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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
THE MAY DEPARTMENT STORES COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 5311 43-1104396
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
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611 OLIVE STREET
ST. LOUIS, MISSOURI 63101-1799
(314) 342-6300
(Address, including zip code, and telephone number including area code,
of registrant's principal executive offices)
--------------------------
RICHARD A. BRICKSON, ESQ.
THE MAY DEPARTMENT STORES COMPANY
611 OLIVE STREET
ST. LOUIS, MISSOURI 63101-1799
(314) 342-6423
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS TO:
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J. MICHAEL SCHELL, ESQ. REED W. TOPHAM, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP STOEL RIVES LLP
919 THIRD AVENUE 201 SOUTH MAIN STREET, SUITE 1100
NEW YORK, NY 10022-3897 SALT LAKE CITY, UT 84111-4904
(212) 735-3000 (801) 328-3131
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER UNIT OFFERING PRICE (2) FEE
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Common Stock, par value $.50 per share Not applicable Not applicable $46,016,691 $12,792.64 (2)
Preferred Stock Purchase Rights (3) Not applicable Not applicable Not applicable Not applicable
</TABLE>
(1) Pursuant to Rule 457(o), only the title of the class of securities to be
registered, the proposed maximum aggregate offering price for such class of
securities and the amount of registration fee need appear in the
"Calculation of Registration Fee" table.
(2) Estimated solely for purposes of calculating the registration fee required
by Section 6(b) of the Securities Act. Pursuant to Rule 457(f)(1) and (c),
the registration fee has been calculated based on a price of $19.813 per
share of Zions Co-operative Mercantile Institution ("ZCMI") common stock
(the average of the bid and asked price as of November 23, 1999 in the
over-the-counter market), and the maximum number of shares of such stock
that may be outstanding immediately prior to the merger, assuming conversion
of all outstanding options (2,322,609 shares). Pursuant to Rule 457(b),
$9,232.37 of the registration fee was paid on November 18, 1999 in
connection with the filing of preliminary proxy statement/prospectus
materials.
(3) Associated with the common stock of The May Department Stores Company are
rights to purchase preferred stock that will not be exercisable or evidenced
separately from such common stock prior to the occurrence of certain events.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
2200 SOUTH 900 WEST
SALT LAKE CITY, UTAH 84137
PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED
Dear ZCMI Shareholder:
As most of you are aware, Zions Co-operative Mercantile Institution ("ZCMI")
has agreed to merge with The May Department Stores Company ("May"). Following
the merger, ZCMI will be a wholly owned subsidiary of May.
You will receive a fraction of a share of May common stock equal to
approximately $22.50 for each share of ZCMI common stock that you own unless you
exercise your right to dissent from the merger and receive the fair value in
cash of your ZCMI shares. The exact number of shares of May common stock you
receive will be determined by dividing $22.50 by May's average stock price
during a ten day period before the merger's closing date and multiplying that
fraction by the number of ZCMI shares that you own.
As described in this proxy statement/prospectus, you may vote upon the
proposed merger of ZCMI with May at a special meeting of ZCMI shareholders to be
held on December 30, 1999. The approval of the merger requires the affirmative
vote of holders of at least a majority of the outstanding shares of ZCMI common
stock. After careful consideration, the board of directors of ZCMI has
determined that the terms of the merger agreement are fair to, and in the best
interests of, ZCMI shareholders, and the board of directors unanimously
recommends voting FOR approval of the merger agreement.
Three shareholders of ZCMI, who collectively control approximately 56.8% of
the outstanding shares of ZCMI common stock, have entered into shareowner
agreements with May. These shareholders have advised ZCMI that they intend to
vote for the approval of the merger agreement. Assuming approval by these
shareholders, approval of the merger is assured without the vote of any other
ZCMI shareholder.
All shareholders are cordially invited to attend the special meeting in
person. However, whether or not you plan to attend the special meeting, please
complete, sign and date the accompanying proxy card and return it promptly in
the enclosed postage-prepaid envelope. Failure to return a properly executed
proxy card or to vote at the special meeting has the same effect as a vote
against the merger.
This document is a proxy statement for ZCMI in connection with soliciting
proxies for the special meeting of shareholders. This document is also a
prospectus of May relating to the issuance of shares of May common stock in
connection with the merger. This document gives you detailed information about
the merger and includes the merger agreement.
Richard H. Madsen
Chairman, President and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved the merger described in this proxy statement/prospectus
or the securities to be issued in the merger, nor have they passed upon the
adequacy or accuracy of this proxy statement/prospectus. Furthermore, the
Securities and Exchange Commission has not determined the fairness or merits of
the merger. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated December 1, 1999, and is first
being mailed to shareholders on December 1, 1999.
<PAGE>
This document incorporates important business and financial information about
our companies from documents that we have filed with the SEC but have not
included in or delivered with this document. If you write or call us, we will
send you these documents, including exhibits, without charge. You can contact us
at:
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Zions Co-operative Mercantile Institution The May Department Stores Company
2200 South 900 West 611 Olive Street
Salt Lake City, Utah 84137 St. Louis, Missouri 63101
Telephone: (801) 579-6404 Telephone: (314) 342-6300
Attention: Chief Financial Officer Attention: Corporate Communications
Website: www.mayco.com
</TABLE>
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS, YOU MUST REQUEST
INFORMATION NO LATER THAN DECEMBER 22, 1999. IF YOU REQUEST ANY INCORPORATED
DOCUMENTS, WE WILL MAIL THEM TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY
PROMPT MEANS, BY THE NEXT BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
SEE "WHERE YOU CAN FIND MORE INFORMATION" FOR MORE INFORMATION ABOUT THE
DOCUMENTS REFERRED TO IN THIS DOCUMENT.
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 30, 1999
To the Shareholders of Zions Co-operative Mercantile Institution:
Zions Co-operative Mercantile Institution ("ZCMI") will hold a Special
Meeting of its shareholders on December 30, 1999 at 10:00 a.m., local time, at
the ZCMI Service Center, 2200 South 900 West, Salt Lake City, Utah for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 14, 1999, among ZCMI, The May
Department Stores Company ("May"), and MS Acquisition, Inc., a Utah
corporation and wholly-owned subsidiary of May, pursuant to which MS
Acquisition will be merged with and into ZCMI, with ZCMI surviving the
merger as a wholly-owned subsidiary of May; and
2. To transact such other matters as may properly come before the special
meeting or any postponement or adjournment thereof.
Notwithstanding approval by the shareholders of the foregoing proposal, ZCMI
reserves the right to abandon the merger at any time prior to the consummation
of the merger upon the terms and subject to the conditions of the merger
agreement.
The board of directors of ZCMI has fixed the close of business on
November 26, 1999, as the record date for the determination of shareholders
entitled to notice of and to vote at the special meeting, and only shareholders
of record at such time will be entitled to notice of and to vote at the special
meeting.
A form of proxy and a proxy statement/prospectus containing more detailed
information with respect to the matters to be considered at the special meeting
accompany this notice.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF ZCMI. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Under Utah law, shareholders will be entitled to dissenters' rights in
connection with the merger.
We cordially invite you and urge you to attend the special meeting in
person. If you attend the special meeting and desire to revoke your proxy and
vote in person, you may do so. In any event, you may revoke a proxy at any time
before the voting closes.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING
SOLICITED BY THE BOARD OF DIRECTORS, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING. YOU MAY USE THE ADDRESSED RETURN ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES FOR THAT PURPOSE.
By Order of the Board of Directors,
Keith C. Saunders
Executive Vice President and Secretary
Salt Lake City, Utah
December 1, 1999
<PAGE>
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER........................................... 1
SUMMARY.......................................................................... 3
The Companies.................................................................. 3
The ZCMI Special Shareholders' Meeting......................................... 3
Shareowner Agreements.......................................................... 4
Appraisal Rights for Dissenting Shareholders................................... 4
The Merger..................................................................... 4
The Merger Agreement........................................................... 6
Comparative Rights of Owners of ZCMI Common Stock and May Common Stock......... 7
May Selected Historical Financial Information.................................. 8
ZCMI Selected Historical Financial Information................................. 10
Comparative Per Share Data..................................................... 11
Comparative Market Price Data.................................................. 12
RISK FACTORS..................................................................... 13
May faces competition in the retail industry................................... 13
May's expansion depends on its ability to successfully acquire or build new
stores and remodel and/or expand existing stores............................. 13
May's sales and operating results depend on consumer preferences and fashion
trends....................................................................... 13
May faces potential Year 2000 issues........................................... 13
THE ZCMI SPECIAL SHAREHOLDERS' MEETING........................................... 14
Time and Place; Purposes....................................................... 14
Record Date; Voting Rights; Votes Required for Approval........................ 14
Principal Shareholders......................................................... 15
Proxies........................................................................ 15
Solicitation of Proxies........................................................ 16
Other Business; Adjournments................................................... 16
THE MERGER....................................................................... 17
General........................................................................ 17
Background of the Merger....................................................... 17
ZCMI's Reasons for the Merger.................................................. 20
Recommendation of the Board of Directors of ZCMI............................... 21
Opinion of Financial Advisor to the Board of Directors of ZCMI................. 21
Interests of Certain Persons in the Merger..................................... 25
Accounting Treatment........................................................... 26
Certain Federal Income Tax Consequences of the Merger.......................... 26
Certain Regulatory Matters..................................................... 28
Restrictions on Resales of May Common Stock by Affiliates of ZCMI.............. 29
THE MERGER AGREEMENT............................................................. 32
General........................................................................ 32
Merger Consideration........................................................... 32
Treatment of ZCMI Stock Options and Restricted Shares.......................... 32
Exchange of Shares............................................................. 32
Rights of Dissenting Shareowners............................................... 33
Certain Covenants.............................................................. 33
No Solicitations............................................................... 33
Additional Agreements.......................................................... 34
Employee Matters and Benefit Plans............................................. 34
Representations and Warranties................................................. 35
Conditions to Obligations...................................................... 35
Election....................................................................... 36
Termination of Merger Agreement................................................ 37
</TABLE>
<PAGE>
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Other Expenses................................................................. 38
Amendments, Extension; Waiver.................................................. 38
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS...................................... 39
THE SHAREOWNER AGREEMENTS........................................................ 41
General........................................................................ 41
Restrictions on Transfer and Encumbrances...................................... 41
No Proxy Solicitations......................................................... 41
Termination.................................................................... 41
Special Provisions in ZCMI Reserve Trust Shareowner Agreement.................. 41
DESCRIPTION OF MAY CAPITAL STOCK................................................. 43
May Common Stock............................................................... 43
May Preferred Stock............................................................ 43
COMPARISON OF RIGHTS OF SHAREOWNERS OF MAY AND SHAREHOLDERS OF ZCMI..............
47
General........................................................................ 47
Charter Amendments............................................................. 47
Amendments to Bylaws........................................................... 47
Dividend Rights................................................................ 47
Size and Classification of Directors........................................... 48
Removal of Directors........................................................... 48
Liability of Directors......................................................... 48
Indemnification of Directors and Officers...................................... 49
Fiduciary Duties of Directors.................................................. 50
Special Meetings............................................................... 51
Action by Shareowners Without a Meeting........................................ 51
Shareowner Proposals........................................................... 51
Mergers and Major Transactions................................................. 52
Dissenters' Rights of Appraisal................................................ 53
Anti-takeover Provisions....................................................... 54
Dissolution.................................................................... 55
Rights Agreements.............................................................. 55
Preemptive, Subscription or Redemption Rights.................................. 55
LEGAL MATTERS.................................................................... 56
EXPERTS.......................................................................... 56
WHERE YOU CAN FIND MORE INFORMATION.............................................. 57
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS........................ 58
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ANNEXES
Annex I Agreement and Plan of Merger
Annex II Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
Annex III Amended and Restated Shareowner Agreement with ZCMI Reserve
Trust
Annex IV Amended and Restated Shareowner Agreement with Patricia
Madsen
Annex V Amended and Restated Shareowner Agreement with Richard
Madsen
Annex VI Sections 16-10A-1301 to 16-10A-1331 of the Utah Revised
Business Corporation Act
</TABLE>
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers provide brief answers to frequently
asked questions about the proposed merger. They may not address all of your
questions. You should carefully read the "Summary" section and the rest of this
document as well as the Annexes and the documents incorporated by reference.
Q: WHY ARE MAY AND ZCMI PROPOSING TO MERGE?
A: Our companies propose to merge because we believe the combination will
provide benefits to our shareholders, customers and employees. We believe
that by combining the companies we can create a stronger company that will be
able to remain competitive in the retail industry.
Q: WHAT WILL I RECEIVE FOR MY ZCMI COMMON STOCK?
A: For each share of ZCMI common stock that you own, you will receive a fraction
of a share of May common stock equal to approximately $22.50.
Q: HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF MAY COMMON STOCK THAT I
RECEIVE?
A: First, we will divide $22.50 by the arithmetic average of the high and low
trading prices of the May stock on the New York Stock Exchange during the
12(th) through 3(rd) trading days before the day on which the merger is
completed. Then, we will multiply that fraction by the number of ZCMI shares
that you own to determine the number of shares of May common stock you will
receive.
Q: WILL THE VALUE OF THE MERGER CONSIDERATION CHANGE?
A: No. When we complete the merger, you will receive approximately $22.50 worth
of May common stock as described above for each share of ZCMI common stock
that you own. However, the value of the May common stock you receive will
fluctuate with the market price for May common stock.
Q: WHEN AND WHERE IS THE SHAREHOLDERS' MEETING?
A: The ZCMI shareholders' meeting will take place at 10:00 a.m. on December 30,
1999 at the ZCMI Service Center, 2200 South 900 West, Salt Lake City, Utah.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want the proxies to vote your
shares, then sign and mail it in the enclosed prepaid return envelope as soon
as possible so that your shares will be represented at the shareholders'
meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Yes, but only if you provide your broker with instructions on how to vote.
You should therefore be sure to provide your broker with instructions on how
to vote your shares.
Q: WHAT SHOULD I DO IF I WANT TO CHANGE MY VOTE?
A: There are three ways for you to change your vote:
- you may send a written notice to ZCMI's Secretary at the address listed
below stating that you would like to revoke your proxy;
- you may complete and submit a new proxy card; or
- you may vote in person at the special meeting.
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Q: AM I ENTITLED TO DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER?
A: Yes. The procedures you need to follow if you wish to exercise your
dissenters' rights are described on page 39.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. When we complete the merger, May will send you written instructions for
exchanging your ZCMI stock certificates for May stock certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We hope to complete the merger by December 31, 1999.
Q: WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE MEETING OR THE MERGER?
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A: Zions Co-operative Mercantile Institution The May Department Stores Company
2200 South 900 West 611 Olive Street
Salt Lake City, Utah 84137 St. Louis, Missouri 63101
Attention: Keith C. Saunders Attention: Jan R. Kniffen
Telephone: (801) 579-6404 Telephone: (314) 342-6413
</TABLE>
2
<PAGE>
SUMMARY
This summary highlights selected information from this document. It may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should carefully read this document and the documents to which we
have referred you. See "Where You Can Find More Information."
THE COMPANIES
THE MAY DEPARTMENT STORES COMPANY
611 Olive Street
St. Louis, Missouri 63101-1799
(314) 342-6300
May is one of the nation's largest retailing companies, operating 405
department stores in 33 states and the District of Columbia. May's department
store divisions and their headquarters are Lord & Taylor in New York City;
Hecht's in Washington, D.C., which also operates as Strawbridge's in
Philadelphia; Foley's in Houston; Robinsons-May in Los Angeles; Kaufmann's in
Pittsburgh; Filene's in Boston; Famous-Barr in St. Louis, which also operates as
L.S. Ayres in Indianapolis and The Jones Store in Kansas City; and Meier & Frank
in Portland, Oregon. When we complete the merger, the ZCMI stores will operate
as part of the Meier & Frank division, initially under the name "ZCMI" or a
combination of the names "ZCMI" and "Meier & Frank" and, within two years of the
merger, under the name "Meier & Frank."
May is organized under the laws of the State of Delaware. As of October 30,
1999, May employed approximately 127,000 people in the United States and eight
offices overseas.
ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
2200 South 900 West
Salt Lake City, Utah 84137
(801) 579-6000
ZCMI operates 14 stores in the States of Utah and Idaho. Its department
stores are located in the cities of Salt Lake City, Ogden, Orem, Layton, Logan,
Sandy and St. George in Utah and Idaho Falls and Chubbuck in Idaho.
ZCMI is organized under the laws of the State of Utah. As of October 30,
1999, ZCMI employed approximately 3,500 employees in Utah and Idaho.
THE ZCMI SPECIAL SHAREHOLDERS' MEETING (SEE PAGE 14)
The special meeting of ZCMI shareholders will be held on December 30, 1999
at 10:00 a.m., local time, at the ZCMI Service Center, 2200 South 900 West, Salt
Lake City, Utah. The record date for the special meeting is November 26, 1999.
On the record date, there were 2,244,441 shares of ZCMI common stock
entitled to vote at the special meeting. ZCMI shareholders may cast one vote for
each share of ZCMI common stock they own on the record date.
Approval of the merger agreement and the transactions contemplated thereby
requires that a majority of the outstanding shares of ZCMI common stock vote in
favor of the merger proposal. Three ZCMI shareholders, who collectively control
approximately 56.8% of the outstanding shares of ZCMI common stock have entered
into shareowner agreements with May. These shareholders have advised
3
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ZCMI that they intend to vote for approval of the merger agreement. Assuming
approval by these shareholders, approval of the merger is assured without the
vote of any other ZCMI shareholders.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
As of the record date,
- ZCMI Reserve Trust, a charitable trust of The Church of Jesus Christ of
Latter-day Saints, 50 East North Temple, Salt Lake City, Utah 84150,
beneficially owned an aggregate of at least 1,176,599 shares of ZCMI
common stock (approximately 52.4% of the outstanding ZCMI common stock);
- the directors and officers of ZCMI and their affiliates beneficially owned
an aggregate of 188,444 shares (excluding shares purchasable upon exercise
of stock options) of ZCMI common stock (approximately 8.4% of the
outstanding ZCMI common stock); and
- the ZCMI Trust, a Utah grantor trust, 35 Century Park-Way, Salt Lake City,
Utah 84115, beneficially owned an aggregate of 113,785 shares of ZCMI
common stock (approximately 5.1% of the outstanding ZCMI common stock).
These shares were transferred to the ZCMI Trust by John Price on
September 15, 1999 for the benefit of the trust's named beneficiaries.
SHAREOWNER AGREEMENTS (SEE PAGE 41)
Three shareholders have entered into shareowner agreements with May. These
shareholders own approximately 56.8% of the outstanding ZCMI common stock.
Pursuant to the agreements, each shareholder agreed not to transfer or otherwise
dispose of their shares and not to solicit proxies to approve a transaction with
an entity other than May. In addition, these shareholders have advised ZCMI that
they intend to vote for the approval of the merger agreement.
APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS (SEE PAGE 39)
Under Utah law, ZCMI shareholders may dissent from the merger and have the
fair value of their shares paid to them in cash. To exercise this right, ZCMI
shareholders must follow certain specified procedures. These procedures include
filing notices with ZCMI and not voting in favor of the merger. For more
information on how to exercise these rights, see "Appraisal Rights of Dissenting
Shareholders" and Annex VI to this document.
THE MERGER (SEE PAGE 17)
Annex I to this proxy statement/prospectus sets forth the full merger
agreement. We encourage you to read the merger agreement, as it is the legal
document that governs the merger.
GENERAL
The merger agreement provides that a wholly owned subsidiary of May will
merge with and into ZCMI, and ZCMI will become a wholly owned subsidiary of May.
ZCMI'S REASONS FOR THE MERGER; RECOMMENDATION OF ZCMI'S BOARD OF DIRECTORS
ZCMI proposes merging with May because ZCMI believes that the two companies
combined will create a stronger company to compete in the retail industry. ZCMI
believes the merger will enable ZCMI and May to take advantage of the strategic
fit of the two businesses and will help achieve cost savings which will create
benefits for shareholders, customers, and employees. By receiving shares of May
common stock in the merger, you will have the opportunity to participate in
these long-term
4
<PAGE>
benefits. To review the background and reasons for the merger in greater detail,
please see "The Merger--ZCMI's Reasons for the Merger."
The ZCMI board of directors has determined that the terms of the merger
agreement are fair to, and in the best interests of, ZCMI shareholders. The
board of directors unanimously recommends that you vote "FOR" the approval and
adoption of the merger agreement.
OPINION OF FINANCIAL ADVISOR TO THE ZCMI BOARD OF DIRECTORS
On October 14, 1999, Donaldson, Lufkin & Jenrette Securities Corporation
delivered its written opinion to the ZCMI board of directors. The opinion states
that, based on the assumptions set forth in the opinion, the merger
consideration to be received by ZCMI shareholders, other than shareholders who
are affiliates of ZCMI, pursuant to the merger agreement is fair to those ZCMI
shareholders from a financial point of view. The opinion is attached as Annex II
to this document. You should read the opinion carefully.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
You should be aware that a number of ZCMI officers and directors have
interests in the merger that are different from, or in addition to, yours and
other shareholders. For example:
- each outstanding stock option and each share of restricted stock owned by
ZCMI executives will be converted into the right to receive cash;
- ten key executives (two of whom are also directors and one of whom was a
director until November 26, 1999) have entered into employment agreements
with May;
- five of these key executives have also entered into consulting contracts
with May that become effective following the expiration of their
employment agreements;
- following the merger, May will continue ZCMI's practice of indemnifying
and providing liability insurance to the ZCMI officers and directors; and
- following the merger, May will continue ZCMI's practice of providing
certain medical benefits and discounts on merchandise for certain
officers.
The ZCMI board of directors was aware of these additional interests, and
considered them, when it approved the merger agreement and the merger. See "The
Merger--Interests of Certain Persons in the Merger."
ACCOUNTING TREATMENT
May will account for the merger as a purchase of ZCMI for accounting and
financial reporting purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
May and ZCMI expect that the merger will qualify as a tax-free
reorganization. If the merger qualifies as a tax-free reorganization, ZCMI
shareholders will not recognize any gain or loss for federal income tax purposes
upon the exchange of their ZCMI common stock for May common stock, except with
respect to any cash received in lieu of a fractional share of May common stock.
Any ZCMI shareholder who dissents from the merger and who receives cash in
exchange for his or her ZCMI common stock generally will be treated as if the
shareholder sold the shares in a taxable transaction. In addition, if ZCMI
shareholders holding more than approximately 18% of the outstanding ZCMI common
stock dissent from the merger, the merger will not qualify as a tax-free
reorganization.
5
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CERTAIN REGULATORY MATTERS
Pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, May and ZCMI each filed a Notification and Report Form in connection
with the merger with the Antitrust Division of the Department of Justice and the
Federal Trade Commission. The FTC granted early termination of the waiting
period on November 5, 1999. Even though the waiting period has terminated, at
any time before or after the merger is completed, the Antitrust Division or the
FTC could take action under the antitrust laws, including seeking to enjoin the
merger or seeking a sale of assets or businesses of either May or ZCMI.
RESTRICTIONS ON RESALES OF MAY COMMON STOCK BY AFFILIATES OF ZCMI
The federal securities laws impose restrictions on the resale of shares of
May common stock received in the merger by persons who are affiliates of ZCMI.
THE MERGER AGREEMENT (SEE PAGE 32)
WHAT ZCMI SHAREHOLDERS WILL RECEIVE
For each share of ZCMI common stock that you own on the closing date of the
merger, you will receive a fraction of a share of May common stock equal to
approximately $22.50. We will determine the exact number of shares of May common
stock you will receive by dividing $22.50 by the arithmetic average of the high
and low trading prices of May common stock on the NYSE during the 12(th) through
3(rd) trading days preceding the merger's closing date and multiplying that
fraction by the number of ZCMI shares that you own. May will not issue any
fractional shares. Instead, you will receive cash for your fractional share of
May common stock.
You should not send in your stock certificates for exchange until May
instructs you to do so after we complete the merger.
OWNERSHIP OF MAY AFTER THE MERGER
Based on the current market price of May common stock, May expects to issue
approximately 1,485,000 shares of May common stock to ZCMI shareholders in the
merger. These shares will represent less than one-half of 1% of the May common
stock outstanding after the merger. This information is based on the number of
shares of May common stock and ZCMI common stock outstanding on the record date
and assumes that the applicable price of May common stock will be $34.
CONDITIONS TO THE MERGER
The completion of the merger depends upon a number of conditions, including
the following:
- there being no law or court order that prohibits the merger;
- approval of the merger agreement by ZCMI's shareholders;
- the absence of a material adverse change applicable to ZCMI or May; and
- the accuracy of each party's representations and warranties, and
compliance by each party with its covenants, contained in the merger
agreement.
Where the law permits, any of the conditions to the merger may be waived by
the company entitled to assert the condition. We cannot be certain when (or if)
the conditions to the merger will be satisfied or waived, or that the merger
will be completed. However, pursuant to the election described below, May has
irrevocably waived its conditions to complete the merger, other than the absence
of any law or court order prohibiting the merger.
6
<PAGE>
ELECTION
The merger agreement permits May to take control of all operations of ZCMI
prior to the closing date of the merger by electing to irrevocably waive
substantially all of the conditions of May's obligations to complete the merger.
This election became effective automatically on November 5, 1999, when the FTC
granted early termination of the HSR waiting period. Once the election became
effective, ZCMI and May took steps to add representatives of May to the board of
directors of ZCMI. This process was completed on November 26, 1999. May
representatives now comprise a majority of ZCMI's board of directors.
TERMINATION OF THE MERGER AGREEMENT
May and ZCMI can agree at any time to terminate the merger agreement without
completing the merger, even if the ZCMI shareholders have approved it. Also,
ZCMI can terminate the merger agreement if any of the following occurs:
- ZCMI shareholders do not approve the merger;
- any governmental entity issues any final and non-appealable statute,
order, decree, or regulation preventing the merger;
- May breaches the merger agreement (and does not correct the breach
promptly) in a way that would entitle ZCMI to not complete the merger, as
long as ZCMI has not materially breached the merger agreement; or
- the merger is not completed by January 31, 2000, unless the failure to
complete the merger by that time is due to a violation of the merger
agreement by ZCMI.
TERMINATION FEE
If ZCMI terminates the merger agreement because May materially breaches the
agreement, May must pay ZCMI a termination fee of $3 million in cash and ZCMI
will have all other remedies available at law or in equity. Prior to the
election by May described above, May had the right to terminate the merger
agreement in the event of a breach by ZCMI of certain provisions and to receive
the payment of a termination fee of $3 million in cash from ZCMI. Now that May
has elected to waive these provisions, May no longer has the right to terminate
the merger agreement and receive payment of a termination fee. See "The Merger
Agreement--Election."
COMPARATIVE RIGHTS OF OWNERS OF ZCMI COMMON STOCK AND MAY COMMON STOCK (SEE PAGE
47)
The rights of ZCMI shareholders are currently governed by Utah law and
ZCMI's articles of incorporation and bylaws. The rights of May shareowners are
governed by Delaware law and May's certificate of incorporation and bylaws.
After we complete the merger, ZCMI shareholders will become shareowners of May
and their rights will be governed by Delaware law and May's certificate of
incorporation and bylaws. See "Comparison of Rights of Shareowners of May and
Shareholders of ZCMI."
7
<PAGE>
MAY SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information presented below for the fiscal
years ended January 30, 1999, January 31, 1998, February 1, 1997, February 3,
1996 and January 28, 1995 and as of the end of each such fiscal year is derived
from the consolidated financial statements of May, which have been audited by
Arthur Andersen LLP, independent public accountants, and should be read in
conjunction with the information and audited consolidated financial statements
contained in May's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, which is incorporated by reference herein. The selected
historical financial information presented below for the 26 week periods ended
July 31, 1999 and August 1, 1998 and as of the end of each such 26 week period
is derived from the unaudited financial statements contained in May's Quarterly
Report on Form 10-Q for the period ended July 31, 1999, which is incorporated by
reference herein. See "Where You Can Find More Information". All of the
financial information presented below has been restated to reflect the May 4,
1996, distribution by May to its shareowners of all of the shares of common
stock of its then wholly owned subsidiary, Payless ShoeSource, Inc.
<TABLE>
<CAPTION>
26 WEEKS ENDED(1) FISCAL YEAR ENDED(2)
--------------------------- -------------------------------------------------------------------
JULY 31, AUGUST 1, JANUARY 30, JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1999 1998 1999 1998 1997 1996 1995
-------- --------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues.................. $ 6,190 $5,706 $13,413 $12,685 $12,000 $10,952 $10,107
Net earnings(3)........... 276 241 849 779 749 700 650
FINANCIAL POSITION
Total assets.............. $10,348 $9,869 $10,533 $ 9,930 $10,059 $ 9,369 $ 8,443
Long-term debt, preferred
and preference stock.... 3,870 3,802 4,152 3,849 4,196 3,701 3,240
PER SHARE OF COMMON STOCK
Net earnings:(3)
Basic................... $ 0.80 $ 0.67 $ 2.43 $ 2.18 $ 1.97 $ 1.82 $ 1.69
Diluted................. 0.77 0.64 2.30 2.07 1.87 1.75 1.62
Cash dividends............ 0.44 1/2 0.42 1/3 0.85 0.80 0.77 0.74 0.67
Book value................ 11.49 11.22 11.46 10.99 10.27 10.26 8.96
WEIGHTED AVERAGE SHARES
Basic................... 333.8 346.8 342.6 348.5 370.8 373.4 372.6
Diluted................. 357.7 372.0 367.4 373.6 396.2 397.3 397.3
</TABLE>
- ------------------------
(1) Operating results of periods which exclude Christmas may not be indicative
of the operating results that may be expected for the full fiscal year.
(2) May's fiscal year ends on the Saturday closest to January 31. Fiscal year
ended February 3, 1996 included 53 weeks.
(3) Represents net earnings and earnings per share from continuing operations.
RECENT RESULTS AND DEVELOPMENTS
For the 13 weeks ending October 30, 1999, May announced diluted earnings per
share of 38 cents, versus 35 cents in the same period a year ago. Net earnings
increased to $138 million from $130 million the prior year. Third quarter
revenues were $3.24 billion, an increase of 5.1% compared with $3.09 billion in
1998. For the nine months ending October 30, 1999, May's diluted earnings per
share were $1.15 per share, compared with 99 cents per share in 1998. Net
earnings were $414 million, versus
8
<PAGE>
$371 million a year ago. Revenues increased 7.3% during the nine months to
$9.44 billion compared with $8.80 billion last year.
May regularly evaluates and pursues business combination opportunities.
Historically, May has been involved in numerous transactions of various sizes,
for consideration which included cash or securities (including common stock) or
combinations of both. As part of its long range planning and regular on-going
evaluation of business combination opportunities, May is regularly engaged in a
number of separate and unrelated discussions concerning possible business
combinations and may in the future engage in discussions or negotiations which
could involve material amounts of cash or stock or a combination of both. May
cannot provide any assurance with respect to the timing, likelihood, or
financial or business effect of any possible transactions. May does not publicly
disclose possible transactions until the transactions reach a stage which makes
them likely to be completed.
9
<PAGE>
ZCMI SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information presented below for the fiscal
years ended January 30, 1999, January 31, 1998, and February 1, 1997 and as of
the end of each such fiscal year is derived from the consolidated financial
statements of ZCMI, which have been audited by Deloitte & Touche LLP,
independent auditors, and should be read in conjunction with the information and
audited consolidated financial statements contained in ZCMI's Annual Report on
Form 10-K/A for the fiscal year ended January 30, 1999, which is incorporated by
reference herein. The selected historical financial information presented below
for the 26 week periods ended July 31, 1999 and August 1, 1998 and as of the end
of each such 26 week period has been obtained from the unaudited consolidated
financial statements contained in ZCMI's Quarterly Report on Form 10-Q/A for the
period ended July 31, 1999, which is incorporated by reference herein. See
"Where You Can Find More Information."
<TABLE>
<CAPTION>
26 WEEKS
ENDED(1) FISCAL YEAR ENDED(2)
-------------------- -------------------------------------------------------------------
JULY 31, AUGUST 1, JANUARY 30, JANUARY 31, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1999 1998 1999 1998 1997 1996 1995
-------- --------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues....................... $ 100 $ 109 $ 247 $ 257 $ 260 $ 254 $ 245
Net earnings (loss)............ (6) (5) (8) -- 2 1 4
FINANCIAL POSITION
Total assets................... $ 121 $ 125 $ 132 $ 139 $ 138 $ 137 $ 145
Long-term debt(3) 15 55 63 57 43 56 51
PER SHARE OF COMMON STOCK
Net earnings (loss):
Basic........................ $(2.91) $(2.38) $(3.93) $ 0.10 $ 0.85 $ 0.27 $ 1.69
Diluted...................... (2.91) (2.38) (3.93) 0.09 0.84 0.27 1.69
Cash dividends................. -- 0.32 0.48 0.63 0.60 0.60 0.60
Book value..................... 15.03 20.05 18.29 23.24 23.92 23.64 24.91
WEIGHTED AVERAGE SHARES
Basic........................ 2.2 2.2 2.2 2.2 2.2 2.2 2.1
Diluted...................... 2.2 2.2 2.2 2.2 2.2 2.2 2.1
</TABLE>
- ------------------------
(1) Operating results of periods which exclude Christmas may not be indicative
of the operating results that may be expected for the full fiscal year.
(2) ZCMI's fiscal year ends on the Saturday nearest the end of January. Fiscal
year ended February 3, 1996 included 53 weeks.
(3) Includes long-term capital lease obligations. As of July 31, 1999, ZCMI was
not in compliance with the financial covenants under its loan agreement.
Accordingly, approximately $47 million of the long-term borrowings under the
loan agreement were reclassified as short-term at July 31, 1999.
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth historical per share data for May and ZCMI,
May combined pro forma per share data giving effect to the proposed merger
accounted for as a purchase under generally accepted accounting principles and
ZCMI equivalent pro forma per share data. The information presented should be
read in conjunction with the historical financial statements and related notes
thereto of May and ZCMI and the selected historical financial data including the
notes thereto, each incorporated in or included elsewhere in this proxy
statement/prospectus. Pro forma data have been included for comparative purposes
only and do not purport to be indicative of (i) the results of operations or
financial position which actually would have been obtained if the proposed
merger had been completed at the beginning of the period or as of the date
indicated or (ii) the results of operations or financial position which may be
obtained in the future.
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ---------------------------
------------------- MAY ZCMI
MAY ZCMI COMBINED(1) EQUIVALENT(2)
-------- -------- ----------- -------------
<S> <C> <C> <C> <C>
NET EARNINGS (LOSS) PER COMMON SHARE:
BASIC
Year ended January 30, 1999....................... $ 2.43 $(3.93) $ 2.39 $1.58
26 weeks ended July 31, 1999...................... 0.80 (2.91) 0.78 0.52
DILUTED
Year ended January 30, 1999....................... $ 2.30 $(3.93) $ 2.27 $1.50
26 weeks ended July 31, 1999...................... 0.77 (2.91) 0.75 0.50
CASH DIVIDENDS PER COMMON SHARE
Year ended January 30, 1999....................... $ 0.85 $ 0.48 $ 0.85 $0.56
26 weeks ended July 31, 1999...................... 0.44 1/2 -- 0.44 1/2 0.29
BOOK VALUE PER COMMON SHARE(3)
As of January 30, 1999............................ $11.46 $18.29 $11.56 $7.65
As of July 31, 1999............................... 11.49 15.03 11.59 7.67
</TABLE>
- ------------------------
(1) Combines the historical operations of May and ZCMI adjusted to reflect the
impact of purchase accounting by May and the issuance of approximately
1,485,000 shares of May common stock to ZCMI shareholders. The number of
shares of May common stock to be issued in the merger assumes an average
price per share of $34. See "The Merger Agreement--What ZCMI Shareholders
Will Receive."
(2) ZCMI equivalent pro forma information is calculated by multiplying the May
combined pro forma per share information by an assumed exchange ratio of
.6618 of May shares for each share of ZCMI.
(3) Book value per share is computed by dividing common shareholders' equity by
the number of shares of common stock outstanding at January 30, 1999 and
July 31, 1999, respectively.
11
<PAGE>
COMPARATIVE MARKET PRICE DATA
May common stock is listed on the NYSE under the symbol "MAY." ZCMI common
stock is traded in the over-the-counter ("OTC") market and quoted through the
OTC Bulletin Board under the symbol "ZNCO." The following tables set forth for
the periods indicated, the reported high and low per share sale prices of May
common stock on the NYSE and the high and low bid price quotations for ZCMI
common stock in the OTC market and dividends paid on such shares.
<TABLE>
<CAPTION>
MAY ZCMI
----------------------------------- -------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------- -------- ------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 31, 1998
First Quarter..................... $33.17 $29.08 $ 0.20 $12.63 $12.50 $0.16
Second Quarter.................... 37.92 30.17 0.20 13.25 12.50 0.16
Third Quarter..................... 38.08 33.83 0.20 14.63 13.25 0.16
Fourth Quarter.................... 37.92 33.25 0.20 14.50 14.50 0.16
FISCAL YEAR ENDED JANUARY 30, 1999
First Quarter..................... $44.33 $35.33 $ 0.21 1/6 $15.12 $14.37 $0.16
Second Quarter.................... 47.25 41.33 0.21 1/6 15.00 14.50 0.16
Third Quarter..................... 44.71 33.17 0.21 1/6 15.00 14.62 0.16
Fourth Quarter.................... 43.00 37.67 0.21 1/6 15.88 15.12 --(2)
FISCAL YEAR ENDED JANUARY 29, 2000
First Quarter..................... $41.50 $36.38 $ 0.22 1/4 $15.00 $14.50 $ --
Second Quarter.................... 45.00 38.69 0.22 1/4 14.75 14.50 --
Third Quarter..................... 41.50 32.63 0.22 1/4 22.00 14.00 --
Fourth Quarter.................... 34.13 31.63 0.22 1/4(1) 21.25 19.00 --
(through November 29, 1999)
</TABLE>
- ------------------------
(1) On November 12, 1999, May's board of directors declared the fourth quarter
cash dividend of $.22 1/4 per share payable on December 15, 1999 to
shareowners of record on December 1, 1999.
(2) On January 20, 1999, ZCMI's board of directors voted to suspend dividend
payments.
On October 14, 1999, the last full trading day prior to May's and ZCMI's
announcement that they had reached an agreement concerning the merger, the
closing sale prices of May common stock as reported by the NYSE and the ZCMI
common stock as reported on the OTC market were $37 1/16 per share and $22 per
share, respectively. Assuming an average price of $37 1/16 per share, the
exchange ratio would have been .6071 of May common stock for each share of ZCMI
common stock.
On November 29, 1999, the last full trading day prior to the date of this
proxy statement/ prospectus, the last reported sales prices per share of May
common stock on the NYSE and the ZCMI common stock on the OTC market were
$34 1/8 per share and $20 3/4 per share, respectively. Assuming an average price
of $34 1/8 per share, the exchange ratio would have been .6593 of May common
stock for each share of ZCMI common stock.
12
<PAGE>
RISK FACTORS
In addition to the other information included in this document, you should
consider carefully the risk factors described below.
MAY FACES COMPETITION IN THE RETAIL INDUSTRY.
May conducts its retail merchandising business under highly competitive
conditions. Although May is one of the nation's largest department store
retailers, it has numerous competitors at the national and local level which
compete with May's individual department stores. Competition is characterized by
many factors including location, reputation, assortment, advertising, price,
quality, service, and credit availability. May believes that it is in a strong
competitive position with regard to each of these factors.
MAY'S EXPANSION DEPENDS ON ITS ABILITY TO SUCCESSFULLY ACQUIRE OR BUILD NEW
STORES AND REMODEL AND/OR EXPAND EXISTING STORES.
May's business expansion strategy focuses on acquiring or building new
stores and remodeling and/or expanding existing stores. May evaluates each
investment decision to determine if it meets its financial standards. May's
success in achieving future growth through opening new stores or expanding
existing stores will depend on its ability to identify, finance, obtain,
construct, and operate these stores. Acquisitions depend on May's ability to
identify, negotiate, and finance acquisitions on acceptable terms and integrate
acquired stores into its operations. The failure by May to effectively implement
its business expansion strategy could have a material adverse effect on its
business and operations.
MAY'S SALES AND OPERATING RESULTS DEPEND ON CONSUMER PREFERENCES AND FASHION
TRENDS.
May's sales and operating results depend in part on its ability to predict
or respond to changes in fashion trends and consumer preferences in a timely
manner. May develops new retail concepts and continuously adjusts its inventory
position in certain major and private-label brands and product categories in an
effort to satisfy its customers. Any sustained failure by May to identify and
respond to emerging trends in lifestyle and consumer preference could have a
material adverse effect on its business. Consumer spending may be affected by
many factors outside May's control, including competition from store-based
retailers, mail order, and internet companies; consumer confidence and
preferences; weather that affects customer traffic; and general economic
conditions.
MAY FACES POTENTIAL YEAR 2000 ISSUES.
In 1996, May began assessing and preparing its critical information systems,
communications networks, equipment and facilities for the year 2000. As of the
end of fiscal 1998, May completed this assessment and substantially completed
the coding, testing, and installation of necessary modifications. In fiscal
1999, May successfully tested its electronic interfaces with major merchandise
and service vendors for year 2000 compliance. Since May has completed its
modifications, May does not expect any material disruption of business. Through
monitoring year 2000 readiness disclosures and other means, May is receiving
assurances from its primary merchandise vendors and service providers regarding
their year 2000 readiness.
Under the most reasonably likely worst case scenario, May does not
anticipate more than isolated, temporary disruptions of its operations caused by
year 2000 failures affecting either May or its primary merchandise and service
vendors. May expects that its technically trained personnel, working in
cooperation with key vendors and service providers, should be able to address
year 2000 system issues that may arise. To the extent May's vendors are unable
to deliver products and provide services due to their own year 2000 issues, May
will generally have alternative sources for comparable products and
13
<PAGE>
services and does not expect to experience any material business disruptions.
Many risks, however, such as the failure to perform by public utilities,
telecommunications providers, and financial institutions, and the impact of the
year 2000 issue on the economy as a whole, are outside May's control and could
adversely affect the company and its ability to conduct business. While May has
made a significant effort to address all anticipated risks within its control,
this is an event without precedent; consequently, May cannot assure you that the
year 2000 issue will not have a material adverse impact on May's financial
condition, operating results, or business.
THE ZCMI SPECIAL SHAREHOLDERS' MEETING
The board of directors of ZCMI is providing this proxy statement/prospectus
to the holders of ZCMI common stock to solicit proxies for use at the special
meeting of the shareholders of ZCMI and at any adjournments or postponements of
that meeting. This proxy statement/prospectus and accompanying form of proxy are
first being mailed to shareholders of ZCMI on or about December 1, 1999.
TIME AND PLACE; PURPOSES
The special meeting will be held at the ZCMI Service Center, 2200 South 900
West, Salt Lake City, Utah 84137, on December 30, 1999, starting at 10:00 a.m.,
local time. At the special meeting, you will be asked to consider and to vote
upon
(1) a proposal to approve and adopt the Agreement and Plan of Merger, dated
as of October 14, 1999, among ZCMI, May, and MS Acquisition, Inc., a Utah
corporation and wholly owned subsidiary of May, pursuant to which MS
Acquisition will be merged with and into ZCMI, with ZCMI surviving the
merger as a wholly owned subsidiary of May, and
(2) such other matters as may properly come before the special meeting or
any postponement or adjournment thereof.
The board of directors of ZCMI has determined that the terms of the merger
agreement are fair to, and in the best interests of, the shareholders of ZCMI.
The board of directors unanimously recommends that you vote "FOR" the approval
and adoption of the merger agreement.
RECORD DATE; VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The record date for the special meeting is November 26, 1999. This means
that you must have been a shareholder of record at the close of business on that
date to vote at the special meeting. You are entitled to one vote for each share
of ZCMI common stock that you owned at the close of business on the record date.
As of the record date, there were issued and outstanding 2,244,441 shares of
ZCMI common stock.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to vote at the special meeting is necessary to constitute a
quorum at the meeting. The affirmative vote by the holders of a majority of the
shares of ZCMI common stock that were outstanding on the record date is required
to approve and adopt the merger agreement and the merger.
14
<PAGE>
PRINCIPAL SHAREHOLDERS
As of the record date, the following shareholders owned more than 5% of the
ZCMI common stock:
- ZCMI Reserve Trust, a charitable trust of The Church of Jesus Christ of
Latter-day Saints, 50 East North Temple, Salt Lake City, Utah 84150,
beneficially owned an aggregate of at least 1,176,599 shares of ZCMI
common stock (approximately 52.4% of the outstanding ZCMI common stock);
- the directors and officers of ZCMI and their affiliates, as a group,
beneficially owned an aggregate of 188,444 shares (excluding shares
purchasable upon exercise of stock options) of ZCMI common stock
(approximately 8.4% of the outstanding ZCMI common stock); and
- the ZCMI Trust, a Utah grantor trust, 35 Century Park-Way, Salt Lake City,
Utah 84115, beneficially owned an aggregate of 113,785 shares of ZCMI
common stock (approximately 5.1% of the outstanding ZCMI common stock).
These shares were transferred to the ZCMI Trust by John Price on
September 15, 1999 for the benefit of the trust's named beneficiaries.
Three shareholders, Richard H. Madsen, chief executive officer of ZCMI,
Patricia Madsen, a director of ZCMI until November 26, 1999, and ZCMI Reserve
Trust have entered into shareowner agreements with May. These shareholders have
advised ZCMI that they intend to vote in favor of the merger agreement. Assuming
favorable votes by these shareholders, approval of the merger is assured without
the vote of any other ZCMI shareholders. See "The Shareowner Agreements."
PROXIES
All shares of ZCMI common stock represented by properly executed proxy cards
received prior to or at the special meeting, and not revoked, will be voted in
accordance with the instructions indicated on such proxy cards. If you send in
your proxy card but do not mark your proxy card to tell the proxies how to vote
your shares, the proxies will vote your shares "FOR" the approval of the merger
agreement.
If you mark "ABSTAIN" on a properly executed proxy card, you will be counted
as present at the special meeting for purposes of determining whether there is a
quorum and for purposes of determining the aggregate voting power and number of
shares represented and entitled to vote at the special meeting. A proxy card
marked "ABSTAIN" with respect to the merger proposal will have the effect of a
vote against the merger agreement and the merger.
If a broker, bank or other nominee holds your ZCMI common stock for your
benefit but not in your own name, your shares are in "street name." In that
case, your bank, broker or other nominee will send you a voting instruction form
to use in voting your shares. Generally a nominee may only vote the common stock
that it holds for you in accordance with your instructions. Consequently, a
nominee cannot vote on the merger proposal if it does not receive your
instructions. This is called a "broker nonvote." A broker nonvote will have the
same effect as a vote against the approval of the merger agreement and the
merger.
You may revoke your proxy at any time before its use by
- sending a written revocation to ZCMI's secretary;
- signing another proxy card bearing a later date; or
- attending the special meeting and voting in person.
15
<PAGE>
SOLICITATION OF PROXIES
ZCMI will pay the cost of its solicitation of proxies. May and ZCMI will
share equally all printing and mailing expenses and filing fees. In addition to
solicitation by mail, ZCMI will arrange with brokerage houses and other
custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners; and ZCMI will, upon request, reimburse such brokerage houses and
custodians for their reasonable expenses in so doing.
Please do NOT send in any stock certificates with your proxy card. May will
mail you a transmittal form with instructions for the surrender of your ZCMI
stock certificates as soon as practicable after we complete the merger.
OTHER BUSINESS; ADJOURNMENTS
The board of directors of ZCMI is not aware of any business to be acted upon
at the special meeting other than as described in this proxy
statement/prospectus. If, however, other matters are properly brought before the
special meeting, or any adjournments or postponements thereof, the proxies will
have discretion to vote or act on those matters according to their best
judgment.
16
<PAGE>
THE MERGER
GENERAL
The merger agreement provides for the merger of MS Acquisition with and into
ZCMI, with ZCMI surviving the merger as a wholly-owned subsidiary of May. You
will receive approximately $22.50 of May common stock for each share of ZCMI
common stock that you own. To determine the exact number of shares of May common
stock you will receive, first we will divide $22.50 by the arithmetic average of
the high and low trading prices of May common stock during the 12(th) through
3(rd) trading days preceding the closing date of the merger. Then, we will
multiply that fraction by the number of ZCMI shares that you own.
May will not issue any fractional shares of May common stock. Instead, you
will receive cash, without interest, for any fractional share. We will determine
the amount of cash you will receive by multiplying the fraction of May common
stock you would have otherwise been entitled to receive by the arithmetic
average of the high and low trading prices of May common stock during the 12(th)
through 3(rd) business days prior to the closing date of the merger.
After completing the merger, May will send you instructions for exchanging
your ZCMI stock certificates for a certificate representing shares of May common
stock. The exchange agent will deliver to you May stock certificates and/or a
check for any fractional share once it receives your ZCMI stock certificates.
May will not pay you any dividends or other distributions with respect to May
common stock with a record date occurring after the completion of the merger
until you exchange your ZCMI stock certificates. You will not be able to vote
any shares of May common stock until you exchange your ZCMI stock certificates.
After completing the merger, no ZCMI shares will be transferred on ZCMI's
stock transfer books. If you present a ZCMI stock certificate for transfer after
the merger, the exchange agent will cancel the certificate and exchange it for a
certificate representing shares of May common stock and a check for the amount
to be paid for any fractional shares.
BACKGROUND OF THE MERGER
Retail department store chains have been combining over the last several
years. A number of competitive factors have contributed to this trend. These
include the efficiencies that result from increased purchasing power, combined
operations, and an ability to serve more markets. The consolidation of the
department store industry has put increasing pressure on the operating margins
of local and regional department store chains, including ZCMI.
ZCMI's revenues have decreased during each of the last two fiscal years.
ZCMI incurred significant losses during the fiscal year ended January 30, 1999,
and has continued to incur losses during the current fiscal year. Decreased
revenues and profitability have adversely affected ZCMI's financial position. At
May 1, 1999, ZCMI was not in compliance with one of the financial covenants
contained in its bank loan agreement. ZCMI was unable to regain compliance with
this financial covenant, and at July 31, 1999, ZCMI was not in compliance with
two additional financial covenants under the bank loan agreement.
ZCMI's management has, from time to time, considered potential business
combination transactions with a view to improving its competitive position and
enhancing shareholder value. Because a majority of the outstanding ZCMI common
stock is controlled by a single shareholder, any merger or business combination
would require the approval of that shareholder under Utah law. Accordingly, in
considering potential business combination transactions, ZCMI's management
considered whether it could obtain the approval of its controlling shareholder.
Although May and other large department store companies contacted ZCMI from time
to time regarding potential business combination transactions, ZCMI's
controlling shareholder was not interested in pursuing a business
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<PAGE>
combination transaction until July, 1999. In light of the controlling
shareholder's position and other factors, ZCMI determined that the preliminary
discussions with May and other companies prior to July, 1999 did not present
realistic opportunities for a business combination transaction.
Between mid-July, 1995 and October, 1998, a representative of May contacted
a representative of ZCMI on a number of occasions to discuss May's interest in
pursuing a business combination or other transaction with ZCMI. Although
representatives of ZCMI and May discussed general issues from time to time
during this period relating to a potential business combination or other
transaction, ZCMI and May did not engage in negotiations with respect to a
specific proposal.
In October 1998, the board of directors of ZCMI reviewed ZCMI's financial
position and requested that management create a committee to examine the
company's financial position, explore strategic alternatives and consult with
retailing experts about ways to address ZCMI's declining performance and related
issues and develop a plan of action.
On January 20, 1999, the board of directors of ZCMI discussed past and
present interest in ZCMI by other major retailers, and the trend towards
consolidation in the industry and formed an ad hoc committee to review the
company's specific situation and alternatives available to it.
In late January and early March, 1999, R. Dean Wolfe, May's executive vice
president of acquisitions and real estate, and Richard H. Madsen, ZCMI's chief
executive officer, communicated on several occasions to discuss May's continued
interest in a possible transaction with ZCMI.
On April 21, 1999, Mr. Madsen reported to the board of directors of ZCMI on
the increased interest by department stores in acquiring ZCMI.
On April 29, 1999, Mr. Wolfe sent Mr. Madsen a letter of interest that
contemplated May's purchase of all of ZCMI's assets.
On July 13, 1999, ZCMI's controlling shareholder indicated that it would
support ZCMI management's decision to hire an investment banking firm.
On July 20, 1999, Mr. Wolfe and Thomas H. Lucas, May's vice president of
corporate development, met with Mr. Madsen and outside members of the board of
directors of ZCMI to discuss May's letter. Following that meeting, May sent to
James Jardine, a director of ZCMI, a package of materials describing May's
employee benefit plans and programs.
On July 21, 1999, Mr. Madsen reviewed May's letter at a meeting of the board
of directors of ZCMI. The board authorized management to hire a consultant to
advise the board in connection with its selection of an investment banking firm
to assist it in reviewing strategic alternatives, including merging with another
department store company.
On July 23, 1999, at a meeting of a committee of the board of directors of
ZCMI, the investment banking firm of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") made a presentation reviewing recent events in the industry,
including recent acquisitions, and outlining various alternatives available to
ZCMI. Following its presentation, ZCMI engaged DLJ to assist ZCMI and begin a
process to solicit acquisition proposals.
During the following weeks, DLJ contacted a number of potential bidders,
including May. On August 11, 1999, May and ZCMI entered into a confidentiality
agreement, and the following day May sent representatives to Salt Lake City to
begin a due diligence investigation of ZCMI. Throughout August 1999, ZCMI also
entered into confidentiality agreements with four of the other potential bidders
contacted by DLJ.
On August 20, 1999, at its regularly scheduled board meeting, May's
management presented to the May board of directors various materials concerning
ZCMI and outlined the terms of a proposed
18
<PAGE>
acquisition transaction. The board of directors authorized management to pursue
the transaction substantially as presented to the board.
On August 27, 1999, DLJ sent a letter outlining the procedures for
submitting an offer to acquire ZCMI and a form of agreement and plan of merger
to May and another potential bidder. It requested that all offers be submitted
by 12:00 p.m. noon (E.D.T.) on September 10, 1999.
On September 10, 1999, May submitted a proposal to acquire ZCMI at $22.50
per share of ZCMI common stock. May expressed a willingness for the
consideration to be paid in either cash or shares of May common stock. At the
same time, May also submitted a form of shareowner agreement to be signed by the
controlling shareholder and two members of the board of directors of ZCMI who
own ZCMI common stock. During the rest of September, May continued its due
diligence, and ZCMI's advisors and representatives and May's representatives
negotiated the terms of the merger agreement and shareowner agreement.
On September 13, 1999, one other bidder submitted a bid for the acquisition
of ZCMI. The other bidder indicated an interest in acquiring all of the
outstanding shares of ZCMI common stock at a price per share in cash below May's
bid. DLJ informed the other bidder that its bid was below a bid previously
received by ZCMI, but the other bidder declined to improve its bid.
On September 21, 1999, at the request of the management of ZCMI, DLJ
negotiated with May in an effort to determine whether May would increase its
purchase price. May indicated that it was not willing to increase the proposed
purchase price, but that it was willing to negotiate certain other aspects of
the transaction.
On September 27, 1999, May modified its proposal to address issues raised by
ZCMI and the controlling shareholder. May proposed to limit its use of the
"ZCMI" trade name and to keep the downtown Salt Lake City store closed on
Sundays. May also proposed to offer employment and consulting agreements to
certain executives of ZCMI and reaffirmed its proposal to provide an enhanced
severance program for other ZCMI employees who are terminated other than for
cause within six months after the closing of the merger.
On September 27, 1999, ZCMI instructed DLJ to inform Mr. Wolfe that May
would be the successful bidder if a final agreement could be reached.
During the first week of October, 1999, several senior executives of May met
with senior executives of ZCMI to discuss operational and transitional issues.
On October 7, 1999, representatives of May met with the trustees of ZCMI
Reserve Trust and its counsel to negotiate the terms of the shareowner
agreement.
On October 13, 1999, and October 14, 1999, representatives of May again met
with the trustees of ZCMI Reserve Trust and its counsel to finalize specific
terms of the ZCMI Reserve Trust's shareowner agreement and May's representatives
and ZCMI's counsel continued to negotiate the terms of the merger agreement. See
"The Shareowner Agreements--Special Provisions in ZCMI Reserve Trust Shareowner
Agreement."
Late on October 14, 1999, the board of directors of ZCMI met in a special
meeting. At the meeting, ZCMI's management and legal and financial advisors
reviewed the material terms of the merger agreement and the shareowner
agreements with the members of the board of directors. DLJ made a presentation
to the board, including a discussion of analyses used in evaluating the proposed
transaction. During the meeting, DLJ provided its opinion that the merger
consideration to be received by shareholders of ZCMI, other than shareholders
who are affiliates of ZCMI, is fair to those shareholders from a financial point
of view. After full consideration and discussion, the ZCMI board of directors
unanimously approved the merger agreement.
19
<PAGE>
Immediately following the board meeting, the appropriate parties signed the
merger agreement, Richard H. Madsen, Patricia Madsen and May signed shareowner
agreements, and May signed the shareowner agreement that ZCMI Reserve Trust
signed earlier in the evening. The parties issued a joint press release
announcing the transaction on the morning of October 15, 1999.
ZCMI'S REASONS FOR THE MERGER
At its October 14, 1999 meeting, after careful consideration, the ZCMI board
of directors:
- determined that the merger is fair to, and in the best interests of, the
shareholders of ZCMI;
- approved the merger agreement and the transactions contemplated thereby;
and
- resolved to recommend the merger agreement to the shareholders of ZCMI.
The following section briefly describes certain of the reasons, factors and
information taken into account by the board of directors in reaching its
conclusion.
INFORMATION AND FACTORS CONSIDERED BY THE BOARD OF DIRECTORS
The ZCMI board of directors made its determination after careful
consideration of, and based on, a number of factors including those described
below:
- current industry, economic and market conditions, including in particular
the significant amount of consolidation that has occurred and is likely to
continue in the industry and the difficulties that smaller companies
experience;
- ZCMI's need to consolidate to keep pace with the larger department store
chains;
- the strategic fit between ZCMI and May, including the opportunity for
synergies and cost savings;
- the fact that ZCMI was not in compliance with the financial covenants
under its bank loan agreement, ZCMI's ability to regain compliance with
such covenants, and ZCMI's need for additional financing;
- the fact that the merger consideration of $22.50 per share of ZCMI common
stock represented a substantial premium over the average trading price of
ZCMI common stock over the past year and that May common stock is highly
liquid, has a higher annual dividend and would provide ZCMI shareholders
with an opportunity to participate in the growth potential of May;
- DLJ's analyses presented to the ZCMI board and DLJ's opinion that, based
upon the assumptions, limitations, and qualifications in the opinion, the
merger consideration to be received by shareholders of ZCMI, other than
shareholders who are affiliates of ZCMI, pursuant to the merger agreement
is fair to those shareholders from a financial point of view (See Annex II
to this proxy statement/prospectus; see "--Opinion of Financial Advisor to
the Board of Directors of ZCMI");
- the expected ability to consummate the merger as a tax-free reorganization
under the Internal Revenue Code of 1986, as amended;
- advice from ZCMI's legal advisors as to the likelihood that certain of the
legal conditions to the closing of the merger could be satisfied;
- the other provisions of the merger agreement, including the requirement of
ZCMI shareholder approval and the limited protection of the employment of
certain employees of ZCMI (see "The Merger Agreement--Employee Matters and
Benefit Plans");
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<PAGE>
- the fact that ZCMI Reserve Trust, ZCMI's controlling shareholder, was in
favor of the merger and willing to enter into a shareowner agreement with
May; and
- the interests of the officers and directors of ZCMI in the merger,
including the matters described under "--Interests of Certain Persons in
the Merger."
In view of the wide variety of factors considered by the board of directors
in connection with its evaluation of the merger and the complexity of such
matters, the board of directors did not consider it practical to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered in reaching its decision. In addition, the board of
directors did not undertake to determine specifically whether any particular
factor (or any aspect of any particular factor) was favorable or unfavorable to
its ultimate determination, but rather conducted a discussion of the factors
described above, including asking questions of ZCMI's management and legal and
financial advisors, and reached a general consensus that the merger is in the
best interests of ZCMI and its shareholders. In considering the factors
described above, individual members of the board of directors of ZCMI may have
given different weight to different factors.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ZCMI
The ZCMI board of directors has determined that the terms of the merger
agreement are fair to, and in the best interests of, ZCMI shareholders and
unanimously recommends that you vote "FOR" the approval and adoption of the
merger agreement.
OPINION OF FINANCIAL ADVISOR TO THE BOARD OF DIRECTORS OF ZCMI
ZCMI selected DLJ as its financial advisor with respect to the merger
because DLJ is a nationally recognized investment banking firm that has
substantial experience in the department store industry. DLJ, as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In its role as financial advisor, DLJ was asked by the ZCMI board of
directors to render an opinion as to the fairness from a financial point of view
to the shareholders of ZCMI, other than shareholders who are affiliates of ZCMI,
of the consideration to be received by such shareholders pursuant to the terms
of the merger agreement. On October 14, 1999, DLJ delivered its written opinion
to the ZCMI board of directors to the effect that, as of that date and based
upon and subject to the assumptions, limitations, and qualifications in such
opinion, the consideration to be received by the shareholders of ZCMI, other
than shareholders who are affiliates of ZCMI, pursuant to the merger agreement
is fair to such shareholders from a financial point of view.
A copy of the DLJ opinion is attached as Annex II. You are urged to read the
DLJ opinion carefully in its entirety for the assumptions made, the procedures
followed, the matters considered, and the limits of the review made by DLJ in
connection with its opinion. DLJ prepared its opinion for the ZCMI board of
directors. The opinion is directed only to the fairness of the consideration to
be received in the merger by shareholders of ZCMI, other than shareholders who
are affiliates of ZCMI, from a financial point of view. The DLJ opinion does not
constitute a recommendation to any shareholder as to how to vote on the merger
and does not constitute an opinion as to the price at which the May stock will
actually trade. DLJ did not, and was not requested by the ZCMI board of
directors to, make any recommendation as to the form or amount of the
consideration to be paid in the merger, which issues were resolved in
arms-length negotiations between ZCMI and May.
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<PAGE>
In preparing its opinion, DLJ:
- reviewed the merger agreement;
- reviewed financial and other information that was publicly available or
furnished to it by ZCMI and May, including information provided during
discussions with their respective managements;
- reviewed the historical stock prices and trading volumes of the common
stock of ZCMI and May;
- compared certain financial and securities data of ZCMI with various other
companies whose securities are traded in public markets;
- reviewed prices and premiums paid in certain other business combinations;
and
- conducted such other financial studies, analyses and investigations as it
deemed appropriate for purposes of its opinion.
Included in the information provided during discussions with management were
financial projections of ZCMI for the period beginning August 1, 1999 and ending
January 31, 2004 prepared by the management of ZCMI and information concerning
ZCMI's near-term liquidity concerns.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by ZCMI and May or their
representatives, or that was otherwise reviewed by it. DLJ relied on
representations that the financial projections provided to it were reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of ZCMI as to the future operating and financial
performance of ZCMI. DLJ did not assume any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by it. DLJ also
assumed that the merger will qualify as a tax-free reorganization.
The DLJ opinion is necessarily based on economic, market, financial, and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the opinion. It does not address the relative merits of
the merger and the other business strategies being considered by the ZCMI board
of directors, nor does it address the board's decision to proceed with the
merger. The DLJ opinion does not constitute a recommendation to any shareholder
as to how such shareholder should vote on the merger.
The following is a summary of the material financial analyses presented by
DLJ to the ZCMI board of directors on October 14, 1999. DLJ drew no specific
conclusions from any of these analyses into its qualitative assessment of the
relevant facts and circumstances. You should read the information presented in
the tables together with the accompanying text.
STOCK PRICE AND TRADING HISTORY. DLJ reviewed the daily trading activity,
including price and volume, of ZCMI from October 12, 1998 to October 12, 1999.
DLJ noted that the daily trading price of ZCMI common stock ranged from a high
of $21.50 on October 12, 1999 to a low of $14.00 on July 29, 1999 and the daily
trading volume ranged from 100 shares to 12,300 shares. DLJ also noted that the
ZCMI closing price one day prior to date of the special committee meeting to
discuss the sale of the company of July 23, 1999 was $14.38 and the closing
price one day prior to the date of press coverage which rumored a sale of ZCMI
of August 27, 1999 was $15.50.
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<PAGE>
ANALYSIS OF SELECTED PUBLICLY-TRADED REGIONAL DEPARTMENT STORE
COMPANIES. DLJ analyzed the implied price per share of ZCMI based on the market
values and trading multiples of selected publicly traded, regional department
store companies. The regional department store companies consisted of: The
Bon-Ton Stores, Inc., Elder-Beerman Stores Corp., Gottschalks Inc. and Stage
Stores, Inc. DLJ compared the enterprise values of the comparable companies as
multiples of their latest twelve months sales, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), earnings before interest and taxes
("EBIT"), projected fiscal year ending January 31, 2000, sales and projected
fiscal year ending January 31, 2001 sales. DLJ also compared the closing stock
prices of each of the comparable companies as multiples of their projected
fiscal year ending January 31, 2000 earnings per share ("EPS"), and projected
fiscal year ending January 31, 2001 EPS. In each case mentioned above, DLJ
derived the implied price per share for ZCMI based on the average of each of the
multiples. Sales and EPS projections for ZCMI were based upon estimates provided
to DLJ by the management of ZCMI. Sales projections for the comparable companies
were based upon publicly available research analyst estimates. EPS projections
for the comparable companies were based upon First Call Research Network
consensus research analyst estimates. All multiples were based on closing stock
prices on October 12, 1999. The ranges of multiples and the implied prices per
share of ZCMI based on the average of the multiples analyzed were as follows:
<TABLE>
<CAPTION>
SELECTED REGIONAL DEPARTMENT STORE COMPANIES
---------------------------------------------------------
IMPLIED ZCMI
STOCK PRICE* AVERAGE HIGH LOW
------------ -------- -------- --------
<S> <C> <C> <C> <C>
Enterprise value as multiple of:
Latest twelve months sales....................... $9.25 0.4x 0.5x 0.2x
Latest twelve months EBITDA...................... n/m 7.0 9.7 4.4
Latest twelve months EBIT........................ n/m 17.1 40.4 7.0
Projected fiscal year ending January 31, 2000
sales.......................................... 2.78 0.3 0.4 0.2
Projected fiscal year ending January 31, 2001
sales.......................................... 1.08 0.3 0.4 0.2
Stock price as multiple of:
Projected fiscal year ending January 31, 2000
EPS............................................ n/m 10.5x 14.0x 6.0x
Projected fiscal year ending January 31, 2001
EPS............................................ n/m 8.6 12.9 5.0
</TABLE>
- ------------------------
* "n/m" means "not meaningful."
ANALYSIS OF SELECTED COMPARABLE REGIONAL DEPARTMENT STORE MERGER AND
ACQUISITION TRANSACTIONS. DLJ analyzed the implied transaction multiples paid in
selected comparable regional department store merger and acquisition
transactions. The transactions were: C.R. Anthony Company/ Stage Stores, Inc.,
G.R. Herberger's, Inc./Proffitt's, Inc., Parisian, Inc./Proffitt's, Inc. and
Younkers, Inc./ Proffitt's, Inc. DLJ analyzed the multiple of the enterprise
value in the comparable transactions to sales and EBITDA for the latest twelve
months and the multiple of equity market value to net income for the latest
twelve months. Enterprise value is equity market value plus total debt and the
book value of preferred stock less excess cash and cash equivalents.
Additionally, DLJ analyzed the average premiums paid in these transactions one
day prior, one week prior and four weeks prior to the public announcement of the
respective transaction. DLJ also calculated the price per share of ZCMI implied
by the average transaction multiples and by the average premiums paid as of the
July 23, 1999 special
23
<PAGE>
committee meeting to discuss the sale of ZCMI, respectively. This analysis
provided the following results:
<TABLE>
<CAPTION>
IMPLIED ZCMI
STOCK PRICE* AVERAGE
------------ --------
<S> <C> <C>
Enterprise value as multiple of:
Latest twelve months sales................................ $27.80 0.6x
Latest twelve months EBITDA............................... n/m 9.3
Equity value as multiple of:
Latest twelve months net income........................... n/m 24.9
Implied premiums paid:
One day prior to Special Committee meeting (07/22/99)..... 15.95 11.0%
One week prior to Special Committee meeting (07/15/99).... 16.27 15.8
One month prior to Special Committee meeting (06/24/99)... 18.80 30.4
</TABLE>
- ------------------------
* "n/m" means "not meaningful."
No company or transaction used in the "Analysis of Selected Publicly-Traded
Regional Department Store Companies" or "Analysis of Selected Comparable
Regional Department Store Merger and Acquisition Transactions" as a comparison
is identical to ZCMI or the merger. Accordingly, an analysis of the results of
the foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the comparable companies, comparable transactions or
the business segment, company or transaction to which they are being compared.
PREMIUMS PAID ANALYSIS. DLJ analyzed the purchase price premium paid over
the market price prior to announcement in selected merger and acquisition
transactions since October 1, 1994 involving stock consideration and with
valuations ranging from $100.0 million to $250.0 million. DLJ analyzed the
average premiums in these transactions one day prior, one week prior and four
weeks prior to the public announcement of the respective transaction, and
applied the average premiums to the ZCMI closing share prices one day prior, one
week prior and four weeks prior to the July 23, 1999 special committee meeting
to discuss the sale of ZCMI and prior to the August 27, 1999 press coverage
which rumored a sale of ZCMI to calculate the implied price per share of ZCMI.
This analysis yielded the following results:
<TABLE>
<CAPTION>
AVERAGE
ZCMI PREMIUMS IMPLIED
CLOSING IN SELECTED ZCMI
STOCK PRICE TRANSACTIONS STOCK PRICE
----------- ------------ -----------
<S> <C> <C> <C>
One day prior to special committee meeting (07/22/99)....... $14.38 25.7% $18.07
One week prior to special committee meeting (07/15/99)...... 14.06 30.5 18.34
Four weeks prior to special committee meeting (06/24/99).... 14.43 41.7 20.45
One day prior to press coverage (08/26/99).................. 15.50 25.7 19.48
One week prior to press coverage (8/19/99).................. 15.19 30.5 19.82
Four weeks prior to press coverage (7/29/99)................ 14.00 41.7 19.83
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a discounted cash flow
analysis of ZCMI using projections and assumptions provided by ZCMI's
management. The discounted cash flow for ZCMI was estimated using discount rates
ranging from 10% to 12% and estimated EBITDA multiples in 2004 ranging from 7.0x
to 9.0x. This analysis yielded implied prices per share for ZCMI from ($4.20) to
$3.36.
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<PAGE>
LIQUIDATION ANALYSIS. DLJ analyzed the value that could potentially have
been realized by a shareholder of ZCMI if ZCMI underwent an orderly liquidation
of its assets. An orderly liquidation scenario contemplates that ZCMI would have
sufficient time to liquidate its assets at market value for such assets. ZCMI
management compared the book value of ZCMI assets as of July 31, 1999 from ZCMI
internal balance sheets and provided estimated liquidation values for such
assets. Total secured, unsecured and other estimated claims as of July 31, 1999
were subtracted from the total estimated asset value to determine an estimated
per share value of ZCMI in a liquidation scenario. This analysis indicated that
ZCMI shareholders would receive a value of $2.22 per share.
The summary set forth above is not a complete description of the analyses
performed by DLJ but describes, in summary form, the principal elements of the
presentation by DLJ to the ZCMI board of directors on October 14, 1999 in
connection with its opinion. The preparation of a fairness opinion involves
various determinations about the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances. Therefore, such an opinion is not readily susceptible to summary
description. Each of the analyses conducted by DLJ was carried out in order to
provide a different perspective on the transaction and add to the total mix of
information available. DLJ did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness from a financial point of view. Rather, in reaching its
conclusion, DLJ considered the results of the analyses together and did not
place particular reliance or weight on any individual analysis and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete or misleading view of the
evaluation process underlying its opinions. The analyses performed by DLJ are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
ZCMI has agreed to pay DLJ for its services in connection with the merger an
aggregate financial advisory fee of 1.50% of the value of the total transaction,
including an aggregate fee of $500,000 for providing advisory services and
rendering its fairness opinion to the ZCMI board of directors with respect to
the merger. ZCMI also has agreed to reimburse DLJ for travel and other
out-of-pocket expenses, including the fees and expenses of its legal counsel.
ZCMI has also agreed to indemnify DLJ and related persons against liabilities,
including liabilities under the federal securities laws, arising out of DLJ's
engagement. DLJ has advised ZCMI that, in the ordinary course of business, DLJ
and its affiliates may actively trade or hold the securities of ZCMI and May for
their own account or for the account of customers and, accordingly, may at any
time hold a long or short position in their securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the board of directors of ZCMI with
respect to the merger agreement and the merger, you should be aware that a
number of ZCMI officers and directors have certain interests in the merger that
are different from, or in addition to, yours and other shareholders, including
those referred to below.
STOCK OPTIONS AND RESTRICTED STOCK. The executive officers of ZCMI own
options to purchase shares of ZCMI common stock and/or restricted shares of ZCMI
common stock pursuant to ZCMI employee benefit plans. Under the merger
agreement, each outstanding share of restricted stock will be cancelled and
converted into the right to receive $22.50 in cash. Each outstanding stock
option will be cancelled and converted into the right to receive in cash the
excess of $22.50 over the exercise price of the option multiplied by the number
of shares of ZCMI common stock subject to the option.
EMPLOYMENT AND CONSULTING AGREEMENTS. On various dates in October, 1999,
May entered into employment agreements with ten key executives of ZCMI. The
employment agreements provide that each key executive will be employed by May
following the closing of the merger for a period of up to
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<PAGE>
one year and will provide services as required by May during the transition and
integration period. All agreements provide that payments under the employment
agreements stop if the executive becomes an employee or director of, or performs
services for, a competitor of May during the term. In addition, the agreements
for five of the key executives prohibit the executives from soliciting employees
of May or from becoming employees or directors of, or performing services for, a
competitor of May for 12 months after their employment with May ends. The
employment agreements for the other five key executives prohibit these
activities for a six month period. Five of the key executives have also entered
into consulting contracts with May. The consulting contracts provide that these
key executives will provide consulting services to May for up to 90 days during
the 18 months following the first anniversary of the closing date of the merger.
In the event Richard H. Madsen's medical condition worsens and he is no longer
able to engage in full time employment, May will continue to employ him on
inactive status for the remainder of the term of his employment agreement,
retain his services for the remainder of the term of his consulting contract and
continue to compensate him for the remainder of the terms of both the employment
agreement and consulting agreement. In addition, May has agreed to provide
certain medical benefits to Mr. Madsen and certain of his dependents after his
retirement for the remainder of his life.
CERTAIN BENEFIT PLANS. All executive officers of ZCMI are eligible to
participate in certain of its employee benefit plans, bonus plans and retention
programs. Pursuant to the merger agreement, May has agreed that it will provide
benefits to employees of ZCMI that are no less favorable in the aggregate than
the employee benefits provided to them prior to the merger or, at May's option,
the employee benefits provided to similarly situated employees of May. See "The
Merger Agreement--Employee Matters and Benefit Plans."
INDEMNIFICATION AND INSURANCE. From and after the effective date of the
merger, May or ZCMI, as the surviving corporation in the merger, will indemnify,
defend and hold harmless certain ZCMI employees, officers and directors to the
fullest extent permitted under applicable law, against any claim, liability,
loss, damage, cost or expense based in whole or in part on, or arising out of
any matter occurring at or prior to the merger, including matters arising out of
or pertaining to the merger.
For a period of four years after the merger, May will maintain in effect the
policies of directors' and officers' liability insurance maintained by ZCMI, or
substitute policies of at least the same coverage and amounts, with respect to
matters arising before the merger, subject to the limitation that May will not
be required to pay an annual premium for such insurance in excess of 200% of the
annual premiums paid by ZCMI immediately prior to the execution date of the
merger agreement.
MERCHANDISE DISCOUNTS. May has agreed to provide discounts on purchases of
merchandise at stores within the Meier & Frank division of May to certain
officers and directors of ZCMI and certain members of their families.
ACCOUNTING TREATMENT
May will account for the merger as a purchase of ZCMI by May for accounting
and financial reporting purposes. Therefore, the aggregate consideration paid by
May in connection with the merger will be allocated to ZCMI's assets and
liabilities based on their fair values with any excess being treated as
goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
This description of certain federal income tax consequences of the merger is
included solely for the general information of ZCMI shareholders. It is not a
comprehensive description of all of the tax consequences that may be relevant to
a shareholder of ZCMI, including tax consequences that arise from rules of
general application to all taxpayers or to some classes of taxpayers or that are
generally
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assumed to be known by investors. This description is based upon the Internal
Revenue Code, applicable Treasury Regulations and administrative rulings and
judicial authority as of the date of this document, all of which are subject to
change (possibly on a retroactive basis) and to differing interpretations.
ZCMI has obtained an opinion letter from its counsel, Stoel Rives LLP, as to
certain tax consequences of the merger which is attached as Exhibit 8.1 to the
registration statement of which this document forms a part, to the effect that
if the merger occurs as set forth in the merger agreement and as described
herein, and assuming that May acquires at least 80 percent of the outstanding
ZCMI common stock in exchange for May common stock:
- The merger will qualify as a "reorganization"within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
- Shareholders of ZCMI (a) will not recognize gain or loss for federal
income tax purposes as a result of the exchange of their shares of ZCMI
common stock for May common stock in the merger, except with respect to
cash received instead of a fractional share of May common stock, as
discussed below, and (b) will have a tax basis in the May common stock
received in the merger equal to the tax basis of the ZCMI common stock
surrendered in the merger less any tax basis of the ZCMI common stock
surrendered that is allocable to a fractional share of May common stock
for which cash is received.
- A ZCMI shareholder's holding period with respect to the May common stock
received in the merger will include the holding period of the ZCMI common
stock surrendered in the merger, assuming the shareholder holds the shares
of ZCMI common stock as a capital asset on the date of the exchange.
- To the extent that a shareholder of ZCMI common stock receives cash
instead of a fractional share of May common stock, the shareholder will
recognize gain or loss for federal income tax purposes, measured by the
difference between the amount of cash received and the portion of the tax
basis of the shareholder's shares of ZCMI stock allocable to such
fractional share of May common stock. Assuming the shareholder holds the
shares of ZCMI common stock as a capital asset on the date of the
exchange, the gain or loss will be a capital gain or loss and will be a
long-term capital gain or loss if the shares of ZCMI common stock
exchanged for the fractional share of May common stock were held for more
than one year at the effective time of the merger.
- A shareholder of ZCMI who dissents from the merger and who receives cash
in exchange for the ZCMI common stock held by the shareholder will
generally recognize gain or loss for federal income tax purposes, measured
by the difference between the amount of cash received and the tax basis of
the shareholder's shares of ZCMI stock. There may, however, be
circumstances peculiar to a dissenting shareholder which would cause the
cash received to be treated as a distribution of property to which
Section 301 of the Code applies (which could under certain circumstances
result in the cash being taxed as a dividend).
- None of May, ZCMI or MS Acquisition will recognize gain or loss for
federal income tax purposes with respect to the merger. However, ZCMI may
recognize income or gain in connection with the receipt of rights and
properties by ZCMI in accordance with the letter agreement dated
October 14, 1999 between May and The Church of Jesus Christ of Latter-day
Saints.
The tax opinions do not address the tax consequences of the merger to ZCMI
shareholders who are subject to special rules, such as shareholders who are not
citizens or residents of the United States or organized under the laws of the
United States, financial institutions, tax-exempt organizations, insurance
companies, brokers or dealers in securities, traders in securities electing mark
to market,
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shareholders who acquired their ZCMI common stock pursuant to the exercise of
options or similar derivative securities or otherwise as compensation or
shareholders who hold their ZCMI common stock pursuant to a tax-qualified
retirement plan or as part of a straddle, hedge or conversion transaction.
The tax opinions are based upon the reasoned conclusion of counsel that the
rights and properties acquired by ZCMI Reserve Trust under the ZCMI Reserve
Trust shareowner agreement solely for the rights and properties to be received
by ZCMI in accordance with the letter agreement between May and The Church of
Jesus Christ of Latter-day Saints does not prevent the merger from satisfying
the "substantially all of its properties" requirement for a reorganization
described in Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. The matter is
not entirely free from doubt.
The tax opinions are based upon the assumption that May will acquire at
least 80 percent of the outstanding ZCMI common stock in exchange for May common
stock. ZCMI common stock acquired for cash with May funds in the merger, such as
the restricted stock of ZCMI (representing approximately 2% of the outstanding
ZCMI common stock) and stock of ZCMI shareholders who dissent from the merger,
will be treated as acquired by May for cash. If the amount of this stock exceeds
20 percent of the ZCMI common stock, the merger would not qualify as a tax-free
reorganization and, among other consequences, ZCMI shareholders who receive May
common stock in the merger would be treated as if they had sold their ZCMI
common stock for cash in an amount equal to the value of the May common stock
received.
The tax opinions are also based upon certain factual assumptions, and upon
certain representations and assurances of May, MS Acquisition, ZCMI and ZCMI
Reserve Trust set forth in certificates signed by officers of May, MS
Acquisition and ZCMI and by a trustee of ZCMI Reserve Trust. While some of those
representations are limited to the best knowledge of the officer or trustee, or
express an intention with respect to future conduct, counsel assumed for
purposes of rendering its opinion that those representations were true without
the knowledge limitation and that the representations accurately describe future
conduct.
An opinion of counsel is not binding upon the IRS or the courts. There is no
assurance that the IRS or a court would agree with the tax opinions of counsel.
No ruling from the IRS concerning the tax consequences of the merger has been
requested.
Cash payments to ZCMI shareholders in the merger (including cash paid to
dissenting shareholders) generally will be subject to backup withholding at a
rate of 31% unless either (1) the shareholder provides its taxpayer
identification number (social security or employer identification number) and
certifies that the number is correct or (2) an exemption from backup withholding
applies under the applicable laws and regulations.
IF YOU ARE A ZCMI SHAREHOLDER, YOU ARE ADVISED TO CONSULT YOUR OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE TAX
RETURN REPORTING REQUIREMENT, THE APPLICABILITY OF FEDERAL, STATE, LOCAL, AND
FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS. ANY
SHAREHOLDER WHO INTENDS TO DISSENT FROM THE MERGER IS PARTICULARLY URGED TO
CONTACT HIS OR HER OWN TAX ADVISOR.
CERTAIN REGULATORY MATTERS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder provide that certain
transactions may not be consummated until required information and materials
have been furnished to the Antitrust Division of the Department of Justice and
the Federal Trade Commission and certain waiting periods have expired or been
terminated. The respective obligations of May and ZCMI to consummate the merger
are conditioned upon all waiting periods (and extensions thereof) applicable to
the consummation of the merger under the HSR Act having expired or been
terminated. See "The Merger Agreement--Conditions to
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Obligations." May and ZCMI both made the requisite filings under the HSR Act by
October 28, 1999, in connection with the merger. The FTC granted early
termination of the waiting period on November 5, 1999. Notwithstanding that the
HSR Act waiting period has been terminated, at any time before or after the
effective time of the merger, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or advisable in the public
interest, including seeking to enjoin the consummation of the merger or seeking
divestiture of assets or businesses of May or ZCMI.
In addition, at any time before or after the effective time of the merger,
and notwithstanding that the HSR Act waiting period has been terminated, any
state could take such action under its antitrust laws as it deems necessary or
desirable in the public interest. Such action could include seeking to enjoin
the consummation of the merger or seeking divestiture of assets or businesses of
May or ZCMI. Private parties may also seek to take legal action under antitrust
laws under certain circumstances.
Based on information available to them, May and ZCMI believe that the merger
may be effected in compliance with federal and state antitrust laws. However,
there can be no assurance that a challenge to the consummation of the merger on
antitrust grounds will not be made or that, if such a challenge were made, May
and ZCMI would prevail or would not be required to accept certain conditions,
possibly including certain divestitures, in order to consummate the merger.
Neither May nor ZCMI is aware of any other governmental or regulatory
filings or approvals required in connection with the merger, other than
compliance with applicable securities laws.
RESTRICTIONS ON RESALES OF MAY COMMON STOCK BY AFFILIATES OF ZCMI
The shares of May common stock to be issued to ZCMI shareholders in the
merger are being registered under the Securities Act pursuant to the
registration statement of which this proxy statement/prospectus is a part. These
shares will be freely transferable, except those received by ZCMI "affiliates,"
as that term is defined under the Securities Act, at the time of the special
meeting. The shares of May common stock received by affiliates may be resold by
them only pursuant to an effective registration statement under the Securities
Act, in transactions permitted by the resale provisions of Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act, or if sold in
compliance with an exemption from the registration requirements of the
Securities Act. Persons who may be considered affiliates of ZCMI include
individuals or entities that control, are controlled by, or are under common
control with ZCMI, and may include some of ZCMI's officers and directors as well
as ZCMI's principal shareholders.
Pursuant to Rule 145 under the Securities Act, the sale of May common stock
acquired by such affiliates of ZCMI pursuant to the merger will be subject to
certain restrictions. Such persons may sell May common stock under Rule 145 only
if
- May has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, during the preceding
12 months;
- the May common stock is sold in a "broker's transaction," which is defined
in Rule 144 under the Securities Act as a sale in which
(a) the seller does not solicit or arrange for orders to buy the
securities,
(b) the seller does not make any payment other than to a broker,
(c) the broker does no more than execute the order and receive a nominal
commission,
(d) the broker does not solicit customer orders to buy the securities;
and
- such sale and all other sales made by such person within the preceding
three months do not collectively exceed the greater of
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(x) 1% of the outstanding shares of May common stock and
(y) the average weekly trading volume of May common stock on all
national securities exchanges during the four-week period preceding
the sale.
ZCMI Reserve Trust may be deemed to be an "affiliate" of ZCMI within the
meaning of Rule 145 under the Securities Act. This proxy statement/prospectus
also constitutes the prospectus of ZCMI Reserve Trust relating to its possible
resale of the shares of May common stock it will receive in the merger.
The following table provides certain information with respect to ZCMI
Reserve Trust's expected beneficial ownership of shares of May common stock
following the merger:
<TABLE>
<CAPTION>
MAXIMUM
NUMBER OF
SHARES OF MAY SHARES OF MAY
COMMON STOCK COMMON
OWNED PRIOR TO STOCK
NAME THE OFFERING * OFFERED
- ---- -------------- -------------
<S> <C> <C>
ZCMI Reserve Trust.......................................... 778,673 778,673
</TABLE>
- ------------------------
* The number of shares of May common stock that ZCMI Reserve Trust will own
after the merger assumes that the average of the high and low trading prices
of May common stock on the NYSE during the 12(th) through 3(rd) trading days
preceding the merger's closing date was $34.
ZCMI Reserve Trust may effect an immediate distribution of its May common
stock in one or more of the following transactions:
(a) through brokerage transactions (which may involve block transactions)
with the broker acting as principal or agent, in special offerings, in
the over-the-counter market or otherwise, in each case at market prices
obtainable at the time of sale, at negotiated prices or at fixed prices,
(b) to underwriters who will acquire the shares of May common stock for
their own account and resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices determined at the time of sale (any public offering price and any
discount or concessions allowed or reallowed or paid to dealers may be
changed from time to time),
(c) directly or through brokers or agents in private sales at negotiated
prices,
(d) to lenders pledged as collateral to secure loans, credit or other
financing arrangements and any subsequent foreclosure, if any,
thereunder, or
(e) by any other legally available means.
In addition, agents designated from time to time by ZCMI Reserve Trust may
solicit offers to purchase the shares of May common stock. Underwriters or other
agents participating in an offering made pursuant to this proxy
statement/prospectus (as amended or supplemented from time to time) may receive
underwriting discounts or commissions under the Securities Act, and discounts or
concessions may be allowed or reallowed or paid to dealers, and brokers or
agents participating in such transactions may receive brokerage or agents'
commissions or fees.
At the time ZCMI Reserve Trust offers any shares of May common stock, to the
extent required by law, it will distribute a prospectus supplement setting forth
the amount of May common stock being offered and the terms of the offering,
including the purchase price or public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriter for
any May common stock purchased from ZCMI Reserve Trust, any discounts,
commission and other items
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constituting compensation from ZCMI Reserve Trust and any discounts, commissions
or concessions allowed or filed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, only registered or licensed brokers or dealers will sell the May
common stock sold under this section. In addition, in certain states the May
common stock may not be sold under this section unless the May common stock has
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and complied with.
ZCMI Reserve Trust has advised May that, as of the date hereof, it has made
no arrangements with any broker for the sale of its shares of May common stock.
ZCMI Reserve Trust and any underwriters, brokers or dealers involved in the sale
of the May common stock may be considered "underwriters" as that term is defined
by the Securities Act, although ZCMI Reserve Trust disclaims such status.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the merger
agreement which are not described in detail elsewhere in this proxy
statement/prospectus. The merger agreement is attached as Annex I and
incorporated herein by reference. This summary is qualified in its entirety by
reference to the merger agreement. We encourage you to read the merger agreement
because it is the legal document that governs the merger.
GENERAL
Under the terms and conditions set forth in the merger agreement, MS
Acquisition will merge with and into ZCMI, with ZCMI as the surviving
corporation. The merger will become effective at the time articles of merger are
filed with the Department of Commerce, Division of Corporations and Commercial
Code, of the State of Utah or such later time as May and ZCMI agree. ZCMI will
file the Articles of Merger on or as promptly as practicable following the
closing of the merger. The closing will occur as soon as practicable after the
conditions set forth in the merger agreement have been satisfied or waived,
unless May and ZCMI agree on a different date. The effectiveness on November 5,
1999, of the election (as defined under "--Election") constitutes the waiver by
May of most of the conditions to the merger. As a result, May is obligated to
close the merger at a time prior to February 1, 2000, as determined by May
unless there is a law or court order prohibiting the merger.
MERGER CONSIDERATION
At the time of the merger, each share of ZCMI common stock will be cancelled
and converted into the right to receive a fraction of a share of May common
stock equal to approximately $22.50.
TREATMENT OF ZCMI STOCK OPTIONS AND RESTRICTED SHARES
Immediately prior to the merger's closing date, each option to purchase ZCMI
common stock outstanding under the ZCMI 1996 Equity-Based Incentive Plan will be
cancelled and May will cause the paying agent to provide to each owner of a ZCMI
option cash in an amount equal to the product of (a) the excess of $22.50 over
the exercise price of the ZCMI option, multiplied by (b) the number of shares
subject to the ZCMI option, less any applicable withholding taxes. In addition,
each restricted share of ZCMI common stock issued to employees pursuant to
incentive plan will be cancelled and May will cause the paying agent to provide
to each owner cash in an amount equal to the product of $22.50 multiplied by the
number of restricted shares held by each owner, less any applicable withholding
taxes.
EXCHANGE OF SHARES
May will designate The Bank of New York as the paying agent for the purpose
of exchanging certificates representing shares of ZCMI common stock for
certificates representing shares of May common stock. As promptly as practicable
after the merger, the paying agent will mail a letter of transmittal to each
record holder of ZCMI common stock for use in the exchange and instructions
explaining how to surrender certificates to the paying agent. Owners of ZCMI
common stock that surrender their ZCMI certificates, together with a properly
completed letter of transmittal, to the paying agent, will receive May common
stock certificates representing the number of whole shares of May common stock
they have the right to receive pursuant to the merger agreement together with a
cash payment in lieu of fractional shares, if any. Owners of unexchanged shares
of ZCMI common stock will not be entitled to vote their shares or receive any
dividends or other distributions payable by May after the merger until their
certificates are surrendered. Upon surrender of their certificates, subject to
applicable laws, these owners will receive accumulated dividends after the date
of the merger
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and distributions payable on the whole shares of May common stock with a record
date subsequent to the merger, without interest.
RIGHTS OF DISSENTING SHAREOWNERS
In some instances the Utah Revised Business Corporation Act ("URBCA") grants
certain rights to owners of shares that are outstanding immediately prior to the
effective time of the merger and held by a shareholder who has not voted in
favor of the merger and has notified ZCMI of his intent to dissent. See
"Appraisal Rights of Dissenting Shareholders."
CERTAIN COVENANTS
From October 14, 1999, the date of the merger agreement, until the effective
time of the merger, ZCMI must conduct its business in the ordinary course in
substantially the same manner as previously conducted and use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and key executives, and preserve its
relationships with customers, employees, creditors, suppliers, licensors,
licensees, distributors and its other business partners.
During this period, ZCMI may not, without May's approval and subject to
certain limited exceptions, among other things:
- declare dividends with respect to its capital stock or redeem its capital
stock;
- amend its articles of incorporation or bylaws;
- acquire certain assets having a material effect on ZCMI;
- enter into any merger or similar significant transaction;
- increase executive officer or director compensation or severance benefits;
- establish any new benefit plans or arrangements;
- enter into any new, or amending existing, employment, consulting,
indemnification, severance or termination agreements with certain officers
or directors;
- make any changes in accounting methods;
- sell or otherwise dispose of assets (other than in the ordinary course of
business);
- incur indebtedness, other than pursuant to its existing loan agreements;
- make new capital expenditures in excess of a specified amount;
- take certain actions with respect to tax matters;
- enter into contracts with any beneficial owner of more than 5% of the ZCMI
common stock; and
- modify, amend or terminate any material contracts.
NO SOLICITATIONS
ZCMI has agreed that neither it nor its affiliates will (and that it will
use its best efforts to cause its officers, directors, employees,
representatives and agents not to) directly or indirectly encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or entity concerning any merger, consolidation,
tender offer, exchange offer, sale of a material portion or product line of
ZCMI, sale of shares of capital stock or debt securities, restructuring,
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recapitalization, or similar transactions. ZCMI also has agreed to stop any
existing activities, discussions or negotiations with other parties.
ADDITIONAL AGREEMENTS
REASONABLE EFFORTS TO RESOLVE ANTITRUST ISSUES
May and ZCMI have agreed to cooperate with each other to take all actions
necessary to complete the merger. In particular, May and ZCMI have agreed to
promptly provide to governmental entities with regulatory jurisdiction over
enforcement of any applicable antitrust laws information and documents they
request or which are necessary, proper or advisable to complete the merger and
the transactions contemplated by the merger agreement. If any permanent or
preliminary injunction or order is entered or becomes reasonably foreseeable to
be entered in any antitrust proceeding that would delay the merger, May and ZCMI
shall promptly take all steps necessary to complete the merger on a schedule as
close as possible to the schedule contemplated by the merger agreement.
INDEMNIFICATION OF ZCMI DIRECTORS AND OFFICERS
May has agreed that after the effective time of the merger, it will, or it
will cause ZCMI to, indemnify and insure directors and officers of ZCMI against
certain liabilities. See "The Merger--Interests of Certain Persons in the
Merger--Indemnification and Insurance."
EMPLOYEE MATTERS AND BENEFIT PLANS
EMPLOYMENT OF ZCMI EMPLOYEES
The merger agreement requires May to offer employment and consulting
agreements to certain ZCMI key executives. See "The Merger--Interests of Certain
Persons in the Merger--Employment and Consulting Agreements."
May has agreed to interview all other corporate office employees. If May
decides not to continue to employ a corporate office employee of ZCMI after the
merger and that employee continues to work through the effective time of the
merger, the employee will receive severance when the employee's employment ends,
unless the employee is terminated for cause. "Severance" means severance pay of
2 weeks of salary or wages, as the case may be, plus 1 week of salary or wages
for each year of service by the employee.
If May wants a corporate office employee of ZCMI to continue employment with
ZCMI for an agreed period of up to 1 year after the effective time of the
merger, May will offer continuing employment to that employee. If the corporate
office employee rejects the offer, the employee will receive no severance
(unless the offer would require the employee to relocate to a work location more
than 35 miles from his or her current work location). If the corporate office
employee accepts the offer of continuing employment and May terminates the
employment without cause prior to the end of the agreed period, the employee
will receive severance.
May will continue the employment of all other ZCMI employees (other than
corporate office employees and employees receiving employment and/or consulting
agreements). If any of these employees voluntarily terminates employment within
six months following the merger, that employee will not receive severance. If
May terminates the employee's employment without cause within six months
following the merger, the employee will receive severance.
RETENTION BONUS ARRANGEMENTS
If a corporate office employee accepts an offer of continuing employment and
works through the agreed period following the merger, that employee will receive
a stay bonus of 25-75% (depending on
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level) of pay during the agreed period as well as severance when his or her
employment ends. If the employee voluntarily terminates employment before the
end of the agreed period, the employee will not receive severance or a stay
bonus.
EMPLOYEE BENEFIT PLANS
Pursuant to the merger agreement, on and after the effective time of the
merger, May will cause ZCMI to provide employee benefits on an uninterrupted
basis to employees of ZCMI which are, in the aggregate, no less favorable than
(i) the employee benefits they were provided immediately prior to the effective
time of the merger, or, at May's option (ii) the employee benefits provided to
similarly situated employees of May and its affiliates. With respect to these
employee benefits, May will credit all service with ZCMI for eligibility and
vesting purposes, except in situations which would result in duplication of
benefits.
In addition, the ZCMI Retirement Plan in effect at the effective time will
continue until it is amended, terminated or merged into another qualified
benefit plan. On and after the effective time of the merger, May will ensure
that the benefits calculated for ZCMI employees covered under the ZCMI
Retirement Plan credit all service with May or its affiliates. If ZCMI employees
become covered under a defined benefit plan maintained by May (other than the
ZCMI Retirement Plan), May will provide these employees with credit for past
service with ZCMI for eligibility and vesting purposes.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES OF ZCMI
The merger agreement contains customary representations and warranties made
by ZCMI to May as to: organization, good standing and corporate power;
subsidiaries and equity interests; capital structure; corporate authority,
execution, delivery and enforceability; board approval; conflicts; governmental
consents; SEC documents; absence of certain changes; undisclosed liabilities;
compliance with the Employee Retirement Income Security Act of 1974, as amended;
litigation; compliance with law; intellectual property; contracts; taxes;
environmental matters; no default; opinion of financial advisors; brokers fees;
property; board recommendation; labor matters; year 2000 compliance; insurance;
accounts receivable and inventory; and real estate matters.
REPRESENTATIONS AND WARRANTIES OF MAY
The merger agreement contains customary representations and warranties made
by May and MS Acquisition to ZCMI as to: organization, good standing and
corporate power; corporate authority, execution, delivery and enforceability; no
conflicts; governmental consents; May common stock, absence of certain changes;
no undisclosed liabilities; litigation, compliance with law; no default;
property; and year 2000 compliance.
CONDITIONS TO OBLIGATIONS
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER
Prior to the effectiveness of the election by May (see "--Election"), the
respective obligations of each of May, ZCMI and MS Acquisition to effect the
merger were subject to the satisfaction on or prior to the closing date of each
of the following conditions:
- the approval of the merger agreement by ZCMI's shareholders;
- the absence of any order by any governmental entity or any statute, rule,
decree or regulation restraining, prohibiting or making illegal the
consummation of the merger;
- expiration or termination of any waiting period under the HSR Act;
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- effectiveness of the Registration Statement under the Securities Act and
the absence of any stop order or proceeding seeking a stop order; and
- the receipt by May of all state securities authorizations necessary to
issue May common stock pursuant to the merger.
Now that the election has become effective, May has waived all of the foregoing
conditions other than the second one set forth above. The conditions still apply
to ZCMI's obligation to effect the merger.
CONDITIONS TO THE OBLIGATIONS OF ZCMI
The obligations of ZCMI to effect the merger are further subject to all of
the following conditions:
- the representations and warranties of May and MS Acquisition contained in
the merger agreement being true and correct in all material respects both
when made and, except for those representations and warranties that
address matters only as of a particular date which need only be true and
accurate as of such date, as of the closing date and ZCMI shall have
received a certificate from May to that effect; and
- the performance in all material respects by May and MS Acquisition of
their obligations required to be performed under the merger agreement at
or prior to the closing date of the merger.
CONDITIONS TO THE OBLIGATIONS OF MAY AND MS ACQUISITION
Prior to the effectiveness of the election, the obligations of May and MS
Acquisition to effect the merger were further subject to all of the following
conditions:
- the representations and warranties of ZCMI contained in the merger
agreement being true and correct in all material respects both when made
and, except for those representations and warranties that address matters
only as of a particular date which need only be true and accurate as of
such date, as of the closing date and the receipt by May of a certificate
from ZCMI to that effect;
- the performance in all material respects by ZCMI of its obligations
required to be performed under the merger agreement at or prior to the
closing date; and
- since January 31, 1999, the absence of any event, change, effect or
development that has had a material adverse effect on ZCMI.
Now that the election has become effective, May and MS Acquisition have waived
all of the foregoing conditions.
ELECTION
The merger agreement provides May a mechanism to waive the conditions set
forth above (except the condition relating to the absence of any order by any
governmental entity or any statute, rule, decree or regulation restraining,
prohibiting or making illegal the consummation of the merger). This election
became effective automatically on November 5, 1999. As a result of the election,
May has approval over the operations of ZCMI prior to the closing date.
Effective November 26, 1999, ZCMI modified the number of directors on the ZCMI
board and elected three nominees designated by May. The May nominees constitute
a majority of the board of directors.
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TERMINATION OF MERGER AGREEMENT
RIGHT TO TERMINATE
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after shareholder approval:
(a) by the mutual consent of May and ZCMI;
(b) by either May or ZCMI if:
(1) the ZCMI shareholders fail to approve and adopt the merger agreement;
or
(2) any governmental entity shall have issued or threatened to issue a
statute, order, decree or regulation or taken any other action
permanently restraining or enjoining the merger and such statute,
order, decree, regulation or other action shall have become final and
non-appealable.
(c) by ZCMI, if May or MS Acquisition materially breaches or fails in any
material respect to perform or comply with any of its covenants and
agreements contained in the merger agreement or breaches its
representations and warranties in the merger agreement in any material
respect; however, ZCMI may not terminate the merger agreement if the
breach is curable through the exercise of the breaching party's
reasonable best efforts and for so long as the breaching party is so
attempting to cure the breach for a period not to exceed 20 days.
(d) by May, if:
(1) ZCMI breaches or fails in any respect to perform certain specified
covenants, or breaches certain representations and warranties;
(2) there are any breaches or failures by ZCMI of its covenants and
agreements contained in the merger agreement which individually or in
the aggregate constitute a material adverse effect; or
(3) ZCMI materially breaches or fails in any material respect to perform
or comply with any of its other covenants or agreements contained in
the merger agreement or breaches its other representations and
warranties in the merger agreement in any material respect, except
that May may not terminate the merger agreement if the breach is
curable through the exercise of ZCMI's reasonable best efforts and
ZCMI is attempting to cure the breach for a period not to exceed
20 days.
(e) if the merger has not been completed by January 31, 2000, the merger
agreement automatically terminates.
Now that the election has become effective, May's rights to terminate the merger
agreement are substantially limited. May is only entitled to terminate the
merger agreement under the circumstances described in b(2), above.
TERMINATION FEES AND EXPENSES
If ZCMI terminates the merger agreement pursuant to (c) above, May shall
immediately pay ZCMI $3 million in cash and ZCMI will have all other remedies
available at law or in equity. Prior to the effectiveness of the election, May
had the right to terminate the merger agreement pursuant to (d) above and
receive payment of $3 million in cash from ZCMI as a termination fee. Now that
the election has become effective, May no longer has this right to terminate and
receive a termination fee.
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OTHER EXPENSES
Except for filing fees pursuant to the HSR Act, for which May is solely
responsible, all costs and expenses incurred in connection with the merger
agreement and the transactions contemplated thereby will be paid by the party
incurring such costs or expenses.
AMENDMENTS, EXTENSION; WAIVER
May and ZCMI may amend the merger agreement in writing before or after ZCMI
shareholder approval of the merger. An amendment requires approval of ZCMI
shareholders if the amendment is made after shareholder approval of the merger
and changes the merger consideration or changes any of the terms of the merger
agreement in a manner that materially adversely affects the rights of the
shareholders.
May and ZCMI may extend the time for the performance of any of the
obligations of May and ZCMI and waive any inaccuracies in the representations
and warranties or compliance with any of the agreements or conditions contained
in the merger agreement. Any extension or waiver must be in writing and be
signed by both May and ZCMI.
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APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
Under Utah law, you may dissent from the merger and have the fair value of
your shares paid to you in cash. To exercise this right, you must follow certain
procedures. The steps you must take if you wish to exercise dissenters' rights
with respect to the merger are described below. The description is not complete.
You should read Sections 16-10a-1301 through 16-10-1331 of the URBCA. These
Sections are attached as Annex VI to this document. FAILURE TO TAKE ANY ONE OF
THE REQUIRED STEPS MAY RESULT IN TERMINATION OF YOUR DISSENTERS' RIGHTS UNDER
THE URBCA. If you are a ZCMI shareholder considering dissenting, you should
consult you own legal advisor.
To exercise dissenters' rights, you must comply with the provisions of
Sections 16-10a-1301 through 16-10a-1331 of the URBCA, including the following
five conditions:
- you must be a shareholder on the date the merger is approved by the
shareholders,
- prior to the vote of the shareholders on the merger, you must deliver to
ZCMI written notice of your intent to demand payment for your shares,
- you must not vote your shares in favor of the merger,
- you must demand payment in accordance with the terms of a dissenters'
notice, which will be sent to dissenting shareholders within 10 days after
the merger is completed, and
- you must deposit your certificates in accordance with the terms of the
dissenters' notice.
The following is a more detailed description of the conditions you must
satisfy to perfect dissenters' rights:
1. MUST BE A SHAREHOLDER ON THE DATE THE MERGER IS APPROVED. To be
entitled to dissenters' rights, you must be the record holder of the dissenting
shares on the date the merger is approved by the shareholders of ZCMI. If you
have a beneficial interest in shares of ZCMI common stock that are held of
record in the name of another person, you must act promptly to cause the
shareholder of record to follow the steps described below.
2. NOTICE OF INTENT TO DEMAND PAYMENT. If you intend to exercise your
dissenters' rights, you must perfect such rights prior to the vote of the ZCMI
shareholders at the special meeting by delivering to ZCMI a written notice of
your intent to demand payment for your shares.
3. NO VOTE IN FAVOR OF THE MERGER. You must not vote shares as to which
you seek "fair value" in favor of the approval and adoption of the merger
agreement and approval of the merger and the ZCMI special meeting. This
requirement will be satisfied:
- if a properly executed proxy is submitted with instructions to vote
"against" the merger or to "abstain from this vote,
- if no proxy is returned and no vote is cast at the ZCMI special meeting in
favor of the merger, or
- if you revoke a proxy and later abstain from or vote "against" the merger.
A VOTE "FOR" THE MERGER IS A WAVIER OF DISSENTERS' RIGHTS. A proxy that is
returned signed but on which no voting preference is indicated will be voted in
favor of the merger and will constitute a waiver of dissenters' rights. Failure
to vote does not constitute a waiver of dissenters' rights.
4. DEMAND FOR PAYMENT. If the merger is completed, ZCMI will deliver a
dissenters' notice to each shareholder who provided ZCMI with written notice of
their intent to demand payment for their shares. The dissenters' notice will be
delivered to dissenting shareholders within 10 days after the date the merger is
completed. The dissenters' notice will state that the merger was authorized and
the effective date or proposed effective date of the merger. In addition, the
dissenters' notice will provide
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important instructions you must follow in order to demand payment for your
shares. Specifically, the dissenters' notice will set forth the following:
- the address to which you must send the payment demand,
- where and when certificates for shares must be deposited and the date by
which ZCMI must receive the payment demand (which date must not be fewer
than 30 days nor more that 70 days after the date on which the dissenters'
notice is delivered),
- a form for demanding payment which will request you to state the address
to which payment is to be made and which includes the date of the first
public announcement of the terms of the merger and requires you to certify
whether you acquired beneficial ownership of the shares before that date,
and
- a copy of the sections of the URBCA pertaining to dissenters' rights.
5. DEPOSIT OF CERTIFICATES. Once you receive the dissenters' notice, you
must deposit your stock certificates in accordance with the terms of the
dissenters' notice. If you do not demand payment or you do not deposit your
certificates as required by the dissenters' notice, you will not be entitled to
a dissenters' right of payment for your shares.
Upon the later of consummation of the merger or receipt of the payment
demand, ZCMI shall pay each shareholder who has complied with the requirements
set forth above, and who certifies that he acquired beneficial ownership of the
shares before the date of the first public announcement to the news media of the
terms of the merger, the amount that ZCMI estimates to be the fair value of such
shares, plus accrued interest. The payment will be accompanied by the latest
available financial statements of ZCMI, a statement of the estimate of the fair
value of the respective shares and the amount of interest payable with respect
to such shares, a statement of your rights if you are dissatisfied with the
payment and a copy of the sections of the URBCA pertaining to dissenters'
rights.
If (a) you believe that the amount paid by ZCMI is less than the fair value
of your shares or that the interest due is incorrectly calculated, (b) ZCMI
fails to make payment within 60 days after the date set in the dissenters'
notice for demanding payment, or (c) the merger is not consummated and ZCMI does
not return to you your deposited certificates within 60 days after the date set
in the dissenters' notice for demanding payment, you may notify ZCMI of your
estimate of the fair value of your shares and the amount of interest due and
demand payment of your estimate, less any payment previously received. You must
notify ZCMI of your demand in writing within 30 days after ZCMI made or offered
payment for your shares. If, within 60 days after receipt by ZCMI of a demand
described in this paragraph, the demand remains unsettled, ZCMI shall commence a
proceeding and shall petition the court to determine the fair value of the
shares and accrued interest thereon. If ZCMI does not bring the proceeding
within such 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded. If the proceeding is brought within the 60-day
period, you will be entitled to judgment for the amount by which the court finds
the fair value of your shares plus interest exceeds the amount paid by ZCMI.
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THE SHAREOWNER AGREEMENTS
The following is a brief summary of certain provisions of each shareowner
agreement, is not intended to be a complete description of the terms and
conditions thereof, and is qualified in its entirety by reference to the full
text of each agreement. The shareowner agreements are filed as Annexes III,
IV and V to this proxy statement/prospectus and are incorporated by reference
herein.
GENERAL
Concurrently with the execution of the merger agreement, each of ZCMI
Reserve Trust, Richard H. Madsen and Patricia Madsen entered into shareowner
agreements with May. The shareowner agreements were subsequently superseded by
amended and restated shareowner agreements dated as of October 14, 1999, between
May and each of ZCMI Reserve Trust, Richard H. Madsen and Patricia Madsen. These
shareholders beneficially own in the aggregate a total of approximately
1,275,899 shares of ZCMI common stock (approximately 56.8% of the outstanding
shares of ZCMI common stock as of the record date) which are subject to the
shareowner agreements.
RESTRICTIONS ON TRANSFER AND ENCUMBRANCES
Each shareholder has agreed not to transfer, sell, offer, pledge, or
otherwise dispose of or encumber any ZCMI shares during the period commencing on
October 14, 1999 and ending on the earlier of (i) the effective date of the
merger; or (ii) the termination of the shareowner agreement.
NO PROXY SOLICITATIONS
Each shareowner agreement provides that the shareholder will not, and will
not permit any entity under the shareholder's control to,
- solicit proxies (or become a participant in a solicitation) in opposition
to or in competition with the consummation of the merger,
- directly or indirectly solicit, encourage, initiate, or otherwise
facilitate any inquiries or the making of any proposal or offer with
respect to, any merger, consolidation, tender offer, exchange offer, sale
of a material portion of ZCMI's assets and business (whether in one or
more transactions), sale of shares of ZCMI's capital stock or debt
securities, restructuring, recapitalization, or similar transaction
involving ZCMI or any division or operating principal business unit of
ZCMI (whether in one or more transactions), or engage in any negotiation
concerning, or provide any confidential information or data to, or have
any discussions with any person relating to, such an acquisition proposal,
or
- become a member of a group with respect to any ZCMI voting securities for
the purpose of opposing or competing with the consummation of the merger.
TERMINATION
Each shareowner agreement terminates upon the earlier of:
(i) consummation of the merger;
(ii) written agreement of the parties to terminate the shareowner agreement;
or
(iii) termination of the merger agreement.
SPECIAL PROVISIONS IN ZCMI RESERVE TRUST SHAREOWNER AGREEMENT
May agreed to certain additional terms in the ZCMI Reserve Trust shareowner
agreement concerning use of the "ZCMI" name and closing of the downtown
Salt Lake City ZCMI store on
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Sundays. May agreed that within two years of the effective date of the merger,
May will change the corporate name of ZCMI to a name that does not include any
of the following words: "Zions," "Co-operative," "Mercantile," or "ZCMI," and
May and ZCMI will cease use of the "ZCMI" name. May further agreed that as long
as May uses the "ZCMI" name, it will not open any of the stores operated by ZCMI
on Sundays. Once it no longer operates any of the stores under the "ZCMI" name,
May may open any of the stores on Sundays except the store located on South Main
Street in downtown Salt Lake City, Utah. May also agreed that it would not open
the Salt Lake City downtown store on Sunday for so long as The Church of Jesus
Christ of Latter-day Saints or any of its affiliates is the landlord of the
downtown store or unless other stores in that shopping center are permitted to
open on Sundays. In addition to the above, May agreed to cause ZCMI to transfer,
subject to some restrictions on use, all rights to the "ZCMI" trademark or trade
name to the ZCMI Reserve Trust after May and ZCMI stop using the name.
In addition to the foregoing, The Church of Jesus Christ of Latter-day
Saints has agreed that, after the merger, it will cause one of its affiliates to
amend its lease with ZCMI for ZCMI's headquarters and service center at 2200
South 900 West, Salt Lake City, Utah. As amended, the lease will provide that
after the merger, the purchase price under the option granted to ZCMI to
purchase the headquarters and service center property, plus, at ZCMI's option,
an additional three acres of undeveloped land adjacent to the headquarters and
service center, will be $2.5 million. Currently, the lease grants ZCMI an option
to purchase only the headquarters and service center for a price equal to the
greater of (i) the undepreciated book value of the leased premises and (ii) the
fair market value of the leased premises. At the time the merger agreement and
the shareowner agreements were executed, May estimated that the current fair
market value of the headquarters and service center property was approximately
$8 million.
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DESCRIPTION OF MAY CAPITAL STOCK
As of July 31, 1999, May's authorized capital stock consisted of
1,000,000,000 shares of May common stock, par value $0.50 per share, of which
331,739,531 shares were issued and outstanding and 138,715,963 were held in
treasury, and 25,000,000 shares of preferred stock, par value $0.50 per share,
of which 633,273 shares were issued and outstanding.
The descriptions set forth below of May common stock, May preferred stock
and the preferred stock purchase rights associated with the May common stock
constitute brief summaries of provisions of May's certificate of incorporation,
May's bylaws, the rights agreement dated as of August 19, 1994 with the Bank of
New York, and the assignment and assumption of the rights agreement dated
May 24, 1996, and are qualified in their entirety by reference to the relevant
provisions of such documents, all of which are filed as exhibits to the
registration statement of which this proxy statement/prospectus is a part and
are incorporated herein by reference.
MAY COMMON STOCK
Owners of May common stock are entitled to one vote per share on all matters
submitted to a vote of the shareowners of May, including the election of
directors. The May board of directors is divided into three classes to be as
nearly equal in number as possible. One third of the directors are elected every
year and serve three-year terms. Owners of May common stock do not have the
right to cumulate votes in the election of directors and have no preemptive or
subscription rights. May common stock is neither redeemable nor convertible, and
there are no sinking fund provisions relating to the stock. Subject to the prior
rights of any outstanding shares of May preferred stock, owners of May common
stock are entitled to receive such dividends as may be lawfully declared from
time to time by May's board of directors. Upon any voluntary or involuntary
liquidation, dissolution or winding up of May, owners of May common stock will
be entitled to receive such assets as are available for distribution to
shareowners in accordance with applicable law, after the payment of creditors.
The outstanding shares of May common stock are, and the shares of May common
stock to be issued in connection with the merger will be, fully paid and
nonassessable. Additional shares of May common stock may be issued, as
authorized by May's board of directors from time to time, without shareowner
approval, unless shareowner approval is required by the NYSE.
The transfer agent and registrar for May's common stock and preferred stock
is The Bank of New York.
MAY PREFERRED STOCK
May's certificate of incorporation authorizes 25,000,000 shares of preferred
stock. May's board of directors has designated 1,000,000 shares of preferred
stock as junior participating preference shares and has authorized these shares
for issuance in connection with the rights agreement. As of the date of this
proxy statement/prospectus, no shares of junior participating preference stock
have been issued. In addition, 800,000 shares of preferred stock have been
designated ESOP preference shares. As of July 31, 1999, 633,273 shares of ESOP
preference stock were issued and outstanding.
RIGHTS; JUNIOR PARTICIPATING PREFERENCE STOCK. Pursuant to May's rights
agreement, each owner of an outstanding share of May common stock has received
one right entitling the owner to purchase from May, at a price of $150, subject
to adjustment, one four-hundredth of a share of May's junior participating
preference stock on or after a rights distribution date.
For each share of May common stock you receive in connection with the
merger, you will receive one right. The rights are not, however, currently
evidenced by separate certificates.
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Until the earlier of:
- a person acquiring beneficial ownership of 20% or more of the outstanding
shares of May common stock or commencing a tender or exchange offer which
would result in such person beneficially owning 30% or more of the
outstanding shares of May common stock; or
- the May board of directors declaring any person to be an "adverse person,"
- upon a determination that such person, alone or together with its
affiliates and associates, has become the beneficial owner of an amount
of May common stock which the board determines to be substantial (at
least 15% of the then outstanding shares of common stock); and
- upon a determination that such ownership is intended to
- cause May to repurchase the May common stock beneficially owned by such
person, or
- cause pressure on May to take action or enter into a transaction
intended to provide that person with short-term financial gain under
circumstances where the board determines that the best long-term
interests of May and its shareowners would not be served, or
- cause, or be reasonably likely to cause, a material adverse impact on
the business or prospects of May to the detriment of May shareowners,
the rights will be evidenced only by certificates representing May common stock,
will be transferable only in connection with the transfer of the May common
stock and will not be exercisable. After the earlier of the two dates, the
rights become exercisable, and separate certificates evidencing the rights will
be mailed to the registered owners of outstanding shares of May common stock.
The separate certificates will thereafter be the sole evidence of the rights.
If
- any person becomes the beneficial owner of 30% or more of the outstanding
shares of May common stock other than pursuant to an offer for all
outstanding shares of May common stock which the board of directors
determines to be fair to, and otherwise in the best interest of,
shareowners;
- May is the surviving corporation in a merger with an acquiring person and
the May common stock is not changed or exchanged;
- one or more reclassifications, recapitalizations or similar transactions
occurs, resulting in the proportionate ownership of any class of May
equity security by any acquiring person increasing by more than one
percentage point; or
- the board of directors declares any person to be an adverse person;
then each owner of a right, other than the acquiring person, adverse person or
affiliates and associates of any such person (or certain transferees of such
persons), may purchase, at the right's then current purchase price, May common
stock (or, in certain circumstances, a combination of May common stock, other
securities, cash or other property) having a calculated value of twice the
right's purchase price. In addition, if, after the rights become exercisable,
May is acquired in a merger or other business combination transaction or 50% or
more of its assets, cash flow or earning power is sold, each right will entitle
its holder to purchase, at the right's then current purchase price, common stock
of the acquiring company having a calculated value of twice the applicable
purchase price.
The board of directors may redeem the rights at $.01 per right at any time
prior to the tenth business day following a public announcement that a 20%
position has been acquired or through such later period as the redemption right
may be extended by amendment of the rights agreement. After the redemption
period expires, the right of redemption will be reinstated if, prior to the
occurrence of a
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triggering event, an acquiring person reduces its beneficial ownership to 10% or
less of the May common stock (other than in a transaction with May) and there
are no other acquiring persons. The board may not redeem the rights if it has
previously declared any person to be an adverse person. The rights will expire
on August 31, 2004, unless the May board redeems them earlier or extends the
expiration date.
ESOP PREFERENCE SHARES. May may issue ESOP preference shares only to a
trustee acting on behalf of an employee stock ownership plan or other employee
benefit plan of May. If such a trustee transfers ESOP preference shares to any
person other than another such plan trustee, the ESOP preference shares so
transferred, upon such transfer and without any further action by May or the
holder, will automatically convert into shares of May common stock on the terms
provided for such conversion (described below). In that case, the transferee
will not have any of the voting powers, preferences and relative, participating,
optional or special rights ascribed to ESOP preference shares. Instead, the
transferee will have only the rights and powers pertaining to the May common
stock (described above) into which such ESOP preference shares are so converted.
ESOP preference shares have a liquidation preference of $507.00 per share
(plus accumulated and unpaid dividends) and pay cumulative dividends
semi-annually in an amount per share equal to $38.025 per share per annum. So
long as ESOP preference shares remain outstanding, May may not declare or pay a
dividend, or set a dividend apart for payment, on any other series of stock of
May ranking on a parity with the ESOP preference shares as to dividends unless
it declares or pays a like dividend or sets apart a like dividend for payment,
on ESOP preference shares. Moreover, except for
- dividends payable solely in shares of stock of May ranking, as to
dividends or as to distributions upon the liquidation, dissolution or
winding-up of May, junior to the ESOP preference shares; or
- acquisitions of any shares of stock of May ranking, as to dividends or as
to liquidation distributions, junior to the ESOP preference shares in
exchange solely for shares of stock of May ranking junior to the ESOP
preference shares, in the event that full cumulative dividends on the
shares of ESOP preference shares have not been declared and paid or set
apart for payment when due,
May may not declare or pay a dividend, or set apart for payment any dividend, or
make any distribution in respect of, or make any payment on account of, the
purchase, redemption or other retirement of any other class of stock or series
thereof of May ranking, as to dividends or as to liquidation distributions,
junior to the ESOP preference shares, until full cumulative dividends on the
ESOP preference shares shall have been paid or declared and provided for.
Generally, May may redeem ESOP preference shares, in whole or in part, at
May's option at a redemption price (payable in cash or securities or a
combination thereof) of $507.00 per share, plus an amount equal to all dividends
accumulated and unpaid on such shares to the date fixed for redemption.
However, under certain circumstances, an owner of ESOP preference shares
(for example, a plan trustee) may, upon not less than five days written notice,
elect to require May to redeem such shares at a redemption price of $507.00 per
share plus an amount equal to all dividends accumulated and unpaid on such
shares to the date fixed for redemption.
ESOP preference shares are, at any time prior to the close of business on
the date fixed for redemption of such shares, convertible into shares of May
common stock, at a conversion rate of 33.78747 shares of May common stock for
each ESOP preference share, subject to anti-dilution adjustment under certain
circumstances. Whenever May issues shares of May common stock upon conversion of
ESOP preference shares, May will issue an associated right under the May rights
agreement with each share of May common stock.
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Owners of the ESOP preference shares are entitled to vote upon all matters
submitted to a vote of the owners of May common stock voting together with the
owners of May common stock as a single class. Each ESOP preference share carries
the number of votes equal to the number of shares of May common stock into which
such ESOP preference share could be converted on the record date for determining
the shareowners entitled to vote, rounded to the nearest one-tenth of a vote.
Owners of ESOP preference shares enjoy no special voting rights and their
consent is not specially required for the taking of any corporate action;
provided, however, that the vote of the owners of at least 66 2/3% of the
outstanding ESOP preference shares, voting separately as a series, is necessary
before certain actions may be taken which would adversely affect the rights of
the ESOP preference shares.
Owners of ESOP preference shares have certain additional rights if May
should
- consummate a merger, consolidation or similar extraordinary transaction
pursuant to which the outstanding shares of May common stock are, by
operation of law, exchanged solely for, or changed, reclassified or
converted solely into, stock of any successor or resulting company
(including May), which stock constitutes "employer securities" with
respect to a holder of ESOP preference shares (within the meaning of
Section 409(l) of the Internal Revenue Code, or any successor provisions
of law) and "qualifying employer securities" with respect to a holder of
ESOP preference shares (within the meaning of Section 407(d)(5) of ERISA,
or any successor provisions of law),
- consummate an extraordinary transaction pursuant to which the outstanding
shares of May common stock are, by operation of law, exchanged for, or
changed, reclassified or converted into, other stock, securities, cash or
any other property, or any combination thereof, or
- enter into any agreement providing for any extraordinary transaction
pursuant to which the outstanding shares of May common stock would, upon
consummation thereof, be, by operation of law, exchanged for, or changed,
reclassified or converted into, other stock, securities, cash or any other
property, or any combination thereof, other than any such consideration
constituted solely of qualifying employer securities and cash payments in
lieu of fractional shares, as the case may be.
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COMPARISON OF RIGHTS OF SHAREOWNERS OF MAY AND SHAREHOLDERS OF ZCMI
GENERAL
In the merger, you will receive May common stock and automatically will
become a shareowner of May. Your rights as a shareowner will be determined by
May's certificate of incorporation and bylaws and the Delaware General
Corporation Law (the "DGCL") instead of ZCMI's articles of incorporation and
bylaws and the URBCA. The following is a summary of the material differences in
the rights of shareowners of May and the shareholders of ZCMI following the
merger. This summary is necessarily general and does not purport to be a
complete discussion of, and is qualified in its entirety by reference to, the
URBCA, the DGCL and the other documents described below. See "Where You Can Find
More Information."
CHARTER AMENDMENTS
MAY. Under the DGCL, an amendment or change to the certificate of
incorporation generally requires the approval of the board of directors,
followed by a vote of the owners of a majority of the shares entitled to vote
thereon. When an amendment of the certificate would affect certain substantial
rights of the owners of a class of stock, or the shares of a series of a class,
the DGCL provides that the enactment of the amendment requires the approval of
the owners of a majority of the outstanding shares of the class entitled to vote
thereon. The May certificate of incorporation provides that any proposal to
amend, repeal or adopt any provision of the certificate of incorporation that is
inconsistent with the "business combination" proposed by an "interested
shareowner" or an affiliate or associate thereof must be approved by the
affirmative vote of at least two-thirds of the votes entitled to be cast thereon
(not including such "interested shareowner" or an affiliate or associate
thereof) unless approved by a majority of the board of directors.
ZCMI. Under the URBCA, an amendment or change to the articles of
incorporation must be proposed by and (in most cases) recommended to the
corporation's shareholders by the corporation's board of directors and requires
the approval of shareholders holding a majority of the voting power entitled to
vote on the matter unless otherwise specified in the corporation's articles of
incorporation, except that the board of directors of the corporation may,
without shareholder approval, make nominal changes to the corporation's articles
or effect a forward share split. The ZCMI articles of incorporation do not
specify otherwise.
AMENDMENTS TO BYLAWS
MAY. Under the DGCL, bylaws may be adopted, amended or repealed by the
shareowners entitled to vote thereon, provided, however, that any corporation
may, in its certificate of incorporation, confer this power upon the directors,
provided the power vested in the shareowners shall not be divested or limited
where the board of directors also has such power. The May certificate of
incorporation provides that the board of directors may adopt, repeal, alter,
amend or rescind the May bylaws by a vote of two-thirds of the entire board of
directors.
ZCMI. Under the URBCA, both the shareholders and the directors have the
power to amend a corporation's bylaws, except to the extent that the
corporation's articles of incorporation and/or bylaws reserve this power
exclusively to the shareholders. The ZCMI bylaws provide that the bylaws may be
altered, amended or repealed and new bylaws may be adopted by the board of
directors at any regular or special meeting of the board.
DIVIDEND RIGHTS
MAY. Under the DGCL, a corporation may pay dividends out of surplus or, if
no such surplus exists, out of net profits for the fiscal year in which such
dividends are declared and/or for its preceding
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fiscal year, provided, however, that dividends may not be paid out of net
profits if the capital of such corporation is less than the aggregate amount of
capital represented by the outstanding stock of all classes having a preference
upon the distribution of assets. The May bylaws provide that, subject to the
provisions in the May certificate of incorporation, May can pay dividends at
such times and in such amounts as the board of directors may determine. The May
certificate of incorporation does not limit this right.
ZCMI. Under the URBCA, a corporation is generally permitted, subject to
restriction in its articles of incorporation, to declare and pay
distributions/dividends, but only if the corporation is solvent and the payment
would not render the corporation insolvent. The ZCMI articles of incorporation
place no further restrictions on distributions.
SIZE AND CLASSIFICATION OF DIRECTORS
MAY. Under the DGCL, a board of directors must have one or more members, as
fixed by, or in the manner provided by, the bylaws unless fixed by the
certificate of incorporation. The May certificate of incorporation provides that
the number of directors will be not less than three nor more than 21 with the
exact number to be fixed by the May bylaws. The May bylaws currently fix the
number of directors at 14.
Delaware law enables directors to be divided into up to three classes in
either the certificate of incorporation or the bylaws. The May certificate of
incorporation provides for a classified board consisting of three classes, with
the number of directors divided as evenly as possible among the three classes.
Each class is elected for a term of three years. Each year the term of one class
of directors expires and approximately one-third of the directors are elected.
ZCMI. Under the URBCA, a corporation's board of directors must have at
least three members as specified in or fixed in accordance with the bylaws. The
ZCMI articles of incorporation provide that the number of directors will be
determined from time to time by the board, but will not be less than five or
more than 20.
Under the URBCA, a corporation's articles of incorporation may provide for
staggering the terms of its directors by dividing the directors into two or
three groups. The ZCMI articles of incorporation do not divide the directors
into groups. All directors are elected annually and hold office until the next
annual meeting of shareholders.
REMOVAL OF DIRECTORS
MAY. Under the DGCL, any director or the entire board of directors may be
removed, with or without cause, by the owners of a majority of the shares then
entitled to vote at an election of directors. If the board is classified (as the
May board is), shareowners may effect such removal only for cause.
ZCMI. Under the URBCA, directors may be removed, with or without cause, by
the affirmative vote of the holders of a majority of the voting power of a
corporation unless the corporation's articles of incorporation otherwise
provide. The ZCMI articles of incorporation do not otherwise provide.
LIABILITY OF DIRECTORS
MAY. The DGCL permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to such corporation or its shareowners for monetary damages arising from a
breach of fiduciary duty, except for:
- a breach of the duty of loyalty to the corporation or its shareowners,
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- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- a declaration of a dividend or the authorization of the repurchase or
redemption of stock in violation of the DGCL, or
- any transaction from which the director derived an improper personal
benefit.
The May certificate of incorporation eliminates director liability to the
maximum extent permitted by the DGCL.
ZCMI. The URBCA permits a corporation, if so provided in its articles of
incorporation, its bylaws or in a shareholder resolution, to eliminate or limit
the personal liability of a director for monetary damages due to any action
taken or any failure to take action as a director, except liability for:
- an improper financial benefit received by the director;
- intentional infliction of harm on the corporation or its shareholders;
- payment of distributions/dividends to shareholders making the corporation
insolvent; and
- an intentional violation of criminal law.
The ZCMI articles of incorporation eliminate directors liability to the maximum
extent permitted by Utah law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
MAY. Under the DGCL, a corporation
- may indemnify any person involved in a third party action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of being a director or officer of the corporation, against expenses
(including attorneys' fees), judgments, fines and settlement amounts
- actually and reasonably incurred in connection with such action, suit or
proceeding (and against expenses incurred in a derivative action on
behalf of such corporation), or
- incurred by reason of such person's being or having been a representative
of such corporation,
if such person acted in good faith and reasonably believed that his actions
were in or not opposed to the best interests of such corporation and, with
respect to any criminal proceeding, had no reasonable cause to believe that
his conduct was unlawful; and
- may advance to such director or officer expenses incurred by him in
defending any action, upon receipt of an undertaking by the person to
repay the amount advanced if it is ultimately determined that he is not
entitled to indemnification
A determination as to the amount of the indemnification to be made by the
corporation shall be made by a majority vote of the directors who are not
parties to such action, even though less than a quorum, or, if such directors so
direct, by independent legal counsel. No indemnification for expenses in
derivative actions is permitted under the DGCL where the person is adjudged
liable to the corporation, unless a court finds him entitled to such
indemnification. If, however, the person is successful in defending a third
party or derivative action, indemnification for expenses incurred is mandatory.
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The DGCL provides further that the provisions for indemnification contained
therein are nonexclusive of any other rights to which the party may be entitled
under any by-law, agreement or vote of shareowners or disinterested directors.
The May bylaws provide for indemnification of directors and officers to the
fullest extent permitted by law and authorize May to purchase and maintain
insurance on behalf of any such person whether or not May would have the power
to indemnify such director or officer against such liability under the DGCL.
ZCMI. Under the URBCA, a corporation may indemnify any person made a party
to a proceeding who is or was a director, against liability in the proceeding if
- his conduct was in good faith;
- he reasonably believed his conduct was in, or not opposed to, the
corporation's best interests; and
- in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
Utah law prohibits indemnification of a director if a director is adjudged
liable to the corporation in the following circumstances:
- in connection with a proceeding by or in the right of the corporation in
which the director was adjudged liable to the corporation; or
- in connection with any other proceeding charging that the director derived
an improper personal benefit, whether or not involving action in the
director's official capacity, the director is adjudged liable on the basis
of the improper personal benefit derived by the director.
Furthermore, under the URBCA, a corporation must, unless limited by the
articles of incorporation, indemnify a director or officer who was successful,
on the merits or otherwise, in the defense of any proceeding, or in the defense
of any claim, issue or matter in the proceeding, to which he was a party because
he is or was a director or officer of the corporation against reasonable
expenses incurred by him in connection with the defense.
Under the URBCA, a corporation may indemnify and advance expenses to an
officer who is not a director to a greater extent if not inconsistent with
public policy and if provided in its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
The ZCMI articles of incorporation provide for indemnification of directors
and officers to the fullest extent permitted by law and authorize ZCMI to
purchase and maintain insurance on behalf of any such person.
FIDUCIARY DUTIES OF DIRECTORS
MAY. Under the DGCL, directors have a fiduciary relationship to the
corporation and its shareowners and are required to discharge their duties in
good faith, and in a manner reasonably believed to be in the best interests of
the corporation and its shareowners. Directors must use the same care, including
reasonable inquiry, skill and diligence, that a person of ordinary prudence
would exercise under similar circumstances. In the absence of a breach of
fiduciary duty, a lack of good faith, or self-dealing, any act of the board of
directors, a committee of the board or an individual director is presumed to be
in the best interests of the corporation. Delaware courts also impose upon
directors a duty of care which requires directors to exercise informed business
judgment, whereby directors must inform themselves of all reasonably available
material information. In addition, Delaware courts have found a heightened
standard of conduct to be imposed on directors when responding to a proposed
change in control or engaging in a sale or auction of the corporation.
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ZCMI. The URBCA provides that directors must discharge their duties in good
faith, with the care that an ordinarily prudent person in a like position would
use under similar circumstances and in a manner which the director reasonably
believes to be in the best interests of the corporation. A director is not
liable to the corporation or its shareholders for any action taken, or failure
to take any action as a director, unless the director breached or failed to
perform the duties of his office in compliance with the URBCA and the breach or
failure to perform constitutes gross negligence, willful misconduct or
intentional infliction of harm on the corporation or the shareholders.
SPECIAL MEETINGS
MAY. Under the DGCL, a special meeting of the shareowners may be called by
the board of directors or such other person as may be authorized by the
certificate of incorporation or the bylaws. The May certificate of incorporation
provides that special meetings of shareowners may be called at any time only by
a majority of the entire board of directors.
ZCMI. The URBCA provides that a special meeting of shareholders may be
called by a majority of a corporation's directors, holders of at least 10% of
the votes entitled to be cast on any issue proposed to be considered at the
meeting, or any other person authorized by the bylaws to call a special meeting.
The ZCMI bylaws provide that special meetings may be called by the board of
directors and as otherwise provided by law.
ACTION BY SHAREOWNERS WITHOUT A MEETING
MAY. The DGCL provides that any action that may be taken at a shareowners'
meeting may be taken without a meeting, without prior notice and without a vote,
if the owners of common stock having not less than the minimum number of votes
otherwise required to approve the action at a meeting of shareowners consent in
writing, unless the certificate of incorporation provides otherwise. The May
certificate of incorporation expressly includes a provision requiring that
corporate action may only be taken by unanimous written consent.
ZCMI. The URBCA provides that any action that may be taken at a meeting of
shareholders may be taken without a meeting, without prior notice, if the
holders of common stock having not less than the minimum number of votes
otherwise required to approve the action at a meeting of shareholders consent in
writing, unless otherwise provided by a corporation's certificate of
incorporation. The ZCMI articles do not otherwise provide. However, the URBCA
provides that action by one or more written consents of less than all of a
corporation's shareholders may not be taken by a corporation in existence on
July 1, 1992 (ZCMI was in existence on that date) until a resolution providing
otherwise is approved by either a unanimous written consent of all shareholders
of the corporation or at a duly convened meeting of the shareholders. The
shareholders of ZCMI have not adopted such a resolution.
SHAREOWNER PROPOSALS
MAY. The DGCL does not include a provision restricting the manner in which
nominations for directors may be made by shareowners or the manner in which
business may be brought before a meeting. The May bylaws, however, include
detailed provisions regarding the procedures to be followed by shareowners with
respect to the business desired to be brought before the meeting and with
respect to the procedures to be followed in the nomination of directors by
shareowners.
ZCMI. The URBCA does not contain a provision restricting the manner in
which nominations for directors may be made by shareholders or the manner in
which business may be brought before an annual meeting of the shareholders.
Under the URBCA, only purposes within the purpose(s) described in the meeting
notice may be conducted at a special shareholders' meeting, unless notice of the
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meeting is waived by all shareholders. The ZCMI bylaws include detailed
provisions regarding the procedures to be followed by shareholders with respect
to the business desired to be brought before a meeting of the shareholders and
with respect to the procedures to be followed in the nomination of directors by
shareholders.
MERGERS AND MAJOR TRANSACTIONS
MAY. Under the DGCL, whenever the approval of the shareowners of a
corporation is required for an agreement of merger or consolidation or for a
sale, lease or exchange of all or substantially all of its assets, such
agreement, sale, lease or exchange must be approved by the affirmative vote of
the owners of a majority of outstanding shares entitled to vote thereon.
Notwithstanding the foregoing, unless required by its certificate of
incorporation, no vote of the shareowners of a constituent corporation surviving
a merger is necessary to authorize such merger if:
- the agreement of merger does not amend the certificate of incorporation of
such constituent corporation,
- each share of stock of such constituent corporation outstanding prior to
such merger is to be an identical outstanding or treasury share of the
surviving corporation after such merger,
- either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such common stock are
to be issued under such agreement of merger, or the number of shares of
common stock issued or so issuable does not exceed 20% of the number
thereof outstanding immediately prior to such merger, and
- certain other conditions are satisfied.
In addition, the DGCL provides that a parent corporation that is the record
holder of at least 90% of the outstanding shares of each class of stock of a
subsidiary may merge such subsidiary into such parent corporation without the
approval of such subsidiary's shareowners or board of directors.
Furthermore, the DGCL provides that no shareowner vote is required to
approve a merger of a constituent corporation with a single direct or indirect
wholly owned subsidiary of such corporation, subject to certain qualifications.
The May certificate of incorporation provides that a transaction which
constitutes a "business combination" proposed by or on behalf of an "interested
shareowner," or any affiliate or associate thereof, must be approved by the
affirmative vote of at least two-thirds of the votes entitled to be cast by
owners of all the outstanding shares of the corporation's stock entitled to vote
generally in the election of directors.
ZCMI. Under the URBCA, a plan of merger or share exchange must be
authorized by each voting group voting separately on the plan by a majority of
the shares entitled to be cast on the plan by that voting group. However,
notwithstanding the foregoing, unless required by the corporation's articles of
incorporation, action by the shareholders of the surviving corporation on a plan
of merger is not required if:
- The articles of incorporation, with certain exceptions, will not be
amended in the merger;
- Each shareholder of the surviving corporation will hold the same number of
shares with identical designations, preferences, limitations, and relative
rights immediately after the merger;
- The number of voting shares of the corporation outstanding immediately
after the merger, plus the number of voting shares issuable as a result of
the merger, will not exceed by more than 20% the total number of voting
shares of the surviving corporation outstanding immediately before the
merger; and
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- The number of participating shares outstanding immediately after the
merger, plus the number of participating shares issuable as a result of
the merger, will not exceed by more than 20% the total number of
participating shares outstanding immediately before the merger.
In addition, the URBCA permits a parent corporation owning at least 90% of
the outstanding shares of each class of a subsidiary corporation to merge the
subsidiary into itself or to merge itself into the subsidiary without a vote of
the shareholders of the subsidiary if all the provisions enumerated above are
met with respect to the merger. If the subsidiary is to be the surviving
corporation, the approval of the shareholders of the parent must be sought. The
ZCMI charter does not otherwise provide.
DISSENTERS' RIGHTS OF APPRAISAL
MAY. Under the DGCL, unless the certificate of incorporation of a
corporation provides otherwise, there are no appraisal rights provided in the
case of certain mergers, a sale or transfer of all or substantially all of its
assets or an amendment to the corporation's certificate of incorporation.
Moreover, the DGCL does not provide appraisal rights in connection with a merger
or consolidation, unless the certificate of incorporation provides otherwise, to
the owners of shares of a corporation that are either
- listed on a national securities exchange or designated as a national
market system security by the NASD, or
- held of record by more than 2,000 shareowners,
unless the applicable agreement of merger or consolidation requires the owners
of such shares to receive in exchange for such shares anything except:
- shares of stock of the resulting or surviving corporation,
- shares of stock of any other corporation listed on a national securities
exchange (or designated as described above) or held of record by more
than 2,000 holders,
- cash in lieu of fractional shares, or
- any combination of the foregoing.
In addition, the DGCL denies appraisal rights to the shareowners of the
surviving corporation in a merger if such merger did not require for its
approval the vote of the shareowners of such surviving corporation.
ZCMI. Under the URBCA, dissenters' rights are available for:
- any plan of merger to which a corporation is a party if a shareholder vote
is required;
- certain sales, leases, exchanges or other dispositions of all or
substantially all the corporation's assets; and
- certain share exchanges.
However, dissenters' rights are not permitted in such transactions (unless
otherwise provided in the corporation's articles of incorporation or bylaws or
by a resolution of the corporation's board of directors) if the stock is listed
on a national securities exchange or on the NASDAQ or if the stock is held by
2,000 or more shareholders. These provisions do not apply if the shareholder
receives for his shares anything except shares of the corporation surviving the
consummation of the plan of merger or share exchange, shares of a corporation
whose shares are listed on a national exchange or NASDAQ or held of record by
not less than 2,000 holders or cash in lieu of fractional shares.
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ANTI-TAKEOVER PROVISIONS
MAY. Under the DGCL, a corporation is prohibited from engaging in any
business combination with a person who, together with his affiliates or
associates owns (or within a three-year period did own) 15% or more of the
corporation's voting stock (an "interested shareowner"), unless
- prior to such date, the board of directors approved either the business
combination or the transaction which resulted in the shareowner becoming
an interested shareowner;
- the interested shareowner acquired 85% of the voting stock of the
corporation (excluding specified shares) upon consummation of the
transaction; or
- on or subsequent to such date the business combination is approved by the
board of directors of such corporation and authorized by the affirmative
vote (at an annual or special meeting and not by written consent) of at
least 66 2/3% of the outstanding voting shares of such corporation
(excluding shares held by such interested shareowner).
A "business combination" includes (i) mergers, consolidations and sales or other
dispositions of 10% or more of the assets of a corporation to or with an
interested shareowner, (ii) certain transactions resulting in the issuance or
transfer to an interested shareowner of any stock of such corporation or its
subsidiaries, and (iii) other transactions resulting in a disproportionate
financial benefit to an interested shareowner. This provision of the DGCL does
not apply to a corporation if the certificate of incorporation or by-laws
contain a provision expressly electing not to be governed by this provision or
the corporation does not have voting stock either listed on a national
securities exchange, authorized for quotation on an inter-dealer quotation
system of a registered national securities association or held of record by more
than 2,000 shareowners.
In addition, the May certificate of incorporation includes a "business
combination" provision substantially similar to that provided in the DGCL.
ZCMI. The URBCA provides that any person who makes a "control share
acquisition," that is who acquires 20% or more of the outstanding voting shares
or the power to direct the exercise of voting power of such shares of a publicly
held Utah corporation, is denied voting rights with respect to the acquired
shares unless a majority of the disinterested shareholders of the corporation
votes to restore the voting rights. Disinterested shareholders are shareholders
other than the officers and employee directors of the corporation and other than
the person making the control share acquisition. The shareholders of the
corporation must consider the status of those voting rights at the next annual
or special meeting of shareholders. The acquiror may accelerate the decision and
require the corporation to hold a special meeting of shareholders for the
purpose of considering the status of those rights if the acquiror
- files an "acquiring person statement" with the corporation; and
- agrees to pay the corporation's expenses of the meeting.
If the shareholders do not vote to restore voting rights to the control shares,
the corporation may, if its articles of incorporation or bylaws so provide,
redeem the control shares from the acquiror at fair market value. An acquisition
pursuant to a merger with respect to which the corporation is a party to the
agreement of merger and which is conducted pursuant to the merger provisions of
the URBCA, which generally will require shareholder approval, is not considered
a "control share acquisition" and is therefore exempt from these provisions of
Utah law.
A corporation's articles of incorporation or bylaws may provide that these
provisions of Utah law do not apply to control share acquisitions of shares of
the corporation after the adoption of the provision in the articles of
incorporation or bylaws. Neither the ZCMI articles of incorporation nor the ZCMI
bylaws contain such a provision.
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DISSOLUTION
MAY. Under the DGCL, if the board of the directors of the corporation deems
it advisable that the corporation should be dissolved and a majority of the
outstanding stock of the corporation entitled to vote thereon votes in favor of
the proposed dissolution, the corporation shall be dissolved upon the filing of
a certificate of dissolution with the Secretary of State of the State of
Delaware. The corporation shall continue after dissolution for the purposes of
defending suits and settling its affairs for a three-year period. Persons having
a claim against the corporation in a pending action, suit or proceeding shall be
given notice and file their claims according to certain procedures specified in
the DGCL. A corporation or successor entity which has given notice in accordance
with the procedures specified in Section 280(a) of the DGCL shall petition the
Court of Chancery to determine the amount of security that the corporation must
provide that will be reasonably likely to be sufficient as compensation for any
claim against the corporation which is the subject of a pending action, suit or
proceeding, which is not barred and which is likely to arise or become known to
the corporation or successor entity within five years after the date of
dissolution or such longer period as the Court of Chancery may determine not to
exceed ten years. Under the DGCL, directors of a dissolved corporation that
comply with the payment and distribution procedures provided therein shall not
be personally liable to the claimants of the dissolved corporation.
ZCMI. For a proposal to dissolve a Utah corporation to be authorized, the
board of directors generally must recommend the dissolution to the shareholders
and the shareholders entitled to vote on the dissolution proposal must approve
the proposal by a majority of all the votes entitled to be cast on the proposal
by each voting group entitled to vote separately on the proposal, unless a
greater vote is required by the corporation's articles of incorporation, bylaws
or by the board of directors. Dissolution, once authorized, is effected by
delivering articles of dissolution to the Division of Corporations and
Commercial Code, but may be revoked by the corporation within 120 days after the
effective date of the dissolution if authorized in the same manner as the
dissolution was authorized. A dissolved corporation continues its corporate
existence, but may not carry on any business except that appropriate to wind up
and liquidate the business and affairs of the corporation. A dissolved
corporation may dispose of the known claims against it by following the
procedures outlined in the URBCA. Claims may be enforced under the applicable
provisions of the URBCA against the dissolved corporation to the extent of the
corporation's undistributed assets or against a shareholder of the dissolved
corporation if the corporation's assets have been distributed in liquidation,
but a shareholder's total liability for all claims may not exceed the total
value of the assets distributed to him as that value is determined at the time
of the distribution. A dissolved corporation must either maintain a registered
office in the State of Utah to accept service of process on its behalf or be
deemed to have authorized service of process on it by registered or certified
mail, return receipt requested, to the address of its principal office as set
forth in its articles of dissolution.
RIGHTS AGREEMENTS
MAY. May has in place a "shareowner rights plan" pursuant to which a right
is attached to each outstanding share of May common stock. The rights become
exercisable only under certain circumstances involving actual or potential
acquisitions of May's common stock by a person or affiliated persons. See
"DESCRIPTION OF MAY CAPITAL STOCK."
ZCMI. ZCMI does not have a rights plan.
PREEMPTIVE, SUBSCRIPTION OR REDEMPTION RIGHTS
MAY. The owners of May common stock do not have preemptive, subscription,
redemption or conversion rights.
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ZCMI. The owners of ZCMI common stock do not have preemptive, subscription,
redemption or conversion rights.
LEGAL MATTERS
The validity of the shares of May common stock to be issued in the merger is
being passed on for May by Alan E. Charlson, Esq., senior vice president and
chief counsel of May. Mr. Charlson beneficially owns 10,253 shares of May common
stock.
Stoel Rives LLP, counsel to ZCMI, has delivered an opinion concerning
certain United States federal income tax consequences of the merger.
EXPERTS
The consolidated financial statements and schedule of May and its
subsidiaries incorporated in this proxy statement/prospectus by reference to the
May Annual Report on Form 10-K for the period ended January 30, 1999, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports dated February 10, 1999, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
With respect to May's unaudited interim financial information for the
quarters ended May 1, 1999 and July 31, 1999, Arthur Andersen LLP has applied
limited procedures in accordance with professional standards for a review of
that information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
reports on unaudited interim financial information because those reports are not
a "report" or a "part" of the registration statement prepared and certified by
the accountants within the meaning of Sections 7 and 11 of the Act.
The financial statements and related financial statement schedule of ZCMI
incorporated in this proxy statement/prospectus by reference to the ZCMI Annual
Report on Form 10-K/A for the period ended January 30, 1999, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
May and ZCMI file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements and other information they file at the SEC's public reference rooms
at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call 1-800-SEC-0330 for further information on the public reference
rooms. You may also request copies by mail from the Public Reference Section of
the SEC, 450 South Fifth Street, N.W., Room 1024, Washington, D.C., at
prescribed rates. These filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
http://www.sec.gov.
May filed a registration statement on Form S-4 to register with the SEC the
May common stock to be issued to ZCMI shareholders in the merger. This proxy
statement/prospectus is part of that registration statement and constitutes a
prospectus of May in addition to being a proxy statement for ZCMI. This proxy
statement/prospectus also constitutes a prospectus of ZCMI Reserve Trust. As
allowed by the SEC's rules, this proxy statement/prospectus does not contain all
of the information you can find in the registration statement or the exhibits to
the registration statement.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information that
we include in this proxy statement/prospectus. This proxy statement/prospectus
incorporates by reference the documents set forth below that have previously
been filed with the SEC. These documents contain important information about
May, ZCMI and their finances.
<TABLE>
<CAPTION>
MAY SEC FILINGS PERIOD DATE FILED
- --------------- ------ ----------
<S> <C> <C>
Annual Report on Form 10-K Year ended January 30, 1999 April 21, 1999
Quarterly Report on Form 10-Q Quarter ended May 1, 1999 June 8, 1999
Quarterly Report on Form 10-Q Quarter ended July 31, 1999 September 8, 1999
Form S-8 Registration Statement April 13, 1999
Current Report on Form 8-K April 21, 1999
Current Report on Form 8-K July 15, 1999
</TABLE>
<TABLE>
<CAPTION>
ZCMI SEC FILINGS PERIOD DATE FILED
- ---------------- ------ ----------
<S> <C> <C>
Annual Report on Form 10-K Year ended January 30, 1999 April 30, 1999
Annual Report on Form 10-K/A Year ended January 30, 1999 September 16, 1999
Annual Report on Form 10-K/A Year ended January 30, 1999 October 12, 1999
Quarterly Report on Form 10-Q Quarter ended May 1, 1999 June 16, 1999
Quarterly Report on Form 10-Q/A Quarter ended May 1, 1999 June 23, 1999
Quarterly Report on Form 10-Q/A Quarter ended May 1, 1999 September 20, 1999
Quarterly Report on Form 10-Q/A Quarter ended May 1, 1999 October 12, 1999
Quarterly Report on Form 10-Q Quarter ended July 31, 1999 September 14, 1999
Quarterly Report on Form 10-Q/A Quarter ended July 31, 1999 September 16, 1999
Current Report on Form 8-K February 11, 1999
Current Report on Form 8-K October 27, 1999
</TABLE>
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We also incorporate by reference additional documents that we file with the
SEC between the date of this proxy statement/prospectus and the effective time
of the merger.
Most of these documents (other than some exhibits) are available to you for
free if you call or write to us and ask for them. You should direct any requests
to:
<TABLE>
<S> <C>
Zions Co-operative Mercantile Institution The May Department Stores Company
2200 South 900 West 611 Olive Street
Salt Lake City, Utah 84137 St. Louis, Missouri 63101
Attention: Keith C. Saunders Attention: Corporate Secretary
Telephone: (801) 579-6404 Telephone Number: (314) 342-6330
</TABLE>
May supplied all information contained or incorporated by reference in this
proxy statement/ prospectus relating to May, and ZCMI supplied all such
information relating to ZCMI.
We have not authorized anyone to give you any information or to make any
representations about the merger and other transactions we discuss in this proxy
statement/prospectus other than those contained herein or in the documents we
incorporate herein by reference. If you are given any information or
representations about these matters that is not discussed or incorporated in
this proxy statement/prospectus, you must not rely on that information. This
proxy statement/prospectus is not an offer to sell or a solicitation of an offer
to buy securities anywhere or to anyone where or to whom we are not permitted to
offer or sell securities under applicable law. The delivery of this proxy
statement/ prospectus or the common stock of May offered hereby does not, under
any circumstances, mean that there has been no change in the affairs of May or
ZCMI since the date hereof. It also does not mean that the information in this
proxy statement/prospectus or in the documents we incorporate herein by
reference is correct after this date.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
about the financial condition, results of operations and business of May and
ZCMI. These statements may be made expressly in this document, or may be
"incorporated by reference" to other documents filed with the SEC and may
include statements for the period following the merger. You can find many of
these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," or similar expressions used in this proxy
statement/prospectus or incorporated herein.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors which may cause the actual results, performance or
achievements of May or ZCMI to be materially different from any future results,
performance or achievements expressed or implied by us in those statements
include, among others, the following:
- the competitive nature of the department store and retail merchandising
business;
- the ability of May to successfully integrate the acquisition of ZCMI and
other business acquisitions;
- the possibility of antitrust scrutiny by the Antitrust Division of the
Department of Justice and the Federal Trade Commission, including
limitations on future acquisition opportunities and possible divestiture
requirements;
- consumer preferences and fashion trends; and
- year 2000 readiness of merchandise vendors and service providers.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. May shareowners and ZCMI
58
<PAGE>
shareholders are cautioned not to place undue reliance on such statements, which
speak only as of the date of this proxy statement/prospectus or, in the case of
documents incorporated by reference, the dates of such documents. See "Risk
Factors."
Neither May nor ZCMI undertakes any responsibility to release publicly any
revisions to these forward-looking statements to take into account events or
circumstances that occur after the date of this proxy statement/prospectus.
Additionally, neither May nor ZCMI undertakes any responsibility to update you
on the occurrence of any unanticipated events which may cause actual results to
differ from those expressed or implied by the forward-looking statements
contained or incorporated by reference in this proxy statement/prospectus.
59
<PAGE>
ANNEX I
AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
THE MAY DEPARTMENT STORES COMPANY
MS ACQUISITION, INC.
AND
ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
OCTOBER 14, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
ARTICLE I................................................... I-1
THE MERGER.................................................. I-1
Section 1.1 The Merger.................................... I-1
Section 1.2 Effective Time................................ I-2
Section 1.3 Closing....................................... I-2
Section 1.4 Articles of Incorporation; Bylaws............. I-2
Section 1.5 Directors and Officers of the Surviving
Corporation............................................... I-2
ARTICLE II.................................................. I-2
CONVERSION OF SHARES........................................ I-2
Section 2.1 Conversion of Common Stock.................... I-2
Section 2.2 Exchange of Certificates...................... I-3
Section 2.3 Company Option Plans; Restricted Shares....... I-5
Section 2.4 Dissenters' Rights............................ I-5
Section 2.5 Stockholders' Meeting......................... I-5
ARTICLE III................................................. I-7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... I-7
Section 3.1 Organization.................................. I-7
Section 3.2 Capitalization................................ I-7
Section 3.3 Authorization; Validity of Agreement.......... I-8
Section 3.4 No Violations; Consents and Approvals......... I-8
Section 3.5 SEC Reports and Financial Statements.......... I-9
Section 3.6 Absence of Certain Changes.................... I-9
Section 3.7 No Undisclosed Liabilities.................... I-9
Section 3.8 Information in Registration Statement and
Proxy Statement........................................... I-9
Section 3.9 Employee Benefit Plans; ERISA................. I-10
Section 3.10 Litigation; Compliance with Law.............. I-12
Section 3.11 Intellectual Property........................ I-12
Section 3.12 Company Agreements........................... I-12
Section 3.13 Taxes........................................ I-13
Section 3.14 Environmental Matters........................ I-14
Section 3.15 No Default................................... I-15
Section 3.16 Opinion of Financial Advisors................ I-15
Section 3.17 Brokers...................................... I-16
Section 3.18 Property..................................... I-16
Section 3.19 Board Recommendations........................ I-16
Section 3.20 Labor Matters................................ I-16
Section 3.21 Year 2000.................................... I-16
Section 3.22 Insurance.................................... I-16
Section 3.23 Accounts Receivable; Inventory............... I-17
Section 3.24 Real Estate Matters.......................... I-17
ARTICLE IV.................................................. I-18
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.... I-18
Section 4.1 Organization.................................. I-18
Section 4.2 Authorization; Validity of Agreement.......... I-18
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 4.3 Consents and Approvals; No Violations......... I-19
Section 4.4 Information in Registration Statement and
Proxy Statement........................................... I-19
Section 4.5 Parent Common Stock........................... I-19
Section 4.6 Absence of Certain Changes.................... I-20
Section 4.7 No Undisclosed Liabilities.................... I-20
Section 4.8 Litigation; Compliance with Law............... I-20
Section 4.9 No Default.................................... I-21
Section 4.10 Property..................................... I-21
Section 4.11 Year 2000.................................... I-21
ARTICLE V................................................... I-21
COVENANTS................................................... I-21
Section 5.1 Interim Operations of the Company............. I-21
Section 5.2 No Solicitations.............................. I-24
Section 5.3 Access to Information......................... I-24
Section 5.4 Further Action; Reasonable Best Efforts....... I-24
Section 5.5 Employee Benefits............................. I-24
Section 5.6 Notification of Certain Matters............... I-27
Section 5.7 Directors' and Officers' Insurance and
Indemnification........................................... I-27
Section 5.8 Existing Credit Documents..................... I-28
Section 5.9 Parent Undertaking............................ I-29
Section 5.10 WARN Act..................................... I-29
Section 5.11 Fashion Place................................ I-29
ARTICLE VI.................................................. I-29
CONDITIONS.................................................. I-29
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger......................................... I-29
Section 6.2 Conditions to the Obligation of the Company to
Effect the Merger......................................... I-29
Section 6.3 Conditions to Obligations of Parent and
Acquisition to Effect the Merger.......................... I-30
Section 6.4 Election...................................... I-30
ARTICLE VII................................................. I-30
TERMINATION................................................. I-30
Section 7.1 Termination................................... I-30
Section 7.2 Effect of Termination......................... I-31
ARTICLE VIII................................................ I-32
MISCELLANEOUS............................................... I-32
Section 8.1 Fees and Expenses............................. I-32
Section 8.2 Amendment; Waiver............................. I-32
Section 8.3 Survival...................................... I-32
Section 8.4 Notices....................................... I-32
Section 8.5 Interpretation................................ I-33
Section 8.6 Section Headings.............................. I-33
Section 8.7 Counterparts.................................. I-33
Section 8.8 Entire Agreement.............................. I-33
Section 8.9 Severability.................................. I-34
Section 8.10 Governing Law; Waiver of Jury Trial;
Enforcement............................................... I-34
Section 8.11 Assignment................................... I-34
Section 8.12 Continuation of Attorney-Client Privilege.... I-34
Section 8.13 Publicity.................................... I-34
</TABLE>
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<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ---- ------------
<S> <C>
Acquisition................................................. Heading
Acquisition Proposal........................................ 5.2
Affiliates.................................................. 8.5
Agreement................................................... Heading
Assertion................................................... 5.7
Associates.................................................. 8.5
Articles of Merger.......................................... 1.2
Audit....................................................... 3.13(b)
Average Closing Price....................................... 2.1(a)
beneficial ownership........................................ 8.5
Certificate................................................. 2.2(b)
Certificates................................................ 2.2(b)
Closing..................................................... 1.3
Closing Date................................................ 1.3
Code........................................................ Recitals
Company..................................................... Heading
Company Agreements.......................................... 3.4
Company Balance Sheet....................................... 3.23(a)
Company Common Stock........................................ 2.1
Company Employee............................................ 5.5(a)
Company Employees........................................... 5.5(a)
Company Option.............................................. 2.3
Company SEC Documents....................................... 3.5
Conflict Matter............................................. 5.7
Disclosure Schedule......................................... 3.4
Dissenting Shares........................................... 2.4
DLJ......................................................... 2.5(a)(iii)
Effective Time.............................................. 1.2
Election.................................................... 6.4
Election Date............................................... 6.4
Encumbrance................................................. 3.24(a)
Encumbrances................................................ 3.24(a)
Environmental Claim......................................... 3.14(e)(i)
Environmental Law........................................... 3.14(e)(ii)
ERISA....................................................... 3.9(a)
ERISA Affiliate............................................. 3.9(a)
ERISA Plans................................................. 3.9(a)
Exchange Act................................................ 2.5(a)(ii)
Existing Credit Documents................................... 5.8
GAAP........................................................ 3.5
Government Antitrust Entity................................. 5.4(c)
Governmental Entity......................................... 3.4
Hazardous Substance......................................... 3.14(e)(iii)
HSR Act..................................................... 3.4
Indemnified Liability....................................... 5.7
Indemnified Parties......................................... 5.7
Indemnified Party........................................... 5.7
</TABLE>
I-iv
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<TABLE>
<CAPTION>
TERM SECTION
- ---- ------------
<S> <C>
Indemnitor.................................................. 5.7
Indemnitors................................................. 5.7
Intellectual Property....................................... 3.11
Key Executive............................................... 5.1(a)
Key Executives.............................................. 5.1(a)
knowledge of the Company.................................... 3.6
Lease....................................................... 3.24(b)
Leases...................................................... 3.24(b)
Leased Properties........................................... 3.24(a)
Leased Property............................................. 3.24(a)
Liens....................................................... 3.4
made available.............................................. 8.5
Majority Shareholder........................................ Recitals
Material Adverse Effect..................................... 3.1
Material Company Agreements................................. 3.12
Merger...................................................... 1.1
Merger Consideration........................................ 2.1(a)
Merger Communications....................................... 8.12
Non-Key Employees........................................... 5.1(d)
Option Plan................................................. 2.3
Owned Property.............................................. 3.24(a)
Parent...................................................... Heading
Parent Common Stock......................................... 2.1(a)
Parent Filings.............................................. 4.5(c)
Parties..................................................... Heading
Party....................................................... Heading
Paying Agent................................................ 2.2(a)
PBGC........................................................ 3.9(c)
Person...................................................... 3.1
Plans....................................................... 3.9(a)
Primary Loan Agreement...................................... 5.8
Proxy Statement............................................. 2.5(a)(iii)
Real Properties............................................. 3.24(a)
Real Property............................................... 3.24(a)
Registration Statement...................................... 2.5(a)(ii)
Release..................................................... 3.14(e)(iv)
Representatives............................................. 5.2
Restricted Plan Shares...................................... 2.3(b)
SEC......................................................... 2.5(a)(iii)
Securities Act.............................................. 3.5
Shareowner Agreement........................................ Recitals
Shareowner Agreements....................................... Recitals
Shares...................................................... 2.1
Special Meeting............................................. 2.5(a)(i)
Subsidiary.................................................. 3.1
Supplemental Loan Agreement................................. 5.8
Surviving Corporation....................................... 1.1
Taxes....................................................... 3.13(i)
Tax Return.................................................. 3.13(i)
Twelve Month Premiums....................................... 5.7
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- ---- ------------
<S> <C>
URBCA....................................................... Recitals
Utah DOC.................................................... 1.2
Voting Debt................................................. 3.2(a)
ZCMI Retirement Plan........................................ 5.5(b)
1934 Act.................................................... 2.5(a)(ii)
1934 Act Rules.............................................. 2.5(a)(ii)
</TABLE>
I-vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of October 14,
1999, by and among THE MAY DEPARTMENT STORES COMPANY, a Delaware corporation
("PARENT"), MS ACQUISITION, INC., a Utah corporation and a wholly-owned
subsidiary of Parent ("ACQUISITION"), and ZIONS CO-OPERATIVE MERCANTILE
INSTITUTION, a Utah corporation (the "COMPANY"). Parent, Acquisition and the
Company are later in this Agreement sometimes referred to individually as a
"PARTY" or collectively as the "PARTIES."
RECITALS
This Agreement is entered into with reference to the following facts,
objectives, and definitions:
A. The Boards of Directors of Parent, Acquisition and the Company have each
approved, and, if required by law, have determined to recommend to their
respective stockholders, the acquisition of the Company by Parent upon the terms
and subject to the conditions set forth in this Agreement, which contemplates a
transaction in which Parent will acquire all of the outstanding capital stock of
the Company for securities of Parent as described herein through a reverse
subsidiary merger of Acquisition with and into the Company.
B. It is contemplated by each of the Parties that the transaction described
above will constitute a tax-free reorganization under Section 368(a)(2)(E) of
the Internal Revenue Code of 1986, as amended (the "CODE").
C. In furtherance of such acquisition, the Boards of Directors of Parent,
Acquisition and the Company have each approved this Agreement and the merger of
Acquisition with and into the Company in accordance with the terms of this
Agreement and the Utah Revised Business Corporation Act (the "URBCA").
D. Concurrently with the execution and delivery of this Agreement, and as a
condition and inducement to the willingness of Parent and Acquisition to enter
into this Agreement, Parent has entered into separate Shareowner Voting
Agreements each dated as of the date hereof with each of ZCMI Reserve Trust (the
"MAJORITY SHAREHOLDER"), Richard Madsen and Patricia Madsen (collectively, the
"SHAREOWNER AGREEMENTS" and, individually, a "SHAREOWNER AGREEMENT"). Pursuant
to the Shareowner Agreements, each of the Majority Shareholder, Richard Madsen
and Patricia Madsen has granted an option in favor of Parent to purchase all of
the shares of Company Common Stock (as hereafter defined) held by each,
respectively, and has granted Parent an irrevocable proxy to vote all of the
shares of Company Common Stock held by each, respectively, in favor of the
Merger (as hereafter defined).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the Parties 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 URBCA, at the Effective Time (as
defined in Section 1.2), Acquisition shall be merged (the "Merger") with and
into the Company and the separate corporate existence of Acquisition shall
cease. After the Merger, the Company shall continue as the surviving corporation
(sometimes later in this Agreement referred to as the "SURVIVING CORPORATION").
The Merger shall have the effects set forth in the URBCA. Without limiting the
generality of the foregoing, at the Effective Time, all the rights, privileges,
immunities, powers, properties and franchises of the Company and Acquisition
shall
I-1
<PAGE>
vest in the Surviving Corporation and all obligations, duties, debts and
liabilities of the Company and Acquisition shall become the obligations, duties,
debts and liabilities of the Surviving Corporation.
Section 1.2 EFFECTIVE TIME. On or as promptly as practicable following the
Closing (as hereafter defined), the Company will cause appropriate Articles of
Merger (the "ARTICLES OF MERGER") to be filed with the Department of Commerce,
Division of Corporations and Commercial Code, of the State of Utah (the "UTAH
DOC") in such form and executed as provided in the URBCA. The Merger shall
become effective at such time as the Articles of Merger have been duly filed
with the Utah DOC or such later time as is agreed upon by the Parties and
specified in the Articles of Merger in accordance with the URBCA, and such time
is later in this Agreement referred to as the "Effective Time."
Section 1.3 CLOSING. The closing of the Merger (the "CLOSING") will take
place at 10:00 a.m., Salt Lake City time, on a date to be specified by the
Parties, which shall be no later than the second business day after satisfaction
or waiver of all of the conditions set forth in Article VI, other than those
conditions (including the vote of the shareholders of the Company) that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions (the "CLOSING DATE"), at the offices of Stoel Rives
LLP, 201 South Main Street, Suite 1100, Salt Lake City, UT 84111, unless another
date or place is agreed to in writing by the Parties. Notwithstanding the
foregoing, in the event the Parent delivers an Election (as hereafter defined)
in the manner set forth in Section 6.4, the Closing will take place at a time
prior to February 1, 2000 as determined in the sole discretion of Parent.
Section 1.4 ARTICLES OF INCORPORATION; BYLAWS. The Articles of
Incorporation of the Company, in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law. The Bylaws of the Company
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the Articles
of Incorporation and such Bylaws.
Section 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
(a) The directors of Acquisition immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the URBCA, and the Surviving Corporation's Articles of Incorporation and
Bylaws.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
until their respective successors are duly appointed and qualified, or until
their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 CONVERSION OF COMMON STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Parties or the
holders of any shares of common stock, par value $.001 per share, of the Company
(the "SHARES" or the "COMPANY COMMON STOCK"):
(a) Each issued and outstanding share of the Company Common Stock (other
than Shares to be canceled in accordance with Section 2.1(c), Restricted Plan
Shares (as defined in Section 2.3(b)) to be canceled in accordance with
Section 2.3(b) and Dissenting Shares (as defined in Section 2.4)) shall be
converted into the right to receive such number of shares of the common stock of
Parent ("PARENT COMMON STOCK") which is the equivalent of $22.50, based on the
arithmetic average rounded to two decimal places of the high and low trading
prices of the Parent Common Stock (the "AVERAGE CLOSING PRICE") as reported on
the Composite Tape for New York Stock Exchange listed securities for the 12(th)
through the 3(rd) business days immediately preceding the Closing Date (the
"MERGER CONSIDERATION"), upon surrender of the certificate formerly representing
such share of the Company Common Stock in
I-2
<PAGE>
the manner provided in Section 2.2. All such shares of the Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2. Any payment made
pursuant to this Section 2.1(a) shall be made net of applicable withholding
taxes to the extent such withholding is required by law in accordance with
Section 2.2(d).
(b) Each issued and outstanding share of common stock, par value $1.00 per
share, of Acquisition shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
(c) All shares of Company Common Stock that are owned at the Effective Time
by the Company, Parent, Acquisition or any other direct or indirect wholly-owned
Subsidiary (as later defined) of the Company, Parent or Acquisition shall be
canceled and retired and no Merger Consideration shall be delivered in exchange
therefor.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall designate an agent reasonably
satisfactory to the Company to act as paying agent in connection with the Merger
(the "PAYING AGENT") for purposes of effecting the exchange of the Merger
Consideration for certificates which, prior to the Effective Time, represented
Shares and with respect to which the owner thereof is entitled to receive the
Merger Consideration pursuant to Section 2.1. On the Closing Date, Parent and
Acquisition will provide the Paying Agent, in trust for the benefit of the
holders of Shares, that number of whole shares of Parent Common Stock equal to
the aggregate Merger Consideration to be paid to the holders of Shares pursuant
to Section 2.1.
(b) As promptly as practicable after the Effective Time, the Paying Agent
shall mail 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" or individually, a "CERTIFICATE"), a form
of letter of transmittal that is reasonably acceptable to the Company (which
shall specify that delivery shall be effective, and risk of loss and title to a
Certificate shall pass, only upon proper delivery of the Certificate to the
Paying Agent) and instructions for effecting the surrender of a Certificate in
consideration of payment of the Merger Consideration for the Shares represented
by the Certificate. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed and completed in
accordance with the instructions thereto, and any other required documents, the
holder of such Certificate shall receive promptly in exchange therefor the
Merger Consideration for each Share formerly evidenced thereby, and such
Certificate shall forthwith be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of a Certificate. If payment 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 be properly endorsed or otherwise be in proper form for transfer and
that the person requesting such payment shall (i) pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or (ii) establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable. One
hundred eighty (180) days after the Effective Time, the Surviving Corporation
shall be entitled to require the Paying Agent to deliver to it any shares of
Parent Common Stock which have been made available to the Paying Agent for
payment of the Merger Consideration hereunder 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 unsecured creditors thereof with respect to
the cash payable upon due surrender of their Certificate(s). Parent shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the distribution of the Merger Consideration for Shares.
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<PAGE>
From and after the Effective Time, until surrendered in accordance with the
provisions of this Section 2.2(b), each Certificate (other than Certificates
which represented (i) Restricted Plan Shares, (ii) Shares held by the Company,
Parent, Acquisition or any direct or indirect wholly-owned Subsidiary of Parent
or Acquisition and (iii) Dissenting Shares) shall represent for all purposes
only the right to receive consideration equal to the Merger Consideration
multiplied by the number of Shares evidenced by such Certificate, without any
interest thereon. From and after the Effective Time, holders of Certificates
shall have no right to vote or to receive any dividends or other distributions
with respect to any Shares which were theretofore represented by such
Certificates, other than any dividends or other distributions payable to holders
of record as of a date prior to the Effective Time, and shall have no other
rights other than as provided herein or by applicable law. Unless and until any
such outstanding Certificate shall be so surrendered, no dividend or other
distribution, if any, payable to holders of record of Parent Common Stock as of
any date on or subsequent to the Effective Time shall be paid to the holder of
such outstanding Certificate, but upon surrender of such outstanding
Certificate, there shall be paid to the record owner of such outstanding
Certificate shares of Parent Common Stock issued in exchange therefor and the
amount, without interest thereon, of dividends and other distributions, if any,
which theretofore and subsequent to the Effective Time have become payable with
respect to the number of whole shares of Parent Common Stock represented
thereby.
(c) From and after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Paying Agent or the Surviving Corporation,
they shall be canceled and exchanged for the Merger Consideration in accordance
with the procedures set forth in this Article II.
(d) The Paying Agent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of Shares such amounts, if any, as the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Code. To the
extent that amounts are so withheld by the Paying Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Certificate(s) in respect of which such deduction and withholding
was made by the Paying Agent.
(e) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this
Article II; PROVIDED, that the person to whom the Merger Consideration is paid
shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
(f) No fractional shares of Parent Common Stock shall be issued in the
Merger, but, in lieu of any such fractional shares of Parent Common Stock, each
holder of Shares who would otherwise have been entitled to a fraction of a share
of Parent Common Stock upon surrender of stock certificates for exchange
pursuant to this Section 2.2 will be paid an amount of cash (without interest)
determined by multiplying (i) the Average Closing Price by (ii) the fractional
share interest in Parent Common Stock to which such holder would otherwise be
entitled.
(g) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock split, combination, exchange
of shares or similar readjustment, or a stock dividend thereon shall be declared
with a record date after the Election Date, if any, and prior to the Effective
Time, the number of shares or class of Parent
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<PAGE>
Common Stock to be issued and delivered in the Merger in exchange for each
outstanding share of Company Common Stock as provided in this Agreement shall be
appropriately adjusted.
Section 2.3 COMPANY OPTION PLANS; RESTRICTED SHARES.
(a) The Company shall take such actions as are appropriate to provide that,
immediately prior to the Closing Date, (i) each option (a "COMPANY OPTION")
outstanding under the Company's ZCMI 1996 Equity-Based Incentive Plan (the
"OPTION PLAN"), whether or not then exercisable or vested, shall become fully
exercisable and vested, (ii) each such Company Option shall be canceled and
(iii) in consideration of such cancellation and in full satisfaction of all
rights of the holder of the Company Option and as promptly as possible after the
Effective Time Parent shall cause the Paying Agent to provide to the holder of
the Company Option cash in an amount equal to the product of (A) the excess of
$22.50 over the exercise price of the Company Option, multiplied by (B) the
number of Shares subject to the Company Option (such payment to be net of
applicable withholding taxes).
(b) The Company shall take such actions as are appropriate to provide that,
immediately prior to the Closing Date, (i) each restricted Share of Company
Common Stock issued to employees of the Company pursuant to the Option Plan (the
"RESTRICTED PLAN SHARES") shall be canceled and (ii) in consideration of such
cancellation and in full satisfaction of all rights of each holder of the
Restricted Plan Shares and as promptly as possible after the Effective Time
Parent shall cause the Paying Agent to provide to each holder of the Restricted
Plan Shares cash in an amount equal to the product of $22.50 multiplied by the
number of Restricted Plan Shares held by each such holder (such payment to be
net of applicable withholding taxes).
(c) The Company shall take such actions as are appropriate to provide that
from and after the Closing Date the Company will not be bound by any options,
warrants, rights or agreements which would entitle any person, other than Parent
or its wholly-owned subsidiaries, to own beneficially, or to receive any
payments (other than as otherwise contemplated by this Agreement) in respect of,
any capital stock or equity of the Company or the Surviving Corporation.
Section 2.4 DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement
to the contrary, Shares that are outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has delivered a written demand for payment of such
shares in accordance with Sections 16-10a-1301 through 16-10a-1331 of the URBCA
("DISSENTING SHARES"), shall not be converted into the right to receive the
Merger Consideration, as provided in Section 2.1, unless and until such holder
fails to perfect or effectively withdraws or otherwise loses his or her right to
payment as a dissenting shareholder under the URBCA. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or otherwise
loses his or her right to payment as a dissenting shareholder, such Dissenting
Shares shall thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration, without
interest or dividends thereon. The Company shall give Parent prompt notice of
any demands received by the Company for payment of Shares, and, prior to the
Effective Time, Parent shall have the right to participate in all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
Section 2.5 STOCKHOLDERS' MEETING.
(a) As soon as practicable following the execution and delivery of this
Agreement,
(i) the Company, acting through its Board of Directors, shall, in
accordance with applicable law, duly call, give notice of, convene and hold
a special meeting (the "SPECIAL MEETING") of its stockholders and submit
this Agreement to a vote of the Company's stockholders;
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(ii) Parent and the Company shall prepare a Joint Proxy/Registration
Statement (the "REGISTRATION STATEMENT") which shall comply as to form with
all applicable laws and which shall include all information concerning the
Company, Parent and Acquisition required to be set forth therein pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the
applicable rules and regulations thereunder (the "1934 ACT RULES" and,
together with the 1934 Act, the "EXCHANGE ACT");
(iii) the Company shall, subject to review of the Registration Statement
by the Securities and Exchange Commission (the "SEC") and notification
(either orally or in writing) to the Company that the SEC has no further
comments relating to such Registration Statement, distribute a letter to
stockholders, notice of meeting, proxy statement and form of proxy to
stockholders of the Company in connection with the Merger (collectively,
including any amendments or supplements thereto, the "PROXY STATEMENT"), and
include in the Proxy Statement (A) the recommendation of the Board of
Directors of the Company that stockholders of the Company vote to approve
this Agreement and the Merger and (B) the written opinion of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") that the Merger
Consideration is fair to the stockholders of the Company (other than
stockholders who are Affiliates of the Company) from a financial point of
view;
(iv) the Company shall file a definitive form of the Proxy Statement,
which shall reflect compliance with the comments and requests in accordance
with the Exchange Act from the SEC as the Company and Parent shall deem
appropriate;
(v) the Company shall distribute the definitive Proxy Statement to its
stockholders in accordance with applicable law; and
(vi) the Company shall take all such other action reasonably necessary
or appropriate to obtain the lawful approval of this Agreement by the
stockholders of the Company.
(b) The Company and Parent shall each pay one-half ( 1/2) of the expenses
related to the printing, preparation, filing and mailing of the Proxy Statement.
The Parent shall pay the registration statement fee to the SEC.
(c) Parent and Acquisition shall furnish to the Company all information
concerning Parent, Acquisition and their Affiliates (as defined in Section 8.5)
required by the Exchange Act or as otherwise required by the SEC to be set forth
in the Proxy Statement.
(d) Each of the Company and Parent shall consult and confer with the other
and the other's counsel regarding the Registration Statement and the Proxy
Statement and each shall have the opportunity to comment on the Registration
Statement and the Proxy Statement and any amendments and supplements thereto
before the Registration Statement and the Proxy Statement, and any amendments or
supplements thereto, are filed with the SEC or mailed to Company stockholders.
Each of the Company and Parent will provide to the other copies of all
correspondence between it (or its advisors) and the SEC relating to the
Registration Statement and the Proxy Statement.
(e) Parent will vote, or cause to be voted, all Shares acquired by Parent,
Acquisition or any other Subsidiary of Parent in favor of the Merger and the
approval of this Agreement.
(f) Parent, Acquisition and the Company shall also take such actions as
reasonably may be required to be taken under applicable "blue sky" laws in
connection with the issuance of the Parent Common Stock pursuant to the Merger.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition that:
Section 3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Utah, has
all requisite corporate power and corporate authority and all necessary
governmental approvals to own, lease and operate its properties and to conduct
its business as it is now being conducted, and is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so organized, existing and in good standing or to
have such power, authority or governmental approvals, or to be so qualified
would not have a Material Adverse Effect (as defined below) on the Company. The
Company has previously delivered to Parent a complete and correct copy of each
of the Company's Articles of Incorporation, as amended, and its Bylaws, as
currently in effect. The Company has no Subsidiaries. For purposes of this
Agreement, (i) any reference to any event, change or effect having a "MATERIAL
ADVERSE EFFECT" on or with respect to any entity (or group of entities taken as
a whole) means an event, change or effect, individually or in the aggregate with
other events, changes, or effects, that is materially adverse to the financial
condition, businesses, results of operations, assets, liabilities or properties
of such entity (or, if used with respect thereto, of such group of entities
taken as a whole); (ii) "SUBSIDIARY" shall mean with respect to any Person, any
corporation or other entity of which more than 50% of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
entity is directly or indirectly owned by such Person; and (iii) "PERSON" shall
mean an individual, partnership, joint venture, limited liability company,
trust, corporation, unincorporated entity or Governmental Entity (as defined in
Section 3.4).
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 5,000,000 shares
of Company Common Stock, par value $.001 per share. As of the date of this
Agreement, (i) 2,209,159 shares of Company Common Stock are issued and
outstanding (including 42,000 Restricted Plan Shares) and (ii) Company Options
to acquire 113,450 shares of Company Common Stock are outstanding under the
Option Plan. All the outstanding shares of the Company's capital stock are duly
authorized, validly issued, fully paid and non-assessable. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("VOTING DEBT") of the Company
issued and outstanding. Except as set forth above, (i) there are no shares of
the capital stock of the Company authorized, issued or outstanding and
(ii) there are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the issued or unissued capital
stock of the Company obligating the Company to issue, transfer or sell or cause
to be issued, transferred or sold any shares of its capital stock or Voting Debt
of, or other equity interest in, the Company or securities convertible into or
exchangeable for such shares or equity interests or obligations of the Company
to grant, extend or enter into any such option, warrant, call, subscription or
other right, convertible security, agreement, arrangement or commitment. There
are no outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any Shares of the capital stock of the Company or Affiliate
of the Company or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any other entity and following the
Merger, the Company will not have any obligation to issue, transfer or sell any
shares of its capital stock.
(b) There are no voting trusts or other agreements or understandings to
which the Company is a party with respect to the voting of the capital stock of
the Company. The Company is not required to
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redeem, repurchase or otherwise acquire shares of the capital stock of the
Company as a result of the transactions contemplated by this Agreement.
(c) At the Effective Time, the number of shares of Company Common Stock
outstanding (assuming all Company Options outstanding on the date hereof are
exercised) shall not exceed 2,322,609.
Section 3.3 AUTHORIZATION; VALIDITY OF AGREEMENT.
(a) The Company has the requisite corporate power and corporate authority to
execute and deliver this Agreement and, subject to approval of its stockholders
as contemplated by Section 2.5, to consummate the transactions contemplated by
this Agreement. The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by the Board of Directors of the Company and, except for
obtaining the stockholder approval contemplated by Section 2.5 in the case of
this Agreement, no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated by
this Agreement. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery of this
Agreement by Parent and Acquisition, this Agreement is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that such enforcement may be subject to or limited by
(i) bankruptcy, insolvency or other similar laws, now or later in effect,
affecting creditors' rights generally, and (ii) the effect of general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) The Board of Directors of the Company has duly and validly approved and
taken all corporate action required to be taken by it for the consummation by
the Company of the transactions contemplated by this Agreement. The affirmative
vote of the holders of a majority of the Shares is the only vote of the holders
of any class or series of the capital stock of the Company necessary to approve
this Agreement and the Merger.
Section 3.4 NO VIOLATIONS; CONSENTS AND APPROVALS. Except as set forth in
Section 3.4 of the Disclosure Schedule attached hereto and incorporated herein
(the "DISCLOSURE SCHEDULE"), and except for filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), and the URBCA, for the approval of this
Agreement and the Merger by the Company's stockholders and the filing and
recordation of the Articles of Merger required by the URBCA, neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated by this Agreement will
(i) conflict with or violate any provision of the Articles of Incorporation or
ByLaws of the Company, (ii) require any filing with, or any permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority, agency or official (a "GOVERNMENTAL ENTITY"), (iii) assuming the
accuracy of the representations and warranties of, and performance of the
covenants by Parent and Acquisition as set forth in this Agreement, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) or require any consent under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which the Company is a party or by which the Company
or any of its assets may be bound (collectively, the "COMPANY AGREEMENTS") or
result in the imposition or creation of any lien, charge, security interest,
option, claim or encumbrance of any nature whatsoever (collectively, "LIENS") on
the assets of the Company or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets; except in the case of clauses (ii), (iii) or (iv), (A) where the
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failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not have a Material Adverse Effect on the Company, or
(B) such violations, breaches or defaults which would not have a Material
Adverse Effect on the Company.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed
with the SEC, and has made available to Parent through EDGAR true and complete
copies of, all forms and documents required to be filed by it since January 1,
1996 and on or before the Closing Date under the Exchange Act, or the Securities
Act of 1933, as amended (the "SECURITIES ACT") (as such documents have been
amended since the time of their filing, collectively, the "COMPANY SEC
DOCUMENTS"). Except as set forth in Section 3.5 of the Disclosure Schedule, as
of their respective dates (or, if amended, as of the date of the last such
amendment), the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and
(ii) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. The consolidated financial
statements included in the Company SEC Documents (i) have been prepared from,
and are in accordance with, the books and records of the Company, (ii) have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as otherwise noted therein and except that the quarterly financial
statements are subject to year end adjustment and do not contain all footnote
disclosures required by GAAP), (iii) comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and (iv) fairly present in all material respects
the financial position and the results of operations and cash flows of the
Company as at the dates thereof or for the periods presented therein.
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as expressly disclosed in
the Company SEC Documents filed prior to the date of this Agreement or as
disclosed in Section 3.6 of the Disclosure Schedule, since January 31, 1999, the
Company has conducted its businesses and operations only in the ordinary course
and consistent with past practice, and there have not occurred (i) any events or
changes (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or which would have a Material
Adverse Effect on the Company; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of the Company; or (iii) any change by the
Company in accounting principles or methods, except insofar as was or may be
required by a change in GAAP. Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or in Section 5.1 of the
Disclosure Schedule, since January 31, 1999, the Company has not taken any of
the actions prohibited by Section 5.1. For purposes of this Agreement,
"KNOWLEDGE OF THE COMPANY" shall mean the actual knowledge of the individuals
specified in Item 4 of Section 3.6 of the Disclosure Schedule.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except as expressly disclosed in
the Company SEC Documents filed prior to the date of this Agreement and except
for liabilities and obligations incurred in the ordinary course of business and
consistent with past practice, since January 31, 1999, the Company has not
incurred any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would have, a Material Adverse Effect on
the Company, or that would be required to be reflected or reserved against in
the financial statements of the Company (including notes thereto) prepared in
accordance with GAAP. Section 3.7 of the Disclosure Schedule describes all
material personal property leases of the Company.
Section 3.8 INFORMATION IN REGISTRATION STATEMENT AND PROXY STATEMENT. The
Registration Statement, and the Proxy Statement at the date it is mailed to
Company stockholders and at the time of the Special Meeting, (i) will not
contain any untrue statement of a material fact or omit to state any
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material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (ii) will comply in all material respects with the provisions of
the Exchange Act; provided, that no representation is made by the Company with
respect to statements made in the Registration Statement and Proxy Statement
based on written information supplied by Parent or Acquisition for inclusion in
the Registration Statement and Proxy Statement.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 3.9(a) of the Disclosure Schedule contains a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement, fund, policy,
practice or arrangement, including all employee benefit plans within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), sponsored, maintained or contributed to by the Company (or
for which the Company makes payroll deductions) or by any trade or business,
whether or not incorporated (an "ERISA AFFILIATE"), that together with the
Company would be deemed a "single employer" within the meaning of section 4001
of ERISA, for the benefit of any employee or former employee of the Company and
their dependents, or any ERISA Affiliate (collectively, the "PLANS").
Section 3.9(a) of the Disclosure Schedule identifies each of the Plans that is
an "employee benefit plan," as defined in section 3(3) of ERISA (collectively,
the "ERISA PLANS").
(b) With respect to each Plan, the Company has heretofore delivered or made
available to Parent true and complete copies of each of the following documents:
(i) the Plan document, including all amendments thereto;
(ii) the annual report and actuarial report for the most recent three
plan years, if required under ERISA;
(iii) the most recent Summary Plan Description (as defined in ERISA)
required under ERISA with respect thereto, including all summaries of
material modifications;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, the trust or other funding agreement and the latest financial
statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under
section 401(a) of the Code or copies of any pending determination letter
requests.
(c) No liability under Title IV of ERISA or any applicable state laws has
been incurred by the Company or any ERISA Affiliate with respect to the Plans
that has not been satisfied or otherwise discharged in full, and no condition
exists or is, to the knowledge of the Company, reasonably likely to arise that
presents a material risk to the Company or any ERISA Affiliate of incurring a
liability under such Title or any applicable state laws, other than liability
for contributions due in the ordinary course and premiums due the Pension
Benefit Guaranty Corporation (the "PBGC") (which contributions and premiums have
been paid when due). There are no amendments or revisions to any Plan which have
been communicated to employees but not reflected in Plan documents or summaries.
(d) No ERISA Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any ERISA Plan a plan described in
section 4063(a) of ERISA.
(e) To the knowledge of the Company, no ERISA Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of each ERISA Plan ended prior to
the Closing Date. There have been no reportable events under section 4043 of
ERISA
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in relation to the ERISA Plans. No Lien imposed under the Code or ERISA exists
or is to the knowledge of the Company likely to be imposed on account of any
ERISA Plan. The form of each ERISA Plan intended to be "qualified" within the
meaning of section 401(a) of the Code has been determined as of October 3, 1996
(the date of the most recent determination letters) by the Internal Revenue
Service to be so qualified (or timely application has been made therefor); to
the knowledge of the Company, no event has occurred since the date of such
determination that would adversely affect such qualification for which the cost
of correction would have a Material Adverse Effect on the Company; and each
trust maintained thereunder has been determined by the Internal Revenue Service
to be exempt from taxation under section 501(a) of the Code. Except as disclosed
in Section 3.10(b) of the Disclosure Schedule, each Plan has been operated and
administered in accordance with its terms and applicable law, including but not
limited to ERISA, the Code and applicable state laws, except for such
non-compliance that would not have a Material Adverse Effect on the Company.
(f) There are no pending, threatened in writing or, to the knowledge of the
Company, anticipated actions, suits, proceedings or claims (other than routine
claims for benefits) by, on behalf of, or against, any of the Plans or any
trusts related thereto that if determined adversely to the Company would have a
Material Adverse Effect on the Company.
(g) The PBGC has not instituted proceedings to terminate any of the ERISA
Plans and to the knowledge of the Company, no condition exists that presents a
material risk that such proceedings will be instituted.
(h) There are no pending, scheduled or, to the knowledge of the Company,
anticipated audits or investigations with respect to the Plans by any
governmental agency or authority as a result of which the Plans or the Company
could be subject to liability which would have a Material Adverse Effect on the
Company.
(i) As of December 31, 1998, the present value of accrued benefits under the
Company's defined benefit plan subject to Title IV of ERISA, as determined using
the actuarial assumptions and methods used for SFAS 87 and 132 financial
disclosure purposes as of January 31, 1999, did not exceed the market value of
the assets of such plan by more than $4,200,000. As of August 31, 1999, the
market value of the assets of such plan was approximately $23,652,173.38. During
the period from February 1, 1999 to August 31, 1999, the total amount of
payments which were made from the plan to satisfy obligations under the plan was
approximately $1,309,000.
(j) To the knowledge of the Company, none of the Company, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder, any trustee or
administrator and any other person or entity acting as a fiduciary thereof has
engaged in a transaction or has taken or failed to take any action in connection
with which the Company, any ERISA Affiliate, any of the ERISA Plans, any such
trust, any trustee or administrator thereof, or any party dealing with the ERISA
Plans or any such trust could be subject to either a civil penalty assessed
pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to
section 4975, 4976 or 4980B of the Code that would have a Material Adverse
Effect on the Company.
(k) No amounts payable under the Plans or any other agreement or arrangement
to which the Company is a party will, as a result of the transaction
contemplated by this Agreement, fail to be deductible for federal income tax
purposes by virtue of section 280G of the Code.
(l) Except as disclosed in Section 3.9(l) of the Disclosure Schedule, no
Plan provides benefits, including without limitation death, medical, dental or
life insurance benefits (whether or not insured), with respect to current or
former employees after retirement or other termination of employment, other than
(i) coverage mandated by applicable law, (ii) disability, death or retirement
benefits under any "employee pension plan," as that term is defined in
section 3(2) of ERISA, (iii) deferred compensation benefits or severance
benefits accrued as liabilities on the books of the Company or an
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ERISA Affiliate, (iv) severance pay, disability benefits and benefit claims
under ERISA Plans incurred on or prior to a termination of employment but not
reported or paid until after such termination, or (v) benefits, the full cost of
which is borne by the current or former employee (or his or her beneficiary).
(m) Except as disclosed in Section 3.9(m) of the Disclosure Schedule, the
Company does not have employment agreements or severance agreements with any
officer, director or other employee as of the date of this Agreement. There are
no such agreements whose terms have expired but pursuant to which the Company
has any continuing liability to any officer, director or employees or any former
officer, director or employee of the Company.
Section 3.10 LITIGATION; COMPLIANCE WITH LAW.
(a) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or in Section 3.10(a) of the Disclosure Schedule,
there is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened, against or affecting the Company or any of
its properties which, if determined adversely to the Company, would have a
Material Adverse Effect on the Company or would prevent or delay the Company
from consummating the Merger or the other transactions contemplated by this
Agreement.
(b) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or in Section 3.10(b) of the Disclosure Schedule,
the Company is in compliance in all material respects with all laws, statutes,
regulations, rules, ordinances, judgments, decrees, orders, writs and
injunctions, of any court or Governmental Entity relating to any of the property
currently or formerly owned or leased by it, or applicable to its business,
including, but not limited to, employment and employment practices, labor
relations, occupational safety and health, environmental, tax, interstate
commerce and antitrust laws, except for such noncompliance which would not have
a Material Adverse Effect on the Company. Except as expressly set forth in the
Company SEC Documents filed prior to the date of this Agreement, neither the
Company nor any of its properties is subject to any judgment, decree, order,
writ or injunction having, or which would have, a Material Adverse Effect on the
Company, or which would prevent or delay the consummation of the transactions
contemplated by this Agreement.
(c) The Company holds all licenses, permits, variances and approvals of
Governmental Entities necessary for the lawful conduct of its businesses as
currently conducted except where the failure to hold such licenses, permits,
variances or approvals would not have a Material Adverse Effect on the Company.
Section 3.11 INTELLECTUAL PROPERTY.
Section 3.11 of the Disclosure Schedule is a complete list of all patents,
trademarks and service marks (registered or unregistered), trade names and
copyrights and applications therefor (collectively, the "INTELLECTUAL PROPERTY")
owned or filed by or licensed to the Company, and with respect to registered
trademarks and service marks, contains a list of all jurisdictions in which such
trademarks and service marks are registered or applied for and all registration
and application numbers. Except as disclosed in Item 3 of Section 3.11 of the
Disclosure Schedule, such Intellectual Property that is owned by the Company is
not subject to any Liens except for such Liens that would not have a Material
Adverse Effect on the Company and, to the knowledge of the Company, there are no
infringements or other violations or conflicts with the rights of others with
respect to the (i) use of or other conduct by the Company within the scope of,
(ii) ownership of, (iii) validity of, or (iv) enforceability of, any
Intellectual Property owned by the Company that has or would have a Material
Adverse Effect on the Company.
Section 3.12 COMPANY AGREEMENTS. Each of the Company Agreements that is
material to the business and operations of the Company as currently conducted
(collectively, the "MATERIAL COMPANY
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AGREEMENTS") is a valid, binding and enforceable obligation of the Company,
except where the failure to be valid, binding and enforceable would not have a
Material Adverse Effect on the Company, and there are no defaults thereunder on
the part of the Company or, to the knowledge of the Company, on the part of any
other party thereto), except those defaults that would not have a Material
Adverse Effect on the Company. Except as disclosed in Section 3.12 of the
Disclosure Schedule, the Company is not a party to any license agreement or
sales agency or distributorship agreement that limits in any material manner the
ability of the Company to compete in or conduct any significant line of business
or compete with any Person or in any geographic area or during any period of
time exceeding one year from the date of this Agreement. The Company is not
bound by any agreement or contract for consulting, advisory, professional or
other similar services which is not unilaterally terminable by the Company upon
notice of 30 days or less without penalty or additional cost to the Company.
Section 3.13 TAXES.
(a) The Company has (i) filed (or there have been filed on its behalf) with
the appropriate Governmental Entity all material Tax Returns (as later defined)
required to be filed by it and such Tax Returns are true, correct and complete
in all material respects, (ii) maintained in all material respects all required
records with respect to all material Tax Returns, (iii) withheld or paid, as
appropriate, in full (or there has been paid on its behalf) all material Taxes
(as later defined) that are due and payable for all taxable periods and portions
thereof except to the extent of reserves established in accordance with GAAP on
the financial statements included in the Company SEC Documents and (iv) made
provision, in accordance with GAAP, for all future material Tax liabilities
(including reserves for deferred Taxes established in accordance with GAAP and
for all material contingent Tax liabilities) for all taxable periods and
portions thereof.
(b) No federal, state, local or foreign audit or other administrative
proceeding ("AUDIT") or court proceedings are presently pending with regard to
any Taxes or Tax Returns of the Company, and the Company has not received
written or, to the knowledge of the Company, oral notice of either the
commencement of any such Audit or of the intention on the part of any
Governmental Entity to commence any such Audit, and the Company has not received
written notice that it has not filed a Tax Return or paid Taxes required to be
filed or paid by it.
(c) No Governmental Entity has asserted in writing against the Company any
material deficiency for any Taxes which have not been satisfied in full or
adequately reserved for in accordance with GAAP on the financial statements
included in the Company SEC Documents.
(d) There are no Liens for Taxes upon any property or assets of the Company
(except for current Taxes that are not yet due and payable).
(e) The income Tax Returns of or including the Company have been examined by
and settled with the appropriate Governmental Entity (or the applicable statutes
of limitation for the assessment of income Taxes for such periods have expired)
for all periods through and including January 28, 1995.
(f) The Company has not waived any statute of limitation with respect to
Taxes (which waiver is currently in effect) or agreed to any extension of time
with respect to a Tax assessment or deficiency (which has not yet been paid) or
extended the time to file any income or other material Tax Return (which Tax
Return has not subsequently been filed).
(g) The Company is not a party to any income tax allocation, tax indemnity
or tax sharing agreement or arrangement, nor has the Company ever joined in the
filing of a consolidated, combined, unitary or other group Tax Return with any
other corporation since January 28, 1995. The Company could not have any
liability for Taxes of any other corporation, person or entity under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law) by contract, or otherwise that, individually or in the aggregate, would
have a Material Adverse Effect on the Company.
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(h) The Company has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
and, except to the extent of any reserves established in accordance with GAAP on
the financial statements included in the Company SEC Documents has, within the
time and manner prescribed by law, withheld and paid over to the proper
Governmental Entity all amounts required to be withheld and paid over under all
applicable laws.
(i) For purposes of this Agreement: "TAXES" shall mean any and all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, excise, stamp, real or personal
property, ad valorem, withholding, workers' compensation, estimated, social
security, unemployment, occupation, sales, use, service, service use, license,
net worth, payroll, franchise, severance, transfer, recording or other taxes,
assessments or charges imposed by any Governmental Entity and any interest,
penalties, or additions to tax attributable thereto; and "TAX RETURN" shall mean
any return, report or similar statement required to be filed with respect to any
Tax (including any attached schedules), including, without limitation, any
information return, including any information return or report with respect to
backup withholding and other payments to third parties, claim for refund,
amended return or declaration of estimated Tax.
Section 3.14 ENVIRONMENTAL MATTERS.
(a) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or as disclosed in Section 3.14(a) of the
Disclosure Schedule, the Company is in compliance in all respects with all
applicable Environmental Laws (as later defined) which compliance includes
(i) the possession of permits, licenses, registrations, variances, exemptions,
orders and other governmental authorizations and financial assurances required
under applicable Environmental Laws for the Company to operate its businesses as
currently conducted, and (ii) compliance with the terms and conditions thereof,
except in all cases above where such non-compliance would not have a Material
Adverse Effect on the Company.
(b) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or as disclosed in Section 3.14(b) of the
Disclosure Schedule, (i) there are no Environmental Claims (as later defined)
pending or, to the knowledge of the Company, threatened, against the Company
that would result in a Material Adverse Effect on the Company, (ii) the Company
has not received any written request for information under any Environmental Law
(as later defined) from any Governmental Entity with respect to any actual or
alleged environmental contamination which has not been remediated or otherwise
resolved and the remediation of which contamination or the resolution of the
request would have a Material Adverse Effect on the Company; (iii) neither the
Company, nor to the knowledge of the Company, any Governmental Entity, is
conducting or has conducted (or, to the knowledge of the Company, is threatening
to conduct) any environmental remediation or investigation which would result in
a Material Adverse Effect on the Company under any Environmental Law; and
(iv) the Company is not subject to the order of any Governmental Entity under
any Environmental Law or relating to the remediation of any Hazardous Substance
(as later defined) contamination.
(c) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or as disclosed in Section 3.14(c) of the
Disclosure Schedule, (i) to the knowledge of the Company, there is no friable
asbestos-containing material in or on any real property currently or formerly
owned or leased by the Company, (ii) there are no polychlorinated biphenyls in
any equipment currently or formerly owned or leased by the Company and
(iii) there are and, to the knowledge of the Company, have been no underground
storage tanks (whether or not required to be registered under any applicable
law), dumps, landfills, lagoons, hydraulic lifts, surface impoundments,
injection wells or other land disposal units in or on any property currently or,
to the knowledge of the Company, formerly owned or leased by the Company where
in each case, the ownership or leasing of which would result in a Material
Adverse Effect on the Company.
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(d) Except as expressly disclosed in the Company SEC Documents filed prior
to the date of this Agreement or as disclosed in Section 3.14(d) of the
Disclosure Schedule, to the knowledge of the Company, there have been no
Releases (as later defined) of Hazardous Substances (as later defined) at any of
the property currently or formerly owned or leased by the Company, or of
Hazardous Substances which were generated, stored, disposed of or transported by
the Company, which could form the basis of any Environmental Claim against the
Company, or to the knowledge of the Company, against any person or entity whose
liability for any Releases the Company has or may have retained or assumed
either contractually or by operation of law, which would have a Material Adverse
Effect on the Company.
(e) As used in this Agreement:
(i) the term "ENVIRONMENTAL CLAIM" means any claim, action,
investigation or written notice to the Company by any person or entity
alleging potential liability or responsibility of the Company (including,
without limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, personal
injuries, or penalties) arising out of, based on, or resulting from (a) the
presence, or release into the environment, of any Hazardous Substance at any
location, whether or not currently or formerly owned or leased by the
Company or (b) circumstances forming the basis of any violation or alleged
violation of any applicable Environmental Law;
(ii) the term "ENVIRONMENTAL LAW" means all federal, state, local and
foreign laws, rules, regulations, ordinances, decrees, orders and other
binding legal requirements, as in effect as of the date of this Agreement,
relating to pollution or protection of the environment or human health in
any manner applicable to the Company, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Substances, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances;
(iii) the term "HAZARDOUS SUBSTANCE" means any materials, chemicals,
pollutants, contaminants, hazardous wastes, toxic substances or radioactive
materials regulated under any Environmental Law, and oil and petroleum
products; and
(iv) the term "RELEASE" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater and surface or
subsurface strata).
Section 3.15 NO DEFAULT. Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as disclosed in
Section 3.15 of the Disclosure Schedule the business of the Company is not being
conducted in default or violation of any term, condition or provision of
(a) its Articles of Incorporation or Bylaws, (b) any Material Company Agreement,
or (c) any federal, state, local or foreign law, statute, regulation, rule,
ordinance, judgement, decree, writ, injunction, franchise, permit or license or
other governmental authorization or approval applicable to the Company,
excluding from the foregoing clauses (b) or (c), defaults or violations that
would not have a Material Adverse Effect on the Company or would not materially
impair the ability of the Company to consummate the Merger or the other
transactions contemplated by this Agreement.
Section 3.16 OPINION OF FINANCIAL ADVISORS. The Board of Directors of the
Company has received an opinion from DLJ to the effect that, as of the date of
this Agreement, the Merger Consideration is fair to the stockholders of the
Company (other than stockholders who are Affiliates of the Company) from a
financial point of view, and a true and correct copy of such opinion has been
delivered to Parent.
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Section 3.17 BROKERS. Except for the fees payable by the Company to DLJ (a
true and complete copy of whose engagement letter has been provided to Parent),
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 or on behalf of the Company.
Section 3.18 PROPERTY. The Company has (i) good and valid title to, or in
the case of leased property, has valid leasehold interests in all real and
personal, whether tangible or intangible, properties and assets, and (ii) all
rights, licenses, easements and other contractual rights, in the case of each of
clause (i) and (ii) above, as necessary to conduct the business of the Company
as currently conducted, except to the extent the failure of this representation
and warranty to be true would not have a Material Adverse Effect on the Company.
Section 3.19 BOARD RECOMMENDATIONS. The Board of Directors of the Company,
at a meeting duly called and held, has by a majority vote of those directors
present (i) determined that this Agreement and the transactions contemplated by
this Agreement are fair to and in the best interests of the stockholders of the
Company and has approved the same, and (ii) resolved to recommend that the
holders of the shares of Company Common Stock approve this Agreement and the
transactions contemplated in this Agreement.
Section 3.20 LABOR MATTERS. Except as expressly disclosed in the Company
SEC Documents filed prior to the date of this Agreement, the Company is not a
party to or bound by any collective bargaining agreement or other labor union
contract applicable to persons employed by the Company nor, to the knowledge of
the Company, as of the date of this Agreement, are there any activities or
proceedings of any labor union to organize any such employees. Except as
expressly disclosed in the Company SEC Documents filed prior to the date of this
Agreement, as of the date of this Agreement, (i) there are no current union
representation questions involving employees of the Company which have, had or
would have a Material Adverse Effect on the Company, (ii) there are no unfair
labor practice charges or complaints pending against the Company before the
National Labor Relations Board and (iii) there is no labor strike, lockout,
organized slowdown or organized work stoppage in effect or, to the knowledge of
the Company, threatened against the Company.
Section 3.21 YEAR 2000. Except as disclosed in Section 3.21 of the
Disclosure Schedule, to the Company's knowledge, there are no material
impediments to the Company being year 2000 compliant by December 31, 1999 (i.e.,
that products, hardware, software and other date-sensitive equipment
manufactured, sold, owned, leased, licensed or used by the Company will be
capable of correctly storing and processing date data (including, but not
limited to, calculating, comparing and sequencing) accurately prior to, during
and after the calendar year 2000 when used, assuming that all third party
products, hardware, software and other date-sensitive equipment used in
combination therewith are capable of properly exchanging date data) except to
the extent the failure of this representation to be true would not have a
Material Adverse Effect on the Company.
Section 3.22 INSURANCE. The Company is covered by insurance in scope and
amount customary and reasonable for the businesses in which it is engaged. Each
insurance policy to which the Company is a party is in full force and effect and
will not require any consent as a result of the consummation of the Merger. The
Company is not in material breach or default (including with respect to the
payment of premiums or the giving of notices) under any insurance policy to
which it is a party, and no event has occurred which, with notice or the lapse
of time, would constitute such a material breach or default by the Company or
would permit termination, modification or acceleration, under such policies. The
Company has not received any written notice from the insurer disclaiming
coverage or reserving rights with respect to any material claim or any such
policy in general.
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Section 3.23 ACCOUNTS RECEIVABLE; INVENTORY.
(a) Subject to any reserves set forth in the balance sheet of the Company
included in the most recent Company SEC Documents (the "COMPANY BALANCE SHEET"),
the accounts receivable shown in the Company Balance Sheet arose in the ordinary
course of business, were not, as of the date of the Company Balance Sheet,
subject to any material discount, contingency, claim of offset or recoupment or
counterclaim, and represented, as of the date of the Company Balance Sheet, bona
fide claims against debtors for sales, leases, licenses and other charges. All
accounts receivable of the Company arising after the date of the Company Balance
Sheet through the date of this Agreement arose in the ordinary course of
business and, as of the date of this Agreement, are not subject to any material
discount, contingency, claim of offset or recoupment or counterclaim, except for
normal reserves consistent with past practice. The amount carried for doubtful
accounts and allowances disclosed in the Company Balance Sheet is believed by
the Company as of the date of the Company Balance Sheet to be sufficient to
provide for any material losses which may be sustained or failure to realize the
accounts receivable shown in the Company Balance Sheet.
(b) To the knowledge of the Company, as of the date of the Company Balance
Sheet, the inventories shown on the Company Balance Sheet consisted in all
material respects of items of a quantity and quality usable or saleable in the
ordinary course of business. All of such inventories were acquired by the
Company in the ordinary course of business and, as of the date of this
Agreement, have been replenished by the Company in all material aspects in the
ordinary course of business consistent with past practices. All such inventories
are valued on the Company Balance Sheet in accordance with GAAP, applied on a
basis consistent with the Company's past practices, and, except as disclosed in
Section 3.23(b) of the Disclosure Schedule, provision has been made or reserves
have been established on the Company Balance Sheet, in each case in an amount
believed by the Company as of the date of this Agreement to be adequate in all
material respects, for all slow-moving, obsolete or unusable inventories.
Section 3.24 REAL ESTATE MATTERS.
(a) The Company has good, valid, and insurable title to: (i) the fee
interest in the real property listed (together with all agreements having a
bearing on the Company's costs therewith, or occupancy or operation thereof) in
Section 3.24(a)(i) of the Disclosure Schedule (the "OWNED PROPERTY"), and
(ii) all of the leasehold estates in all real properties listed (together with
all agreements having a bearing on the Company's costs therewith, or occupancy
or operation thereof) in Section 3.24(a)(ii) of the Disclosure Schedule
(collectively, the "LEASED PROPERTIES" or individually, a "LEASED PROPERTY"; the
Owned Property and Leased Properties being sometimes collectively referred to in
this Agreement as the "REAL PROPERTIES" or individually as a "REAL PROPERTY"),
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" or individually, an "ENCUMBRANCE"), except for
Encumbrances (x) set forth in the copies of title commitments delivered to
Parent for the Real Properties listed in Sections 3.24(a)(i) and 3.24(a)(ii) of
the Disclosure Schedule or (y) which, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Company. The Company
neither owns, leases, licenses, uses, occupies or otherwise holds any interest
in any real estate other than the Real Properties.
(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 on the Company:
(i) each of the agreements by which the Company has obtained a leasehold
interest in a Leased Property (individually, a "LEASE" and collectively, the
"LEASES") is in full force and effect in accordance with its respective terms
and the Company 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 including, without
limitation, the transactions contemplated
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by this Agreement; the Company has complied with and timely performed all
conditions, covenants, undertakings and obligations on its part to be complied
with or performed under each of the Leases; the Company has paid all rents and
other charges to the extent due and payable under the Leases; (ii) other than as
described in Section 3.24(b) of the Disclosure Schedule, there are no leases,
subleases, licenses, concessions or any other contracts or agreements granting
to any person or entity other than the Company 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, if any, 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; and (vi) all the buildings,
structures, equipment and other tangible 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 of the Company.
(c) The Company is not obligated under or bound by any option, right of
first refusal, purchase contract, or other contractual right or obligation to
acquire, use or operate any real property not listed in Sections 3.24(a)(i) or
3.24(a)(ii) of the Disclosure Schedule nor to sell or dispose of any Real
Property or any portions thereof or interests therein.
(d) Other than as disclosed in Section 3.24(d) of the Disclosure Schedule,
the Company has not transferred, sold, terminated or otherwise disposed of any
real property interests for which the Company has any continuing liability with
respect to such real property.
(e) Any error, misstatement, omission or inaccuracy with respect to the
representations set forth in this Section 3.24, viewed as if it were
individually made without reference to Material Adverse Effect, which either
individually or collectively would result in a material ongoing impairment in
the operation of, or material adverse financial arrangements with respect to,
one or more of the Real Properties as a warehouse, a specialty store or a
department store, as the case may be, shall constitute a Material Adverse
Effect.
(f) The Company has provided to Parent prior to the execution of this
Agreement title commitments for all Real Properties listed in Sections
3.24(a)(i) or 3.24(a)(ii) of the Disclosure Schedule except with respect to the
downtown Salt Lake City auto service center.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition, jointly and severally, represent and warrant to the
Company as follows:
Section 4.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. Each of Parent and Acquisition has all requisite corporate
power and corporate authority to own, lease and operate its respective
properties and to carry on its respective business as now being conducted except
where the failure to have such power or authority would not have a Material
Adverse Effect on Parent or Acquisition, taken as a whole, or materially impair
or delay the consummation of the transactions contemplated by this Agreement.
Section 4.2 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of Parent and
Acquisition has the requisite corporate power and corporate authority to execute
and deliver this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery by Parent and Acquisition of
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this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by the respective Boards of Directors of
Parent and Acquisition and no other corporate proceedings on the part of Parent
or Acquisition are necessary to authorize the execution and delivery of this
Agreement by Parent and Acquisition and the consummation of the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Parent and Acquisition. Assuming due authorization, execution and
delivery of this Agreement by the Company, this Agreement is a valid and binding
obligation of Parent and Acquisition, enforceable against each of them in
accordance with its terms, except that such enforcement may be subject to or
limited by (i) bankruptcy, insolvency or other similar laws, now or later in
effect, affecting creditors' rights generally, and (ii) the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act and the HSR Act and the
filing and recordation of the Articles of Merger as required by the URBCA, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by Parent or Acquisition
of the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated by this Agreement nor
compliance by Parent or Acquisition with any of the provisions of this Agreement
will (i) conflict with or violate any provision of the Articles of Incorporation
or Certificate of Incorporation, as the case may be, or Bylaws, of Parent or
Acquisition or (ii) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent or Acquisition or any of their respective
properties or assets, except in the case of clause (ii) where such violations
would not have a Material Adverse Effect on Parent and Acquisition taken as a
whole.
Section 4.4 INFORMATION IN REGISTRATION STATEMENT AND PROXY
STATEMENT. None of the information supplied by Parent or Acquisition for
inclusion in the Registration Statement and the Proxy Statement will, at the
date mailed to stockholders and at the time of the Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated in the Registration Statement and the Proxy Statement or necessary
in order to make the statements in the Registration Statement and the Proxy
Statement, in light of the circumstances under which they are made, not
misleading.
Section 4.5 PARENT COMMON STOCK.
(a) The authorized capital stock of Parent consists of (i) 25,000,000 shares
of Preference Stock, including ESOP Preference Shares, par value $0.50 per
share, of which 633,273 were issued and outstanding as of July 31, 1999 and
(ii) 1,000,000,000 shares of common stock, par value $0.50 per share, of which
331,739,531 shares were issued and outstanding and 138,715,963 shares were held
in treasury by Parent as of July 31, 1999. All the shares of Parent Common Stock
will, when issued pursuant to this Agreement, be duly authorized, validly
issued, fully paid and non-assessable.
(b) The authorized capital stock of Acquisition consists of 1,000 shares of
common stock, par value $1.00 per share. The issued capital stock consists of
100 shares of common stock, all or which are owned by Parent on the date of this
Agreement. Acquisition was incorporated in the State of Utah on September 7,
1999, is validly existing and in good standing under the laws of the State of
Utah and has engaged in no business and incurred no liabilities except as
contemplated by this Agreement. All the outstanding shares of Acquisition's
capital stock are duly authorized, validly issued, fully paid and
non-assessable.
(c) Since January 31, 1999, each of Parent and its subsidiaries that is
required to make filings under the Securities Act or the Exchange Act has filed
with the SEC all forms, reports and documents required to be filed by it
pursuant to the Securities Act and the Exchange Act, all of which, as of their
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respective filing dates, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act. Parent has heretofore
made available to the Company through EDGAR a true and complete copy of
(i) each registration statement, final prospectus and definitive proxy statement
filed by Parent or any of its subsidiaries with the SEC since January 31, 1999,
and (ii) each report filed by Parent or any of its subsidiaries with the SEC
since January 31, 1999 (the documents referred to in clauses (i) and (ii) being
hereinafter referred to as the "PARENT FILINGS"). None of the Parent Filings as
of the respective dates on which they were filed with the SEC contained any
untrue statement of a material fact or omitted to state a material fact
necessary to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) Parent shall use all reasonable efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities law
or "blue sky" permits and approvals required to carry out the transactions
contemplated by this Agreement and the Merger, and will pay all expenses
incident thereto.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Parent
Filings filed prior to the date of this Agreement, since January 31, 1999 Parent
has conducted its businesses and operations only in the ordinary course and
consistent with past practice, and there have not occurred any events or changes
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having or which would have a Material Adverse
Effect on Parent.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Parent
Filings filed prior to the date of this Agreement and except for liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice, since January 31, 1999, Parent has not incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would have, a Material Adverse Effect on Parent, or that would be
required to be reflected or reserved against in the financial statements of
Parent (including notes thereto) prepared in accordance with GAAP.
Section 4.8 LITIGATION; COMPLIANCE WITH LAW.
(a) Except as disclosed in the Parent Filings filed prior to the date of
this Agreement, there is no suit, claim, action, proceeding or investigation
pending or, to the knowledge of Parent, threatened, against or affecting Parent
or any Affiliate of Parent or any of their respective properties which, if
determined adversely to Parent or any Affiliate of Parent, would have a Material
Adverse Effect on Parent or would prevent or delay Parent from consummating the
Merger or the other transactions contemplated by this Agreement.
(b) Except as disclosed in the Parent Filings filed prior to the date of
this Agreement, Parent and each Affiliate of Parent are in compliance in all
material respects with all laws, statutes, regulations, rules, ordinances,
judgments, decrees, orders, writs and injunctions, of any court or Governmental
Entity relating to any of the property owned, leased or used by it, or
applicable to its business, including, but not limited to, employment and
employment practices, labor relations, occupational safety and health,
environmental, tax, interstate commerce and antitrust laws, except for such
noncompliance which would not have a Material Adverse Effect on Parent. Except
as set forth in the Parent Filings filed prior to the date of this Agreement,
neither Parent, any Affiliate of Parent nor any of their respective properties
is subject to any judgment, decree, order, writ or injunction having, or which
would have, a Material Adverse Effect on Parent, or which would prevent or delay
the consummation of the transactions contemplated by this Agreement.
(c) Parent and each Affiliate of Parent holds all licenses, permits,
variances and approvals of Governmental Entities necessary for the lawful
conduct of its businesses as currently conducted except where the failure to
hold such licenses, permits, variances or approvals would not have a Material
Adverse Effect on Parent.
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Section 4.9 NO DEFAULT. Except as disclosed in the Parent Filings filed
prior to the date of this Agreement, the business of Parent and each Affiliate
of Parent is not being conducted in default or violation of any term, condition
or provision of (a) its Certificate of Incorporation, Articles of Incorporation
or Bylaws or (b) any federal, state, local or foreign law, statute, regulation,
rule, ordinance, judgement, decree, writ, injunction, franchise, permit or
license or other governmental authorization or approval applicable to Parent or
such Affiliate, excluding from the foregoing, defaults or violations that would
not have a Material Adverse Effect on Parent or would not materially impair the
ability of Parent to consummate the Merger or the other transactions
contemplated by this Agreement.
Section 4.10 PROPERTY. Parent and each Affiliate of Parent has good and
valid title to, or in the case of leased property, has valid leasehold interests
in all real and personal, whether tangible or intangible, properties and assets
necessary to conduct the business of Parent or such Affiliate as currently
conducted, except to the extent the failure of this representation and warranty
to be true would not have a Material Adverse Effect on Parent.
Section 4.11 YEAR 2000. To Parent's knowledge, there are no material
impediments to Parent and each Affiliate of Parent being year 2000 compliant by
December 31, 1999 (i.e., that products, hardware, software and other
date-sensitive equipment manufactured, sold, owned, leased, licensed or used by
Parent and each Affiliate of Parent will be capable of correctly storing and
processing date data (including, but not limited to, calculating, comparing and
sequencing) accurately prior to, during and after the calendar year 2000 when
used, assuming that all third party products, hardware, software and other
date-sensitive equipment used in combination therewith are capable of properly
exchanging date data) except to the extent the failure of this representation to
be true would not have a Material Adverse Effect on Parent.
ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and
agrees that, except as (i) provided to the contrary in this Agreement,
(ii) disclosed in Section 5.1 of the Disclosure Schedule or (iii) approved in
writing by Parent (which approval Parent shall not unreasonably withhold, delay,
or condition), after the date of this Agreement and prior to the Effective Time:
(a) the business of the Company shall be conducted only in the ordinary
course consistent with the requirements of law and past practice and, to the
extent consistent therewith, the Company shall use its commercially reasonable
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business partners,
and the Company shall use its reasonable efforts to cause the key executive
employees of the Company (such individuals being later collectively referred to
as the "KEY EXECUTIVES" or individually as a "KEY EXECUTIVE" (which Key
Executives are identified and listed on Section 5.1 of the Disclosure Schedule)
to continue to perform their duties as currently performed for the Company;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock;
(c) the Company shall not: (i) amend its Articles of Incorporation or
Bylaws; (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock;
(iii) issue, sell, transfer, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of the
capital stock of any class of the Company, other than issuances pursuant to the
exercise of Company Options and Company benefit plan obligations disclosed in
Section 3.9(a) of the Disclosure Schedule, in each case which are outstanding on
the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose
of or encumber any material assets other than in the ordinary
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and usual course of business; or (v) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock;
(d) the Company shall not, except as required by law or as otherwise
expressly provided elsewhere in this Agreement: (i) grant any increase in the
compensation payable or to become payable by the Company to any of the Key
Executives, key employees or directors or (A) adopt any new, or (B) amend or
otherwise increase, or accelerate the payment or vesting of the amounts payable
or to become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement,
program, fund, policy, practice or arrangement; or (ii) enter into any, or amend
any existing, employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company; provided,
however, that the Company may, in the ordinary course of business, consistent
with past practice, enter into termination agreements or arrangements with
employees other than any Key Executive (collectively, the "NON-KEY EMPLOYEES"),
so long as the aggregate value of such agreements and arrangements does not
exceed the aggregate amounts that are payable under the Company's present
Severance Pay Plan listed in Section 3.9(a) of the Disclosure Schedule by more
than $100,000, and with respect to any individual Non-Key Employee does not have
a value not in excess of $10,000.
(e) the Company shall not modify, amend or terminate any of the Material
Company Agreements or waive, release or assign any material rights or claims
with respect to such Material Company Agreements, except in the ordinary course
of business and consistent with past practice;
(f) the Company shall not permit any material insurance policy naming it as
a beneficiary or a loss payable payee to be canceled or terminated without
notice to and consent of Parent, unless equivalent replacement policies, without
lapse of coverage, shall be put in place;
(g) the Company shall not: (i) except as described in Section 5.1of the
Disclosure Schedule, incur or assume any indebtedness for borrowed money or
enter into any capital leases or other arrangements with similar economic
effects except pursuant to the Existing Credit Documents (as later defined);
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than customary loans or advances to
employees in accordance with past practice); or (iv) except as described in
Section 5.1 of the Disclosure Schedule, enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets);
(h) the Company shall not settle or compromise any claim, liability or
obligation which is described in the Company SEC documents filed prior to the
date hereof and the Company shall not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, (x) to the extent reflected or
reserved against in, or contemplated by, the Company Balance Sheet (or the notes
thereto), (y) incurred in the ordinary course of business and consistent with
past practice or (z) which are legally required to be paid, discharged or
satisfied (provided that if such claims, liabilities or obligations referred to
in this clause (z) are legally required to be paid and are also not otherwise
payable in accordance with clauses (x) or (y) above, the Company will notify
Parent in writing if such claims, liabilities or obligations exceed,
individually or in the aggregate, $200,000 in value, reasonably in advance of
their payment), provided that notwithstanding anything to the contrary set forth
in this Section 5.1(h), the Company shall not settle or compromise any claim or
litigation brought by any stockholder of the Company making such claim or
bringing such litigation as such a stockholder, either individually or on behalf
of any class;
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(i) the Company will not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company (other than with respect to the Merger);
(j) the Company will not change any method of accounting or any accounting
principle or practice, except for changes required by a concurrent change in
GAAP;
(k) the Company will not take, or agree to commit to take, any action that
would make any representation or warranty of the Company contained in this
Agreement inaccurate at, or as of any time prior to, the Effective Time;
(l) the Company shall (i) use reasonable efforts to maintain or otherwise
preserve its rights in all of the Intellectual Property owned by the Company
that is material to the business and operations of the Company and use
reasonable efforts not to permit any of such Intellectual Property to lapse,
expire or go abandoned by any action or inaction on its part; (ii) diligently
and responsively prosecute all applications or registrations before whichever
Governmental Entity the same may be pending; and (iii) not allow any rights with
respect to trademarks material to the Company to go abandoned for failure to
timely file new applications for registrations corresponding to the subject
matter thereof;
(m) the Company shall not voluntarily make or agree to make any material
change in any Tax accounting method, waive or consent to the extension of any
statute of limitations with respect to income or other material Taxes, or
consent to any material assessment of Taxes, or settle any judicial proceeding
affecting any material amount of Taxes;
(n) the Company shall not fail to take all reasonable steps in defense of
any claim (which would be disclosable by the Company in a filing pursuant to the
Exchange Act or the Securities Act) asserted against the Company in any
proceedings before any Governmental Entity; and
(o) Except as otherwise expressly permitted in this Agreement, the Company
shall not (i) issue, sell or otherwise distribute or dispose of any shares of
Company Common Stock to, (ii) become indebted in respect of borrowed money or
make any commitment with respect to borrowed money from, (iii) sell (other than
sales of retail merchandise), distribute, mortgage, license, lease or otherwise
dispose of any assets of the Company to, or (iv) enter into any other such
agreement, arrangement or transaction involving the Company's assets or finances
with any officer, director or legal or beneficial owner of more than 5% of the
Company Common Stock and their affiliates, without the prior consent of Parent,
which consent is in Parent's sole and absolute discretion;
(p) the Company shall not make, or commit to make, any capital expenditures
in excess of $100,000 for each such individual expenditure or $300,000 in the
aggregate;
(q) the Company shall not amend, modify, supplement or terminate any
agreement listed in Sections 3.24(a)(i) and 3.24(a)(ii) of the Disclosure
Schedule with respect to Real Property or enter into any new agreement or
arrangement with respect to real property; except Company may, with Parent's
written consent, which consent may not be unreasonably withheld, delayed or
conditioned, enter into and execute subordination agreements, estoppel
certificates and similar instruments required to be executed pursuant to the
terms of the agreements listed in Sections 3.24(a)(i) or 3.24(a)(ii) with
respect to the Real Property leases;
(r) the Company will not enter into any agreement, contract or other
commitment with any beneficial owner of more than 5% of the Company Common Stock
without Parent's consent, which consent is in Parent's sole and absolute
discretion; and
(s) the Company will not enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
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Section 5.2 NO SOLICITATIONS.
Neither the Company nor any of its Affiliates shall (and the Company shall
use its best efforts to cause its officers, directors, employees,
representatives and agents (collectively, "REPRESENTATIVES"), including, but not
limited to, investment bankers, attorneys and accountants, not to), 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 or any of its Affiliates or
Representatives) concerning any merger, consolidation, tender offer, exchange
offer, sale of a material portion or product line of the assets and business of
the Company (whether in one or more transactions), sale of shares of capital
stock or debt securities, restructuring, recapitalization, or similar
transactions involving the Company or any division or operating or principal
business unit of the Company (whether in one or more transactions) (an
"ACQUISITION PROPOSAL"). The Company further will, and will cause its
Representatives to, immediately cease any existing activities, discussions or
negotiations with any parties previously conducted with respect to any of the
foregoing.
Section 5.3 ACCESS TO INFORMATION.
(a) From the date of this Agreement until the Effective Time, the Company
shall afford to Parent and the Parent's Representatives reasonable access upon
reasonable prior notice to all of its books, records, files, documents and
Company Agreements and, during such period, the Company shall furnish promptly
to Parent (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of the federal securities laws and (ii) such other information including,
without limitation, copies of books, records, files, documents and Company
Agreements, concerning the Company's business, properties and personnel as
Parent may reasonably request; provided, that Parent and Parent's
Representatives will conduct all such inspections in a reasonable manner and so
as to not unreasonably interfere with the conduct of the business or affairs of
the Company. The Company shall provide Parent and Parent's Representatives with
reasonable access upon reasonable prior notice to the Key Executives and the Key
Executives shall reasonably cooperate with Parent and Parent's Representatives
and provide Parent and Parent's Representatives with such information regarding
the Company as may be reasonably requested. The Company shall in addition use
its reasonable efforts to provide Parent and Parent's Representatives with
access to the Representatives, commercial bankers, actuaries, trustees, outside
Plan administrators and consultants of the Company and to use its best efforts
to cause such Representatives, commercial bankers, actuaries, trustees, outside
Plan administrators and consultants to provide Parent and Parent's
Representatives with such information regarding the Company as may be reasonably
requested. Parent and Parent's Representatives shall use reasonable efforts to
conduct any activities pursuant to this Section 5.3(a) in a manner that does not
interfere in any material respect with the management and conduct of the
Company's operations. The obligations of the Company under this Section 5.3(a)
are subject to any and all limitations imposed by law.
(b) Until the Effective Time, Parent and Acquisition will, with respect to
the information furnished to Parent by or on behalf of the Company, and the
Company will, with respect to the information furnished to the Company by or on
behalf of Parent or Acquisition, have the same confidentiality obligations as
set forth in the letter agreement dated August 11, 1999 between Parent and the
Company.
Section 5.4 FURTHER ACTION; REASONABLE BEST EFFORTS.
(a) Upon the terms and subject to the conditions provided in this Agreement,
each of the Parties shall use its reasonable best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) to comply promptly with all legal requirements which may be imposed on it
with respect to this Agreement and the transactions contemplated by this
Agreement (which actions shall include, without limitation, furnishing all
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information required by applicable law in connection with approvals of or
filings with any Governmental Entity), (ii) to satisfy the conditions precedent
to the obligations of such Party, (iii) to obtain any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party required to be obtained or made by Parent,
Acquisition, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated by this Agreement, (iv) to
effect all necessary registrations and filings and (v) to take any action
reasonably necessary to vigorously defend, lift, mitigate, rescind the effect of
any litigation or administrative proceeding adversely affecting the Merger or
this Agreement, including promptly appealing any adverse court or administrative
decision.
(b) Subject to appropriate confidentiality protections, each of the Parties
will furnish to the other Parties such necessary information and reasonable
assistance as such other Parties may reasonably request in connection with the
foregoing and will provide the other Parties with copies of all filings made by
such Party with any Governmental Entity and, upon request, any other information
supplied by such Party to a Governmental Entity in connection with this
Agreement and the transactions contemplated by this Agreement. Upon the terms
and subject to the conditions provided in this Agreement, in case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and/or directors of the
Parties shall use their reasonable best efforts to take or cause to be taken all
such necessary action.
(c) Without limiting the generality of the undertakings in this
Section 5.4, Parent and the Company shall take or cause to be taken the
following actions: (i) provide promptly to Governmental Entities with regulatory
jurisdiction over enforcement of any applicable antitrust laws (a "GOVERNMENT
ANTITRUST ENTITY") information and documents requested by any Government
Antitrust Entity or necessary, proper or advisable to permit consummation of the
Merger and the transactions contemplated by this Agreement; (ii) without in any
way limiting the provisions of Section 5.4(c)(i), file any Notification and
Report Form and related material required under the HSR Act as soon as
practicable and in any event not later than five (5) business days after the
date hereof, and thereafter use its reasonable efforts to certify as soon as
practicable its substantial compliance with any requests for additional
information or documentary material that may be made under the HSR Act; and
(iii) Company and Parent shall take promptly, in the event that any permanent or
preliminary injunction or other order is entered or becomes reasonably
foreseeable to be entered in any antitrust proceeding that would make
consummation of the Merger in accordance with the terms of this Agreement
unlawful or that would prevent or delay consummation of the Merger or the other
transactions contemplated by this Agreement, any and all steps (including the
appeal thereof or the posting of a bond) necessary to vacate, modify or suspend
such injunction or order so as to permit such consummation on a schedule as
close as possible to that contemplated by this Agreement. Each of the Company
and Parent will provide to the other copies of all correspondence between it (or
its advisors) and any Government Antitrust Entity relating to this Merger or any
of the matters described in this Section 5.4(c).
Section 5.5 EMPLOYEE BENEFITS.
(a) FAIR AND NON-DISCRIMINATORY TREATMENT. Except as provided in
Section 5.5(b) and to the extent Company employees timely complete any required
enrollment forms, on and after the Effective Time, Parent shall, and shall cause
its Affiliates (including the Surviving Corporation) to, provide on an
uninterrupted basis employee benefits (including, if applicable, group medical
and dental, life insurance, defined contribution retirement plan, short-and
long-term disability, severance, vacation and sick pay) for nonbargaining unit
employees of the Company as of the Effective Time (collectively, the "COMPANY
EMPLOYEES" or individually, a "COMPANY EMPLOYEE") which are, in the aggregate,
no less favorable than (i) the employee benefits they were provided immediately
prior to the Effective Time or, at Parent's option, (ii) the employee benefits
provided to similarly situated employees of Parent and its Affiliates.
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(b) RETIREMENT PLANS.
(1) The ZCMI Employee Retirement Plan (the "ZCMI RETIREMENT PLAN") in
effect at the Effective Time shall continue until such time as it may be
amended, terminated or merged into another qualified defined benefit plan.
On and after the Effective Time, Parent shall take all actions necessary to
ensure that the benefits calculated for Company Employees pursuant to the
terms of the ZCMI Retirement Plan (i) credit all service of a Company
Employee with the Parent and its Affiliates after the Effective Time for
purposes of eligibility and vesting under such plan (including eligibility
for early or normal retirement) and (ii) for periods during which (a) a
defined benefit plan is maintained by the Parent or its Affiliates for
similarly situated employees of Parent and its Affiliates, but (b) Company
Employees are not covered by such defined benefit plan, credit service for
such periods with the Parent or its Affiliates after the Effective Time for
purposes of accruing a retirement benefit under the ZCMI Retirement Plan;
and
(2) At all times during which Company Employees are covered by a defined
benefit plan (other than the ZCMI Retirement Plan) maintained by Parent or
any of its Affiliates, Parent shall take all actions necessary to provide
Company Employees with (1) credit under the defined benefit plan for past
service with the Company for eligibility and vesting purposes (including
eligibility for early or normal retirement) and otherwise in accordance with
the terms of such defined benefit plan, and (2) the retirement benefit
accrued under such defined benefit plan based solely on their service after
the Effective Time, and without any offset for benefits accrued under the
ZCMI Retirement Plan. Notwithstanding the foregoing, a period of service
shall be credited to a Company Employee for the purpose of accruing a
benefit under either the ZCMI Retirement Plan or another defined benefit
plan providing accruals for similarly situated employees of the Parent and
its Affiliates, but not under both such plans.
(c) PAST SERVICE CREDIT. Except with respect to the ZCMI Retirement Plan,
all service by Company Employees with the Company shall be counted as service
with Parent and its Affiliates for all purposes, including eligibility to
participate, vesting and determining the amount of a benefit, but without
duplication of benefits provided under any Company Plan to Company Employees
after the Effective Time, under the employee benefit plans and compensation
practices (including, if applicable, group medical and dental, life insurance,
defined contribution retirement plan, short- and long-term disability,
severance, vacation and sick pay) covering or otherwise benefitting Company
Employees on and after the Effective Time. Parent shall take or cause its
Affiliates (including Surviving Corporation) to take such action as may be
necessary or appropriate under all employee benefit plans and compensation
practices covering or otherwise benefitting Company Employees on or after the
Effective Time to provide for such past service credit.
(d) CO-PAYMENTS AND DEDUCTIBLES. Each Company Employee shall be given credit
for any deductible or co-payment amounts paid under Plans maintained by the
Company in respect of the Plan year in which the Effective Time occurs, to the
extent that, following the Effective Time, he or she participates in comparable
plans maintained by Parent or its Affiliates for which deductibles or
co-payments are required. Parent shall also cause each of its and its
Affiliates' plans to waive any preexisting condition requirement to the extent
waived under the terms of any Plan maintained by the Company immediately prior
to the Effective Time.
(e) LABOR AGREEMENTS. To the extent required by applicable law,Parent shall
cause the Surviving Corporation to honor all labor or collective bargaining
agreements pertaining to employees of the Company in effect at the Effective
Time.
(f) VACATION. Parent shall or shall cause its Affiliates (including the
Surviving Corporation) to provide all vacation entitlement to Company Employees
for the 1999 calendar year as determined under the Company's vacation pay
policies in effect as of the Effective Time.
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(g) COBRA. Parent shall provide or cause its Affiliates to provide
continuation coverage for purposes of Part 6 of Title I of ERISA to former
non-bargaining unit employees of the Company and their eligible dependents
comparable to the benefits, as from time to time in effect, provided to
similarly situated employees of the Company.
(h) EMPLOYEE DISCOUNTS. Parent shall provide discounts on merchandise
purchases to current and former employees of the Company in the manner described
on Section 5.5(h) of the Disclosure Schedule.
(i) CONTINUING EMPLOYMENT; SEVERANCE. On or before the Closing Date, Parent
shall interview and/or offer continuing employment with the Surviving
Corporation to Company Employees after the Effective Time under the terms
described in Item 1 of Section 5.5(i) of the Disclosure Schedule. In the event
the employment of any Company Employee is terminated by Parent or the Surviving
Corporation after the Effective Time, such Company Employees will be entitled to
the severance benefits, if any, described in Item 1 of Section 5.5(i) of the
Disclosure Schedule.
(j) EMPLOYMENT AND CONSULTING AGREEMENTS. Parent shall offer (i) an
employment agreement and a consulting agreement substantially in the respective
forms set forth in Section 5.5(j)(i) of the Disclosure Schedule to each of the
respective individuals listed in Section 5.5(j)(i) of the Disclosure Schedule
and (ii) an employment agreement substantially in the form set forth in
Section 5.5(j)(ii) of the Disclosure Schedule to each of the respective
individuals listed in Section 5.5(j)(ii) of the Disclosure Schedule.
Section 5.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time, (ii) any material failure of the Company, Parent or Acquisition, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement and (iii) the
commencement or the threat of any action, suit, claim, investigation or
proceeding which relates to this Agreement or the transactions contemplated by
this Agreement; provided, however, that the delivery of any notice pursuant to
this Section 5.6 shall not limit or otherwise affect the remedies, if any,
available under this Agreement to the party receiving such notice.
Section 5.7 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION. Following the Effective Time, Parent shall indemnify, or shall
cause the Surviving Corporation to indemnify, each person who is now, or has
been at any time prior to the date of this Agreement, an employee, agent,
director or officer of the Company (individually an "INDEMNIFIED PARTY" and
collectively the "INDEMNIFIED PARTIES"), to the same extent and in the same
manner as is now provided in the URBCA, Articles of Incorporation or Bylaws of
the Company, or pursuant to indemnification agreements described in Section 5.7
of the Disclosure Schedule in effect on the date of this Agreement, with respect
to any claim, liability, loss, damage, cost or expense, whenever asserted or
claimed ("INDEMNIFIED LIABILITY"), based in whole or in part on, or arising in
whole or in part out of, any matter existing or occurring at or prior to the
Effective Time, including, without limitation, matters arising out of or
pertaining to the Merger, this Agreement or the transactions contemplated by
this Agreement. Parent shall, or shall cause the Surviving Corporation to,
maintain in effect for not less than four years after the Effective Time
policies of directors' and officers' liability insurance equivalent in all
material respects to those maintained by or on behalf of the Company on the date
of this Agreement (and having at least the same coverage and containing terms
and conditions which are no less advantageous to the persons currently covered
by such policies) with respect to matters existing or occurring at or prior to
the Effective Time; provided, however, that if the aggregate annual premiums for
such insurance at any time during such period shall exceed 200% of the premiums
paid by the Company for such insurance for the twelve calendar months
immediately preceding the date of this Agreement (the "TWELVE MONTH PREMIUMS"),
then Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall,
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provide the maximum coverage that shall then be available at an annual premium
equal to 200% of the Twelve Month Premiums. Without limiting the foregoing, in
the event any Indemnified Party becomes involved in any capacity in any action,
proceeding or investigation based in whole or in part on, or arising in whole or
in part out of, any matter, including the transactions contemplated by this
Agreement, existing or occurring at or prior to the Effective Time, then to the
maximum extent permitted by law Parent shall, or shall cause the Surviving
Corporation to, periodically advance to such Indemnified Party his or her legal
and other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event of a
final determination by a court of competent jurisdiction that such Indemnified
Party is not entitled thereto. Promptly after receipt by an Indemnified Party of
notice of the assertion (an "ASSERTION") of any claim or the commencement of any
action against him or her as a result of which indemnity or reimbursement may be
sought against Parent, the Company, the Surviving Corporation (collectively, the
"INDEMNITORS" or individually, an "INDEMNITOR") under this Agreement, such
Indemnified Party shall notify any Indemnitor in writing of the Assertion, but
the failure to so notify any Indemnitor shall not relieve any Indemnitor of any
liability it may have to such Indemnified Party under this Agreement, except to
the extent that such failure shall have materially prejudiced the Indemnitor in
defending against such Assertion. The Indemnitors shall be entitled to
participate in and, to the extent the Indemnitors elect by written notice to
such Indemnified Party within 30 days after receipt by any Indemnitor of notice
of such Assertion, to assume the defense of such Assertion, at their own
expense, with counsel chosen by the Indemnitors and reasonably satisfactory to
such Indemnified Party. Notwithstanding that the Indemnitors shall have elected
by such written notice to assume the defense of any Assertion, such Indemnified
Party shall have the right to participate in the investigation and defense
thereof, with separate counsel chosen by such Indemnified Party, but in such
event the fees and expenses of such counsel shall be paid by such Indemnified
Party. Notwithstanding the foregoing, in the event the Indemnified Party
reasonably believes, based on the advice of his or her independent counsel under
applicable standards of professional conduct that there is reasonably likely to
be, with respect to a particular matter, a conflict on any significant issue
between the positions of any two or more Indemnified Parties or with any
Indemnitor (a "CONFLICT MATTER") such Indemnified Party may select a separate
counsel, reasonably acceptable to the Indemnitors, to represent such Indemnified
Party with respect to such Conflict Matter and the Indemnitors shall pay the
reasonable fees and expenses of counsel so selected by the Indemnified Party in
connection with such Conflict Matter. No Indemnified Party shall settle any
Assertion without the prior written consent of Parent, which, in the case of a
settlement solely for a cash payment, shall not be unreasonably withheld,
delayed, or conditioned, nor shall Parent or any other Indemnitor settle any
Assertion without either (i) the written consent of all Indemnified Parties
against whom such Assertion was made, or (ii) obtaining an unconditional general
release from the party making the Assertion for all Indemnified Parties as a
condition of such settlement. The provisions of this Section 5.8 are intended
for the benefit of, and shall be enforceable by, the respective Indemnified
Parties. In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Surviving Corporation or
Parent shall assume all of Parent's obligations set forth in this Section 5.7.
Section 5.8 EXISTING CREDIT DOCUMENTS. The Company will use reasonable
efforts to assist Parent to negotiate and to enter into arrangements with
(i) First Security Bank, N.A. and Zions First National Bank and the other
lenders party to the Loan Agreement with the Company dated as of April 15, 1999
(the "PRIMARY LOAN AGREEMENT") and (ii) First Security Bank, N.A. and Zions
First National Bank as parties to the Loan Agreement with the Company referenced
in Section 5.1 of the Disclosure Schedule (the "SUPPLEMENTAL LOAN AGREEMENT"),
which arrangements will permit the Company to terminate, on
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and as of the Closing Date, the Primary Loan Agreement, the Supplemental Loan
Agreement and all related loan documentation (collectively, the "EXISTING CREDIT
DOCUMENTS"), upon payment in full of all obligations of the Company thereunder
as of the Closing Date, without any requirement that the Company deliver
irrevocable prior notices of termination under the Existing Credit Documents or
to make any payment with respect to the Existing Credit Documents except upon
the occurrence of the Merger.
Section 5.9 PARENT UNDERTAKING. Parent shall be responsible for and shall
cause Acquisition to perform all of its obligations under this Agreement in a
timely manner.
Section 5.10 WARN ACT. Parent will comply, and will cause the Surviving
Corporation to comply, in all material respects with the Workers Adjustment and
Retraining Notification Act.
Section 5.11 FASHION PLACE. The Company will use reasonable efforts to
(i) assist Parent to negotiate and (ii) enter into an agreement with
Rouse-Fashion Place, LLC for the continued use and operation by the Company of a
retail facility at the Fashion Place Mall.
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each Party to consummate the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) This Agreement shall have been approved and adopted by the shareholders
of the Company in accordance with the URBCA;
(b) No Governmental Entity shall have issued, given notice of its intent to
issue or commenced any proceeding for the purpose of issuing any order, and
there shall not be any statute, rule, decree or regulation restraining,
prohibiting or making illegal the consummation of the Merger; and
(c) Any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(d) The Registration Statement shall have become effective and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated by the SEC.
Parent shall have received all state securities laws or "blue sky" permits and
other authorizations necessary to consummate the Merger.
Section 6.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Parent and Acquisition contained
in this Agreement shall be true and correct in all material respects both when
made and (except for those representations and warranties that address matters
only as of a particular date which need only be true and accurate as of such
date) as of the Closing Date after giving effect to the Merger as if made at and
as of such time and the Company shall have received at the Closing Date a
certificate to that effect dated the Closing Date and executed on behalf of the
Parent and Acquisition by an executive officer of each of Parent and
Acquisition; and
(b) Each of Parent and Acquisition shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Closing Date pursuant to the terms hereof.
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<PAGE>
Section 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION TO EFFECT
THE MERGER. The obligations of Parent and Acquisition to effect the Merger are
further subject to the satisfaction or waiver at or prior to the Effective Time
of the following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects both when made and
(except for those representations and warranties that address matters only as of
a particular date which need only be true and accurate as of such date) as of
the Closing Date after giving effect to the Merger as if made at and as of such
time and Parent shall have received at the Closing Date a certificate to that
effect dated the Closing Date and executed on behalf of the Company by an
executive officer of the Company;
(b) The Company shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it at or prior to
the Closing Date pursuant to the terms hereof; and
(c) Since January 31, 1999, the Company shall not have experienced events,
changes or effects, the effect of which, on an overall basis, would have, or, in
the written opinion of an independent investment banking firm of national
stature, would be likely to have, a Material Adverse Effect, other than
resulting from any matter expressly disclosed in the Company SEC Documents filed
after January 31, 1999 and prior to the date hereof or in Section 6.3(c) of the
Disclosure Schedule.
Section 6.4. ELECTION. Notwithstanding any other provision of this
Article VI, if Parent elects at any time to irrevocably waive the conditions set
forth in Sections 6.1(a), 6.1(c), 6.1(d), 6.3(a), 6.3(b) and 6.3(c) by
delivering a written statement (the "ELECTION") to the Company to such effect
and in form and substance reasonably satisfactory to the Company, then effective
on the effective date of the delivery of the Election (the "ELECTION DATE"), the
board of directors of the Company will, in accordance with the URBCA and the
Company's Bylaws, take action to expand the number of directors on the board to
such extent as may be necessary, and shall elect nominees designated by Parent
to serve as directors, so that the nominees designated by Parent shall
constitute a majority of the board of directors of the Company. In addition,
effective on and after the Election Date, and notwithstanding any other
provision of this Agreement, Parent shall have the full right of approval over
the operations of the Company. The exercise by Parent of the option granted
pursuant to the Shareowner Agreement of the Majority Shareholder will, for all
purposes, constitute and have the same effect as a delivery by Parent of the
Election. The receipt of notice from a Government Antitrust Entity of the early
termination of the waiting period with respect to the HSR Act will, for all
purposes, constitute and have the same effect as a delivery by Parent of the
Election. The delivery by Parent of the Election will not constitute an exercise
by Parent of the option granted pursuant to any of the Shareowner Agreements.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after stockholder
approval thereof:
(a) By the mutual consent of Parent and the Company.
(b) By either the Company or Parent if:
(i) the stockholders of the Company fail to approve and adopt this
Agreement at the Special Meeting (including any postponement or adjournment
thereof); or
(ii) any Governmental Entity shall have issued or threatened to issue a
statute, order, decree or regulation or taken any other action, in each case
permanently restraining or enjoining the
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<PAGE>
consummation of the transactions contemplated by this Agreement and such
statute, order, decree, regulation or other action shall have become final
and non-appealable.
(c) By the Company if Parent or Acquisition materially breaches or fails in
any material respect to perform or comply with any of its covenants and
agreements contained in this Agreement or breaches its representations and
warranties in this Agreement in any material respect; provided, however, that if
any such breach is curable by the breaching party through the exercise of the
breaching party's reasonable best efforts and for so long as such breaching
party shall be so attempting to cure such breach for a period not to exceed
20 days, the Company may not terminate this Agreement pursuant to this section.
(d) By Parent if (i) the Company breaches or fails in any respect to perform
or comply with any of its covenants set forth in Sections 5.1(b), 5.1(c),
5.1(d), 5.1(e), 5.1(g), 5.1(i), 5.1(o), 5.1(q), 5.1(r), 5.1(s), 5.2 or 5.3 as
concerns any agreement, contract, commitment or arrangement relating to a matter
subject to any of the foregoing subsections of Section 5.1 of this Agreement or
breaches its representations and warranties set forth in Sections 3.6, 3.7,
3.9(h), 3.9(m) or 3.24(f), or (ii) if there are any breaches or failures by the
Company of its covenants and agreements contained in this Agreement which
individually or in the aggregate constitute a Material Adverse Effect, or
(iii) if the Company materially breaches or fails in any material respect to
perform or comply with any of its other covenants or agreements contained in
this Agreement or breaches its other representations and warranties in this
Agreement in any material respect; provided, however, that if any such breach is
curable by the Company through the exercise of its reasonable best efforts and
for so long as the Company shall be so attempting to cure such breach for a
period not to exceed 20 days, the Board of Directors of Parent may not terminate
this Agreement pursuant to this section; or
(e) If the Merger has not been consummated by January 31, 2000, this
Agreement shall automatically terminate; provided, however, that if the Merger
has not been consummated by January 31, 2000 by reason of a failure of a Party
to fulfill any obligations under this Agreement, the other Party shall have all
rights and remedies provided for in this Agreement.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given by the terminating Party or Parties to the other Party or Parties
specifying the provision(s) of this Agreement pursuant to which such termination
is made, and this Agreement shall forthwith terminate and there shall be no
liability on the part of Parent, Acquisition or the Company or their respective
directors or officers under this Agreement except that Sections 7.2, 8.1 and
8.10 of this Agreement shall survive any such termination. Without limiting the
generality of the foregoing, Parent, Acquisition and the Company expressly agree
that the sole remedy for any breach of this Agreement prior to the Election
Date, if any (including, without limitation, as contemplated by Sections 8.1(b)
and 8.1(c)), shall be the termination rights contained in Section 7.1 and any
fee payable pursuant to Section 8.1, and in the event of any such breach, the
breaching party shall have no liability whatsoever (including, without
limitation, liability for actual, direct, indirect, consequential (including
lost profits), punitive, exemplary or special damages), other than the
obligation to pay any fee required to be paid pursuant to Section 8.1. Any such
fee shall constitute liquidated damages and shall not be deemed a penalty. No
Party shall be obligated to pay more than one such fee. After the Election Date
and notwithstanding anything in this Agreement to the contrary, Parent and the
Company shall each have the right to receive any fee payable under Section 8.1
hereof and shall also have all other remedies available at law or in equity in
the event of a breach of this Agreement by the other Party.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated in this Agreement shall be paid by the Party incurring
such expenses.
(b) If this Agreement is terminated by the Company pursuant to
Section 7.1(c), then Parent shall immediately pay to the Company an amount equal
to $3,000,000 in immediately available funds.
(c) If this Agreement is terminated by Parent pursuant to Section 7.1(d),
then the Company shall immediately pay to Parent an amount equal to $3,000,000
in immediately available funds.
(d) Parent shall be solely responsible for any and all filing fees that are
payable in connection with or on account of any filing by Parent or any other
Party concerning the transactions contemplated by this Agreement under or
pursuant to the HSR Act.
Section 8.2 AMENDMENT; WAIVER.
(a) This Agreement may be amended by the Parties, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval by the stockholders of the Company of the matters presented in
connection with the Merger, but after any such approval no amendment shall be
made without the approval of such stockholders if such amendment changes the
Merger Consideration or alters or changes any of the other terms or conditions
of this Agreement in a matter that materially adversely affects the rights of
such stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all of the Parties.
(b) At any time prior to the Effective Time, the Parties may (i) extend the
time for the performance of any of the obligations or other acts of the Parties,
(ii) waive any inaccuracies in the representations and warranties of one or more
Parties contained in this Agreement or in any document, certificate or writing
delivered pursuant to this Agreement or (iii) waive compliance with any of the
agreements or conditions of the Parties contained in this Agreement. Any
agreement on the part of any Party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
Party.
Section 8.3 SURVIVAL. The respective representations and warranties of
Parent, Acquisition and the Company contained herein or in any certificates or
other documents delivered prior to or as of the Effective Time shall not survive
beyond the Effective Time. The covenants and agreements of the Parties
(including the Surviving Corporation after the Merger) shall survive the
Effective Time without limitation (except for such covenants and agreements
which, by their terms, contemplate a shorter survival period).
Section 8.4 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission provided that a confirmed
delivery by a standard overnight carrier or a hand delivery is made within two
business days of the date such facsimile is sent or (b) confirmed delivery by a
standard overnight carrier or when delivered by hand, addressed at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
(a) if to the Company, to:
Zions Co-operative Mercantile Institution
2200 South 900 West
Salt Lake City, UT 84119
I-32
<PAGE>
Telephone: (801) 579-6179
Facsimile: (801) 292-5671
Attention: Chief Financial Officer
with a copy to:
Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, UT 84111-4904
Telephone: (801) 328-3131
Facsimile: (801) 578-6999
Attention: Brent J. Giauque
and
(b) if to Parent or Acquisition, to:
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101
Telephone: (314) 342-6563
Facsimile: (314) 342-3040
Attention: R. Dean Wolfe
with a copy to:
The May Department Stores Company
611 Olive Street, Suite 1750
St. Louis, MO 63101
Telephone: (314) 342-6467
Facsimile: (314) 342-3066
Attention: Alan E. Charlson
Section 8.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "MADE AVAILABLE" when used in this Agreement shall mean
that the information referred to has been made available if requested by the
Party to which such information is to be made available. The words "AFFILIATES"
and "ASSOCIATES" when used in this Agreement shall have the respective meanings
ascribed to them in Rule 12b-2 under the Exchange Act. The phrase "BENEFICIAL
OWNERSHIP" and words of similar import when used in this Agreement shall have
the meaning ascribed to it in Rule 13d-3 under the Exchange Act.
Section 8.6 SECTION HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
be considered one and the same agreement.
Section 8.8 ENTIRE AGREEMENT. This Agreement, together with the schedules,
documents, letter agreements, and instruments referred to therein or in this
Agreement, (i) constitute the entire agreement between the Parties on the
subject matter of this Agreement, and supersedes all prior agreements and
understandings (written and oral), among the Parties with respect to the subject
matter of this Agreement and (ii) except as provided in Section 5.7, is not
intended to confer upon any person other than the Parties any rights or remedies
under this Agreement.
I-33
<PAGE>
Section 8.9 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 GOVERNING LAW; WAIVER OF JURY TRIAL; ENFORCEMENT. This
Agreement shall be governed and construed in accordance with the laws of the
State of Utah without giving effect to the principles of conflicts of law
thereof. Each Party (a) waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement, (b) consents to submit
itself to the personal jurisdiction of any federal court located in the State of
Utah or any Utah state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (c) agrees
that it will not attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (d) 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 Utah.
Section 8.11 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated by
any of the Parties (whether by operation of law or otherwise) without the prior
written consent of the other Parties, except that Acquisition may, in its sole
discretion, assign any or all of its rights, interests and obligations under
this Agreement to Parent or any majority-owned Affiliate of Parent.
Section 8.12 CONTINUATION OF ATTORNEY-CLIENT PRIVILEGE. The Company has
been represented by counsel in connection with the Merger and representatives of
the Company, including certain of the Key Executives, have had and through the
Closing will have communications with such counsel concerning or related to the
Merger, the reasons for the Merger, alternatives available to the Company to
resolve its financial situation, existing or possible financing arrangements,
and other similar or related matters that are entitled to be treated as
confidential attorney-client communications under the Utah Rules of Professional
Conduct and Utah law (collectively, the "MERGER COMMUNICATIONS"). Subsequent to
the consummation of the transactions contemplated by this Agreement, the
confidential nature of the Merger Communications shall be preserved and,
therefore, the Merger Communications shall be treated as confidential by Parent
and shall not be directly or indirectly disclosed to or used by Parent or any
representative of Parent or the Company, notwithstanding that the Company is
owned by Parent.
Section 8.13 PUBLICITY. The initial press release with respect to the
Merger shall be a joint press release. Thereafter, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), the Company, Parent and Acquisition shall consult with each
other before issuing any such press release or otherwise making public
statements with respect to the Merger.
[signature page follows]
I-34
<PAGE>
IN WITNESS WHEREOF, Parent, Acquisition and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
<TABLE>
<S> <C> <C>
THE MAY DEPARTMENT STORES COMPANY
By: /s/ R. DEAN WOLFE
-----------------------------------------
R. Dean Wolfe
Executive Vice President
MS ACQUISITION, INC.
By: /s/ RICHARD A. BRICKSON
-----------------------------------------
Richard A. Brickson
Vice President
ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
By: /s/ RICHARD H. MADSEN
-----------------------------------------
Richard H. Madsen
Chairman, Chief Executive Officer and
President
</TABLE>
I-35
<PAGE>
ANNEX II
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 - (212) 892-3000
October 14, 1999
Board of Directors
Zions Co-operative Mercantile Institution
2200 South 900 West
Salt Lake City, Utah 84119
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Zions Co-operative Mercantile Institution (the
"Company") (other than stockholders who are Affiliates (as defined in the
Agreement) of the Company) of the consideration to be received by such
stockholders pursuant to the terms of the Agreement and Plan of Merger, dated as
of October 14, 1999 (the "Agreement"), by and between the Company, The May
Department Stores Company ("May") and MS Acquisition, Inc., a wholly-owned
subsidiary of May, pursuant to which MS Acquisition, Inc. will be merged (the
"Merger") with and into the Company.
Pursuant to the Agreement, each share of common stock, par value $.001 per
share of the Company (the "Company Common Stock"), will be converted into the
right to receive such number of shares of common stock, par value $0.50 per
share, of May ("May Common Stock"), which is the equivalent of $22.50, based on
the arithmetic average rounded to two decimal places of the high and low trading
prices of May Common Stock as reported on the Composite Tape of the New York
Stock Exchange listed securities for the 12th to the 3rd business days
immediately preceding the Closing Date (as defined in the Agreement) (the
"Merger Consideration").
In arriving at our opinion, we have reviewed the draft dated October 12,
1999 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company and May including
information provided during discussions with their respective managements.
Included in the information provided during discussions with Company management
were certain financial projections of the Company for the period beginning
August 1, 1999 and ending January 31, 2004 prepared by the management of the
Company and certain information concerning the Company's near-term liquidity
concerns. In addition, we have compared certain financial and securities data of
the Company with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the common
stock of the Company and May, reviewed prices and premiums paid in certain other
business combinations and conducted other such financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and May or their
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have relied on representations that
they have been reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of the Company as to the
future operating and financial performance of the Company. We have not assumed
any responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have assumed that the Merger will qualify as a tax-free
reorganization.
II-1
<PAGE>
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion as to the prices
at which May Common Stock will actually trade at any time. Our opinion does not
address the relative merits of the Merger and the other business strategies
being considered by the Company's Board of Directors, nor does it address the
Board's decision to proceed with the Merger. Our opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Merger Consideration to be received by the stockholders
of the Company (other than stockholders who are Affiliates of the Company)
pursuant to the Agreement is fair to such stockholders from a financial point of
view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Steven Puccinelli
------------------------------------------------------------------
Steven Puccinelli
Managing Director
II-2
<PAGE>
ANNEX III
AMENDED AND RESTATED SHAREOWNER AGREEMENT
THIS AMENDED AND RESTATED SHAREOWNER AGREEMENT (this "Agreement") is made
and entered into as of the 14th day of October, 1999 by and between THE MAY
DEPARTMENT STORES COMPANY, a Delaware corporation ("May"), and ZCMI RESERVE
TRUST, an irrevocable charitable trust organized under the laws of the State of
Utah ("ZRT") and a holder of shares of Zions Co-operative Mercantile
Institution, a Utah corporation ("ZCMI"). May and ZRT are later in this
Agreement sometimes referred to individually as a "PARTY" or collectively as the
"PARTIES."
RECITALS
This Agreement is entered into with reference to the following facts,
objectives, and definitions:
A. On October 14, 1999, May, ZCMI, and MS Acquisition, Inc., a Utah
Corporation and a wholly-owned subsidiary of May ("ACQUISITION CORP"), entered
into an Agreement and Plan of Merger, dated as of October 14, 1999 (the "MERGER
AGREEMENT"), pursuant to which it is contemplated that ZCMI will merge (the
"Merger") with Acquisition Corp, upon the terms and conditions set forth in the
Merger Agreement; and
B. ZRT owns a majority of the issued and outstanding shares of the $0.001
par value common stock of ZCMI (the "COMMON STOCK"), and desires to facilitate
the consummation of the Merger, and for such purpose ZRT has agreed (i) not to
transfer ZRT's shares of the Common Stock and (ii) to retain the right to vote
ZRT's shares of the Common Stock; and
C. ZRT and May desire to amend the original Shareowner Voting Agreement
dated October 14, 1999, and restate such agreement, so that this Amended and
Restated Shareowner Agreement supersedes and replaces the original Shareowner
Voting Agreement and sets forth the entire agreement between the Parties
concerning the subject matter of this Agreement, all effective as of
October 14, 1999.
NOW, THEREFORE, in consideration of this Agreement and of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. REPRESENTATIONS AND WARRANTIES OF ZRT. ZRT represents and warrants that
(i) it is the holder, free and clear of all liens and encumbrances, of at least
one million one hundred and thirty four thousand, five hundred and twenty-nine
(1,134,529) shares of the Common Stock (the "SHARES"); (ii) it does not
beneficially own (as such term is defined in the Securities Exchange Act of
1934, as amended (the "1934 ACT")) any shares of the Common Stock other than the
Shares; (iii) it has full power and authority to make, enter into, and carry out
the terms of this Agreement; (iv) the execution, delivery, and performance of
this Agreement by ZRT will not violate any other agreement to which ZRT is a
party, including, without limitation, any voting agreement, shareholder
agreement, or voting trust; and (v) the execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement have
been duly authorized by all requisite action on the part of ZRT or the Trustees
of ZRT, acting as trustees and not individually (the "TRUSTEES"), and when
executed by the Trustees, will constitute a legal, valid, and binding obligation
of ZRT and the Trustees, in their capacity as Trustees of ZRT, enforceable
against ZRT and the Trustees, in their capacity as Trustees of ZRT, in
accordance with its terms.
III-1
<PAGE>
2. VOTING RIGHTS. ZRT shall not hereafter, unless and until this Agreement
terminates, purport to grant any proxy or power of attorney with respect to any
of the Shares, deposit any of the 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 any of the Shares (except for a revocable proxy
solicited by ZCMI or by the board of directors of ZCMI in connection with the
shareholders' meeting to be held in connection with the Merger). ZRT shall
retain at all times the right to vote the Shares in ZRT's sole discretion on all
matters that are presented for a vote to the Shareholders of ZCMI generally.
3. NO OTHER VOTING AGREEMENTS OR VOTING TRUSTS. ZRT represents, warrants,
and covenants that (i) it is not a party to any voting agreement, voting trust,
or other agreement for voting control or other like agreement involving any of
the Shares and (ii) during the term of this Agreement, it will not become a
party to any such agreement or trust.
4. NO PROXY SOLICITATIONS. ZRT will not, nor will it permit any entity
under its control to, (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the 1934 Act)
in opposition to or competition with the consummation of the Merger,
(ii) directly or indirectly solicit, encourage, initiate, or otherwise
facilitate any inquiries or the making of any proposal or offer with respect to
any, merger, consolidation, tender offer, exchange offer, sale of a material
portion of the assets and business of ZCMI (whether in one or more
transactions), sale of shares of the capital stock or debt securities of ZCMI,
restructuring, recapitalization, or similar transaction involving ZCMI or any
division or operating principal business unit of ZCMI (whether in one or more
transactions) (an "ACQUISITION PROPOSAL") or engage in any negotiation
concerning, or provide any confidential information or data to, or have any
discussions with any person relating to, an Acquisition Proposal, or
(iii) become a member of a "group" (as such term is used in Section 13(d) of the
1934 Act) with respect to any voting securities of ZCMI for the purpose of
opposing or competing with the consummation of the Merger. ZRT shall immediately
cease and cause to be terminated any activities, discussions, or negotiations
with respect to any of the foregoing.
5. TRANSFER AND ENCUMBRANCE. ZRT shall not transfer, sell, offer, pledge,
or otherwise dispose of or encumber any of the Shares during the period
commencing on date of this Agreement and ending on the earlier of (i) the
effective date of the Merger or (ii) the date this Agreement is terminated in
accordance with its terms.
6. ADDITIONAL PURCHASES. During the period commencing on the date of this
Agreement and ending on the earlier of (i) the effective date of the Merger or
(ii) the date this Agreement is terminated in accordance with its terms, ZRT
shall not (a) purchase or otherwise acquire beneficial ownership of any shares
of the Common Stock ("NEW SHARES") other than by charitable donation to The
Church of Jesus Christ of Latter-day Saints, or (b) voluntarily acquire the
right to vote or share in the voting of any shares of the Common Stock other
than the Shares. Any New Shares acquired or purchased by ZRT shall be subject to
the terms of this Agreement and for all purposes shall be and constitute a
portion of the Shares.
7. ADJUSTMENTS TO PREVENT DILUTION. In the event of a stock dividend or
distribution, or any change in the 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.
8. USE OF ZCMI NAME AND CLOSING OF DOWNTOWN SALT LAKE CITY ZCMI STORE. May
acknowledges that compliance by ZRT with the terms and conditions of this
Agreement in general and, in particular, ZRT's agreement (i) not to transfer
ZRT's shares of the Common Stock and (ii) to retain the right to vote ZRT's
shares of the Common Stock, is conditioned upon and is in consideration of the
agreements, representations, and warranties of May set forth below in this
Paragraph 8.
III-2
<PAGE>
After the closing of the Merger:
i. May shall select a date (the "TERMINATION DATE") that is within two
(2) years of the effective date of the Merger;
ii. on or before the Termination Date, as may be permissible under Utah
law, May shall change the corporate name of ZCMI to a name that does not
include any of the following words: "Zions", "Co-operative", "Mercantile" or
"ZCMI";
iii. until the Termination Date, May or any of its subsidiaries may use
exterior signs with the name "ZCMI" on the stores operated by ZCMI in
connection with the operation of the business conducted by ZCMI (the "ZCMI
BUSINESS");
iv. as soon as practicable after the effective date of the Merger
consistent with good business practices, May or its subsidiaries shall, and
until the Termination Date May or its subsidiaries may, use a combined name
of "ZCMI" and a trade name used by May in the internal operation of a
department store (the "NEW NAME"), in connection with the ZCMI Business, and
v. until the Termination Date, May or its subsidiaries may not open any
of the stores operated by ZCMI on any Sunday,
vi. after the Termination Date:
(1) May, and may permit its subsidiaries to, open any of the stores
operated by ZCMI, other than the ZCMI store located on South Main Street
in Salt Lake City, Utah (the "SALT LAKE CITY DOWNTOWN STORE") on any
Sunday; and
(2) May will not, and will not permit any of its subsidiaries to,
open the Salt Lake City Downtown Store on any Sunday for so long as The
Church of Jesus Christ of Latter-day Saints or any of its affiliates
(collectively, the "CHURCH") is the landlord with respect to the Salt
Lake City Downtown Store or unless the Church permits other stores in the
shopping mall or center of which the Salt Lake Downtown Store is a part
("ZCMI Center Mall") to open on Sundays and will not vote for and will
vote against any attempt by other stores in the ZCMI Center Mall to be
open on Sundays; and
(3) forthwith after the Termination Date, May will, and will cause
its subsidiaries to, convey and transfer all right, title, and interest
that May or any of its subsidiaries may have in or to the "ZCMI"
trademark or trade name (collectively, the "ZCMI Name") to ZRT on the
condition that ZRT:
(a) not thereafter use the ZCMI Name for or in connection with
any business activity; provided, however, that to the extent that
either May or ZRT can affect the name of the shopping mall or center
of which the Salt Lake Downtown Store is a part, both May and ZRT
will act to maintain the name of the mall as "ZCMI Center Mall";
(b) not thereafter license or otherwise authorize any other
person or entity to use the ZCMI Name for or in connection with any
business activity;
(c) take all actions necessary to enforce its intellectual
property rights in the ZCMI Name; and
(d) not sell, transfer, assign or otherwise convey the ZCMI Name
or any rights to use the ZCMI Name to any other person or entity
unless that person agrees to these conditions as fully as if that
person or entity were ZRT.
Provided, however, that nothing in this Paragraph 8 shall require that
May or ZCMI alter, change, or at any time discontinue the use of the
trademark "ZCMI" as it is on the date of this
III-3
<PAGE>
Agreement being used on the front of the facade on the west entrance to the
ZCMI store located on the Salt Lake City Downtown Store, which shall not be
considered a use by May.
9. NO THIRD-PARTY BENEFICIARY RIGHTS. No provision of this Agreement is
intended to nor shall it be interpreted to provide or create any third-party
beneficiary rights or any other rights of any kind in any person or entity who
is not a Party and all provisions of this Agreement are personal to and solely
between the Parties.
10. FURTHER ASSURANCES. Each Party shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, or documents as any other
Party shall reasonably request from time to time in order to carry out the
intent and purposes of this Agreement. No Party shall voluntarily undertake any
course of action inconsistent with satisfaction of the requirements applicable
to such Party as set forth in this Agreement, and each Party shall promptly do
all acts and take all measures as may be appropriate or necessary to enable such
Party to perform, as early as practicable, the obligations required to be
performed by such Party under this Agreement.
11. INJUNCTIVE RELIEF. The Parties intend and agree that the provisions of
this Agreement are for the benefit of May and shall be specifically enforceable
as contemplated by Section 16-10a-731 of the Utah Revised Business Corporation
Act. The Parties acknowledge that it is impossible to measure in money the
damages that will accrue to one or more of them by reason of the failure of
either of them to abide by the provisions of this Agreement, that every such
provision is material, and that in the event of any such failure, the other
Party will not have an adequate remedy at law or damages. Therefore, if any
Party shall institute any action or proceeding to enforce the provisions of this
Agreement, in addition to any other relief, the court in such action or
proceeding may grant injunctive relief against any Party found to be in breach
or violation of this Agreement, as well as or in addition to any remedies at law
or damages, and such Party waives the claim or defense in any such action or
proceeding that the Party bringing such action has an adequate remedy at law,
and such Party shall not argue or assert in any such action or proceeding the
claim or defense that such remedy at law exists. No Party shall seek and each
Party shall waive any requirement for, the securing or posting of a bond in
connection with the other Party seeking or obtaining such equitable relief.
12. COURT MODIFICATION. Should any portion of this Agreement be declared by
a court of competent jurisdiction to be unreasonable, unenforceable, or void for
any reason or reasons, the involved court shall modify the applicable
provision(s) of this Agreement so as to be reasonable or as is otherwise
necessary to make this Agreement enforceable and valid and to protect the
interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
13. FACSIMILE TRANSMISSION AND COUNTERPARTS. This Agreement may be executed
by facsimile transmission and 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.
14. NOTICES. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be delivered (i) personally,
(ii) by first class mail, certified, return receipt requested, postage prepaid,
(iii) by overnight courier, with one acknowledged receipt, or (iv) by facsimile
transmission followed by delivery by first class mail or by overnight courier,
in the manner provided for in this Paragraph 14 and properly addressed as
follows:
III-4
<PAGE>
If to May to:
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101
Telephone: (314) 342-6563
Facsimile: (314) 342-3040
Attention: R. Dean Wolfe
with a copy to:
The May Department Stores Company
611 Olive Street, Suite 1750
St. Louis, MO 63101
Telephone: (314) 342-6467
Facsimile: (314) 342-3066
Attention: Alan E. Charlson
If to ZRT:
ZCMI Reserve Trust
50 East South Temple
COB 2WW
Salt Lake City, Utah 84111
Attention: Boyd J. Black
Telephone: (801) 240-6235
Facsimile: (801) 240-1109
with a copy to:
R. Willis Orton, Esq.
Kirton & McConkie
60 East South Temple
Suite 1800
Salt Lake City, Utah 84111
Telephone: (801) 321-4816
Facsimile: (801) 321-4893
or to such other address or addresses as a Party to this Agreement may indicate
to the other Party in the manner provided for in this Paragraph 14. Notices,
etc. given by mail and notices, etc. given by overnight courier shall be deemed
effective and complete upon delivery; notices by facsimile transmission shall be
deemed effective upon receipt, unless receipt thereof shall be disputed in which
case receipt shall be deemed effective as of the effective date of the follow-up
notice called for by this Paragraph 14 with respect to such facsimile
transmitted notice; and notices, etc. delivered personally shall be deemed
effective and complete at the time of the delivery of the notice and the
obtaining of a signed receipt for the notice, unless a Party shall refuse to
provide a signed receipt, in which case the notice shall be effective upon the
completion of personal delivery of the notice in such a way as to insure the
ability to evidence such personal delivery.
15. OTHER AGREEMENTS.
This Agreement supersedes all prior agreements or understandings of the
Parties on the subject matter of this Agreement. There are no representations,
warranties, or agreements, whether express or implied, or oral or written, with
respect to the subject matter of this Agreement, except as set forth in this
Agreement. This Agreement (i) shall not be modified by any oral agreement,
either express or implied, and all amendments or modifications of this Agreement
shall be in writing and be signed by
III-5
<PAGE>
all of the Parties, and (ii) shall be binding on and shall inure to the benefit
of the Parties and their respective heirs, legal representatives, successors,
and permitted assigns, if any.
None of the rights, duties, or obligations under this Agreement of any Party
may be assigned, delegated, or transferred expressly, by operation of law,
merger, or otherwise, without the prior written consent of the other Party.
The paragraph headings in this Agreement are for the purpose of convenience
only and shall not limit or otherwise affect any of the terms of this Agreement.
Should any Party be in default under or breach of any of the covenants or
agreements contained in this Agreement, or in the event a dispute shall arise as
to the meaning of any term of this Agreement, the defaulting or nonprevailing
Party shall pay all costs and expenses, including reasonable attorneys' fees, of
the other Party that may arise or accrue from enforcing this Agreement, securing
an interpretation of any provision of this Agreement, or in pursuing any remedy
provided by law whether such remedy is pursued or interpretation is sought by
the filing of a lawsuit, an appeal, or otherwise.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Utah, which internal laws exclude any provision or
interpretation of such laws that would call for, or permit, the application of
the laws of any other state or jurisdiction, and any dispute arising therefrom
and the remedies available shall be determined solely in accordance with such
internal laws.
Sections 1 through 7 of this Agreement shall terminate upon the first to
occur of the following events:
i. the successful consummation of the Merger;
ii. the written agreement of all of the Parties to terminate this
Agreement; or
iii. the termination of the Merger Agreement.
Where the context requires, the singular shall include the plural, the
plural shall include the singular, and any gender shall include all other
genders.
Recitals A and B are by this reference incorporated into and made a part of
this Agreement.
III-6
<PAGE>
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on or as
of the date of this Agreement.
<TABLE>
<S> <C> <C>
THE MAY DEPARTMENT STORES COMPANY,
a Delaware Corporation
By: /s/ R. DEAN WOLFE
-----------------------------------------
R. Dean Wolfe,
Executive Vice President
ZCMI RESERVE TRUST,
an irrevocable charitable trust
By: /s/ THOMAS S. MONSON
-----------------------------------------
Thomas S. Monson,
not individually but as Trustee
By: /s/ L. TOM PERRY
-----------------------------------------
L. Tom Perry,
not individually but as Trustee
By: /s/ DAVID B. HAIGHT
-----------------------------------------
David B. Haight,
not individually but as Trustee
</TABLE>
III-7
<PAGE>
ANNEX IV
AMENDED AND RESTATED SHAREOWNER AGREEMENT
THIS AMENDED AND RESTATED SHAREOWNER AGREEMENT (this "AGREEMENT") is made
and entered into as of the 14th day of October, 1999, by and between THE MAY
DEPARTMENT STORES COMPANY, a Delaware corporation ("May"), PATRICIA MADSEN
("Madsen") and a holder of shares of Zions Co-operative Mercantile Institution,
a Utah corporation ("ZCMI"). May and Madsen are later in this Agreement
sometimes referred to individually as a "PARTY" or collectively as the
"PARTIES."
RECITALS
This Agreement is entered into with reference to the following facts,
objectives, and definitions:
A. On October 14, 1999, May, ZCMI, and MS Acquisition, Inc., a Utah
Corporation and a wholly-owned subsidiary of May ("ACQUISITION CORP"), entered
into an Agreement and Plan of Merger, dated as of October 14, 1999 (the "MERGER
AGREEMENT"), pursuant to which it is contemplated that ZCMI will merge (the
"Merger") with Acquisition Corp, upon the terms and conditions set forth in the
Merger Agreement; and
B. Madsen owns certain of the issued and outstanding shares of the $0.001
par value common stock of ZCMI (the "COMMON STOCK"), and desires to facilitate
the consummation of the Merger, and for such purpose Madsen has agreed (i) not
to transfer Madsen's shares of the Common Stock and (ii) to retain the right to
vote Madsen's shares of the Common Stock; and
C. Madsen and May desire to amend the original Shareowner Voting Agreement
dated October 14, 1999, and restate such agreement, so that this Amended and
Restated Shareowner Agreement supersedes and replaces the original Shareowner
Voting Agreement and sets forth the entire agreement between the parties
concerning the subject matter of this Agreement, all effective as of
October 14, 1999.
NOW, THEREFORE, in consideration of this Agreement and of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. REPRESENTATIONS AND WARRANTIES OF MADSEN. Madsen represents and warrants
that (i) she is the holder, free and clear of all liens and encumbrances, of at
least forty-three thousand three hundred seventy-five (43,375) shares of the
Common Stock (the "SHARES"); (ii) she has full power and authority to make,
enter into, and carry out the terms of this Agreement; (iii) the execution,
delivery, and performance of this Agreement by Madsen will not violate any other
agreement to which Madsen is a party, including, without limitation, any voting
agreement, shareholder agreement, or voting trust; and (iv) when executed by
Madsen, will constitute a legal, valid, and binding obligation of Madsen,
enforceable against Madsen, in accordance with its terms.
2. VOTING RIGHTS. Madsen shall not hereafter, unless and until this
Agreement terminates, purport to grant any proxy or power of attorney with
respect to any of the Shares, deposit any of the 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 any of the Shares (except for
a revocable proxy solicited by ZCMI or by the board of directors of ZCMI in
connection with the shareholders' meeting to be held in connection with the
Merger). Madsen shall retain at all times the right to vote the Shares in
Madsen's sole discretion on all matters that are presented for a vote to the
Shareholders of ZCMI generally.
IV-1
<PAGE>
3. NO OTHER VOTING AGREEMENTS OR VOTING TRUSTS. Madsen represents,
warrants, and covenants that (i) she is not a party to any voting agreement,
voting trust, or other agreement for voting control or other like agreement
involving any of the Shares and (ii) during the term of this Agreement, she will
not become a party to any such agreement or trust.
4. NO PROXY SOLICITATIONS. Madsen will not, nor will she permit any entity
under her control to, (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the 1934 Act)
in opposition to or competition with the consummation of the Merger,
(ii) directly or indirectly solicit, encourage, initiate, or otherwise
facilitate any inquiries or the making of any proposal or offer with respect to
any, merger, consolidation, tender offer, exchange offer, sale of a material
portion of the assets and business of ZCMI (whether in one or more
transactions), sale of shares of the capital stock or debt securities of ZCMI,
restructuring, recapitalization, or similar transaction involving ZCMI or any
division or operating principal business unit of ZCMI (whether in one or more
transactions) (an "ACQUISITION PROPOSAL") or engage in any negotiation
concerning, or provide any confidential information or data to, or have any
discussions with any person relating to, an Acquisition Proposal, or
(iii) become a member of a "group" (as such term is used in Section 13(d) of the
1934 Act) with respect to any voting securities of ZCMI for the purpose of
opposing or competing with the consummation of the Merger. Madsen shall
immediately cease and cause to be terminated any activities, discussions, or
negotiations with respect to any of the foregoing.
5. TRANSFER AND ENCUMBRANCE. Madsen shall not transfer, sell, offer,
pledge, or otherwise dispose of or encumber any of the Shares during the period
commencing on date of this Agreement and ending on the earlier of (i) the
effective date of the Merger or (ii) the date this Agreement is terminated in
accordance with its terms.
6. ADDITIONAL PURCHASES. During the period commencing on the date of this
Agreement and ending on the earlier of (i) the effective date of the Merger or
(ii) the date this Agreement is terminated in accordance with its terms, Madsen
shall not (a) purchase or otherwise acquire beneficial ownership of any shares
of the Common Stock ("NEW SHARES"), or (b) voluntarily acquire the right to vote
or share in the voting of any shares of the Common Stock other than the Shares.
Any New Shares acquired or purchased by Madsen shall be subject to the terms of
this Agreement and for all purposes shall be and constitute a portion of the
Shares.
7. ADJUSTMENTS TO PREVENT DILUTION. In the event of a stock dividend or
distribution, or any change in the 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.
8. NO THIRD-PARTY BENEFICIARY RIGHTS. No provision of this Agreement is
intended to nor shall it be interpreted to provide or create any third-party
beneficiary rights or any other rights of any kind in any person or entity who
is not a Party and all provisions of this Agreement are personal to and solely
between the Parties.
9. FURTHER ASSURANCES. Each Party shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, or documents as any other
Party shall reasonably request from time to time in order to carry out the
intent and purposes of this Agreement. No Party shall voluntarily undertake any
course of action inconsistent with satisfaction of the requirements applicable
to such Party as set forth in this Agreement, and each Party shall promptly do
all acts and take all measures as may be appropriate or necessary to enable such
Party to perform, as early as practicable, the obligations required to be
performed by such Party under this Agreement.
IV-2
<PAGE>
10. INJUNCTIVE RELIEF. The Parties intend and agree that the provisions of
this Agreement are for the benefit of May and shall be specifically enforceable
as contemplated by Section 16-10a-731 of the Utah Revised Business Corporation
Act. The Parties acknowledge that it is impossible to measure in money the
damages that will accrue to one or more of them by reason of the failure of
either of them to abide by the provisions of this Agreement, that every such
provision is material, and that in the event of any such failure, the other
Party will not have an adequate remedy at law or damages. Therefore, if any
Party shall institute any action or proceeding to enforce the provisions of this
Agreement, in addition to any other relief, the court in such action or
proceeding may grant injunctive relief against any Party found to be in breach
or violation of this Agreement, as well as or in addition to any remedies at law
or damages, and such Party waives the claim or defense in any such action or
proceeding that the Party bringing such action has an adequate remedy at law,
and such Party shall not argue or assert in any such action or proceeding the
claim or defense that such remedy at law exists. No Party shall seek and each
Party shall waive any requirement for, the securing or posting of a bond in
connection with the other Party seeking or obtaining such equitable relief.
11. COURT MODIFICATION. Should any portion of this Agreement be declared by
a court of competent jurisdiction to be unreasonable, unenforceable, or void for
any reason or reasons, the involved court shall modify the applicable
provision(s) of this Agreement so as to be reasonable or as is otherwise
necessary to make this Agreement enforceable and valid and to protect the
interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
12. FACSIMILE TRANSMISSION AND COUNTERPARTS. This Agreement may be executed
by facsimile transmission and 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.
13. NOTICES. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be delivered (i) personally,
(ii) by first class mail, certified, return receipt requested, postage prepaid,
(iii) by overnight courier, with one acknowledged receipt, or (iv) by facsimile
transmission followed by delivery by first class mail or by overnight courier,
in the manner provided for in this Paragraph 13 and properly addressed as
follows:
If to May to:
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101
Telephone: (314) 342-6563
Facsimile: (314) 342-3040
Attention: R. Dean Wolfe
with a copy to:
The May Department Stores Company
611 Olive Street, Suite 1750
St. Louis, MO 63101
Telephone: (314) 342-6467
Facsimile: (314) 342-3066
Attention: Alan E. Charlson
IV-3
<PAGE>
If to Madsen:
Patricia Madsen
2051 South 1100 East
Salt Lake City, Utah 84106
Telephone: (801) 467-1579
with a copy to:
Brent J. Giauque, Esq.
Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, Utah 84111
Telephone: (801) 578-6918
Facsimile: (801) 578-6999
or to such other address or addresses as a Party to this Agreement may indicate
to the other Party in the manner provided for in this Paragraph 13. Notices,
etc. given by mail and notices, etc. given by overnight courier shall be deemed
effective and complete upon delivery; notices by facsimile transmission shall be
deemed effective upon receipt, unless receipt thereof shall be disputed in which
case receipt shall be deemed effective as of the effective date of the follow-up
notice called for by this Paragraph 13 with respect to such facsimile
transmitted notice; and notices, etc. delivered personally shall be deemed
effective and complete at the time of the delivery of the notice and the
obtaining of a signed receipt for the notice, unless a Party shall refuse to
provide a signed receipt, in which case the notice shall be effective upon the
completion of personal delivery of the notice in such a way as to insure the
ability to evidence such personal delivery.
14. OTHER AGREEMENTS.
This Agreement supersedes all prior agreements or understandings of the
Parties on the subject matter of this Agreement. There are no representations,
warranties, or agreements, whether express or implied, or oral or written, with
respect to the subject matter of this Agreement, except as set forth in this
Agreement. This Agreement (i) shall not be modified by any oral agreement,
either express or implied, and all amendments or modifications of this Agreement
shall be in writing and be signed by all of the Parties, and (ii) shall be
binding on and shall inure to the benefit of the Parties and their respective
heirs, legal representatives, successors, and permitted assigns, if any.
None of the rights, duties, or obligations under this Agreement of any Party
may be assigned, delegated, or transferred expressly, by operation of law,
merger, or otherwise, without the prior written consent of the other Party.
The paragraph headings in this Agreement are for the purpose of convenience
only and shall not limit or otherwise affect any of the terms of this Agreement.
Should any Party be in default under or breach of any of the covenants or
agreements contained in this Agreement, or in the event a dispute shall arise as
to the meaning of any term of this Agreement, the defaulting or nonprevailing
Party shall pay all costs and expenses, including reasonable attorneys' fees, of
the other Party that may arise or accrue from enforcing this Agreement, securing
an interpretation of any provision of this Agreement, or in pursuing any remedy
provided by law whether such remedy is pursued or interpretation is sought by
the filing of a lawsuit, an appeal, or otherwise.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Utah, which internal laws exclude any provision or
interpretation of such laws that would call for, or permit, the application of
the laws of any other state or jurisdiction, and any dispute arising therefrom
and the remedies available shall be determined solely in accordance with such
internal laws.
IV-4
<PAGE>
Sections 1 through 7 of this Agreement shall terminate upon the first to
occur of the following events:
i. the successful consummation of the Merger;
ii. the written agreement of all of the Parties to terminate this
Agreement; or
iii. the termination of the Merger Agreement.
Where the context requires, the singular shall include the plural, the
plural shall include the singular, and any gender shall include all other
genders.
Recitals A and B are by this reference incorporated into and made a part of
this Agreement.
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on or as
of the date of this Agreement.
<TABLE>
<S> <C> <C>
THE MAY DEPARTMENT STORES COMPANY,
a Delaware Corporation
By: /s/ R. DEAN WOLFE
-----------------------------------------
R. Dean Wolfe,
Executive Vice President
By: /s/ PATRICIA MADSEN
-----------------------------------------
Patricia Madsen
</TABLE>
IV-5
<PAGE>
ANNEX V
AMENDED AND RESTATED SHAREOWNER AGREEMENT
THIS AMENDED AND RESTATED SHAREOWNER AGREEMENT (this "AGREEMENT") is made
and entered into as of the 14th day of October, 1999, by and between THE MAY
DEPARTMENT STORES COMPANY, a Delaware corporation ("May"), RICHARD H. MADSEN
("Madsen") and a holder of shares of Zions Co-operative Mercantile Institution,
a Utah corporation ("ZCMI"). May and Madsen are later in this Agreement
sometimes referred to individually as a "PARTY" or collectively as the
"PARTIES."
RECITALS
This Agreement is entered into with reference to the following facts,
objectives, and definitions:
A. On October 14, 1999, May, ZCMI, and MS Acquisition, Inc., a Utah
Corporation and a wholly-owned subsidiary of May ("ACQUISITION CORP"), entered
into an Agreement and Plan of Merger, dated as of October 14, 1999 (the "MERGER
AGREEMENT"), pursuant to which it is contemplated that ZCMI will merge (the
"Merger") with Acquisition Corp, upon the terms and conditions set forth in the
Merger Agreement; and
B. Madsen owns certain of the issued and outstanding shares of the $0.001
par value common stock of ZCMI (the "COMMON STOCK"), and desires to facilitate
the consummation of the Merger, and for such purpose Madsen has agreed not to
transfer Madsen's shares of the Common Stock and to retain the right to vote
Madsen's shares of the Common Stock; and
C. Madsen and May desire to amend the original Shareowner Voting Agreement
dated October 14, 1999, and restate such agreement, so that this Amended and
Restated Shareowner Agreement supersedes and replaces the original Shareowner
Voting Agreement and sets forth the entire agreement between the Parties
concerning the subject matter of this Agreement, all effective as of
October 14, 1999.
NOW, THEREFORE, in consideration of this Agreement and of the covenants and
conditions contained in this Agreement, the Parties represent, warrant, and
agree as follows:
AGREEMENT
1. REPRESENTATIONS AND WARRANTIES OF MADSEN. Madsen represents and
warrants that (i) he is the holder, free and clear of all liens and
encumbrances, of at least forty-seven thousand forty-five (47,045) shares of the
Common Stock (the "Shares"); (ii) he has full power and authority to make, enter
into, and carry out the terms of this Agreement; (iii) the execution, delivery,
and performance of this Agreement by Madsen will not violate any other agreement
to which Madsen is a party, including, without limitation, any voting agreement,
shareholder agreement, or voting trust; and (iv) when executed by Madsen, will
constitute a legal, valid, and binding obligation of Madsen, enforceable against
Madsen, in accordance with its terms.
2. VOTING RIGHTS. Madsen shall not hereafter, unless and until this
Agreement terminates, purport to grant any proxy or power of attorney with
respect to any of the Shares, deposit any of the 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 any of the Shares (except for
a revocable proxy solicited by ZCMI or by the board of directors of ZCMI in
connection with the shareholders' meeting to be held in connection with the
Merger). Madsen shall retain at all times the right to vote the Shares in
Madsen's sole discretion on all matters that are presented for a vote to the
Shareholders of ZCMI generally.
V-1
<PAGE>
3. NO OTHER VOTING AGREEMENTS OR VOTING TRUSTS. Madsen represents,
warrants, and covenants that (i) he is not a party to any voting agreement,
voting trust, or other agreement for voting control or other like agreement
involving any of the Shares and (ii) during the term of this Agreement, he will
not become a party to any such agreement or trust.
4. NO PROXY SOLICITATIONS. Madsen will not, nor will he permit any entity
under his control to, (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the 1934 Act)
in opposition to or competition with the consummation of the Merger,
(ii) directly or indirectly solicit, encourage, initiate, or otherwise
facilitate any inquiries or the making of any proposal or offer with respect to
any, merger, consolidation, tender offer, exchange offer, sale of a material
portion of the assets and business of ZCMI (whether in one or more
transactions), sale of shares of the capital stock or debt securities of ZCMI,
restructuring, recapitalization, or similar transaction involving ZCMI or any
division or operating principal business unit of ZCMI (whether in one or more
transactions) (an "ACQUISITION PROPOSAL") or engage in any negotiation
concerning, or provide any confidential information or data to, or have any
discussions with any person relating to, an Acquisition Proposal, or
(iii) become a member of a "group" (as such term is used in Section 13(d) of the
1934 Act) with respect to any voting securities of ZCMI for the purpose of
opposing or competing with the consummation of the Merger. Madsen shall
immediately cease and cause to be terminated any activities, discussions, or
negotiations with respect to any of the foregoing.
5. TRANSFER AND ENCUMBRANCE. Madsen shall not transfer, sell, offer,
pledge, or otherwise dispose of or encumber any of the Shares during the period
commencing on date of this Agreement and ending on the earlier of (i) the
effective date of the Merger or (ii) the date this Agreement is terminated in
accordance with its terms.
6. ADDITIONAL PURCHASES. During the period commencing on the date of this
Agreement and ending on the earlier of (i) the effective date of the Merger or
(ii) the date this Agreement is terminated in accordance with its terms, Madsen
shall not (a) purchase or otherwise acquire beneficial ownership of any shares
of the Common Stock ("NEW SHARES"), or (b) voluntarily acquire the right to vote
or share in the voting of any shares of the Common Stock other than the Shares.
Any New Shares acquired or purchased by Madsen shall be subject to the terms of
this Agreement and for all purposes shall be and constitute a portion of the
Shares.
7. ADJUSTMENTS TO PREVENT DILUTION. In the event of a stock dividend or
distribution, or any change in the 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.
8. NO THIRD-PARTY BENEFICIARY RIGHTS. No provision of this Agreement is
intended to nor shall it be interpreted to provide or create any third-party
beneficiary rights or any other rights of any kind in any person or entity who
is not a Party and all provisions of this Agreement are personal to and solely
between the Parties.
9. FURTHER ASSURANCES. Each Party shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, or documents as any other
Party shall reasonably request from time to time in order to carry out the
intent and purposes of this Agreement. No Party shall voluntarily undertake any
course of action inconsistent with satisfaction of the requirements applicable
to such Party as set forth in this Agreement, and each Party shall promptly do
all acts and take all measures as may be appropriate or necessary to enable such
Party to perform, as early as practicable, the obligations required to be
performed by such Party under this Agreement.
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<PAGE>
10. INJUNCTIVE RELIEF. The Parties intend and agree that the provisions of
this Agreement are for the benefit of May and shall be specifically enforceable
as contemplated by Section 16-10a-731 of the Utah Revised Business Corporation
Act. The Parties acknowledge that it is impossible to measure in money the
damages that will accrue to one or more of them by reason of the failure of
either of them to abide by the provisions of this Agreement, that every such
provision is material, and that in the event of any such failure, the other
Party will not have an adequate remedy at law or damages. Therefore, if any
Party shall institute any action or proceeding to enforce the provisions of this
Agreement, in addition to any other relief, the court in such action or
proceeding may grant injunctive relief against any Party found to be in breach
or violation of this Agreement, as well as or in addition to any remedies at law
or damages, and such Party waives the claim or defense in any such action or
proceeding that the Party bringing such action has an adequate remedy at law,
and such Party shall not argue or assert in any such action or proceeding the
claim or defense that such remedy at law exists. No Party shall seek and each
Party shall waive any requirement for, the securing or posting of a bond in
connection with the other Party seeking or obtaining such equitable relief.
11. COURT MODIFICATION. Should any portion of this Agreement be declared
by a court of competent jurisdiction to be unreasonable, unenforceable, or void
for any reason or reasons, the involved court shall modify the applicable
provision(s) of this Agreement so as to be reasonable or as is otherwise
necessary to make this Agreement enforceable and valid and to protect the
interests of the Parties intended to be protected by this Agreement to the
maximum extent possible.
12. FACSIMILE TRANSMISSION AND COUNTERPARTS. This Agreement may be
executed by facsimile transmission and 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.
13. NOTICES. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be delivered (i) personally,
(ii) by first class mail, certified, return receipt requested, postage prepaid,
(iii) by overnight courier, with one acknowledged receipt, or (iv) by facsimile
transmission followed by delivery by first class mail or by overnight courier,
in the manner provided for in this Paragraph 13 and properly addressed as
follows:
If to May to:
The May Department Stores Company
611 Olive Street
St. Louis, MO 63101
Telephone: (314) 342-6563
Facsimile: (314) 342-3040
Attention: R. Dean Wolfe
with a copy to:
The May Department Stores Company
611 Olive Street, Suite 1750
St. Louis, MO 63101
Telephone: (314) 342-6467
Facsimile: (314) 342-3066
Attention: Alan E. Charlson
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<PAGE>
If to Madsen:
Richard H. Madsen
ZCMI
200 South 900 West
Salt Lake City, Utah 84119
Telephone: (801) 579-6325
Facsimile: (801) 579-7429
with a copy to:
Brent J. Giauque, Esq.
Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, Utah 84111
Telephone: (801) 578-6918
Facsimile: (801) 578-6999
or to such other address or addresses as a Party to this Agreement may indicate
to the other Party in the manner provided for in this Paragraph 13. Notices,
etc. given by mail and notices, etc. given by overnight courier shall be deemed
effective and complete upon delivery; notices by facsimile transmission shall be
deemed effective upon receipt, unless receipt thereof shall be disputed in which
case receipt shall be deemed effective as of the effective date of the follow-up
notice called for by this Paragraph 13 with respect to such facsimile
transmitted notice; and notices, etc. delivered personally shall be deemed
effective and complete at the time of the delivery of the notice and the
obtaining of a signed receipt for the notice, unless a Party shall refuse to
provide a signed receipt, in which case the notice shall be effective upon the
completion of personal delivery of the notice in such a way as to insure the
ability to evidence such personal delivery.
14. OTHER AGREEMENTS.
This Agreement supersedes all prior agreements or understandings of the
Parties on the subject matter of this Agreement. There are no representations,
warranties, or agreements, whether express or implied, or oral or written, with
respect to the subject matter of this Agreement, except as set forth in this
Agreement. This Agreement (i) shall not be modified by any oral agreement,
either express or implied, and all amendments or modifications of this Agreement
shall be in writing and be signed by all of the Parties, and (ii) shall be
binding on and shall inure to the benefit of the Parties and their respective
heirs, legal representatives, successors, and permitted assigns, if any.
None of the rights, duties, or obligations under this Agreement of any Party
may be assigned, delegated, or transferred expressly, by operation of law,
merger, or otherwise, without the prior written consent of the other Party.
The paragraph headings in this Agreement are for the purpose of convenience
only and shall not limit or otherwise affect any of the terms of this Agreement.
Should any Party be in default under or breach of any of the covenants or
agreements contained in this Agreement, or in the event a dispute shall arise as
to the meaning of any term of this Agreement, the defaulting or nonprevailing
Party shall pay all costs and expenses, including reasonable attorneys' fees, of
the other Party that may arise or accrue from enforcing this Agreement, securing
an interpretation of any provision of this Agreement, or in pursuing any remedy
provided by law whether such remedy is pursued or interpretation is sought by
the filing of a lawsuit, an appeal, or otherwise.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Utah, which internal laws exclude any provision or
interpretation of such laws that would call
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<PAGE>
for, or permit, the application of the laws of any other state or jurisdiction,
and any dispute arising therefrom and the remedies available shall be determined
solely in accordance with such internal laws.
Sections 1 through 7 of this Agreement shall terminate upon the first to
occur of the following events:
i. the successful consummation of the Merger;
ii. the written agreement of all of the Parties to terminate this
Agreement; or
iii. the termination of the Merger Agreement.
Where the context requires, the singular shall include the plural, the
plural shall include the singular, and any gender shall include all other
genders.
Recitals A and B are by this reference incorporated into and made a part of
this Agreement.
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on or as
of the date of this Agreement.
<TABLE>
<S> <C> <C>
THE MAY DEPARTMENT STORES COMPANY,
a Delaware Corporation
By: /s/ R. DEAN WOLFE
-----------------------------------------
R. Dean Wolfe,
EXECUTIVE VICE PRESIDENT
By: /s/ RICHARD H. MADSEN
-----------------------------------------
Richard H. Madsen
</TABLE>
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<PAGE>
ANNEX VI
SECTIONS 16-10A-1301 TO 16-10A-1331
UTAH REVISED BUSINESS CORPORATION ACT
UTAH CODE
TITLE 16. CORPORATIONS
CHAPTER 10A. REVISED BUSINESS CORPORATION ACT
PART 13. DISSENTERS' RIGHTS
16-10A-1301. DEFINITIONS.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under Section 16-10a-1302 and who exercises that right when and in
the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the statutory rate set forth in
Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares that are
registered in the name of a nominee to the extent the beneficial owner is
recognized by the corporation as the shareholder as provided in
Section 16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
16-10A-1302. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent from,
and obtain payment of the fair value of shares held by him in the event of,
any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party if:
(i) shareholder approval is required for the merger by
Section 16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or
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substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair value of
his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors
so provides.
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution
of the board of directors, and subject to the limitations set forth in
Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series
of shares which either were listed on a national securities exchange
registered under the federal Securities Exchange Act of 1934, as amended, or
on the National Market System of the National Association of Securities
Dealers Automated Quotation System, or were held of record by more than
2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine shareholders
entitled to sign writings consenting to the proposed corporate action; or
(c) the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the shareholder
will receive for his shares, pursuant to the corporate action, anything
except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities
exchange registered under the federal Securities Exchange Act of 1934, as
amended, or on the National Market System of the National Association of
Securities Dealers Automated Quotation System, or will be held of record
by more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash in
lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares under
this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10A-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if the shareholder dissents with respect
to all shares beneficially owned by any one person and causes the
corporation to receive written notice which states the dissent and the name
and address of each person on whose behalf dissenters' rights are being
asserted. The rights of a
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partial dissenter under this subsection are determined as if the shares as
to which the shareholder dissents and the other shares held of record by him
were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares held on
his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of which
he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents with
respect to the shares held by any one or more beneficial shareholders, each
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted,
or will timely assert, dissenters' rights as to all the shares unlimited on
the ability to exercise dissenters' rights. The certification requirement
must be stated in the dissenters' notice given pursuant to
Section 16-10a-1322.
16-10A-1320. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the
meeting. The notice shall state that shareholders are or may be entitled to
assert dissenters' rights under this part. The notice must be accompanied by
a copy of this part and the materials, if any, that under this chapter are
required to be given the shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as required by this subsection
does not affect any action taken at the shareholders' meeting for which the
notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant
to Section 16-10a-704, any written or oral solicitation of a shareholder to
execute a written consent to the action contemplated by Section 16-10a-704
must be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under this
part, by a copy of this part, and by the materials, if any, that under this
chapter would have been required to be given to shareholders entitled to
vote on the proposed action if the proposed action were submitted to a vote
at a shareholders' meeting. Failure to give written notice as provided by
this subsection does not affect any action taken pursuant to
Section 16-10a-704 for which the notice was to have been given.
16-10A-1321. DEMAND FOR PAYMENT--ELIGIBILITY AND NOTICE OF INTENT.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken, written
notice of his intent to demand payment for shares if the proposed action
is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant
to Section 16-10a-704, a shareholder who wishes to assert dissenters' rights
may not execute a writing consenting to the proposed corporate action.
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(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a
shareholder with respect to the shares for which payment is demanded as of
the date the proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is approved by the shareholders, if shareholder approval
is required, or as of the effective date of the corporate action if the
corporate action is authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections
(1) through (3) is not entitled to payment for shares under this part.
16-10A-1322. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment
for their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later than
ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective date or
proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment demands
and an address at which certificates for certificated shares must be
deposited;
(c) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter to
state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand and
by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if the
requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10A-1323. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice described in
Section 16-10a-1322, who meets the requirements of Section 16-10a-1321, and
wishes to assert dissenters' rights must, in accordance with the terms of
the dissenters' notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with the
terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described in
Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person
on whose behalf he asserts dissenters' rights acquired
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beneficial ownership of the shares before the date of the first
announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under
Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1) retains
all rights of a shareholder except the right to transfer the shares until
the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for
the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share certificates as
required, by the date or dates set in the dissenters' notice, is not
entitled to payment for shares under this part.
16-10A-1324. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the
transfer of the shares until the proposed corporate action is taken or the
restrictions are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
16-10A-1325. PAYMENT.
(1) Except as provided in Section 16-10a-1327, upon the later of the effective
date of the corporate action creating dissenters' rights under
Section 16-10a-1302, and receipt by the corporation of each payment demand
pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenter's shares, plus
interest to each dissenter who has complied with Section 16-10a-1323, and
who meets the requirements of Section 16-10a-1321, and who has not yet
received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end of its most recent
fiscal year, or if not available, a fiscal year ending not more
than 16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and
a statement of cash flow for that year, if the corporation
customarily provides such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection
(i) must be audited if the corporation customarily provides audited
financial statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under
Section 16-10a-1328; and
(d) a copy of this part.
16-10A-1326. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters' rights
under Section 16-10a-1302 does not occur within 60 days after the date set
by the corporation as the date by which the
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corporation must receive payment demands as provided in
Section 16-10a-1322, the corporation shall return all deposited certificates
and release the transfer restrictions imposed on uncertificated shares, and
all shareholders who submitted a demand for payment pursuant to
Section 16-10a-1323 shall thereafter have all rights of a shareholder as if
no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters' rights
under Section 16-10a-1302 occurs more than 60 days after the date set by the
corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send
a new dissenters' notice, as provided in Section 16-10a-1322, and the
provisions of Sections 16-10a-1323 through 16-10a-1328 shall again be
applicable.
16-10A-1327. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION.
(1) A corporation may, with the dissenters' notice given pursuant to
Section 16-10a-1322, state the date of the first announcement to news media
or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302 and state that a shareholder
who asserts dissenters' rights must certify in writing, in or with the
payment demand, whether or not he or the person on whose behalf he asserts
dissenters' rights acquired beneficial ownership of the shares before that
date. With respect to any dissenter who does not certify in writing, in or
with the payment demand that he or the person on whose behalf the
dissenters' rights are being asserted, acquired beneficial ownership of the
shares before that date, the corporation may, in lieu of making the payment
provided in Section 16-10a-1325, offer to make payment if the dissenter
agrees to accept it in full satisfaction of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10A-1328. PROCEDURE FOR SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own
estimate of the fair value of his shares and demand payment of the estimated
amount, plus interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section 16-10a-1325 or
offered under Section 16-10a-1327 is less than the fair value of the
shares;
(b) the corporation fails to make payment under Section 16-10a-1325 within
60 days after the date set by the corporation as the date by which it
must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates
or release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section unless he
causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for his
shares.
16-10A-1330. JUDICIAL APPRAISAL OF SHARES--COURT ACTION.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court
to determine the fair value of the shares and the
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amount of interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the
corporation's principal office, or if it has no principal office in this
state, the county where its registered office is located. If the corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with, or whose shares were
acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether
or not they are residents of this state whose demands remain unresolved,
parties to the proceeding commenced under Subsection (2) as an action
against their shares. All such dissenters who are named as parties must be
served with a copy of the petition. Service on each dissenter may be by
registered or certified mail to the address stated in his payment demand
made pursuant to Section 16-10a-1328. If no address is stated in the payment
demand, service may be made at the address stated in the payment demand
given pursuant to Section 16-10a-1323. If no address is stated in the
payment demand, service may be made at the address shown on the
corporation's current record of shareholders for the record shareholder
holding the dissenter's shares. Service may also be made otherwise as
provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under Subsection
(2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value of
his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under
Section 16-10a-1327.
16-10A-1331. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under Section 16-10a-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds that the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
Section 16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to those counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
VI-7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL provides generally and in pertinent part that a
Delaware corporation may indemnify its directors and officers against expenses,
judgments, fines and settlements actually and reasonably incurred by them in
connection with any civil suit or action, except actions by or in the right of
the corporation, or any administrative or investigative proceeding, if, in
connection with the matters in issue, they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interests of the
corporation, and in connection with any criminal suit or proceeding, if in
connection with the matters in issue, they had no reasonable cause to believe
their conduct was unlawful.
Section 145 further provides that, in connection with the defense or
settlement of any action by or in the right of the corporation, a Delaware
corporation may indemnify its directors and officers against expenses actually
and reasonably incurred by them if, in connection with the matters in issue,
they acted in good faith in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation, and without negligence or
misconduct in the performance of their duties to the corporation.
Section 145 further permits a Delaware corporation to grant its directors
and officers additional rights of indemnification through by-law provisions and
otherwise.
May has entered into indemnification agreements with each director and
certain executive officers of May. Each indemnification agreement provides,
among other things,
(1) for indemnification to the fullest extent permitted by law against all
expenses, judgments, fines and penalties incurred in connection with, and
amounts paid in settlement of, any claim against the indemnified party, provided
it is determined pursuant to the agreement that the indemnitee is entitled to be
indemnified under the applicable standard of conduct under the DGCL,
(2) for advancement of expenses to the indemnitee in connection with the
indemnitee's defense of any threatened or pending claim, provided that if it is
determined pursuant to the agreement that the indemnitee would not be permitted
to be indemnified under applicable law, May shall be entitled to be reimbursed
by the indemnitee for all such amounts previously paid,
(3) for the creation of a trust for the benefit of the indemnitee in the
event of a potential change in control of May which shall be funded from time to
time at the request of the indemnitee in an amount sufficient to satisfy May's
indemnification obligations under the agreement, and
(4) that no legal action be brought and no cause of action be asserted by or
on behalf of May against the indemnitee after the expiration of the earlier of
the applicable statute of limitations or two years after the date of accrual of
such cause of action.
Similar indemnification agreements may be entered into from time to time with
additional officers of May. In addition, May has a directors and officers
liability insurance policy.
Article Eleventh of the May certificate of incorporation and Article VI of
the May bylaws provide that May shall indemnify its directors and officers to
the fullest extent permitted by the DGCL. Section 102(b)(7) of the DGCL provides
that a certificate of incorporation may contain a provision eliminating or
limiting the personal liability of a director to the corporation or its
shareowners for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director
(i) for any breach of the director's duty of loyalty to the corporation or
its shareowners,
II-1
<PAGE>
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock), or
(iv) for any transaction from which the director derived an improper
personal benefit.
Article Tenth of the May certificate of incorporation contains such a provision.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated October 14, 1999, among
May, MS Acquisition and ZCMI (included as Annex I to the
proxy statement/prospectus).
3.1 Amended and Restated Certificate of Incorporation of May
(incorporated by reference to Exhibit 4(a) of May's
Post-Effective Amendment No. 1 to Form S-8 filed May 29,
1996).
3.2 By-Laws of May (incorporated by reference to May's Quarterly
Report on Form 10-Q for the period ended May 1, 1999).
4.1 Rights Agreement, dated as of August 19, 1994, between The
May Department Stores Company, a New York corporation ("May
New York"), and the Bank of New York, as Rights Agent (the
"Rights Agreement"), which includes as Exhibit A thereto,
the Form of Rights Certificate (incorporated by reference to
Exhibit 1 of the Current Report of May New York on Form 8-K
dated September 2, 1994).
4.2 Assignment and Assumption of the Rights Agreement, dated May
24, 1996, among May New York, May, and The Bank of New York
(incorporated by reference to Exhibit 4(d) of May's
Post-Effective Amendment No. 1 to Form S-8 filed May 29,
1996).
4.3 Certificate of Designation, Preferences and Rights of the
Junior Participating Preference Shares and ESOP Preference
Shares (incorporated by reference to Exhibit 4.4 of May's
registration statement on Form S-4, filed June 7, 1996).
5.1 Opinion of Alan E. Charlson, Esq., May's senior vice
president and chief counsel, regarding the legality of the
securities being registered.
8.1 Opinion of Stoel Rives LLP regarding certain federal income
tax consequences of the merger.
10.1 Form of Employment Agreement.
10.2 Form of Consulting Contract.
10.3 Amended and Restated Shareowner Agreement dated as of
October 14, 1999 between ZCMI Reserve Trust and May
(included as Annex III to the proxy statement/prospectus).
10.4 Amended and Restated Shareowner Agreement dated as of
October 14, 1999 between Patricia Madsen and May (included
as Annex IV to the proxy statement/prospectus).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.5 Amended and Restated Shareowner Agreement dated as of
October 14, 1999 between Richard H. Madsen and May (included
as Annex V to the proxy statement/prospectus).
12.1 Statement re: Computation of per share earnings
(incorporated by reference to Exhibit 12 to May's Annual
Report on Form 10-K for the fiscal year ended January 30,
1999).
15.1 Letter of Arthur Andersen LLP regarding unaudited interim
financial information.
21.1 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 to May's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999).
23.1 Consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
23.2 Consent of Stoel Rives LLP (included in Exhibit 8.1).
23.3 Consent of Alan E. Charlson (included in Exhibit 5.1).
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
99.1 Proxy Card
99.2 Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation dated October 14, 1999 (included as Annex II to
the proxy statement/prospectus).
</TABLE>
- ------------------------
(b) Financial Statement Schedules
Not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reoffering by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(b) The registrant undertakes that every prospectus:
(i) that is filed pursuant to paragraph (a) immediately preceding, or
(ii) that purports to meet the requirements of Section 10(a)(3) of the
Act and is used in connection with an offering of securities subject to
Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
II-3
<PAGE>
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference to the proxy statement/prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning the transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Louis, State of
Missouri, on November 30, 1999.
<TABLE>
<S> <C> <C>
THE MAY DEPARTMENT STORES COMPANY
By: /s/ RICHARD A. BRICKSON
-----------------------------------------
Name: Richard A. Brickson
Title: Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
*
------------------------------------------- Director, President and November 30, 1999
Eugene S. Kahn Chief Executive Officer
*
------------------------------------------- Director and Chairman of November 30, 1999
Jerome T. Loeb the Board
Director and Vice Chairman,
* and Chief Executive
------------------------------------------- Officer of May November 30, 1999
Anthony J. Torcasio Merchandising Company
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
*
------------------------------------------- Director, Vice Chairman and November 30, 1999
John L. Dunham Chief Financial Officer
* Director and Executive Vice
------------------------------------------- President of Acquisitions November 30, 1999
R. Dean Wolfe and Real Estate
*
------------------------------------------- Director November 30, 1999
Marsha J. Evans
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*
------------------------------------------- Director November 30, 1999
Helene L. Kaplan
*
------------------------------------------- Director November 30, 1999
James M. Kilts
*
------------------------------------------- Director November 30, 1999
Russell E. Palmer
*
------------------------------------------- Director November 30, 1999
Michael R. Quinlan
*
------------------------------------------- Director November 30, 1999
William P. Stiritz
*
------------------------------------------- Director November 30, 1999
Robert D. Storey
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ RICHARD A. BRICKSON
--------------------------------------
Richard A. Brickson
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT 5.1
[MAY logo]
The May Department Stores Company
Office of Legal Counsel
Alan E. Charlson
Senior Vice President and Chief Counsel
November 29, 1999
The May Department Stores Company
611 Olive Street
St. Louis, Missouri 63101-1799
Ladies and Gentlemen:
I have acted as counsel to The May Department Stores Company, a
Delaware corporation ("May"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), of May's Registration Statement on Form S-4. The
Registration Statement relates to the registration of shares of common stock,
par value $0.50 per share, of May ("Common Stock"), together with associated
preferred stock purchase rights ("Rights"), that May will issue pursuant to the
terms of the Agreement and Plan of Merger, dated as of October 14, 1999 (the
"Merger Agreement"), among May, MS Acquisition, Inc., a Utah corporation and
wholly owned subsidiary of May ("MS Acquisition"), and Zions Co-Operative
Mercantile Institution, a Utah corporation ("ZCMI"). The Merger Agreement
provides for the merger of MS Acquisition with and into ZCMI, with ZCMI
surviving the merger as a wholly owned subsidiary of May (the "Merger").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K promulgated under the Act.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents,
corporate records, certificates and other instruments, and have conducted such
other investigations of fact and law as I have deemed necessary or advisable for
the purposes of this opinion.
In my examination, I have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such copies. In making my examination of
documents executed by parties other than May, I have assumed that such parties
had the power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite action,
corporate or other, and execution and delivery by such parties of such documents
and the validity and binding effect thereof on such parties.
On the basis of the foregoing, and subject to the limitations,
qualifications, exceptions, and assumptions set forth herein, it is my opinion
that
- - the issuance of the shares of Common Stock, including the associated
Rights, under the Merger Agreement has been duly authorized by
requisite corporate action by May, and
- - when issued and delivered in accordance with the terms and conditions
of the Merger Agreement, the shares of Common Stock, including the
associated Rights, will be validly issued, fully paid and
nonassessable.
<PAGE>
In rendering the foregoing opinion, I have assumed that
(i) the Merger and the other transactions contemplated by the Merger
Agreement will be consummated in accordance with the terms of the
Merger Agreement (and the exhibits thereto), including being approved
and adopted by the requisite vote of the ZCMI shareholders,
(ii) the Common Stock and the Rights will conform in all material
respects to the descriptions thereof set forth in the proxy statement/
prospectus forming a part of the Registration Statement, and
(iii) the certificates representing the Common Stock will be duly
executed and delivered.
I am a member of the bars of the States of Missouri and Pennsylvania,
and am familiar with the general principles of Delaware law as they related to
the matters set forth in this opinion. I express no opinion as to the laws of
any jurisdiction other than the laws of the State of Delaware and the United
States of America.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Registration Statement. In giving such consent, I do not hereby
admit that I come into the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and Exchange
Commission promulgated under the Act.
Very truly yours,
/s/ Alan E. Charlson
Alan E. Charlson
<PAGE>
EXHIBIT 8.1
November 29, 1999
Zions Co-operative Mercantile Institution
2200 South 900 West
Salt Lake City, Utah 84119
RE: MERGER OF MS ACQUISITION, INC. WITH AND INTO ZCMI
Ladies and Gentlemen:
We have acted as counsel to Zions Co-operative Mercantile Institution, a
Utah corporation ("ZCMI"), in connection with the proposed merger of MS
Acquisition, Inc. ("ACQUISITION"), a Utah corporation and a wholly owned
subsidiary of The May Department Stores Company, a Delaware corporation ("MAY"),
with and into ZCMI, and related transactions (the "MERGER") pursuant to the
terms of the Agreement and Plan of Merger dated as of October 14, 1999 (the
"PLAN OF MERGER") by and among ZCMI, May and Acquisition. We have been engaged
by ZCMI to render our opinion with respect to certain United States federal
income tax consequences arising at the Effective Time of the Merger. Unless
otherwise defined in this letter, all capitalized terms have the same meanings
as set forth in the Plan of Merger.
In connection with the Plan of Merger, as of October 14, 1999 May entered
into an Amended and Restated Shareowner Agreement (the "SHAREOWNER AGREEMENT")
with ZCMI Reserve Trust, an irrevocable charitable trust organized under the
laws of the State of Utah ("ZRT"), under which ZRT acquired certain rights of
ZCMI relating to the "ZCMI" trade name and trademark and the use thereof, and
May agreed, on behalf of ZCMI, to certain limitations on operation of the ZCMI's
Salt Lake City downtown and other stores on Sunday (the "ZCMI RIGHTS AND
COVENANTS"). We are advised that in exchange for the ZCMI Rights and Covenants,
ZCMI's lease with an affiliate of ZRT for the ZCMI headquarters and service
center will be amended to provide ZCMI with an option to purchase the
headquarters and service center and certain adjoining land for $2.5 million (the
"Service Center Option") in accordance with a letter agreement (the "LETTER
AGREEMENT") dated October 14, 1999 between The Church of Jesus Christ of
Latter-day Saints and May.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(a) the Plan of Merger, (b) the agreements between May and certain ZCMI
stockholders, including the Shareowner Agreement, (c) the Letter Agreement, (d)
a certificate of the chief financial officer of ZCMI addressed to us of even
date herewith (the "ZCMI CERTIFICATE"), (e) a certificate of an executive
vice-president of May and a vice-president of Acquisition addressed to us of
even date herewith (the "MAY CERTIFICATE"), (f) a certificate of a trustee of
ZRT addressed to us of even date herewith (the "ZRT CERTIFICATE") (the ZCMI
Certificate, the May Certificate and the ZRT Certificate are sometimes
collectively referred to herein as the "CERTIFICATES"), (g) the Registration
Statement on Form S-4 of May to be filed with the Securities and Exchange
Commission (the "REGISTRATION STATEMENT"), and (h) such other documents as we
have deemed necessary or appropriate in order to enable us to render the
opinions below. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authority of all
persons signing documents, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. In rendering the opinions set forth below, we have
relied upon certain statements, representations and covenants of ZCMI, May and
Acquisition contained in the Plan of Merger, the ZCMI Certificate, the May
Certificate or the Registration Statement, and the statements and
representations made by ZRT in the ZRT Certificate. We have made no independent
investigation with regard to such statements, representations or covenants. We
assume that all such statements and representations are, and will be at the
Effective Time, true and complete, but we express no opinion as to their
accuracy or completeness. To the extent any such statement or representation is
made based on the knowledge of the person making the statement or
representation, we have assumed that the statement or representation is true
notwithstanding such knowledge qualifier. To the extent any such statement or
representation is expressed as an intention with respect to future conduct, we
have also assumed that the statement or representation accurately describes the
future conduct. We assume that no actions will be taken that are inconsistent
with such statements, representations and covenants and that the transactions
<PAGE>
Zions Co-operative Mercantile Institution
November 29, 1999
Page 2
described in the Plan of Merger, the Registration Statement, the Shareowner
Agreement and the Letter Agreement (with the Shareowner Agreement and the Letter
Agreement interpreted as clarified by the representations of the Certificates)
will be carried out in accordance with their terms.
Our opinion is based on the Internal Revenue Code of 1986, as amended
("Code"), and Treasury Regulations promulgated thereunder, administrative
pronouncements by the Internal Revenue Service (the "Service"), judicial
decisions, and such other legal authorities as we have deemed necessary or
appropriate for purposes of our opinion, as each exists as of the date of this
letter. Existing laws may be changed by legislation or promulgation of
regulations or may be interpreted differently than they are at present by courts
or by the Service, and such changes may alter the conclusions reached in this
letter.
Based upon the foregoing and subject to the analysis, conditions and
limitations set forth in this letter, and assuming that May acquires in the
Merger at least 80 percent of the outstanding ZCMI common stock in exchange for
May voting common stock, in our opinion:
(1) The Merger will qualify as a "reorganization" within the meaning of
Section 368(a) of the Code.
(2) Except as provided below, holders of ZCMI stock (a) will not recognize
gain or loss for federal income tax purposes as a result of the exchange of
their shares of ZCMI common stock for May common stock in the Merger, except
with respect to cash received instead of a fractional share of May common stock,
as discussed below, and (b) have a tax basis in the May common stock received in
the Merger equal to the tax basis of the ZCMI common stock surrendered in the
Merger less any tax basis of the ZCMI common stock surrendered that is allocable
to a fractional share of May common stock for which cash is received.
(3) A ZCMI stockholder's holding period with respect to the May common
stock received in the Merger will include the holding period of the ZCMI common
stock surrendered in the Merger, assuming the stockholder holds the shares of
ZCMI common stock as a capital asset on the date of the exchange.
(4) To the extent that a holder of shares of ZCMI common stock receives
cash instead of a fractional share of May common stock, the holder will
recognize gain or loss for federal income tax purposes, measured by the
difference between the amount of cash received and the portion of the tax basis
of the holder's shares of ZCMI stock allocable to such fractional share of May
common stock. Assuming the stockholder holds the shares of ZCMI common stock as
a capital asset on the date of the exchange, the gain or loss will be a capital
gain or loss and will be a long-term capital gain or loss if the share of ZCMI
common stock exchanged for the fractional share of May common stock was held for
more than one year at the Effective Time.
(5) A holder of shares of ZCMI common stock who dissents from the Merger
and who receives cash in exchange for the ZCMI common stock held by the holder
will generally recognize gain or loss for federal income tax purposes, measured
by the difference between the amount of cash received and the tax basis of the
holder's shares of ZCMI common stock. There may, however, be circumstances
peculiar to a dissenting stockholder that could cause the cash received to be
treated as a distribution of property to which Section 301 of the Code applies.
(6) None of May, ZCMI or Acquisition will recognize gain or loss for
federal income tax purposes with respect to the Merger. However, ZCMI may
recognize income or gain in connection with the receipt by ZCMI of the rights to
the Service Center Option in accordance with the Letter Agreement.
In order for the Merger to have the tax consequences described above, ZCMI
must after the Merger hold "substantially all" of its assets held before the
Merger. Code Section 368(a)(2)(E). Any assets transferred to ZRT under the
Shareowner Agreement likely will be considered assets held by ZCMI before the
Merger that will not be held by ZCMI following the Merger. We have concluded,
however, that the "substantially all" requirement will be satisfied in the
Merger for the following reasons.
In an early ruling, the Service observed that whether a transaction
satisfies the "substantially all" test is to be determined by an examination of
all of the facts and circumstances. Revenue Ruling 57-518, 1957-2 C.B. 253. In
that ruling involving the sale of the assets of a target corporation, the
Service focused on the nature of the properties retained by the target
corporation and the purpose for the retention, finding that the small amount of
assets retained were not held for purposes of engaging in business or for
distribution to shareholders. For purposes of issuing advance rulings on a
transaction, the Service has stated that the "substantially all" requirement is
satisfied if assets of the target acquired in the transaction represent 90
percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets of the target corporation, although this is not
a rule of substantive law and the Service has stated this ruling standard is not
intended to set the minimum for satisfying the "substantially all" requirement.
Revenue Procedure 77-37, 1977-2 C.B. 568.
<PAGE>
Zions Co-operative Mercantile Institution
November 29, 1999
Page 3
The Service recognized in Revenue Ruling 88-48, 1988-1 C.B. 117, which
involved the pre-acquisition sale of 50 percent of the historic business assets
of the target corporation, that a pre-reorganization sale by the target
corporation does not impact the calculation of the "substantially all" test so
long as the proceeds of the sale are included in the subsequent acquisition and
are not distributed to shareholders. The Service concluded that the transaction
was not divisive in part because the buyer of the historic business assets was
an unrelated purchaser, and therefore the shareholders of the target corporation
retained no continuing interest in those historic business assets. We are not
aware of any judicial or administrative authority that has expressly considered
application of the substituted asset principle enunciated in Revenue Ruling
88-48 to an acquisition of target assets for value by a target shareholder. A
recent field service advisory of the Service considered a purported Code Section
368(a)(2)(E) merger that involved a post-merger sale of one of the target's
business divisions to a pre-merger target shareholder for cash and a note. FSA
199945006 (July 23, 1999). The Service in that advisory concluded that the
merger did not meet the "substantially all" test. In reaching that conclusion,
the Service appears to have concluded that the assets sold to the former target
shareholder were excluded from the target's post-merger assets for purposes of
the "substantially all" test without any apparent consideration of the
substituted asset principle of Revenue Ruling 88-48.
While the Merger involves a transfer of certain rights to ZRT, a ZCMI
stockholder, the transaction does not appear to be an attempt to circumvent the
statutory requirements for a tax-free division of a business. According to the
transaction documents and the representations of ZRT, ZCMI and May to us, (1)
the aggregate value of the ZCMI Rights and Covenants does not appear to exceed
16 percent of the pre-Merger value of the net assets of ZCMI, (2) ZRT will
acquire the ZCMI Rights and Covenants solely for rights to the Service Center
Option under the Letter Agreement in an arms length transaction, (3) any
property transferred to ZCMI in accordance with the Letter Agreement will remain
in ZCMI to be used in the operation of its business and will not be distributed
to stockholders, (4) the covenants being made on behalf of ZCMI regarding the
operation of the business of ZCMI on Sunday are consistent with the
long-standing practice of ZCMI, (5) acquisition of the ZCMI Rights and Covenants
were negotiated by ZRT solely for religious and historical purposes that are
unrelated to its position as a stockholder of ZCMI and (6) ZRT is restricted
under the Shareowner Agreement from using the ZCMI name for any commercial or
business purpose.
We believe the policy concerns about a divisive transaction expressed in
Revenue Ruling 88-48 are not raised by the Merger. Based upon the nature and
value of the ZCMI Rights and Covenants, the nature and value of the
consideration paid for those rights, and the purposes for which ZRT negotiated
for those rights and covenants, we believe the acquisition of the ZCMI Rights
and Covenants should not prevent the Merger from satisfying the "substantially
all" requirement.
In order for the Merger to have the tax consequences described above, May
must acquire at least 80 percent of the outstanding ZCMI common stock for May
voting stock in the Merger. ZCMI common stock acquired for cash with funds of
May, including the restricted stock to be acquired for cash under the Plan of
Merger and the stock acquired for cash as a result of the exercise of dissenters
rights by holders of ZCMI common stock, will be treated as ZCMI common stock
acquired by May for cash. If May were to acquire less than 80 percent of the
outstanding ZCMI common stock for May voting stock, the Merger would not qualify
as a reorganization within the meaning of Section 368(a) of the Code, and, among
other consequences, holders of ZCMI common stock who receive May common stock in
the Merger would be treated for federal income tax purposes as if they had sold
their ZCMI common stock for cash in an amount equal to the value of the May
common stock received.
Our opinion does not address all aspects of United States federal income
taxation that may be relevant to a ZCMI stockholder in light of the
stockholder's particular circumstances or to those ZCMI stockholders subject to
special rules, such as stockholders who are not citizens or residents of the
United States or organized under the laws of the United States, financial
institutions, tax-exempt organizations, insurance companies, brokers or dealers
in securities, traders in securities electing mark to market, stockholders who
acquired their ZCMI stock pursuant to the exercise of options or similar
derivative securities or otherwise as compensation or stockholders who hold
their ZCMI stock pursuant to a tax-qualified retirement plan or as part of a
straddle, hedge or conversion transaction.
Our opinion is limited to the federal income tax matters addressed, and no
opinion is rendered with respect to any other issue, including any other tax
aspects of the Merger or of the acquisition of the ZCMI Rights and Covenants by
ZRT under the Shareowners Agreement for the properties to be received by ZCMI in
accordance with the Letter Agreement. We express no opinion with respect to the
tax consequences of any May common stock received other than in exchange for
ZCMI stock or with respect to any state, local or foreign tax consequences of
the Merger. In addition, our conclusions are based on federal income tax law
currently in effect, which is subject to change on a
<PAGE>
Zions Co-operative Mercantile Institution
November 29, 1999
Page 4
prospective or retroactive basis. If any assumption or representation described
above or contained in the Plan of Merger or the Certificates is not true,
correct and complete, or in the event of a change in law adversely affecting the
conclusions reached in this letter, our opinion will be void and of no force or
effect. You should be aware that although this letter represents our best
judgment concerning the matter specifically discussed, it is not binding on the
courts or on any administrative agency, including the Service and a court or
agency may hold or act to the contrary. We undertake no obligation to update
this letter or our opinion at any time. Our opinion is provided to you as a
legal opinion only, and not as a guaranty or warranty, and is limited to the
specific transactions, documents and matters described above. No opinion may be
implied or inferred beyond that which is expressly stated in this letter.
This opinion is furnished solely for the benefit of ZCMI in connection
with the Plan of Merger and may not be filed with or furnished to any
individual, entity, association, agency or other person and may not be quoted or
referred to, orally or in writing, in whole or in part, without our prior
written consent.
We consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the references to our firm name therein. In giving
this consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules or regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
STOEL RIVES LLP
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is entered into as of the ___________ day of October,
1999, between THE MAY DEPARTMENT STORES COMPANY ("May") and______________
(generally referred to as "you").
1. EMPLOYMENT. (a) May will employ you and you will provide personal services to
May, from the closing date of the merger of Zions Co-operative Mercantile
Institution and MS Acquisition, Inc. to the first anniversary of such closing
date (the "Contract Term"), as______________________________________ of the ZCMI
operating division of May and/or perform such other executive duties as may be
required of you by May. You represent that you are not subject to any other
employment agreement or other obligation that would prevent you from performing
or would interfere with your ability to perform your obligations under this
Agreement.
(b) May will pay you basic compensation for your services at the annual
rate of $___________, payable semi-monthly. The annual rate will be subject to
review by May each year and may be increased but not decreased. If you are
selected to participate in a May bonus plan (the "Incentive Plan"), you will be
entitled to the awards, if any, that may be payable under the terms of the
Incentive Plan. You may elect to have all or any part of your compensation paid
under the terms of any applicable deferred compensation plan.
(c) May will reimburse you for all reasonable normal expenses you incur
in accordance with May's employee expense reimbursement policies.
(d) If you continue as a May employee after the Contract Term expires,
this Agreement will continue in full force, except that your employment will
then become terminable "at will" by either you or May.
(e) The most recent Executive Compensation Change Memorandum, as
initialed by May and by you, is incorporated by reference and is a part hereof.
(f) May provides to its executives certain employee benefit plans and
fringe benefits. May reserves the right to amend, modify or terminate any of
these plans and benefits. You will be entitled to whatever benefits may be
provided to you in accordance with the terms of these plans and benefits, as
amended from time to time.
2. YOUR DUTIES. For the remaining period of the Contract Term and for any period
you may continue to work for May after the Contract Term expires,
(a) you will (i) faithfully and diligently perform your duties in
accordance with May's directions and serve May to the best of your ability; (ii)
devote your undivided time and attention to May's business, subject to
reasonable vacations in accordance with May's vacation policy, to such extent as
may be reasonably necessary for you to perform your personal services properly;
and (iii) maintain your residence in Salt Lake City, Utah or within reasonable
access to the business activities of May in that city; and
(b) you will not (i) engage in any activity that conflicts with or
adversely affects your performance of your duties under this Agreement; (ii)
accept any other employment, whether as an executive, as a consultant or in any
other capacity, whether or not you are compensated therefor, or (iii) violate
any of the policies described in May's then applicable Policy of Business
Conduct.
3. DISABILITY. You will be "Totally Disabled" if you are unable to substantially
fulfill the normal duties of your position under this Agreement. If you remain
Totally Disabled for more than 180 days during any 360 day period, May may
terminate its obligations under this Agreement by giving you written notice. If
<PAGE>
May does so, your employment will terminate on the last day of the month in
which notice is given. If you have previously elected to participate in May's
Long Term Disability Plan, then the terms of that plan will apply.
4. TERMINATION OF EMPLOYMENT. (a) If your employment terminates because of your
death or Total Disability or your voluntary termination of employment or if it
is terminated by May for Cause, (i) you will not be entitled to receive basic
compensation and employee benefits following your termination or any other
payment or benefit except as expressly provided herein or in any applicable
employee benefit plan or arrangement; and (ii) you (or your legal
representative(s)) will be entitled to receive any incentive compensation
payable under the terms of the Incentive Plan.
(b) If your employment terminates because of your voluntary termination
of employment, or if it is terminated by May for Cause, then your obligations
under this Agreement, including those contained in Paragraphs 5 through 13,
remain in full force and effect, and May will be entitled to all legal and
equitable rights and remedies under this Agreement.
(c) If your employment is terminated by May without Cause, then
(i) your obligations under this Agreement, including those contained in
Paragraphs 5 through 13, remain in full force and effect, and May will
be entitled to all legal and equitable rights and remedies under this
Agreement; and
(ii) you will be entitled to your basic compensation and the other
benefits provided for in Paragraph 1(f) for the remaining period of the
Contract Term, subject to the provisions of Paragraph 4(c)(v); and
(iii) you will be entitled to any incentive compensation payable under
the terms of the Incentive Plan; and
(iv) you will be entitled to post-termination benefits payable under
May's employee benefit plans, including any right to participate in
May's medical plans under COBRA, based on your service up to the
termination date; and
(v) if you accept other employment consistent with the terms of
Paragraph 5, you will promptly notify May of the compensation
receivable or which you expect to receive from that employment that is
attributable to the remaining period of the Contract Term. All basic
compensation otherwise payable under Paragraph 4(c) (except pursuant to
Paragraph 4(c)(vi)) for any remaining period of the Contract Term will
be reduced by the amount of any compensation receivable or which you
expect to receive from your subsequent employment; and
(vi) notwithstanding the foregoing, the minimum amount payable to you
upon your termination shall be your basic compensation for the period
during which your post-termination obligations under Paragraph 5 are in
force.
(d) "Cause" in this Agreement means (i) an intentional act of fraud,
embezzlement, theft or any other material violation of law that occurs during or
in the course of your employment with May; (ii) intentional damage to May's
assets; (iii) intentional disclosure of May's confidential information contrary
to May's policies; (iv) breach of your obligations under this Agreement; (v)
intentional engagement in any competitive activity which would constitute a
breach of your duty of loyalty or of your obligations under this Agreement; (vi)
intentional breach of any of May's policies; (vii) the willful and continued
failure to substantially perform your duties for May (other than as a result of
incapacity due to physical or mental illness); or (viii) willful conduct by you
that is demonstrably and materially injurious to May, monetarily or otherwise.
For purposes of this Paragraph 4(d), an act, or a failure to act, shall not be
deemed "willful" or "intentional" unless it is done, or omitted to be done, by
you in bad faith or without a reasonable belief that your action or omission was
in the best interest of May. Failure to meet performance standards or
<PAGE>
objectives, by itself, does not constitute "Cause". "Cause" also includes any of
the above grounds for dismissal regardless of whether May learns of it before or
after terminating your employment.
(e) In addition to any other remedies, May can offset any amount due to
you as wages, compensation, bonus, deferred compensation or otherwise by any
unpaid amount which you owe to May.
5. AVOIDING CONFLICT OF INTEREST. (a) At all times while you are employed by May
and for one year after your employment terminates, you will not directly or
indirectly:
(i) own, manage, operate, finance, join, control, advise, consult,
render services to, have an interest or future interest in or
participate in the ownership, management, operation, financing or
control of, or be employed by or connected in any manner with any
Competing Business;
(ii) solicit for employment, hire or offer employment to, or otherwise
aid or assist (by disclosing information about employees or otherwise)
any other person or entity other than May or a May subsidiary in
soliciting for employment, hiring or offering employment to, any
employee of May or a May subsidiary; or
(iii) take any action which is intended to harm May or its reputation,
or that May reasonably concludes could harm May or its reputation or
lead to unwanted or unfavorable publicity for May.
Ownership of an investment of less than the greater of $25,000 or 1% of any
class of equity or debt security of a Competing Business will not be deemed
ownership or participation in ownership for purposes of Paragraph 5(a).
(b) "Competing Business" includes, but is not limited to,
(i) any (x) retail department store, specialty store or other retail
business that sells goods or merchandise of the types sold in May's (or
its subsidiaries' or divisions') stores at retail to consumers or (y)
any group of such stores or businesses or any other business that (A)
competes (for customers, suppliers, employees or any other resource)
with May or a May subsidiary, division or store; (B) is located in the
United States or another country where May or a May subsidiary or
division operates a store or stores; and (C) had annual gross sales
volume or revenues (including sales in leased departments) in the prior
fiscal year of more than $25 million or is reasonably expected to have
gross sales volume or revenues in either of the current fiscal year or
the next following fiscal year of more than $25 million; or
(ii) any business that provides buying office services to any store or
group of stores or businesses referred to in Paragraph 5(b)(i); or
(iii) any business in the United States or another country where May or
a May subsidiary or division operates a store or stores in which your
duties and functions would be substantially similar to your duties and
functions under this Agreement and that is in material competition with
May or a May subsidiary or division.
(c) You agree that the restrictions set forth above are reasonable,
appropriate and enforceable because:
(i) May is one of the leading retail companies in the United States,
with department stores throughout the United States;
(ii) as an integral part of its business, May has expended a great deal
of time, money and effort to develop and maintain confidential,
proprietary and trade secret information to compete against similar
businesses; this information, if misused or disclosed, could be very
harmful to May's business and its competitive position in the
marketplace;
<PAGE>
(iii) your position with May provides you with access to May's
confidential and proprietary trade secret information, strategies and
other confidential business information that would be of considerable
value to a Competing Business;
(iv) May compensates its executives and other associates to, among
other things, develop and maintain valuable goodwill and relationships
on May's behalf and to develop and maintain business information for
May's exclusive ownership and use;
(v) long-term customer and supplier relationships are difficult to
develop and maintain and require a significant investment of time,
effort and expense;
(vi) May is entitled to appropriate safeguards (x) to ensure that you
do not use any confidential information given to you during your
employment by May or take any other action that could result in a loss
of May's goodwill developed on May's behalf and at its expense, and (y)
to prevent you and/or any Competing Business from having an unfair
competitive advantage over May;
(vii) the amount of compensation and benefits you receive from May is
based in considerable part on your express agreement to refrain from
competing with May and to maintain the confidentiality of May's
proprietary information in accordance with the terms of this Agreement;
(viii) the limited time period during which you have agreed not to
compete with May after leaving May's employment, the limited scope of
the restriction and the limited prohibition on your activities are
reasonable to ensure that May's confidential current and long-term
business methods, strategies and plans are not made available to its
competitors; and
(ix) on balance, in light of your training and background, the
restrictions will not pose an undue hardship on you.
(d) If you engage in any activity which would violate your obligations
under this Agreement (including this Paragraph 5) and which involves another
person or employer or a Competing Business, you will disclose your obligations
under this Agreement to that other person, employer or Competing Business.
(e) Any time during which you violate any of these restrictions will
not be counted in determining the time during which the restrictions apply. For
example, if you were to join a Competing Business in violation of the
restrictions in Paragraph 5(a) and work for that business for a month before a
court enjoined this violation, then the time period of the restriction would
begin when the injunction was issued and the month during which you violated the
restriction would not be included in the time that the restriction is to apply.
6. PRESERVATION OF CONFIDENTIAL INFORMATION. (a) You will not, at any time,
directly or indirectly, use or disclose any of May's Confidential Information
except as authorized and within the scope of your employment with May.
(b) At May's request and/or on termination of your employment with May,
you will return to May all documents, records, notebooks, computer diskettes and
tapes and anything else containing May's Confidential Information, including all
copies thereof, as well as any other May property, in your possession, custody
or control. You will also delete from your own computer or other electronic
storage medium any of May's proprietary or confidential information. Not later
than 20 days after your employment is terminated, you will certify in writing to
May that you have complied with these obligations.
(c) During your employment with May and thereafter, you will (i) notify
and provide May immediately with the details of any unauthorized possession, use
or knowledge of any of May's Confidential Information, (ii) assist in preventing
any reoccurrence of this possession, use or knowledge,
<PAGE>
and (iii) cooperate with May in any litigation or other action to protect or
retrieve May's Confidential Information.
(d) "Confidential Information" means any non-public information
pertaining to May's business. Confidential Information includes information
disclosed by May to you, and information developed or learned by you during the
course of or as a result of your employment with May, which you also agree is
May's property. You further agree that any item of intellectual or artistic
property generated or prepared by you, by yourself or with others, in connection
with your employment by May is May's sole property and shall remain so unless
May otherwise specifically agrees in writing. Confidential Information includes,
without limitation, information and documents concerning May's processes;
suppliers (including May's terms, conditions and other business arrangements
with suppliers); supplier and customer lists; advertising and marketing plans
and strategies; profit margins; seasonal plans, goals, objectives and
projections; compilations, analyses and projections regarding May's divisions,
stores, product segments, product lines, suppliers, sales and expenses; files;
trade secrets and patent applications (prior to their being public); salary,
staffing and employment information (including information about performance of
other executives); and "know-how," techniques or any technical information not
of a published nature relating, for example, to how May conducts its business.
(e) You agree that you will not disclose to May or use, or induce May
to use, any proprietary information, trade secret or confidential business
information of any other person or entity, including any previous employer of
yours. You also represent that you have returned all property, proprietary
information, trade secret and confidential business information belonging to any
prior employer.
7. AUTOMATIC AMENDMENT BY COURT ORDER AND INTERIM ENFORCEMENT. (a) If a court
determines that, but for the provisions of this Paragraph 7, any part of this
Agreement is illegal, void as against public policy or otherwise unenforceable,
then the relevant part will automatically be amended to the extent necessary to
make it sufficiently narrow in scope, time and geographic area to be legally
enforceable. All other terms will remain in full force and effect.
(b) If you raise any question as to the enforceability of any part or
terms of this Agreement, including, without limitation, Paragraphs 5 and 6, you
specifically agree that you will comply fully with this Agreement unless and
until an appropriate court designated in Paragraph 13 has entered a final
judgment to the contrary.
(c) You agree that the restrictions in Paragraphs 5 and 6 will apply
regardless of the manner in which your employment with May is terminated,
whether voluntarily, for Cause, without Cause or otherwise.
8. EQUITABLE AND LEGAL REMEDIES. (a) May and you shall each be entitled to
pursue all legal and equitable rights and remedies to secure performance of
their respective obligations and duties under this Agreement, unless otherwise
expressly provided herein, and enforcement of one or more of these rights and
remedies will not preclude May or you from pursuing any other rights and
remedies.
(b) You acknowledge and agree that the individualized services and
capabilities that you will provide to May under this Agreement are of a
personal, special, unique, unusual, extraordinary and intellectual character.
(c) You acknowledge and agree that the restrictions in this Agreement
are reasonable to protect May's rights under this Agreement and to safeguard
May's Confidential Information. You expressly consent to injunctive and other
equitable relief. Without limiting the foregoing, if you breach or threaten to
breach your obligations under Paragraphs 5 or 6, you consent to entry of a
temporary, preliminary and/or permanent injunction enjoining you from breaching
those obligations.
(d) If any legal proceeding is instituted, neither you nor May will be
entitled to seek or obtain punitive or exemplary damages of any kind from the
other or, in your case, from May's subsidiaries or divisions, or from the
officers, directors or employees of May, its subsidiaries or divisions, or to
seek or
<PAGE>
obtain damages or compensation for emotional distress. Nothing herein shall
preclude an award of compensatory and punitive damages against any other third
party.
(e) If you terminate your employment voluntarily or if your employment
is terminated by May for Cause, you will be liable for all attorneys' fees and
costs incurred by May in seeking to enforce its rights under this Agreement.
9. ENTIRE UNDERSTANDING. The entire understanding and agreement between you and
May has been incorporated into this Agreement, and this Agreement supersedes any
other agreements and understandings between you and May with respect to your
employment by May. There are no other promises, representations, understandings
or inducements other than those specifically set forth in this Agreement. This
Agreement may not be altered, amended or added to except in a single writing
signed by both you and May.
10. ARM'S LENGTH. This Agreement was entered into at arm's length, without
duress or coercion, and is to be interpreted as an agreement between two parties
of equal bargaining strength. Both you and May agree that this Agreement is
clear and unambiguous as to its terms, and that no parol or other evidence will
be used or admitted to alter or explain the terms of this Agreement, but that it
will be interpreted based on the language within its four corners in accordance
with the purposes for which it is entered into.
11. SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of, and
will be binding upon, May, its successors and assigns and you and your heirs,
successors and assigns; provided, however, that, because this is an agreement
for the personal services, you cannot assign any of your obligations under this
Agreement to anyone else. May may assign its obligations under this Agreement to
a May subsidiary; any assignment, however, will not relieve May of any of its
obligations hereunder except to the extent that they are actually discharged by
the subsidiary. Whenever this Agreement refers to May, that reference includes
any of May's subsidiaries or divisions in existence at any time during which
this Agreement governs the conduct of you and May.
12. SIGNING THIS AGREEMENT. This Agreement may be executed in counterparts, in
which case each of the two counterparts will be deemed to be an original and the
final counterpart will be deemed to have been executed in St.
Louis, Missouri.
13. MISSOURI LAW GOVERNS. This Agreement has been executed by May at May's
corporate headquarters and principal executive offices in St. Louis, Missouri.
May and you agree that your relationship with May is centered in St. Louis,
Missouri and that the weight of your contacts with and obligations to May is
also in St. Louis, Missouri. Any questions or other matter arising under this
Agreement, whether of validity, interpretation, performance or otherwise, will
therefore be governed by and construed in accordance with the laws of the State
of Missouri applicable to agreements made and to be performed in Missouri
without regard to Missouri's choice of law rules. All actions and proceedings
arising out of or relating directly or indirectly to this Agreement will be
filed and litigated exclusively in any state court or federal court located in
the City or County of St. Louis, Missouri. May and you expressly consent to the
jurisdiction of these courts, agree that venue is proper is these courts and
consent to service of process made upon the Secretary of State of the State of
Missouri or at your last known address in May's records.
BY SIGNING THIS AGREEMENT, YOU HEREBY CERTIFY THAT YOU (A) HAVE
RECEIVED A COPY OF THIS AGREEMENT TO REVIEW AND STUDY BEFORE SIGNING IT; (B)
HAVE READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAVE HAD SUFFICIENT
OPPORTUNITY BEFORE SIGNING IT TO ASK ANY QUESTIONS ABOUT IT AND HAVE RECEIVED
SATISFACTORY ANSWERS TO ALL YOUR QUESTIONS; (D) HAVE HAD AN OPPORTUNITY TO
DISCUSS IT WITH YOUR OWN LEGAL COUNSEL AND TO BE ADVISED AS TO ITS TERMS AND
YOUR OBLIGATIONS AND RIGHTS UNDER IT, AND (E) UNDERSTAND YOUR RIGHTS AND
OBLIGATIONS UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, this Agreement has been executed by you and then by
May in St.
<PAGE>
Louis, Missouri on the dates shown below, but effective as of the date and year
first above written.
Date:_______________ ___________________________________
Executive
THE MAY DEPARTMENT STORES COMPANY
Date:_______________ BY:________________________________
<PAGE>
EXHIBIT 10.2
CONSULTING CONTRACT
This Consulting Contract made and entered into as of the ________ day of
October, 1999, by and between The May Department Stores Company, a New York
corporation ("May") and_________________ (generally referred to as "you").
WHEREAS, May and Zions Co-operative Mercantile Institution ("ZCMI") have
entered into a merger agreement dated as of October 14, 1999, pursuant to which
May will acquire all of the outstanding common stock of ZCMI (the "Merger"); and
WHEREAS, we entered into an employment agreement, dated the date of this
Consulting Contract (the "Employment Agreement"), under which you have agreed to
render personal services to May as________________ of the ZCMI operating
division of May for a period of one year from the closing date of the Merger;
and
WHEREAS, May desires to retain your services for an additional period of
time following the first anniversary of the closing date of the Merger (the
"Consulting Commencement Date"); and
WHEREAS, we each desire that you serve as a consultant to May following
the termination of the Employment Agreement for the fees and upon and subject to
the terms and provisions set forth below;
NOW THEREFORE, in consideration of the mutual promises and agreements set
forth in this Consulting Contract, we hereby agree as follows:
1.(a) The term of this Consulting Contract shall extend for 18 months from
the Consulting Commencement Date. You will, when and as May requests (subject to
Section 1(c), below), from time to time after the Consulting Commencement Date
and during the term of this Consulting Contract, and at such place or places as
May may reasonably request, render and furnish consulting services relating to
the conduct and operation of May's affairs as requested by the proper officers
of May. If your employment under the Employment Agreement is terminated by May
for cause or if you voluntarily terminate employment before the Consulting
Commencement Date, then this Consulting Contract shall terminate immediately and
no amounts shall be payable under this Consulting Contract.
(b) In rendering those consulting services, you will make available to May
such personal expertise, know-how and assistance as May may reasonably request.
The parties recognize and agree that your services are of a special and unique
character. Your obligations hereunder are personal obligations, and you may not
assign your obligations to be performed by others.
(c) We both desire to permit you the maximum flexibility in terms of the
timing of your work, consistent with May's need for your consulting services. In
addition, however, we both recognize that, in many instances, May must be able
to count on receiving such services in a timely fashion. Therefore, you and May
will both seek to be as reasonable as possible in exercising rights in carrying
out duties hereunder and will communicate with each other as far in advance as
reasonably practicable to schedule consulting services.
(d) You agree to provide up to 90 days of consulting services during the
term of this Consulting Contract.
For purposes of this Consulting Contract, you will be deemed to have provided
consulting services under this Consulting Contract for a "day" for each calendar
day or portion thereof on which you provide not less than three hours of
consulting services under this Consulting Contract; provided, however, that in
no event shall any single calendar day be counted as more than one "day" for
purposes of calculating fees payable to you under this Consulting Contract. In
the event that you provide less than three hours of
<PAGE>
services in any calendar day (a "short-hour day") under this Consulting
Contract, then you will be deemed to have provided consulting services under
this Consulting Contract for a "day" for each group of short-hour days in which
the aggregate of hours of consulting services provided is not less than seven
hours; provided, however, that in no event shall any one short-hour day be
included in more than one such group of short-hour days.
2.(a) May agrees to pay you consulting fees at an annual rate of
$__________, payable monthly in arrears on the last day of each month after the
Consulting Commencement Date and during the term of this Consulting Contract,
reduced by the amounts of any minimum payments payable under Paragraph 4(c)(vi)
of the Employment Agreement with respect to any period following the Consulting
Commencement Date. May will not be obligated to provide any fringe benefits or
additional remuneration to you during or after the term of this Consulting
Contract.
(b) May will reimburse you for all reasonable ordinary and necessary
business expenses incurred directly in the rendering of consulting services
hereunder, including, but not by way of limitation, expenses for such matters as
transportation, travel, entertainment, long distance telephone calls and other
necessary and customary expenses, but only to the extent such expenses were
approved in writing, in advance, by an authorized officer of May and were
specifically necessary to be incurred in connection with providing services
hereunder. Payment of such expenses shall be made monthly upon presentation of
supporting documents comparable to those required to be submitted by employees
of May during the term of this Consulting Contract.
(c) May will not be obligated to provide you with an office, with a
secretary, with support staff, with supplies or with other office services or
items of overhead, it being expressly agreed that such office, secretary,
support staff, supplies and other office services or items of overhead are your
responsibility. To the extent that you are not required to provide services
hereunder to May and to the extent that you are not otherwise restricted from
doing so by the terms of this Consulting Contract, you will be permitted to
provide services to others.
(d) Nothing in this Section 2 or elsewhere in this Consulting Contract
will be deemed or construed to create or continue an employer-employee
relationship between you and May.
3. In the event of your death or disability during the term of this
Consulting Contract, consulting fees through the end of the month in which such
death or disability shall occur shall be paid
(a) in the event of your death, to your estate (or such other beneficiary
that you designate from time to time by written notice to May in accordance with
Section 5 of this Consulting Contract); and
(b) in the event of your disability, to you at the time or times otherwise
payable.
No further amounts will be payable thereafter.
4.(a) The restrictions on you and your obligations under Paragraphs 4 and
5 of the Employment Agreement remain in full force and effect in accordance with
their terms during the term of this Consulting Contract, without regard to the
actual date of termination of your employment under the Employment Agreement.
(b) In the event that you violate the provisions of Paragraph 4 of the
Employment Agreement or this Section 4 and accept full time employment with an
employer, which employment violates the provisions of Paragraph 4 of the
Employment Agreement, then
(i) your and May's obligations under Section 1 shall cease on the date
that such employment commences;
(ii) May's obligation to pay the consulting fees hereunder or to reimburse
you for expenses incurred after that date shall cease as of the date that
such employment commences;
<PAGE>
(iii) The remaining terms of this Consulting Contract (including, without
limitation, the terms of this Section 4) shall remain in full force and
effect in accordance with their terms.
5.(a) Whenever it is provided herein that notice, demand, request or other
communication shall or may be given to or served upon either of the parties by
the other, and whenever either of the parties shall desire to give or serve upon
the other any notice, demand, request or other communication, each such notice,
demand, request or other communication shall be in writing and shall not be
effective for any purposes unless the same shall be given or served by mailing
the same or having the same delivered by an independent courier, addressed as
follows:
(i) If to May:
The May Department Stores Company
Sixth and Olive Streets
St. Louis, MO 63101
Attention: President
or at such other address or addresses
as May may from time to time designate
by notice given to you.
(ii) If to you:
or at such other address or addresses
as you may from time to time designate
by notice given to May.
Every notice, demand, request or other communication under this Consulting
Contract shall be given or served by (1) depositing the same in the United
States mails, first-class, registered or certified, postage paid, return receipt
requested, or (2) depositing the same with an independent courier, expenses
prepaid, return receipt requested, and the postal receipt or courier receipt
showing delivery to May or to you, as the case may be, of any such notice,
demand, request or other communication addressed and delivered in accordance
with this Section 5 shall be deemed conclusive evidence that (x) such notice,
demand, request or other communication shall have been given or served as of the
date so deposited in the United States mails or with such independent courier
and (y) such addressee shall have received the same; such notice, demand,
request or other communication shall be effective as of the time of receipt by
the addressee.
(b) You have requested that May mail all payments of consulting fees to
you at the notice address for you listed above. You agree that such payments may
be made by depositing such payments in the United States mails, first-class,
postage paid.
6. May agrees to provide to you on a timely basis all relevant company
reports and confidential information and data that you shall need to render the
consulting services hereunder. You covenant and agree to hold in strictest
confidence all of such reports, information and data and any and all of May's
other confidential data, including but not limited to information and documents
concerning May's business, suppliers, supplier and customer lists, marketing
methods, files, trade secrets, tax information, tax files, "know-how",
techniques or any other technical information not of a published nature or any
other information which has previously or shall come into your possession or
custody concerning the business of May. This covenant and agreement shall
survive this Consulting Contract and continue in full force and effect after the
expiration of the term hereof, whether by limitation or otherwise. Nothing
contained in
<PAGE>
this Section 6, however, shall be construed to prevent you from using your
knowledge, experience, training and education in pursuing any endeavor which
does not conflict with Section 4 of this Consulting Contract, and you agree
that, in doing so, you will not disclose any May-specific confidential
information.
7. We shall each be entitled to pursue all legal and equitable rights and
remedies to secure performance of the obligations and duties of the other under
this Consulting Contract, and enforcement of one or more of such rights and
remedies shall in no way preclude either of us from pursuing, at the same time
or subsequently, any and all other rights and remedies available to us. In no
event may either party (the "terminating party") terminate this Consulting
Contract or your engagement hereunder on account of the breach of this
Consulting Contract by the other party unless the terminating party gives notice
to the other party of the grounds for claiming such breach and such grounds
continue for ten days after the other party receives such notice. The giving of
one such notice on one or more grounds shall not preclude the giving of a
subsequent notice or notices. In any legal or other proceeding with respect to
any such breach of this Consulting Contract, the only basis on which the
terminating party may establish such stated breach will be the grounds stated in
any such notice or subsequent notice or notices.
8. We each hereby expressly agree that the restrictions on you in Section
4 of this Consulting Contract are reasonable in scope, time and geographic area,
do not unreasonably restrict you in any way, have been read care-fully and
understood by you and are entered into voluntarily and as the result of
arms-length negotiations between you and May. Furthermore, we each hereby
expressly agree that should any court of competent jurisdiction determine that
any provision of this Consulting Contract shall, but for the provisions of this
Section 8, be illegal or void as against public policy, for any reason, then
such provision shall automatically be amended to the extent (but only to the
extent) necessary to make it sufficiently narrow in scope, time and geographic
area that such court shall determine it not to be illegal or void as against
public policy. If any such provision cannot be amended to the extent provided in
the preceding sentence, then such provision shall be severed from this
Consulting Contract. In either event, all other remaining terms and provisions
shall remain in full force and effect.
9. Any question or other matter arising under this Consulting Contract,
whether of validity, interpretation, performance or otherwise, shall be
determined in accordance with and governed by the laws of the State of Missouri.
10. The entire understanding and agreement between the parties with
respect to your consulting services hereunder has been incorporated into this
Consulting Contract. This Consulting Contract may not be amended, except in
writing, signed by both parties.
11. Your obligations hereunder may not be assigned without the express
written consent of May. This Consulting Contract shall be binding upon you, your
heirs, successors and assigns and upon May, its successors and assigns.
IN WITNESS WHEREOF, this Consulting Contract has been executed you, and
then by May in St. Louis, Missouri on the dates shown below, but as of the date
and year first above written.
Date:_____________ ___________________________________
Consultant
THE MAY DEPARTMENT STORES
COMPANY
Date:_____________ BY:________________________________
<PAGE>
EXHIBIT 15.1
To the Board of Directors and Shareowners of
The May Department Stores Company
We are aware that The May Department Stores Company has incorporated by
reference in this Registration Statement on Form S-4 its Form 10-Q for the
quarters ended May 1, 1999, and July 31, 1999, which include our reports dated
May 28, 1999, and September 8, 1999, respectively, covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of
the Securities Act of 1933, these reports are not considered a part of the
registration statement prepared or certified by our firm or a report prepared
or certified by our firm within the meaning of Sections 7 and 11 of the Act.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
November 24, 1999
<PAGE>
EXHIBIT 23.1
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated
October 14, 1999 to the Board of Directors of Zions Co-operative Mercantile
Institution (the "Company") as Annex II to the Registration Statement of The May
Department Stores Company ("May") relating to the Company's merger with May and
(ii) all references to DLJ in the sections captioned "Background of the Merger"
and "Opinion of Financial Advisor to the Board of Directors of ZCMI", of the
Registration Statement on Form S-4 of May. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Steve Puccinelli
--------------------------------
Steve Puccinelli
Managing Director
New York, New York
November 22, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The May Department Stores Company on Form S-4 of our reports dated April 19,
1999, appearing in and incorporated by reference in the Annual Report on Form
10-K/A of Zions Cooperative Mercantile Institution for the year ended January
30, 1999 and to the references to us under the headings "Experts" and "Selected
Historical Financial Information" in the Proxy Statement/Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
November 24, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 10, 1999,
included and incorporated by reference in The May Department Stores Company's
Form 10-K for the year ended January 30, 1999, and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
November 24, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Eugene S. Kahn
--------------------------
Eugene S. Kahn
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Jerome T. Loeb
--------------------------
Jerome T. Loeb
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ John L. Dunham
--------------------------
John L. Dunham
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Anthony J. Torcasio
--------------------------
Anthony J. Torcasio
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ R. Dean Wolfe
--------------------------
R. Dean Wolfe
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as her true and lawful attorney-in-fact and agent,
with full power of substitution for her and in her name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or her substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Marsha J. Evans
--------------------------
Marsha J. Evans
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as her true and lawful attorney-in-fact and agent,
with full power of substitution for her and in her name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or her substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Helene L. Kaplan
--------------------------
Helene L. Kaplan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ James M. Kilts
--------------------------
James M. Kilts
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Russell E. Palmer
--------------------------
Russell E. Palmer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Michael R. Quinlan
--------------------------
Michael R. Quinlan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ William P. Stiritz
--------------------------
William P. Stiritz
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Richard A. Brickson, Alan E. Charlson, and John L. Dunham, and each or
any one of them acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution for him and in his name, place and stead, in any
and all capacities, to sign any and all registration statements on Form S-4 and
amendments thereto with respect to The May Department Stores Company's
acquisition of Zions Cooperative Mercantile Institution and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises to perfect and
complete such filing(s), as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
DATED this 12th day of November, 1999
/s/ Robert D. Storey
--------------------------
Robert D. Storey
<PAGE>
Exhibit 99.1
PROXY DESIGNATION AND INSTRUCTION CARD
ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
This Proxy Is Solicited on Behalf of the Board of Directors
for a Special Meeting of Shareholders
to be held on
December 30, 1999
By signing this card, the undersigned hereby appoints each of Richard H. Madsen
and Keith C. Saunders, as proxy, with full power of substitution, and authorizes
them to represent and vote, subject to the directions on the other side of this
card, all shares of the Common Stock of Zions Co-operative Mercantile
Institution held of record by the undersigned on November 26, 1999, at the
December 30, 1999 Special Meeting of Shareholders to be held at the ZCMI Service
Center, 2200 South 900 West, Salt Lake City, Utah at 10:00 a.m. (local time), or
when the meeting reconvenes if it is adjourned or postponed. The board of
directors recommends a vote "FOR" Proposal 1.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned on the other side of this card. If no directions are given and this
signed card is returned, the undersigned understands that the proxies will vote
in accordance with the recommendation of the board of directors and in each
proxy's discretion on any other matters that are properly raised at the meeting
or when the meeting reconvenes if it is adjourned or postponed.
(Please sign the other side of this card)
To vote for Proposal 1, mark the "FOR" box. To vote against Proposal 1, mark the
"AGAINST" box. To abstain from voting, mark the "ABSTAIN" box. To vote in
accordance with the board's recommendations, just sign and return this proxy
card without checking any box.
FOR AGAINST ABSTAIN
1. Proposal to approve and adopt the Agreement and Plan / / / / / /
of Merger, dated as of October 14, 1999, among ZCMI,
The May Department Stores Company and MS Acquisition,
Inc., a Utah corporation and wholly-owned subsidiary
of May, pursuant to which MS Acquisition will be
merged with and into ZCMI, with ZCMI surviving the
merger as a wholly-owned subsidiary of May.
2. In their discretion, the proxies are authorized to
vote upon such other matters as may properly come
before the Special Meeting or any postponement or
adjournment thereof.
Please sign and date this Proxy where shown below and return it promptly. No
postage is required if this proxy is returned in the enclosed envelope and
mailed in the United States.
Signed:
----------------------------------------
(Shareholder's signature)
Signed:
----------------------------------------
(Joint shareholder's signature (if any))
Date: _____________, 1999
PLEASE INDICATE ANY CHANGE OF ADDRESS
------------------------------------------------
(Street and Number)
------------------------------------------------
(City) (State) (Zip Code)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY. USING THE ENCLOSED ENVELOPE
Note: (Please sign above exactly as your shares are
registered. When shares are held by joint tenants,
both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please
sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.)
