<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
------------------------
MERCANTILE STORES COMPANY, INC.
(Name of Subject Company)
MSC ACQUISITIONS, INC.
DILLARD'S, INC.
(Bidders)
COMMON STOCK, $.14 2/3 PAR VALUE PER SHARE
(Title of Class of Securities)
587533100
(CUSIP Number of Class of Securities)
PAUL J. SCHROEDER, ESQ.
VICE PRESIDENT, SECRETARY
& GENERAL COUNSEL
DILLARD'S, INC.
1600 CANTRELL ROAD
LITTLE ROCK, ARKANSAS 72201
TELEPHONE: (501) 376-5200
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
ALAN G. SCHWARTZ, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$2,958,638,000 $591,728
</TABLE>
* Based on the offer to purchase all of the outstanding shares of Common Stock
of the Subject Company at $80 cash per share; 36,887,475 Shares outstanding
and 95,500 options outstanding as of May 16, 1998.
** 1/50 of 1% of Transaction Valuation.
/ / 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:
Form or Registration No.:
Filing Party:
Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Tender Offer Statement on Schedule 14D-1 relates to the offer by MSC
Acquisitions, Inc., a Delaware corporation (the "Purchaser"), a wholly owned
subsidiary of Dillard's, Inc., a Delaware corporation ("Parent"), to purchase
all of the outstanding shares of Common Stock, $.14 2/3 par value per share (the
"Shares"), of Mercantile Stores Company, Inc., a Delaware corporation (the
"Company"), at a purchase price of $80 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated May 21, 1998 (the "Offer to Purchase"), a copy
of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, as amended from time to
time, constitute the "Offer"), a copy of which is attached hereto as Exhibit
(a)(2).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Mercantile Stores Company, Inc. The
information set forth in Section 7 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is Common Stock, par value $.14 2/3 per share, of the Company. The
information set forth in the Introduction (the "Introduction") of the Offer to
Purchase 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) and (g) This Statement is filed by the Purchaser and the Parent. The
information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase and in Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor the Parent
nor, to the best knowledge of the Purchaser or the Parent, any of the persons
listed in Schedule I to the Offer to Purchase (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning the Purchaser and the Parent") and Section 10 ("Background of the
Offer; Contacts with the Company") and Section 11 ("The Merger Agreement") of
the Offer to Purchase and in Exhibit (c)(1) of this Schedule 14D-1 is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (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.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger
Agreement"), Section 12 ("Purpose of the Offer; the
2
<PAGE>
Merger; Plans for the Company") and Section 13 ("Dividends and Distributions")
of the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 14 ("Effect of the Offer on the
Market for the Shares, Stock Exchange Listing and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction and Section 8
("Certain Information Concerning the Purchaser and the Parent") of the Offer to
Purchase and Schedule I to the Offer to Purchase is incorporated herein by
reference.
ITEM 7.CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and the Parent"), Section 10 ("Background
of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement")
and Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 14 ("Effect of the Offer on the
Market for the Shares, Stock Exchange Listing and Exchange Act Registration")
and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer
to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated May 21, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
3
<PAGE>
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement as published on May 21, 1998.
(a)(8) Form of Press Release issued by the Parent on May 18, 1998.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of May 16, 1998, among
Dillard's, Inc., MSC Acquisitions, Inc. and Mercantile Stores
Company, Inc.
(c)(2)Agreement and Plan of Merger, dated as of May 16, 1998, among
Dillard's, Inc., WMI Acquisition, Inc. and Woodbank Mills, Inc.
(c)(3)Agreement and Plan of Merger, dated as of May 16, 1998, among
Dillard's, Inc., MMC Acquisition, Inc. and Minot Mercantile
Corporation.
(c)(4)Proxy and Indemnification Agreement, dated as of May 16, 1998, between
Dillard's, Inc. and each of the stockholders of Woodbank Mills, Inc.
that are signatories to the Agreement.
(c)(5)Proxy and Indemnification Agreement, dated as of May 16, 1998, between
Dillard's, Inc. and each of the stockholders of Minot Mercantile
Corporation that are signatories to the Agreement.
(c)(6)Stockholders' Agreement, dated as of May 16, 1998, between Dillard's,
Inc. and each of the parties listed on the signature page of the
Agreement.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
4
<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.
<TABLE>
<S> <C> <C>
DILLARD'S, INC.
By: /s/ JAMES I. FREEMAN
-----------------------------------------
Name: James I. Freeman
Title: SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
MSC ACQUISITIONS, INC.
By: /s/ JAMES I. FREEMAN
-----------------------------------------
Name: James I. Freeman
Title: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Date: May 21, 1998
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- --------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
(a)(1) Offer to Purchase dated May 21, 1998............................................................
(a)(2) Letter of Transmittal...........................................................................
(a)(3) Notice of Guaranteed Delivery...................................................................
(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees........................................................................................
(a)(5)... Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees
(a)(6)... Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
(a)(7) Form of Summary Advertisement as published on May 21, 1998......................................
(a)(8) Form of Press Release issued by the Parent on May 18, 1998......................................
(c)(1) Agreement and Plan of Merger, dated as of May 16, 1998, among Dillard's, Inc., MSC Acquisitions,
Inc. and Mercantile Stores Company, Inc.........................................................
(c)(2) Agreement and Plan of Merger, dated as of May 16, 1998, among Dillard's, Inc., WMI Acquisition,
Inc. and Woodbank Mills, Inc.
(c)(3) Agreement and Plan of Merger, dated as of May 16, 1998, among Dillard's, Inc., MMC Acquisition,
Inc. and Minot Mercantile Corporation.
(c)(4) Proxy and Indemnification Agreement, dated as of May 16, 1998, between Dillard's, Inc. and each
of the stockholders of Woodbank Mills, Inc. that are signatories to the Agreement.
(c)(5) Proxy and Indemnification Agreement, dated as of May 16, 1998, between Dillard's, Inc. and each
of the stockholders of Minot Mercantile Corporation that are signatories to the Agreement.
(c)(6) Stockholders' Agreement, dated as of May 16, 1998, between Dillard's, Inc. and each of the
parties listed on the signature page of the Agreement.
</TABLE>
6
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
AT
$80 NET PER SHARE
BY
MSC ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
DILLARD'S, INC.
----------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, JUNE 19, 1998,
UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK WHICH, TOGETHER WITH ANY SHARES OWNED,
DIRECTLY OR INDIRECTLY, BY DILLARD'S, INC. (THE "PARENT") OR MSC
ACQUISITIONS, INC. (THE "PURCHASER"), CONSTITUTES MORE THAN 50% OF THE
VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS), OF ALL SECURITIES OF
MERCANTILE STORES COMPANY, INC. (THE "COMPANY") ENTITLED TO VOTE
GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER AND (II) THE
EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE
"HSR ACT"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE THE INTRODUCTION AND
SECTIONS 1 AND 15.
--------------------------
THE BOARD OF DIRECTORS OF MERCANTILE STORES COMPANY, INC. HAS UNANIMOUSLY
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING EACH OF THE OFFER AND THE MERGER, ARE ADVISABLE AND ARE FAIR TO AND
IN THE BEST INTERESTS OF THE STOCKHOLDERS OF MERCANTILE STORES COMPANY,
INC. AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES TO THE PURCHASER.
--------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S
SHARES (AS DEFINED HEREIN) OF MERCANTILE STORES COMPANY, INC. SHOULD EITHER (1)
COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN
ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL, MAIL OR DELIVER
THE LETTER OF TRANSMITTAL (OR SUCH FACSIMILE) AND ANY OTHER REQUIRED DOCUMENTS
TO THE DEPOSITARY (AS DEFINED HEREIN), AND EITHER DELIVER THE CERTIFICATES
REPRESENTING THE TENDERED SHARES AND ANY OTHER REQUIRED DOCUMENTS TO THE
DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY
TRANSFER SET FORTH IN SECTION 3 OR (2) REQUEST SUCH STOCKHOLDER'S BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE
TRANSACTION FOR SUCH STOCKHOLDER. STOCKHOLDERS HAVING SHARES REGISTERED IN THE
NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST
CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF
THEY DESIRE TO TENDER SHARES SO REGISTERED.
A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY
WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH
SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION
3.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO MORGAN STANLEY &
CO. INCORPORATED (THE "DEALER MANAGER") OR TO D.F. KING & CO., INC. (THE
"INFORMATION AGENT") AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET
FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS
OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED
DELIVERY MAY ALSO BE OBTAINED FROM THE INFORMATION AGENT OR THE DEALER MANAGER,
OR FROM BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
--------------------------
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
MAY 21, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION............................................................................................... 1
THE TENDER OFFER........................................................................................... 3
1. Term of the Offer, Expiration Date.................................................................. 3
2. Acceptance for Payment and Payment for Shares....................................................... 4
3. Procedure for Tendering Shares...................................................................... 5
4. Withdrawal Rights................................................................................... 8
5. Certain Federal Income Tax Consequences............................................................. 8
6. Price Range of Shares; Dividends.................................................................... 9
7. Certain Information Concerning the Company.......................................................... 10
8. Certain Information Concerning the Purchaser and the Parent......................................... 11
9. Source and Amount of Funds.......................................................................... 13
10. Background of the Offer; Contacts with the Company................................................. 13
11. The Merger Agreement............................................................................... 14
12. Purpose of the Offer; the Merger; Plans for the Company............................................ 24
13. Dividends and Distributions........................................................................ 26
14. Effect of the Offer on the Market for the Shares, Stock Exchange Listing and
Exchange Act Registration.......................................................................... 27
15. Certain Conditions of the Offer.................................................................... 28
16. Certain Legal Matters and Regulatory Approvals..................................................... 29
17. Fees and Expenses.................................................................................. 31
18. Miscellaneous...................................................................................... 32
SCHEDULE I Certain Information Regarding the Directors and Executive Officers of
the Purchaser and Parent I-1
</TABLE>
i
<PAGE>
To the Stockholders of Mercantile Stores Company, Inc.:
INTRODUCTION
MSC Acquisitions, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Dillard's, Inc., a Delaware corporation (the
"Parent"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $.14 2/3 per share (the "Shares"), of Mercantile Stores
Company, Inc., a Delaware corporation (the "Company"), at a purchase price of
$80 per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Morgan Stanley & Co. Incorporated
("Morgan Stanley"), which is acting as Dealer Manager for the Offer (in such
capacity, the "Dealer Manager"), Harris Trust Company of New York, which is
acting as the Depositary (in such capacity, the "Depositary") and D.F. King &
Co., Inc. (in such capacity, the "Information Agent") incurred in connection
with the Offer. See Section 17.
The Board of Directors of the Company has unanimously determined that the
Merger Agreement (as defined below) and the transactions contemplated thereby,
including each of the Offer and the Merger (as defined below), are advisable and
are fair to and in the best interests of the stockholders of the Company and
recommends that the holders of the Shares accept the Offer and tender their
Shares to the Purchaser.
The Board of Directors of the Company has received the written opinion of
Goldman, Sachs & Co., financial adivsor to the Company ("Goldman Sachs"), that
the $80 per Share in cash to be received by the holders of Shares in the Offer
and the Merger is fair from a financial point of view to such holders. A copy of
the opinion of Goldman Sachs is attached to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which is being distributed to the stockholders of the Company, and stockholders
are urged to read the opinion in its entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
SECTION 1) A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES OWNED, DIRECTLY OR
INDIRECTLY, BY THE PARENT OR THE PURCHASER, CONSTITUTES MORE THAN 50% OF THE
VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS), OF ALL SECURITIES OF THE
COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER
(THE "MINIMUM CONDITION") AND (II) THE EXPIRATION OR TERMINATION OF ALL
APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976, AS AMENDED (THE "HSR ACT"). SEE SECTIONS 1 AND 15. IF THE PURCHASER
PURCHASES NOT LESS THAN THAT NUMBER OF SHARES NEEDED TO SATISFY THE MINIMUM
CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF
ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTION 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 16, 1998 (the "Merger Agreement"), among the Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, for the making
of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL"), the Purchaser will be merged with and into the Company (the
"Merger"). Following the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and become a wholly owned subsidiary
of the Parent, and the separate corporate existence of the Purchaser will cease.
Stockholders of the Company representing approximately 40% of the issued and
outstanding Shares of the Company (the "Locked-up Stockholders") have
contractually agreed, among other things, to tender their Shares in the Offer,
provide Parent with an irrevocable proxy, grant an option at the $80 Offer price
1
<PAGE>
and otherwise support the transaction with Parent. See Section 11 for a
discussion of the arrangements with the Locked-up Stockholders.
Pursuant to the Merger Agreement, the Company agrees, if and to the extent
permitted by law, at the request of the Purchaser and subject to the terms of
the Merger Agreement, to take all necessary and appropriate actions to cause the
Merger to become effective as soon as reasonably practicable after the purchase
of the Shares pursuant to the Offer, without a meeting of the Company's
stockholders in accordance with the DGCL. See Section 11.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company and each Share, if any, owned by the
Parent, the Purchaser or any other direct or indirect subsidiary of the Parent
or of the Purchaser, which shall be cancelled, and other than Shares, if any
(collectively, "Dissenting Shares"), held by stockholders who have not voted in
favor of the Merger Agreement or consented thereto and who have delivered to the
Company a written demand for appraisal and payment in the time and manner
provided in Section 262 of the DGCL) will be cancelled, extinguished and
converted into the right to receive $80 in cash, or any higher price that may be
paid pursuant to the Offer (the "Merger Consideration"), payable, without
interest, to the holder thereof, upon the surrender of the certificate formerly
representing such Share, less any required withholding taxes.
The Company has represented to the Parent that (i) as of May 16, 1998, there
were 36,748,550 Shares issued and outstanding and 95,500 Shares reserved for
issuance upon the exercise of outstanding stock options. Based upon the
foregoing, the Purchaser believes that approximately 18,422,026 Shares
constitute a majority of the outstanding Shares on a fully-diluted basis.
The Company has advised the Purchaser that, to the knowledge of the Company,
all the directors of the Company intend to tender their Shares pursuant to the
Offer.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. TERM OF THE OFFER, EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Friday, June, 19,
1998, unless and until the Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger Agreement), shall have extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED
BY THE HSR ACT AND CERTAIN OTHER CONDITIONS. SEE SECTION 15, WHICH SETS FORTH IN
FULL THE CONDITIONS TO THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER
AGREEMENT AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), THE PURCHASER RESERVES THE RIGHT, IN ITS
SOLE DISCRETION, TO WAIVE ANY OR ALL CONDITIONS TO THE OFFER (OTHER THAN THE
MINIMUM CONDITION) AND TO MAKE ANY OTHER CHANGES IN THE TERMS AND CONDITIONS OF
THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT, INCLUDING THE
PROVISIONS OF THE MERGER AGREEMENT SET FORTH IN THE NEXT PARAGRAPH, AND THE
APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, IF BY THE EXPIRATION DATE
ANY OR ALL OF SUCH CONDITIONS TO THE OFFER HAVE NOT BEEN SATISFIED, THE
PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (I) TERMINATE THE
OFFER AND RETURN ALL TENDERED SHARES TO TENDERING STOCKHOLDERS, (II) WAIVE SUCH
UNSATISFIED CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED OR (III) EXTEND
THE OFFER AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE RIGHTS OF
STOCKHOLDERS TO WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE BEEN
TENDERED, UNTIL THE TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred or
shall have been determined by the Purchaser to have occurred, to (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. Under the
terms of the Merger Agreement, however, without the written consent of the
Company, the Purchaser will not change the Minimum Condition, decrease the price
per Share payable in the Offer, change the form of consideration payable in the
Offer (other than by adding consideration), reduce the maximum number of Shares
to be purchased in the Offer, modify or amend the conditions to the Offer or
otherwise amend the Offer in a manner adverse to holders of the Shares. The
Purchaser shall have no obligation to pay interest on the purchase price of
tendered Shares, including in the event the Purchaser exercises its right to
extend the period of time during which the Offer is open. The rights reserved by
the Purchaser in this paragraph are in addition to the Purchaser's rights to
terminate the Offer pursuant to Section 15. Purchaser has agreed that, so long
as the Merger Agreement is in effect and all of the Offer conditions are
satisfied other than the conditions to the Offer set forth in clause (h) in
Section 15 and the Minimum Condition, at the request of the Company, the
Purchaser, at its option, shall extend the Offer until the earlier of (1) such
time as such conditions are satisfied or waived, and (2) the date chosen by the
Company which shall not be later than (x) the Outside Date (as defined herein)
and (y) the earliest date on which the Company reasonably believes such
conditions will be satisfied; PROVIDED, that the Company may request further
extensions up until the Outside Date if the Offer conditions set forth in such
clause (h) and the Minimum Condition are still the only Offer conditions not
satisfied unless the Merger Agreement has been terminated in accordance with its
terms.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made in accordance with Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange
3
<PAGE>
Act"), no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which the Purchaser may choose to make any public announcement, except as
provided by applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that material changes be promptly disseminated to
holders of Shares), the Purchaser shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality, of the changes. With respect to a change in price or, subject to
certain limitations, a change in the percentage of securities sought, a minimum
ten business day period from the day of such change is generally required to
allow for adequate dissemination to stockholders. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday, or a federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
The Company has provided the Purchaser with the Company's stockholder list
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
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder 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 FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date as soon as
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in Section 15,
including without limitation the expiration or termination of the waiting period
applicable to the acquisition of Shares pursuant to the Offer under the HSR Act.
In addition, subject to applicable rules of the Commission, the Purchaser
expressly reserves the right to delay acceptance for payment of or payment for
Shares pending receipt of any other regulatory approvals specified in Section
16. Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates for such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3, (ii) 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 below) in
connection with a book-entry transfer, and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the
4
<PAGE>
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. If for any reason whatsoever acceptance for payment of or payment
for any Shares tendered pursuant to the Offer is delayed or the Purchaser is
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then without prejudice to the Purchaser's rights set forth herein, the
Depositary may nevertheless, on behalf of the Purchaser and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Shares and such Shares may not
be withdrawn except to the extent that the tendering stockholder is entitled to
and duly exercises withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
The 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 all
or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES. VALID TENDERS. Except as set forth
below, in order for Shares to be validly tendered pursuant to the Offer, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, 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 on or
prior to the Expiration Date and either (i) Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures described below must be complied with.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the
5
<PAGE>
Letter of Transmittal, 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 on or prior
to the Expiration Date, or the guaranteed delivery procedures described below
must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates not accepted for payment or not tendered are to be returned, to a
person other than the registered holder, the Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case, signed exactly as
the name of the registered holder appears on such certificates, with the
signatures on such certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) must
accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to reach the Depositary on or prior to the Expiration
Date, or such stockholder cannot complete the procedure for delivery by
book-entry transfer on a timely basis, such Shares may nevertheless be tendered,
provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required by
the Letter of Transmittal are received by the Depositary within three New
York Stock Exchange (the "NYSE") trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution and a representation that the
stockholder owns the Shares tendered within the meaning of, and that the tender
of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act,
each in the form set forth in such Notice of Guaranteed Delivery.
6
<PAGE>
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time and will depend upon when Share Certificates or Book-Entry Confirmations of
such Shares are received into the Depositary's account at the Book-Entry
Transfer Facility.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares, other securities or rights issued or issuable in respect
of such Shares on or after the date hereof). All such powers of attorney and
proxies shall be considered irrevocable and coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent powers of attorney and proxies may be
given nor any subsequent written consents executed (and, if given or executed,
will not be deemed effective). The designees of the Purchaser will, with respect
to the Shares (and such other Shares and securities) for which such appointment
is effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's payment for such Shares, the
Purchaser must be able to exercise full voting rights with respect to such
Shares and other securities, including voting at any meeting of stockholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender of
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of the Purchaser, the Parent, any of their
affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defects
or irregularities in tenders or incur any liability for failure to give any such
notification. The Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding.
BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the payor of such
cash with such stockholder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify, under penalties of perjury, that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31%.
7
<PAGE>
All stockholders surrendering Shares pursuant to the Offer should complete and
sign the substitute Form W-9 included in the Letter of Transmittal to provide
the information and certification necessary to avoid backup withholding (unless
an applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain stockholders (including among others all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
OTHER REQUIREMENTS. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after July 19, 1998. If the Purchaser extends the Offer, is delayed in its
acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then without prejudice to the
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this Section 4. Any such delay in acceptance for payment
will be accompanied by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex 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. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates to be withdrawn have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and the signatures on the notice of withdrawal must be guaranteed
by an Eligible Institution unless such Shares have been tendered for the account
of any Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, any of their affiliates or assigns, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences
set forth below is for general information only and is based on the law as
currently in effect. The tax treatment of each stockholder will depend in part
upon such stockholder's particular situation. Special tax consequences not
8
<PAGE>
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, stockholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, for Federal income tax
purposes, a stockholder will recognize gain or loss in an amount equal to the
difference between the cash received by the stockholder pursuant to the Offer or
the Merger and the stockholder's adjusted tax basis in the Shares purchased
pursuant to the Offer or converted into cash in the Merger. For Federal income
tax purposes, such gain or loss will be a capital gain or loss if the Shares are
a capital asset in the hands of the stockholder, and a long-term capital gain or
loss if the stockholder's holding period is more than one year as of the date
the Purchaser accepts such Shares for payment pursuant to the Offer or the
effective date of the Merger, as the case may be. In the case of a non-corporate
stockholder, capital gain is eligible for a maximum federal income tax rate of
28% if the Shares were held for more than one year but not more than 18 months
or 20% if the Shares were held for more than 18 months. There are limitations on
the deductibility of capital losses.
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 (the "1997 Annual
Report"), the Shares are listed and traded principally on the NYSE. The
following table sets forth, for the quarters indicated, the high and low sales
prices per Share on the NYSE as reported in the 1997 Annual Report with respect
to periods occurring in 1996 and 1997 and as reported by the Dow Jones News
Service thereafter, and the amount of cash dividends paid or declared per share
for each quarter based on publicly available sources.
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED PAID
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended February 1, 1997:
First Quarter........................................... $ 625/8 $ 441/4 $ .55 $ .261/2
Second Quarter.......................................... 67 571/8 -- .281/2
Third Quarter........................................... 593/8 47 .57 .281/2
Fourth Quarter.......................................... 54 477/8 -- .281/2
Year Ended January 31, 1998:
First Quarter........................................... $ 501/4 $ 463/8 $ .581/2 $ .281/2
Second Quarter.......................................... 68 /16 493/4 -- .30
Third Quarter........................................... 66 /16 571/4 .60 .30
Fourth Quarter.......................................... 65 /16 581/4 -- .30
Year Ended January 30, 1999:
First Quarter........................................... $ 73 /16 $ 591/2 $ .611/2 $ .30
Second Quarter (through May 18, 1998)................... 787/8 713/4 -- --
</TABLE>
On May 15, 1998, the last full trading day prior to announcement of the
Offer, the closing sale price per Share reported on the NYSE Composite
Transactions Tape as reported by THE WALL STREET JOURNAL was $73 5/16 . On May
20, 1998, the last full trading day before commencement of the Offer, the
closing sale price per Share reported on the NYSE Composite Transactions Tape as
reported by THE WALL STREET JOURNAL was $78 3/4. STOCKHOLDERS ARE URGED TO
OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
9
<PAGE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 7 and elsewhere in this Offer
to Purchase is derived from the 1997 Annual Report and other publicly available
information. The summary information set forth below is qualified in its
entirety by reference to such reports (which may be obtained and inspected as
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although the Purchaser and the Parent do
not have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, neither the Purchaser nor the Parent assumes
any responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Purchaser and the Parent.
GENERAL. The Company was incorporated under the laws of the State of
Delaware on January 10, 1919. The Company is listed on the NYSE (NYSE
designation of "MST") and is engaged in general merchandise department store
retailing. The Company's retailing strategy is to cater to middle and upper
income customers by carrying wide assortments of national brand items and goods
sold under the Company's private labels, with emphasis on apparel, accessories
and fashion home products.
The Company regularly employs, on a full or part-time basis, an average of
approximately 34,200 associates, of which approximately 19,500 are considered
full-time associates. The Company's principal executive offices are located at
9450 Seward Road, Fairfield, Ohio 45014. The telephone number of the Company at
such offices is (513) 881-8000.
FINANCIAL INFORMATION. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years which were derived from
the 1997 Annual Report. More comprehensive financial information is included in
the reports (including management's discussion and analysis of financial
condition and results of operations) and other documents filed by the Company
with the Commission, and the following financial data is qualified in its
entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the NYSE in the manner set forth below.
10
<PAGE>
MERCANTILE STORES COMPANY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED,
-------------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales.................................................... $ 3,143,765 $ 3,030,822 $ 2,944,324
Cost and expenses............................................ 2,207,618 2,113,022 2,059,753
Earnings before income taxes................................. 213,362 201,552 204,580
Income taxes................................................. 83,656 80,087 81,332
Net earnings................................................. 129,706 121,465 123,248
Net earnings per common share................................ 3.53 3.30 3.35
Weighted average number of common shares outstanding......... 36,770,797 36,844,050 36,844,050
BALANCE SHEET (AT PERIOD END)
Total Assets................................................. $ 2,177,791 $ 2,142,503 $ 2,074,724
Total Liabilities............................................ 530,945 577,190 589,611
Total Stockholders' Equity................................... $ 1,646,846 $ 1,565,313 $ 1,485,113
</TABLE>
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's stockholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Except as otherwise
noted in this Offer to Purchase, all of the information with respect to the
Company set forth in this Offer to Purchase has been derived from publicly
available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The
Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was
organized in connection with the Offer and has not carried on any activities to
date other than those incident to its formation and commencement of the Offer.
Parent, a Delaware corporation incorporated in 1964, is an outgrowth of a
department store originally founded by William Dillard. Parent operates retail
department stores located primarily in the Southeastern, Southwestern and
Midwestern areas of the United States, offering a distinctive mix of name-brand
and private label merchandise.
Parent has its principal executive offices at 1600 Cantrell Road, Little
Rock, Arkansas 72201 and is currently operating 270 stores. The telephone number
for Parent is (501) 376-5200.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history of each of the directors and executive officers
of the Purchaser and the Parent and certain other information are set forth in
Schedule I hereto.
11
<PAGE>
Set forth below are certain selected consolidated financial data relating to
the Parent and its subsidiaries for the Parent's last three fiscal years which
have been derived from the financial statements contained in the Parent's Annual
Report on Form 10-K for the fiscal year ended January 31, 1998 (the "Form 10-K")
filed by the Parent with the Commission. More comprehensive financial
information is included in the reports (including management's discussion and
analysis of financial condition and results of operations) and other documents
filed by the Parent with the Commission, and the following financial data is
qualified in its entirety by reference to such reports and other documents,
including the financial information and related notes contained therein. Such
reports and other documents may be examined and copies thereof may be obtained
from the offices of the Commission and the NYSE in the manner set forth below.
DILLARD'S, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------------------------
JANUARY 31, FEBRUARY 1, FEBRUARY 3,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net Sales..................................................... $ 6,631,752 $ 6,227,585 $ 5,918,038
Cost of Sales................................................. 4,393,291 4,124,765 3,893,786
Income Before Taxes........................................... 410,035 378,761 269,653
Income Taxes.................................................. 151,710 140,140 102,470
Net Earnings.................................................. 258,325 238,621 167,183(a)
Earnings per share (fully-diluted)............................ $ 2.31 $ 2.09 $ 1.48
Average Number of Shares outstanding.......................... 111,993,814 113,988,633 113,143,842
BALANCE SHEET DATA (AT PERIOD END)
Total Assets.................................................. $ 5,591,847 $ 5,059,726 $ 4,778,535
Total Liabilities............................................. 2,783,909 2,342,548 2,300,208
Stockholders' Equity.......................................... $ 2,807,938 $ 2,717,178 $ 2,478,327
</TABLE>
- ------------------------
(a) Includes impairment charges of $126.6 million before taxes ($78.5 million
after taxes).
The Parent is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Parent's directors and officers, their remuneration,
options granted to them, the principal holders of the Parent's securities and
any material interest of such persons in transactions with the Parent is
required to be disclosed in such proxy statements and distributed to the
Parent's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission located in Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at prescribed rates at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Such reports, proxy statements and other information may also be
obtained at the Web site that the Commission maintains at http://www.sec.gov.
Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material is also available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
Except as set forth on Schedule I hereto, none of the Purchaser, the Parent
nor, to the best knowledge of the Purchaser and the Parent, any of the persons
listed on Schedule I hereto or any associate or
12
<PAGE>
majority-owned subsidiary of the Purchaser, the Parent or any of the persons so
listed, beneficially owns or has a right to acquire directly or indirectly any
Shares, and none of the Purchaser, the Parent nor, to the best knowledge of the
Purchaser and the Parent, any of the persons or entities referred to above, or
any of the respective executive officers, directors or subsidiaries of any of
the foregoing, has effected any transactions in the Shares during the past 60
days.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay
fees and expenses related to the Offer and the proposed Merger is estimated to
be approximately $3 billion. The Purchaser plans to obtain all funds needed for
the Offer and the proposed Merger through capital contributions or advances made
by Parent. Parent plans to obtain the funds for such capital contributions or
advances from its available cash and from working capital and expects to obtain
the balance of such funds required to purchase the Shares from borrowings under
credit facilities that Parent will seek to obtain from commercial banks and
other financing sources. Parent has spoken to various banks and other financing
sources who have indicated their willingness to assist in obtaining such
financing. Any debt incurred to fund the purchase of the Shares in the Offer is
expected to be repaid from funds internally generated by the Parent and its
subsidiaries and from external sources, including potentially from the sales of
debt securities or receivables financings on terms not yet determined.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. Over the past
several years, the members of Parent's senior management have considered various
potential transactions which could enhance the value of Parent for its
stockholders, including the possibility of a strategic acquisition of the
Company. In prior years, however, no formal discussions concerning a potential
transaction had taken place.
Since early 1997, in light of the industry rumors concerning the willingness
of the Company to consider a sale, Parent had intensified its review of the
Company's business and its prospects. During each regularly scheduled meeting of
the Board of Directors of Parent from November 1997 to February 1998, the Board
discussed a potential transaction with the Company as part of its review of
Parent's strategic alternatives.
On April 6, 1998, Parent contacted Morgan Stanley, Parent's financial
advisor, to discuss Parent's potential interest in the Company. After reviewing
the current state of the Company's business and its operating performance,
Parent authorized Morgan Stanley to contact representatives of the Company to
discuss Parent's interest in pursuing a potential acquisition of the Company. In
response to Parent's inquiry, Roger Milliken, a director of the Company and a
representative of the Milliken family, which controls, directly or indirectly,
approximately 40% of the Shares, communicated that the Company was not prepared
to discuss a potential transaction with Parent at that time because it was
currently evaluating its strategic alternatives and was not prepared to make a
decision to pursue a transaction with Parent.
On May 5, 1998, Goldman Sachs, the financial advisor to the Company, called
Morgan Stanley to inform them that the Company was currently engaged in
substantive negotiations with a third party with respect to the sale of the
Company and that if Parent was still interested that the Company would provide
Parent with an opportunity to participate in the sale process. On May 5-6, 1998
Morgan Stanley had several conversations with William Dillard II and certain of
Parent's senior officers concerning the merits of a potential acquisition of the
Company and Morgan Stanley undertook a detailed business review of the Company.
On May 7, 1998, the parties concluded that to make a meaningful assessment
of the benefits of the transaction, Parent would need to review confidential
information and on such date the parties entered into the Parent Confidentiality
Agreement.
On May 8-9, 1998, officers of the Parent and Parent's legal and financial
advisors continued Parent's due diligence review of the Company and commenced
the review of the Company's nonpublic information in a data room. Legal and
financial diligence continued until May 16, 1998.
13
<PAGE>
On May 9, 1998, the executive officers of the Company delivered a management
presentation to the executive officers and legal and financial advisors of
Parent. On May 9-10, 1998, Parent's executive officers and financial advisors
continued to evaluate the financial basis for pursuing a transaction.
On May 10, 1998, Morgan Stanley informed Goldman Sachs that on the basis of
Parent's review of the Company's information, Parent was prepared to pursue a
transaction at a range of value of $75-80 per share.
On May 11-12, 1998, Parent continued to meet with its financial advisors to
evaluate the financial and strategic ramifications of the transaction.
On May 12, 1998, at a special meeting of Parent's Board of Directors, the
Board analyzed and reviewed various strategic and financial considerations
concerning the possible acquisition and the status of negotiations. Management
responded to questions from directors and after further deliberation, the Board
authorized management to continue to pursue the transaction. On May 12, 1998,
Morgan Stanley, on behalf of Parent, informed Goldman Sachs that Parent was
prepared to pursue the transaction at $78 per share.
On May 13, 1998, Parent's legal advisors reviewed the contract terms with
the officers of Parent and forwarded a copy of a revised merger agreement to
counsel for the Company.
On May 14, 1998, the legal advisors to Parent and the Company met to
negotiate the terms of the Merger Agreement and the related agreements and the
Company communicated to Parent that if Parent was prepared to increase its bid
to $80 that it would negotiate a transaction with Parent on an exclusive basis.
After discussions with Parent's financial advisors, the senior officers of
Parent met to discuss a final valuation of the transaction and after discussing
the merits of the transaction, Parent instructed Morgan Stanley to inform
Goldman Sachs that Parent was prepared to offer $80 per share for the Company if
the Company would commit to a 48 hour exclusivity period.
On May 14-16, 1998, the parties' legal and financial advisors met to
negotiate the terms of the Merger Agreement and related documents.
On May 16, 1998, at a regularly scheduled Board of Directors meeting,
Parent's Board discussed the results of the negotiations and, after considering
reports from management and Parent's legal and financial advisors (including
Morgan Stanley's financial analysis and its delivery of a fairness opinion), the
Board of Directors approved the Merger Agreement and the transactions
contemplated in the Merger Agreement.
Following approval of the Board of Directors of the Company and Parent, on
May 16, 1998, the Company, Parent and Purchaser entered into the Merger
Agreement and the related agreements.
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement and the agreements with the Locked-Up Stockholders, which summary is
qualified in its entirety by reference to the Merger Agreement and such other
agreements which are filed as exhibits to the Tender Offer Statement on Schedule
14D-1.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as soon as reasonably practicable, and in any event within five business days
from the date of public announcement of the execution thereof. The obligation of
Purchaser to accept for payment Shares tendered pursuant to the Offer is subject
to (i) the Minimum Condition, and (ii) the satisfaction or waiver of certain
conditions of the Offer. Under the Merger Agreement, Purchaser expressly
reserves the right, in its sole discretion, to waive any such condition (other
than the Minimum Condition) and make any other changes in the terms or
conditions of the Offer. The Minimum Condition of the Offer is that at the
expiration of the Offer, a number of Shares which, together with any Shares
owned, directly or indirectly, by Parent or Purchaser, constitutes more than 50%
of the voting power (determined on a fully-diluted basis), on the date of
purchase, of all the securities of the Company entitled to vote generally in the
election of directors or in a merger shall have been validly tendered and not
properly withdrawn prior to the expiration of the Offer.
14
<PAGE>
Notwithstanding the above, under the terms of the Merger Agreement, without
the written consent of the Company, the Purchaser will not change the Minimum
Condition, decrease the price per Share payable in the Offer, change the form of
consideration payable in the Offer (other than by adding consideration), reduce
the maximum number of Shares to be purchased in the Offer, or modify or amend
the conditions to the Offer or otherwise amend the Offer in a manner adverse to
holders of the Shares. The Purchaser shall have no obligation to pay interest on
the purchase price of tendered Shares, including in the event the Purchaser
exercises its right to extend the period of time during which the Offer is open.
The rights reserved by the Purchaser in this paragraph are in addition to the
Purchaser's rights to terminate the Offer pursuant to Section 15. The Merger
Agreement provides that, subject to the terms and conditions of the Merger
Agreement, including but not limited to the Offer Conditions, Parent will accept
for payment and pay for Shares as soon as it is permitted to do so under
applicable law.
THE MERGER. The Merger Agreement provides, that upon the terms and subject
to the conditions thereof (and including those described in Section 15) and in
accordance with the DGCL, at the Effective Time of the Merger, the Purchaser
shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Purchaser shall cease and the Company shall
continue as the surviving corporation of the Merger. At Parent's election, any
direct or indirect subsidiary of Parent other than Purchaser may be merged with
and into the Company instead of the Purchaser.
Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time (unless otherwise provided for) shall be
cancelled, extinguished and converted into the right to receive the Merger
Consideration, which equals $80 in cash, or any higher price that may be paid
pursuant to the Offer, payable to the holder thereof, without interest, upon
surrender of the certificate formerly representing such Share in the manner
described in the Merger Agreement, less any required withholding taxes.
The Merger Agreement provides that, immediately prior to the Effective Time,
each outstanding stock option granted to employees and non-employee directors of
the Company and its subsidiaries (each, an "Option"), whether or not then
exercisable, shall be cancelled by the Company, and the holder thereof shall be
entitled to receive at the Effective Time or as soon as practicable thereafter
from the Company in consideration for such cancellation an amount in cash equal
to the product of (a) the number of Shares previously subject to such Option and
(b) the excess, if any, of the Merger Consideration over the exercise price per
Share previously subject to such Option, less any withholding taxes.
The Merger Agreement provides that, unless otherwise stipulated, Shares that
are issued and outstanding immediately prior to the Effective Time and which are
held by stockholders who have not voted in favor of or consented to the Merger
and shall have delivered a written demand for appraisal of such Shares in the
time and manner provided in Section 262 of the DGCL and shall not have failed to
perfect or shall not have effectively withdrawn or lost their rights to
appraisal and payment under the DGCL shall not be converted into the right to
receive the Merger Consideration, but shall be entitled to receive the
consideration as shall be determined pursuant to Section 262 of the DGCL;
PROVIDED, HOWEVER, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right to appraisal and
payment under the DGCL, such holder's Shares shall thereupon be deemed to have
been converted, at the Effective Time, into the right to receive the Merger
Consideration as described above without any interest thereon.
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company and Purchaser, the Restated
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter and further amended as provided therein and under
the DGCL. At the Effective Time and without any further action on the part of
the Company and Purchaser, the By-Laws of Purchaser shall be the By-Laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Purchaser and as
provided by law.
15
<PAGE>
The Merger Agreement provides that the directors of Purchaser immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
AGREEMENTS OF THE PARENT, THE PURCHASER AND THE COMPANY.
STOCKHOLDERS MEETING. The Merger Agreement provides that if required, the
Company, acting through its Board of Directors, shall, in accordance with and
subject to applicable law and the Company's Restated Certificate of
Incorporation and By-Laws, (i) duly call, give notice of, convene and hold a
meeting of its stockholders as soon as practicable following consummation of the
Offer for the purpose of adopting the Merger Agreement and the transactions
contemplated thereby (the "Stockholders Meeting") and (ii) except if the Board
of Directors by majority vote determines in good faith, based on the advice of
outside legal counsel to the Company, that to do so would constitute a breach of
fiduciary duty under applicable law, (A) include in the Proxy Statement the
unanimous recommendation of the Board of Directors that the stockholders of the
Company vote in favor of the adoption of the Merger Agreement and the
transactions contemplated thereby and the written opinion of the Company's
financial adviser, Goldman Sachs, that the consideration to be received by the
stockholders of the Company pursuant to the Offer and the Merger is fair to such
stockholders and (B) use its reasonable best efforts to obtain the necessary
adoption of the Merger Agreement and the transactions contemplated thereby by
its stockholders. At the Stockholders Meeting, Parent and Purchaser shall cause
all Shares then owned by them and their subsidiaries to be voted in favor of
adoption of the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement provides, that notwithstanding the foregoing, in the
event that the Purchaser shall acquire at least 90% of the outstanding Shares,
the Company agrees, at the request of the Purchaser, subject to the respective
provisions of the Merger Agreement, to take all necessary and appropriate action
to cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's stockholders, in accordance
with Section 253 of the DGCL.
PROXY STATEMENT. The Merger Agreement provides that if required by
applicable law, as soon as practicable following Parent's request, the Company
shall file the proxy statement with respect to the Stockholders' Meeting with
the Commission under the Exchange Act and the rules and regulations promulgated
thereunder, and shall use its reasonable best efforts to have such proxy
statement cleared by the Commission. The parties will cooperate with one another
in this endeavor.
DESIGNATION OF DIRECTORS. The Merger Agreement provides that, promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, and from time to time
thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as shall give Purchaser representation on the Board of Directors equal
to the product of the total number of directors on such Board (giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by Purchaser or any
affiliate of Purchaser bears to the total number of Shares then outstanding, and
the Company shall, at such time, promptly take all action necessary to cause
Purchaser's designees to be so elected, including either increasing the size of
the Board of Directors or securing the resignations of incumbent directors or
both. At such times, the Company will use its reasonable best efforts to cause
persons designated by Purchaser to constitute the same percentage as is on the
board of (i) each committee of the Board of Directors, (ii) each board of
directors of each subsidiary of the Company and (iii) each committee of each
such board, in each case only to the extent permitted by law. The Merger
Agreement provides that until Purchaser acquires a majority of the outstanding
Shares on a fully diluted basis, the Company shall use its reasonable best
efforts to ensure that all members of the Board of
16
<PAGE>
Directors, and such boards and committees as of the date thereof who are not
employees of the Company shall remain members of the Board of Directors and such
boards and committees.
ACCESS TO INFORMATION; CONFIDENTIALITY. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company shall, and shall cause
its subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Parent, and
financing sources who shall agree to be bound by such provisions of the Merger
Agreement as though a party thereto, complete access, consistent with applicable
law, at all reasonable times to its officers, employees, agents, properties,
offices, plants and other facilities and to all books and records, and shall
furnish Parent and such financing sources with all financial, operating and
other data and information as Parent, through its officers, employees or agents,
or such financing sources may from time to time reasonably request.
The Merger Agreement further provides that all information obtained by
Parent and Purchaser pursuant to the above paragraph shall be kept confidential
in accordance with the Confidentiality Agreement, dated on or about May 7, 1998
(the "Parent Confidentiality Agreement"), between Parent and the Company. Parent
is allowed to share information with potential purchasers of assets in
connection with the future divestiture of any of the Company's stores or assets.
NO SOLICITATION OF TRANSACTIONS. The Merger Agreement provides that the
Company, its subsidiaries and their affiliates will immediately cease any
existing discussions and negotiations regarding any acquisition or exchange of
all or any material portion of the assets of the Company or any of its
subsidiaries or any business combination with or involving the Company or its
subsidiaries. The Company may, directly or indirectly, furnish information and
access, in each case only in response to a request for such information or
access to any person made after the date thereof which was not encouraged,
solicited or initiated by the Company or any of its affiliates or any of its or
their respective officers, directors, employees, representatives or agents after
the date thereof, pursuant to appropriate confidentiality agreements containing
terms and conditions (including standstill provisions) that are no less
favorable than the terms and conditions contained in the Parent Confidentiality
Agreement, and may participate in discussions and negotiate with such person
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company (whether furnishing
information and access or participating in discussion and negotiations,) only if
such person has submitted a written proposal to the Board of Directors of the
Company relating to any such transaction and the Board by a majority vote
determines in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law. The Board shall notify Parent
immediately if any such proposal (oral or written) is made and shall in such
notice, indicate in reasonable detail the identity of the offeror and the terms
and conditions of any proposal, and if the proposal is in writing, provide a
copy of such proposal to Parent, and shall keep Parent promptly advised of all
developments which could reasonably be expected to culminate in the Board of
Directors withdrawing, modifying or amending its recommendation of the Offer,
the Merger and the other transactions contemplated by the Merger Agreement.
Except as set forth in the Merger Agreement, neither the Company or any of
its affiliates, nor any of its or their respective officers, directors,
employees, representatives or agents, shall, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with or provide
any information to, any corporation, partnership, person or other entity or
group (other than Parent and Purchaser, any affiliate or associate of Parent and
Purchaser or any designees of Parent or Purchaser) concerning any merger, sale
of any material portion or assets, sale of any shares of capital stock or
similar transactions (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company; PROVIDED, HOWEVER, that
nothing herein shall prevent the Board from taking, and disclosing to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer; PROVIDED,
FURTHER, that the Board shall not recommend that the stockholders of the Company
tender their Shares in connection with any such tender offer unless the
17
<PAGE>
Board by majority vote shall have determined in good faith, based upon the
advice of outside counsel to the Company, that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law. The
Company has also agreed not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company
is a party, unless the Board shall have determined in good faith, based upon the
advice of outside counsel, that failing to release such third party or waive
such provisions would constitute a breach of the fiduciary duties of the Board
of Directors under applicable law.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Certificate of Incorporation of the Surviving
Company shall contain provisions no less favorable with respect to
indemnification than are set forth in the governing documents of the Company and
these provisions are not to be materially modified for a period of six years
from the Merger in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers or employees
of the Company.
For at least six years after the Merger, Parent agrees to maintain the
current policies of directors' and officers' liability insurance maintained by
the Company and its subsidiaries (or substitute policies with equivalent terms),
with respect to matters occurring prior to the Merger to the extent such
insurance is reasonably available.
The Merger Agreement also provides that for six years after the Effective
Time, Parent agrees that it will or will cause the Surviving Corporation to
indemnify and hold harmless each present and former director and officer of the
Company, determined as of the Effective Time (the "INDEMNIFIED PARTIES"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, the "COSTS") (but
only to the extent such Costs are not otherwise covered by insurance and paid)
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under applicable law (and Parent shall, or
shall cause the Surviving Corporation to, also advance expenses as incurred to
the fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
FURTHER ACTION; REASONABLE BEST EFFORTS. The Merger Agreement provides
that, upon the terms and subject to the conditions thereof, each of the parties
thereto shall use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement as soon as
practicable, including but not limited to (i) cooperation in the preparation and
filing of the Offer Documents, the Schedule 14D-9, the Proxy Statement, any
required filings under the HSR Act and any amendments to any thereof, (ii)
cooperation with respect to consummating the financing of the Offer and the
Merger and (iii) using its reasonable best efforts to promptly make all required
regulatory filings and applications including, without limitation, responding
promptly to requests for further information and to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and its
subsidiaries as are necessary for the consummation of the transactions
contemplated by the Merger Agreement and to fulfill the conditions to the Offer
and the Merger.
18
<PAGE>
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed (and has agreed to cause its subsidiaries) to operate
their businesses in the ordinary course and in a manner consistent with past
practice. The Company and its subsidiaries will also use reasonable best efforts
to seek to preserve intact their current business organizations, keep available
the service of its current officers, employees and consultants, and preserve its
relationships with customers, suppliers and other persons with which the Company
has significant business relations.
The Company and its subsidiaries will also refrain from taking various
actions without Parent's consent pending consummation of the Merger. These
limitations cover, among other things (subject to certain limitations), changes
in governing documents, changes in capital stock, declaration or payment of
dividend or other distribution (other than regular quarterly dividends
consistent with past practice not to exceed $.32), increases in the compensation
of directors, officers and employees (except to the extent required under
existing plans), adopting a plan of complete or partial dissolution, incurring
debt beyond specified limits, making capital expenditures beyond specified
limits, entering into transactions, making any material tax election, changing
accounting principles and paying or discharging any claims, liabilities or
obligations.
EMPLOYEE BENEFITS MATTERS. The Merger Agreement provides that, on and after
the Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the terms
of any compensation arrangements, employment agreements and employee or director
benefit plans, programs and policies in existence as of the date thereof for all
employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries. Parent and the Company have agreed that the
Surviving Corporation and its subsidiaries shall pay promptly or provide when
due all compensation and benefits required to be paid pursuant to the terms of
any individual agreement with any employee, former employee, director or former
director in effect as of the date thereof.
Pursuant to the Merger Agreement the Parent has agreed to cause the
Surviving Corporation, for the period commencing at the Effective Time and
ending on the second anniversary thereof, to provide employee benefits under
plans, programs and arrangements which, in the aggregate, will provide benefits
to the employees of the Surviving Corporation and its subsidiaries which are no
less favorable in the aggregate than those provided pursuant to the plans,
programs and arrangements of Parent in effect on the date thereof; PROVIDED,
HOWEVER, that nothing in the Merger Agreement shall prevent the amendment or
termination of any specific plan, program or arrangement, require that the
Surviving Corporation provide or permit investment in the securities of Parent,
the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law. Employees of the Surviving Corporation shall be
given credit for all service with the Company and its subsidiaries, to the same
extent as such service was credited for such purpose by the Company, under each
employee benefit plan, program, or arrangement of the Parent in which such
employees are eligible to participate for purposes of eligibility and vesting;
PROVIDED, HOWEVER, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service. Parent has also agreed to maintain the
Company's severance plan (as amended per the Merger Agreement) for a period of
one year from the Effective Time and to maintain certain other benefits to the
Company's employees.
The Merger Agreement further provides that if employees of the Surviving
Corporation and its subsidiaries become eligible to participate in a medical,
dental or health plan of Parent or its subsidiaries, Parent shall cause such
plan to (i) waive any preexisting condition limitations for conditions covered
under the applicable medical, health or dental plans of the Company and its
subsidiaries and (ii) honor any deductible and out of pocket expenses incurred
by the employees and their beneficiaries under such plans during the portion of
the calendar year prior to such participation.
19
<PAGE>
DISPOSITION OF LITIGATION. The Merger Agreement provides that the Company
agrees that it will not settle any litigation currently pending, or commenced
after the date thereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or the Merger Agreement,
without the prior written consent of Parent (which shall not be unreasonably
withheld). The Merger Agreement further provides that the Company will not
voluntarily cooperate with any third party which has sought or may hereafter
seek to restrain or prohibit or otherwise oppose the Offer or the Merger and
cooperate with Parent and Purchaser to resist any such effort to restrain or
prohibit or otherwise oppose the Offer or the Merger.
REPRESENTATION AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations and warranties by the Company concerning the Company's
capitalization, required filings and consents, the Board of Directors' approval
of the Merger Agreement and the transactions contemplated thereby (including
approvals so as to render inapplicable thereto the limitation on business
combinations contained in Section 203 of the DGCL and certain provisions of the
Company's Restated Certificate of Incorporation), SEC filings and financial
statements, absence of certain changes or events, business, compliance with law,
absence of litigation, employee benefit plans, environmental matters, tax
matters, real estate matters and brokers. Some of the representatives are
qualified by a material adverse effect clause. "Material Adverse Effect"
includes any change or effect that would be materially adverse to the assets,
liabilities, results of operations, financial condition or business of the
Company and its subsidiaries taken as a whole other than as a result of general
economic conditions.
CONDITIONS OF THE MERGER. Under the Merger Agreement, the respective
obligations of the Parent, Purchaser and the Company to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (i) If required by the DGCL, the Merger Agreement shall
have been approved by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance with the Company's Certificate of Incorporation
and the DGCL (which the Company has represented shall be solely the affirmative
vote of a majority of the outstanding Shares); (ii) no statute, rule,
regulation, executive order, decree, ruling, injunction or other order (whether
temporary, preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any United States, foreign, federal or state court or
governmental authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger; (iii) Purchaser shall have purchased Shares pursuant
to the Offer; and (iv) any waiting period applicable to the Merger under the HSR
Act shall have been terminated or expired.
TERMINATION EVENTS. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time notwithstanding approval
thereof by the stockholders of the Company:
(a) by mutual written consent of the parties;
(b) by either party if any governmental authority takes any action
permanently restraining, enjoining or otherwise prohibiting the Offer or the
Merger, and such action has become final and nonappealable;
(c) by Parent if due to an occurrence or circumstance which resulted in a
failure to satisfy any of the Offer Conditions (other than as a result of a
breach by Parent or Purchaser of its obligations under the Merger Agreement),
Purchaser shall have (i) terminated the Offer or (ii) failed to pay for Shares
pursuant to the Offer on or prior to the Outside Date (as defined below);
(d) by the Company if (i) there shall have been a material breach of any
covenant or agreement on the part of Parent or the Purchaser contained in this
Agreement which materially adversely affects Parent's or Purchaser's ability to
consummate (or materially delays commencement or consummation of) the Offer, and
which shall not have been cured prior to the earlier of (A) 10 business days
following notice of such breach and (B) two business days prior to the date on
which the Offer expires, (ii) Purchaser shall have (A) terminated the Offer or
(B) failed to pay for Shares pursuant to the Offer on or prior to the Outside
Date (unless such failure is caused by or results from the failure of any
representation or warranty of the
20
<PAGE>
Company to be true and correct in any material respect or the failure of the
Company to perform in any material respect any of its covenants or agreements
contained in this Agreement) or (iii) prior to the purchase of Shares pursuant
to the Offer, any person shall have made a bona fide offer to acquire the
Company (A) that the Board of Directors of the Company by majority vote
determines in its good faith judgment is more favorable to the Company's
stockholders than the Offer and the Merger and (B) as a result of which the
Board of Directors by majority vote determines in good faith, based upon the
advice of outside counsel, that it is obligated by its fiduciary obligations
under applicable law to terminate this Agreement, PROVIDED that such termination
under this clause (iii) shall not be effective until the Company has made
payment of the full fee and expense reimbursement discussed below;
(e) by Parent prior to the purchase of Shares pursuant to the Offer, if (i)
there shall have been a breach of any representation, warranty, covenant or
agreement on the part of the Company contained in this Agreement which is
reasonably likely to have a Material Adverse Effect, which shall not have been
cured prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the date on which the Offer expires,
(ii) the Board shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger or shall have recommended another
offer or transaction, shall have resolved to effect any of the foregoing, or
(iii) the Minimum Condition shall not have been satisfied by the expiration date
of the Offer as it may have been extended pursuant hereto and on or prior to
such date (A) any person (including the Company but not including Parent or
Purchaser) shall have made a public announcement, disclosure or communication to
the Company with respect to a Third Party Acquisition (as defined below) or (B)
any person (including the Company or any of its affiliates or subsidiaries),
other than Parent or any of its affiliates, shall have become (and remain at the
time of termination) the beneficial owner of 19.9% or more of the Shares (unless
such person shall have tendered and not withdrawn such person's Shares pursuant
to the Offer). As used herein, the "Outside Date" shall mean the latest of (I)
70 days following the date hereof or (II) the date that all conditions to the
Offer set forth under "Certain Conditions of the Offer" in Section 15 (the
"Offer Conditions"), the satisfaction of which involve compliance with or
otherwise relate to any United States antitrust or competition laws or
regulations (including any enforcement thereof), have been satisfied for a
period of 10 business days; PROVIDED that in no event shall the Outside Date be
later than January 31, 1999;
TERMINATION FEES AND EXPENSES. If: (i) Parent terminates the Merger
Agreement because of the Company's breach, or if the Company terminates the
Merger Agreement under circumstances that would have permitted Parent to
terminate this Agreement because of the Company's breach, and within 12 months
thereafter, the Company enters into an agreement with respect to a Third Party
Acquisition, or a Third Party Acquisition occurs, involving any party (or any
affiliate or associate thereof) (x) with whom the Company (or its agents) had
any discussions with respect to a Third Party Acquisition, (y) to whom the
Company (or its agents) furnished information with respect to or with a view to
a Third Party Acquisition or (z) who had submitted a proposal or expressed any
interest publicly or to the Company in a Third Party Acquisition, in the case of
each of clauses (x), (y) and (z) prior to such termination; or
(ii) (A) the Company terminates this Agreement to accept a bona fide offer
from a third party or (B) the Company terminates this Agreement pursuant to the
failure by Purchaser to pay for the Shares and at such time Parent would have
been permitted to terminate this Agreement because the Company's Board has
withdrawn support for the transaction or the Offer fails at such time as a Third
Party Acquisition is publicly announced or communicated or (C) Parent terminates
this Agreement because of the withdrawal of recommendation by the Company's
Board or the failure to meet the Minimum Condition at such time as a Third Party
Acquisition is publicly announced or communicated or a person acquires more than
19.9% of the Shares;
then the Company shall pay to Parent and Purchaser, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with any termination contemplated by the
provisions above, a fee, in cash, of $88,288,000, PROVIDED, HOWEVER, that the
Company
21
<PAGE>
in no event shall be obligated to pay more than one such fee with respect to all
such agreements and occurrences and such termination. The payment of any
expenses in the manner described in the next paragraph will be credited against
payment of any break-up fee.
The Merger Agreement also provides that upon the termination of the Merger
Agreement (i) under circumstances in which Parent shall have been entitled to
terminate the Merger Agreement pursuant to (e)(i) above (whether or not
expressly terminated on such basis) or (ii) if any of the representations and
warranties of the Company contained in the Merger Agreement were untrue or
incorrect in any material respect when made and at the time of termination
remained untrue or incorrect in any material respect and such misrepresentation
materially adversely affected the consummation (or materially delayed
commencement or consummation) of the Offer, then the Company shall reimburse
Parent, Purchaser and their affiliates (not later than one business day after
submission of statements therefor) for all actual documented out-of-pocket fees
and expenses actually incurred by any of them or on their behalf in connection
with the Offer and the Merger and the consummation of all transactions
contemplated by the Merger Agreement (including, without limitation, fees and
disbursements payable to financing sources, investment bankers, counsel to
Purchaser or Parent or any of the foregoing, and accountants) up to a maximum
amount of $3 million; PROVIDED, HOWEVER, that in no circumstances shall any
payment be made under this paragraph after a payment has been made of the
transaction fee discussed above.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or similar business
combination by any person other than Parent, Purchaser or any affiliate thereof
(a "Third Party"); (ii) the acquisition by a Third Party of 20.0% or more of the
book or fair market value of the consolidated assets of the Company and its
subsidiaries, taken as a whole; or (iii) the acquisition by a Third Party of
20.0% or more of the outstanding Shares.
STOCKHOLDERS AGREEMENT. Concurrently with the execution and delivery of the
Merger Agreement, Parent and certain of the Locked-Up Stockholders entered into
a Stockholders' Agreement (the "Stockholders' Agreement").
Pursuant to the Stockholders' Agreement, each such Locked-Up Stockholder
agreed to grant Parent an irrevocable option (the "Lock-Up Option") to purchase
such stockholder's Shares at a purchase price equal to the Merger Consideration
at any time, in whole or in part, commencing on the Exercise Date and ending on
the Expiration Date (each as defined below). The "Exercise Date" means the first
to occur of the following events: (a) such stockholder fails to perform in any
material respect any of such stockholder's covenants in the Stockholders'
Agreement or (b) the Merger Agreement is terminated and Parent is entitled to
the payment of a termination fee pursuant to the provisions described in
paragraph (ii) under "--Termination Fees and Expenses" above. The "Expiration
Date" means the first to occur of the following dates: (i) the Effective Time,
(ii) 12 months after the termination of the Merger Agreement, or (iii) the date
Parent has delivered written notice to such Locked-Up Stockholders of its
termination of the Stockholders' Agreement. Parent has agreed that, with respect
to Shares owned by Locked-Up Stockholders that are taxable as C corporations
under the Internal Revenue Code of 1986, Parent and such stockholders will use
their best efforts to have Parent acquire such Share pursuant to the PHC Merger
Agreements (as defined below) rather than exercising the Option for such Shares.
The Stockholders' Agreement also provides that the Locked-Up Stockholders
parties thereto will (i) tender their Shares pursuant to the Offer (except for
any such Locked-Up Stockholders that are C corporations, the Shares of which
will be acquired pursuant to the PHC Merger Agreements), (ii) grant an
irrevocable proxy to Parent to vote their Shares during the term of the
Stockholders' Agreement in favor of the adoption of the Merger Agreement and
against any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer, (iii) not directly or
indirectly solicit, encourage, participate in or initiate any inquiries or the
making of any proposal by any person (other than Parent and its affiliates)
which may reasonably lead to any sale of the Shares or any acquisition of a
material portion of the Company's assets or any equity interest in the Company
or its subsidiaries, or
22
<PAGE>
(iv) not transfer, pledge, assign or otherwise dispose of their Shares during
the term of the Stockholders' Agreement. Notwithstanding anything to the
contrary in the Stockholders' Agreement, the Locked-Up Stockholders that are
parties thereto are permitted to transfer as charitable gifts up to an aggregate
of 300,000 Shares.
PHC MERGER AGREEMENTS. Concurrently with the execution and delivery of the
Merger Agreement, Parent entered into separate Agreements and Plans of Merger
with Minot Mercantile Corporation ("Minot Mercantile") and Woodbank Mills, Inc.
("Woodbank Mills"; individually, with Minot Mercantile, a "PHC"), respectively,
each of which is a personal holding corporation operated by certain of the
Locked-Up Stockholders (such agreements, the "PHC Merger Agreements"). As of the
date of this Offer, Minot Mercantile directly owns 10,484,875 Shares and
Woodbank Mills directly owns 27,413 Shares (and, in addition, Woodbank Mills
owns approximately 50% of the outstanding shares of Minot Mercantile). At the
effective time of the PHC Mergers (as defined below), each PHC's assets will
consist solely of Shares and cash and cash equivalents (and, in the case of
Woodbank Mills, shares of common stock of Minot Mercantile).
Pursuant to the PHC Merger Agreements, subject to the satisfaction of the
conditions to the Offer (other than the condition that the PHC Mergers are
consummated), separate newly formed, wholly owned subsidiaries of Parent will be
merged with and into each PHC, with such companies becoming wholly owned
subsidiaries of Parent (the "PHC Mergers"). As a result of the PHC Mergers,
Parent will acquire all of the Shares owned by each PHC. Under the PHC Merger
Agreements, stockholders of each PHC will receive merger consideration for their
shares based on the Merger Consideration being paid by Parent pursuant to the
Offer and the Merger under the Merger Agreement.
Each PHC Merger Agreement provides that the related PHC will agree to a
number of additional covenants, including, without limitation, (i) limiting any
activities pending the consummation of the related PHC Merger, (ii) calling and
holding respective stockholders' meetings to adopt such PHC Merger Agreement,
(iii) refraining from any solicitations of alternative transactions, (iv)
providing Parent access to such PHC and its books and records and (v) taking all
requisite further action and using their respective reasonable best efforts to
cause all conditions to the related PHC Merger to be satisfied.
Under each PHC Merger Agreement, the related PHC Merger is subject to the
satisfaction at or prior to its respective effective time of the following
conditions: (a) such PHC Merger Agreement shall have been adopted by the
stockholders of such PHC, (b) no statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by any
United States, foreign, federal or state court or governmental authority which
prohibits, restrains, enjoins or restricts the consummation of such PHC Merger,
the Offer or the Merger, (c) any waiting period applicable to such PHC Merger
under the HSR Act shall have been terminated or expired, (d) all of the
conditions to the Offer (other than the consummation of the PHC Mergers), shall
have been satisfied and Purchaser shall have determined to purchase the Shares
pursuant to the Offer, PROVIDED that, if the Merger Agreement is terminated
under circumstances in which Parent is entitled to the payment of a termination
fee pursuant to the provisions described in paragraph (ii) under "--Termination
Fees and Expenses" above, Parent (in its sole and absolute discretion) shall be
entitled to waive the satisfaction of the conditions described in this clause
(d), and (e) in the case of the PHC Merger Agreement for Minot Mercantile, the
condition that the PHC Merger for Woodbank Mills shall have been consummated.
Each PHC Merger Agreement may be terminated and the related PHC Merger
abandoned at any time prior to its respective effective time: (a) by mutual
written consent of Parent and the related PHC, (b) by Parent or the related PHC
if any court of competent jurisdiction or other governmental body located or
having jurisdiction within the United States shall have issued a final order,
injunction, decree, judgment or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting such PHC Merger, the Offer or
the Merger and such order, injunction, decree, judgment, ruling or other action
is or shall
23
<PAGE>
have become final and nonappealable, (c) by Parent if due to an occurrence or
circumstance which resulted in a failure to satisfy any of the conditions to the
Offer (other than as a result of a breach by Parent or Purchaser of its
obligations under the Merger Agreement), Purchaser shall have (i) terminated the
Offer or (ii) failed to pay for Shares pursuant to the Offer on or prior to the
Outside Date, (d) by the related PHC if (i) the Merger Agreement is terminated
and (ii) Parent is no longer entitled to the payment of a termination fee
pursuant to the provisions described in paragraph (ii) under "--Termination Fees
and Expenses" above, or (e) by Parent prior to the purchase of Shares pursuant
to the Offer, if (i) there shall have been a breach of any representation,
warranty, covenant or agreement on the part of the related PHC contained in such
PHC Merger Agreement which is reasonably likely to have a material adverse
effect, which shall not have been cured prior to the earlier of (A) 10 business
days following notice of such breach and (B) two business days prior to the date
on which the Offer expires, or (ii) the Merger Agreement is terminated.
PHC PROXY AND INDEMNIFICATION AGREEMENTS. Concurrently with the execution
and delivery of the Merger Agreement, Parent has entered into separate Proxy and
Indemnification Agreements with holders of no less than 70% of the outstanding
stock of each PHC (such agreements, the "PHC Proxy and Indemnification
Agreements"; together with the Stockholders' Agreement and the PHC Merger
Agreements, the "Lock-Up Agreements").
Each PHC Proxy and Indemnification Agreement provides that the Locked-Up
Stockholders parties thereto will (i) grant an irrevocable proxy to Parent to
vote their shares of the related PHC during the term of such agreement in favor
of the adoption of the related PHC Merger Agreement and against any action or
agreement that would impede, interfere with, delay, postpone or attempt to
discourage the related PHC Merger or the Offer, (ii) not directly or indirectly
solicit, encourage, participate in or initiate any inquiries or the making of
any proposal by any person (other than Parent and its affiliates) which may
reasonably lead to any sale of their shares of the related PHC or any
acquisition of a material portion of the related PHC's assets or any equity
interest in the related PHC, or (iii) not transfer, pledge, assign or otherwise
dispose of their shares of the related PHC during the term of such agreement.
Under each PHC Proxy and Indemnification Agreement, each Locked-Up
Stockholder that is a party thereto further agrees to, jointly and severally,
indemnify and hold Parent and its affiliates harmless from any and all
liabilities, damages, expenses, losses or other claims (including, without
limitation, reasonable attorneys' fees and expenses), directly or indirectly,
suffered or paid that arise out of or relate to (i) the failure of any
representation or warranty made by (A) the related PHC under its PHC Merger
Agreement or (B) any such Locked-Up Stockholder thereunder, in each case to be
true and correct in all respects as of the date of the related PHC Merger
Agreement and as of the effective time thereunder, (ii) any breach by (A) the
related PHC of any of its covenants or agreements contained in its PHC Merger
Agreement and (B) any such Locked-Up Stockholder of any of its covenants or
agreements contained herein, and (iii) the related PHC's business, operations or
conduct at any time on or prior to the effective time of the related PHC Merger.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose of
the Offer is to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement. As promptly
as practicable following consummation of the Offer and after satisfaction or
waiver of all conditions to the Merger set forth in the Merger Agreement, the
Purchaser intends to acquire the remaining equity interest in the Company not
acquired in the Offer by consummating the Merger.
VOTE REQUIRED TO APPROVE THE MERGER. The Board of Directors of the Company
has approved and adopted the Merger and the Merger Agreement in accordance with
the DGCL. The Board will be required to submit the Merger Agreement to the
Company's stockholders for approval at a stockholders' meeting convened for that
purpose in accordance with the DGCL. If stockholder approval is required, the
Merger Agreement must generally be approved by the vote of the holders of a
majority of the outstanding
24
<PAGE>
Shares. As a result, if the Minimum Condition is satisfied, the Purchaser will
have the power, which it intends to exercise, to approve the Merger Agreement
without the affirmative vote of any stockholder.
Pursuant to the Merger Agreement, the Company has agreed, if and to the
extent permitted by law, at the request of the Purchaser and subject to the
terms of the Merger Agreement, to take all necessary and appropriate actions to
cause the Merger to become effective as soon as reasonably practicable after the
purchase of the Shares pursuant to the Offer, without a meeting of the Company's
stockholders in accordance with the DGCL.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF. ANY
SUCH SOLICITATION WHICH THE PURCHASER MAY MAKE WILL BE MADE ONLY PURSUANT TO
SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(A) OF
THE EXCHANGE ACT.
STOCKHOLDER APPROVAL. The DGCL requires that unless otherwise provided by
the Company's Restated Certificate of Incorporation, the Merger be approved by
the affirmative vote of the holders of at least a majority of the outstanding
Shares. The Minimum Condition requires that there shall have been validly
tendered and not properly withdrawn on or prior to the Expiration Date a number
of Shares which, together with the Shares owned, directly or indirectly, by the
Parent, constitutes more than 50% of the voting power (determined on a fully
diluted basis) on the date of purchase of all securities entitled to vote
generally in the election of directors or in a merger. Upon consummation of the
Offer and assuming the Minimum Condition is satisfied, the Purchaser will own
sufficient Shares to enable it to effect stockholder approval of the Merger with
the affirmative vote of the Shares owned by it. The Board of Directors of the
Company has approved the Merger Agreement and the transactions contemplated
thereby, so as to render inapplicable the limitation on business combination
contained in Section 203 of the DGCL and certain provisions of the Company's
Restated Certificate of Incorporation.
THE OFFER IS CONDITIONED UPON THE MINIMUM CONDITION BEING SATISFIED.
APPRAISAL RIGHTS IN CONNECTION WITH THE OFFER. Stockholders do not have
appraisal rights as a result of the Offer. However, if the Merger is
consummated, stockholders of the Company at the time of the Merger who do not
vote in favor of the Merger will have the right under the DGCL to dissent and
demand appraisal of, and receive payment in cash of the fair value of, their
Shares outstanding immediately prior to the effective date of the Merger in
accordance with Section 262 of the DGCL.
Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be higher or lower than the price per Share paid pursuant to the Offer or
the consideration per Share to be paid in the Merger or other similar business
combination.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
WEINBERGER AND RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above.
25
<PAGE>
However, a damages remedy or injunctive relief may be available if a merger is
found to be the product of procedural unfairness, including fraud,
misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DELAWARE LAW.
The foregoing description of the DGCL is not necessarily complete and is
qualified in its entirety by reference to the DGCL.
RULE 13E-3. 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 following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per Share price paid
pursuant to the Offer. However, in the event that the Purchaser is deemed to
have acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby stockholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
stockholders in the Merger or such alternative transaction, be filed with the
Commission and disclosed to stockholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14. If such registration were terminated,
Rule 13e-3 would be inapplicable to any such future Merger or such alternative
transaction.
PLANS FOR THE COMPANY. Subject to regulatory requirements, the Parent does
not have any current definitive plans to dispose of any stores or other assets
of the Company or to effect any material changes in its operations, except that
Parent may convert any number of the Company's department stores to be operated
under the Dillard's nameplate and may sell a number of stores in certain
geographic areas where Parent's management believes the combined companies can
achieve improved operating results by reducing the overlap of stores.
Except as described in this Offer to Purchase, none of the Purchaser, the
Parent nor, to the best knowledge of the Purchaser and the Parent, any of the
persons listed on Schedule I has any present plans or proposals that would
relate to or result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries, any material change in the capitalization or dividend
policy of the Company or any other material change in the Company's corporate
structure or business or the composition of its Board of Directors or
management.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement, split, combine or otherwise change the Shares or
its capitalization, or disclose that it has taken any such action, then without
prejudice to the Purchaser's rights under Section 15, the Purchaser may make
such adjustments to the purchase price and other terms of the Offer as it deems
appropriate to reflect such split, combination or other change.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any cash or stock dividend or other distribution on, or issue any rights
with respect to, the Shares (except for the Company's regular quarterly dividend
of up to $.32 per Share) that is payable or distributable to
26
<PAGE>
stockholders of record on a date prior to the transfer to the name of the
Purchaser or the nominee or transferee of the Purchaser on the Company's stock
transfer records of such Shares that are purchased pursuant to the Offer, then
without prejudice to the Purchaser's rights under Section 15, (i) the purchase
price payable per Share by the Purchaser pursuant to the Offer will be reduced
to the extent any such dividend or distribution is payable in cash and (ii) any
non-cash dividend, distribution (including additional Shares) or right received
and held by a tendering stockholder shall be required to be promptly remitted
and transferred by the tendering stockholder to the Depositary for the account
of the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance or appropriate assurance thereof, the Purchaser will, subject to
applicable law, be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount or value thereof, as
determined by the Purchaser in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK EXCHANGE LISTING
AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer
will reduce the number of Shares that might otherwise trade publicly and could
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares by the public. Following
completion of the Offer, at least a majority of the outstanding Shares will be
owned by Purchaser.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NYSE for continued listing and the listing of the Shares
is discontinued, the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of the securities firms, the possible termination of registration under
the Exchange Act as described below and other factors. 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 it would cause future market prices to be
greater or less than the Offer price.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The 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 the Shares and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings 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 the
securities pursuant to Rule 144 under the Securities Act of 1933.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for NASDAQ reporting.
27
<PAGE>
The Shares are currently "margin securities" under the rules 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 for the purpose of buying, carrying, or trading in
securities ("purpose loans"). Depending upon factors similar to those described
above with respect to listing and market quotations, it is possible that,
following the Offer, 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 purpose loans made by brokers.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, but subject to the terms and conditions of the Merger Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for
any Shares tendered pursuant to the Offer, and may postpone the acceptance for
payment or, subject to the restriction referred to above, payment for any Shares
tendered pursuant to the Offer, and may amend or terminate the Offer (whether or
not any Shares have theretofore been purchased or paid for) to the extent
permitted by the Merger Agreement if, (i) at the expiration of the Offer, a
number of shares which, together with any Shares owned, directly or indirectly,
by Parent or Purchaser, constitutes more than 50% of the voting power
(determined on a fully-diluted basis), on the date of purchase, of all the
securities of the Company entitled to vote generally in the election of
directors or in a merger shall not have been validly tendered and not properly
withdrawn prior to the expiration of the Offer, or (ii) at any time on or after
the date of this Agreement and prior to the acceptance for payment of Shares,
any of the following conditions occurs or has occurred:
(a) there shall have been entered any order, preliminary or permanent
injunction, decree, judgment or ruling in any action or proceeding before
any court or governmental, administrative or regulatory authority or agency,
or any statute, rule or regulation enacted, entered, enforced, promulgated,
amended or issued that is applicable to Parent, Purchaser, the Company or
any subsidiary or affiliate of Purchaser or the Company or the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency that is reasonably likely
to have the effect of: (i) making illegal or otherwise directly or
indirectly restraining or prohibiting the making of the Offer in accordance
with the terms of the Merger Agreement, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its affiliates
or the consummation of the Merger; (ii) prohibiting the ownership or
operation of the Company and its subsidiaries by Parent or any of Parent's
subsidiaries, (iii) imposing limitations on the ability of Parent, Purchaser
or any of Parent's affiliates effectively to acquire or hold or to exercise
full rights of ownership of the Shares, including without limitation the
right to vote any Shares acquired or owned by Parent or Purchaser or any of
its affiliates on all matters properly presented to the stockholders of the
Company, including without limitation the adoption of the Merger Agreement
or the right to vote any shares of capital stock of any subsidiary directly
or indirectly owned by the Company; or (iv) requiring divestiture by Parent
or Purchaser or any of their affiliates of any Shares;
(b) there shall have occurred any event that is reasonably likely to
have a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices (other than suspensions or limitations triggered on
the New York Stock Exchange by price fluctuations on a trading day) for,
securities on any national securities exchange, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) a commencement of a war or material armed hostilities
or other material national calamity directly involving the United States or
materially adversely affecting the consummation of the Offer or (iv) in the
case of any of the foregoing existing at the time of commencement of the
Offer, a material acceleration or worsening thereof;
28
<PAGE>
(d) (A) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Purchaser
the approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal or any other
acquisition of Shares other than the Offer, (B) any such person or group
shall have entered into a definitive agreement or an agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Shares or a merger, consolidation or other business combination with or
involving the Company or any of its subsidiaries, or (C) the Board of
Directors of the Company or any committee thereof shall have resolved to do
any of the foregoing;
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified by reference to a Material
Adverse Effect shall not be true and correct, or any such representations
and warranties that are not so qualified shall not be true and correct in
any respect that is reasonably likely to have a Material Adverse Effect, in
each case as if such representations and warranties were made at the time of
such determination;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(h) any waiting periods under the HSR Act applicable to the purchase of
Shares pursuant to the Offer or the Merger shall not have expired or been
terminated; or
(i) each of the PHC Mergers shall not have been consummated in
accordance with the terms of the related PHC Merger Agreement, respectively;
which, in the reasonable judgment of Purchaser with respect to each and
every matter referred to above and regardless of the circumstances (except
for any action or inaction by Purchaser or any of its affiliates
constituting a breach of the Merger Agreement) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares or to proceed with the
Merger.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or (other than the
Minimum Condition) may be waived by Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by 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 other 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.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Except as set
forth below, based upon its examination of publicly available filings by the
Company with the Commission and other publicly available information concerning
the Company, neither the Purchaser nor the Parent is aware of any licenses or
other regulatory permits that appear to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the Purchaser's acquisition of Shares (and the indirect acquisition of the
stock of the Company's subsidiaries) as contemplated herein, or of any filings,
approvals or other actions by or with any domestic (federal or state), foreign
or supranational governmental authority or administrative or regulatory agency
that would be required prior to the acquisition of Shares (or the indirect
acquisition of the stock of the Company's subsidiaries) by the Purchaser
pursuant to the Offer as contemplated herein. Should any such approval or other
action be required, it is the Purchaser's present intention to seek such
approval or action. However, the Purchaser
29
<PAGE>
does not presently intend to delay the purchase of Shares tendered pursuant to
the Offer pending the receipt of any such approval or the taking of any such
action (subject to the Purchaser's right to delay or decline to purchase Shares
if any of the conditions in Section 15 shall have occurred). There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the business of the Company, the Parent or the Purchaser or that certain parts
of the businesses of the Company, the Parent or the Purchaser might not have to
be disposed of or held separate or other substantial conditions complied with in
order to obtain such approval or other action or in the event that such approval
was not obtained or such other action was not taken, any of which could cause
the Purchaser to elect to terminate the Offer without the purchase of the Shares
thereunder. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 16.
STATE TAKEOVER LAWS. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. To the extent that
certain provisions of certain of these state takeover statutes purport to apply
to the Offer, the Purchaser believes that such laws conflict with federal law
and constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in EDGAR V. MITE CORP., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to certain
other state takeover statutes. However, in 1987, in CTS CORP. V. DYNAMICS CORP.
OF AMERICA, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and in particular those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining stockholders, provided that such laws were
applicable only under certain conditions. Subsequently, in TLX ACQUISITION CORP.
V. TELEX CORP., a federal district court in Oklahoma ruled that the Oklahoma
statutes were unconstitutional insofar as they applied to corporations
incorporated outside Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in GRAND
METROPOLITAN PLC V. BUTTERWORTH that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, the Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
the Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 15.
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 acquisition
of Shares pursuant to the Offer is subject to such requirements. See Section 2.
The Parent has filed, on May 20, 1998, with the FTC and the Antitrust
Division a Premerger Notification and Report Form in connection with the
purchase of Shares pursuant to the Offer. Under the
30
<PAGE>
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by the Parent. Accordingly,
the waiting period under the HSR Act applicable to such purchases of Shares
pursuant to the Offer will expire at 11:59 p.m., New York City time, on June 4,
1998, unless such waiting period is extended by a request from the FTC or the
Antitrust Division for additional information or documentary material prior to
the expiration of the waiting period. If either the FTC or the Antitrust
Division were to request additional information or documentary material from the
Parent, the waiting period would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by the Parent
with such request. Thereafter, the waiting period could be extended only by
court order or agreement of the parties. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the Offer may, but
need not, be extended and in any event the purchase of and payment for Shares
will be deferred until ten days after the request is substantially complied
with, unless the waiting period is sooner terminated by the FTC and the
Antitrust Division. See Section 2. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order or agreement of the
parties. Any such extension of the waiting period will not give rise to any
withdrawal rights not otherwise provided for by applicable law. See Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase by
the Purchaser of Shares pursuant to the Offer, either of the FTC and the
Antitrust Division 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 the divestiture of Shares
purchased by the Purchaser or the divestiture of substantial assets of the
Parent, its subsidiaries or the Company. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company and its subsidiaries are engaged, the Purchaser
has determined that the Company and the Parent both service customers in certain
geographic areas. Should the FTC or the Antitrust Division raise antitrust
concerns, the Purchaser would be prepared, in order to expedite the Offer or the
Merger, to address those concerns promptly and to consider the possible
divestiture of certain assets to deal with those concerns, if necessary. There
is no guarantee that the Purchaser and the FTC or the Antitrust Division would
reach an agreement with respect to such divestiture. See Section 15 for certain
conditions to the Offer, including conditions with respect to litigation and
certain government actions.
MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Morgan Stanley is acting as Dealer Manager in
connection with the Offer and serving as financial advisor to the Parent and the
Purchaser in connection with the proposed acquisition of the Company. The Parent
has agreed to pay to Morgan Stanley a fee of $11.450 million upon the
consummation of a merger or other business combination with, or acquisition of
80% or more of the Shares or of all or substantially all of the assets of, the
Company. The Parent and the Purchaser will also reimburse Morgan Stanley for
reasonable out-of-pocket expenses, including reasonable attorneys' fees,
31
<PAGE>
and have also agreed to indemnify Morgan Stanley against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and Harris Trust Company of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward the Offer materials
to beneficial owners. The Information Agent and the Depositary will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain out-of-pocket expenses. The Purchaser and the
Parent have also agreed to indemnify the Information Agent and the Depositary
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Dealer Manager, the Information Agent and the Depositary).
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase
and the related Letter of Transmittal and is being made to all holders of
Shares. The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a Schedule 14D-1
(including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing
certain additional information with respect to the Offer. Such statement and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained from the offices of the Commission (except that they will not be
available at the regional offices of the Commission) in the manner set forth in
Section 7 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
MSC Acquisitions, Inc.
May 21, 1998
32
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER AND THE PARENT
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name and position
with the Purchaser of each director and executive officer of the Purchaser are
set forth below. The other required information with respect to each such person
is set forth under "Directors and Executive Officers of the Parent" below. All
directors and executive officers listed below are citizens of the United States.
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
William Dillard II...................................... President
James I. Freeman........................................ Senior Vice President, Chief Financial Officer and
Director
Paul J. Schroeder, Jr. ................................. Vice President, Secretary and Director
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. The name, business
address, present principal occupation or employment and material occupations,
positions, offices or employments during the last five years of each director
and executive officer of the Parent and certain other information are set forth
below. Unless otherwise indicated, the business address of each such director
and executive officer is: c/o Dillard's, Inc., 1600 Cantrell Road, Little Rock,
Arkansas 72201. Unless otherwise indicated, each occupation set forth opposite
an individual's name refers to employment with the Parent. All directors and
executive officers listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Calvin N. Clyde, Jr.................... Director (since 1985); Chairman of the Board and Publisher of T.B.
T.B. Butler Publishing Co., Inc. Butler Publishing Co., Inc. (daily and Sunday newspaper)
410 West Erwin
Tyler, Texas 75702
Robert C. Connor....................... Director (since 1987); Entrepreneur (Private/Personal Investments)
31 Hickory Hills Circle
Little Rock, Arkansas 72212
Drue Corbusier......................... Director (since 1994); Executive Vice President of Parent (since
Dillard's, Inc. 5/16/98); Vice President of Parent (until 5/16/98); Chairman of Division
4501 North Beach Street 7 of Parent (since 6/93); General Merchandise Manager of Division 7 of
Fort Worth, Texas 76137 Parent (until 6/93)
Will D. Davis.......................... Director (since 1972); Partner at Heath, Davis & McCalla, Attorneys,
Heath, Davis & McCalla Austin Texas
200 Perry Brooks Building
121 8th Street
Austin, Texas 78701
Alex Dillard........................... Director (since 1975); President of Parent (since 5/16/98); Vice
Dillard's, Inc. President of Parent (until 5/16/98)
1600 Cantrell Road
Little Rock, Arkansas 72201
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Mike Dillard........................... Director (since 1976); Executive Vice President of Parent; Chairman of
Dillard's, Inc. Division 4 of Parent
900 West Capitol
Little Rock, Arkansas 72201
William Dillard........................ Director (since 1964); Chairman of the Board (since 5/6/98); Chief
Dillard's, Inc. Executive Officer of Parent (until 5/16/98)
1600 Cantrell Road
Little Rock, Arkansas 72201
William Dillard, II.................... Director (since 1967); Chief Executive Officer of Parent (since
Dillard's, Inc. 5/16/98); President of Parent (until 5/16/98); Chief Operating Officer
1600 Cantrell Road of Parent (until 5/16/98). Director of Acxiom Corporation, Barnes &
Little Rock, Arkansas 72201 Noble, Inc. and Simon Debartolo Group, Inc.
James I. Freeman....................... Director (since 1991); Senior Vice President and Chief Financial Officer
Dillard's, Inc. of Parent
1600 Cantrell Road
Little Rock, Arkansas 72201
John Paul Hammerschmidt................ Director (since 1992); United States Congressman 1967-93; now retired.
P.O. Box 999 Director of American Freightways Corporation, First Federal Bank of
Harrison, Arkansas 72602 Arkansas and Southwestern Energy Co.
William B. Harrison, Jr................ Director (since 1986); Vice Chairman, Chase Manhattan Corporation, New
Chase Manhattan Corporation York, New York. Director of Chase Manhattan Corporation,
270 Park Avenue, 8th Floor Freeport-McMoran Inc., and Freeport-McMoran Copper and Gold, Inc.
New York, New York 10017-2070
John H. Johnson........................ Director (since 1986); Chairman & CEO, Johnson Publishing Company, Inc.,
Johnson Publishing Company, Inc. Chicago, Illinois
820 South Michigan Avenue
Chicago, Illinois 60605
E. Ray Kemp............................ Director (since 1970); Former Vice Chairman of the Board and Chief
9 St. Johns Place Administrative Officer of Parent (until 1992); now retired
Little Rock, Arkansas 72207
Jackson T. Stephens.................... Director (since 1997); Chairman--Stephens Group, Inc., Little Rock,
Stephens Group, Inc. Arkansas
111 Center Street, 25th Floor
Little Rock, Arkansas 72201
William H. Sutton...................... Director (since 1994); Managing Partner at Friday, Eldredge & Clark,
Friday, Eldredge & Clark Attorneys, Little Rock, Arkansas
2000 First Commercial Building
400 Capitol Avenue
Little Rock, Arkansas 72201
Paul J. Schroeder, Jr.................. Vice President of Parent (since 5/16/98); Secretary of Parent (since
Dillard's, Inc. 5/16/98); General Counsel of Parent (since 5/16/98); previously, Partner
1600 Cantrell Road at Bryan Cave, Attorneys, St. Louis, Missouri
Little Rock, Arkansas 72201
</TABLE>
I-2
<PAGE>
3. OWNERSHIP OF SUBJECT COMPANY'S SECURITIES BY DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER. Except for Jack Stephens, who owns 3,600
Shares (which he purchased on April 21, 1995), to the best knowledge of Parent
and Purchaser, none of Parent's and Purchaser's other directors or executive
officers beneficially owns any equity securities, or rights to acquire any
equity securities of the Company and none has been involved in any transactions
with respect to any class of the Company's Securities or with the Company or any
of its directors, executive officers, affiliates or associates during the past
60 days.
Stephens Capital Management ("SCM"), a registered investment advisor and
division of Stephens Group, Inc., manages numerous customer accounts on a
discretionary basis. SCM currently holds 104,696 Shares of the Company for the
benefit of its various customers. SCM has discretionary authority over such
accounts. Jack Stephens is the Chairman of Stephens Group, Inc.
I-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
Wall Street Station (for Eligible Institutions DELIVERY:
P.O. Box 1023 only) 88 Pine Street
New York, NY 10268-1023 (212) 701-7636 or -7637 19th Floor
New York, NY 10005
CONFIRM BY TELEPHONE:
(212) 701-7624
</TABLE>
Any questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. 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. You may also contact your broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: 1-800-431-9633
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway, 35th Floor
New York, NY 10036
(212) 761-8117 (Call Collect)
(800) 761-8950 x8117
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED MAY 21, 1998
BY
MSC ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
DILLARD'S, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 19, 1998, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF
NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT DELIVERY:
Wall Street Station (for Eligible Institutions only) 88 Pine Street
P.O. Box 1023 (212) 701-7636 or -7637 19th Floor
New York, NY 10268-1023 New York, NY 10005
Confirm by Telephone:
(212) 701-7624
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders, either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
tenders of Shares are to be made by book-entry transfer into the account of
Harris Trust Company of New York, as Depositary (the "Depositary"), at The
Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant
to the procedures set forth in Section 3 of the Offer to Purchase (as defined
below). Stockholders who tender Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
----------------------------------------------
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the
Depositary will be deemed to have been
tendered. See Instruction 4.
----------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
/ / CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE
DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
Account Number Transaction Code Number
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO
THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution that Guaranteed Delivery:
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer Facility):
/ / The Depository Trust Company
Account Number Transaction Code Number
</TABLE>
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to MSC Acquisitions, Inc., a Delaware
corporation (the "Purchaser"), a wholly owned subsidiary of Dillard's, Inc., a
Delaware corporation ("Parent"), the above-described shares of Common Stock,
$.14 2/3 par value per share (the "Shares"), of Mercantile Stores Company, Inc.,
a Delaware corporation (the "Company"), at a purchase price of $80 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated May 21, 1998 (the
"Offer to Purchase") and in this Letter of Transmittal (which together
constitute the "Offer"). The undersigned understands that the 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 all or any portion of the
Shares tendered pursuant to the Offer, receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all non-cash dividends, distributions (including additional
Shares) or rights declared, paid or issued with respect to the tendered Shares
on or after May 16, 1998 and payable or distributable to the undersigned on a
date prior to the transfer to the name of the Purchaser or nominee or transferee
of the Purchaser on the Company's stock transfer records of the Shares tendered
herewith (collectively, a "Distribution"), and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any Distribution) with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver such Share Certificates (as defined herein) (and any Distribution)
or transfer ownership of such Shares (and any Distribution) on the account books
maintained by the Book-Entry Transfer Facility, together in either case with
appropriate evidences of transfer, to the Depositary for the account of the
Purchaser, (b) present such Shares (and any Distribution) 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 any Distribution), all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after May 16, 1998. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Shares for payment. Upon such acceptance
for payment, all prior proxies given by such stockholder with respect to such
Shares (and such other shares and securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent written
consents executed (and, if given or executed, will not be deemed effective). The
designees of the Purchaser will be empowered to exercise all voting and other
rights of such stockholder as they in their sole discretion may deem proper at
any annual or special meeting of the Company's stockholders or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares the Purchaser must be able to exercise full voting rights with respect to
such Shares.
4
<PAGE>
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distribution) tendered hereby and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to the Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer; and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and 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.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after July 19, 1998. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated herein under "Special Delivery
Instructions", please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered". In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. The undersigned recognizes that the Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
5
<PAGE>
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than the
undersigned.
Issue / / check / / certificates to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
____________________________________________________________________________
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
----------------------------
- ------------------------------------------------------------
----------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned or
to the undersigned at an address other than that shown above.
Mail / / check / / certificates to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
____________________________________________________________________________
6
<PAGE>
SIGN HERE
SIGN
SIGN
AND COMPLETE SUBSTITUTE FORM W-9
HERE
HERE
X __________________________________________________________________________
\
^
X __________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Dated: _______________________________________________________________, 1998
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s) ____________________________________________________________________
____________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) ______________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Tax Identification or
Social Security No. ________________________________________________________
COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
Name of Firm _______________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _____________________________________________
Dated: _______________________________________________________________, 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made pursuant to the procedure
for tender by book-entry transfer set forth in Section 3 of the Offer to
Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility, as well as this Letter of
Transmittal (or a facsimile hereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). Stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary prior to the Expiration
Date; and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (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 New York Stock Exchange trading days after the date of execution of
such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS) If fewer
than all the Shares evidenced by any Share Certificate submitted 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 cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share 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 certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
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 or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on 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 certificate(s) listed, the certificate(s) 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
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
not tendered or accepted for payment are to be registered in the name of, any
person other than the registered holder(s), or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the certificate(s) listed in this
Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger
Agreement, the conditions of the Offer (other than the Minimum Condition (as
defined in the Offer to Purchase)) may be waived by the Purchaser in whole or in
part at any time and from time to time in its sole discretion.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
9
<PAGE>
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the stockholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons 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 from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Manager or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF GUARANTEED
DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY
PRIOR TO THE EXPIRATION DATE.
10
<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT THE RIGHT AND or Employer
FORM W-9 CERTIFY BY SIGNING AND DATING Identification Number
BELOW. ------------------------
PART 2--Certification--Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct Taxpayer
Department of the Identification Number (or I am waiting for a number to be
Treasury issued to me) and
Internal Revenue Service
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been
PAYER'S REQUEST FOR notified by the Internal Revenue Service (the "IRS") that
TAXPAYER IDENTIFICATION I am subject to backup withholding as a result of a
NUMBER ("TIN") failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup
withholding.
Certification Instructions--You must cross out item (2) above
if you have been notified by the IRS that you are
currently subject to backup withholding because of
under-reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were
subject to backup withholding you received another
notification from the IRS that you are no longer subject
to backup withholding, do not cross out such Item (2).
SIGN HERE ^ Signature PART 3--
Date , 1998 Awaiting TIN / /
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) 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
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
<TABLE>
<CAPTION>
Signature Date , 1998
<S> <C>
</TABLE>
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
BANKS AND BROKERS CALL COLLECT: (212) 269-5550
ALL OTHERS CALL TOLL FREE: 1-800-431-9633
THE DEALER MANAGER FOR THE OFFER IS:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
(212) 761-8117 (Call Collect)
(800) 761-8950 (Toll Free) x8117
May 21, 1998
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or if the procedure for delivery
by book-entry transfer cannot be completed on a timely basis. This instrument
may be delivered by hand or transmitted by facsimile transmission or mail to the
Depositary.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF
NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
DELIVERY:
Wall Street Station (FOR ELIGIBLE INSTITUTIONS 88 Pine Street
ONLY)
P.O. Box 1023 (212) 701-7636 or -7637 19th Floor
New York, NY 10268-1023 New York, NY 10005
CONFIRM BY TELEPHONE:
(212) 701-7624
</TABLE>
DELIVERY OF THIS INSTRUMENT 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 form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to MSC Acquisitions, Inc., a Delaware
corporation and a wholly owned subsidiary of Dillard's, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated May 21, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, the number of shares of Common Stock, $.14 2/3 par value
per share (the "Shares"), of Mercantile Stores Company, Inc., a Delaware
corporation, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase.
<PAGE>
<TABLE>
<S> <C>
Signature(s) Address(es)
Name(s) of Record Holders
ZIP CODE
PLEASE TYPE OR PRINT
Area Code and Tel. No.(s)
Number of Shares
(Check the box below if Shares will be
tendered by book-entry transfer)
Certificate Nos. (If Available)
/ / The Depository Trust Company
Dated , 1998
Account Number
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, (a) represents 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, as amended ("Rule 14e-4"), (b)
represents that such tender of Shares complies with Rule 14e-4, and (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"), in either case
together with 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 the case of a
book-entry delivery, and any other required documents, all within three New York
Stock Exchange trading days after the date hereof.
<TABLE>
<S> <C>
NAME OF FIRM AUTHORIZED SIGNATURE
Name
ADDRESS PLEASE TYPE OR PRINT
Title
ZIP CODE
Area Code and Tel. No. Dated , 1998
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
AT
$80 NET PER SHARE
BY
MSC ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
DILLARD'S, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, JUNE 19, 1998, UNLESS THE OFFER IS EXTENDED.
May 21, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by MSC Acquisitions, Inc., a Delaware corporation
(the "Purchaser"), and a wholly owned subsidiary of Dillard's, Inc., a Delaware
corporation (the "Parent"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase for cash all the outstanding shares of Common
Stock, par value $.14 2/3 per share (the "Shares"), of Mercantile Stores
Company, Inc., a Delaware corporation (the "Company") at a purchase price of $80
per Share, net to the seller in cash without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated May 21,
1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer") enclosed herewith. Holders of Shares whose
certificates for such Shares (the "Share Certificates") are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary (as defined below) prior to the Expiration Date (as
defined in the Offer to Purchase), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated May 21, 1998.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to Harris
Trust Company of New York (the "Depositary") by the Expiration Date or if
the procedure for book-entry transfer cannot be completed by the Expiration
Date.
<PAGE>
4. The Letter to Stockholders of the Company from the Chairman of the
Board, President and Chief Executive Officer of the Company, accompanied by
the Company's Solicitation/Recommendation Statement on Schedule 14D-9.
5. A printed 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.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to Harris Trust Company of New York, the
Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JUNE 19, 1998, UNLESS THE OFFER
IS EXTENDED.
In order to take advantage of the Offer, (i) 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 other required documents should be sent to
the Depositary, and (ii) either Share Certificates representing the tendered
Shares should be delivered to the Depositary or such Shares should be tendered
by book-entry transfer into the Depositary's account maintained at the
Book-Entry Transfer Facility (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and D.F. King & Co.,
Inc. (the "Information Agent") (as described in the Offer to Purchase)) for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Morgan Stanley & Co. Incorporated, the Dealer Manager, or the Information Agent,
at their respective addresses and telephone numbers set forth on the back cover
of the Offer to Purchase. Additional copies of the enclosed materials may be
obtained from the Information Agent.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGER,
THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
AT
$80 NET PER SHARE
BY
MSC ACQUISITIONS, INC.
A WHOLLY OWNED SUBSIDIARY OF
DILLARD'S, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, JUNE 19, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated May 21, 1998
(the "Offer to Purchase"), and the related Letter of Transmittal relating to an
offer by MSC Acquisitions, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Dillard's, Inc., a Delaware corporation (the
"Parent"), to purchase all of the outstanding shares of Common Stock, $.14 2/3
par value per share (the "Shares"), of Mercantile Stores Company, Inc., a
Delaware corporation (the "Company"), at a purchase price of $80 per Share, net
to the seller in cash without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"). We are the holder of record
of Shares held by us 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 to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer to Purchase.
Your attention is directed to the following:
1. The tender price is $80 per share, net to the seller in cash without
interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has determined that the Merger
Agreement (as defined below) and the transactions contemplated thereby,
including each of the Offer and the Merger (as defined below), are advisable
and are fair to and in the best interests of the stockholders of the Company
and recommends that holders of the Shares accept the Offer and tender their
Shares to the Purchaser.
4. The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of May 16, 1998 (the "Merger Agreement"), which provides
that subsequent to the consummation of the Offer, the Purchaser will merge
with and into the Company (the "Merger"). At the effective time of the
Merger (the "Effective Time"), each Share issued and outstanding immediately
prior to the Effective Time (other than Shares held in the treasury of the
Company and Shares, if any, owned by the
<PAGE>
Purchaser, the Parent or any direct or indirect subsidiary of the Parent or
of the Company and other than Shares, if any, held by stockholders who have
not voted in favor of the Merger Agreement or consented thereto in writing
and have timely delivered to the Company demand for appraisal of such Shares
in accordance with the Delaware General Corporation Law) shall be cancelled,
extinguished and converted automatically into the right to receive $80 in
cash, without interest.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, June 19, 1998, unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer, at least that number of Shares which, when combined with the Shares
owned, directly or indirectly, by the Parent and its direct and indirect
subsidiaries, constitute more than 50% of the voting power (determined on a
fully-diluted basis) of all securities of the Company entitled to vote
generally in the election of directors or in a merger and (ii) the
expiration or termination of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The Purchaser
is not aware of any State where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid State statute. If the
Purchaser becomes aware of any valid State statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, the Purchaser will make a
good faith effort to comply with any such State statute. If, after such good
faith effort, the Purchaser cannot comply with such State statute, the Offer
will not be made to nor will tenders be accepted from or on behalf of the
holders of Shares in such State. In any jurisdiction where the securities, "blue
sky" or other laws require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers that are licensed under the
laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MERCANTILE STORES COMPANY, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated May 21, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal pursuant to an offer by MSC Acquisitions, Inc., a Delaware
corporation and a wholly owned subsidiary of Dillard's, Inc., a Delaware
corporation, to purchase all outstanding shares of Common Stock, $.14 2/3 par
value per share (the "Shares"), of Mercantile Stores Company, Inc., a Delaware
corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
<TABLE>
<S> <C>
Number of Shares to be Tendered*
................................................ Shares
Dated........................................... , 1998
SIGN HERE
...........................................................
...........................................................
Signature(s)
...........................................................
Please print name(s)
...........................................................
Address
...........................................................
Area Code and Telephone Number
...........................................................
Tax Identification or Social Security Number
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
<PAGE>
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: 00-0000000. The table below will help determine the number to give
the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT NUMBER OF
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
5. Adult and minor The adult, or if the
(joint account) minor is the only
contributor, the
minor(1)
6. Account in the name The ward, minor, or
of guardian or incompetent
committee for a person(3)
designated ward,
minor, or
incompetent person
7. a. The usual The grantor-
revocable savings trustee(1)
trust account
(grantor is also
trustee)
b. So-called trust The actual owner(4)
account that is
not a legal or
valid trust under
State law
8. Sole proprietorship The owner(4)
account
- -----------------------------------------------------
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF
<S> <C> <C>
- -----------------------------------------------------
9. A valid estate or The legal entity (Do
pension trust not 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, The organization
charitable or
educational
organization account
12. Partnership account The partnership
held in the name of
the partnership
13. Association, club, The organization
or other tax-exempt
organization
14. A broker or The broker or
registered 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
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
(5) Show your individual name. You may also enter your business name. You may
use either your social security number or your employer identification
number.
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
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
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and
continue until you furnish your taxpayer identification number to the requester.
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 item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A 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), or an IRA, or a
custodial account under section 403(b)(7).
(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 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 times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Securities,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under Section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
Note: 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.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451 of the Code.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO 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 Sections 6041, 6041(a), 6042, 6044, 6045, 6049, 6050A and 6050N
of the Code and the regulations promulgated therein.
PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, 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
and to help verify the accuracy of your tax return. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends and certain other payments
to a payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish you 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 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
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated May 21, 1998 and the related Letter of
Transmittal (and any amendments thereto) and is being made to all holders of
Shares. The Purchaser (as defined below) is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to a state statute. If the Purchaser becomes aware of any state where the making
of the Offer is prohibited, the Purchaser will make a good faith effort to
comply with any such statute or seek to have such statute declared inapplicable
to the Offer. If, after such good faith effort, the Purchaser cannot comply with
any applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In those
jurisdictions where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by Morgan Stanley & Co. Incorporated or one or more
registered brokers or dealers licensed under the laws of such jurisdictions.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Mercantile Stores Company, Inc.
at
$80 Net Per Share
by
MSC Acquisitions, Inc.
a wholly owned subsidiary of
Dillard's, Inc.
MSC Acquisitions, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Dillard's, Inc., a Delaware corporation (the
"Parent"), is offering to purchase all of the outstanding shares of Common
Stock, $.14 2/3 par value per share (the "Shares"), of Mercantile Stores
Company, Inc., a Delaware corporation (the "Company"), at a purchase price of
$80 per Share, net to the seller in cash without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated May
21, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer").
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 19, 1998, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER
A NUMBER OF SHARES WHICH, TOGETHER WITH ANY SHARES OWNED, DIRECTLY OR
INDIRECTLY, BY THE PARENT OR THE PURCHASER, CONSTITUTES MORE THAN 50% OF THE
VOTING POWER (DETERMINED ON A FULLY-DILUTED BASIS) OF ALL THE SECURITIES OF THE
COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER
AND (II) THE EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER
THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED.
<PAGE>
2
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Following the consummation of the Offer, the Purchaser
intends to effect the Merger described below. The Offer is being made pursuant
to an Agreement and Plan of Merger, dated as of May 16, 1998 (the "Merger
Agreement"), among the Parent, the Purchaser and the Company. The Merger
Agreement provides, among other things, for the making of the Offer by the
Purchaser, and further provides that, following the completion of the Offer,
upon the terms and subject to the conditions of the Merger Agreement and the
Delaware General Corporation Law ("DGCL"), the Purchaser will be merged with and
into the Company (the "Merger"), and each Share issued and outstanding
immediately prior to the effective time of the Merger (other than Shares held in
the treasury of the Company and each Share owned by the Parent, the Purchaser or
any other direct or indirect subsidiary of the Parent or of the Company, which
shall be cancelled, and other than Shares, if any, held by stockholders who have
not voted in favor of or consented to the Merger and who have delivered a
written demand for appraisal of such Shares in the time and manner provided in
the DGCL) will, by virtue of the Merger and without any action on the part of
the Purchaser, the Company or the holders of the capital stock, be cancelled,
extinguished and converted into the right to receive $80 in cash payable to the
holder thereof, without interest, upon the surrender of the certificate formerly
representing such Share, less any required withholding taxes. The Merger
Agreement is more fully described in Section 11 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY 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 HOLDERS OF
SHARES AND RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER ALL
OF THEIR SHARES TO THE PURCHASER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to Harris
Trust Company of New York (the "Depositary") of the Purchaser's acceptance of
such Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchaser and transmitting such payments to
stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES
WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In
all cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates representing Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer of such Shares into 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, (ii)
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 Section 2 of the Offer to Purchase) in connection with a book-entry
transfer, and (iii) any other documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, and regardless of whether or not any of the events set forth in Section
15 of the Offer to Purchase shall have occurred, to (i) extend the period of
time during which the Offer is open and thereby delay acceptance for payment of,
and the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary and (ii) amend the Offer in any respect by giving
oral or written notice of such amendment to the Depositary. Any extension,
delay, termination, waiver or amendment will be followed as promptly as
practicable by public announcement 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.
<PAGE>
3
During any such extension all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the rights of a tendering
stockholder to withdraw such stockholder's Shares.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, June 19, 1998, unless and until the Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after July
19, 1998. For a withdrawal to be effective, a written, telegraphic, telex 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 the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered such Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to Purchase) unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) 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 stockholder
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 and other relevant materials will be mailed by the Purchaser to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder 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 THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Manager or the Information Agent as set forth below. Requests for copies of the
Offer to Purchase and the related Letter of Transmittal and all other tender
offer materials may be directed to the Information Agent or the Dealer Manager,
and copies will be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or any other person
(other than the Dealer Manager and the Information Agent) for soliciting tenders
of Shares pursuant to the Offer.
<PAGE>
4
The Information Agent for the Offer is:
D.F KING & CO., INC.
------------
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
All Others Call Toll Free 1-800-431-9633 (Toll-Free)
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
1585 Broadway 35th Floor
New York, New York 10036
(212) 761-8117 (call collect)
or
(800) 761-8950 (toll free) x8117
May 21, 1998
<PAGE>
DILLARD'S
Dillard's, Inc. 1600 Cantrell Road
Little Rock, AR 72201
News Release
Contact: James I. Freeman For Immediate Release
(501) 376-5980
DILLARD'S, INC. ANNOUNCES DEFINITIVE AGREEMENT FOR ACQUISITION OF
MERCANTILE STORES COMPANY, INC.
<PAGE>
Little Rock, Arkansas, May 18 1998 - Dillard's Inc. announced today that the
boards of directors of Dillard's, Inc. and Mercantile Stores Company, Inc. have
approved a definitive agreement under which Dillard's, Inc. will acquire
Mercantile Stores for $80.00 per share or approximately $2.9 billion in cash.
Pursuant to the agreement, a cash tender offer will be commenced by a
wholly-owned subsidiary of Dillard's, Inc. no later than May 22, 1998 to acquire
all of the outstanding shares of Mercantile Stores Company, Inc.
Mercantile operates 103 predominately fashion apparel stores and 16 home fashion
stores. The stores span 17 states, situated mainly in the southern,
southeastern, and midwest regions of the country. Operating under 13 different
names and managed by five regional divisions, Mercantile's sales for fiscal year
1997 exceeded $3 billion.
"We're very excited about this transaction," said William Dillard, II, Chief
Executive Officer of Dillard's, Inc. "We have admired Mercantile for many years.
This acquisition will allow us to broaden the markets in which we have stores
and help us to better server customers in our existing markets."
Mr. Dillard added, "The stores are a great fit for the Dillard's location
strategy, ranging from urban to less populated areas. They have achieved the
number one market position in 70% of their markets. This could not have been
accomplished without a great pool of talent. We're excited to be associated with
this fine organization."
The tender offer will be subject to the valid tender of shares (together with
any other shares acquired by Dillard's, Inc.) representing a majority of the
voting power of Mercantile Stores Company, Inc., the expiration of the waiting
period under applicable antitrust and competition laws, and other customary
conditions. The Milliken family, holders of approximately 40% of the stock of
Mercantile Stores Company, Inc., has contractually agreed to support the
transaction.
Established sixty years ago by William Dillard, Dillard's, Inc. currently
operates 272 stores in twenty-seven states featuring branded and private label
merchandise in the upper-middle price range and catering to a broad spectrum of
the population.
[Home]]Up][Dillard's Events!][Major Acquisition]
<PAGE>
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
DILLARD'S, INC.
MSC ACQUISITIONS, INC.
and
MERCANTILE STORES COMPANY, INC.
Dated as of May 16, 1998
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
THE OFFER ............................ 2
SECTION 1.1 The Offer ................................................... 2
SECTION 1.2 Company Action .............................................. 3
ARTICLE II
THE MERGER ............................ 4
SECTION 2.1 The Merger ................................................. 4
SECTION 2.2 Closing; Effective Time .................................... 4
SECTION 2.3 Effects of the Merger ...................................... 4
SECTION 2.4 Certificate of Incorporation; By-Laws ...................... 5
SECTION 2.5 Directors and Officers ..................................... 5
SECTION 2.6 Conversion of Securities ................................... 5
SECTION 2.7 Treatment of Options ....................................... 6
SECTION 2.8 Dissenting Shares and Section 262 Shares ................... 6
SECTION 2.9 Surrender of Shares; Stock Transfer Books .................. 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....................... 8
SECTION 3.1 Organization and Qualification; Subsidiaries ............... 8
SECTION 3.2 Certificate of Incorporation and By-Laws ................... 8
SECTION 3.3 Capitalization ............................................. 8
SECTION 3.4 Authority Relative to This Agreement ....................... 9
SECTION 3.5 No Conflict; Required Filings and Consents ................. 10
SECTION 3.6 Compliance ................................................. 10
SECTION 3.7 SEC Filings; Financial Statements .......................... 11
SECTION 3.8 Absence of Certain Changes or Events ....................... 11
SECTION 3.9 Absence of Litigation ...................................... 12
SECTION 3.10 Employee Benefit Plans ..................................... 12
SECTION 3.11 Tax Matters ................................................ 14
SECTION 3.12 Offer Documents; Proxy Statement ........................... 14
SECTION 3.13 Environmental Matters ...................................... 15
SECTION 3.14 Real Estate Matters ........................................ 17
SECTION 3.15 Brokers .................................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER .............................. 18
SECTION 4.1 Corporate Organization ..................................... 18
SECTION 4.2 Authority Relative to This Agreement ....................... 18
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.3 No Conflict; Required Filings and Consents ................. 18
SECTION 4.4 Offer Documents; Proxy Statement ........................... 19
SECTION 4.5 Brokers .................................................... 20
SECTION 4.6 Funds ...................................................... 20
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER .......................... 20
SECTION 5.1 Conduct of Business of the Company Pending the Merger ...... 20
ARTICLE VI
ADDITIONAL AGREEMENTS ................................. 22
SECTION 6.1 Stockholders Meeting ....................................... 22
SECTION 6.2 Proxy Statement ............................................ 22
SECTION 6.3 Company Board Representation; Section 14(f) ................ 23
SECTION 6.4 Access to Information; Confidentiality ..................... 24
SECTION 6.5 No Solicitation of Transactions ............................ 25
SECTION 6.6 Employee Benefits Matters .................................. 26
SECTION 6.7 Directors' and Officers' Indemnification and Insurance ..... 27
SECTION 6.8 Postponement of Annual Meeting ............................. 28
SECTION 6.9 Notification of Certain Matters ............................ 28
SECTION 6.10 Further Action; Reasonable Best Efforts .................... 28
SECTION 6.11 Public Announcements ....................................... 29
SECTION 6.12 Disposition of Litigation .................................. 29
ARTICLE VII
CONDITIONS OF MERGER ................................. 29
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger . 29
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER ........................... 30
SECTION 8.1 Termination ................................................ 30
SECTION 8.2 Effect of Termination ...................................... 31
SECTION 8.3 Fees and Expenses .......................................... 32
SECTION 8.4 Amendment .................................................. 33
SECTION 8.5 Waiver ..................................................... 33
ARTICLE IX
GENERAL PROVISIONS .................................. 33
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements 33
SECTION 9.2 Notices .................................................... 33
SECTION 9.3 Certain Definitions ........................................ 34
SECTION 9.4 Severability ............................................... 35
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.5 Entire Agreement; Assignment ............................... 36
SECTION 9.6 Parties in Interest ........................................ 36
SECTION 9.7 Governing Law .............................................. 36
SECTION 9.8 Headings ................................................... 36
SECTION 9.9 Counterparts ............................................... 36
SECTION 9.10 Knowledge .................................................. 36
SECTION 9.11 Specific Performance ....................................... 36
</TABLE>
Annex A - Offer Conditions
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 16, 1998 (this
"Agreement"), among DILLARD'S, INC., a Delaware corporation ("Parent"), MSC
ACQUISITIONS, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and MERCANTILE STORES COMPANY, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and the stockholders of the
Company to enter into this Agreement with Parent and Purchaser, providing for
the merger (the "Merger") of Purchaser with the Company in accordance with the
General Corporation Law of the State of Delaware ("DGCL"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent and Purchaser have
each approved the Merger of Purchaser with the Company in accordance with the
DGCL upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MMC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("MMC MergerSub"), and Minot Mercantile Corporation,
a Delaware corporation ("Holding Co."), have entered into a merger agreement,
dated as of the date hereof (the "Holding Co. Merger Agreement"), pursuant to
which MMC MergerSub will be merged with and into Holding Co. (the "Holding Co.
Merger"), and Holding Co. shall be the surviving corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, WMI Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("WMI MergerSub"), and Woodbank Mills, Inc., a
Delaware corporation ("Woodbank"), have entered into a merger agreement, dated
as of the date hereof (the "Woodbank Merger Agreement"), pursuant to which WMI
MergerSub will be merged with and into Woodbank (the "Woodbank Merger"), and
Woodbank shall be the surviving corporation; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and each of Holding Co., Woodbank, various family trust
entities (collectively, the "Related Sellers") have entered into a stockholders'
agreement, dated as of the date hereof (the "Stockholders' Agreement"), pursuant
to which, among other things, the Related Sellers have granted an option in
favor of Parent with respect to the shares of Company Common Stock (as defined
herein) respectively held by such persons, subject to the terms and conditions
contained therein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
<PAGE>
2
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall
not have been terminated in accordance with Section 8.1 and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall, as soon as reasonably practicable after the date
hereof (and in any event within five business days from the date of public
announcement of the execution hereof), commence an offer (the "Offer") to
purchase for cash all of the issued and outstanding shares of Common Stock, par
value $.14 2/3 per share (referred to herein as either the "Shares" or "Company
Common Stock"), of the Company at a price of $80.00 per Share, net to the seller
in cash. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer shall be subject only to the satisfaction or waiver by
Purchaser of the Offer Conditions. Purchaser expressly reserves the right, in
its sole discretion, to waive any such condition (other than the Minimum
Condition as defined in the Offer Conditions) and make any other changes in the
terms or conditions of the Offer, provided that, unless previously approved by
the Company in writing, no change may be made which decreases the price per
Share payable in the Offer, changes the form of consideration payable in the
Offer (other than by adding consideration), reduces the maximum number of Shares
to be purchased in the Offer, modify or amend the Offer Conditions or otherwise
amend the Offer in a manner adverse to holders of the Shares. Purchaser
covenants and agrees that, subject to the terms and conditions of this
Agreement, including but not limited to the Offer Conditions, it will accept for
payment and pay for Shares as soon as it is permitted to do so under applicable
law; provided that, Purchaser shall have the right, in its sole discretion, to
extend the Offer for up to five business days, notwithstanding the prior
satisfaction of the Offer, in order to attempt to satisfy the requirements of
Section 253 of the DGCL. It is agreed that the Offer Conditions are for the
benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (except for any action or
inaction by Purchaser or Parent constituting a breach of this Agreement) or,
except with respect to the Minimum Condition, may be waived by Purchaser, in
whole or in part at any time and from time to time, in its sole discretion.
Purchaser further agrees that the Holding Co. Merger and the Woodbank Merger
will not be closed until the Offer Conditions are otherwise satisfied or waived
by Purchaser, and immediately prior to the purchase of the Shares by Purchaser
pursuant to the Offer. Purchaser agrees that, so long as this Agreement is in
effect and all of the Offer Conditions are satisfied other than the conditions
to the Offer set forth in clause (h) of Annex A and the Minimum Condition, at
the request of the Company the Purchaser, at its option, shall extend the Offer
until the earlier of (1) such time as such conditions are satisfied or waived,
and (2) the date chosen by the Company which shall not be later than (x) the
Outside Date (as defined herein), (y) the earliest date on which the Company
reasonably believes such condition will be satisfied; provided, that the Company
may request further extensions up until the Outside Date if the Offer Conditions
set forth in clause (h) and the Minimum Condition are still the only Offer
Condition not satisfied unless this Agreement has been terminated pursuant to
the provisions of Article VIII.
(b) As soon as reasonably practicable on the date the Offer is
commenced, Purchaser shall file a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with
<PAGE>
3
respect to the Offer with the Securities and Exchange Commission (the "SEC").
The Schedule 14D-1 shall contain an Offer to Purchase and forms of the related
letter of transmittal (which Schedule 14D-1, Offer to Purchase and other
documents, together with any supplements or amendments thereto, are referred to
herein collectively as the "Offer Documents"). Parent and Purchaser agree that
the Company and its counsel shall be given an opportunity to review the Schedule
14D-1 before it is filed with the SEC. Parent, Purchaser and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents that shall have become false or misleading in any material respect,
and Parent and Purchaser further 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.
SECTION 1.2 Company Action. (a) The Company hereby approves of
and consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on May 15, 1998, has unanimously
(A) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are advisable and are fair to and in the
best interests of the holders of Shares, (B) approved this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
and (C) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to Purchaser thereunder and adopt this Agreement;
provided, however, that prior to the consummation of the Offer, if the Company's
Board of Directors by majority vote shall have determined in good faith, based
upon the advice of outside counsel to the Company, that failure to modify or
withdraw its recommendation would constitute a breach of the Board's fiduciary
duty under applicable law, the Board of Directors may so modify or withdraw its
recommendation; and (ii) Goldman, Sachs & Co. (the "Financial Adviser") has
delivered to the Board of Directors of the Company its opinion that the
consideration to be received by holders of Shares, other than Parent and
Purchaser, pursuant to each of the Offer and the Merger is fair to such holders
from a financial point of view. The Company has been authorized by the Financial
Adviser to permit, subject to prior review and consent by such Financial
Adviser, the inclusion of such fairness opinion (or a reference thereto) in the
Schedule 14D-9 referred to below and the Proxy Statement referred to in Section
3.12. The Company hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company's Board of Directors described in this Section
1.2(a).
(b) The Company shall file with the SEC, contemporaneously
with the commencement of the Offer pursuant to Section 1.1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D- 9"), containing the
recommendations of the Company's Board of Directors described in Section
1.2(a)(i) and shall promptly mail the Schedule 14D-9 to the stockholders of the
Company. The Schedule 14D-9 and all amendments thereto will comply in all
material respects with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder. The
Company, Parent and Purchaser each agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 that shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws.
<PAGE>
4
(c) In connection with the Offer, if requested by Purchaser,
the Company shall promptly furnish Purchaser with mailing labels, security
position listings, any non-objecting beneficial owner lists and any available
listings or computer files containing the names and addresses of the record
holders of Shares, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including but not limited to updated
lists of stockholders, mailing labels, security position listings and
non-objecting beneficial owner lists) and such other assistance as Parent,
Purchaser or their agents may reasonably require in communicating the Offer to
the record and beneficial holders of Shares. Subject to the requirements of law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer and the Merger, Parent
and each of its affiliates and associates shall hold in confidence the
information contained in any of such lists, labels or additional information
and, if this Agreement is terminated, shall promptly deliver to the Company all
copies of such information then in their possession.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined in Section 2.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). At Parent's election,
any direct or indirect subsidiary of Parent other than Purchaser may be merged
with and into the Company instead of the Purchaser. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 2.2 Closing; Effective Time. Subject to the provisions
of Article VII, the closing of the Merger (the "Closing") shall take place in
New York City at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York, as soon as practicable but in no event later than
the first business day after the satisfaction or waiver of the conditions set
forth in Article VII, or at such other place or at such other date as Parent and
the Company may mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date". At the Closing, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger or a certificate of ownership and merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by and executed in accordance with the relevant provisions of the
DGCL (the date and time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (or such later time as is specified
in the Certificate of Merger) being the "Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Purchaser shall vest in the Surviving Corporation, and all debts,
<PAGE>
5
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Restated Certificate of Incorporation of the Company (as amended,
the "Certificate of Incorporation"), as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided therein and under the DGCL.
(b) At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of the Purchaser, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Purchaser and as
provided by law.
SECTION 2.5 Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation (directors of the Company
shall tender their resignations effective upon the Effective Time), and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed (as the case may be) and
qualified.
SECTION 2.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to
Section 2.6(b), Shares held by Holding Co. or Woodbank and any
Dissenting Shares (as defined in Section 2.8(a)) shall be cancelled,
extinguished and converted into the right to receive $80.00 in cash or
any higher price that may be paid pursuant to the Offer (the "Merger
Consideration") payable to the holder thereof, without interest, upon
surrender of the certificate formerly representing such Share in the
manner provided in Section 2.9, less any required withholding taxes.
(b) Each share of Company Common Stock held in the treasury of
the Company and each Share owned by the Company, Parent, Purchaser or
any other direct or indirect subsidiary of such persons, in each case
immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted
into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
<PAGE>
6
SECTION 2.7 Treatment of Options. Immediately prior to the
Effective Time, the Company shall cause each of the 95,500 outstanding options
to purchase Company Common Stock under the Company's 1996 Option Plan as set
forth in Schedule 2.7 to the Company Disclosure Letter (an "Option"), whether or
not then exercisable or vested, to be cancelled by the Company, and the holder
thereof to be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company in consideration for such cancellation
an amount in cash equal to the product of (a) the number of Shares previously
subject to such Option and (b) the excess, if any, of the Merger Consideration
over the exercise price per Share previously subject to such Option (such
payment to be net of applicable withholding taxes).
SECTION 2.8 Dissenting Shares and Section 262 Shares. (a)
Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted in favor of or
consented to the Merger and shall have delivered a written demand for appraisal
of such shares of Company Common Stock in the time and manner provided in
Section 262 of the DGCL and shall not have failed to perfect or shall not have
effectively withdrawn or lost their rights to appraisal and payment under the
DGCL (the "Dissenting Shares") shall not be converted into the right to receive
the Merger Consideration, but shall be entitled to receive the consideration as
shall be determined pursuant to Section 262 of the DGCL; provided, however, that
if such holder shall have failed to perfect or shall have effectively withdrawn
or lost his, her or its right to appraisal and payment under the DGCL, such
holder's shares of Company Common Stock shall thereupon be deemed to have been
converted, at the Effective Time, into the right to receive the Merger
Consideration set forth in Section 2.6(a) of this Agreement, without any
interest thereon.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal pursuant to Section 262 received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.9 Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
to act as agent for the holders of Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Shares
shall become entitled pursuant to Section 2.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 2.9(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Parent, as
Parent directs.
<PAGE>
7
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
<PAGE>
8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that, except as set forth in the letter (the "Company Disclosure
Letter") delivered by the Company to Purchaser prior to the date of execution of
this Agreement:
SECTION 3.1 Organization and Qualification; Subsidiaries. Each
of the Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect (as defined below) or prevent or
materially delay the consummation of the Offer or the Merger. Each of the
Company and each of its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing as are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. When used in connection with the Company or any of its subsidiaries, the
term "Material Adverse Effect" means any change or effect that would be
materially adverse to the assets, liabilities, results of operations, financial
condition or business of the Company and its subsidiaries taken as a whole,
other than, as a result of changes in general economic conditions in the United
States.
SECTION 3.2 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws of the Company as currently in
effect. Such Certificate of Incorporation and ByLaws are in full force and
effect and no other organizational documents are applicable to or binding upon
the Company. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
SECTION 3.3 Capitalization. The authorized capital stock of
the Company consists of 36,887,475 shares of Company Common Stock. As of May 16,
1998, (a) 36,748,550 shares of Company Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable and were issued
free of preemptive (or similar) rights and (b) 138,925 shares of Company Common
Stock were held in the treasury of the Company. Since May 16, 1998, no options
to purchase shares of Company Common Stock have been granted and no shares of
Company Common Stock have been issued and the total number of Options
outstanding as of May 16, 1998 was 95,500. Except (i) as set forth above and
(ii) as a result of the exercise of Options outstanding as of May 16, 1998,
there are outstanding (A) no shares of capital stock or other voting securities
of the Company, (B) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(C) no options or other rights to acquire from the Company, and no obligation of
the Company
<PAGE>
9
to issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (D) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "Company Securities"). There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive (or similar) rights. There are no
outstanding contractual obligations of the Company or any of its subsidiaries to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such subsidiary or any other entity. Each of
the outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and all such
shares are owned by the Company or another wholly owned subsidiary of the
Company as set forth in Schedule 3.3 to the Company Disclosure Letter and are
owned free and clear of all security interests, liens, claims, pledges,
agreements, limitations in voting rights, charges or other encumbrances of any
nature whatsoever, except where the failure to own such shares free and clear is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect. The Company has delivered to Parent prior to the date hereof a
list of the subsidiaries and affiliates of the Company which evidences, among
other things, the percentage of capital stock or other equity interests owned by
the Company, directly or indirectly, in such subsidiaries or associated
entities. No entity in which the Company owns, directly or indirectly, less than
a 50% equity interest is, individually or when taken together with all such
other entities, material to the business of the Company and its subsidiaries
taken as a whole other than the Metro North Company.
SECTION 3.4 Authority Relative to This Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock if and to the extent required by applicable law,
and the filing of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by Parent and
Purchaser, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The Board of
Directors of the Company has approved this Agreement and the transactions
contemplated hereby (including but not limited to the Offer and the Merger and
the transactions contemplated by the Holding Co. Merger Agreement, Woodbank
Merger Agreement and the Stockholders Agreements and the transactions
contemplated by each such agreement) so as to render inapplicable hereto and
thereto (a) the limitation on business combinations contained in Section 203 of
the DGCL (or any similar provision) and (b) the restriction on "business
<PAGE>
10
combinations" with "related persons" contained in Article EIGHTH of the
Certificate of Incorporation. As a result of the foregoing actions subject to
the applicability of Section 253 of the DGCL, the only vote required to
authorize the Merger is the affirmative vote of a majority of the outstanding
Shares.
SECTION 3.5 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by the Company do not
and will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
subsidiaries; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been
obtained and all filings described in such clauses have been made, conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its subsidiaries or by which its or any of their
respective properties are bound or affected; or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, except for
(i) applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), state securities, takeover and "blue
sky" laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the DGCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain are not, individually or in the aggregate, reasonably likely
to (x) prevent or materially delay the Company from performing its obligations
under this Agreement or (y) have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties are bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such conflicts, defaults or violations which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
<PAGE>
11
SECTION 3.7 SEC Filings; Financial Statements. (a) The Company
and, to the extent applicable, each of its then or current subsidiaries, has
filed all forms, reports, statements and documents required to be filed with the
SEC since January 1, 1995 (collectively, the "SEC Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
regulations promulgated thereunder, each as in effect on the date so filed. None
of the SEC Reports (including but not limited to any financial statements or
schedules included or incorporated by reference therein) contained when filed,
or (except to the extent revised or superseded by a subsequent filing with the
SEC) contains, any untrue statement of a material fact or omitted or omits to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the audited consolidated balance sheets of the
Company as of January 31, 1998 and February 1, 1997 and the related statements
of consolidated income and retained earnings, and statements of consolidated
cash flows for each of the three fiscal years ended January 31, 1998, February
1, 1997 and February 3, 1996, included in its Annual Reports on Form 10-K for
the fiscal years ended January 31, 1998, in each case, including any related
notes thereto, as filed with the SEC (collectively, the "Company Financial
Statements"), has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly presents in all material
respects the consolidated financial position of the Company and its subsidiaries
at the respective date thereof and the consolidated results of its operations
and changes in cash flows for the periods indicated.
(c) There are no liabilities of the Company or any of its
subsidiaries of any kind whatsoever, whether or not accrued and whether or not
contingent or absolute, that are material to the Company and its subsidiaries,
taken as a whole, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of the Company and its subsidiaries at January 31,
1998, including the notes thereto, (ii) the SEC Reports, (iii) liabilities
incurred on behalf of the Company in connection with this Agreement and the
contemplated Merger, and (iv) liabilities incurred in the ordinary course of
business consistent with past practice since January 31, 1998, none of which
are, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
(d) The Company has heretofore furnished or made available to
Parent a complete and correct copy of any amendments or modifications which have
not yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Securities Act and the rules and regulations promulgated thereunder or the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 3.8 Absence of Certain Changes or Events. Since
January 31, 1998, except as contemplated by this Agreement or as disclosed in
the SEC Reports filed and publicly available prior to the date of this Agreement
or as disclosed in Schedule 3.8 to the Company Disclosure Letter, the Company
and its subsidiaries have conducted their businesses only in the
<PAGE>
12
ordinary course and in a manner consistent with past practice and, since such
date, there has not been: (i) any changes in the assets, liabilities, results of
operation, financial condition or business of the Company or any of its
subsidiaries having or reasonably likely to have a Material Adverse Effect; (ii)
any condition, event or occurrence which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect; (iii) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets of the Company or any of its subsidiaries which is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; (iv) any
change by the Company in its accounting methods, principles or practices; (v)
any revaluation by the Company of any of its material assets, including but not
limited to writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any entry by the
Company or any of its subsidiaries into any commitment or transactions material
to the Company and its subsidiaries taken as a whole (other than commitments or
transactions entered into in the ordinary course of business); (vii) any
declaration, setting aside or payment of any dividends or distributions in
respect of the Shares other than the regular quarterly dividend in the amount of
$.32 per share; (viii) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, or any
other increase in the compensation payable or to become payable to any present
or former directors, officers or key employees of the Company or any of its
subsidiaries, except for increases in base compensation in the ordinary course
of business consistent with past practice, or any employment, consulting or
severance agreement or arrangement entered into with any such present or former
directors, officers or key employees; or (ix) any other action which, if it had
been taken after the date hereof, would have required the consent of Parent
under Section 5.1.
SECTION 3.9 Absence of Litigation. Except as disclosed in the
SEC Reports filed and publicly available prior to the date of this Agreement,
there are no suits, claims, actions, proceedings or investigations pending or,
to the best knowledge of the Company, threatened against the Company or any of
its subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect. As of the date hereof,
neither the Company nor any of its subsidiaries nor any of their respective
properties is or are subject to any order, writ, judgment, injunction, decree,
determination or award having, or which, insofar as can be reasonably foreseen,
is reasonably likely to have a Material Adverse Effect or prevent or materially
delay consummation of the transactions contemplated hereby.
SECTION 3.10 Employee Benefit Plans. Except (i) as set forth
in the SEC Reports filed and publicly available prior to the date of this
Agreement or (ii) as is not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect or prevent or materially delay the
consummation of the Offer or the Merger:
(a) Schedule 3.10 to the Company Disclosure Letter contains a
true and complete list of each "employee benefit plan" (within the
meaning of section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including,
<PAGE>
13
without limitation, multiemployer plans within the meaning of ERISA
section 3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not
subject to ERISA, whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of the
Company or any of its subsidiaries, has any present or future right to
benefits or under which the Company or any of its subsidiaries has any
present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the
"Company Plans".
(b) With respect to each Company Plan, the Company has
delivered or made available to Parent a current, accurate and complete
copy (or, to the extent no such copy exists, an accurate description)
thereof and, to the extent applicable: (i) any related trust agreement
or other funding instrument; (ii) the most recent determination letter,
if applicable; (iii) any summary plan description and other written
communications by the Company or any of its subsidiaries to their
employees concerning the extent of the benefits provided under a
Company Plan; and (iv) for the three most recent years (A) the Form
5500 and attached schedules, (B) audited financial statements and (C)
actuarial valuation reports.
(c) (i) Each Company Plan has been established and
administered in accordance with its terms, and in material compliance
with the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws, rules and
regulations; (ii) each Company Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification, and
nothing has occurred, whether by action or failure to act, that would
cause the loss of such qualification; (iii) no event has occurred and
no condition exists that would subject the Company or any of its
subsidiaries, either directly or by reason of their affiliation with
any member of their "Controlled Group" (defined as any organization
which is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine,
lien or penalty imposed by ERISA, the Code or other applicable laws,
rules and regulations; (iv) for each Company Plan with respect to which
a Form 5500 has been filed, no material change has occurred with
respect to the matters covered by the most recent Form since the date
thereof; and (v) no "reportable event" (as such term is defined in
ERISA section 4043), "prohibited transaction" (as such term is defined
in ERISA section 406 and Code section 4975) or "accumulated funding
deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred with respect to any
Company Plan.
(d) With respect to each of the Company Plans that is subject
to Title IV of ERISA, as of the Effective Time, the assets of each such
Company Plan are at least equal in value to the present value of the
accrued benefits (vested and unvested) of the participants in such
Company Plan on a termination basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
<PAGE>
14
(e) Neither the Company nor any subsidiary is a party to any
multiemployer plan within the meaning of section 4001(a)(3) of ERISA or
any collective bargaining agreement.
(f) With respect to any Company Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
are pending or, to the knowledge of the Company, threatened, and (ii)
no facts or circumstances exist, to the knowledge of the Company, that
could give rise to any such actions, suits or claims.
(g) No Company Plan exists that could result in the payment to
any present or former employee of the Company or any of its
subsidiaries of any money or other property or accelerate or provide
any other rights or benefits to any present or former employee of the
Company or any of its subsidiaries as a result of the transaction
contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G.
SECTION 3.11 Tax Matters. The Company and each of its
subsidiaries, and any consolidated, combined, unitary or aggregate group for tax
purposes of which the Company or any of its subsidiaries is or has been a member
has timely filed all Tax Returns required to be filed by it in the manner
provided by law, has paid all Taxes (including interest and penalties) shown
thereon to be due and has provided adequate reserves in its financial statements
according to generally accepted accounting principles for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns. All such
Tax Returns were true, correct and complete in all material respects. Except as
has been disclosed to Parent in Schedule 3.11 to the Company Disclosure Letter:
(i) no material claim for unpaid Taxes has become a lien or encumbrance of any
kind against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries; (ii) as of the date
hereof no audit of any Tax Return of the Company or any of its subsidiaries is
being conducted by a Tax authority; and (iii) no extension of the statute of
limitations on the assessment of any Taxes has been granted by the Company or
any of its subsidiaries and is currently in effect. As used herein, "Taxes"
shall mean any taxes of any kind, including but not limited to those on or
measured by or referred to as income, gross receipts, capital, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority. As used herein, "Tax
Return" shall mean any return, report or statement required to be filed with any
governmental authority with respect to Taxes.
SECTION 3.12 Offer Documents; Proxy Statement. Neither the
Schedule 14D-9, nor any of the information supplied by the Company for inclusion
in the Offer Documents, shall, at the respective times such Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Neither the proxy statement to be sent to the stockholders of the
Company in connection with the Stockholders Meeting (as
<PAGE>
15
defined in Section 6.1) or the information statement to be sent to such
stockholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, is herein referred to as the "Proxy Statement"), shall,
at the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to stockholders and at the time of the Stockholders Meeting, if
any, and at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading or necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Purchaser or any of their
respective representatives which is contained in the Schedule 14D-9 or the Proxy
Statement. The Schedule 14D-9 and the Proxy Statement will comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
SECTION 3.13 Environmental Matters. (a) Except as disclosed in
SEC Reports filed and publicly available prior to the date of this Agreement and
to the extent that the inaccuracy of any of the following (or the circumstances
giving rise to such inaccuracy), individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect or prevent or materially
delay consummation of the Offer or the Merger:
(i) the Company and its subsidiaries are, and within
the period of all applicable statutes of limitation have been, in
compliance with all applicable Environmental Laws;
(ii) the Company and its subsidiaries hold all
Environmental Permits (each of which is in full force and effect)
required for any of their current operations and for any property
owned, leased, or otherwise operated by any of them, and are, and
within the period of all applicable statutes of limitation have been,
in compliance with all such Environmental Permits;
(iii) no review by, or approval of, any Governmental
Authority or other person is required under any Environmental Law in
connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby;
(iv) neither the Company nor any of its subsidiaries has
received any Environmental Claim (as hereinafter defined) against any
of them, and the Company has no knowledge of any such Environmental
Claim being threatened;
(v) to the knowledge of the Company, Hazardous
Materials are not present on any property owned, leased, or operated by
the Company or any of its subsidiaries, that is reasonably likely to
form the basis of any Environmental Claim against any of them; and the
Company has no reason to believe that Hazardous Materials are present
on any other property that is reasonably likely to form the basis of
any Environmental Claim against any of them;
<PAGE>
16
(vi) the Company has no knowledge of any material
Environment Claim pending or threatened, or of the presence or
suspected presence of any Hazardous Materials that is reasonably likely
to form the basis of any Environmental Claim, in any case against any
person or entity whose liability the Company or any of its subsidiaries
has or may have retained or assumed either contractually or by
operation of law. or against any real property which the Company or any
of its subsidiaries formerly owned, leased, or operated, in whole or in
part; and
(vii) to the knowledge of the Company, the Company has
informed the Parent and the Purchaser of: all material facts which the
Company reasonably believes could form the basis of a material
Environmental Claim against the Company or any of its subsidiaries
arising out of the non-compliance or alleged non-compliance with any
Environmental Law, or the presence or suspected presence of Hazardous
Materials at any location.
(b) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter,
or notice (written or oral) of noncompliance, violation, or liability,
by any person or entity asserting liability or potential liability
(including without limitation liability or potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Laws
or Environmental Permits, or (iii) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other
legally enforceable requirement (including, without limitation, common
law) of any foreign government, the United States, or any state, local,
municipal or other governmental authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of
human health as affected by the environment or Hazardous Materials
(including without limitation employee health and safety) or the
environment (including without limitation indoor air, ambient air,
surface water, groundwater, land surface, subsurface strata, or plant
or animal species).
"Environmental Permits" means all permits, licenses,
registrations, approvals, exemptions and other filings with or
authorizations by any Governmental Authority under any Environmental
Law.
"Governmental Authority" means any government, any state or
other political subdivision thereof and any entity (including, without
limitation, a court) exercising
<PAGE>
17
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof), petroleum products, asbestos, asbestos-containing
materials, pollutants, contaminants, radioactivity, electromagnetic
fields and all other materials, whether or not defined as such, that
are regulated pursuant to any Environmental Laws or that could result
in liability under any applicable Environmental Laws.
SECTION 3.14 Real Estate Matters. (a) The Company or its
subsidiaries has good, valid, and, in the case of Owned Properties (as defined
below), marketable fee title to: (i) all of the material real property and
interests in real property owned by the Company or its subsidiaries, except for
properties sold or otherwise disposed of in the ordinary course of business (the
"Owned Properties"), and (ii) all of the material leasehold estates in all real
properties leased by the Company or its subsidiaries, except leasehold interests
terminated in the ordinary course of business (the "Leased Properties"; the
Owned Properties and Leased Properties being sometimes referred to herein as the
"Real Properties"), in each case free and clear of all mortgages, liens,
security interests, easements, covenants, rights-of-way, subleases and other
similar restrictions and encumbrances ("Encumbrances"), except for Encumbrances
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
(b) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy), individually or
in the aggregate, are not reasonably likely to have a Material Adverse Effect:
(i) each of the agreements by which the Company has obtained a leasehold
interest in each Leased Property (individually, a "Lease" and collectively, the
"Leases") is in full force and effect in accordance with its respective terms
and the Company or its subsidiary is the holder of the lessee's or tenant's
interest thereunder; to the knowledge of the Company, there exists no default
under any Lease and no circumstance exists which, with the giving of notice, the
passage of time or both, is reasonably likely to result in such a default; the
Company and its subsidiaries have complied with and timely performed all
conditions, covenants, undertakings and obligations on their parts to be
complied with or performed under each of the Leases; the Company and its
subsidiaries have paid all rents and other charges to the extent due and payable
under the Leases; (ii) there are no leases, subleases, licenses, concessions or
any other contracts or agreements granting to any person or entity other than
the Company or any of its subsidiaries any right to the possession, use,
occupancy or enjoyment of any Real Property or any portion thereof; (iii) the
current operation and use of the Real Properties does not violate any statute,
law, regulation, rule, ordinance, permit, requirement, order or decree now in
effect; the use being made of each Real Property at present is in conformity
with the certificate of occupancy issued for such Real Property; (iv) there are
no existing, or to the knowledge of the Company, threatened, condemnation or
eminent domain proceedings (or proceedings in lieu thereof) affecting the Real
Properties or any portion thereof; (v) no default or breach exists under any of
the covenants, conditions, restrictions, rights-of-way, or easements, if any,
affecting all or any portion of a Real Property, which are to be performed or
complied with by the Company or any of its subsidiaries; and (vi) all the
buildings, structures, equipment and other tangible
<PAGE>
18
assets of the Company (whether owned or leased) are in normal operating
condition (normal wear and tear excepted) and are fit for use in the ordinary
course of business.
(c) Neither the Company nor any of its subsidiaries is
obligated under or bound by any option, right of first refusal, purchase
contract, or other contractual right to sell or dispose of any Owned Property or
any portions thereof or interests therein which property, portions and
interests, individually or in the aggregate, are material to the Company and its
subsidiaries.
SECTION 3.15 Brokers. No broker, finder or investment banker
(other than the Financial Adviser) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company. The
Company has heretofore furnished to Parent information concerning the fee which
will be payable to the Financial Advisor in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals is not, individually or in the
aggregate, reasonably likely to prevent the consummation of the Offer or the
Merger.
SECTION 4.2 Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
other than filing and recordation of appropriate merger documents as required by
the DGCL. This Agreement has been duly executed and delivered by Parent and
Purchaser and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by Parent and
Purchaser do not and will not: (i)
<PAGE>
19
conflict with or violate the respective certificates of incorporation or by-laws
of Parent or Purchaser; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b)
below have been obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Purchaser or by which either of them or their
respective properties are bound or affected; or (iii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a material benefit
under, or give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the property or assets of Parent or Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Purchaser is a party or by
which Parent or Purchaser or any of their respective properties are bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which are not, individually
or in the aggregate, reasonably likely to prevent or materially delay the
consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, except (i) for applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated thereunder,
the HSR Act, state securities, takeover and "blue sky" laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain are not, individually or in
the aggregate, reasonably likely to prevent the consummation of the Offer or the
Merger.
SECTION 4.4 Offer Documents; Proxy Statement. The Offer
Documents, as filed pursuant to Section 1.1, will not, at the time such Offer
Documents are filed with the SEC or are first published, sent or given to
stockholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The information
supplied by Parent for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to stockholders, at the time of the
Stockholders Meeting (as defined in Section 6.1), if any, or at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading. Notwithstanding the foregoing, Parent and
Purchaser make no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in or
incorporated by reference in any of the foregoing documents or the Offer
Documents. The Offer Documents, as amended and supplemented, will comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
<PAGE>
20
SECTION 4.5 Brokers. No broker, finder or investment banker
(other than Morgan Stanley & Co. Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Purchaser.
SECTION 4.6 Funds. Parent or Purchaser, at the expiration date
of the Offer and at the Effective Time, will have the funds necessary to
consummate the Offer and the Merger, respectively.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, unless Parent shall otherwise agree in writing,
the businesses of the Company and its subsidiaries shall be conducted only in,
and the Company and its subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company and its subsidiaries shall each use its reasonable best efforts to
preserve substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, neither the
Company nor any of its subsidiaries shall, between the date of this Agreement
and the Effective Time, directly or indirectly do, or commit to do, any of the
following without the prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation
or by-laws or equivalent organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (i) any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom
stock), of the Company or any of its subsidiaries (except for the
issuance of up to 95,500 shares of Common Stock required to be issued
pursuant to the terms of Options outstanding as of May 16, 1998) or
(ii) any material assets of the Company or any of its subsidiaries,
except for sales of inventory in the ordinary course of business and in
a manner consistent with past practice;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (other than regular quarterly
dividends consistent with past practice, in an amount not to exceed
$.32 per share);
<PAGE>
21
(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) incur any indebtedness for
borrowed money (except for drawdowns on the Company's existing credit
facility in the ordinary course of business consistent with past
practice) or issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans, advances or capital
contributions to, or investments in, any other person; (iii) enter into
any contract or agreement other than in the ordinary course of business
consistent with past practice; or (iv) except as set forth in Schedule
5.1(e)(iv) of the Company Disclosure Letter, other than as provided in
the Company's capital expenditure budget (a copy of which was provided
to Parent) authorize any single capital expenditure which is in excess
of $200,000 or capital expenditures which are, in the aggregate, in
excess of $1,000,000 for the Company and its subsidiaries taken as a
whole;
(f) Except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement, increase the compensation or fringe benefits of
any of its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries who are
not officers of the Company in the ordinary course of business in
accordance with past practice, or grant any severance or termination
pay not currently required to be paid under existing severance plans to
or enter into any employment, consulting or severance agreement or
arrangement with any present or former director, officer or other
employee of the Company or any of its subsidiaries, or establish,
adopt, enter into or amend or terminate any collective bargaining
agreement or Company Plan, including, but not limited to, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees;
(g) Except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting practices or principles used by it;
(h) Make any material Tax election, change any material method
of Tax accounting or settle or compromise any material federal, state,
local or foreign Tax liability;
(i) Settle or compromise any pending or threatened suit,
action or claim which is material or which relates to the transactions
contemplated hereby;
(j) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger);
<PAGE>
22
(k) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (i) in
the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Company Financial
Statements or incurred in the ordinary course of business and
consistent with past practice and (ii) of liabilities required to be
paid, discharged or satisfied pursuant to the terms of any contract in
existence on the date hereof (including, without limitation, benefit
plans relating to directors); or
(l) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 5.1(a)
through 5.1(k) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken, or would result in any of the conditions set forth
in Annex A not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. (a) If adoption of this
Agreement is required by applicable law, the Company, acting through its Board
of Directors, shall in accordance with and subject to applicable law and the
Company's Certificate of Incorporation and By-Laws, (i) duly call, give notice
of, convene and hold a meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of adopting this Agreement
and the transactions contemplated hereby (the "Stockholders Meeting") and (ii)
except if the Board of Directors by majority vote determines in good faith,
based on the advice of outside legal counsel to the Company that to do so would
constitute a breach of fiduciary duty under applicable law, (A) include in the
Proxy Statement the unanimous recommendation of the Board of Directors that the
stockholders of the Company vote in favor of the adoption of this Agreement and
the written opinion of the Financial Adviser that the consideration to be
received by the stockholders of the Company pursuant to the Offer and the Merger
is fair to such stockholders and (B) use its reasonable best efforts to obtain
the necessary adoption of this Agreement. At the Stockholders Meeting, Parent
and Purchaser shall cause all Shares then owned by them and their subsidiaries
to be voted in favor of adoption of this Agreement.
(b) Notwithstanding the foregoing, in the event that Purchaser
shall acquire at least 90% of the outstanding Shares, the Company agrees, at the
request of Purchaser, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the Company's
stockholders, in accordance with Section 253 of the DGCL.
SECTION 6.2 Proxy Statement. If required by applicable law, as
soon as practicable following Parent's request, the Company shall file with the
SEC under the Exchange Act and the rules and regulations promulgated thereunder,
and shall use its reasonable best efforts
<PAGE>
23
to have cleared by the SEC, the Proxy Statement with respect to the Stockholders
Meeting. Parent, Purchaser and the Company will cooperate with each other in the
preparation of the Proxy Statement; without limiting the generality of the
foregoing, each of Parent and Purchaser will furnish to the Company the
information relating to it required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof filed by it
and cause such Proxy Statement to be mailed to the Company's stockholders at the
earliest practicable time.
SECTION 6.3 Company Board Representation; Section 14(f). (a)
Promptly upon the purchase by Purchaser of Shares pursuant to the Offer, and
from time to time thereafter, Purchaser shall be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation on the Board of
Directors equal to the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence and including
any vacancies or unfilled newly-created directorships) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any affiliate of Purchaser bears to the total number of Shares then
outstanding, and the Company shall amend, or cause to be amended its by-laws to
provide for each of the matters set forth in this Section 6.3 and shall, at such
time, promptly take all action necessary to cause Purchaser's designees to be so
elected, including either increasing the size of the Board of Directors or
securing the resignations of incumbent directors or both. At such times, the
Company will use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the board of (i) each
committee of the Board of Directors, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board, in each
case only to the extent permitted by law. Until Purchaser acquires a majority of
the outstanding Shares on a fully diluted basis, the Company shall use its
reasonable best efforts to ensure that all the members of the Board of Directors
and such boards and committees as of the date hereof who are not employees of
the Company shall remain members of the Board of Directors and such boards and
committees.
(b) The Company's obligations to appoint designees to its
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 information statement provided to stockholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.3. Parent or Purchaser will supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
(c) In addition to any vote of the Board of Directors required
by law, the Certificate of Incorporation or the By-laws of the Company,
following the election or appointment of Purchaser's designees pursuant to this
Section 6.3 and prior to the Effective Time, the concurrence of a majority of
the directors of the Company then in office who are neither designated by
Purchaser nor are employees of the Company (the "Disinterested Directors") will
<PAGE>
24
be required to authorize any amendment, or waiver of any term or condition, of
this Agreement or the Certificate of Incorporation or By-Laws of the Company,
any termination of this Agreement by the Company, any extension by the Company
of the time for the performance of any of the obligations or other acts of
Purchaser or waiver or assertion of any of the Company's rights hereunder, the
awarding of the $3 million pursuant to the terms of the Company's incentive
performance plan, and any other consent or action by the Board of Directors with
respect to this Agreement. Notwithstanding Section 6.3(a) hereof, the number of
Disinterested Directors shall be not less than three; provided, however, that,
in such event, if the number of Disinterested Directors shall be reduced below
three for any reason, the remaining Disinterested Director(s) shall be entitled
to designate persons to fill such vacancies who shall be deemed to be
Disinterested Directors for purposes of this Agreement, or if no Disinterested
Directors then remain, the other directors who were directors prior to the date
hereof shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of the Company, Parent or Purchaser, and
such persons shall be deemed to be Disinterested Directors for purposes of this
Agreement.
SECTION 6.4 Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Parent, and
financing sources who shall agree to be bound by the provisions of this Section
6.4 as though a party hereto, complete access, consistent with applicable law,
at all reasonable times to its officers, employees, agents, properties, offices,
plants and other facilities and to all books and records, and shall furnish
Parent and such financing sources with all financial, operating and other data
and information as Parent, through its officers, employees or agents, or such
financing sources may from time to time reasonably request. Notwithstanding the
foregoing, any such investigation or consultation shall be conducted in such a
manner as not to interfere unreasonably with the business or operations of the
Company or its subsidiaries.
(b) As soon as practicable after the date of this Agreement,
Company and Parent shall cooperate in good faith to develop a plan (the "Plan")
with respect to the communications with their respective employees and the
employees of their respective subsidiaries regarding the transactions
contemplated by this Agreement. Prior to consummation of the Offer, Parent shall
use its reasonable best efforts to coordinate any communications to the
Company's employees (including employees of the Company's subsidiaries) through
the officers of the Company and in a manner that will not disrupt the operations
of the Company.
(c) All information obtained by Parent and Purchaser pursuant
to this Section 6.4 shall be kept confidential in accordance with the
Confidentiality Agreement, dated on or about May 7, 1998 (the "Parent
Confidentiality Agreement"), between Parent and the Company; provided, that
Parent shall not be prohibited from sharing information with any potential
purchaser of assets in connection with the future divestiture of any of the
Company's stores or assets.
(d) No investigation pursuant to this Section 6.4 shall affect
any representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
<PAGE>
25
SECTION 6.5 No Solicitation of Transactions. The Company, its
affiliates and their respective officers, directors, employees, representatives
and agents shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity interest
in, the Company or any of its subsidiaries or any business combination with or
involving the Company or any of its subsidiaries. At any time prior to
consummation of the Offer, the Company may, directly or indirectly, furnish
information and access, in each case only in response to a request for such
information or access to any person made after the date hereof which was not
encouraged, solicited or initiated by the Company or any of its affiliates or
any of its or their respective officers, directors, employees, representatives
or agents after the date hereof, pursuant to appropriate confidentiality
agreements containing terms and conditions (including standstill provisions)
that are no less favorable than the terms and conditions contained in the Parent
Confidentiality Agreement, and may participate in discussions and negotiate with
such person concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction (including an exchange of stock or assets)
involving the Company or any subsidiary or division of the Company, in each case
(whether furnishing information and access or participating in discussions and
negotiations) only if such person has submitted a written proposal to the Board
of Directors of the Company relating to any such transaction and the Board by a
majority vote determines in good faith, based upon the advice of outside counsel
to the Company, that failing to take such action would constitute a breach of
the Board's fiduciary duty under applicable law. The Board shall provide a copy
of any such written proposal to Parent immediately after receipt thereof, shall
notify Parent immediately if any proposal (oral or written) is made and shall in
such notice, indicate in reasonable detail the identity of the offeror and the
terms and conditions of any proposal and shall keep Parent promptly advised of
all developments which could reasonably be expected to culminate in the Board of
Directors withdrawing, modifying or amending its recommendation of the Offer,
the Merger and the other transactions contemplated by this Agreement. Except as
set forth in this Section 6.5, neither the Company or any of its affiliates, nor
any of its or their respective officers, directors, employees, representatives
or agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Purchaser, any affiliate or associate of Parent and Purchaser or any designees
of Parent or Purchaser) concerning any merger, sale of any material portion or
assets, sale of any shares of capital stock or similar transactions (including
an exchange of stock or assets) involving the Company or any subsidiary or
division of the Company; provided, however, that nothing herein shall prevent
the Board from taking, and disclosing to the Company's stockholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to any tender offer; provided, further, that the Board shall not
recommend that the stockholders of the Company tender their Shares in connection
with any such tender offer unless the Board by majority vote shall have
determined in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law. The Company agrees not to release
any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party, unless the Board by
majority vote shall have determined in good faith, based upon the advice of
outside counsel, that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board of
Directors under applicable law.
<PAGE>
26
SECTION 6.6 Employee Benefits Matters. (a) On and after the
Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the terms
of any compensation arrangements, employment agreements and employee or director
benefit plans, programs and policies in existence as of the date hereof for all
employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries (including all compensation and benefits earned
through the Effective Time pursuant to the Company Plans set forth in Schedule
3.10(a) of the Company Disclosure Letter). Parent and the Company agree that the
Surviving Corporation and its subsidiaries shall pay promptly or provide when
due all compensation and benefits required to be paid pursuant to the terms of
any individual agreement with any employee, former employee, director or former
director in effect as of the date hereof and disclosed in Schedule 3.10(a) of
the Company Disclosure Letter.
(b) Except as set forth in Schedule 6.6(b) of the Company
Disclosure Letter, Parent shall cause the Surviving Corporation, for the period
commencing at the Effective Time and ending on the second anniversary thereof,
to provide employee benefits under plans, programs and arrangements which, in
the aggregate, will provide benefits to the employees of the Surviving
Corporation and its subsidiaries (other than employees covered by a collective
bargaining agreement) which are no less favorable in the aggregate than those
provided to Parent's similarly situated employees pursuant to the plans,
programs and arrangements (other than those related to the equity securities of
the Company) of Parent and its subsidiaries in effect on the date hereof and
employees covered by collective bargaining agreements shall be provided with
such benefits as shall be required under the terms of any applicable collective
bargaining agreement; provided, however, that nothing herein shall prevent the
amendment or termination of any specific plan, program or arrangement, require
that the Surviving Corporation provide or permit investment in the securities of
Parent, the Company or the Surviving Corporation or interfere with the Surviving
Corporation's right or obligation to make such changes as are necessary to
conform with applicable law. Employees of the Surviving Corporation shall be
given credit for all service with the Company and its subsidiaries, to the same
extent as such service was credited for such purpose by the Company, under each
employee benefit plan, program, or arrangement of the Parent in which such
employees are eligible to participate for purposes of eligibility and vesting;
provided, however, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service.
(c) If employees of the Surviving Corporation and its
subsidiaries become eligible to participate in a medical, dental or health plan
of Parent or its subsidiaries, Parent shall cause such plan to (i) waive any
preexisting condition limitations for conditions covered under the applicable
medical, health or dental plans of the Company and its subsidiaries and (ii)
honor any deductible and out-of-pocket expenses incurred by the employees and
their beneficiaries under such plans during the portion of the calendar year
prior to such participation.
(d) Nothing in this Section 6.6 shall require the continued
employment of any person or, with respect to clauses (b) and (c) hereof, prevent
the Company and/or the Surviving Corporation and their subsidiaries from taking
any action or refraining from taking any action
<PAGE>
27
which the Company and its subsidiaries prior to the Effective Time, could have
taken or refrained from taking.
SECTION 6.7 Directors' and Officers' Indemnification and
Insurance. (a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the Certificate of Incorporation and
By-laws of the Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers or employees of the Company.
(b) Parent shall use its reasonable best efforts to cause to
be maintained in effect for six years from the Effective Time the current
policies of the directors' and officers' liability insurance maintained by the
Company (provided that Parent may substitute therefor policies of at least the
same coverage containing terms and conditions which are not materially less
advantageous) with respect to matters occurring prior to the Effective Time to
the extent such insurance is reasonably available.
(c) For six years after the Effective Time, Parent agrees that
it will or will cause the Surviving Corporation to indemnify and hold harmless
each present and former director and officer of the Company, determined as of
the Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") (but only to the extent such
Costs are not otherwise covered by insurance and paid) incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (collectively, "Claims"), arising out
of or pertaining to matters existing or occurring at or prior to the Effective
Time, whether asserted or claimed prior to, at or after the Effective Time, to
the fullest extent permitted under applicable law (and Parent shall, or shall
cause the Surviving Corporation to, also advance expenses as incurred to the
fullest extent permitted under applicable law provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification).
(d) Any Indemnified Party wishing to claim indemnification
under Section 6.7(c), upon learning of any such Claim, shall promptly notify
Parent thereof, but the failure to so notify shall not relieve Parent of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice Parent. In the event of any such Claim (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Parties and Parent shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues that raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Parent shall be obligated pursuant to
<PAGE>
28
this paragraph (d) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such Indemnified
Parties would present such counsel with a conflict of interest, (ii) the
Indemnified Parties will cooperate in the defense of any such matter and (iii)
Parent shall not be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld; and provided,
further, that Parent shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
SECTION 6.8 Postponement of Annual Meeting. The Company shall
as soon as possible indefinitely postpone its annual meeting of stockholders
currently scheduled for May 27, 1998, and shall take no action unless compelled
by legal process to reschedule such annual meeting or to call a special meeting
of stockholders of the Company except in accordance with this Agreement unless
and until this Agreement has been terminated in accordance with its terms.
SECTION 6.9 Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of the occurrence or non-occurrence of (i) any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.9 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10 Further Action; Reasonable Best Efforts. (a) Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
but not limited to (i) cooperation in the preparation and filing of the Offer
Documents, the Schedule 14D-9, the Proxy Statement, any required filings under
the HSR Act and any amendments to any thereof, (ii) cooperation with respect to
consummating the financing for the Offer and the Merger and (iii) using its
reasonable best efforts to promptly make all required regulatory filings and
applications including, without limitation, responding promptly to requests for
further information and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its subsidiaries and Parent and its
subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Offer and
the Merger. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such necessary action.
(b) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly
<PAGE>
29
furnishing the other with copies of notices or other communications received by
Parent or the Company, as the case may be, or any of their subsidiaries, from
any governmental authority with respect to the Offer or the Merger or any of the
other transactions contemplated by this Agreement. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
the HSR Act or any other antitrust law.
(c) Each party shall timely and promptly make all filings
which are required under the HSR Act and Parent shall pay the filing fee. Each
party will furnish to the other such necessary information and reasonable
assistance as it may request in connection with its preparation of such filings.
Each party will supply the other with copies of all correspondence, filings or
communications between such party or its representatives and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice or
any other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby.
SECTION 6.11 Public Announcements. Parent and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Offer or the Merger and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with its
securities exchange.
SECTION 6.12 Disposition of Litigation. (a) The Company agrees
that it will not settle any litigation currently pending, or commenced after the
date hereof, against the Company or any of its directors by any stockholder of
the Company relating to the Offer or this Agreement, without the prior written
consent of Parent (which shall not be unreasonably withheld).
(b) The Company will not voluntarily cooperate with any third
party which has sought or may hereafter seek to restrain or prohibit or
otherwise oppose the Offer or the Merger and will cooperate with Parent and
Purchaser to resist any such effort to restrain or prohibit or otherwise oppose
the Offer or the Merger.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) If required by the DGCL, this Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance
<PAGE>
30
with the Company's Certificate of Incorporation and the DGCL (which the
Company has represented shall be solely the affirmative vote of a
majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by
any United States, foreign, federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger; provided, however, that prior to invoking
this condition each party agrees to comply with Section 6.10.
(c) Purchaser shall have purchased Shares pursuant to the
Offer.
(d) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) By mutual written consent of Parent, Purchaser and the
Company;
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States shall have issued a final order, injunction,
decree, judgment or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Offer or the Merger and such
order, injunction, decree, judgment, ruling or other action is or shall
have become final and nonappealable; provided, however, that prior to
invoking this right of termination each party agrees to comply with
Section 6.10;
(c) By Parent if due to an occurrence or circumstance which
resulted in a failure to satisfy any of the Offer Conditions (other
than as a result of a breach by Parent or Purchaser of its obligations
hereunder), Purchaser shall have (i) terminated the Offer or (ii)
failed to pay for Shares pursuant to the Offer on or prior to the
Outside Date (as defined below);
(d) By the Company if (i) there shall have been a material
breach of any covenant or agreement on the part of Parent or the
Purchaser contained in this Agreement which materially adversely
affects Parent's or Purchaser's ability to consummate (or materially
delays commencement or consummation of) the Offer, and which shall not
have been cured prior to the earlier of (A) 10 business days following
notice of such breach and (B) two business days prior to the date on
which the Offer expires, (ii)
<PAGE>
31
Purchaser shall have (A) terminated the Offer or (B) failed to pay for
Shares pursuant to the Offer on or prior to the Outside Date (unless
such failure is caused by or results from the failure of any
representation or warranty of the Company to be true and correct in any
material respect or the failure of the Company to perform in any
material respect any of its covenants or agreements contained in this
Agreement) or (iii) prior to the purchase of Shares pursuant to the
Offer, any person shall have made a bona fide offer to acquire the
Company (A) that the Board of Directors of the Company by majority vote
determines in its good faith judgment is more favorable to the
Company's stockholders than the Offer and the Merger and (B) as a
result of which the Board of Directors by majority vote determines in
good faith, based upon the advice of outside counsel, that it is
obligated by its fiduciary obligations under applicable law to
terminate this Agreement, provided that such termination under this
clause (iii) shall not be effective until the Company has made payment
of the full fee and expense reimbursement required by Section 8.3; or
(e) By Parent prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation,
warranty, covenant or agreement on the part of the Company contained in
this Agreement which is reasonably likely to have a Material Adverse
Effect, which shall not have been cured prior to the earlier of (A) 10
business days following notice of such breach and (B) two business days
prior to the date on which the Offer expires, (ii) the Board shall have
withdrawn or modified (including by amendment of the Schedule 14D-9) in
a manner adverse to Purchaser its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended another
offer or transaction in accordance with Section 6.5, shall have
resolved to effect any of the foregoing, or (iii) the Minimum Condition
shall not have been satisfied by the expiration date of the Offer as it
may have been extended pursuant hereto and on or prior to such date (A)
any person (including the Company but not including Parent or
Purchaser) shall have made a public announcement, disclosure or
communication to the Company with respect to a Third Party Acquisition
or (B) any person (including the Company or any of its affiliates or
subsidiaries), other than Parent or any of its affiliates, shall have
become (and remain at the time of termination) the beneficial owner of
19.9% or more of the Shares (unless such person shall have tendered and
not withdrawn such person's Shares pursuant to the Offer). As used
herein, the "Outside Date" shall mean the latest of (I) 70 days
following the date hereof or (II) the date that all conditions to the
Offer set forth in paragraph (h) of the Offer Conditions, the
satisfaction of which involve compliance with or otherwise relate to
any United States antitrust or competition laws or regulations
(including any enforcement thereof), have been satisfied for a period
of 10 business days; provided that in no event shall the Outside Date
be later than January 31, 1999.
SECTION 8.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 8.3 and Section 9.1; provided, however,
that nothing herein shall relieve any party from liability for any wilful breach
hereof; provided, further, that the payment of the termination fee set forth in
Section 8.3(a)(i) shall be considered with respect to the calculation of any
damages resulting from any such wilful breach by the Company.
<PAGE>
32
SECTION 8.3 Fees and Expenses. (a) If:
(i) Parent terminates this Agreement pursuant to
Section 8.1(e)(i) hereof, or if the Company terminates this Agreement
pursuant to Section 8.1(d)(ii) hereof under circumstances that would
have permitted Parent to terminate this Agreement pursuant to Section
8.1(e)(i) hereof, and within 12 months thereafter, the Company enters
into an agreement with respect to a Third Party Acquisition, or a Third
Party Acquisition occurs, involving any party (or any affiliate or
associate thereof) (x) with whom the Company (or its agents) had any
discussions with respect to a Third Party Acquisition, (y) to whom the
Company (or its agents) furnished information with respect to or with a
view to a Third Party Acquisition or (z) who had submitted a proposal
or expressed any interest publicly or to the Company in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) prior to
such termination; or
(ii) (A) the Company terminates this Agreement pursuant
to 8.1(d)(iii) or (B) the Company terminates this Agreement pursuant to
Section 8.1(d)(ii)(B) hereof and at such time Parent would have been
permitted to terminate this Agreement under Section 8.1(e)(ii) or (iii)
hereof or (C) Parent terminates this Agreement pursuant to Section
8.1(e)(ii) or (iii) hereof;
then the Company shall pay to Parent and Purchaser, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with any termination contemplated by Section
8.3(a)(ii) above, a fee, in cash, of $88,288,000, provided, however, that the
Company in no event shall be obligated to pay more than one such fee with
respect to all such agreements and occurrences and such termination. The payment
of any expenses pursuant to Section 8.3(b) shall be credited against the payment
of any fee pursuant to Section 8.3(a).
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger or similar
business combination by any person other than Parent, Purchaser or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of 20.0% or
more of the book or fair market value of the consolidated assets of the Company
and its subsidiaries, taken as a whole; or (iii) the acquisition by a Third
Party of 20.0% or more of the outstanding Shares.
(b) Upon the termination of this Agreement (i) under
circumstances in which Parent shall have been entitled to terminate this
Agreement pursuant to Section 8.1(e)(i) hereof (whether or not expressly
terminated on such basis) or (ii) if any of the representations and warranties
of the Company contained in this Agreement were untrue or incorrect in any
material respect when made and at the time of termination remained untrue or
incorrect in any material respect and such misrepresentation materially
adversely affected the consummation (or materially delayed commencement or
consummation) of the Offer, then the Company shall reimburse Parent, Purchaser
and their affiliates (not later than one business day after submission of
statements therefor) for all actual documented out-of-pocket fees and expenses
actually incurred by any of them or on their behalf in connection with the Offer
and the Merger and the consummation of all transactions contemplated by this
Agreement (including, without limitation,
<PAGE>
33
fees and disbursements payable to financing sources, investment bankers, counsel
to Purchaser or Parent or any of the foregoing, and accountants) up to a maximum
amount of $3 million; provided, however, that in no circumstances shall any
payment be made under this Section 8.3(b) after a payment has been made under
Section 8.3(a).
(c) Except as otherwise specifically provided herein, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4 Amendment. Subject to Section 6.3, this Agreement
may be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after adoption of the Agreement by the stockholders of
the Company, no amendment may be made which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any time prior
to the Effective Time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that the agreements set
forth in Article II, Section 6.6, Section 6.7 and Article IX shall survive the
Effective Time and those set forth in Section 6.4, Section 8.3 and Article IX
shall survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
<PAGE>
34
if to Parent or Purchaser:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James I. Freeman
with additional copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
if to the Company:
Mercantile Stores Company
9450 Seward Road
Fairfield, Ohio 45016
Attention: David L. Nichols
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
with a further copy to:
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Avenue, 35th Floor
New York, New York 10178
Attention: Jeremiah T. Mulligan, Esq.
SECTION 9.3 Certain Definitions. For purposes of this
Agreement, the term:
"affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
"beneficial owner" with respect to any Shares means a person
who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates
or associates (as such term is defined in Rule 12b-2 of the Exchange
Act) has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange
<PAGE>
35
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares; provided, however, that no person
nor any affiliate or associate of such person shall be deemed to be the
beneficial owner of any securities by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to which
shares neither such person nor any such affiliate or associate is
otherwise deemed the beneficial owner.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
"generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession in the United States,
in each case applied on a basis consistent with the manner in which the
audited financial statements for the fiscal year of the Company ended
January 31, 1998 were prepared;
"person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company,
the Surviving Corporation, Parent or such other person, as the case may
be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.4 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
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 to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
<PAGE>
36
SECTION 9.5 Entire Agreement; Assignment. This Agreement,
together with the Stockholders Agreement, Parent Confidentiality Agreement, the
Holding Co. Merger Agreement and the Woodbank Merger Agreement, constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 9.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, except for the provisions of Section 6.7,
is intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.7 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 9.8 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.10 Knowledge. As used in this Agreement, the terms
"the best knowledge of the Company", "known to the Company" or words of similar
import used herein with respect to the Company shall mean the actual knowledge
of any Company Executive, together with the knowledge a reasonable business
person would have obtained after making reasonable inquiry and after exercising
reasonable diligence with respect to the matters at hand. The "Company
Executives" shall consist of David L. Nichols, James M. McVicker, Randolph L.
Burnette, Kathryn M. Muldowney and Louis L. Ripley. As used in this Agreement,
the terms "the best knowledge of Parent", "known to Parent" or words of similar
import used herein with respect to Parent shall mean the actual knowledge of any
Parent Executive, together with the knowledge a reasonable business person would
have obtained after making reasonable inquiry and after exercising reasonable
diligence with respect to the matters at hand. The "Parent Executives" shall
consist of the executive officers of Parent as listed in the latest proxy
statement or registration statement of Parent filed with the SEC.
SECTION 9.11 Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in
<PAGE>
37
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which such party is entitled at law or in
equity. In addition, each of the parties hereto (i) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of Delaware, and (iv) consents to service being made
through the notice procedures set forth in Section 9.2.
<PAGE>
38
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DILLARD'S, INC.
By: /s/ James I. Freeman
--------------------------------
Name: James I. Freeman
Title: Senior Vice President and
Chief Financial Officer
MSC ACQUISITIONS, INC.
By: /s/ James I. Freeman
--------------------------------
Name: James I. Freeman
Title: Senior Vice President and
Chief Financial Officer
MERCANTILE STORES COMPANY, INC.
By:
--------------------------------
Name: David L. Nichols
Title: Chief Executive Officer
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
DILLARD'S, INC.
By:
----------------------------
Name:
Title:
MSC ACQUISITIONS, INC.
By:
----------------------------
Name:
Title:
MERCANTILE STORES COMPANY, INC.
By: /s/ David L. Nichols
----------------------------
Name: David L. Nichols
Title: Chairman of the Board
<PAGE>
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings
set forth in the attached Merger Agreement.
Notwithstanding any other provision of the Offer, but subject
to the terms and conditions of the Merger Agreement, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant to
the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered pursuant to the
Offer, and may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) to the extent permitted by the Merger
Agreement if, (i) at the expiration of the Offer, a number of shares of Company
Common Stock which, together with any Shares owned, directly or indirectly, by
Parent or Purchaser (including the shares of Company Common Stock to be acquired
pursuant to the Holding Co. Merger and Woodbank Merger), constitutes more than
50% of the voting power (determined on a fully-diluted basis), on the date of
purchase, of all the securities of the Company entitled to vote generally in the
election of directors or in a merger shall not have been validly tendered and
not properly withdrawn prior to the expiration of the Offer, the ("Minimum
Condition") or (ii) at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment of Shares, any of the following conditions
occurs or has occurred:
(a) there shall have been entered any order, preliminary or
permanent injunction, decree, judgment or ruling in any action or
proceeding before any court or governmental, administrative or
regulatory authority or agency, or any statute, rule or regulation
enacted, entered, enforced, promulgated, amended or issued that is
applicable to Parent, Purchaser, the Company or any subsidiary or
affiliate of Purchaser or the Company or the Offer or the Merger, by
any legislative body, court, government or governmental, administrative
or regulatory authority or agency that is reasonably likely to have the
effect of: (i) making illegal or otherwise directly or indirectly
restraining or prohibiting the making of the Offer in accordance with
the terms of the Merger Agreement, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates or the consummation of the Merger; (ii) prohibiting the
ownership or operation of the Company and its subsidiaries by Parent or
any of Parent's subsidiaries, (iii) imposing limitations on the ability
of Parent, Purchaser or any of Parent's affiliates effectively to
acquire or hold or to exercise full rights of ownership of the Shares,
including without limitation the right to vote any Shares acquired or
owned by Parent or Purchaser or any of its affiliates on all matters
properly presented to the stockholders of the Company, including
without limitation the adoption of the Merger Agreement or the right to
vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company; or (iv) requiring divestiture by
Parent or Purchaser or any of their affiliates of any Shares; provided,
that prior to invoking this condition each party agrees to comply with
Section 6.10.
A-1
<PAGE>
(b) there shall have occurred any event that is reasonably
likely to have a Material Adverse Effect;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices (other than suspensions or
limitations triggered on the New York Stock Exchange by price
fluctuations on a trading day) for, securities on any national
securities exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
a commencement of a war or material armed hostilities or other material
national calamity directly involving the United States or materially
adversely affecting the consummation of the Offer or (v) in the case of
any of the foregoing existing at the time of commencement of the Offer,
a material acceleration or worsening thereof;
(d) (A) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent
or Purchaser the approval or recommendation of the Offer, the Merger or
the Merger Agreement, or approved or recommended any takeover proposal
or any other acquisition of Shares other than the Offer, (B) any such
person or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any Shares or a merger, consolidation or other
business combination with or involving the Company or any of its
subsidiaries, or (C) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified by reference to a
Material Adverse Effect shall not be true and correct, or any such
representations and warranties that are not so qualified shall not be
true and correct in any respect that is reasonably likely to have a
Material Adverse Effect, in each case as if such representations and
warranties were made at the time of such determination;
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated with
the consent of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer or the Merger shall not have
expired or been terminated; or
(i) each of the Holding Co. Merger and the Woodbank Merger
shall not have been consummated in accordance with the terms of the
Holding Co. Merger Agreement and the Woodbank Merger Agreement,
respectively;
which, in the reasonable judgment of Purchaser with respect to each and every
matter referred to above and regardless of the circumstances (except for any
action or inaction by Purchaser or
A-2
<PAGE>
any of its affiliates constituting a breach of the Merger Agreement) giving rise
to any such condition, makes it inadvisable to proceed with the Offer or with
such acceptance for payment of or payment for Shares or to proceed with the
Merger.
The foregoing conditions are for the sole benefit of Purchaser
and may be asserted by Purchaser regardless of the circumstances giving rise to
any such condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or (other than the
Minimum Condition) may be waived by Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by 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 other 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.
A-3
<PAGE>
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
DILLARD'S, INC.
WMI ACQUISITION, INC.
and
WOODBANK MILLS, INC.
Dated as of May 16, 1998
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER ........................... 2
SECTION 1.1 The Merger ................................................. 2
SECTION 1.2 Closing; Effective Time .................................... 2
SECTION 1.3 Effects of the Merger ...................................... 2
SECTION 1.4 Certificate of Incorporation; By-Laws ...................... 2
SECTION 1.5 Directors and Officers ..................................... 3
SECTION 1.6 Conversion of Securities ................................... 3
SECTION 1.7 Dissenting Shares and Section 262 Shares ................... 4
SECTION 1.8 Surrender of Shares; Stock Transfer Books .................. 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 6
SECTION 2.1 Corporate Organization; Subsidiaries and Employees ......... 6
SECTION 2.2 Certificate of Incorporation and By-Laws ................... 6
SECTION 2.3 Capitalization ............................................. 7
SECTION 2.4 Authority Relative to This Agreement ....................... 7
SECTION 2.5 No Conflict; Required Filings and Consents ................. 7
SECTION 2.6 Compliance ................................................. 8
SECTION 2.7 Limited Operations; Financial Statements; No Undisclosed
Liabilities .............................................. 8
SECTION 2.8 Absence of Litigation ...................................... 9
SECTION 2.9 Tax Matters ................................................ 9
SECTION 2.10 Investment Company ......................................... 10
SECTION 2.11 Brokers .................................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER ................................. 10
SECTION 3.1 Corporate Organization ..................................... 10
SECTION 3.2 Authority Relative to This Agreement ....................... 10
SECTION 3.3 No Conflict; Required Filings and Consents ................. 10
SECTION 3.4 Brokers .................................................... 11
SECTION 3.5 Funds ...................................................... 11
ARTICLE IV
CONDUCT PENDING THE CLOSING; ADDITIONAL AGREEMENTS .................... 11
SECTION 4.1 Conduct of Business of the Company Pending the Merger ...... 11
SECTION 4.2 Stockholders Meeting ....................................... 13
-i-
<PAGE>
SECTION 4.3 No Solicitation; Affirmation of Covenants in Stockholders'
Agreement .................................................. 13
SECTION 4.4 Access to Information; Confidentiality ..................... 13
SECTION 4.5 Notification of Certain Matters ............................ 14
SECTION 4.6 Further Action; Reasonable Best Efforts .................... 14
SECTION 4.7 Public Announcements ....................................... 14
ARTICLE V
CONDITIONS OF MERGER .................................. 15
SECTION 5.1 Conditions to Obligation of Each Party to Effect the Merger 15
SECTION 5.2 Additional Conditions to Obligation of Parent and Purchaser
to Effect the Merger ....................................... 15
SECTION 5.3 Additional Conditions to Obligation of the Company to Effect
the Merger ................................................. 16
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER .......................... 16
SECTION 6.1 Termination ................................................ 16
SECTION 6.2 Effect of Termination ...................................... 17
SECTION 6.3 Amendment .................................................. 17
SECTION 6.4 Waiver ..................................................... 17
ARTICLE VII
GENERAL PROVISIONS .................................. 17
SECTION 7.1 Survival of Representations, Warranties and Agreements ..... 17
SECTION 7.2 Notices .................................................... 17
SECTION 7.3 Certain Definitions ........................................ 19
SECTION 7.4 Severability ............................................... 19
SECTION 7.5 Entire Agreement; Assignment ............................... 19
SECTION 7.6 Parties in Interest ........................................ 19
SECTION 7.7 Fees and Expenses .......................................... 20
SECTION 7.8 Governing Law .............................................. 20
SECTION 7.9 Headings ................................................... 20
SECTION 7.10 Counterparts ............................................... 20
Schedule 1.6(d) - Schedule of Cash Equivalents
-ii-
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 16, 1998 (this
"Agreement"), among DILLARD'S, INC., a Delaware corporation ("Parent"), WMI
ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and WOODBANK MILLS, INC., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and the stockholders of the
Company to enter into this Agreement with Parent and Purchaser, providing for
the merger (the "Merger") of Purchaser with the Company in accordance with the
General Corporation Law of the State of Delaware ("DGCL"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent and Purchaser have
each approved the Merger of Purchaser with the Company in accordance with the
DGCL upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MSC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("MSC MergerSub"), and Mercantile Stores Company,
Inc., a Delaware corporation ("MSC"), have entered into a merger agreement,
dated as of the date hereof (the "MSC Merger Agreement"), pursuant to which MSC
MergerSub has agreed to make a tender offer (the "Offer") for all outstanding
shares of common stock, $.14 2/3 par value per share (the "MSC Common Stock"),
of MSC, at $80.00 per share, or any higher price that may be paid pursuant to
the Offer (the "Offer Price"), net to the seller in cash, subject to the offer
condition contained therein (the "Offer Conditions"), to be followed by a merger
(the "MSC Merger") of MSC MergerSub with and into MSC, with MSC as the surviving
corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MMC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("MMC MergerSub"), and Minot Mercantile Corporation,
a Delaware corporation ("MMC"), have entered into a merger agreement, dated as
of the date hereof (the "MMC Merger Agreement"), pursuant to which MMC MergerSub
will be merged with and into MMC (the "MMC Merger"), and MMC shall be the
surviving corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, holders of not less than 70% of all of the holders (the "WMI
Stockholders") of the Company's common stock, par value $1.00 per share
(referred to herein as the "Shares" or "Company Common Stock"), have executed
and delivered an agreement (the "Proxy and Indemnification Agreement"), pursuant
to which (i) the WMI Stockholders have granted Parent an irrevocable proxy to
vote their Shares in favor of the adoption of this Agreement and the Merger at
the Stockholders Meeting (as defined herein), and (ii) the WMI Stockholders have
agreed to indemnify Parent and Purchaser in respect of any and all claims
resulting from the Merger, in each case, subject to the terms and conditions
contained therein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and each of the Company, MMC and certain affiliated
stockholders of MSC (collectively,
<PAGE>
2
the "Related Sellers") have entered into a stockholders' agreement, each dated
as of the date hereof (each, a "Stockholders' Agreement"), pursuant to which,
among other things, each Related Seller has granted an option in favor of Parent
with respect to the shares of Company Common Stock respectively held by such
person, subject to the terms and conditions contained therein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). At Parent's election,
any direct or indirect subsidiary of Parent other than Purchaser may be merged
with and into the Company instead of the Purchaser. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 1.2 Closing; Effective Time. Subject to the provisions
of Article V, the closing of the Merger (the "Closing") shall take place in New
York City at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York, as soon as practicable but in no event later than the first
business day after the satisfaction or waiver of the conditions set forth in
Article V, or at such other place or at such other date as Parent and the
Company may mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date". At the Closing, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger or a certificate of ownership and merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by and executed in accordance with the relevant provisions of the
DGCL (the date and time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (or such later time as is specified
in the Certificate of Merger) being the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be
<PAGE>
3
amended and restated so as to read in its entirety in the form set forth in
Exhibit A hereto and, as so amended, until thereafter and further amended as
provided therein and under the DGCL, it shall be the Certificate of
Incorporation of the Surviving Corporation following the Merger.
(b) At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Purchaser and as provided by
law.
SECTION 1.5 Directors and Officers. The directors and officers
of Purchaser immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
SECTION 1.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each share of the Company Common Stock, issued and
outstanding immediately prior to the Effective Time (other than any
Shares to be cancelled pursuant to Section 1.6(b) and any Dissenting
Shares (as defined in Section 1.7(a)) shall be cancelled, extinguished
and converted into the right to receive an amount (the "Merger
Consideration") calculated as follows: (i) the Aggregate Value of
Company Assets (as defined in Section 1.6(d) below) immediately prior
to the Effective Time divided by (ii) the aggregate number of shares of
Company Common Stock issued and outstanding immediately prior to the
Effective Time. The Merger Consideration shall be payable to the holder
of each Share, without interest, upon surrender of the certificate
formerly representing such Share in the manner provided in Section 1.8,
less any required withholding taxes.
(b) Each share of Company Common Stock held in the treasury of
the Company and each Share owned by the Company, Parent, Purchaser or
any other direct or indirect subsidiary of such persons, in each case
immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted
into and become one validly issued, fully paid and nonassessable share
of identical common stock of the Surviving Corporation.
(d) "Aggregate Value of Company Assets" means an amount equal
to (i) the product of (A) the aggregate number of outstanding shares of
MSC Common Stock directly owned by MMC immediately prior to the
"Effective Time" (under and as defined in the MMC Merger Agreement),
(B) the Offer Price and (C) a fraction, the numerator
<PAGE>
4
of which is the aggregate number of outstanding shares of MMC common
stock directly owned by the Company and the denominator of which is all
of the outstanding shares of MMC common stock, in each case,
immediately prior to the "Effective Time" (under and as defined in the
MMC Merger Agreement), plus (ii) the product of (A) the aggregate
number of outstanding shares of MSC Common Stock directly owned by the
Company immediately prior to the Effective Time and (B) the Offer
Price, plus (iii) the aggregate amount of Net Assets (as defined
below). "Net Assets" means the amount by which the Company's assets
exceeds its liabilities, each of which will be calculated from the
Closing Balance Sheet (as defined below). Attached hereto as Schedule
1.6(d) is a list of all of assets and liabilities of the Company as of
the date hereof.
(e) "Closing Balance Sheet" means a balance sheet of the
Company reflecting its assets and liabilities as of Closing, as
prepared by the Company and delivered to Parent, for its review and
consent, no later than 15 days prior to Closing. Parent shall, within
five days of its receipt of the Closing Balance Sheet, complete its
review thereof and identify to the Company any items with which Parent
does not agree. Parent and the Company will promptly attempt to resolve
in good faith any disagreement as to items contained on the Closing
Balance Sheet. The Company will, as promptly as practicable after the
date hereof, undertake to liquidate and/or sell all of its investments
and other assets (other than its shares of MSC Common Stock and MMC
common stock) so that the Company's assets, as reflected on the Closing
Balance Sheet, will consist solely of cash and short-term, highly
liquid cash equivalents (with maturities of seven days or less). The
Closing Balance Sheet will set forth, in reasonable detail and
specificity (with notes where appropriate), all of the Company's assets
and liabilities as of the Closing, including without limitation all tax
liabilities incurred on account of any liquidations or sales of the
Company's investments or other assets and all liabilities, fees and
expenses owing to the Company's advisors. The amount of cash and cash
equivalents that are held back to cover the Company's liabilities, as
identified on the Closing Balance Sheet, is referred to as the
"Holdback Amount". The Holdback Amount will be applied by Parent and
Purchaser to pay, upon presentment of proper invoices, to any
post-Closing fees, expenses, liabilities and other obligations of the
Company.
(f) Promptly following the date on which all of the Company's
liabilities that were identified on the Closing Balance Sheet, together
with all outstanding "Losses" under and as defined in the Proxy and
Indemnification Agreement, have been paid in full, any remaining
Holdback Amount shall be released to the Paying Agent (as hereinafter
defined) for distribution to the former holders of the Shares.
SECTION 1.7 Dissenting Shares and Section 262 Shares. (a)
Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted in favor of or
consented to the Merger and shall have delivered a written demand for appraisal
of such shares of Company Common Stock in the time and manner provided in
Section 262 of the DGCL and shall not have failed to perfect or shall not have
effectively withdrawn or lost their rights to appraisal and payment under the
DGCL (the "Dissenting Shares") shall not be converted into the right to receive
the Merger Consideration, but shall be
<PAGE>
5
entitled to receive the consideration as shall be determined pursuant to Section
262 of the DGCL; provided, however, that if such holder shall have failed to
perfect or shall have effectively withdrawn or lost his, her or its right to
appraisal and payment under the DGCL, such holder's shares of Company Common
Stock shall thereupon be deemed to have been converted, at the Effective Time,
into the right to receive the Merger Consideration set forth in Section 1.6(a)
of this Agreement, without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal pursuant to Section 262 received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
Pursuant to the Proxy and Indemnification Agreement, the WMI Stockholders shall
indemnify, defend and hold harmless Parent and Purchaser against any and all
liabilities, damages, expenses, losses or other claims that are paid in respect
of any Dissenting Shares (including reasonable attorneys' fees and expenses) in
excess of the aggregate Merger Consideration that would otherwise have been
payable in respect of such Dissenting Shares pursuant to Section 1.6(a).
SECTION 1.8 Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
to act as agent for the holders of Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Shares
shall become entitled pursuant to Section 1.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 1.8(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Parent, as
Parent directs.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
<PAGE>
6
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that:
SECTION 2.1 Corporate Organization; Subsidiaries and
Employees. (a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority and any necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted. The Company is not qualified or licensed as a foreign corporation to
do business in any jurisdiction. When used in connection with the Company, the
term "Material Adverse Effect" means any change or effect that would be
materially adverse to the assets, liabilities, results of operations, financial
condition or business of the Company.
(b) The Company has no subsidiaries and no employees.
<PAGE>
7
SECTION 2.2 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws of the Company as currently in
effect. Such Certificate of Incorporation and ByLaws are in full force and
effect and no other organizational documents are applicable to or binding upon
the Company. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
SECTION 2.3 Capitalization. The authorized capital stock of
the Company consists of 188,200 shares of Company Common Stock, of which (a)
188,200 shares of Company Common Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable and have been issued free of
preemptive (or similar) rights, and (b) no shares of Company Common Stock are
held in the treasury of the Company. Except as set forth above, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "Company Securities"). There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company to
which the Company is a party. There are no outstanding contractual obligations
of the Company to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any other entity and, except for the
shares of MSC Common Stock, the Company has no other direct or indirect equity
interests in any other person.
SECTION 2.4 Authority Relative to This Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock and the filing of appropriate merger documents as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Purchaser, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. As a result of the foregoing actions, the only vote required to authorize
the Merger is the affirmative vote of a majority of the outstanding Shares.
SECTION 2.5 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by the Company do not
and will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent
<PAGE>
8
organizational documents of any of its subsidiaries; (ii) assuming that all
consents, approvals and authorizations contemplated by clauses (i), (ii) and
(iii) of subsection (b) below have been obtained and all filings described in
such clauses have been made, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties are bound or affected; or
(iii) result in any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both could become a default) or result in
the loss of a material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, except for
(i) applicable requirements, if any, of the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), state securities, takeover
and "blue sky" laws, (ii) the filing and recordation of appropriate merger or
other documents as required by the DGCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain are not, individually or in the aggregate, reasonably likely
to (x) prevent or materially delay the Company from performing its obligations
under this Agreement or (y) have a Material Adverse Effect.
SECTION 2.6 Compliance. The Company is not in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or by which its properties are bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or its properties are bound or
affected, except for any such conflicts, defaults or violations which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
SECTION 2.7 Limited Operations; Financial Statements; No
Undisclosed Liabilities. (a) The Company operates solely as a "personal holding
corporation" within the meaning of Section 542 of the Internal Revenue Code of
1986, as amended (the "Code"). Except for (i) this Agreement and the
transactions contemplated hereby, (ii) activities related to maintaining its
corporate existence and (iii) activities related to the Company's ownership of
the shares of MSC Common Stock and other investments (including, without
limitation, the investment and reinvestment of proceeds received on account of
such investments and distributions to the Company's stockholders), the Company
has not engaged in any business activities of any type or kind whatsoever or
entered into any agreements or arrangements with any person. The legal name of
the Company is as set forth in this Agreement. The Company has no trade names,
fictitious names, assumed names or "doing business as" names.
<PAGE>
9
(b) The Company has not incurred, directly or indirectly, any
liabilities, commitments, or obligations of any kind whatsoever, whether or not
accrued and whether or not contingent or absolute, other than liabilities
disclosed in Schedule 2.7(b) of the Company Disclosure Letter.
(c) The Company has delivered to Parent true and correct
copies of the Company's audited balance sheets for the prior three fiscal years
and the related statements of consolidated income and retained earnings, and
statements of consolidated cash flows for each of the last three fiscal years,
including any related notes thereto (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the financial position of
the Company at the respective date thereof and the results of its operations and
changes in cash flows for the periods indicated.
SECTION 2.8 Absence of Litigation. There are no suits, claims,
actions, proceedings or investigations pending or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
court, arbitrator or administrative, governmental or regulatory authority or
body. As of the date hereof, neither the Company nor any of its subsidiaries nor
any of their respective properties is or are subject to any order, writ,
judgment, injunction, decree, determination or award.
SECTION 2.9 Tax Matters. The Company has, or will have, (i)
filed all Tax Returns and reports required to be filed by it prior to the
Closing Date (taking into account extensions), (ii) paid or accrued all Taxes
due and payable for all taxable years or periods ending on or prior to the
Closing Date, and (iii) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings). All such Tax Returns are complete and
correct in all material respects. Neither the Internal Revenue Service (the
"IRS") nor any other Taxing authority has asserted any claim for Taxes, or is
threatening to assert any claims for Taxes, against the Company. The Company has
withheld or collected and paid over to the appropriate Taxing authorities all
Taxes required by law to be withheld or collected and paid over to such Taxing
authorities. The Company has not made an election under Section 341(f) of the
Code. There are no liens for Taxes upon any of the assets of the Company (other
than liens for Taxes that are not yet due or that are being contested in good
faith by appropriate proceedings). No extension of the statute of limitations on
the assessment of any Taxes has been granted by the Company and is currently in
effect. As used herein, "Taxes" shall mean any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority. As
used herein, "Tax Return" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes.
<PAGE>
10
SECTION 2.10 Investment Company. The Company is not an
"investment company" or a company controlled by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or is exempt from
all provisions of such act.
SECTION 2.11 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company (other than Goldman, Sachs & Co.'s
engagement as financial advisor on behalf of MSC).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 3.1 Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals is not, individually or in the
aggregate, reasonably likely to prevent the consummation of the Merger.
SECTION 3.2 Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
other than filing and recordation of appropriate merger documents as required by
the DGCL. This Agreement has been duly executed and delivered by Parent and
Purchaser and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms.
SECTION 3.3 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by Parent and
Purchaser do not and will not: (i) conflict with or violate the respective
certificates of incorporation or by-laws of Parent or Purchaser; (ii) assuming
that all consents, approvals and authorizations contemplated by clauses (i),
(ii) and (iii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or Purchaser or
by which either of them or their respective properties are bound or affected; or
(iii) result in any breach or violation of or constitute a default (or an
<PAGE>
11
event which with notice or lapse of time or both could become a default) or
result in the loss of a material benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent or
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or Purchaser is a party or by which Parent or Purchaser or any of their
respective properties are bound or affected, except, in the case of clauses (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which are not, individually or in the aggregate, reasonably likely
to prevent or materially delay the consummation of the Merger.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, except (i) for applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated thereunder,
the HSR Act, state securities, takeover and "blue sky" laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain are not, individually or in
the aggregate, reasonably likely to prevent the consummation of the Merger.
SECTION 3.4 Brokers. No broker, finder or investment banker
(other than Morgan Stanley & Co. Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Purchaser.
SECTION 3.5 Funds. Parent or Purchaser, at the expiration date
of the Offer and at the Effective Time, will have the funds necessary to
consummate the Merger.
ARTICLE IV
CONDUCT PENDING THE CLOSING; ADDITIONAL AGREEMENTS
SECTION 4.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, unless Parent shall otherwise agree in writing and
except as otherwise expressly contemplated by this Agreement, the Company shall
not (i) engage in any business activities of any type or kind whatsoever or
enter into any agreements or arrangements with any person, except as otherwise
contemplated pursuant to this Agreement and (ii) incur, directly or indirectly,
any liabilities, commitments, or obligations of any kind whatsoever, whether or
not accrued and whether or not contingent or absolute. By way of amplification
and not limitation, the Company shall not, between the date of this Agreement
and the Effective Time, directly or indirectly do, or commit to do, any of the
following without the prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation
or by-laws;
<PAGE>
12
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (i) any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom
stock), of the Company or (ii) any assets of the Company;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof, or otherwise form or commit to form
any subsidiary; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments
in, any other person; (iii) enter into any contract or agreement other
than in the ordinary course of business consistent with past practice;
or (iv) authorize any capital expenditures of any nature whatsoever;
(f) Hire, appoint or engage, or commit to hire, appoint or
engage, any director, officer, employee, consultant or other advisor,
or otherwise pay or commit to pay any compensation, fringe benefits or
severance or other termination benefits to any such persons, other than
the engagement of any agent by the Company in connection with the
liquidation and/or sale of the Company's assets and investments in the
manner contemplated herein;
(g) Make any Tax election, change any method of Tax accounting
or settle or compromise any federal, state, local or foreign Tax
liability;
(h) Settle or compromise any pending or threatened suit,
action or claim;
(i) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company (other than the Merger); or
(j) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 4.1(a)
through 4.1(i) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken.
Notwithstanding anything contained in this Section 4.1, the
Company shall be entitled to liquidate and/or sell all or any of its investments
and other assets (other than its MSC
<PAGE>
13
Common Stock and MMC common stock) and/or declare and pay dividends to its
stockholders (other than of its MSC Common Stock or MMC common stock), so long
as the Closing Balance Sheet accurately reflects the results of any such
liquidation, sale and/or dividend.
SECTION 4.2 Stockholders Meeting. Promptly following the date
hereof, the Company, acting through its Board of Directors, shall in accordance
with and subject to applicable law and the Company's Certificate of
Incorporation and By-Laws, duly call, give notice of, convene and hold a meeting
of its stockholders for the purpose of adopting this Agreement and the
transactions contemplated hereby (the "Stockholders Meeting"). The Company's
Board of Directors shall include, in any notice to stockholders of the
Stockholders Meeting, the unanimous recommendation of the Board of Directors
that the stockholders of the Company vote in favor of the adoption of this
Agreement and use its reasonable best efforts to obtain the necessary adoption
of this Agreement. At the Stockholders Meeting, Parent and Purchaser shall cause
all Shares subject to the WMI Stockholders' proxy under the Proxy and
Indemnification Agreement to be voted in favor of adoption of this Agreement.
SECTION 4.3 No Solicitation; Affirmation of Covenants in
Stockholders' Agreement. (a) The Company shall not, and the Company shall cause
all of its directors, agents, affiliates and associates to not, directly or
indirectly, solicit, encourage, participate in or initiate any inquiries or the
making of any proposal by any person or entity (other than Parent or any
affiliate of Parent) which constitutes, or may reasonably be expected to lead
to, (i) any sale of the Shares or (ii) any acquisition or purchase of any of the
Company's assets or any equity interest in, or any merger, consolidation or
business combination with, the Company. If the Company receives an inquiry or
proposal with respect to the sale of Shares, then the Company shall promptly
inform Parent of the terms and conditions, if any, of such inquiry or proposal
and the identity of the person making it. The Company and its directors, agents,
affiliates and associates will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) The Company affirms and agrees that it shall comply in all
respects with the covenants set forth in its Stockholders' Agreement, including
without limitation the covenants set forth in Section 5 thereof.
SECTION 4.4 Access to Information; Confidentiality. From the
date hereof to the Effective Time, the Company shall, and shall cause its
officers, directors and other agents to, afford the officers, employees,
auditors and other agents of Parent, and financing sources who shall agree to be
bound by the provisions of this Section 4.4 as though a party hereto, complete
access, consistent with applicable law, at all reasonable times to all books and
records of the Company, and shall furnish Parent and such financing sources with
all financial, operating and other data and information as Parent, through its
officers, employees or agents, or such financing sources may from time to time
reasonably request. All information obtained by Parent and Purchaser pursuant to
this Section 4.4 shall be kept confidential in accordance with the
Confidentiality Agreement, dated on or about May 7, 1998 (the "Parent
Confidentiality Agreement"), between Parent and MSC. No investigation pursuant
to this Section 4.4 shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto.
<PAGE>
14
SECTION 4.5 Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of the occurrence or non-occurrence of (i) any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.5 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 4.6 Further Action; Reasonable Best Efforts. (a) Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
but not limited to (i) cooperation in the preparation and filing of any required
filings under the HSR Act and any amendments to any thereof and (ii) using its
reasonable best efforts to promptly make all required regulatory filings and
applications including, without limitation, responding promptly to requests for
further information and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and any
other third parties as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such necessary action.
(b) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
their subsidiaries, from any governmental authority with respect to the Merger
or any of the other transactions contemplated by this Agreement. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law.
SECTION 4.7 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with its securities exchange.
<PAGE>
15
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction (or, in the case of Section 5.1(d) below, the
waiver, to the extent available, by Parent) at or prior to the Effective Time of
the following conditions:
(a) This Agreement shall have been adopted by the affirmative
vote of the stockholders of the Company by the requisite vote in
accordance with the Company's Certificate of Incorporation and the DGCL
(which the Company has represented shall be solely the affirmative vote
of a majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by
any United States, foreign, federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger, the Offer or the MSC Merger.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
(d) All of the Offer Conditions, other than the consummation
of the Merger, shall have been satisfied and MSC MergerSub shall have
determined to purchase the shares of MSC Common Stock pursuant to the
Offer; provided that, if the MSC Merger Agreement is terminated under
circumstances in which Parent is entitled to the payment of the fees
set forth in Section 8.3(a)(ii) of the MSC Merger Agreement, Parent (in
its sole and absolute discretion) shall be entitled to waive the
satisfaction of the conditions in this Section 5.1(d).
SECTION 5.2 Additional Conditions to Obligation of Parent and
Purchaser to Effect the Merger. The obligations of Parent and Purchaser to
effect the Merger shall be subject to the satisfaction (or waiver) at or prior
to the Effective Time of the following conditions:
(a) The Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(b) The representations and warranties made herein by the
Company shall have been true and correct in all material respects on
the date of this Agreement and as of the Effective Time, except to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct as of such date.
<PAGE>
16
(c) Each of (i) the Stockholder's Agreement of the Company
(and the Stockholder's Agreements for each other Related Seller), and
(ii) the Proxy and Indemnification Agreement shall continue to be in
full force and effect, with no amendments or other changes thereto.
SECTION 5.3 Additional Conditions to Obligation of the Company
to Effect the Merger. The obligations of the Company to effect the Merger shall
be subject to the satisfaction (or waiver) at or prior to the Effective Time of
the following conditions:
(a) Parent and Purchaser shall have performed in all material
respects all of their respective covenants and agreements required to
be performed by them under this Agreement at or prior to the Closing
Date.
(b) The representations and warranties made herein by Parent
and Purchaser shall have been true and correct in all material respects
on the date of this Agreement and as of the Effective Time, except to
the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct as of such date.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) By mutual written consent of Parent, Purchaser and the
Company;
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States shall have issued a final order, injunction,
decree, judgment or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger, the Offer or the MSC
Merger and such order, injunction, decree, judgment, ruling or other
action is or shall have become final and nonappealable;
(c) By Parent if due to an occurrence or circumstance which
resulted in a failure to satisfy any of the Offer Conditions (other
than as a result of a breach by Parent or MSC MergerSub of its
obligations under the MSC Merger Agreement), MSC MergerSub shall have
(i) terminated the Offer or (ii) failed to pay for shares of MSC Common
Stock pursuant to the Offer on or prior to the Outside Date (as defined
in the MSC Merger Agreement);
(d) By the Company if (i) the MSC Merger Agreement is
terminated and (ii) Parent is no longer entitled to the payment of the
fees set forth in Section 8.3(a)(ii) of the MSC Merger Agreement; or
<PAGE>
17
(e) By Parent prior to the purchase of shares of MSC Common
Stock pursuant to the Offer, if (i) there shall have been a breach of
any representation, warranty, covenant or agreement on the part of the
Company contained in this Agreement which is reasonably likely to have
a Material Adverse Effect, which shall not have been cured prior to the
earlier of (A) 10 business days following notice of such breach and (B)
two business days prior to the date on which the Offer expires, or (ii)
the MSC Merger Agreement is terminated.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 7.1; provided, however, that nothing
herein shall relieve any party from liability for any wilful breach hereof.
SECTION 6.3 Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger without the redelivery by the Company's stockholders of a stockholders'
consent thereto. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 6.4 Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Survival of Representations, Warranties and
Agreements. (a) Except as set forth in Section 7.1(b), all representations,
warranties and agreements contained in this Agreement shall terminate and be
extinguished at the Effective Time or the earlier date of termination of this
Agreement pursuant to Section 6.1.
(b) Notwithstanding Section 7.1(a), (i) the covenants and
agreements made by the parties in this Agreement which by their terms
contemplate performance after the Effective Time (or after termination) shall
survive the Effective Time (or such termination) until fully performed, and (ii)
the representations and warranties of the Company contained herein shall survive
the Effective Time indefinitely.
SECTION 7.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have
<PAGE>
18
been duly given upon receipt) by delivery in person, by cable, telecopy,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
if to Parent or Purchaser:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James I. Freeman
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
if to the Company:
c/o Ivins Phillips & Barker
1700 Pennslyvania Avenue
Washington, D.C. 20006
Attention: Stuart Dunn, Esq.
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
with a further copy to:
Morris, Nichols, Arsht & Tunnel
1201 N. Market Street
Wilminton, Delaware 19801
Attention: Andrew M. Johnston, Esq.
<PAGE>
19
SECTION 7.3 Certain Definitions. For purposes of this
Agreement, the term:
"affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
"person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
"subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
SECTION 7.4 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
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 to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
SECTION 7.5 Entire Agreement; Assignment. This Agreement,
together with the Stockholders Agreements, Parent Confidentiality Agreement, the
MSC Merger Agreement, the MMC Merger Agreement and the Proxy and Indemnification
Agreement, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by operation of law
or otherwise, except that Parent and Purchaser may assign all or any of their
respective rights and obligations hereunder to any direct or indirect wholly
owned subsidiary or subsidiaries of Parent, provided that no such assignment
shall relieve the assigning party of its obligations hereunder if such assignee
does not perform such obligations.
SECTION 7.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
<PAGE>
20
SECTION 7.7 Fees and Expenses. Except as otherwise
specifically provided herein, in the MSC Merger Agreement and in the Proxy and
Indemnification Agreement, whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
SECTION 7.8 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 7.9 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 7.10 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
21
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DILLARD'S, INC.
By: /s/ James I. Freeman
---------------------------------
Name: James I. Freeman
Title: Chief Financial Officer
WMI ACQUISITION, INC.
By: /s/ James I. Freeman
---------------------------------
Name: James I. Freeman
Title:
WOODBANK MILLS, INC.
By: /s/ Roger Milliken
---------------------------------
Name: Roger Milliken
Title: Chairman
<PAGE>
----------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
DILLARD'S, INC.
MMC ACQUISITION, INC.
and
MINOT MERCANTILE CORPORATION
Dated as of May 16, 1998
----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
<TABLE>
<S> <C> <C>
THE MERGER .......................... 2
SECTION 1.1 The Merger ................................................ 2
SECTION 1.2 Closing; Effective Time ................................... 2
SECTION 1.3 Effects of the Merger ..................................... 2
SECTION 1.4 Certificate of Incorporation; By-Laws ..................... 3
SECTION 1.5 Directors and Officers .................................... 3
SECTION 1.6 Conversion of Securities .................................. 3
SECTION 1.7 Dissenting Shares and Section 262 Shares .................. 4
SECTION 1.8 Surrender of Shares; Stock Transfer Books ................. 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............. 6
SECTION 2.1 Corporate Organization; Subsidiaries and Employees ........ 6
SECTION 2.2 Certificate of Incorporation and By-Laws .................. 6
SECTION 2.3 Capitalization ............................................ 7
SECTION 2.4 Authority Relative to This Agreement ...................... 7
SECTION 2.5 No Conflict; Required Filings and Consents ................ 7
SECTION 2.6 Compliance ................................................ 8
SECTION 2.7 Limited Operations; Financial Statements; No Undisclosed
Liabilities ............................................... 8
SECTION 2.8 Absence of Litigation ..................................... 9
SECTION 2.9 Tax Matters ............................................... 9
SECTION 2.10 Investment Company ........................................ 9
SECTION 2.11 Brokers ................................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER ............................... 10
SECTION 3.1 Corporate Organization .................................... 10
SECTION 3.2 Authority Relative to This Agreement ...................... 10
SECTION 3.3 No Conflict; Required Filings and Consents ................ 10
SECTION 3.4 Brokers ................................................... 11
SECTION 3.5 Funds ..................................................... 11
ARTICLE IV
CONDUCT PENDING THE CLOSING; ADDITIONAL AGREEMENTS ........ 11
SECTION 4.1 Conduct of Business of the Company Pending the Merger ..... 11
SECTION 4.2 Stockholders Meeting ...................................... 13
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.3 No Solicitation; Affirmation of Covenants in Stockholders'
Agreement ................................................. 13
SECTION 4.4 Access to Information; Confidentiality .................... 13
SECTION 4.5 Notification of Certain Matters ........................... 13
SECTION 4.6 Further Action; Reasonable Best Efforts ................... 14
SECTION 4.7 Public Announcements ...................................... 14
ARTICLE V
CONDITIONS OF MERGER ............................ 14
SECTION 5.1 Conditions to Obligation of Each Party to Effect the Merger 14
SECTION 5.2 Additional Conditions to Obligation of Parent and Purchaser
to Effect the Merger ..................................... 15
SECTION 5.3 Additional Conditions to Obligation of the Company to Effect
the Merger ............................................... 16
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER ......................... 16
SECTION 6.1 Termination ............................................... 16
SECTION 6.2 Effect of Termination ..................................... 17
SECTION 6.3 Amendment ................................................. 17
SECTION 6.4 Waiver .................................................... 17
ARTICLE VII
GENERAL PROVISIONS ................................. 17
SECTION 7.1 Survival of Representations, Warranties and Agreements .... 17
SECTION 7.2 Notices ................................................... 17
SECTION 7.3 Certain Definitions ....................................... 18
SECTION 7.4 Severability .............................................. 19
SECTION 7.5 Entire Agreement; Assignment .............................. 19
SECTION 7.6 Parties in Interest ....................................... 19
SECTION 7.7 Fees and Expenses ......................................... 19
SECTION 7.8 Governing Law ............................................. 19
SECTION 7.9 Headings .................................................. 20
SECTION 7.10 Counterparts .............................................. 20
Schedule 1.6(d) - Current Schedule of Assets and Liabilities
Exhibit A - Certificate of Incorporation of Surviving Corporation
</TABLE>
-ii-
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 16, 1998 (this
"Agreement"), among DILLARD'S, INC., a Delaware corporation ("Parent"), MMC
ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and MINOT MERCANTILE CORPORATION, a Delaware corporation
(the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and the stockholders of the
Company to enter into this Agreement with Parent and Purchaser, providing for
the merger (the "Merger") of Purchaser with the Company in accordance with the
General Corporation Law of the State of Delaware ("DGCL"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent and Purchaser have
each approved the Merger of Purchaser with the Company in accordance with the
DGCL upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MSC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("MSC MergerSub"), and Mercantile Stores Company,
Inc., a Delaware corporation ("MSC"), have entered into a merger agreement,
dated as of the date hereof (the "MSC Merger Agreement"), pursuant to which MSC
MergerSub has agreed to make a tender offer (the "Offer") for all outstanding
shares of common stock, $.14 2/3 par value per share (the "MSC Common Stock"),
of MSC, at $80.00 per share, or any higher price that may be paid pursuant to
the Offer (the "Offer Price"), net to the seller in cash, subject to the offer
condition contained therein (the "Offer Conditions"), to be followed by a merger
(the "MSC Merger") of MSC MergerSub with and into MSC, with MSC as the surviving
corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, WMI Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("WMI MergerSub"), and Woodbank Mills, Inc., a
Delaware corporation ("Woodbank"), have entered into a merger agreement, dated
as of the date hereof (the "Woodbank Merger Agreement"), pursuant to which WMI
MergerSub will be merged with and into Woodbank (the "Woodbank Merger"), and
Woodbank shall be the surviving corporation;
WHEREAS, concurrently with the execution and delivery of this
Agreement, holders of not less than 70% of all of the holders (the "MMC
Stockholders") of the Company's common stock, par value $5.00 per share
(referred to herein as the "Shares" or "Company Common Stock"), have executed
and delivered an agreement (the "Proxy and Indemnification Agreement"), pursuant
to which (i) the MMC Stockholders have granted Parent an irrevocable proxy to
vote their Shares in favor of the adoption of this Agreement and the Merger at
the Stockholders Meeting (as defined herein), and (ii) the MMC Stockholders have
agreed to indemnify Parent and Purchaser in respect of any and all claims
resulting from the Merger, in each case, subject to the terms and conditions
contained therein; and
<PAGE>
2
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and each of the Company, Woodbank and certain affiliated
stockholders of MSC (collectively, the "Related Sellers") have entered into a
stockholders' agreement, each dated as of the date hereof (each, a
"Stockholders' Agreement"), pursuant to which, among other things, each Related
Seller has granted an option in favor of Parent with respect to the shares of
Company Common Stock respectively held by such person, subject to the terms and
conditions contained therein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with the DGCL, at the Effective
Time (as defined in Section 1.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). At Parent's election,
any direct or indirect subsidiary of Parent other than Purchaser may be merged
with and into the Company instead of the Purchaser. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 1.2 Closing; Effective Time. Subject to the provisions
of Article V, the closing of the Merger (the "Closing") shall take place in New
York City at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York, as soon as practicable but in no event later than the first
business day after the satisfaction or waiver of the conditions set forth in
Article V, or at such other place or at such other date as Parent and the
Company may mutually agree. The date on which the Closing actually occurs is
hereinafter referred to as the "Closing Date". At the Closing, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
certificate of merger or a certificate of ownership and merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by and executed in accordance with the relevant provisions of the
DGCL (the date and time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (or such later time as is specified
in the Certificate of Merger) being the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the debts,
liabilities and duties of the Surviving Corporation.
<PAGE>
3
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Purchaser, the Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended and restated so as to
read in its entirety in the form set forth in Exhibit A hereto and, as so
amended, until thereafter and further amended as provided therein and under the
DGCL, it shall be the Certificate of Incorporation of the Surviving Corporation
following the Merger.
(b) At the Effective Time and without any further action on
the part of the Company and Purchaser, the By-Laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Purchaser and as provided by
law.
SECTION 1.5 Directors and Officers. The directors and officers
of Purchaser immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation.
SECTION 1.6 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each share of the Company Common Stock, issued and
outstanding immediately prior to the Effective Time (other than any
Shares to be cancelled pursuant to Section 1.6(b), any Shares held by
Woodbank and any Dissenting Shares (as defined in Section 1.7(a)) shall
be cancelled, extinguished and converted into the right to receive an
amount (the "Merger Consideration") calculated as follows: (i) the
Aggregate Value of Company Assets (as defined in Section 1.6(d) below)
immediately prior to the Effective Time divided by (ii) the aggregate
number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time. The Merger Consideration shall
be payable to the holder of each Share, without interest, upon
surrender of the certificate formerly representing such Share in the
manner provided in Section 1.8, less any required withholding taxes.
(b) Each share of Company Common Stock held in the treasury of
the Company and each Share owned by the Company, Parent, Purchaser or
any other direct or indirect subsidiary of such persons, in each case
immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted
into and become one validly issued, fully paid and nonassessable share
of identical common stock of the Surviving Corporation.
<PAGE>
4
(d) "Aggregate Value of Company Assets" means an amount equal
to (i) the product of (A) the aggregate number of outstanding shares of
MSC Common Stock, directly owned by the Company immediately prior to
the Effective Time, and (B) the Offer Price, plus (ii) the aggregate
amount of Net Assets (as defined below). "Net Assets" means the amount
by which the Company's assets exceeds its liabilities, each of which
will be calculated from the Closing Balance Sheet (as defined below).
Attached hereto as Schedule 1.6(d) is a list of all of assets and
liabilities of the Company as of the date hereof.
(e) "Closing Balance Sheet" means a balance sheet of the
Company reflecting its assets and liabilities as of Closing, as
prepared by the Company and delivered to Parent, for its review and
consent, no later than 15 days prior to Closing. Parent shall, within
five days of its receipt of the Closing Balance Sheet, complete its
review thereof and identify to the Company any items with which Parent
does not agree. Parent and the Company will promptly attempt to resolve
in good faith any disagreement as to items contained on the Closing
Balance Sheet. The Company will, as promptly as practicable after the
date hereof, undertake to liquidate and/or sell all of its investments
and other assets (other than its shares of MSC Common Stock) so that
the Company's assets, as reflected on the Closing Balance Sheet, will
consist solely of cash and short-term, highly liquid cash equivalents
(with maturities of seven days or less). The Closing Balance Sheet will
set forth, in reasonable detail and specificity (with notes where
appropriate), all of the Company's assets and liabilities as of the
Closing, including without limitation all tax liabilities incurred on
account of any liquidations or sales of the Company's investments or
other assets and all liabilities, fees and expenses owing to the
Company's advisors. The amount of cash and cash equivalents that are
held back to cover the Company's liabilities, as identified on the
Closing Balance Sheet, is referred to as the "Holdback Amount". The
Holdback Amount will be applied by Parent and Purchaser to pay, upon
presentment of proper invoices, to any post-Closing fees, expenses,
liabilities and other obligations of the Company.
(f) Promptly following the date on which all of the Company's
liabilities that were identified on the Closing Balance Sheet, together
with all outstanding "Losses" under and as defined in the Proxy and
Indemnification Agreement, have been paid in full, any remaining
Holdback Amount shall be released to the Paying Agent (as hereinafter
defined) for distribution to the former holders of the Shares.
SECTION 1.7 Dissenting Shares and Section 262 Shares. (a)
Notwithstanding anything in this Agreement to the contrary, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted in favor of or
consented to the Merger and shall have delivered a written demand for appraisal
of such shares of Company Common Stock in the time and manner provided in
Section 262 of the DGCL and shall not have failed to perfect or shall not have
effectively withdrawn or lost their rights to appraisal and payment under the
DGCL (the "Dissenting Shares") shall not be converted into the right to receive
the Merger Consideration, but shall be entitled to receive the consideration as
shall be determined pursuant to Section 262 of the DGCL; provided, however, that
if such holder shall have failed to perfect or shall have effectively
<PAGE>
5
withdrawn or lost his, her or its right to appraisal and payment under the DGCL,
such holder's shares of Company Common Stock shall thereupon be deemed to have
been converted, at the Effective Time, into the right to receive the Merger
Consideration set forth in Section 1.6(a) of this Agreement, without any
interest thereon.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal pursuant to Section 262 received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
Pursuant to the Proxy and Indemnification Agreement, the MMC Stockholders shall
indemnify, defend and hold harmless Parent and Purchaser against any and all
liabilities, damages, expenses, losses or other claims that are paid in respect
of any Dissenting Shares (including reasonable attorneys' fees and expenses) in
excess of the aggregate Merger Consideration that would otherwise have been
payable in respect of such Dissenting Shares pursuant to Section 1.6(a).
SECTION 1.8 Surrender of Shares; Stock Transfer Books. (a)
Prior to the Effective Time, Purchaser shall designate a bank or trust company
to act as agent for the holders of Shares in connection with the Merger (the
"Paying Agent") to receive the Merger Consideration to which holders of Shares
shall become entitled pursuant to Section 1.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 1.8(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Parent, as
Parent directs.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective
Time, of an outstanding certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose
<PAGE>
6
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable.
(c) At any time following six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Purchaser that:
SECTION 2.1 Corporate Organization; Subsidiaries and
Employees. (a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority and any necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted. The Company is not qualified or licensed as a foreign corporation to
do business in any jurisdiction. When used in connection with the Company, the
term "Material Adverse Effect" means any change or effect that would be
materially adverse to the assets, liabilities, results of operations, financial
condition or business of the Company.
(b) The Company has no subsidiaries and no employees.
SECTION 2.2 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws of the Company as currently in
effect. Such Certificate of Incorporation and By-
<PAGE>
7
Laws are in full force and effect and no other organizational documents are
applicable to or binding upon the Company. The Company is not in violation of
any of the provisions of its Certificate of Incorporation or By-Laws.
SECTION 2.3 Capitalization. The authorized capital stock of
the Company consists of 280,300 shares of Company Common Stock, of which (a)
280,300 shares of Company Common Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable and have been issued free of
preemptive (or similar) rights, and (b) no shares of Company Common Stock are
held in the treasury of the Company. Except as set forth above, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "Company Securities"). There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company to
which the Company is a party. There are no outstanding contractual obligations
of the Company to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any other entity and, except for the
shares of MSC Common Stock, the Company has no other direct or indirect equity
interests in any other person.
SECTION 2.4 Authority Relative to This Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock and the filing of appropriate merger documents as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by Parent and Purchaser, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. As a result of the foregoing actions, the only vote required to authorize
the Merger is the affirmative vote of a majority of the outstanding Shares.
SECTION 2.5 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by the Company do not
and will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
subsidiaries; (ii) assuming that all consents, approvals and authorizations
contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been
obtained and all filings described in such clauses have been made, conflict with
or violate any
<PAGE>
8
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its subsidiaries or by which its or any of their respective properties
are bound or affected; or (iii) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of time or both
could become a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the properties
or assets of the Company or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory authority, except for
(i) applicable requirements, if any, of the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), state securities, takeover
and "blue sky" laws, (ii) the filing and recordation of appropriate merger or
other documents as required by the DGCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of which
to make or obtain are not, individually or in the aggregate, reasonably likely
to (x) prevent or materially delay the Company from performing its obligations
under this Agreement or (y) have a Material Adverse Effect.
SECTION 2.6 Compliance. The Company is not in conflict with,
or in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or by which its properties are bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or its properties are bound or
affected, except for any such conflicts, defaults or violations which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect.
SECTION 2.7 Limited Operations; Financial Statements; No
Undisclosed Liabilities. (a) The Company operates solely as a "personal holding
corporation" within the meaning of Section 542 of the Internal Revenue Code of
1986, as amended (the "Code"). Except for (i) this Agreement and the
transactions contemplated hereby, (ii) activities related to maintaining its
corporate existence and (iii) activities related to the Company's ownership of
the shares of MSC Common Stock and other investments (including, without
limitation, the investment and reinvestment of proceeds received on account of
such investments and distributions to the Company's stockholders), the Company
has not engaged in any business activities of any type or kind whatsoever or
entered into any agreements or arrangements with any person. The legal name of
the Company is as set forth in this Agreement. The Company has no trade names,
fictitious names, assumed names or "doing business as" names.
<PAGE>
9
(b) The Company has not incurred, directly or indirectly, any
liabilities, commitments, or obligations of any kind whatsoever, whether or not
accrued and whether or not contingent or absolute, other than liabilities
disclosed in Schedule 1.6(d) hereto.
(c) The Company has delivered to Parent true and correct
copies of the Company's audited balance sheets for the prior three fiscal years
and the related statements of consolidated income and retained earnings, and
statements of consolidated cash flows for each of the last three fiscal years,
including any related notes thereto (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the financial position of
the Company at the respective date thereof and the results of its operations and
changes in cash flows for the periods indicated.
SECTION 2.8 Absence of Litigation. There are no suits, claims,
actions, proceedings or investigations pending or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
court, arbitrator or administrative, governmental or regulatory authority or
body. As of the date hereof, neither the Company nor any of its subsidiaries nor
any of their respective properties is or are subject to any order, writ,
judgment, injunction, decree, determination or award.
SECTION 2.9 Tax Matters. The Company has, or will have, (i)
filed all Tax Returns and reports required to be filed by it prior to the
Closing Date (taking into account extensions), (ii) paid or accrued all Taxes
due and payable for all taxable years or periods ending on or prior to the
Closing Date, and (iii) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings). All such Tax Returns are complete and
correct in all material respects. Neither the Internal Revenue Service (the
"IRS") nor any other Taxing authority has asserted any claim for Taxes, or is
threatening to assert any claims for Taxes, against the Company. The Company has
withheld or collected and paid over to the appropriate Taxing authorities all
Taxes required by law to be withheld or collected and paid over to such Taxing
authorities. The Company has not made an election under Section 341(f) of the
Code. There are no liens for Taxes upon any of the assets of the Company (other
than liens for Taxes that are not yet due or that are being contested in good
faith by appropriate proceedings). No extension of the statute of limitations on
the assessment of any Taxes has been granted by the Company and is currently in
effect. As used herein, "Taxes" shall mean any taxes of any kind, including but
not limited to those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority. As
used herein, "Tax Return" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes.
<PAGE>
10
SECTION 2.10 Investment Company. The Company is not an
"investment company" or a company controlled by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or is exempt from
all provisions of such act.
SECTION 2.11 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company (other than Goldman, Sachs & Co.'s
engagement as financial advisor on behalf of MSC).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent
and warrant to the Company that:
SECTION 3.1 Corporate Organization. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority and any necessary governmental authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power, authority and governmental approvals is not, individually or in the
aggregate, reasonably likely to prevent the consummation of the Merger.
SECTION 3.2 Authority Relative to This Agreement. Each of
Parent and Purchaser has all necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Purchaser
other than filing and recordation of appropriate merger documents as required by
the DGCL. This Agreement has been duly executed and delivered by Parent and
Purchaser and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms.
SECTION 3.3 No Conflict; Required Filings and Consents. (a)
The execution, delivery and performance of this Agreement by Parent and
Purchaser do not and will not: (i) conflict with or violate the respective
certificates of incorporation or by-laws of Parent or Purchaser; (ii) assuming
that all consents, approvals and authorizations contemplated by clauses (i),
(ii) and (iii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or Purchaser or
by which either of them or their respective properties are bound or affected; or
(iii) result in any breach or violation of or constitute a default (or an
<PAGE>
11
event which with notice or lapse of time or both could become a default) or
result in the loss of a material benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent or
Purchaser pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Parent or Purchaser is a party or by which Parent or Purchaser or any of their
respective properties are bound or affected, except, in the case of clauses (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which are not, individually or in the aggregate, reasonably likely
to prevent or materially delay the consummation of the Merger.
(b) The execution, delivery and performance of this Agreement
by Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, except (i) for applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated thereunder,
the HSR Act, state securities, takeover and "blue sky" laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the DGCL,
and (iii) such consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain are not, individually or in
the aggregate, reasonably likely to prevent the consummation of the Merger.
SECTION 3.4 Brokers. No broker, finder or investment banker
(other than Morgan Stanley & Co. Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
Parent or Purchaser.
SECTION 3.5 Funds. Parent or Purchaser, at the expiration date
of the Offer and at the Effective Time, will have the funds necessary to
consummate the Merger.
ARTICLE IV
CONDUCT PENDING THE CLOSING; ADDITIONAL AGREEMENTS
SECTION 4.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, unless Parent shall otherwise agree in writing and
except as otherwise expressly contemplated by this Agreement, the Company shall
not (i) engage in any business activities of any type or kind whatsoever or
enter into any agreements or arrangements with any person, except as otherwise
contemplated pursuant to this Agreement and (ii) incur, directly or indirectly,
any liabilities, commitments, or obligations of any kind whatsoever, whether or
not accrued and whether or not contingent or absolute. By way of amplification
and not limitation, the Company shall not, between the date of this Agreement
and the Effective Time, directly or indirectly do, or commit to do, any of the
following without the prior written consent of Parent:
(a) Amend or otherwise change its certificate of incorporation
or by-laws;
<PAGE>
12
(b) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, (i) any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind
to acquire any shares of capital stock, or any other ownership interest
(including but not limited to stock appreciation rights or phantom
stock), of the Company or (ii) any assets of the Company;
(c) Declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) Acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof, or otherwise form or commit to form
any subsidiary; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments
in, any other person; (iii) enter into any contract or agreement other
than in the ordinary course of business consistent with past practice;
or (iv) authorize any capital expenditures of any nature whatsoever;
(f) Hire, appoint or engage, or commit to hire, appoint or
engage, any director, officer, employee, consultant or other advisor,
or otherwise pay or commit to pay any compensation, fringe benefits or
severance or other termination benefits to any such persons, other than
the engagement of any agent by the Company in connection with the
liquidation and/or sale of the Company's assets and investments in the
manner contemplated herein;
(g) Make any Tax election, change any method of Tax accounting
or settle or compromise any federal, state, local or foreign Tax
liability;
(h) Settle or compromise any pending or threatened suit,
action or claim;
(i) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company (other than the Merger); or
(j) Take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 4.1(a)
through 4.1(i) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken.
Notwithstanding anything contained in this Section 4.1, the
Company shall be entitled to liquidate and/or sell all or any of its investments
and other assets (other than its MSC
<PAGE>
13
Common Stock) and/or declare and pay dividends to its stockholders (other than
of its MSC Common Stock), so long as the Closing Balance Sheet accurately
reflects the results of any such liquidation, sale and/or dividend.
SECTION 4.2 Stockholders Meeting. Promptly following the date
hereof, the Company, acting through its Board of Directors, shall in accordance
with and subject to applicable law and the Company's Certificate of
Incorporation and By-Laws, duly call, give notice of, convene and hold a meeting
of its stockholders for the purpose of adopting this Agreement and the
transactions contemplated hereby (the "Stockholders Meeting"). The Company's
Board of Directors shall include, in any notice to stockholders of the
Stockholders Meeting, the unanimous recommendation of the Board of Directors
that the stockholders of the Company vote in favor of the adoption of this
Agreement and use its reasonable best efforts to obtain the necessary adoption
of this Agreement. At the Stockholders Meeting, Parent and Purchaser shall cause
all Shares subject to the MMC Stockholders' proxy under the Proxy and
Indemnification Agreement to be voted in favor of adoption of this Agreement.
SECTION 4.3 No Solicitation; Affirmation of Covenants in
Stockholders' Agreement. (a) The Company shall not, and the Company shall cause
all of its directors, agents, affiliates and associates to not, directly or
indirectly, solicit, encourage, participate in or initiate any inquiries or the
making of any proposal by any person or entity (other than Parent or any
affiliate of Parent) which constitutes, or may reasonably be expected to lead
to, (i) any sale of the Shares or (ii) any acquisition or purchase of any of the
Company's assets or any equity interest in, or any merger, consolidation or
business combination with, the Company. If the Company receives an inquiry or
proposal with respect to the sale of Shares, then the Company shall promptly
inform Parent of the terms and conditions, if any, of such inquiry or proposal
and the identity of the person making it. The Company and its directors, agents,
affiliates and associates will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) The Company affirms and agrees that it shall comply in all
respects with the covenants set forth in its Stockholders' Agreement, including
without limitation the covenants set forth in Section 5 thereof.
SECTION 4.4 Access to Information; Confidentiality. From the
date hereof to the Effective Time, the Company shall, and shall cause its
officers, directors and other agents to, afford the officers, employees,
auditors and other agents of Parent, and financing sources who shall agree to be
bound by the provisions of this Section 4.4 as though a party hereto, complete
access, consistent with applicable law, at all reasonable times to all books and
records of the Company, and shall furnish Parent and such financing sources with
all financial, operating and other data and information as Parent, through its
officers, employees or agents, or such financing sources may from time to time
reasonably request. All information obtained by Parent and Purchaser pursuant to
this Section 4.4 shall be kept confidential in accordance with the
Confidentiality Agreement, dated on or about May 7, 1998 (the "Parent
Confidentiality Agreement"), between Parent and MSC. No investigation pursuant
to this Section 4.4 shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto.
<PAGE>
14
SECTION 4.5 Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of the occurrence or non-occurrence of (i) any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.5 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 4.6 Further Action; Reasonable Best Efforts. (a) Upon
the terms and subject to the conditions hereof, each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
but not limited to (i) cooperation in the preparation and filing of any required
filings under the HSR Act and any amendments to any thereof and (ii) using its
reasonable best efforts to promptly make all required regulatory filings and
applications including, without limitation, responding promptly to requests for
further information and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and any
other third parties as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable best
efforts to take all such necessary action.
(b) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
their subsidiaries, from any governmental authority with respect to the Merger
or any of the other transactions contemplated by this Agreement. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law.
SECTION 4.7 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with its securities exchange.
<PAGE>
15
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction (or, in the case of Section 5.1(d) below, the
waiver, to the extent available, by Parent) at or prior to the Effective Time of
the following conditions:
(a) This Agreement shall have been adopted by the affirmative
vote of the stockholders of the Company by the requisite vote in
accordance with the Company's Certificate of Incorporation and the DGCL
(which the Company has represented shall be solely the affirmative vote
of a majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by
any United States, foreign, federal or state court or governmental
authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger, the Offer or the MSC Merger.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
(d) All of the Offer Conditions, other than the consummation
of the Merger, shall have been satisfied and MSC MergerSub shall have
determined to purchase the shares of MSC Common Stock pursuant to the
Offer; provided that, if the MSC Merger Agreement is terminated under
circumstances in which Parent is entitled to the payment of the fees
set forth in Section 8.3(a)(ii) of the MSC Merger Agreement, Parent (in
its sole and absolute discretion) shall be entitled to waive the
satisfaction of the conditions in this Section 5.1(d).
(e) The Woodbank Merger shall have been consummated.
SECTION 5.2 Additional Conditions to Obligation of Parent and
Purchaser to Effect the Merger. The obligations of Parent and Purchaser to
effect the Merger shall be subject to the satisfaction (or waiver) at or prior
to the Effective Time of the following conditions:
(a) The Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(b) The representations and warranties made herein by the
Company shall have been true and correct in all material respects on
the date of this Agreement and as of the Effective Time, except to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct as of such date.
<PAGE>
16
(c) Each of (i) the Stockholder's Agreement of the Company
(and the Stockholder's Agreements for each other Related Seller), and
(ii) the Proxy and Indemnification Agreement shall continue to be in
full force and effect, with no amendments or other changes thereto.
SECTION 5.3 Additional Conditions to Obligation of the Company
to Effect the Merger. The obligations of the Company to effect the Merger shall
be subject to the satisfaction (or waiver) at or prior to the Effective Time of
the following conditions:
(a) Parent and Purchaser shall have performed in all material
respects all of their respective covenants and agreements required to
be performed by them under this Agreement at or prior to the Closing
Date.
(b) The representations and warranties made herein by Parent
and Purchaser shall have been true and correct in all material respects
on the date of this Agreement and as of the Effective Time, except to
the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct as of such date.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated and
the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) By mutual written consent of Parent, Purchaser and the
Company;
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States shall have issued a final order, injunction,
decree, judgment or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger, the Offer or the MSC
Merger and such order, injunction, decree, judgment, ruling or other
action is or shall have become final and nonappealable;
(c) By Parent if due to an occurrence or circumstance which
resulted in a failure to satisfy any of the Offer Conditions (other
than as a result of a breach by Parent or MSC MergerSub of its
obligations under the MSC Merger Agreement), MSC MergerSub shall have
(i) terminated the Offer or (ii) failed to pay for shares of MSC Common
Stock pursuant to the Offer on or prior to the Outside Date (as defined
in the MSC Merger Agreement);
(d) By the Company if (i) the MSC Merger Agreement is
terminated and (ii) Parent is no longer entitled to the payment of the
fees set forth in Section 8.3(a)(ii) of the MSC Merger Agreement; or
<PAGE>
17
(e) By Parent prior to the purchase of shares of MSC Common
Stock pursuant to the Offer, if (i) there shall have been a breach of
any representation, warranty, covenant or agreement on the part of the
Company contained in this Agreement which is reasonably likely to have
a Material Adverse Effect, which shall not have been cured prior to the
earlier of (A) 10 business days following notice of such breach and (B)
two business days prior to the date on which the Offer expires, or (ii)
the MSC Merger Agreement is terminated.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 7.1; provided, however, that nothing
herein shall relieve any party from liability for any wilful breach hereof.
SECTION 6.3 Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger without the redelivery by the Company's stockholders of a stockholders'
consent thereto. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 6.4 Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Survival of Representations, Warranties and
Agreements. (a) Except as set forth in Section 7.1(b), all representations,
warranties and agreements contained in this Agreement shall terminate and be
extinguished at the Effective Time or the earlier date of termination of this
Agreement pursuant to Section 6.1.
(b) Notwithstanding Section 7.1(a), (i) the covenants and
agreements made by the parties in this Agreement which by their terms
contemplate performance after the Effective Time (or after termination) shall
survive the Effective Time (or such termination) until fully performed, and (ii)
the representations and warranties of the Company contained herein shall survive
the Effective Time indefinitely.
SECTION 7.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have
<PAGE>
18
been duly given upon receipt) by delivery in person, by cable, telecopy,
telegram or telex or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
if to Parent or Purchaser:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James I. Freeman
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
if to the Company:
c/o Ivins Phillips & Barker
1700 Pennslyvania Avenue
Washington, D.C. 20006
Attention: Stuart Dunn, Esq.
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Russell B. Richards, Esq.
with a further copy to:
Morris, Nichols, Arsht & Tunnel
1201 N. Market Street
Wilminton, Delaware 19801
Attention: Andrew M. Johnston, Esq.
SECTION 7.3 Certain Definitions. For purposes of this
Agreement, the term:
"affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
<PAGE>
19
"person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
"subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
SECTION 7.4 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
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 to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
SECTION 7.5 Entire Agreement; Assignment. This Agreement,
together with the Stockholders Agreements, Parent Confidentiality Agreement, the
MSC Merger Agreement, the Woodbank Merger Agreement and the Proxy and
Indemnification Agreement, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Purchaser may assign all
or any of their respective rights and obligations hereunder to any direct or
indirect wholly owned subsidiary or subsidiaries of Parent, provided that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
SECTION 7.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 7.7 Fees and Expenses. Except as otherwise
specifically provided herein, in the MSC Merger Agreement and in the Proxy and
Indemnification Agreement, whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses.
SECTION 7.8 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
<PAGE>
20
SECTION 7.9 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 7.10 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE>
21
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DILLARD'S, INC.
By: /s/ James I. Freeman
--------------------------------------
Name: James I. Freeman
Title: Chief Financial Officer
MMC ACQUISITION, INC.
By: /s/ James I. Freeman
--------------------------------------
Name: James I. Freeman
Title:
MINOT MERCANTILE CORPORATION
By: /s/ Roger Milliken
--------------------------------------
Name: Roger Milliken
Title: Chairman
<PAGE>
PROXY AND INDEMNIFICATION AGREEMENT
PROXY AND INDEMNIFICATION AGREEMENT (this "Agreement"), dated
as of May 16, 1998, among DILLARD'S, INC., a Delaware corporation ("Parent"),
and each of the stockholders of WOODBANK MILLS, INC., a Delaware corporation
(the "Company"), that are signatories hereto (each, a "WMI Stockholder").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, WMI Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and the Company have entered into a
merger agreement, dated as of the date hereof (the "Merger Agreement";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement), pursuant to which WMI MergerSub will be merged with
and into the Company (the "Merger"), and the Company shall be the surviving
corporation; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and consummate the Merger, Parent and Purchaser have required
that each WMI Stockholder agree, and each WMI Stockholder has agreed, among
other things, (i) to grant to Parent the irrevocable proxy with respect to all
of the Company's common stock, par value $1.00 per share ("Company Common
Stock"), owned by such WMI Stockholder, together with any additional shares when
and if they are acquired (such shares, and any additional shares when and if
they are acquired, being referred to herein as such WMI Stockholder's "Shares"
and collectively as the "Shares") on the terms and conditions provided for
herein, and (ii) to indemnify and hold harmless Parent and Purchaser, in the
manner provided herein, on account of any Losses (as defined herein) arising out
of or relating to the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent and each WMI Stockholder hereby agree as follows:
1. Irrevocable Proxy. Each WMI Stockholder hereby irrevocably
appoints Parent or any designee of Parent the lawful agent, attorney and proxy
of such stockholder, during the term of this Agreement, to (a) vote such WMI
Stockholder's Shares in favor of the Merger; (b) vote such WMI Stockholder's
Shares against any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (c) vote
such WMI Stockholder's Shares against any action or agreement (other than the
Merger Agreement or the transactions contemplated thereby) that would impede,
interfere with, delay, postpone or attempt to discourage the Merger or the
Offer, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company; (ii) a sale or transfer of a material amount of assets of
the Company or a reorganization, recapitalization or liquidation of the Company;
(iii) any change in the management or board of directors of the Company, except
as otherwise agreed to in writing by Purchaser; (iv) any material change in the
present capitalization or dividend policy of the
<PAGE>
2
Company; or (v) any other material change in the Company's corporate structure
or business. Each WMI Stockholder intends this proxy to be irrevocable and
coupled with an interest and will take such further action or execute such other
instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by it with respect to the Shares.
Each WMI Stockholder shall not hereafter, unless and until this Agreement
terminates pursuant to Section 7.6 hereof, purport to vote (or execute a consent
with respect to) his Shares (other than through this irrevocable proxy) or grant
any other proxy or power of attorney with respect to such Shares, deposit any
such Shares into a voting trust or enter into any agreement (other than this
Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of such Shares.
2. Representations and Warranties.
2.1 Representations and Warranties of Parent. Parent hereby
represents and warrants to the WMI Stockholders as follows:
(a) Due Authorization. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors
of Parent, and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by Parent and constitutes a valid and binding agreement
of Parent, enforceable against Parent in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) is subject to
general principles of equity.
(b) No Conflicts. Except for (i) filings under the
HSR Act, if applicable, (ii) the applicable requirements of the
Exchange Act and the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the applicable requirements of state
securities, takeover or Blue Sky laws and (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby
and (B) neither the execution and delivery of this Agreement by Parent
nor the consummation by Parent of the transactions contemplated hereby
nor compliance by Parent with any of the provisions hereof shall (1)
conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws (or similar documents) of
Parent, (2) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification
or acceleration) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which Parent is a party or by which
it or any of its properties or assets may be bound or (3) violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to Parent or any of its properties or assets, except in the case of (2)
or (3) for violations,
<PAGE>
3
breaches or defaults which would not in the aggregate materially impair
the ability of Parent to perform its obligations hereunder.
(c) Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to execute
and deliver this Agreement.
2.2 Representations and Warranties of each WMI Stockholder.
Each WMI Stockholder hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such WMI Stockholder is the owner of
his Shares and has the power to vote and dispose of such Shares. To
such WMI Stockholder's knowledge, his Shares are validly issued, fully
paid and nonassessable, with no personal liability attaching to the
ownership thereof. Such WMI Stockholder has good title to his Shares,
free and clear of any agreements, liens, adverse claims or encumbrances
whatsoever with respect to the ownership of or the right to vote such
Shares.
(b) Power; Binding Agreement. Such WMI Stockholder has the
legal capacity, power and authority to enter into and perform all of
its obligations under this Agreement. The execution, delivery and
performance of this Agreement by such WMI Stockholder will not violate
any other agreement to which such WMI Stockholder is a party including,
without limitation, any voting agreement, stockholders agreement or
voting trust. This Agreement has been duly and validly authorized,
executed and delivered by such WMI Stockholder and constitutes a valid
and binding agreement of such WMI Stockholder, enforceable against such
WMI Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) is subject to general principles
of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and
the Securities Act, (iii) the applicable requirements of state
securities, takeover or Blue Sky laws, (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by such WMI
Stockholder and the consummation by such WMI Stockholder of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by such WMI Stockholder nor the consummation
by such WMI Stockholder of the transactions contemplated hereby nor
compliance by such WMI Stockholder with any of the provisions hereof
shall (1) conflict with or result in any breach of any provision of the
certificate of incorporation, by-laws, trust or charitable instruments
(or similar documents) of such WMI Stockholder, (2) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or
obligation to which such WMI Stockholder is
<PAGE>
4
a party or by which such WMI Stockholder or any of his properties or
assets may be bound or (3) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to such WMI Stockholder or any
of his properties or assets, except in the case of (2) or (3) for
violations, breaches or defaults which would not in the aggregate
materially impair the ability of such WMI Stockholder to perform his
obligations hereunder.
3. Certain Covenants of each WMI Stockholder. Each WMI
Stockholder hereby covenants and agrees as follows:
3.1 No Solicitation. Such WMI Stockholder shall not, directly
or indirectly, solicit, encourage, participate in or initiate any inquiries or
the making of any proposal by any person or entity (other than Parent or any
affiliate of Parent) which constitutes, or may reasonably be expected to lead
to, (a) any sale of the Shares or (b) any acquisition or purchase of a material
portion of the Company's assets or any equity interest in, or any merger,
consolidation or business combination with, the Company. If any WMI Stockholder
receives an inquiry or proposal with respect to the sale of Shares, then such
WMI Stockholder shall promptly inform Parent of the terms and conditions, if
any, of such inquiry or proposal and the identity of the person making it. Each
WMI Stockholder will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
3.2 Restriction on Transfer, Proxies and Non-Interference.
Each WMI Stockholder hereby agrees, while this Agreement is in effect, and
except as contemplated hereby, not to (a) sell, transfer, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any of his Shares or (b) grant
any proxies, deposit any of his Shares into a voting trust or enter into a
voting agreement with respect to any of his Shares or (c) take any action that
would make any representation or warranty of such WMI Stockholder contained
herein untrue or incorrect or have the effect of preventing or disabling such
WMI Stockholder from performing his obligations under this Agreement.
4. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate the transactions contemplated by this
Agreement.
5. Adjustments to Prevent Dilution, Etc. In the event of a
stock dividend or distribution, or any change in the Company Common Stock by
reason of any stock dividend, split-up, recapitalization, combination or the
exchange of shares, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such stock dividends and distributions and any shares
into which or for which any or all of the Shares may be changed or exchanged.
6. Indemnification.
6.1 General Indemnification. Each WMI Stockholder
(collectively, the "Indemnifying Party"), jointly and severally, indemnifies,
defends and holds Parent, Purchaser
<PAGE>
5
and Surviving Corporation and their respective directors, officers, employees
and affiliates (collectively, the "Indemnified Party") harmless from any and all
liabilities, damages, expenses, losses or other claims (including, without
limitation, reasonable attorneys' fees and expenses) ("Losses"), directly or
indirectly, suffered or paid that arise out of or relate to (i) the failure of
any representation or warranty made by (A) the Company under the Merger
Agreement or (B) any WMI Stockholder hereunder, in each case to be true and
correct in all respects as of the date of this Agreement and as of the Closing
Date, (ii) any breach by (A) the Company of any of its covenants or agreements
contained in the Merger Agreement and (B) any WMI Stockholder of any of its
covenants or agreements contained herein, and (iii) the Company's business,
operations or conduct at any time on or prior to the Closing Date, including,
without limitation, any and all Taxes imposed on the Company in respect of
periods on or prior to the Closing Date; provided that, the aggregate amount of
the Holdback Amount (as defined in Section 1.6 of the Merger Agreement) shall be
applied to the payment of any Losses prior to any recourse to any Indemnifying
Party's indemnity hereunder.
6.2 Indemnification Procedures. If any indemnifiable claim is
asserted by any third party against or sought to be collected from any
Indemnified Party, such Indemnified Party shall promptly notify the Indemnifying
Party of such claim and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the final amount of
such claim); provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure. The Indemnifying Party shall have 20 days after receipt of such notice
to assume the conduct and control, through counsel reasonably acceptable to the
Indemnified Party and at the expense of the Indemnifying Party, of the
settlement or defense thereof; provided that the Indemnifying Party shall permit
the Indemnified Party to participate in such settlement or defense through
counsel chosen by the Indemnified Party so long as the fees and expenses of such
counsel are borne by the Indemnified Party. So long as the Indemnifying Party is
reasonably contesting any such claim in good faith, the Indemnified Party shall
not pay or settle any such claim; provided that the Indemnified Party may pay or
settle any such claim if the Indemnified Party waives its right to
indemnification hereunder in respect of such claim. If the Indemnifying Party
does not notify the Indemnified Party within 20 days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
contest, pay or settle the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement. The Indemnifying Party shall not,
except with the consent of the Indemnified Party, enter into any settlement that
does not include as an unconditional term thereof the unconditional release of
the Indemnified Party from all liability with respect to the related claim. The
obligations to indemnify and hold harmless pursuant to this Section 6 shall
survive the consummation of the transactions contemplated hereby.
7. Miscellaneous.
7.1 Entire Agreement; Assignment. This Agreement, together
with the Merger Agreement, (i) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) shall not be assigned by
<PAGE>
6
operation of law or otherwise, provided that Parent may assign its rights and
obligations hereunder to any direct or indirect wholly owned parent company or
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
7.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
7.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at (i) in the case of any WMI Stockholder, c/o Ivins Phillips
& Barker, 1700 Pennsylvania Avenue, Washington, D.C. 20006, and (ii) in the case
of Parent, the following address:
if to Parent:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James I. Freeman
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
7.5 Cooperation as to Regulatory Matters. If so requested by
Parent, promptly after the date hereof, each WMI Stockholder will use its
reasonable best efforts to cause it and the Company (if required) to make all
filings which are required under the HSR Act and applicable requirements and to
seek all regulatory approvals required in connection with the transactions
contemplated hereby. The parties shall furnish to each other such necessary
information and reasonable assistance as may be requested in connection with the
preparation of filings and submissions to any governmental agency, including,
without limitation, filings under the provisions of the HSR Act. Each WMI
Stockholder shall also use its reasonable best efforts
<PAGE>
7
to cause the Company to supply Parent with copies of all correspondence, filings
or communications (or memoranda setting forth the substance thereof) between the
Company and its representatives and the Federal Trade Commission, the Department
of Justice and any other governmental agency or authority and members of their
respective staffs with respect to this Agreement and the transactions
contemplated hereby.
7.6 Termination. Except for the provisions of Section 6 which
shall remain in effect indefinitely, this Agreement shall terminate on the
earlier of (i) the Effective Time or (ii) the termination of the Merger
Agreement in accordance with its terms.
7.7 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore, each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
7.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same Agreement.
7.9 Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
7.10 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
<PAGE>
8
IN WITNESS WHEREOF, Parent and each WMI Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
DILLARD'S, INC.
By: /s/ James I. Freeman
----------------------------------
Name: James I. Freeman
Title: Chief Financial Officer
WMI STOCKHOLDERS (listed on next page)
<PAGE>
/s/ Roger Milliken
- ----------------------------------
Roger Milliken
Wilmington Trust Company
By: /s/ Carol M. Drummond
------------------------------
Name: Carol M. Drummond
Title: Assistant Vice President
as the trustees of trusts
holding 6,440 shares of
the common stock,
par value $1.00 per share,
of Woodbank Mills, Inc.
<PAGE>
/s/ Roger Milliken
- ----------------------------------
Roger Milliken
/s/ Gerrish H. Milliken, Jr.
- ----------------------------------
Gerrish H. Milliken, Jr.
as a majority of the trustees of trusts
holding 26,300 shares of the common stock,
par value $1.00 per share,
of Woodbank Mills, Inc.
<PAGE>
/s/ Roger Milliken
- ----------------------------------
Roger Milliken
/s/ Minot K. Milliken
- ----------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 47,400 shares of the common stock,
par value $1.00 per share,
of Woodbank Mills, Inc.
<PAGE>
/s/ Justine VR. Milliken
- ----------------------------------
Justine VR. Milliken
/s/ Minot K. Milliken
- ----------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 51,000 shares of the common stock,
par value $1.00 per share,
of Woodbank Mills, Inc.
<PAGE>
/s/ Roger Milliken
- ----------------------------------
Roger Milliken
/s/ Gerrish H. Milliken
- ----------------------------------
Gerrish H. Milliken, Jr.
/s/ Minot K. Milliken
- ----------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 16,300 shares of the common stock,
par value $1.00 per share,
of Woodbank Mills, Inc.
<PAGE>
PROXY AND INDEMNIFICATION AGREEMENT
PROXY AND INDEMNIFICATION AGREEMENT (this "Agreement"), dated
as of May 16, 1998, among DILLARD'S, INC., a Delaware corporation ("Parent"),
and each of the stockholders of MINOT MERCANTILE CORPORATION, a Delaware
corporation (the "Company"), that are signatories hereto (each, a "MMC
Stockholder").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, MMC Acquisition, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and the Company have entered into a
merger agreement, dated as of the date hereof (the "Merger Agreement";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement), pursuant to which MMC MergerSub will be merged with
and into the Company (the "Merger"), and the Company shall be the surviving
corporation; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement and consummate the Merger, Parent and Purchaser have required
that each MMC Stockholder agree, and each MMC Stockholder has agreed, among
other things, (i) to grant to Parent the irrevocable proxy with respect to all
of the Company's common stock, par value $5.00 per share ("Company Common
Stock"), owned by such MMC Stockholder, together with any additional shares when
and if they are acquired (such shares, and any additional shares when and if
they are acquired, being referred to herein as such MMC Stockholder's "Shares"
and collectively as the "Shares") on the terms and conditions provided for
herein, and (ii) to indemnify and hold harmless Parent and Purchaser, in the
manner provided herein, on account of any Losses (as defined herein) arising out
of or relating to the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent and each MMC Stockholder hereby agree as follows:
1. Irrevocable Proxy. Each MMC Stockholder hereby irrevocably
appoints Parent or any designee of Parent the lawful agent, attorney and proxy
of such stockholder, during the term of this Agreement, to (a) vote such MMC
Stockholder's Shares in favor of the Merger and, if applicable, in favor of
Parent's exercise of its option under the Company's Stockholder's Agreement; (b)
vote such MMC Stockholder's Shares against any action or agreement that would
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement; and (c) vote such MMC Stockholder's Shares against any action or
agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer, including, but not limited to: (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company; (ii) a sale or transfer of a
material amount of assets of the Company or a reorganization, recapitalization
or liquidation of the Company; (iii) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing by
<PAGE>
2
Purchaser; (iv) any material change in the present capitalization or dividend
policy of the Company; or (v) any other material change in the Company's
corporate structure or business. Each MMC Stockholder intends this proxy to be
irrevocable and coupled with an interest and will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
this proxy and hereby revokes any proxy previously granted by it with respect to
the Shares. Each MMC Stockholder shall not hereafter, unless and until this
Agreement terminates pursuant to Section 7.6 hereof, purport to vote (or execute
a consent with respect to) his Shares (other than through this irrevocable
proxy) or grant any other proxy or power of attorney with respect to such
Shares, deposit any such Shares into a voting trust or enter into any agreement
(other than this Agreement), arrangement or understanding with any person,
directly or indirectly, to vote, grant any proxy or give instructions with
respect to the voting of such Shares.
2. Representations and Warranties.
2.1 Representations and Warranties of Parent. Parent hereby
represents and warrants to the MMC Stockholders as follows:
(a) Due Authorization. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors
of Parent, and no other corporate proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by Parent and constitutes a valid and binding agreement
of Parent, enforceable against Parent in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) is subject to
general principles of equity.
(b) No Conflicts. Except for (i) filings under the
HSR Act, if applicable, (ii) the applicable requirements of the
Exchange Act and the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the applicable requirements of state
securities, takeover or Blue Sky laws and (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby
and (B) neither the execution and delivery of this Agreement by Parent
nor the consummation by Parent of the transactions contemplated hereby
nor compliance by Parent with any of the provisions hereof shall (1)
conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws (or similar documents) of
Parent, (2) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification
or acceleration) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement or
other instrument or obligation to which Parent is a party or by which
it or any of its properties or assets may be bound or
<PAGE>
3
(3) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or any of its properties or assets,
except in the case of (2) or (3) for violations, breaches or defaults
which would not in the aggregate materially impair the ability of
Parent to perform its obligations hereunder.
(c) Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to execute
and deliver this Agreement.
2.2 Representations and Warranties of each MMC Stockholder.
Each MMC Stockholder hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such MMC Stockholder is the owner of
his Shares and has the power to vote and dispose of such Shares. To
such MMC Stockholder's knowledge, his Shares are validly issued, fully
paid and nonassessable, with no personal liability attaching to the
ownership thereof. Such MMC Stockholder has good title to his Shares,
free and clear of any agreements, liens, adverse claims or encumbrances
whatsoever with respect to the ownership of or the right to vote such
Shares.
(b) Power; Binding Agreement. Such MMC Stockholder has the
legal capacity, power and authority to enter into and perform all of
its obligations under this Agreement. The execution, delivery and
performance of this Agreement by such MMC Stockholder will not violate
any other agreement to which such MMC Stockholder is a party including,
without limitation, any voting agreement, stockholders agreement or
voting trust. This Agreement has been duly and validly authorized,
executed and delivered by such MMC Stockholder and constitutes a valid
and binding agreement of such MMC Stockholder, enforceable against such
MMC Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) is subject to general principles
of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and
the Securities Act, (iii) the applicable requirements of state
securities, takeover or Blue Sky laws, (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by such MMC
Stockholder and the consummation by such MMC Stockholder of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by such MMC Stockholder nor the consummation
by such MMC Stockholder of the transactions contemplated hereby nor
compliance by such MMC Stockholder with any of the provisions hereof
shall (1) conflict with or result in any breach of any provision of the
certificate of incorporation, by-laws, trust or charitable instruments
(or similar documents) of such MMC Stockholder, (2) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
<PAGE>
4
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or
obligation to which such MMC Stockholder is a party or by which such
MMC Stockholder or any of his properties or assets may be bound or (3)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to such MMC Stockholder or any of his properties
or assets, except in the case of (2) or (3) for violations, breaches or
defaults which would not in the aggregate materially impair the ability
of such MMC Stockholder to perform his obligations hereunder.
3. Certain Covenants of each MMC Stockholder. Each MMC
Stockholder hereby covenants and agrees as follows:
3.1 No Solicitation. Such MMC Stockholder shall not,
directly or indirectly, solicit, encourage, participate in or initiate any
inquiries or the making of any proposal by any person or entity (other than
Parent or any affiliate of Parent) which constitutes, or may reasonably be
expected to lead to, (a) any sale of the Shares or (b) any acquisition or
purchase of a material portion of the Company's assets or any equity interest
in, or any merger, consolidation or business combination with, the Company.
If any MMC Stockholder receives an inquiry or proposal with respect to the
sale of Shares, then such MMC Stockholder shall promptly inform Parent of the
terms and conditions, if any, of such inquiry or proposal and the identity of
the person making it. Each MMC Stockholder will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
3.2 Restriction on Transfer, Proxies and
Non-Interference. Each MMC Stockholder hereby agrees, while this Agreement is
in effect, and except as contemplated hereby, not to (a) sell, transfer,
pledge, encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, pledge, encumbrance, assignment or other disposition of, any of his
Shares or (b) grant any proxies, deposit any of his Shares into a voting
trust or enter into a voting agreement with respect to any of his Shares or
(c) take any action that would make any representation or warranty of such
MMC Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such MMC Stockholder from performing his obligations
under this Agreement.
4. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate the transactions
contemplated by this Agreement.
5. Adjustments to Prevent Dilution, Etc. In the event of a
stock dividend or distribution, or any change in the Company Common Stock by
reason of any stock dividend, split-up, recapitalization, combination or the
exchange of shares, the term "Shares" shall be deemed to refer to and include
the Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be changed or
exchanged.
6. Indemnification.
<PAGE>
5
6.1 General Indemnification. Each MMC Stockholder
(collectively, the "Indemnifying Party"), jointly and severally, indemnifies,
defends and holds Parent, Purchaser and Surviving Corporation and their
respective directors, officers, employees and affiliates (collectively, the
"Indemnified Party") harmless from any and all liabilities, damages, expenses,
losses or other claims (including, without limitation, reasonable attorneys'
fees and expenses) ("Losses"), directly or indirectly, suffered or paid that
arise out of or relate to (i) the failure of any representation or warranty made
by (A) the Company under the Merger Agreement or (B) any MMC Stockholder
hereunder, in each case to be true and correct in all respects as of the date of
this Agreement and as of the Closing Date, (ii) any breach by (A) the Company of
any of its covenants or agreements contained in the Merger Agreement and (B) any
MMC Stockholder of any of its covenants or agreements contained herein, and
(iii) the Company's business, operations or conduct at any time on or prior to
the Closing Date, including, without limitation, any and all Taxes imposed on
the Company in respect of periods on or prior to the Closing Date; provided
that, the aggregate amount of the Holdback Amount (as defined in Section 1.6 of
the Merger Agreement) shall be applied to the payment of any Losses prior to any
recourse to any Indemnifying Party's indemnity hereunder.
6.2 Indemnification Procedures. If any indemnifiable
claim is asserted by any third party against or sought to be collected from
any Indemnified Party, such Indemnified Party shall promptly notify the
Indemnifying Party of such claim and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive
of the final amount of such claim); provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder
except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. The Indemnifying Party shall have 20
days after receipt of such notice to assume the conduct and control, through
counsel reasonably acceptable to the Indemnified Party and at the expense of
the Indemnifying Party, of the settlement or defense thereof; provided that
the Indemnifying Party shall permit the Indemnified Party to participate in
such settlement or defense through counsel chosen by the Indemnified Party so
long as the fees and expenses of such counsel are borne by the Indemnified
Party. So long as the Indemnifying Party is reasonably contesting any such
claim in good faith, the Indemnified Party shall not pay or settle any such
claim; provided that the Indemnified Party may pay or settle any such claim
if the Indemnified Party waives its right to indemnification hereunder in
respect of such claim. If the Indemnifying Party does not notify the
Indemnified Party within 20 days after the receipt of the Indemnified Party's
notice of a claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, pay
or settle the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement. The Indemnifying Party shall not, except
with the consent of the Indemnified Party, enter into any settlement that
does not include as an unconditional term thereof the unconditional release
of the Indemnified Party from all liability with respect to the related
claim. The obligations to indemnify and hold harmless pursuant to this
Section 6 shall survive the consummation of the transactions contemplated
hereby.
<PAGE>
6
7. Miscellaneous.
7.1 Entire Agreement; Assignment. This Agreement, together
with the Merger Agreement, (i) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) shall not be assigned by operation
of law or otherwise, provided that Parent may assign its rights and obligations
hereunder to any direct or indirect wholly owned parent company or subsidiary of
Parent, but no such assignment shall relieve Parent of its obligations hereunder
if such assignee does not perform such obligations.
7.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
7.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at (i) in the case of any MMC Stockholder, c/o Ivins Phillips
& Barker, 1700 Pennsylvania Avenue, Washington, D.C. 20006, and (ii) in the case
of Parent, the following address:
if to Parent:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James I. Freeman
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
7.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
<PAGE>
7
7.5 Cooperation as to Regulatory Matters. If so requested by
Parent, promptly after the date hereof, each MMC Stockholder will use its
reasonable best efforts to cause it and the Company (if required) to make all
filings which are required under the HSR Act and applicable requirements and to
seek all regulatory approvals required in connection with the transactions
contemplated hereby. The parties shall furnish to each other such necessary
information and reasonable assistance as may be requested in connection with the
preparation of filings and submissions to any governmental agency, including,
without limitation, filings under the provisions of the HSR Act. Each MMC
Stockholder shall also use its reasonable best efforts to cause the Company to
supply Parent with copies of all correspondence, filings or communications (or
memoranda setting forth the substance thereof) between the Company and its
representatives and the Federal Trade Commission, the Department of Justice and
any other governmental agency or authority and members of their respective
staffs with respect to this Agreement and the transactions contemplated hereby.
7.6 Termination. Except for the provisions of Section 6
which shall remain in effect indefinitely, this Agreement shall terminate on
the earlier of (i) the Effective Time or (ii) the termination of the Merger
Agreement in accordance with its terms.
7.7 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for money
damages, and therefore, each of the parties hereto agrees that in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
7.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same Agreement.
7.9 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
7.10 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
<PAGE>
8
IN WITNESS WHEREOF, Parent and each MMC Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
DILLARD'S, INC.
By: /s/ James I. Freeman
---------------------------------------
Name: James I. Freeman
Title: Chief Financial Officer
MMC STOCKHOLDERS (listed on next page)
<PAGE>
Woodbank Mills, Inc.
By: /s/ Roger Milliken
------------------
Name: Roger Milliken
Title: Chairman
as the holder of 139,000 shares
of the common stock,
par value $5.00 per share,
of Minot Mercantile Corporation
<PAGE>
/s/ Roger Milliken
------------------
Roger Milliken
/s/ Gerrish H. Milliken, Jr.
------------------------
Gerrish H. Milliken, Jr.
/s/ Minot K. Milliken
-----------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 32,646 shares of the common stock,
par value $5.00 per share,
of Minot Mercantile Corporation
<PAGE>
/s/ Roger Milliken
------------------
Roger Milliken
/s/ Gerrish H. Milliken, Jr.
------------------------
Gerrish H. Milliken, Jr.
as a majority of the trustees of trusts
holding 43,680 shares of the common stock,
par value $5.00 per share,
of Minot Mercantile Corporation
<PAGE>
/s/ Roger Milliken
------------------
Roger Milliken
/s/ Minot K. Milliken
-----------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 5,660 shares of the common stock,
par value $5.00 per share,
of Minot Mercantile Corporation
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of May
16, 1998, by and between Dillard's, Inc., a company organized under the laws of
Delaware ("Purchaser"), and each of the parties listed on the signature page
hereto (individually a "Seller" and collectively, the "Sellers").
RECITALS
Concurrently herewith, Purchaser, MSC Acquisitions, Inc., a
Delaware corporation and a wholly-owned subsidiary of Purchaser, and Mercantile
Stores Company (the "Company"), a Delaware corporation, are entering into an
Agreement and Plan of Merger of even date herewith attached hereto (the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which Sub agrees to
make a tender offer (the "Offer") for all outstanding shares of common stock,
$.14 2/3 par value per share (the "Common Stock"), of the Company, at $80 per
share (the "Offer Price"), net to the seller in cash, to be followed by a merger
(the "Merger") of Sub with and into the Company.
As a condition to their willingness to enter into the Merger
Agreement and make the Offer, Purchaser and Sub have required that each of the
Sellers agree, and each Seller has agreed, among other things, to grant to
Purchaser the Option and irrevocable proxy with respect to the number of shares
of Common Stock of such Seller set forth opposite such Seller's name on the
signature page hereto, together with any additional shares when and if they are
acquired (such shares, and any additional shares when and if they are acquired,
being referred to herein as the "Shares") on the terms and conditions provided
for herein.
The Board of Directors of the Company has approved the
Purchaser becoming an "interested shareholder" for purposes of Section 203 of
the Delaware General Corporation Law and for all purposed under Article Eighth
of the Company's Certificate of Incorporation.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Option to Purchase Shares.
1.1 Grant of Option. Each Seller hereby grants to Purchaser an
irrevocable option (the "Option") to purchase all of the Shares set forth below
such Seller's name on the signature page hereto at a purchase price of $80 per
share (the "Exercise
<PAGE>
2
Price") in cash (subject to adjustment pursuant to Section 7 below) for each
Share purchased.
1.2 Exercise of Option.
(a) Subject to applicable law (including Rule 10b-
13 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
the Option may be exercised by Purchaser, in whole or in part, at any time, or
from time to time, commencing upon the Exercise Date and prior to the Expiration
Date (as hereinafter defined). As used herein, the term "Exercise Date" means
the first to occur of any of the following dates:
(i) Seller fails to perform any agreement or covenant
of Seller contained herein in any material respect; or
(ii) the Merger Agreement is terminated and Purchaser
is entitled to the payment of a termination fee pursuant to any of the
provisions set forth in Section 8.3(a)(ii) of the Merger Agreement.
As used herein, the term "Expiration Date" means the first to
occur of any of the following dates:
(1) the Effective Time (as defined in the Merger
Agreement);
(2) 12 months after the date of the termination
of the Merger Agreement; or
(3) written notice of termination of this Agreement
by Purchaser to the Seller.
(b) In the event Purchaser wishes to exercise the Option,
Purchaser shall send a written notice to Seller of its intention to so exercise
the Option (a "Notice"), specifying the place, time and date of the closing of
such purchase (the "Closing"), which date shall not be less than two business
days nor more than five business days from the date on which a Notice is
delivered; provided, that the Closing shall be held only if such purchase would
not otherwise then violate or cause the violation of, any applicable law or
regulations (including, without limitation, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act")) or any decree, order or injunction of
any governmental agency, authority or court, whether temporary, preliminary or
permanent. If the Closing shall be violative of any such laws or rules or any
such decree, order or injunction, then such Notice shall be deemed rescinded and
of no effect and Purchaser shall send a new Notice at such time as the Closing
is not violative of such laws, rules, decrees, orders or injunctions.
Notwithstanding the occurrence of such rescission, this Agreement shall remain
in full force and effect.
<PAGE>
3
(c) At the Closing, Seller shall deliver to Purchaser all of
the Shares to be purchased by delivery of a certificate or certificates
evidencing such Shares so purchased by Purchaser duly endorsed or with executed
blank stock power attached, in either event with signature guaranteed such that
registered ownership of the Shares may be registered for transfer on the books
of the Company and Purchaser will make payment to Seller of the aggregate
Exercise Price for the Shares being purchased upon exercise of the Option in
immediately available funds in the amount equal to the Exercise Price multiplied
by the number of Shares purchased pursuant to this Section 1.
(d) Notwithstanding any of the foregoing, with respect to the
Shares held by Minot Mercantile Corporation and Woodbank Mills, Inc.
(collectively, the "C Corps"), Purchaser shall form an acquisition subsidiary to
acquire such Shares in the form of a merger pursuant to a form of merger
agreement reasonably acceptable to the parties, and each party will use its best
efforts to consummate the acquisition of such Shares pursuant to the Option by
merger.
2. Agreement to Tender. Each Seller hereby agrees to validly
tender pursuant to the Offer and not withdraw all Shares; provided, however, the
C Corps shall not be obligated to tender the Shares held by each of them because
such Shares will be acquired by Merger as contemplated by the Merger Agreement.
3. Irrevocable Proxy. Each Seller hereby irrevocably appoints
Purchaser or any designee of Purchaser the lawful agent, attorney and proxy of
such shareholder, during the term of this Agreement, to (a) vote the Shares in
favor adoption of the Merger Agreement; (b) vote the Shares against any action
or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement; and (c) vote the Shares against any action
or agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer, including, but not limited to: (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company and its subsidiaries; (ii) a sale or
transfer of a material amount of assets of the Company and its subsidiaries or a
reorganization, recapitalization or liquidation of the Company and its
subsidiaries; (iii) any change in the management or board of directors of the
Company, except as otherwise agreed to in writing by Purchaser; (iv) any
material change in the present capitalization or dividend policy of the Company;
or (v) any other material change in the Company's corporate structure or
business. Each Seller intends this proxy to be irrevocable and coupled with an
interest and will take such further action or execute such other instruments as
may be necessary to effectuate the intent of this proxy and hereby revokes any
proxy previously
<PAGE>
4
granted by it with respect to the Shares. Each Seller shall not hereafter,
unless and until this Agreement terminates pursuant to Section 8.6 hereof,
purport to vote (or execute a consent with respect to) such Shares (other than
through this irrevocable proxy) or grant any other proxy or power of attorney
with respect to any Shares, deposit any Shares into a voting trust or enter into
any agreement (other than this Agreement), arrangement or understanding with any
person, directly or indirectly, to vote, grant any proxy or give instructions
with respect to the voting of such Shares. Notwithstanding anything herein to
the contrary, the Sellers may transfer as charitable gifts up to an aggregate of
300,000 Shares.
4. Representations and Warranties.
4.1 Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to each Seller as follows:
(a) Due Authorization. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors
of Purchaser, and no other corporate proceedings on the part of
Purchaser are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Purchaser and constitutes a valid and
binding agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and
(ii) is subject to general principles of equity.
(b) No Conflicts. Except for (i) filings under the
HSR Act, if applicable, (ii) the applicable requirements of the
Exchange Act and the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the applicable requirements of state
securities, takeover or Blue Sky laws and (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated
hereby and (B) neither the execution and delivery of this Agreement by
Purchaser nor the consummation by Purchaser of the transactions
contemplated hereby nor compliance by Purchaser with any of the
provisions hereof shall (1) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws (or
similar documents) of
<PAGE>
5
Purchaser, (2) result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which Purchaser is a
party or by which it or any of its properties or assets may be bound or
(3) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser or any of its properties or assets,
except in the case of (2) or (3) for violations, breaches or defaults
which would not in the aggregate materially impair the ability of
Purchaser to perform its obligations hereunder.
(c) Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to execute
and deliver this Agreement.
4.2 Representations and Warranties of Sellers. Each Seller
hereby severally and not jointly represents and warrants to Purchaser as
follows:
(a) Ownership of Shares. Subject to Section 5.3, such Seller
is the owner of the Shares set forth below its name and has the power
to vote and dispose of such Shares. To Seller's knowledge, such Shares
are validly issued, fully paid and nonassessable, with no personal
liability attaching to the ownership thereof. Such Seller has good
title to the Shares, free and clear of any agreements, liens, adverse
claims or encumbrances whatsoever with respect to the ownership of or
the right to vote such Shares.
(b) Power; Binding Agreement. Such Seller has the legal
capacity, power and authority to enter into and perform all of its
obligations under this Agreement, except for the approval of the
holders of a majority of the stockholders of Minot Mercantile
Corporation is required with respect to their obligations under Section
1. The execution, delivery and performance of this Agreement by such
Seller will not violate any other agreement to which such Seller is a
party including, without limitation, any voting agreement, stockholders
agreement or voting trust. This Agreement has been duly and validly
authorized, executed and delivered by such Seller and constitutes a
valid and binding agreement of such Seller, enforceable against such
Seller in accordance with its terms, except that such enforceability
(i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or
<PAGE>
6
relating to enforcement of creditors' rights generally and (ii) is
subject to general principles of equity.
(c) No Conflicts. Except for (i) filings under the HSR Act,
if applicable, (ii) the applicable requirements of the Exchange Act
and the Securities Act, (iii) the applicable requirements of state
securities, takeover or Blue Sky laws, (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or
authority is necessary for the execution of this Agreement by such
Seller and the consummation by such Seller of the transactions
contemplated hereby and (B) neither the execution and delivery of this
Agreement by such Seller nor the consummation by such Seller of the
transactions contemplated hereby nor compliance by such Seller with any
of the provisions hereof shall (1) conflict with or result in any
breach of any provision of the certificate of incorporation, by-laws,
trust or charitable instruments (or similar documents) of such Seller,
(2) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which such Seller is a party or by which he
or any of his properties or assets may be bound or (3) violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to such Seller or any of his properties or assets, except in the case
of (2) or (3) for violations, breaches or defaults which would not in
the aggregate materially impair the ability of such Seller to perform
his obligations hereunder.
5. Certain Covenants of Sellers. Each Seller hereby covenants
and agrees as follows:
5.1 No Solicitation. Such Seller shall not, directly or
indirectly, solicit, encourage, participate in or initiate any inquiries or the
making of any proposal by any person or entity (other than Purchaser or any
affiliate of Purchaser) which constitutes, or may reasonably be expected to lead
to, (a) any sale of the Shares or (b) any acquisition or purchase of a material
portion of the Company's assets or any equity interest in, or any merger,
consolidation or business combination with, the Company or any of its
subsidiaries. If such Seller receives an inquiry or proposal with respect to the
sale of Shares, then such Seller shall promptly inform Purchaser of the terms
and conditions, if any, of such inquiry or proposal and the identity of the
person making it. Each Seller will immediately cease and cause to be terminated
any existing activities, discussions or
<PAGE>
7
negotiations with any parties conducted heretofore with respect
to any of the foregoing.
5.2 Restriction on Transfer, Proxies and NonInterference.
Each Seller hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to (a) sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares or (b) grant any proxies,
deposit any Shares into a voting trust or enter into a voting agreement with
respect to any Shares or (c) take any action that would make any representation
or warranty of such Seller contained herein untrue or incorrect or have the
effect of preventing or disabling such Seller from performing his obligations
under this Agreement.
5.3 Legending of Certificates; Nominees Shares. If requested
by Purchaser, each Seller agrees to submit to Purchaser contemporaneously with
or promptly following execution of this Agreement all certificates representing
the Shares so that Purchaser may note thereon a legend referring to the option,
proxy and other rights granted to it by this Agreement. If any of the Shares
beneficially owned by such Seller are held of record by a brokerage firm in
"street name" or in the name of any other nominee (a "Nominee," and, as to such
Shares, "Nominee Shares"), each Seller agrees that, upon written notice by
Purchaser requesting it, such Seller will within five days of the giving of such
notice execute and deliver to Purchaser a limited power of attorney in such form
as shall be reasonably satisfactory to Purchaser enabling Purchaser to require
the Nominee to (i) grant to Purchaser an option and irrevocable proxy to the
same effect as Sections 1 and 3 hereof with respect to the Nominee Shares held
by such Nominee, (ii) tender such Nominee Shares in the Offer pursuant to
Section 2 hereof and (iii) submit to Purchaser the certificates representing
such Nominee Shares for notation of the above-referenced legend thereon.
5.4 Stop Transfer Order. In furtherance of this Agreement,
concurrently herewith, each Seller shall and hereby does authorize the Company's
counsel to notify the Company's transfer agent that there is a stop transfer
order with respect to all of the Shares (and that this Agreement places limits
on the voting and transfer of such shares).
6. Further Assurances. From time to time, at the other
party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate the transactions
contemplated by this Agreement, including, without limitation, to vest in
Purchaser good title to any Shares purchased hereunder.
<PAGE>
8
7. Adjustments to Prevent Dilution, Etc. In the event of a
stock dividend or distribution, or any change in the Company's Common Stock by
reason of any stock dividend, split-up, reclassification, recapitalization,
combination or the exchange of shares, the term "Shares" shall be deemed to
refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged. In such event, the amount to be paid per share by
Purchaser shall be proportionately adjusted.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) shall not be assigned by operation of law or otherwise, provided that
Purchaser may assign its rights and obligations hereunder to any direct or
indirect wholly owned parent company or subsidiary of Purchaser, but no such
assignment shall relieve Purchaser of its obligations hereunder if such assignee
does not perform such obligations.
8.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the
Sellers: c/o Ivins Phillips & Barker
1700 Pennsylvania Avenue
Washington, D.C. 20006
If to Purchaser:
Dillard's, Inc.
1600 Cantrell Road
Little Rock, Arkansas 72201
Attention: James Freeman
copy to: Simpson Thacher & Bartlett
<PAGE>
9
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
8.5 Cooperation as to Regulatory Matters. If so requested by
Purchaser, promptly after the date hereof, the Seller will use its reasonable
best efforts to cause it and the Company (if required) to make all filings which
are required under the HSR Act and applicable requirements and to seek all
regulatory approvals required in connection with the transactions contemplated
hereby. The parties shall furnish to each other such necessary information and
reasonable assistance as may be requested in connection with the preparation of
filings and submissions to any governmental agency, including, without
limitation, filings under the provisions of the HSR Act. The Seller shall also
use its reasonable best efforts to cause the Company to supply Purchaser with
copies of all correspondence, filings or communications (or memoranda setting
forth the substance thereof) between the Company and its representatives and the
Federal Trade Commission, the Department of Justice and any other governmental
agency or authority and members of their respective staffs with respect to this
Agreement and the transactions contemplated hereby.
8.6 Termination. Except for the provisions of Sections 1 and
5.2 which shall expire on the Expiration Date, this Agreement shall terminate on
the earlier of (i) the Effective Time or (ii) the termination of the Merger
Agreement in accordance with its terms.
8.7 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore, each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
8.8 Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an
<PAGE>
10
original, but both of which shall constitute one and the same
Agreement.
8.9 Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
8.10 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
<PAGE>
11
IN WITNESS WHEREOF, the Sellers and Purchaser have caused this
Agreement to be duly executed as of the day and year first above written.
DILLARD'S, INC.
By: /s/ James I. Freeman
-------------------------------
Name: James I. Freeman
Title: Senior Vice President and
Chief Financial Officer
[The Sellers listed on the attached signature pages]
<PAGE>
/s/ Roger Milliken
- -------------------------------
Roger Milliken
Wilmington Trust Company
By: /s/ Carol M. Drummond
-------------------------------
Name: Carol M. Drummond
Title: Assistant Vice President
as the trustees of trusts
holding 2,120,485
shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
Wilmington Trust Company
By: /s/ Carol M. Drummond
-------------------------------
Name: Carol M. Drummond
Title: Assistant Vice President
as the trustee of trusts holding
1,654,311 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Justine VR. Milliken
- -------------------------------
Justine VR. Milliken
/s/ Minot K. Milliken
- -------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 27,645 shares of the common stock,
par value of $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Justine VR. Milliken
- -------------------------------
Justine VR. Milliken
/s/ Gerrish H. Milliken, Jr.
- -------------------------------
Gerrish H. Milliken, Jr.
/s/ Minot K. Milliken
- -------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 25,065 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
Woodbank Mills, Inc.
By: /s/ Roger Milliken
-------------------------------
Name: Roger Milliken
Title: Chairman
as the holder of 27,413 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
Minot Mercantile Corporation
By: /s/ Roger Milliken
-------------------------------
Name: Roger Milliken
Title: Chairman
as the holder of 10,484,875 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Roger Milliken
- -------------------------------
Roger Milliken
/s/ Gerrish H. Milliken, Jr.
- -------------------------------
Gerrish H. Milliken, Jr.
as a majority of the trustees of trusts holding
56,848 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Roger Milliken
- -------------------------------
Roger Milliken
/s/ Gerrish H. Milliken, Jr.
- -------------------------------
Gerrish H. Milliken, Jr.
/s/ Minot K. Milliken
- -------------------------------
Minot K. Milliken
as a majority of the trustees of trusts holding
258,178 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Roger Milliken
- -------------------------------
Roger Milliken
/s/ Minot K. Milliken
- -------------------------------
Minot K. Milliken
as a majority of the trustees of trusts holding
22,104 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
<PAGE>
/s/ Gerrish H. Milliken, Jr.
- -------------------------------
Gerrish H. Milliken, Jr.
/s/ Minot K. Milliken
- -------------------------------
Minot K. Milliken
as a majority of the trustees of trusts
holding 32,419 shares of the common stock,
par value $.14 2/3 per share,
of Mercantile Stores Company, Inc.
