or
initiate any discussion or negotiations with, or offer to provide any
information to, any person or group, other than Charming or its employees,
representatives or agents concerning any transaction involving the sale of the
Company or any of its subsidiaries or assets, and that if the Company does
receive any proposal in respect of any such transaction, the Company will
promptly communicate to Charming (unless prohibited by the terms of such
proposal) the material terms of and the name of the person making such
proposal. Charming agrees that it shall use its reasonable best efforts to
complete its due diligence during such four week period and that, for a period
of one year from the date hereof, neither Charming nor its affiliates (as
defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as
amended) will, directly or indirectly, acting alone or in concert with others,
solicit for employment or employ (as an employee, consultant or in any other
capacity), or encourage the termination of employment by, any person who is or
has been from and after the date hereof a Vice President or other executive
officer of the Company or any of its affiliates.
C. Miscellaneous.
You further acknowledge and agree that no failure or delay by the Company
in exercising any right, power, or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power, or
privilege hereunder.
You agree that unless and until a definitive agreement between the Company
and you with respect to any transaction referred to in the first paragraph of
this letter has been executed and delivered, neither the Company nor you will
be under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of its directors, officers, employees, agents or any
other representatives or its advisors except for the matters
<PAGE>
Charming Shoppes, Inc.
October 12, 1999
Page 5
specifically agreed to in this letter. The agreements set forth in this letter
may be modified or waived only by a separate writing by the Company and you
expressly modifying or waiving such agreements.
The parties hereto acknowledge that money damages are an inadequate remedy
for breach of this letter agreement because of the difficulty of ascertaining
the amount of damage that will be suffered by the Company in the event that
this agreement is breached. Therefore, you agree that the Company may obtain
specific performance of this agreement and injunctive relief against any breach
hereof. If any term, provision, covenant, or restriction of this letter
agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Unless otherwise provided, this letter agreement shall be binding upon the
parties hereto for a period of two years from the date hereof.
<PAGE>
Charming Shoppes, Inc.
October 12, 1999
Page 6
This letter shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Pennsylvania without regard to principles of
conflicts of laws.
Very truly yours,
CATHERINES STORES CORPORATION
By: /s/ David C. Forell
----------------------------------
David C. Forell,
Executive Vice President
Accepted and Agreed to:
CHARMING SHOPPES, INC.
By: /s/ Dorrit J. Bern
------------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
