SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November
17, 1995
MELVILLE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
New York 1-1011 04-1611460
(State or Other (Commission File Number) (IRS Employer
Jurisdiction Identification
of Incorporation) No.)
One Theall Road
Rye, New York 10580
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code:
(914) 925-4000
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
This is page 1 of ___ pages
Exhibit Index appears on page ___
Item 2. Acquisition or Disposition of Assets.
On November 17, 1995, the Registrant consummated the closing
(the "Closing") of the sale to The TJX Companies, Inc., a Delaware corporation
("TJX"), of all of the capital stock (the "Shares") of Marshalls of Roseville,
Minn., Inc. (the "Company"), the Registrant's holding company for its
Marshalls division, pursuant to the Stock Purchase Agreement (the "Stock
Purchase Agreement") between the Registrant and TJX dated as of October 14,
1995.
The purchase price paid by TJX at the Closing for the Shares
was $375,000,000 in cash plus convertible preferred stock (the "Preferred
Stock") that has an aggregate liquidation preference equal to $175,000,000.
The preferred stock will be issued in two series: (i) $25,000,000 of Series D
Cumulative Convertible Preferred Stock of TJX (the "Series D Preferred
Stock"), which is automatically convertible into shares of TJX's common stock
("Common Stock") on the first anniversary of its issuance if not earlier
redeemed for cash or converted into such Common Stock in accordance with the
terms thereof, and (ii) $150,000,000 of Series E Cumulative Convertible
Preferred Stock of TJX (the "Series E Preferred Stock"), which is
automatically convertible into Common Stock on the third anniversary of its
issuance if not earlier converted into such Common Stock in accordance with
the terms thereof. The Preferred Stock will be convertible, in the aggregate,
into between approximately 9.4 million and 11.7 million shares of Common
Stock, depending on the market price of such Common Stock during the ten
trading days prior to the time of conversion. The cash portion of the
purchase price is subject to adjustment following the Closing in accordance
with the Stock Purchase Agreement.
At the Closing, the Registrant and TJX entered into a
Standstill and Registration Rights Agreement (the "Standstill and Registration
Rights Agreement") pursuant to which the Registrant agreed (i) not to acquire
any voting securities of TJX until such time as voting securities of TJX held
by the Registrant represent less than 3 percent of the total combined voting
power of all of TJX's outstanding voting securities and (ii) to vote all of
TJX's voting securities held by the Registrant in the manner recommended by
TJX's Board of Directors or, if the agreement to so vote shall be prohibited
or invalid, then to vote such voting securities in the same proportion as the
votes cast by or on behalf of the other holders of TJX's voting securities.
The Standstill and Registration Rights Agreement also provides
that TJX will register, under the Securities Act of 1933, the Series E
Preferred Stock held by the Registrant, or the shares of Common Stock received
by the Registrant upon conversion or redemption of Series D Preferred Stock or
Series E Preferred Stock, on not more than two separate occasions on demand
and on not more than three separate occasions in connection with a registration
of Common Stock by TJX.
On November 20, 1995, the Registrant issued a press release
announcing, among other things, the consummation of the Closing. The
information contained in the press release is incorporated herein by
reference. The press release is attached hereto as Exhibit 99.1.
The foregoing description is qualified in its entirety by
reference to the Stock Purchase Agreement, a copy of which is attached hereto
as Exhibit 2.1, as amended by Amendment Number One, a copy of which is
attached hereto as Exhibit 2.2; the Standstill and Registration Rights
Agreement, a copy of which is attached hereto as Exhibit 10.1; the Preferred
Stock Subscription Agreement entered into by the Registrant and TJX at
Closing, a copy of which is attached hereto as Exhibit 10.2; and the
Certificates of Designations, Preferences and Rights for the Series D
Preferred Stock and the Series E Preferred Stock, respectively, copies of
which are attached hereto as Exhibits 99.2 and 99.3, respectively.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(b) Pro Forma Financial Information.
Set forth hereunder is the pro forma financial information
required to be furnished by the Registrant with respect to the transaction
described in Item 2 above.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
STATEMENT OF EARNINGS
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994
($ IN 000'S)
Continuing Operations
Historical Pro Forma Adjustments Pro Forma
Before Pro Forma ----------------------- Continuing
The Company Marshalls Adjustments Debit Credit Operations
----------- --------- --------------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $11,285,561 $2,774,851 $8,510,710 $8,510,710
Cost of Goods Sold, Buying
and Warehousing Costs 7,252,568 1,827,239 5,425,329 5,425,329
----------- ---------- ---------- -------- ------- ----------
4,032,993 947,612 3,085,381 3,085,381
Store Operating, Selling, General
and Administrative Expenses 3,215,985 745,081 2,470,904 6,000 (a) 2,464,904
Depreciation and Amortization 206,266 51,876 154,390 154,390
----------- ---------- ---------- -------- ------- ----------
Operating Profit 610,742 150,655 460,087 6,000 466,087
Interest Expense, Net 32,636 1,778 30,858 1,166 (b) 26,696 (c) 5,328
----------- ---------- ---------- -------- ------- ----------
Earnings Before Income Taxes
and Minority Interests 578,106 148,877 429,229 (1,166) 32,696 460,759
Income Tax Provision 218,741 56,862 161,879 13,538 (d) 175,417
----------- ---------- ---------- -------- ------- ----------
Earnings Before Minority Interests 359,365 92,015 267,350 (14,704) 32,696 285,342
Minority Interests in Net Earnings 51,895 51,895 51,895
----------- ---------- ---------- -------- ------- ----------
Net Earnings $307,470 $92,015 $215,455 ($14,704) $32,696 $233,447
=========== ========== ========== ======== ======= ==========
Net Earnings per Share of Common Stock $2.75 $2.06
===== =====
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1995
($ IN 000'S)
Continuing Operations
Historical Pro Forma Adjustments Pro Forma
Before Pro Forma ----------------------- Continuing
The Company Marshalls Adjustments Debit Credit Operations
----------- --------- --------------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $8,076,219 $1,852,244 $6,223,975 $6,223,975
Cost of Goods Sold, Buying
and Warehousing Costs 5,374,255 1,310,400 4,063,855 4,063,855
----------- ---------- ---------- -------- ------- ----------
2,701,964 541,844 2,160,120 2,160,120
Store Operating, Selling, General
and Administrative Expenses 2,456,236 558,202 1,898,034 4,500 (a) 1,893,534
Depreciation and Amortization 179,456 45,430 134,026 134,026
----------- ---------- ---------- -------- ------- ----------
Operating Profit (Loss) 66,272 (61,788) 128,060 4,500 132,560
Interest Expense, Net 38,231 6,030 32,201 1,372 (b) 24,187 (c) 9,386
----------- ---------- ---------- -------- ------- ----------
Earnings (Loss) Before Income
Taxes and Minority Interests 28,041 (67,818) 95,859 (1,372) 28,687 123,174
Income Tax Provision (Benefit) 2,622 (27,053) 29,675 11,601 (d) 41,276
----------- ---------- ---------- -------- ------- ----------
Earnings (Loss) Before Minority
Interests 25,419 (40,765) 66,184 (12,973) 28,687 81,898
Minority Interests in Net Earnings 23,265 23,265 23,265
----------- ---------- ---------- -------- ------- ----------
Net Earnings (Loss) $2,154 ($40,765) $42,919 ($12,973) $28,687 $58,633
=========== ========== ========== ======== ======= ==========
Net (Loss) Earnings per Share of
Common Stock ($0.10) $0.44
====== =====
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1995
($ IN 000'S)
Continuing Operations
Historical Pro Forma Adjustments Pro Forma
Before Pro Forma ----------------------- Continuing
The Company Marshalls Adjustments Debit Credit Operations
----------- --------- --------------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $80,062 $0 $80,062 $341,000 (a) $382,641 (c) $37,322
4,500 (b) 5,599 (f)
Accounts Receivable, Net 232,623 30,081 202,542 9,187 (e) 211,729
Inventories 2,584,228 606,594 1,977,634 1,977,634
Prepaid Expenses 170,419 9,906 160,513 13,829 (f) 146,684
---------- ---------- ---------- -------- -------- ----------
Total Current Assets 3,067,332 646,581 2,420,751 354,687 402,069 2,373,369
Property, Plant, Equipment, Leasehold
Improvements and Leased Property
Under Capital Leases, Net 1,634,139 444,359 1,189,780 1,189,780
Investment in TJX 0 0 0 175,000 (a) 175,000
Goodwill, Net 438,404 28,652 409,752 409,752
Deferred Charges and Other Assets 114,904 16,646 98,258 98,258
---------- ---------- ---------- -------- -------- ----------
TOTAL ASSETS $5,254,779 $1,136,238 $4,118,541 $529,687 $402,069 $4,246,159
========== ========== ========== ======== ======== ==========
LIABILITIES & EQUITY
Current Liabilities:
Accounts Payable $875,391 $243,688 $631,703 $631,703
Accrued Expenses 542,891 80,643 462,248 11,561 (a) 1,372 (d) 457,944
5,885 (f)
Notes Payable 940,000 101,485 838,515 397,641 (c) 440,874
Other current liabilities 8,945 2,461 6,484 69,523 (a) (76,751)
13,712 (f)
Total Current Liabilities 2,367,227 428,277 1,938,950 492,437 7,257 1,453,770
---------- ---------- ---------- -------- -------- ----------
Long-Term Debt 332,056 0 332,056 332,056
Deferred Income Taxes 87,395 0 87,395 87,395
Other Long-Term Liabilities 136,997 1,875 135,122 8,000 (a) 143,122
Minority Interests in Subsidiaries 79,851 0 79,851 79,851
Redeemable Preferred Stock
Series B, $4.00 Dividend 1,330 0 1,330 1,330
Shareholders' Equity:
Series One ESOP Convertible
Preference Stock, $3.90 Dividend 336,424 0 336,424 18,805 (d) 317,619
Guaranteed ESOP Obligation (321,096) 0 (321,096) (321,096)
Common Stock 111,646 0 111,646 111,646
Capital Surplus 54,708 0 54,708 1,559 (d) 56,267
Retained Earnings 2,376,491 (40,765) 2,417,256 157,767 (a) 4,500 (b) 2,275,203
1,372 (d) 15,000 (c)
11,601 (f) 9,187 (e)
Cumulative Translation Adjustment (2,305) 0 (2,305) (2,305)
Common Stock in Treasury, at Cost (305,945) 0 (305,945) 17,246 (d) (288,699)
Subsidiary Equity 0 746,851 (746,851) 746,851 (a) 0
---------- ---------- ---------- -------- -------- ----------
Total Shareholders' Equity 2,249,923 706,086 1,543,837 189,545 794,343 2,148,635
---------- ---------- ---------- -------- -------- ----------
TOTAL LIABILITIES & EQUITY $5,254,779 $1,136,238 $4,118,541 $681,982 $809,600 $4,246,159
========== ========== ========== ======== ======== ==========
</TABLE>
See accompanying notes to the unaudited pro forma financial statements.
Notes to Pro Forma Continuing Operations Financial Statements
Note 1 Background
On November 17, 1995, the Company completed the sale of its
Marshalls division ("Marshalls") to the TJX Companies, Inc. (the
"Purchaser") for total proceeds of $550 million, consisting of
$375 million in cash and $175 million of convertible preferred
stock.
Note 2 Basis of Presentation
The unaudited Pro Forma Continuing Operations financial
information is based upon the historical financial statements of
the Company, adjusted to exclude Marshalls, as of September 30,
1995 and for the year ended December 31, 1994 and for the nine
months ended September 30, 1995, and should be read in conjunction
with the historical consolidated financial statements and notes
related thereto, for the periods indicated.
Note 3 Unaudited Pro Forma Continuing Operations Balance Sheet Adjustments
The following assets and (liabilities) formerly recorded on the
books of Marshalls, were retained by the Company after the date of
disposition:
Miscellaneous accounts receivable $ 17,000
Miscellaneous other assets 3,600
Total Assets $ 20,600
Income tax liabilities $( 39,700)
Self insurance reserves (21,400)
Restructuring reserves (21,100)
Net deferred income tax liabilities (19,200)
Employee benefit accruals (8,400)
Miscellaneous other liabilities (7,800)
Total Liabilities $(117,600)
Pro forma balance sheet adjustments are as follows:
(a) To record the sales proceeds, net of payments for
contractual obligations, and the loss on disposition.
(b) To reflect anticipated reductions in corporate overhead.
(c) To reduce short term borrowings and related interest expense
to reflect the impact of the sale.
(d) To record the conversion of 351,819 shares of Series One
ESOP Preference Stock to common stock and to record the
increase in employer contribution expense caused by the
conversion. the purchaser.
(f) To adjust income tax liabilities to reflect the sale as of
January 1, 1995.
Note 4 Unaudited Pro Forma Continuing Operations Statement of Operations
Adjustments
(a) To record anticipated reductions in corporate overhead.
(b) To record incremental ESOP costs after conversion of 351,819
shares at January 1, 1995 and 299,075 shares at January 1,
1994, respectively, of Series One ESOP Preference Stock.
(c) To adjust interest expense to reflect the reduction in short
term borrowings.
(d) To record the net change in the provision for income taxes
based upon the results of operations as set forth in the pro
forma financial statements.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of October 14, 1995,
by and between Melville Corporation and The TJX Companies, Inc.
2.2 Amendment Number One to Stock Purchase Agreement, dated as of
November 17, 1995, by and between Melville Corporation and The
TJX Companies, Inc.
10.1 Standstill and Registration Rights Agreement, dated as of
November 17, 1995, by and between Melville Corporation and the
TJX Companies, Inc.
10.2 Preferred Stock Subscription Agreement, dated as of
November 17, 1995, by and between Melville Corporation and The
TJX Companies, Inc.
99.1 Press Release of Melville Corporation dated November 20, 1995.
99.2 Certificate of Designations, Preferences and Rights of Series D
Cumulative Convertible Preferred Stock of the TJX Companies,
Inc.
99.3 Certificate of Designations, Preferences and Rights of Series E
Cumulative Convertible Preferred Stock of the TJX Companies,
Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MELVILLE CORPORATION
Dated: December 4, 1995 By /s/ Gary Crittenden
Gary Crittenden
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Sequential
Page
Exhibit No. Description of Exhibit No.
- ----------- ---------------------- ----------
2.1 Stock Purchase Agreement, dated as
of October 14, 1995, by and between
Melville Corporation and The TJX
Companies, Inc.
2.2 Amendment Number One to Stock Purchase
Agreement, dated as of November 17,
1995, by and between Melville Corporation
and The TJX Companies, Inc.
10.1 Standstill and Registration Rights
Agreement, dated as of November 17, 1995,
by and between Melville Corporation and
the TJX Companies, Inc.
10.2 Preferred Stock Subscription Agreement,
dated as of November 17, 1995, by and
between Melville Corporation and The
TJX Companies, Inc.
99.1 Press Release of Melville Corporation
dated November 20, 1995.
99.2 Certificate of Designations, Preferences,
and Rights of Series D Cumulative
Convertible Preferred Stock of The TJX
Companies, Inc.
99.3 Certificate of Designations, Preferences
and Rights of Series E Cumulative
Convertible Preferred Stock of the TJX
Companies, Inc.
Execution Copy
marshalls of roseville, minn., inc.
Stock Purchase Agreement
between
The TJX Companies, Inc.
as Buyer
and
Melville Corporation,
as Seller
Dated as of October 14, 1995
TABLE OF CONTENTS
1.Definitions...............................................................1
1.1. Certain Matters of Construction.......................................1
1.2. Cross Reference Table.................................................2
1.3. Certain Definitions...................................................4
2.Acquisition; Excluded Liabilities........................................12
3.Payment and Closing......................................................12
3.1. Transaction Price....................................................12
3.2. Time and Place of Closing............................................13
3.3. Delivery.............................................................13
3.4. Cash Price Adjustment................................................13
4.Representations and Warranties of Seller.................................16
4.1. Corporate Matters, etc...............................................16
4.2. Financial Statements, etc............................................18
4.3. Change in Condition..................................................19
4.4. Liabilities..........................................................22
4.5. Assets...............................................................22
4.6. Intellectual Property Rights.........................................24
4.7. Accounts; Funds, etc.................................................25
4.8. Certain Contractual Obligations......................................25
4.9. Insurance, etc.......................................................27
4.10. Transactions with Affiliates.........................................28
4.11. Compliance with Laws, etc............................................28
4.12. Tax Matters..................................................28
4.13. [Intentionally Omitted.].............................................30
4.14. Employee Benefit Plans...............................................30
4.15. Environmental Matters, etc...........................................31
4.16. Employees and Labor Relations........................................32
4.17. Litigation, etc......................................................32
4.18. [Intentionally Omitted]..............................................33
4.19. Brokers, etc.........................................................33
5.Representations and Warranties of Buyer..................................33
5.1. Corporate Matters....................................................33
5.2. Authorization and Enforceability.....................................33
5.3. Non-Contravention, etc...............................................33
5.4. Investment Intent....................................................34
5.5. Litigation...........................................................35
5.6. Financing............................................................35
5.7. Brokers, etc.........................................................35
6.Certain Agreements of the Parties........................................35
6.1. No Solicitation of Other Offers......................................35
6.2. Access to Premises and Information...................................36
6.3. Confidentiality Covenant of Buyer....................................36
6.4. Operation of Business in the Ordinary Course.........................36
6.5. Certain Notices......................................................38
6.6. Preparation for Closing..............................................38
6.7. Tax Matters..........................................................39
6.8. Expenses of Transaction..............................................44
6.9. Confidentiality Covenants............................................45
6.10. Books and Records; Personnel.........................................46
6.11. Use of Certain Names and Marks.......................................46
6.12. Further Assurances...................................................47
6.13. Reimbursement by the Parties.........................................47
6.14. Open and Closed Stores...............................................47
6.15. Financial Statement Deliveries.......................................47
6.16. Insurance Policies...................................................48
6.17. Divestiture..........................................................48
6.18. Failed Consents......................................................51
6.19. No Solicitation or Employment........................................53
6.20. Manchester, CT and Staten Island, NY Stores; Etc.....................53
7.Conditions to the Obligation to Close of Buyer...........................53
7.1. Representations, Warranties and Covenants............................53
7.2. Closing Agreements...................................................54
7.3. Legality; Governmental Authorization; Litigation.....................54
7.4. Affiliate Debt.......................................................54
7.5. Financing............................................................54
7.6. Opinion of Counsel...................................................55
7.7. General..............................................................55
8.Conditions to the Obligation to Close of Seller..........................55
8.1. Representations, Warranties and Covenants............................55
8.2. Closing Agreements; Buyer Stock......................................55
8.3. Legality; Government Authorization; Litigation.......................56
8.4. Opinion of Counsel...................................................56
9.Employment and Employee Benefits Arrangements............................56
9.1. Definitions..........................................................56
9.2. Disposition of Company Plans and Benefit Arrangements................57
9.3. Employment...........................................................58
9.4. Liabilities Retained or Assumed by Seller............................58
9.5. Certain Severance Arrangements.......................................60
9.6. Qualified Plans......................................................60
9.7. Service Credit.......................................................61
9.8. WARN Act.............................................................61
10.Indemnification.........................................................61
10.1. Indemnification......................................................61
10.2. Time Limitation on Indemnification...................................63
10.3. Monetary Limitations on Seller's Indemnification.....................63
10.4. Certain Matters of Construction......................................64
10.5. Third Party Claims...................................................64
10.6. No Circular Recovery.................................................64
10.7. Nature of Indemnification Payments...................................65
11.Consent to Jurisdiction; Jury Trial Waiver..............................66
11.1. Consent to Jurisdiction..............................................66
11.2. Waiver of Jury Trial.................................................66
12.Termination.............................................................67
12.1. Termination of Agreement.............................................67
12.2. Effect of Termination................................................68
13.Miscellaneous...........................................................68
13.1. Entire Agreement; Waivers............................................68
13.2. Amendment or Modification............................................69
13.3. Survival, etc........................................................69
13.4. Independence of Representations and Warranties.......................69
13.5. Severability.........................................................69
13.6. Knowledge............................................................69
13.7. Successors and Assigns...............................................70
13.8. Notices..............................................................70
13.9. Public Announcements.................................................71
13.10. Headings, etc.................................................71
13.11. Third Party Beneficiaries.....................................71
13.12. Counterparts..................................................71
13.13. Governing Law.................................................72
EXHIBITS
Exhibit A - Preferred Stock Subscription Agreement
Exhibit B - Standstill and Registration Rights Agreement
Exhibit C - Forms of Legal Opinions of Seller's Counsel
Exhibit D - Forms of Legal Opinions of Buyer's Counsel
SCHEDULES
Schedule 3.4A Form of Company Net Assets Statement
Schedule 3.4B Estimated Statement of Company Net Assets as of
October 30, 1995
Schedule 4.1.4 Required Approvals, Consents, Filings, Etc.
Schedule 4.1.7 List of Company Subsidiaries
Schedule 4.3 Changes in Condition
Schedule 4.3(b)(i) Budget
Schedule 4.3(b)(iv)(A) Cash Management Program
Schedule 4.3(b)(iv)(B) Distributions Made by the Company
Schedule 4.5.1 Real Property; Liens on Assets
Schedule 4.5.2(a) Real Property Leases-In
Schedule 4.5.2(b) Real Property Leases, Etc. Under Which Company
or a Subsidiary is Lessor
Schedule 4.6 Intangibles
Schedule 4.7 Bank Accounts
Schedule 4.8 Contractual Obligations
Schedule 4.9(a) Insurance Policies and Binders
Schedule 4.10 Affiliate Relationships
Schedule 4.11 Violations and Defaults; Permits and Applications
Therefor
Schedule 4.12 Tax Exceptions
Schedule 4.14 Company Plans and Benefit Arrangements
Schedule 4.15 Environmental Matters
Schedule 4.16 Disputes with Employees
Schedule 4.17 Litigation Against Company or Subsidiaries
Schedule 6.4(d) Certain Debt Incurrences
Schedule 6.20 Principal Terms of Manchester, CT and Staten
Island, NY Leases
Schedule 7.2(i) Terms of Transitional Services
Section 9.5 Severance Benefits
Section 9.5A Limit on Buyer Responsibility for Severance
Benefits
Stock Purchase Agreement
This Stock Purchase Agreement (this "Agreement") is made as of the
14th day of October, 1995, between The TJX Companies, Inc., a Delaware
corporation (the "Buyer"), and Melville Corporation, a New York corporation
(the "Seller").
Recitals
1. Seller owns all of the issued and outstanding shares of capital
stock (the "Shares") of Marshalls of Roseville, Minn., Inc., a Minnesota
corporation (the "Company").
2. Seller desires to sell and transfer the Shares to Buyer, and Buyer
desires to purchase (the "Purchase") the Shares from Seller, all upon the
terms and subject to the conditions set forth in this Agreement.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1. Certain Matters of Construction. In addition to the definitions
referred to as set forth below in this Section 1:
(a) The words "hereof", "herein", "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a
particular Section of this Agreement shall include all subsections
thereof.
(b) The words "party" and "parties" shall refer to Seller and
Buyer.
(c) Definitions shall be equally applicable to both the singular
and plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
(d) Accounting terms used herein and not otherwise defined herein
are used herein as defined by generally accepted accounting principles
in effect as of the date hereof.
(e) All references in this Agreement to any Exhibit or Schedule
shall, unless the context otherwise requires, be deemed to be a
reference to an Exhibit or Schedule, as the case may be, to this
Agreement, all of which are made a part of this Agreement.
1.2. Cross Reference Table. The following terms defined in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
Term Definition
"Accountants" Section 6.7(g)
"Accounting Policy Changes" Section 3.4(a)
"Affected Store" Section 6.17
"Affiliate Relationships" Section 4.10
"Affiliated Group" Section 4.12
"Agreement" Preamble
"Annual Balance Sheet" Section 4.2.1(a)
"Annual Financials" Section 4.2.1(a)
"Assets" Section 4.5.1
"Assumed Store Contribution" Section 6.17.1
"Benefit Arrangement" Section 9.1(d)
"Benefit Transition Period" Section 9.2
"Books and Records" Section 6.10(b)
"Budget" Section 4.3(b)(i)
"Buyer" Preamble
"Buyer's Closed Store Damages" Section 6.17.2
"Buyer's Deemed Sales Price Notice" Section 6.7(g)
"Cash Management Program" Section 4.3(b)(iv)
"Cash Price Adjustment" Section 3.4(b)
"Cash Purchase Price" Section 3.1
"Closing" Section 3.2
"Closing Agreements" Section 7.2
"Closing Balance Sheet" Section 3.4(a)
"Closing Date" Section 3.2
"Commitment Letter" Section 5.6
"Company" Recitals
"Company Net Assets" Section 3.4(a)
"Company Net Assets Statement" Section 3.4(a)
"Company Plan" Section 9.1(c)
"Confidentiality Agreement" Section 6.3
"Consent" Section 6.18
"Contracts" Section 4.8
"Coopers" Section 3.4(a)
"Coopers Report" Section 3.4(a)
"Delivered Lease" Section 6.18
"DOL" Section 4.14(a)
"Employee" Section 9.1(a)
"Environmental Condition" Section 10.8
"Equipment" Section 4.8(f)
"Estimated Cash Purchase Price" Section 3.1
"Estimated Purchase Price" Section 3.1
"Eviction" Section 6.18
"Financial Statements" Sections 4.2.1(a) & 6.2
"Former Employee" Section 9.1(b)
"General Survival Period" Section 10.2
"Goldman" Section 5.7
"HSR Act" Section 4.1.4
"Indemnifying Party" Section 10.1
"Indemnitee" Section 10.1
"Insurance Policies" Section 4.9
"Intangibles" Section 4.6
"Interim Balance Sheet" Section 4.2.1(b)
"Interim Financials" Sections 4.2.1(b) & 6.2
"Inventory Firm" Section 3.4(a)
"Inventory Statement" Section 3.4(a)
"IRS" Section 4.14(a)
"Landlord" Section 6.18
"Lead Lenders" Section 5.6
"Leases" Section 4.5.2
"Leases-In" Section 4.5.2
"Licenses" Section 4.6
"Miscellaneous Taxes" Section 6.7(c)
"Monthly Financials" Sections 4.2.1(c) & 6.2
"Morgan Stanley" Section 4.19
"New Buyer Store" Section 6.17.1
"New Seller Store" Section 6.17.1
"Non-Active Employees" Section 9.3
"Permits" Section 4.11
"Post-Closing Claims" Section 6.16
"Post-Closing Tax Period" Section 6.7(c)
"Pre-Closing Tax Period" Section 6.7(c)
"Purchase" Recitals
"Purchase Price" Section 3.1
"Real Property" Section 4.5.1
"Rent Increase" Section 6.18
"Reserved Claims" Section 10.2
"Salomon" Section 5.7
"Section 338(h)(10) Election" Section 6.7(a)
"Securities Act" Section 5.4(b)
"Seller" Preamble
"Seller's Employee Stock Ownership Plan" Section 9.1(e)
"Seller's 401(k) Profit Sharing Plan" Section 9.1(f)
"Shares" Recitals
"Similar Sales Volume Stores" Section 6.17.1
"Store Contribution" Section 6.17.1
"Store Schedule" Section 6.17
"Target Net Asset Amount" Section 3.4(a)
"Tax Loss" Section 6.7(c)(i)
"Transfer Taxes" Section 6.7(e)
"Transitional Services Agreement" Section 7.2
"Undelivered Leases" Section 4.5.2
1.3. Certain Definitions. The following terms shall have the following
meanings:
1.3.1. Action. The term "Action shall mean any claim, action,
cause of action or suit (in contract or tort or otherwise), arbitration,
proceeding or investigation by or before any Governmental Authority (and
whether brought by any Governmental Authority or any other Person).
1.3.2. Affiliate. The term "Affiliate shall mean, as to the
Company (or other specified Person), each Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with the Company (or such specified Person); provided that neither the
Company nor any Subsidiary shall be considered an Affiliate of Seller.
1.3.3. Affiliate Debt. "Affiliate Debt shall mean all Debt
between the Company or any Subsidiary, on the one hand, and Seller or
any Affiliate of Seller, on the other hand, and all intercompany
advances of funds between the Seller or any of its Affiliates, on the
one hand, and the Company or any Subsidiary, on the other hand.
1.3.4. Alternative Accountants. The term "Alternative
Accountants shall mean an accounting firm of recognized national
standing (other than Coopers and KPMG Peat Marwick) mutually acceptable
to Seller and Buyer or if Seller and Buyer do not designate such a
mutually acceptable firm within three Business Days of the date any
dispute under this Agreement is required to be submitted to such a firm
then an accounting firm of nationally recognized standing (other than
Coopers and KPMG Peat Marwick) chosen by lot.
1.3.5. Business. The term "Business shall mean the business of
the Company and its Subsidiaries as such business is currently conducted.
1.3.6. Business Day. The term "Business Day shall mean any day
on which banking institutions in New York, New York and Boston,
Massachusetts are customarily open for the purpose of transacting
business.
1.3.7. Buyer Stock. The term "Buyer Stock shall mean the shares
of Buyer's Series D Cumulative Convertible Preferred Stock, par value
$1 per share, and Series E Cumulative Convertible Preferred Stock, par
value $1 per share, to be issued by Buyer to Seller at Closing pursuant
and subject to the terms of the Preferred Stock Subscription Agreement.
1.3.8. By-laws. The term "By-laws shall mean all written rules,
regulations and by-laws, and all other documents (other than the
Charter), relating to the management, governance or internal regulation
of a Person (other than an individual) or interpretative of the Charter
of such Person, each as from time to time in effect.
1.3.9. Charter. The term "Charter shall mean the certificate or
articles of incorporation or organization, statute, constitution, joint
venture or partnership agreement or articles or other charter documents
of any Person (other than an individual), each as from time to time in
effect.
1.3.10. Company Marks. The term "Company Marks shall mean the
name "Marshalls and those trademarks required to be listed on Schedule
4.6, and all variations of the foregoing.
1.3.11. Code. The term "Code shall mean the Internal Revenue
Code of 1986, as amended.
1.3.12. Compensation. The term "Compensation, as applied to any
Person, shall mean all salaries, compensation, remuneration or bonuses
of any character, and medical, surgical, dental, hospital, disability,
unemployment, retirement, pension, vacation, insurance or fringe
benefits of any kind, or other payments or benefits of any kind
whatsoever made or provided directly or indirectly by or on behalf of
the Company to such Person or members of the immediate family of such
Person.
1.3.13. Contractual Obligation. The term "Contractual Obligation
shall mean, with respect to any Person, any contract, agreement, deed,
mortgage, lease, sublease, license, indenture, Guarantee, commitment,
undertaking or arrangement, written or oral, or other consensual
document or instrument, including, without limitation, any document or
instrument evidencing or otherwise relating to any indebtedness but
excluding the Charter and By-laws of such Person, to which or by which
such Person is a party or otherwise subject or bound or to which or by
which any property or right of such Person is subject or bound.
1.3.14. Controlled Group. The term "Controlled Group, with
respect to any Person, shall mean any Person which is a member of the
same "controlled group, or under "common control, within the meaning of
Section 414(b) or (c) of the Code or Section 4001(b) of ERISA, with such
Person.
1.3.15. Debt. "Debt of any Person shall mean all obligations of
such Person (i) in respect of indebtedness for borrowed money, (ii)
evidenced by notes, bonds, debentures or similar instruments, (iii) for
the deferred purchase price of goods or services (other than trade
payables or accruals incurred in the Ordinary Course of Business), (iv)
under capital leases and (v) in the nature of Guarantees of the
obligations described in clauses (i) through (iv) above of any other
Person.
1.3.16. Distribution. The term "Distribution shall mean, with
respect to the capital stock of or other equity interests in any Person,
(i) the declaration or payment of any dividend on or in respect of any
shares of any class of such capital stock or in respect of any such
equity interest; (ii) the purchase, redemption or other retirement of
any shares of any class of such capital stock or of any such equity
interest, directly, or indirectly through a Subsidiary or otherwise; and
(iii) any other distribution on or in respect of any shares of any class
of such capital stock or on or in respect of any such equity interest.
1.3.17. Enforceable. The term "Enforceable shall mean, with
respect to any Contractual Obligation, that such Contractual Obligation
is the legal, valid and binding obligation of the Person in question,
enforceable against such Person in accordance with its terms.
1.3.18. Environmental Laws. The term "Environmental Laws shall
mean any Federal, state or local law relating to (i) releases or
threatened releases of Hazardous Substances; (ii) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous
Substances or materials containing Hazardous Substances; or (iii)
otherwise relating to pollution of the environment or the protection of
human health.
1.3.19. Equity Securities. The term "Equity Securities shall
mean, with respect to any Person that is not a natural person, all
shares of capital stock or other equity or beneficial interests issued
by or created in or by such Person, all stock appreciation or similar
rights or grants of, or other Contractual Obligation for, any right to
share in the equity, income, revenues or cash flow of such Person, and
all securities or other rights, warrants or other Contractual
Obligations to acquire any of the foregoing, whether by conversion,
exchange, exercise or otherwise.
1.3.20. Excluded Liabilities. The term "Excluded Liabilities
shall mean all Liabilities (other than Liabilities for Taxes, which are
referred to in Section 6.7) whenever arising with respect to any of the
following (whether or not such matters are the subject of any
representation or warranty made by or on behalf of Seller herein or are
disclosed in any Schedule hereto or otherwise disclosed to Buyer):
(i) operations and assets discontinued at any time on or
prior to the Closing Date or leased or subleased or otherwise
transferred to Persons other than the Company and its Subsidiaries
at any time on or prior to the Closing Date or stores closed at
any time on or prior to the Closing Date (including, without
limitation, Liabilities for severance and other employee costs,
lease and other occupancy costs and contingent lease obligations);
(ii) product liability claims whenever arising from
products sold on or prior to the Closing Date;
(iii) general, automobile or public liability claims
(whether or not insured, including as a result of deductibles,
retentions or limits in any insurance policies), other than
product liability claims, arising from occurrences on or prior to
the Closing Date;
(iv) any Action pending or, to the knowledge of Seller,
threatened in writing against the Company or any Subsidiary on or
prior to the Closing Date (including without limitation the matter
disclosed on Schedule 4.17 related to the Americans with
Disabilities Act ), except insofar as any such Action is brought
as a result of the transactions contemplated hereby;
(v) any Liability for which Seller is responsible under
Section 9;
(vi) corporate owned life insurance directly or indirectly
benefitting Seller or any of its Affiliates and any related
employee or death benefits;
(vii) the environmental contamination on or adjacent to or
emanating from the portion of the property leased by Gasolinas de
Puerto Rico at the Bayamon, Puerto Rico Store No. 626 of the
Company or any Subsidiary and on or adjacent to or emanating from
the portion of the property leased by Gasolinas de Puerto Rico or
Isla Petroleum Corporation at the Carolina, Puerto Rico owned Real
Property, in each case as reported in certain environmental site
assessment reports previously provided by Seller to Buyer (and
including any contamination arising from the spread, migration or
leaching of such reported contamination);
(viii) environmental contamination emanating from (y) a
5,000 gallon underground storage tank removed in 1993 and located
at the Company's warehouse/distribution center in Woburn,
Massachusetts (but only to the extent the Liabilities resulting
from the matters described in this clause (y) exceed $50,000), and
(z) two underground storage tanks removed in 1983 and a sandy area
possibly used for the disposal of waste located at the Company's
warehouse/distribution center in Chelmsford, Massachusetts (but
only to the extent the Liabilities resulting from the matters
described in this clause (z) exceed $50,000).
(ix) any Liability of the Company or any Subsidiary to
Seller or any of its Affiliates in respect of Affiliate Debt or in
respect of other obligations, states of facts or conditions in
existence at or prior to the Closing Date, except for (A)
Liabilities incurred after the Closing Date under agreements or
leases to be entered into between the Company or its Subsidiaries,
on the one hand, and Seller and its Affiliates, on the other hand,
pursuant to Sections 6.20 and 7.2(i) and (B) any Guarantee by
Seller or its Affiliates of any Lease or the Guarantee of Seller
disclosed in Schedule 4.8(e);
(x) except for capital lease obligations set forth in the
Interim Balance Sheet and incurred since such date in the Ordinary
Course of Business and in amounts consistent with the Budget, any
Liability of the Company or any Subsidiary in respect of Debt
incurred prior to the Closing (other than Debt owed solely to the
Company or any wholly owned Subsidiary) or any other Liability of
the Company or any Subsidiary incurred prior to, or arising out of
the conduct of the Business prior to, the Closing of a category
properly classified as long-term in accordance with generally
accepted accounting principles consistently applied by the Company
(and including the current portion of any such long-term Liability
and the remaining portion of any Liability that when incurred or
arising should have been properly classified as a long-term
Liability in accordance with generally accepted accounting
principles and as to which only the current portion remains); and
(xi) all Liabilities of a category set forth under the
caption "Items to be Assumed/Retained by Seller in Schedule 3.4B,
including Appendix A thereto (whether or not any such Liability
would be required to be set forth on a balance sheet prepared as
of the Closing Date in accordance with generally accepted
accounting principles).
1.3.21. ERISA. The term "ERISA shall mean the federal Employee
Retirement Income Security Act of 1974 or any successor statute, and the
rules and regulations thereunder, and in the case of any referenced
section of any such statute, rule or regulation, any successor section
thereto, collectively and as from time to time amended and in effect.
1.3.22. Generally Accepted Accounting Principles. The term
"generally accepted accounting principles shall mean generally accepted
accounting principles, as in effect on the date hereof.
1.3.23. Governmental Authority. The term "Governmental Authority
shall mean any U.S. federal, state or local or any foreign government,
governmental authority, regulatory or administrative agency,
governmental commission, court or tribunal (or any department, bureau or
division thereof) or any arbitral body.
1.3.24. Governmental Order. The term "Governmental Order shall
mean any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.
1.3.25. Guarantee. The term "Guarantee, with respect to any
Person, shall mean (i) any guarantee of the payment or performance of,
or any contingent obligation in respect of, any Debt or other obligation
of any other Person, (ii) any other arrangement whereby credit is
extended to any other Person on the basis of any promise or undertaking
of such Person (A) to pay the Debt of such other Person, (B) to purchase
any obligation owed by such other Person, (C) to purchase or lease assets
(other than inventory in the ordinary course of business) under
circumstances that would enable such other Person to discharge one or
more of its obligations, or (D) to maintain the capital, working
capital, solvency or general financial condition of such other Person,
and (iii) any liability of such Person as a general partner of a
partnership or as a venturer in a joint venture in respect of Debt or
other obligations of such partnership or venture.
1.3.26. Hazardous Substances. The term "Hazardous Substances
shall mean (i) substances which contain substances defined in or
regulated under the following Federal statutes, as amended, and their
state counterparts, as well as these statutes' implementing regulations
as amended from time to time and as interpreted by administering
Governmental Authorities: the Hazardous Materials Transportation Act,
the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water
Act, the Safe Drinking Water Act, the Asbestos Hazard Emergency Response
Act, the Atomic Energy Act, the Toxic Substances Control Act, the
Federal Insecticide, Fungicide, and Rodenticide Act, and the Clean Air
Act; (ii) petroleum and petroleum products, including crude oil and any
fractions thereof; (iii) natural gas, synthetic gas and any mixtures
thereof; (iv) radon; (v) PCBs; (vi) asbestos; (vii) any substance with
respect to which a Governmental Authority requires environmental
investigation, monitoring, reporting or remediation; and (viii) any
other hazardous, noxious, radioactive or toxic materials or substances.
1.3.27. Income Tax. The term "Income Tax means any Tax which is,
in whole or in part, based on or measured by income or gains.
1.3.28. Legal Requirement. The term "Legal Requirement shall
mean any U.S. federal, state or local or any foreign law, statute,
standard, ordinance, code, order, rule, regulation, resolution or
promulgation, or any Governmental Order, or any license, franchise,
consent, approval, permit or similar right granted under any of the
foregoing, or any similar provision having the force and effect of law.
1.3.29. Liabilities. The term "Liabilities shall mean any and
all liabilities and obligations, whether accrued, fixed, absolute or
contingent, matured or unmatured or determined or determinable, or
otherwise.
1.3.30. Lien. The term "Lien shall mean any mortgage, pledge,
lien, security interest, charge, attachment, equity or other
encumbrance, or restriction on the creation of any of the foregoing,
whether relating to any property or right or the income or profits
therefrom; provided, however, that the term "Lien shall not include (i)
statutory liens for Taxes to the extent that the payment thereof is not
in arrears or otherwise due, (ii) encumbrances in the nature of zoning
restrictions, easements, rights or restrictions of record on the use of
real property if the same do not detract from the value of the property
encumbered thereby or impair the use of such property in the Business as
currently conducted or proposed to be conducted, (iii) statutory or
common law liens to secure landlords, lessors or renters under leases
or rental agreements confined to the premises rented to the extent that
no payment or performance under any such lease or rental agreement is in
arrears or is otherwise due, (iv) deposits or pledges made in connection
with, or to secure payment of, worker's compensation, unemployment
insurance, old age pension programs mandated under applicable Legal
Requirements or other social security, (v) statutory or common law liens
in favor of carriers, warehousemen, mechanics and materialmen, statutory
or common law liens to secure claims for labor, materials or supplies
and other like liens, which secure obligations to the extent that (A)
payment of such obligations is not in arrears or otherwise due and (B)
such liens do not and will not, individually or in the aggregate, have a
Material Adverse Effect or materially affect the use of any Real
Property, and (vi) restrictions on transfer of securities imposed by
applicable state and federal securities laws.
1.3.31. Losses. The term "Losses shall mean any and all losses,
damages, obligations, Liabilities, claims, awards (including, without
limitation, awards of punitive or treble damages or interest),
assessments, amounts paid in settlement, judgments, orders, decrees,
fines and penalties, costs and expenses (including, without limitation,
reasonable legal costs and expenses and costs and expenses of
collection).
1.3.32. Material Adverse Effect. The term "Material Adverse
Effect shall mean any adverse change in or effect on the business,
condition (financial or otherwise), operations, performance, properties
or prospects of the Company or any of its Subsidiaries (or of another
specified Person) that, when considered either singly or together with
all other adverse changes and effects with respect to which such phrase
is used in this Agreement, is material to the Company and its
Subsidiaries (or to such other specified Person and its Subsidiaries),
taken as a whole; provided, however, that when such term is used in
reference to Buyer, such term shall not include any change or effect
attributable to the Company or any Subsidiary.
1.3.33. Ordinary Course of Business. The term "Ordinary Course of
Business shall mean the ordinary course of the Business consistent with
past custom and practice.
1.3.34. Preferred Stock Subscription Agreement. The
termPreferred Stock Subscription Agreement shall mean the Preferred
Stock Subscription Agreement to be entered into by Buyer and Seller at
or prior to the Closing in the form of Exhibit A hereto.
1.3.35. Person. The term "Person shall mean any individual,
partnership, corporation, association, trust, joint venture,
unincorporated organization or other entity, and any Governmental
Authority.
1.3.36. Standstill and Registration Rights Agreement. The term
"Standstill and Registration Rights Agreement shall mean the Standstill
and Registration Rights Agreement to be entered into by Buyer and Seller
at or prior to the Closing in the form of Exhibit B hereto.
1.3.37. Subsidiary. The term "Subsidiary shall mean any Person
of which the Company (or other specified Person) shall own directly or
indirectly at least a majority of the outstanding capital stock (or
other shares of equity interest) entitled to vote generally in the
election of directors or in which the Company (or other specified
Person) is a general partner or joint venturer without limited liability.
1.3.38. Taxes. The term "Tax shall mean any federal, state,
local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental taxes under Code Section 59A, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, fee, levy, duty, impost or charge of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
1.3.39. Tax Return. The term "Tax Return shall mean any return,
declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
2. Acquisition; Excluded Liabilities. Upon the terms, subject to the
conditions, and in reliance on the representations, warranties and covenants
set forth herein, Seller agrees to sell and transfer to Buyer, and Buyer
agrees to purchase from Seller, on the Closing Date, all of the Shares. At
the Closing, Seller shall retain and assume and remain or become primarily
obligated with respect to all Excluded Liabilities.
3. Payment and Closing.
3.1. Transaction Price. (a) In consideration of the sale and transfer
of the Shares by Seller to Buyer and of the agreement by Seller to perform
each of the other obligations and covenants to be fulfilled or complied with
by them hereunder, including, without limitation, the agreement of Seller to
perform its obligations and covenants set forth in Section 6.9 hereof, Buyer
shall:
(i) pay to Seller at the Closing (by wire transfer of
immediately available federal funds to an account designated by
Seller by notice to Buyer not fewer than three Business Days prior
to the Closing Date) an aggregate amount (the "Estimated Cash
Purchase Price) equal to $375,000,000; and
(ii) issue and deliver to Seller the Buyer Stock.
At the option of Buyer, Buyer may increase the amount of the Estimated
Cash Purchase Price by all or any portion of the proceeds received by Buyer
after the date hereof from the sale of any operating Subsidiary or division of
Buyer or the sale by Buyer of shares of its common stock or preferred stock
mandatorily convertible into common stock. If Buyer elects such option, the
amount of Series D Preferred Stock to be issued and delivered at Closing as
part of the Buyer Stock shall be reduced (and the Estimated Cash Purchase Price
shall be appropriately increased) so that the aggregate liquidation
preferences of the outstanding Series D Preferred Stock immediately following
issuance of the Series D Preferred Stock actually issued equals the amount
such preferences would have been if Buyer had not elected such option minus
the amount by which Buyer has elected to increase the Estimated Cash Purchase
Price. For all purposes of this Agreement, the terms Estimated Cash Purchase
Price and Buyer Stock shall mean the amounts thereof after giving effect to
the provisions of this paragraph.
The Buyer Stock and the Estimated Cash Purchase Price are referred to
herein collectively as the "Estimated Purchase Price. The Estimated Cash
Purchase Price and the Estimated Purchase Price (but not the Buyer Stock)
shall be subject to adjustment following the Closing as set forth in Section
3.4 below. The Estimated Cash Purchase Price and the Estimated Purchase Price
as so adjusted are referred to herein as the "Cash Purchase Price and the
"Purchase Price, respectively. The parties agree that the value of the Buyer
Stock equals $175,000,000.
3.2. Time and Place of Closing. The closing of the purchase and sale
of the Shares and the other transactions contemplated by this Agreement (the
"Closing) shall take place at the Conference Center of Ropes & Gray in Boston,
Massachusetts at 10:00 a.m. (local time) on November 16, 1995, or at such
other time or place upon which the parties may agree, provided that all
conditions to Closing have been satisfied or waived as provided in Sections
7 and 8 (the day on which the Closing takes place being referred to herein as
the "Closing Date).
3.3. Delivery. At the Closing, Seller will convey, transfer and assign
the Shares to Buyer free and clear of any Liens (including without limitation
restrictions on transfer or voting), and will deliver to Buyer a certificate
or certificates evidencing all of the Shares duly endorsed or accompanied by
separate stock power(s) duly endorsed, in each case with signature(s)
guaranteed, with all required stock transfer Tax stamps affixed and in form
proper for transfer, against delivery by Buyer of the Estimated Purchase Price
as set forth in Section 3.1 above.
3.4. Cash Price Adjustment.
(a) As promptly as possible following the Closing Date, the
Company shall prepare a consolidated balance sheet of the Company and
its Subsidiaries as of a time immediately prior to the Closing (the
"Closing Balance Sheet) in accordance with generally accepted accounting
principles applied consistently with the Company's past practices used
in the preparation of the Annual Financials, except that inventory will
be determined using the first-in first-out inventory cost method and
without regard to the Company's adoption of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of, and the change in the
Company's accounting policy with respect to the capitalization of
internally developed software (the "Accounting Policy Changes). During
the fourteen (14) days preceding the Closing Date, RGIS (the "Inventory
Firm) shall conduct a wall-to-wall physical count of all the owned
inventory located at the stores, distribution centers and warehouses of
the Company and its Subsidiaries. Buyer, Seller and their respective
accountants shall have the opportunity to observe the physical count of
the inventory. As promptly as practicable and no later than fourteen
(14) days following the Closing Date, the Inventory Firm shall deliver
to Seller and Buyer a written statement setting forth the counted value
of the inventory (the "Inventory Statement). The inventory reflected on
the Closing Balance Sheet shall be calculated in accordance with
generally accepted accounting principles consistently applied by the
Company based on the Inventory Statement, utilizing the retail method
for the store inventory and the cost method for the warehouse and
distribution centers as consistently applied by the Company in
preparation of the Annual Financials, except inventory cost will be
determined using the first-in first-out inventory cost method. Amounts
reflected on the Closing Balance Sheet for those elements, accounts or
items to be included in the calculation of Company Net Assets shall
include all known and estimated assets and liabilities as of the Closing
Date consistent with the Company's fiscal year-end cut-off procedures.
As promptly as possible following the receipt of the unaudited
Closing Balance Sheet, Coopers & Lybrand L.L.P. ("Coopers) shall perform
procedures agreed upon by the parties and Coopers (as set forth in
Appendix B to Schedule 3.4B) in connection with the elements, accounts
or items of the Closing Balance Sheet that are to be included in the
calculation of Company Net Assets for the purposes of issuing a report
(the "Coopers Report) thereon detailing the results of such procedures as
applied by Coopers in accordance with standards established by the
American Institute of Certified Public Accountants (and prior to the
issuance by Coopers of such report, KPMG Peat Marwick and
representatives of Seller and the Company reasonably designated by
Seller shall have the opportunity to review Coopers' work papers and to
be present during the performance of all such procedures). Adjustments
proposed by Coopers to the elements, accounts or items of the Closing
Balance Sheet to be included in the calculation of Company Net Assets
will be aggregated and to the extent the total of such adjustments
exceeds $750,000 on a net basis, such excess adjustments shall be
reflected in the Closing Balance Sheet for the purpose of calculating
Company Net Assets. Coopers shall furnish the Coopers Report to Seller
and Buyer within 75 days following the Closing or as soon thereafter as
practicable.
Within 10 days following delivery of the Coopers Report, Coopers
shall prepare and deliver a Company Net Assets Statement in
substantially the form of Schedule 3.4A, which will include a
calculation of the Cash Purchase Price in the form of Appendix A
thereto. Assets and liabilities on the Company Net Assets Statement
will be equal to such items in the Closing Balance Sheet except as
otherwise specified in Schedule 3.4A and will exclude the impact of the
Accounting Policy Changes and will reflect property on a gross cost
basis. The Company Net Assets Statement will exclude those assets and
liabilities detailed in Schedule 3.4B, including Appendix A thereto,
under the columns titled "Items to be Assumed/Retained by Seller and
"Other Adjustments. "Company Net Assets shall mean the net asset figure
appearing on the Company Net Assets Statement.
Schedule 3.4B sets forth Company Net Assets on an estimated basis
as of October 30, 1995. The "Target Net Asset Amount shall mean
$968,372,000 (which amount equals the net asset figure shown under the
column styled "Estimated Statement of Net Assets on said Schedule 3.4B).
(b) If the amount of Company Net Assets as set forth on the
Company Net Assets Statement is: (i) less than the Target Net Asset
Amount, then the amount by which Company Net Assets are less than the
Target Net Asset Amount shall be paid to Buyer by Seller; or (ii)
greater than the Target Net Asset Amount, then the amount by which
Company Net Assets are greater than the Target Net Asset Amount shall be
paid to Seller by Buyer but in no event shall such payment to Seller be
greater than $50 million. Any amount due as a result of the operation
of this Section 3.4(b) shall be referred to herein as the "Cash Price
Adjustment and shall be treated for all purposes as an adjustment to the
Purchase Price. The Cash Purchase Price shall be the Estimated Cash
Purchase Price decreased or increased, as the case may be, by the Cash
Price Adjustment.
(c) If Seller disagrees with the Company Net Assets Statement or
the Cash Purchase Price, Seller shall, within twenty (20) Business Days
after receipt of the Company Net Assets Statement furnish to Buyer a
written statement of such disagreement, together with an explanation of
the reasons therefor. If Seller does not furnish such a statement to
Buyer within such period, the amount of Company Net Assets set forth on
the Company Net Assets Statement and the amount of the Cash Purchase
Price derivable therefrom shall be binding and conclusive on all parties
hereto. If Seller does furnish such a statement to Buyer within such
period, the parties hereto shall first use commercially reasonable
efforts to resolve such disagreement among themselves. If the parties
are unable to resolve the dispute within 20 calendar days after delivery
of such notification, the dispute shall be submitted to the Alternative
Accountants for resolution. The parties shall request the Alternative
Accountants to resolve the dispute within 30 calendar days after
submission. The determination of the Alternative Accountants as to the
resolution of any dispute shall be binding and conclusive upon all
parties hereto. All determinations pursuant to this Section 3.4(c)
shall be in writing and shall be delivered to the parties hereto. Any
award made pursuant to this Section 3.4(c) may be entered in and
enforced by any court referred to in Section 11.1 hereof and the parties
hereby consent and commit themselves to the jurisdiction of any such
court for purposes of the enforcement of any such award.
(d) The fees and expenses of Coopers related to the matters set
forth in this Section 3.4 shall be borne by Buyer and the fees and
expenses of KPMG Peat Marwick related to the matters set forth in this
Section 3.4 shall be borne by Seller. Each party will bear all expenses
for any special work performed at its request in connection with the
matters that are the subject of this Section 3.4. The fees and costs of
the Inventory Firm associated with the taking of the physical inventory
shall be shared equally by Buyer and Seller. The fees and expenses of
the Alternative Accountants in connection with the resolution of
disputes pursuant to paragraph (d) above shall be shared equally by
Buyer and Seller.
(e) The amount of the Cash Price Adjustment shall bear interest at
an annual rate equal to the reference rate from time to time of Morgan
Guaranty Trust Company of New York plus 1% from and including the
Closing Date to, but excluding, the date of payment. The Cash Price
Adjustment, together with accrued interest thereon, shall be paid within
three Business Days after the later of (i) five Business Days after
delivery of the Company Net Assets Statement, including the calculation
of the Cash Purchase Price appended thereto, and (ii) the earlier of the
resolution of any dispute by Buyer and Seller following notification of
Seller's disagreement to Buyer pursuant to Section 3.4(c) above or a
determination by the Alternative Accountants pursuant to Section 3.4(c)
above. Any such amount shall be paid by wire transfer of immediately
available funds to an account designated by the party to receive such
payment.
(f) The provisions of this Section 3.4 and the Schedules referred
to in this Section 3.4 shall be used solely for the purpose of
calculating the amount of the Cash Price Adjustment, if any, and shall
not affect the ownership of any assets or rights or the responsibility
for any liabilities, except to the extent set forth in the definition of
Excluded Liabilities.
4. Representations and Warranties of Seller. In order to induce Buyer to
enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Seller represents and warrants to Buyer as follows:
4.1. Corporate Matters, etc.
4.1.1. Incorporation and Authority of Seller. Seller is a
corporation duly organized, validly existing and in good standing under
the laws of the State of New York and has all requisite power and
authority, corporate and otherwise, to enter into this Agreement and
each of the Closing Agreements, to carry out and perform its obligations
hereunder and to consummate the transactions contemplated hereby.
4.1.2. Organization, Power and Standing. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Minnesota, and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under
the jurisdiction of its incorporation or organization. Each of the
Company and each of its Subsidiaries has all requisite power and
authority, corporate and otherwise, to carry on the Business as currently
conducted, and to consummate the transactions contemplated hereby. Each
of the Company and its Subsidiaries is duly qualified or licensed to do
business as a foreign corporation or otherwise, and is in good standing
as such, in each jurisdiction where the nature of the Company's or such
Subsidiary's activities or its ownership or leasing of property require
such qualification, except such failures to be so qualified as have not
had and will not have a Material Adverse Effect.
4.1.3. Authorization and Enforceability. This Agreement has been
duly authorized, executed and delivered by Seller and is Enforceable
against Seller. Each of the Closing Agreements to which Seller or any
of its Affiliates is intended to be party has been duly authorized, and,
on or before the Closing Date, will be duly executed and delivered by
Seller or its applicable Affiliate and be Enforceable against Seller or
such Affiliate.
4.1.4. Non-Contravention, etc. No approval, consent, waiver,
authorization or other order of, and no filing, registration,
qualification or recording with, any Governmental Authority or any other
Person (other than any party to any Lease-In other than the Company or
any Subsidiary) is required to be obtained or made by or on behalf of
Seller or the Company or any of its Subsidiaries in connection with the
execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except for (i)
satisfaction of the requirements of the Hart-Scott-Rodino Antitrust
Improvements of 1976, as amended (the "HSR Act), (ii) items listed on
Schedule 4.1.4 which shall have been obtained or made and shall be in
full force and effect at the Closing (subject to the materiality
exception set forth at the end of the next sentence) and (iii) any other
of the foregoing items required to be obtained from or made with any
Person other than any Governmental Authority which the failure to obtain
or make, individually or in the aggregate, have and could reasonably be
expected to have neither a Material Adverse Effect nor a material
adverse effect on the ability of Seller to consummate the transactions
contemplated hereby. Except as set forth on Schedule 4.1.4, neither the
execution, delivery and performance of this Agreement nor the
consummation of any of the transactions contemplated hereby (including,
without limitation, the execution, delivery and performance of the
Closing Agreements) does or will constitute, result in or give rise to
(i) a breach or violation or default under any Legal Requirement
applicable to Seller, the Company or any of its Subsidiaries, (ii) a
breach of or a default under any Charter or By-Laws provision of Seller,
the Company or any of its Subsidiaries, (iii) the acceleration of the
time for performance of any obligation under any Contractual Obligation
(other than any Lease-In) of Seller, the Company or any of its
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of
any Asset, other than any Asset held under any Lease-In, (v) a breach of
or a default under any Contractual Obligation (other than any Lease-In)
of Seller, the Company or any of its Subsidiaries, or (vi) right to any
severance payments other than by operation of law (including without
limitation if such payments become due only if employment is terminated
following the Closing), termination, right of termination, modification
of terms or change in benefits or burdens under any Contractual
Obligation (other than any Lease-In), other than in the case of clauses
(i), (iii), (iv), (v) and (vi) such as, individually or in the
aggregate, have and could reasonably be expected to have neither a
Material Adverse Effect nor a material adverse effect on the ability of
Seller to consummate the transactions contemplated hereby.
4.1.5. Title, etc. Seller has good and marketable title to all
Shares free and clear of any Liens (including without limitation
restrictions on transfer or voting). Except for this Agreement, there
is no Contractual Obligation pursuant to which Seller has, directly or
indirectly, granted any option, warrant or other right to any Person to
acquire the Shares or any other securities of the Company or any of its
Subsidiaries. Upon delivery of certificates representing the Shares,
and delivery of the consideration therefor as herein contemplated, Buyer
will receive good and marketable title to the Shares, free and clear of
any Liens (including without limitation restrictions on transfer or
voting) and subject to no rescission or similar rights or equities of
any kind.
4.1.6. Capitalization. The only issued and outstanding shares of
capital stock of the Company are the Shares, all of which are duly
authorized, validly issued, fully paid and non-assessable, and all of
which are beneficially owned and held of record by Seller. There is no
Contractual Obligation or Charter or By-law provision that obligates the
Company or any Subsidiary to issue, purchase or redeem, or make any
payment in respect of, any Equity Security.
4.1.7. Subsidiaries. Except as indicated therein, the Company
has only the Subsidiaries listed in Schedule 4.1.7. Not later than the
tenth day after the date hereof, Seller will deliver to Buyer a complete
substitute Schedule 4.1.7 that lists no Persons other than those that
are Subsidiaries as of the date hereof and sets forth the name and
jurisdiction of incorporation or organization, the date of incorporation
or organization, the issued and outstanding shares of capital stock, and
the federal or foreign taxpayer identification number of each such
Subsidiary. The Company is the direct or indirect record and beneficial
owner of all of the issued and outstanding shares of capital stock of
each of its Subsidiaries, such shares have been duly authorized and
validly issued and are fully paid and nonassessable, and the Company or
a wholly owned direct or indirect Subsidiary has good and marketable
title to such shares free and clear of any Liens (including without
limitation restrictions on transfer or voting). There is no outstanding
Equity Security of any Subsidiary other than its issued and outstanding
shares of capital stock. The Company has no investment in any Person
other than (a) its Subsidiaries, (b) demand deposit or money market
accounts and (c) advances made to suppliers in the Ordinary Course of
Business. No Subsidiary has any investment in any Person other than (a)
demand deposit or money market accounts and (b) advances made to
suppliers in the Ordinary Course of Business.
4.1.8. Charter and By-laws. Seller has heretofore delivered to
Buyer a true and complete copy of the Charter and By-laws of the Company
and each of its material Subsidiaries, in each case in the form
currently in effect and as will be in effect immediately prior to the
Closing, and at least ten Business Days prior to the Closing, Seller
will have delivered to Buyer a true and complete copy of the Charter and
By-laws of each of the other Subsidiaries, in each case in the form then
in effect and as will be in effect immediately prior to the Closing.
4.2. Financial Statements, etc.
4.2.1. Financial Information. Buyer has been furnished with true
and complete copies of each of the following:
(a) The unaudited consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 1994 (the "Annual Balance
Sheet) and the related statement of earnings for the fiscal year
then ended, and similar financial statements as at the end of and
for each of the preceding two fiscal years (the "Annual Financials
and, together with the Interim Financials and the Monthly
Financials, the "Financial Statements).
(b) The unaudited consolidated balance sheets of the
Company and its Subsidiaries as of July 1, 1995 (the "Interim
Balance Sheet) and as of July 1, 1994 and related unaudited
consolidated statements of earnings of the Company and its
Subsidiaries for each of the six-month periods then ended (the
"Interim Financials).
(c) Monthly unaudited consolidated statements of earnings
of the Company and its Subsidiaries for the months of July and
August, 1995, such monthly income statements having been prepared
in the form customarily prepared by management for internal use
(the "Monthly Financials).
(d) The adjusted unaudited consolidated balance sheet of
the Company and its Subsidiaries as of December 31, 1994 and the
related statement of earnings for the fiscal year then ended, and
similar financial statements as at the end of and for each of the
preceding two fiscal years.
4.2.2. Character of Financial Information. The Annual Financials
and the Interim Financials were prepared in accordance with generally
accepted accounting principles consistently applied by the Company
throughout the periods specified therein and present fairly, in all
material respects, the consolidated financial position and results of
operations of the Company and its Subsidiaries for the periods specified
therein, subject to an absence of footnotes and in the case of the
Interim Financials to normal year-end audit adjustments which will not
in the aggregate be material. Such financial information reflects the
Company's accounting policies currently in effect and does not reflect
the impact of the Accounting Policy Changes.
4.3. Change in Condition. Except for the matters set forth in Schedule
4.3, since the date of the Interim Balance Sheet:
(a) The Business has been conducted only in the Ordinary Course
of Business (except as otherwise required by the terms of this
Agreement), and without limiting the generality of the foregoing, the
Company and its Subsidiaries have made capital expenditures in the
Ordinary Course of Business and in an aggregate amount consistent with
the Budget;
(b) Neither the Company nor any of its Subsidiaries has:
(i) made any capital expenditures except routine
expenditures for repairs and maintenance and except in an
aggregate amount consistent with the budget set forth on Schedule
4.3(b)(i) hereto (the "Budget);
(ii) incurred or otherwise become liable in respect of any
Debt (other than Affiliate Debt, none of which will be outstanding
as of the Closing) or become liable in respect of any Guarantee,
other than Debt, intercompany advances or any Guarantee between
the Company and its wholly owned Subsidiaries or between wholly
owned Subsidiaries;
(iii) mortgaged or pledged an Asset or subjected any Asset
to any Lien except Liens disclosed on Schedule 4.5.1;
(iv) declared or made any Distribution (other than (A)
distributions of cash to Seller in the Ordinary Course of Business
pursuant to the cash management program of Seller and its
Subsidiaries, a true and correct description of which is included
on Schedule 4.3(b)(iv)(A) (the "Cash Management Program); (B) the
distributions set forth on Schedule 4.3(b)(iv)(B); (C)
distributions of cash or of any receivable constituting Affiliate
Debt in connection with the repayment or cancellation of Affiliate
Debt; and (D) distributions or contributions in connection with an
increase in or the repayment or cancellation (in whole or in part)
of Debt or intercompany advances between the Company and its
wholly owned Subsidiaries or between wholly owned Subsidiaries);
(v) sold, leased to others or otherwise disposed of any of
its Assets (except for sales of inventory in the Ordinary Course
of Business and except as contemplated by clause (iv) of this
Section 4.3(b));
(vi) purchased any Equity Security of any Person other than
of a direct or indirect wholly owned Subsidiary of the Company, or
any assets (other than inventory) material in amount or
constituting a business, or been party to any merger,
consolidation or other business combination or entered into any
Contractual Obligation relating to any such purchase, merger,
consolidation or business combination;
(vii) made any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in or to the Company or its wholly
owned Subsidiaries and other than loans or advances to suppliers
in the Ordinary Course of Business;
(viii) canceled or compromised any Debt or claim other
than in the Ordinary Course of Business and other than any
Affiliate Debt or any Debt, intercompany advances or claim between
the Company and a wholly owned Subsidiary or between wholly owned
Subsidiaries;
(ix) sold, transferred, licensed or otherwise disposed of
any Intangibles other than in the Ordinary Course of Business;
(x) made or agreed to make any material change in its
customary methods of accounting or accounting practices except for
the Accounting Policy Changes;
(xi) engaged in or become obligated in respect of any
transaction with Seller or any Affiliate of Seller, except in
accordance with the Cash Management Program or as described on
Schedule 4.3(b)(iv)(B) or Schedule 4.10.
(xii) waived or released or permitted to lapse any right of
material value except in the Ordinary Course of Business; or
(xiii) instituted, settled or agreed to settle any material
Action;
(c) Neither the Company nor any of its Subsidiaries has (i) had
any material change in its relationships with its employees, agents,
customers or suppliers, or (ii) made any changes in the rate of
Compensation payable (or paid or agreed or orally promised to pay,
conditionally or otherwise, any extra Compensation) to any director,
officer, manager, employee, consultant or agent of the Company (other
than increases granted in the Ordinary Course of Business and consistent
with past practices, which increases will not have a Material Adverse
Effect);
(d) There has been no amendment of any material provision of any
Equity Security of the Company or any Subsidiary;
(e) Neither Seller nor any of its Affiliates nor the Company nor
any of its Subsidiaries has entered into any Contractual Obligation (and
Seller and its Affiliates have not entered into any Contractual
Obligation obligating the Company or any of its Subsidiaries) to do any
of the things referred to in clauses (a) through (d) above with respect
to the Company, any Subsidiary or the Business; and
(f) No Material Adverse Effect has occurred.
4.4. Liabilities. Neither the Company nor any of its Subsidiaries has
any Liabilities, other than, to the extent the existence thereof is consistent
with all other representations and warranties of Seller:
(a) set forth on the Interim Balance Sheet;
(b) incurred in usual amounts since the date of the Interim
Balance Sheet in the Ordinary Course of Business;
(c) in respect of the Leases and Contracts; or
(d) in respect of purchase orders or similar Contractual
Obligations for the purchase of inventory in the Ordinary Course of
Business.
(e) between the Company and a wholly owned Subsidiary or between
wholly owned Subsidiaries;
(f) any Excluded Liabilities; or
(g) other undisclosed Liabilities which, individually or in the
aggregate, are not material to the Company or its Subsidiaries, taken as
a whole.
4.5. Assets.
4.5.1. Title to Assets; Owned Real Estate. The Company and its
Subsidiaries have good and marketable title to, or, in the case of
property held under lease or other Contractual Obligation, a valid and
enforceable right to use under an Enforceable Lease or License, all of
their properties, rights and assets, whether real, personal or
intellectual and whether tangible or intangible (collectively, the
"Assets), including, without limitation, all properties, rights and
assets reflected in the Interim Balance Sheet or acquired after the date
of the Interim Balance Sheet (except as sold or otherwise disposed of
since the date of the Interim Balance Sheet in the Ordinary Course of
Business or as otherwise permitted by this Agreement to be disposed of
since the date of the Interim Balance Sheet). Schedule 4.5.1 contains a
true, correct and complete list of all real property and improvements
(collectively, "Real Property) which are owned by the Company or any
Subsidiary. Seller has furnished to Buyer true and correct copies of
all title reports and title insurance policies with respect to the Real
Property listed in Schedule 4.5.1. The Assets are not subject to any
Lien except as described in said Schedule. The Assets (including,
without limitation, Real Property, the Intangibles, the Leases and the
Contracts), together with the services to be provided to the Company
after the Closing pursuant to the Transitional Services Agreement,
constitute all properties, rights and Assets held for or used in or
necessary for the conduct of the Business as currently conducted.
4.5.2. Real Property Leases.
Schedule 4.5.2(a) sets forth a true, correct and complete list of each
Real Property location which is leased or subleased, or which has been agreed
to be leased or subleased, as lessee or sublessee by the Company or any
Subsidiary (all of the leases, subleases or other Contractual Obligations
pursuant to which such Real Property locations are held or are to be held
being referred to herein collectively as the "Leases-In). Section A of said
Schedule lists for each Lease-In pertaining to the retail department stores
the store ID number, the name of the lessee, and the city and state of its
location. Section B of said Schedule lists Leases-In pertaining to the home
office facilities. Section C of said Schedule lists Leases-In pertaining to
regional and local offices, distribution facilities and local warehouses.
Section D of such Schedule lists those other properties in which the Company
or a Subsidiary retains an interest. Sections B, C and D include information
comparable to that required in Section A. Schedule 4.5.2(b) sets forth a
true, correct and complete list of each lease, sublease or other Contractual
Obligation under which the Company or a Subsidiary is a lessor or sublessor of
any Real Property (together with the Leases-In, the "Leases) and includes
information comparable to that required in Schedule 4.5.2(a). True, correct and
complete copies of the Leases, and all material amendments, modifications and
supplemental agreements thereto, have been previously delivered to Buyer.
Each Lease to which Seller or an Affiliate of Seller is a party is noted on
Schedule 4.5.2(a) and 4.5.2(b). All of the retail department stores operated
in the Business are owned or leased as lessee or subleased as sublessee by the
Company or a Subsidiary.
Except as set forth on Schedules 4.5.2 to the best of Seller's knowledge:
(i) each Lease is an Enforceable agreement of the Company
or the Subsidiary party thereto, and Seller does not have any
knowledge that any Lease is not an Enforceable agreement of the
other parties thereto, other than as a result of or arising out of
the transactions contemplated hereby;
(ii) the Company or the Subsidiary party thereto has
fulfilled all material obligations required pursuant to the Leases
to have been performed by the Company or the Subsidiary party
thereto on its part, other than as a result of or arising out of
the transactions contemplated hereby;
(iii) neither the Company nor the Subsidiary party thereto
is in material breach of or default under any Lease, and no event
has occurred which with the passage of time or giving of notice or
both would constitute such a default, result in a loss of rights
or result in the creation of any Lien thereunder or pursuant
thereto (other than as a result of or arising out of the
transactions contemplated hereby);
(iv)(A) there is no existing material breach or default by
any other party to any Lease, and (B) no event has occurred which
with the passage of time or giving of notice or both would
constitute a material default by such other party, result in a
loss of rights or result in the creation of any Lien thereunder or
pursuant thereto;
(v) neither the Company nor any Subsidiary is obligated to
pay any material leasing or brokerage commission as a result of
the transaction contemplated hereby; and
(vi) there is no pending or threatened eminent domain
taking affecting any of the properties which are the subject of
the Leases.
4.6. Intellectual Property Rights. Schedule 4.6 lists and identifies
all trade and product names; patents, patent applications, trademarks, service
marks, logos and copyrights (including registrations and applications); trade
secrets, know-how; computer software; and all other intellectual or intangible
property and rights; in each case that are directly or indirectly owned,
licensed or otherwise used by and are material to the Company or any
Subsidiary (the "Intangibles, which term shall also include any other
proprietary or confidential information that is directly or indirectly owned,
licensed or otherwise used by the Company or any Subsidiary) and identifies
the owner and any licensee or other user thereof; provided, however, that
there have been only generally described on such Schedule such of the
Intangibles (including trade secrets, know-how and computer software) as are
not readily susceptible to listing. Schedule 4.6 also lists and identifies
the term of each license or other Contractual Obligation (including all
amendments) under which any material Intangible is held or used by the Company
or any Subsidiary in the conduct of the Business or otherwise (the "Licenses)
and identifies the owner and any licensee or other user thereof. Except as
disclosed on Schedule 4.6, all Intangibles are owned solely by the Company or a
Subsidiary or licensed to the Company or its Subsidiaries under an exclusive
perpetual License not requiring payment of any royalty or fee (other than in
the case of licenses of software in the Ordinary Course of Business). Except
as set forth on Schedule 4.6, there is no material license or other
Contractual Obligation under which the Company or any Subsidiary is liable as
licensor with respect to any Intangibles and neither the Company nor any
Subsidiary has granted any material license to any third party with respect to
any Intangible. Except as set forth on Schedule 4.6 and to the Seller's
knowledge, the use or sale by the Company and its Subsidiaries of any products
or services in the Business and use by the Company and its Subsidiaries of the
Intangibles does not infringe and has not infringed any rights of any third
party, and no activity of any third party infringes upon the rights of the
Company or any Subsidiary with respect to any of the Intangibles. Except as
set forth on Schedule 4.6, no Action alleging or relating to any such
infringement against the rights of the Company or any Subsidiary or any third
parties is currently pending or, to the knowledge of Seller, threatened.
4.7. Accounts; Funds, etc. Subject to the provisions of Section 6.13,
after the Closing Date, all monies and bank or other depository accounts
arising out of, relating to or established for the Business or the Company or
any Subsidiary shall be held by, and accessible only to, the Company or the
relevant Subsidiary; provided, however, that all such monies or accounts in
respect of change funds shall be held by, and accessible only to, the Company
or the relevant Subsidiary on or after the Closing Date. Schedule 4.7
identifies each bank account or similar account for the deposit of cash or
securities maintained by or on behalf of the Company or any Subsidiary
(indicating the name and address of the bank or other financial institution,
the account name and number and the individuals with signing authority with
respect to such account).
4.8. Certain Contractual Obligations. Set forth on Schedule 4.8 is a
true and complete list of all of the following Contractual Obligations of the
Company or any Subsidiary:
(a) All collective bargaining agreements and other labor
agreements; all employment or material consulting agreements; and all
other plans, agreements, arrangements or practices which constitute
Compensation or benefits to any of the directors, officers or employees
of the Company or any Subsidiary, except to the extent any of the
foregoing constitute a Company Plan or Benefit Arrangement;
(b) All Contractual Obligations under which the Company or any
Subsidiary is or may become obligated to pay any legal, accounting,
brokerage, finder's or similar fees or expenses in connection with, or
incur any severance pay or special Compensation obligations which would
become payable by reason of, this Agreement or the consummation of the
transactions contemplated hereby;
(c) All Contractual Obligations under which the Company or any
Subsidiary is or will after the Closing be restricted from carrying on
any business or other activities anywhere in the world;
(d) All Contractual Obligations (including, without limitation,
options) to: (i) sell or otherwise dispose of any Assets except in the
Ordinary Course of Business or (ii) purchase or otherwise acquire any
material property or properties or other assets except pursuant to
purchase orders for inventory and other arrangements with suppliers in
the Ordinary Course of Business;
(e) All Contractual Obligations under which the Company or any
Subsidiary has any liability for Debt or obligation for Debt or
constituting or giving rise to a Guarantee of any liability or
obligation of any Person (other than any Lease, any Debt or intercompany
advances between the Company and any wholly owned Subsidiary or between
wholly owned Subsidiaries, or any Affiliate Debt), or under which any
Person has any liability or obligation constituting or giving rise to a
Guarantee of any liability or obligation of the Company or any
Subsidiary (including, without limitation, partnership and joint venture
agreements) other than any Guarantee by Seller or any of its Affiliates
of any Lease or the Guarantee of Seller disclosed in Schedule 4.8(e), or
under which any default could arise or penalty or payment could be
required in the event of any action or inaction of Seller or any of its
Affiliates other than any Guarantee by Seller or its Affiliates of any
Lease or the Guarantee of Seller disclosed in Schedule 4.8(e);
(f) Any lease or other Contractual Obligation under which any
tangible personal property other than inventory (the "Equipment) having
a cost or capital lease obligation in excess of $250,000 is held or used
by the Company or any Subsidiary;
(g) Any Contractual Obligation under which the Company or any
Subsidiary may become obligated to pay any amount in excess of $500,000
in respect of indemnification obligations or purchase price adjustment
provisions in connection with any (i) acquisition or disposition of
assets or securities, real property or of property constituting a
product line, (ii) other acquisition or disposition of assets other than
sales of inventory in the Ordinary Course of Business, (iii) assumption
of liabilities or warranty, (iv) settlement of claims, (v) merger,
consolidation or other business combination, or (vi) series or group of
related transactions or events of a type specified in subclauses (i)
through (v); and if with respect to any such Contractual Obligation
there exists any pending or, to the knowledge of Seller, threatened
Action that could reasonably be expected to result in the Company and
its Subsidiaries being liable to pay an amount in excess of $100,000 or
there currently exist circumstances that would reasonably be expected to
give rise to such an Action, such Action or circumstances are described
on Schedule 4.17; and
(h) Any other Contractual Obligation of a type not specifically
covered in clauses (a) through (g) above entered into other than in the
Ordinary Course of Business or which in the case of such other
Contractual Obligations individually is likely to involve payments by or
on behalf of, or to, the Company or any of its Subsidiaries in excess of
$250,000 during the calendar year ended December 31, 1995 or $500,000
over the remaining term of such Contractual Obligation or the
termination of which may reasonably be expected to require payments by
the Company or any of its Subsidiaries exceeding $250,000 (other than
(i) purchase orders for inventory and other arrangements with suppliers
entered into in the Ordinary Course of Business, (ii) agreements
pertaining to common area maintenance entered into in the Ordinary
Course of Business, (iii) concessionaire and other store related
contracts applicable to fewer than 10 stores entered into in the Ordinary
Course of Business, and (iv) purchase and lease commitments,
construction contracts and other capital expenditure and maintenance and
repair commitments reflected in the Company's capital expenditure and
maintenance and repair budgets and entered into in the Ordinary Course
of Business).
Seller has heretofore delivered to Buyer a true and complete copy (or, in the
case of oral contracts or arrangements, a full and accurate written summary)
of each of the Contractual Obligations listed on Schedule 4.8, each as in
effect on the date hereof and (except as otherwise required by this Agreement)
as it will be in effect at the Closing, including, without limitation, all
amendments (such Contractual Obligations required to be listed on Schedule
4.8, together with the Licenses, and Insurance Policies, but excluding the
Company Plans and Benefit Arrangements, being referred to herein collectively
as the "Contracts). Each Contract is Enforceable by the Company or the
Subsidiary party thereto, against each Person (other than the Company or such
Subsidiary) party thereto, except: (i) as otherwise required by the terms of
this Agreement and (ii) as such enforceability may be limited by or as a
result of (A) bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally, (B) general principles of equity
(whether considered in a proceeding at law or in equity) and (C) execution,
delivery and performance of this Agreement and the Closing Agreements. No
material breach or default by the Company or any Subsidiary under any of the
Contracts has occurred and is continuing, and no event has occurred or
circumstance exists which with notice or lapse of time would constitute such a
breach or default or permit termination, modification or acceleration by any
other Person under any of the Contracts or would result in a loss of rights or
creation of any lien, charge or encumbrance thereunder or pursuant thereto
except as would arise from execution, delivery and performance of this
Agreement and the Closing Agreements. To the knowledge of Seller, no material
breach or default by any other Person under any of the Contracts has occurred
and is continuing, and no event has occurred or circumstance exists that with
notice or lapse of time would constitute such a breach or default or permit
termination, modification or acceleration by the Company or any Subsidiary
under any of the Contracts or would result in a loss of rights or creation of
any lien, charge or encumbrance thereunder or pursuant thereto except as would
arise from execution, delivery and performance of this Agreement and the
Closing Agreements.
4.9. Insurance, etc. All material properties of the Company and its
Subsidiaries are covered by valid and currently effective insurance policies
issued in favor of the Company and its Subsidiaries or are self-insured in
amounts that are customary in the place in which such properties are located
for companies operating similar businesses and operations. All insurance
coverages required under the Leases are in force under valid and currently
effective insurance policies. Set forth on Schedule 4.9(a) is a summary of all
policies or binders of insurance by which the Company or any Subsidiary (or
any risk of the Business) is insured (the "Insurance Policies) together with
(i) the name and telephone number of the agent or broker, (ii) the name of the
insurer and the names of the principal insured and each named insured, (iii)
the policy number and period of coverage, the type, scope (including an
indication of whether the coverage is on a claims made, occurrence or other
basis) and amounts (including a description of how deductibles, retentions,
aggregates and retroactive premium adjustments or other loss-sharing
arrangements are calculated and operate) of coverage. Seller has provided
Buyer with true and correct copies of all Insurance Policies in the forms that
are available to Seller. All premiums due under such policies have been paid,
and none of Seller, the Company, any Subsidiary or any of Seller's other
Affiliates is in default with respect to its respective obligations under any
of such policies.
4.10. Transactions with Affiliates. Except for the matters specified in
Schedule 4.10 (the "Affiliate Relationships), none of Seller or any of its
Affiliates is an officer, director, employee, consultant, distributor,
supplier or vendor of, or is party to any Contractual Obligation with, the
Company or any Subsidiary, and after the Closing neither the Company nor any
Subsidiary will have any liability or obligation to or for the benefit of
Seller or any of its Affiliates except pursuant to the Transitional Services
Agreement. Except for the matters specified in Schedule 4.10, there are no
Assets (including without limitation Intangibles, franchises and know-how)
that Seller or any of its Affiliates owns or is licensed or otherwise has the
right to use which are used in or necessary to the conduct of the Business.
4.11. Compliance with Laws, etc. The operations of the Business as
heretofore or currently conducted were not since June 30, 1991 and are not in
violation of, nor is the Company or any Subsidiary in default under, any Legal
Requirement, except for such violations or defaults listed on Schedule 4.11 or
as have not had and will not have individually or in the aggregate a Material
Adverse Effect. The Company and its Subsidiaries have been duly granted and
continue to hold, and at the Closing will hold, all licenses, permits,
consents, approvals, franchises and other authorizations under any Legal
Requirement or trade practice necessary for the conduct of the Business as
currently conducted (the "Permits), except such as have not had and will not
have individually or in the aggregate a Material Adverse Effect. All of the
Permits are now and after giving effect to the Closing will be in full force
and effect, except such as will not have a Material Adverse Effect. Schedule
4.11 includes a list of all Permits and applications therefor that are
material to the Business. Neither the Company nor any Subsidiary nor Seller
has received any notice that any Governmental Authority or other licensing
authority or association will revoke, cancel, rescind, materially modify or
refuse to renew in the ordinary course any of the Permits, which individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect.
4.12. Tax Matters. Except as set forth in Schedule 4.12 or the Interim
Balance Sheet:
(i) To Seller's knowledge, (a) all material Tax Returns required
to be filed on or before the date hereof with respect to any Pre-Closing
Tax Period (as defined in Section 6.7(c)) by, or with respect to the
Company or any Subsidiary have been duly and timely filed (taking into
account extensions); (b) no position is reflected in a Tax Return
referred to in (a) for which the applicable limitation period has not
expired (and for which a closing agreement has not been entered into)
which (x) was not, at the time such Tax Return was filed, supported by
substantial authority (as determined for purposes of Section 6662 of the
Code, or any predecessor provision, and any comparable provisions of
applicable federal, state, or local tax statutes, rules or regulations)
and (y) would have a Material Adverse Effect if decided against the
taxpayer; (c) the Company and its Subsidiaries have timely paid,
withheld or made provision for all Taxes shown as due and payable on any
Tax Return and have timely paid, withheld, or made provision for all
material Taxes, whether or not shown on any Tax Return; (d) no Liens
for Taxes upon the assets of the Company or any Subsidiary exist; (e)
neither the Company nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax
Return; and (f) no claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(ii) The Company and each of its Subsidiaries other than New York
Department Stores de Puerto Rico, Inc. is a member of the affiliated
group, within the meaning of Section 1504(a) of the Code, of which
Seller is the common parent (the "Affiliated Group), and such Affiliated
Group files a consolidated federal Income Tax Return. Since the
acquisition of Marshalls, Inc. by Seller and Brandon's Plantation, Inc.,
Brandon's Kendall, Inc., Brandon's Town Center, Inc., Brandon's N.
Miami, Inc. and Brandon's S. Miami, Inc., neither the Company nor any of
its Subsidiaries has at any time been a member of an affiliated group
filing a consolidated federal Income Tax Return other than a group, the
common parent of which is Seller. To Seller's knowledge, all Income
Taxes shown on any Tax Return of the Affiliated Group have been paid for
each taxable period during which any of the Company and its Subsidiaries
was a member of the Affiliated Group.
(iii) To Seller's knowledge, each of the Company and its
Subsidiaries has withheld and paid all material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, foreign person,
or other third party.
(iv) There is no dispute or claim concerning any material Tax
liability of any of the Company and its Subsidiaries either (A) claimed
or raised by any taxing authority in writing or (B) as to which Seller
has knowledge based upon personal contact with any agent of such taxing
authority. Schedule 4.12 lists all federal, state, local, and foreign
Income Tax Returns filed with respect to the Company or any of its
Subsidiaries for taxable periods ended on or after December 31, 1992,
indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Seller has
delivered to Buyer correct and complete copies of all portions of
federal Income Tax Returns and examination reports which pertain to the
Company and its Subsidiaries, and statements of deficiencies assessed
against or agreed to by any of the Company and its Subsidiaries since
December 30, 1992.
(v) To Seller's knowledge, neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(vi) Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G.
4.13. [Intentionally Omitted.]
4.14. Employee Benefit Plans.
(a) Schedule 4.14 lists all Company Plans and Benefit
Arrangements. The following have previously been delivered to Buyer:
(i) true and complete copies of all Company Plans and Benefit
Arrangements that have been reduced to writing, together with all
amendments; (ii) written summaries of the material terms of all other
Company Plans and Benefit Arrangements and related amendments; (iii) in
the case of each Company Plan and Benefit Arrangement, copies of each of
the following to the extent applicable: summary plan descriptions and
similar employee summaries (including employee handbooks), trust
agreements, and insurance contracts; (iv) in the case of each Company
Plan or Benefit Arrangement for which a Form 5500 Series annual report
is required to be filed, a copy of the most recent such annual report,
together with all schedules, attachments, and related opinions; (v) in
the case of each Company Plan or Benefit Arrangements intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
Internal Revenue Service ("IRS) determination letter (plus, if a request
for determination is currently pending, a copy of the request); and (vi)
in the case of each Company Plan or Benefit Arrangement, copies of any
correspondence from or to the IRS, the Department of Labor ("DOL), or
other U.S. government department or agency relating to an audit or
penalty assessment with respect to such Plan or Arrangement or relating
to requested relief from any liability or penalty (including, but not
limited to, any correspondence relating to the IRS's Voluntary
Compliance Resolution Program or Closing Agreement Program, or the DOL's
amnesty programs for late filers and non-filers). Except as indicated
on Schedule 4.14, all Company Plans and Benefit Arrangements are
maintained by Melville Corporation.
(b) Section 401(a)(11) of the Code does not apply to any
participant in Seller's 401(k) Profit Sharing Plan (as defined in
Section 9.1(f)).
(c) There have been no prohibited transactions (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) that have
resulted or could result in the Company, any of its Subsidiaries, or any
of their employees being held liable for a civil penalty under Section
502 or ERISA or an excise tax under Section 4975 of the Code.
(d) Each of the Company Plans and the Benefit Arrangements has
been maintained and administered in all material respects in accordance
with its terms and applicable law (including the provisions of the
Code). No event has occurred that has resulted or could result in the
Company or any of its Subsidiaries being liable with respect to a Tax
under Chapter 43 of the Code.
(e) Neither the Company nor any of its Subsidiaries has any
obligation or liability with respect to any plan (including, without
limitation, any multiemployer plan) subject to Part 3 of Title I of
ERISA, Title IV of ERISA, or Section 412 of the Code.
(f) All required contributions to, premium payments or
assessments on account or, and benefit payments under each Company Plan
and each Benefit Arrangement that are due or accruable through the
Closing Date, for which the Company or any Subsidiary is or may be
liable, have been paid or properly accrued.
(g) Except as set forth in Schedule 4.14, there are not pending
or, to the knowledge of Seller, threatened actions or other
controversies relating to any Company Plan or Benefit Arrangement, other
than claims for benefits in the normal course.
(h) Other than as required under Section 601 et seq. of ERISA or
as specifically set forth in Schedule 4.14, no Company Plan or Benefit
Arrangement provides benefits or coverage in the nature of severance or
health or life insurance following retirement or other termination of
employment. No event has occurred that has resulted or could result in
a loss of any deduction to the Company or any of its Subsidiaries under
Section 162(n) of the Code. Except for individual employment
agreements, neither the Company nor any Subsidiary is obligated under
any Company Plan or Benefit Arrangement that cannot be amended,
terminated or modified prospectively without the consent of any Employee
or beneficiary.
4.15. Environmental Matters, etc.
(a) Except as set forth in Schedule 4.15, or except as has not
had and will not have a Material Adverse Effect, the Company and each
Subsidiary is and has at all times been in compliance in all respects
with all Environmental Laws and any other applicable Legal Requirements
relating to environmental, natural resource, health or safety matters.
Except as set forth in Schedule 4.15, the Company has not received
notice of any Action pending against the Company or any Subsidiary nor,
to the knowledge of Seller, is there any basis for any Action or is any
Action threatened, in each case in respect of (i) noncompliance by the
Company or any Subsidiary with any Environmental Laws or any such Legal
Requirement, or (ii) the presence or release or threatened release into
the environment of any Hazardous Substance whether or not generated by
the Company or any Subsidiary or located at or about or emanating from
or to a site included in the Real Property currently or heretofore
owned, leased or otherwise used by the Company or any Subsidiary or any
predecessor entity.
(b) Except as set forth in Schedule 4.15 and for any other
matters that would not result in any material liability to the Company
and its Subsidiaries taken as a whole, no event has occurred or
condition exists or operating practice is being employed that could give
rise to any Liability or Losses on the part of the Company or any
Subsidiary (or, after the Closing, Buyer) either at the present or at
any future time (including, without limitation, any obligation to
conduct any remedial or monitoring work) under any Environmental Laws or
otherwise resulting from or relating to the handling, storage, use,
transportation or disposal of any Hazardous Substance by or on behalf of
the Company or any Subsidiary or any of their respective predecessors or
otherwise.
(c) To the knowledge of the Seller, the Seller has previously
provided to Buyer true and correct copies of all written reports or
other documents arising out of environmental inspections,
investigations, studies, audits, tests, reviews or other analyses
conducted with respect to any Real Property listed on Schedule 4.5.1. or
any Real Property leased by the Company or any of its Subsidiaries as
warehouse space.
4.16. Employees and Labor Relations. None of the employees of the
Company or any Subsidiary is represented by a labor union, and no petition has
been filed or proceedings instituted by any employee or group of employees
with any labor relations board seeking recognition of a bargaining
representative. To the knowledge of Seller, there is no organizational effort
currently being made or threatened by or on behalf of any labor union to
organize any employees of the Company or any Subsidiary. Except as set forth
on Schedule 4.16, there are no controversies or disputes pending between the
Company or any Subsidiary on the one hand and any of their respective
employees on the other hand, except for controversies and disputes with
individual employees arising in the Ordinary Course of Business that have not
had and will not have a Material Adverse Effect. Other than G. Politzer and
certain internal auditors and tax, bad check processing or workmen's
compensation related personnel, no individual who is an employee of Seller or
any of its Affiliates devotes his or her business time primarily to the
affairs of the Company or any Subsidiary.
4.17. Litigation, etc. There is no Action against the Company or any
Subsidiary, pending or, to the knowledge of Seller, threatened, which could
reasonably be expected to have a Material Adverse Effect, except for such of
the foregoing as are described in Schedule 4.17. Except as set forth on
Schedule 4.17, there is no Action pending or, to the knowledge of Seller,
threatened with respect to which Seller or any of its Affiliates, on the one
hand, and the Company or any of its Subsidiaries, on the other hand, are or
would be parties. There is no Action pending or, to the knowledge of Seller,
threatened, that seeks rescission of, seeks to enjoin the consummation of, or
otherwise relates to, this Agreement or any of the transactions contemplated
hereby and that could reasonably be expected to have a Material Adverse Effect
or a material adverse effect on Seller's ability to consummate the
transactions contemplated hereby. No Governmental Order specifically directed
at the Company or any of its Subsidiaries has been issued which has had or
could reasonably be expected to have a Material Adverse Effect.
4.18. [Intentionally Omitted]
4.19. Brokers, etc. Except for Morgan Stanley & Co. Incorporated
("Morgan Stanley) and Financo, Inc., no broker, finder, investment bank or
similar agent is entitled to any brokerage, finder's or other fee,
Compensation or reimbursement of expenses in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by
or on behalf of (or the conduct of) Seller, the Company, any Subsidiary or any
of their respective Affiliates. Seller shall be solely responsible for the
payment of the fees and expenses of Morgan Stanley and Financo, Inc.
5. Representations and Warranties of Buyer. In order to induce Seller to
enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Buyer represents and warrants to Seller as follows:
5.1. Corporate Matters. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate and otherwise, to enter into this
Agreement, to carry out and perform its obligations hereunder and to
consummate the transactions contemplated hereby.
5.2. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Buyer, and is Enforceable against Buyer.
5.3. Non-Contravention, etc. No approval, consent, waiver,
authorization or other order of, and no filing, registration, qualification or
recording with, any Governmental Authority or any other Person is required to
be obtained or made by or on behalf of Buyer or any of its Subsidiaries in
connection with the execution, delivery or performance of this Agreement and
the consummation of the transactions contemplated hereby, except for (i)
satisfaction of the requirements of the HSR Act and (ii) any item required to
be obtained from or made with any Person other than a Governmental Authority
the failure to obtain or make which, individually or in the aggregate, have
and could reasonably be expected to have neither a Material Adverse Effect on
Buyer nor a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the execution, delivery
and performance of the Closing Agreements and performance by Buyer of its
obligations in respect of the Buyer Stock in accordance with its terms) does
or will constitute, result in or give rise to (i) a breach or violation or
default under any Legal Requirement applicable to Buyer or any of its
Subsidiaries (assuming the accuracy of the representations and warranties of
Seller in Section 4.4 of the Preferred Stock Subscription Agreement), (ii) a
breach of or a default under any Charter or By-Laws provision of Buyer or any
of its Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation of Buyer or any of its
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of any
asset of Buyer or any of its Subsidiaries, (v) a breach of or a default under
any Contractual Obligation of Buyer or any of its Subsidiaries, or (vi)
termination, right of termination, modification of terms or change in benefits
or burdens under any Contractual Obligation of Buyer or any of its
Subsidiaries, other than in the case of clauses (i), (iii), (iv), (v) and (vi)
such as, individually or in the aggregate, have and could reasonably be
expected to have neither a Material Adverse Effect on Buyer nor a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby (including, without limitation, Buyer's ability to
consummate its obligations under the other Closing Agreements and its
obligations in respect of the Buyer Stock in accordance with its terms).
5.4. Investment Intent.
(a) Buyer is acquiring the Shares hereunder for its own account,
for investment, and not with a view to, or for sale in connection with,
any distribution thereof within the meaning of the Securities Act.
(b) Buyer understands and agrees that the Shares will not be
registered or qualified under the Securities Act of 1933, as amended
(the "Securities Act), or state "blue-sky or other securities laws and
therefore cannot be resold unless they are registered under the
Securities Act and applicable state laws or unless an exemption from
such registration requirement is available.
(c) Buyer is able to bear the economic risk of holding the Shares
for an indefinite period of time and is experienced and has such
knowledge and experience in financial and business matters that it is
capable of evaluating the risks and merits of acquiring the Shares.
Buyer acknowledges that the Shares will bear a legend to the effect that
transfers are restricted unless (i) the transfer is exempt from the
registration requirements under the Securities Act and the Company
receives an opinion of counsel reasonably satisfactory to the Company to
that effect or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
(d) Buyer understands that the Company is under no obligation to
effect a registration of the Shares under the Securities Act.
(e) Buyer is an Accredited Investor within the definition set
forth in Rule 501(a) of the Securities Act.
(f) Nothing in this Section 5.4 shall limit or qualify the
representations, warranties, covenants or agreements made by Seller
herein or in any Closing Agreement or in any certificate or document
delivered pursuant hereto or thereto. Seller acknowledges and agrees
that the purpose of this Section 5.4 is solely to ensure that the sale
of the Shares pursuant hereto complies with the transfer restrictions
under the Securities Act and the transfer restrictions under other
applicable securities laws.
5.5. Litigation. There is no Action against Buyer or any of its
Subsidiaries, pending or, to the knowledge of Buyer, threatened, which could
reasonably be expected to have a Material Adverse Effect on Buyer. There is
no Action pending or, to the knowledge of Buyer, threatened, that seeks
rescission of, seeks to enjoin the consummation of, or otherwise relates to,
this Agreement or any of the transactions contemplated hereby and that could
reasonably be expected to have a Material Adverse Effect on Buyer or a material
adverse effect on Buyer's ability to consummate the transactions contemplated
hereby. No Governmental Order specifically directed at Buyer or any of its
Subsidiaries has been issued which has had or could reasonably be expected to
have a Material Adverse Effect on Buyer.
5.6. Financing. Buyer has received and delivered to Seller a letter
from The First National Bank of Chicago, Bank of America Illinois, The Bank of
New York and Pearl Street L.P. ("Lead Lenders) dated as of the date hereof
(the "Commitment Letter), with respect to debt financing in an amount
sufficient to enable Buyer to pay the Cash Purchase Price. Buyer represents
and warrants that the terms of such letter have not been altered or amended by
Buyer or Lead Lenders in a manner that would have a material adverse effect
upon Buyer's ability to perform its obligations under this Agreement and that
such letter remains in full force and effect (unless superseded by definitive
credit documentation that would not have a material adverse effect upon
Buyer's ability to perform its obligations under this Agreement).
5.7. Brokers, etc. Except for Goldman Sachs & Co. ("Goldman) and
Salomon Brothers Inc ("Salomon), no broker, finder, investment bank or similar
agent is entitled to any brokerage, finder's or other fee, Compensation or
reimbursement of expenses in connection with the transactions contemplated by
this Agreement based upon agreements or arrangements made by or on behalf of
(or the conduct of) Buyer or its Affiliates. Buyer shall be solely
responsible for the payment of the fees and expenses of Goldman and Salomon.
6. Certain Agreements of the Parties.
6.1. No Solicitation of Other Offers. Seller will not, and will cause
all of its Affiliates and all of its and their respective employees,
representatives and agents not to, directly or indirectly, solicit or initiate
or enter into discussions or transactions or Contractual Obligations with or
encourage or provide any information to any Person (other than Buyer and its
designees) concerning any sale of stock of, or any merger or share exchange or
sale or other disposition of securities or substantial assets or any
recapitalization or any similar transaction involving, the Company or any of
its Subsidiaries. Seller will notify Buyer immediately upon becoming aware
that any Person has made any proposal, offer, inquiry, or contact with respect
to any such transaction, which notice shall include the identity of all
relevant parties and the content of such communication.
6.2. Access to Premises and Information. Prior to the Closing, Seller
will cause the Company and its Subsidiaries to permit Buyer and its
prospective lenders, and their respective representatives, to have full access
to their premises and documents, books and records and to make copies during
normal business hours of such financial and operating data and other
information with respect to the Company as Buyer, such lenders, or any of their
representatives shall reasonably request; provided, however, that Seller shall
not be required to provide access to, or copies of, the portions of any
documents, books and records or other data that contain information relating
solely to entities other than the Company and its Subsidiaries. In addition,
Seller shall cause the Company's and its Subsidiaries' management to be
available to Buyer and its prospective lenders at such times, and from time to
time, as Buyer and its prospective lenders may reasonably request in
connection with the transactions contemplated hereby and their review of the
Business. Seller will cause to be delivered such additional information and
copies of documents, books and records relating to the Company, its
Subsidiaries or the Business as may be reasonably requested by Buyer, such
lenders, or any of their representatives, including, without limitation, all
quarterly and monthly financial statements that become available prior to the
Closing (which financial statements shall be included within the meaning of
the term Financial Statements for all purposes of this Agreement from and
after their respective dates).
6.3. Confidentiality Covenant of Buyer. The provisions of that certain
letter agreement between Buyer and Seller dated June 26, 1995 (the
"Confidentiality Agreement) are hereby confirmed and remain in effect;
provided, however, that the Confidentiality Agreement is hereby amended so
that (i) it shall terminate not later than the consummation of the Closing,
(ii) it shall not prohibit any retention of records or disclosure made in
connection with the enforcement of any right or remedy relating to this
Agreement or the transactions contemplated hereby and (iii) in the event the
Closing does not occur and this Agreement is terminated, the term of such
Confidentiality Agreement shall be extended until the fifth anniversary of the
date hereof.
6.4. Operation of Business in the Ordinary Course. On and prior to the
Closing Date, except as otherwise required by this Agreement (including
without limitation Section 6.14), Seller will cause the Company to conduct the
Business only in the Ordinary Course of Business and use its reasonable best
efforts to maintain the value of the Business as a going concern and the
relationships of the Company with customers, suppliers, vendors, employees,
agents and Governmental Authorities. Seller agrees to cause the Company and
its Subsidiaries to make capital expenditures in the Ordinary Course of
Business up to the Closing Date and prior to the Closing Date to consult with
Buyer before making significant decisions regarding merchandise markdowns,
inventory purchases and promotional activity. Without limiting the generality
of the foregoing, on and prior to the Closing Date Seller will cause the
Company not to, without the prior written consent of Buyer:
(a) Enter into any transactions with Seller or any of its
Affiliates except in the Ordinary Course of Business or with respect to
Affiliate Debt or as set forth on Schedules 4.10 or 7.2(i);
(b) Pay or accrue any Compensation other than in the Ordinary
Course of Business or increase any Compensation of any officer or
employee other than such increases in Compensation for individual
employees as may be made in the Ordinary Course of Business;
(c) Make any Distribution other than (i) distributions of cash to
Seller in the Ordinary Course of Business pursuant to the Cash
Management Program, Seller's Employee Stock Ownership Plan as currently
in effect or Seller's VEBA as currently in effect; (ii) the
distributions set forth on Schedule 4.3(b)(iv)(B); (iii) distributions of
cash or of any receivable constituting Affiliate Debt in connection with
the repayment or cancellation of Affiliate Debt; and (iv) distributions
or contributions in connection with an increase in or the repayment or
cancellation (in whole or in part) of Debt or intercompany advances
between the Company and its wholly owned Subsidiaries or between wholly
owned Subsidiaries;
(d) Except as set forth on Schedule 6.4(d), incur any Debt except
capitalized leases entered into in the Ordinary Course of Business and
in amounts consistent with the Budget or Debt or intercompany advances
between the Company and any wholly owned Subsidiary or between wholly
owned Subsidiaries, or incur any Lien except in the Ordinary Course of
Business;
(e) Amend the Charter or Bylaws of the Company or any Subsidiary;
(f) Allow any material Permit or License to lapse or terminate or
fail to renew any Permit or License in accordance with prudent business
practice;
(g) Fail to operate the Business and maintain the Company's and
its Subsidiaries' books, accounts and records in the Ordinary Course of
Business and maintain in good repair the Company's and its Subsidiaries'
business premises, fixtures, machinery, furniture and equipment in a
manner consistent with past practice;
(h) Engage any new employee of the Company or its Subsidiaries
for a salary in excess of $100,000 per annum;
(i) Enter into, amend in any material respect, extend, terminate
or permit any renewal notice period or option to lapse with respect to
any Lease or any other Contractual Obligation that contains either
consideration to be given or performed by the Company or any of its
Subsidiaries of a value exceeding $250,000 or a term exceeding one year
(except for purchases of inventory in the Ordinary Course of Business
and the making of capital expenditures in an aggregate amount consistent
with the Budget and except to the extent otherwise required by this
Agreement or to the extent the obligation is between the Company and a
wholly owned Subsidiary or between wholly owned Subsidiaries);
(j) Purchase or otherwise acquire any Real Property;
(k) Take any of the actions specified in any of subsections (a)
through (d) of Section 4.3; or
(l) Consent or agree to do any of the foregoing.
6.5. Certain Notices. Prior to the Closing, Seller will promptly upon
becoming aware thereof give Buyer written notice of any material development
affecting the Business, or the financial condition of the Company and any
material breach of or inaccuracy in any representation or warranty of Seller
contained in this Agreement; provided, however, that no such disclosure shall
be deemed to amend any Schedule hereto, or prevent or cure any breach of or
inaccuracy in, or disclose any exception to, any of the representations and
warranties set forth herein.
6.6. Preparation for Closing. Each party will use its reasonable best
efforts to bring about the timely fulfillment of each of the conditions
precedent to the obligations of the other parties hereto set forth in this
Agreement. Without limiting the generality of the foregoing, the parties
shall take the actions set forth below in this Section 6.6.
6.6.1. HSR Filing. Promptly upon execution and delivery of this
Agreement, each of Seller and Buyer will prepare and file, or cause to
be prepared and filed, with the appropriate Governmental Authorities, a
notification with respect to the transactions contemplated by this
Agreement pursuant to the HSR Act. Each of Seller and Buyer will
promptly provide all additional information requested, and take all
other actions necessary or appropriate, to comply with notification
requirements under the HSR Act and to cause the expiration of all
waiting periods under the HSR Act.
6.6.2. Closing Agreements. Seller will enter into each of the
Closing Agreements to which it is intended to be a party, and Seller
will cause each of its Affiliates, the Company and any Subsidiary which
is intended to be a party to any Closing Agreement to enter into each
Closing Agreement to which such Person is intended to be a party. Buyer
will enter into each of the Closing Agreements to which it is intended
to be a party, and Buyer will cause each of its Affiliates which is
intended to be party to any Closing Agreement to enter into each Closing
Agreement to which such Affiliate is intended to be a party.
6.7. Tax Matters.
(a) Section 338(h)(10) Election and Corporate Structure. Buyer
and Seller agree to join in making a timely, effective and irrevocable
election under Section 338(h)(10) of the Code (and any corresponding
elections under state, local, or foreign tax law, other than Puerto
Rican law) (collectively, the "Section 338(h)(10) Election) with respect
to the Company and each of its Subsidiaries, and to file such election in
accordance with applicable regulations. Seller and Buyer agree to
cooperate (and cause their respective subsidiaries to cooperate) in all
respects for the purpose of effectuating a timely and effective Section
338(h)(10) Election, including without limitation, the execution and
filing of any forms or returns.
(b) Buyer's Covenants. Buyer covenants that it will not cause or
permit the Company, any Subsidiary or any Affiliate of Buyer to take any
action on the Closing Date other than in the ordinary course of
business, including but not limited to the distribution of any dividend
or the effectuation of any redemption that could give rise to any tax
liability to the Seller Affiliated Group or the reduction of any loss of
the Seller or the Seller Affiliated Group. Except for the transactions
contemplated by this Agreement, Buyer agrees that Seller is to have no
liability for any Tax resulting from any action of the Company, Buyer or
any Affiliate of Buyer on the Closing Date, which action is not within
the ordinary course of business of such persons, and agrees to indemnify
and hold harmless Seller and its Affiliates against any such tax. Seller
agrees to give prompt notice to Buyer of the assertion of any claim, or
the commencement of any action or proceeding, in respect of which
indemnity may be sought under this Section 6.7(b). Buyer may
participate in and assume the defense of any such suit, action or
proceeding at its own expense. If Buyer assumes such defense, Seller
shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the
counsel employed by Buyer. Whether or not Seller chooses to defend or
prosecute any claim, the parties hereto shall cooperate in the defense
or prosecution thereof.
(c) Tax Indemnification.
(i) Seller shall be liable for and shall pay (and shall
indemnify and hold Buyer harmless from) (x) all Income Taxes with
respect to the Company and its Subsidiaries for any Pre-Closing
Tax Period (including without limitation any Income Taxes
attributable to the Section 338(h)(10) Elections), (y) all Taxes
other than Income Taxes and Transfer Taxes ("Miscellaneous Taxes)
with respect to any Pre-Closing Tax Period, but only to the extent
the amount payable exceeds the amount reflected on the Company Net
Assets Statement for Miscellaneous Taxes and (z) any and all
federal Income Taxes of the Affiliated Group of which Seller is a
member imposed on the Company or any of its Subsidiaries pursuant
to Section 1.1502-6 of the Treasury Regulations, in each case
incurred or suffered by Buyer, any of its Affiliates or, effective
upon the Closing, the Company or any Subsidiary (the sum of (x),
(y) and (z) being referred to as a "Tax Loss); provided, however,
that Seller shall have no liability for the payment of any Tax
Loss attributable to or resulting from any action described in
Section 6.7(b) hereof. For purposes of this Section 6.7, (A) the
term "Pre-Closing Tax Period shall mean all taxable periods ending
on or before the close of the Closing Date and the portion ending
at the close of the Closing Date of any taxable period that
includes (but does not end on) the Closing Date, and (B) the term
"Post-Closing Tax Period shall mean all taxable periods that begin
on or after the day following the Closing Date and the portion
ending after the Closing Date of any taxable period that includes
(but does not end on) the Closing Date. In the case of a taxable
period that includes (but does not end on) the Closing Date, the
Tax attributable to the Pre-Closing Tax Period shall be the
responsibility of Seller (and not the Company and its
Subsidiaries) and the Taxes attributable to the Post-Closing Tax
Period shall be the responsibility of Buyer and the Company and
its Subsidiaries.
(ii) For purposes of this Section 6.7(c), in the case of
any Taxes that are imposed on a periodic basis and are payable for
a Tax period that includes (but does not end on) the Closing Date,
the portion of such Tax related to the portion of such Tax period
ending on the Closing Date shall (x) in the case of any Taxes
other than Taxes based upon or related to income, sales, gross
receipts, wages, capital expenditures or expenses, be deemed to be
the amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is
the number of days in the entire Tax period, and (y) in the case
of any Tax based upon or related to income, sales, gross receipts,
wages, capital expenditures or expenses, be deemed equal to the
amount which would be payable if the relevant Tax period ended on
the Closing Date. In the case of Income Taxes described in the
preceding sentence, if either Buyer or Seller is adversely
affected (as a consequence of an increase in liability or a
reduction of refund or other tax attribute) that would have been
available to it if the relevant tax period had ended on the
Closing Date, and the other party is benefitted from such
circumstance, the party benefitted shall reimburse the party
adversely affected to the extent of the benefit realized.
(iii) If as a result of an adjustment Seller makes a
payment to any taxing authority in respect of a Miscellaneous Tax
of the Company with respect to any Pre-Closing Tax Period, then
Buyer shall promptly pay to Seller an amount equal to such payment
made by Seller, provided, however, that the aggregate of such
payments by Buyer shall not exceed the amount reflected on the
Company Net Assets Statement for Miscellaneous Taxes.
(iv) Any payment by Seller pursuant to this Section 6.7(c)
shall be made (x) if reflected on a Tax Return, contemporaneously
with the filing of such Return and (y) in all other cases, not
later than 30 days after receipt by Seller of written notice from
Buyer stating that any Tax Loss has been paid by Buyer, any of its
Affiliates or, effective upon the Closing, the Company or any
Subsidiary and the amount thereof and of the indemnity payment
requested.
(v) If any claim or demand for Taxes in respect of which
indemnity may be sought pursuant to this Section 6.7(c) is
asserted in writing against Buyer, any of its Affiliates or,
effective upon the Closing, the Company or any Subsidiary, Buyer
shall promptly notify Seller of such claim or demand within
sufficient time that would allow Seller to timely respond to such
claim or demand, and shall give Seller such information with
respect thereto as Seller may reasonably request. Seller may
discharge, at any time, its indemnification obligation under this
Section 6.7(c) by paying to Buyer the amount of the applicable Tax
Loss, calculated on the date of such payment. Seller may, at its
own expense, participate in and, upon notice to Buyer, assume the
defense of any such claim, suit, action, litigation or proceeding
(including any Tax audit). If Seller assumes such defense and if
the relevant claim, suit, action, litigation or proceeding relates
to a taxable period that includes (but does not end on) the
Closing Date, Buyer shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by Seller.
Whether or not Seller chooses to defend or prosecute any claim,
all of the parties hereto shall cooperate in the defense or
prosecution thereof. Seller shall not be liable under this
Section 6.7(c), for (x) any Tax claimed or demanded by any taxing
authority, the payment of which was made without Seller's prior
written consent unless Seller refused to participate in the
proceedings and assume the defense or (y) any settlements effected
without the consent of Seller, or resulting from any claim, suit,
action, litigation or proceeding in which Seller was not permitted
an opportunity to participate.
(vi) Except with respect to Taxes described in clause (z) of
Section 6.7(c)(i) or any tax detriment attributable to any
agreement entered into prior to the Closing Date obligating the
Company or any Subsidiary to make payments that are not deductible
under Code Section 280G, for which Seller shall indemnify Buyer
and which shall be treated as a Tax Loss, Buyer shall be liable
for any Taxes pertaining to any Post-Closing Tax Period, and any
transactions described in Section 6.7(b).
(vii) No action of Buyer, the Company or any Subsidiary
with respect to the ownership or corporate existence of the
Company or any Subsidiary undertaken subsequent to the Closing
Date shall in any way expand or limit the amount or scope of any
obligation of either Buyer or Seller under this Section 6.7(c).
(d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date,
the Company and its Subsidiaries shall not be bound thereby or have any
liability thereunder.
(e) Transfer Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement
("Transfer Taxes) shall be borne by the party on whom such Tax is
imposed under the relevant law, except that the aggregate liability for
any New York State Real Property Gains Tax and New York City Real Estate
Transfer Tax shall be shared equally by Buyer and Seller.
(f) Return Filings, Refunds and Credits.
(i) Seller shall include the income of the Company and its
Subsidiaries in Seller's federal consolidated Income Tax Returns,
and shall file all state, foreign and local Income Tax Returns of
the Company and its Subsidiaries, for all Tax periods ending on or
before the Closing Date and shall be responsible for remitting all
Taxes reflected on such Income Tax Returns. Seller shall also
prepare or cause to be prepared and file or cause to be filed all
Miscellaneous Tax Returns due on or before the Closing Date
(taking into account extensions) and shall be responsible for
remitting all Miscellaneous Taxes reflected on such Miscellaneous
Tax Returns. Copies of all such Tax Returns (or the relevant
portion thereof relating to the Company and its Subsidiaries)
shall be furnished to Buyer.
(ii) Buyer shall prepare or cause to be prepared and file
or cause to be filed on a timely basis (with the assistance of
Seller to the extent provided in any separate agreement for
continuing services) all Income Tax Returns with respect to the
Company and its Subsidiaries for taxable periods including (but
not ending on) the Closing Date and all Miscellaneous Tax Returns
due after the Closing Date (taking into account extensions) and
shall be responsible for remitting all Taxes reflected on such Tax
Returns. Any such Tax Return shall be prepared in a manner
consistent with past practice and without a change of any election
or any accounting method and shall be submitted by Buyer to Seller
in sufficient time to permit a reasonable review prior to the due
date (including extensions) of such Tax Return. Seller shall have
the right to review all work papers and procedures used to prepare
any such Tax Return. If Seller, within 10 business days after
delivery of any such Tax Return, notifies Buyer in writing that it
objects to any items in such Tax Return, the parties shall proceed
in good faith to resolve the disputed items and, if they are
unable to do so within 10 business days, the disputed items shall
be resolved (within a reasonable time, taking into account the
deadline for filing such Tax Return) by the Accountants (as
defined in Section 6.7(g), provided, however, that if the
Accountants shall determine that two or more alternative positions
with respect to the matter in question are equally supported by
applicable law, the party that is liable for such item under
Section 6.7(c) shall determine which position shall be taken on
the relevant Tax Return. Upon resolution of all disputed items,
the relevant Tax Return shall be adjusted to reflect such
resolution and shall be binding upon the parties without further
adjustment. The costs, fees and expense of such accounting firm
shall be borne equally by Buyer and Seller.
(iii) Seller and Buyer shall reasonably cooperate, and
shall cause their respective Affiliates, agents, auditors,
representatives, officers and employees reasonably to cooperate,
in preparing and filing all Tax Returns (including amended returns
and claims for refund), including maintaining and making available
to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable
periods relating to Taxes. Buyer and Seller agree to retain or
cause to be retained all books and records pertinent to the
Company and the Subsidiaries until the applicable period for
assessment under applicable law (giving effect to any and all
extensions or waivers) has expired, and to abide by or cause the
abidance with all record retention agreements entered into with
any taxing authority. The Company and its Subsidiaries agree to
give Seller reasonable notice prior to transferring, discarding or
destroying any such books relating to Tax matters and, if Seller
so requests, the Company or any Subsidiary shall allow Seller to
take possession of such books and records. Buyer and Seller shall
cooperate with each other in the conduct of any audit or other
proceedings involving the Company or any Subsidiary for any Tax
purposes and each shall execute and deliver such powers of
attorney and other documents as are necessary to carry out the
intent of this subsection. For any Income Tax Return of the
Company or its Subsidiaries that Seller is responsible for filing
and that requires the signature of an officer of the Company or
one of its Subsidiaries, Seller shall present a completed Income
Tax Return for the signature of an appropriate officer designated
by the Company or the applicable Subsidiary. Seller shall give
such officer any support for the Tax Return reasonably requested
by such officer. The officer shall sign the return and deliver it
to Seller as soon as reasonably practicable.
(iv) Except in the case of refunds attributable to
carrybacks from Post-Closing Tax Periods, any refunds with respect
to Income Tax Returns paid to Buyer for any period ending on or
before the Closing Date which were not reflected on the Company
Net Assets Statement shall be paid to Seller by Buyer within three
(3) business days after receipt in cash or as a credit to Buyer's
Tax liability.
(g) Allocation of Purchase Price. In connection with the Section
338(h)(10) Election, Buyer and Seller shall cooperate as provided herein
in determining the modified ADSP (as such term is defined in Treasury
Regulations Section 1.338(h)(10)-1) of the assets of the Company and the
allocation of the modified ADSP for purposes of Section 338(a)(1) of the
Code in accordance with all applicable Treasury Regulations promulgated
under Section 338 of the Code. Buyer initially shall determine such
modified ADSP and allocation of the modified ADSP and shall notify
Seller in writing of the price and allocation so determined ("Buyer's
Deemed Sales Price Notice) within 120 days after the Closing Date.
Seller shall be deemed to have accepted such determination unless,
within 30 days after receipt of Buyer's Deemed Sales Price Notice,
Seller notifies Buyer in writing of (i) the amount that Seller proposes
as the deemed sales price (if it differs from that proposed by Buyer),
(ii) the allocation of the deemed sales prices proposed by Seller and
(iii) the reasons for Seller's allocations. If Seller provides such
notice to Buyer, the parties shall proceed in good faith to determine
mutually the matters in dispute and, if they are unable to do so within
30 days, the matter shall be referred to a nationally recognized
independent accounting firm chosen and mutually acceptable to both Buyer
and Seller (the "Accountants) who shall within 30 days decide the
matter. The decision of the Accountants shall be final and bind both
parties. The Accountants' fees shall be shared equally by Buyer and
Seller. Neither Buyer nor Seller shall take, nor shall they permit any
affiliated corporation (including, without limitation, the Company and
its Subsidiaries) to take, any position for Tax purposes that is
inconsistent with the deemed sales price and allocation as finally
determined hereunder; provided, however, that the deemed purchase price
of the assets shall differ from the deemed sales price to the extent
necessary to reflect the inclusion in the total deemed purchase price of
items (for example, Buyer's capitalized acquisition costs in addition to
the Purchase Price) not included in the total deemed sales price.
6.8. Expenses of Transaction.
6.8.1. Transaction Costs of Seller. Except to the extent
specifically otherwise provided by Section 3.4(d), Seller shall pay all
financial advisory, legal, accounting and other fees and expenses
incurred by Seller, the Company or any of their Affiliates in connection
with the transactions contemplated by this Agreement (including, without
limitation, any sale bonus or retention or similar forms of Compensation
payable by the Company or any of its Subsidiaries to any directors,
officers or employees of any Person in connection with or as a result of
the sale of the Shares or otherwise in preparation for or connection
with the transactions contemplated hereby); provided that with respect
to the Company and its Subsidiaries the Seller shall pay only fees and
expenses incurred prior to Closing.
6.8.2. Transaction Costs of Buyer and Affiliates. Except to the
extent specifically otherwise provided by Section 3.4(d), Buyer shall
bear all financial advisory, legal, accounting and other fees and
expenses incurred by Buyer in connection with the transactions
contemplated by this Agreement.
6.9. Confidentiality Covenants. Seller acknowledges that the success
of the Company after the Closing and its ability to generate earnings
sufficient to service the financing of the Purchase Price depends upon the
continued preservation of the confidentiality of certain information possessed
by Seller and its Affiliates, that the preservation of the confidentiality of
such information and its Affiliates is an essential premise of the bargain
between the parties, and that Buyer would be unwilling to enter into this
Agreement in the absence of this Section 6.9. Accordingly, Seller hereby
agree with Buyer as follows:
6.9.1. Confidentiality Covenant. For a period beginning on the
date hereof and ending five years after the Closing, Seller will not,
and will cause its Affiliates (and the Company and each Subsidiary of
the Company until the Closing Date) not to, directly or indirectly,
without the prior written consent of Buyer, disclose any confidential or
proprietary information involving or relating to Buyer, the Company or
their respective Subsidiaries or, insofar as such information relates
exclusively to Buyer and its Subsidiaries (other than the Company and
its Subsidiaries), use such information in any manner adverse to Buyer
and its Subsidiaries; provided, however, that the information subject to
the foregoing provisions of this sentence shall be deemed not to include
any information known generally in the industry or otherwise in the
public domain (other than as a result of disclosure in violation hereof
by Seller or any such Affiliate thereof); and provided, further, that
the provisions of this Section 6.9.1 shall not prohibit any retention of
records or disclosure required by law or made in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
6.9.2. Enforcement. Seller acknowledges and agrees that (i) it
regards the restrictions contained in this Section 6.9 as reasonable and
designed to provide Buyer with limited, legitimate and reasonable
protection against subsequent diminution of the value of the Shares
attributable to any actions of Seller or any of its Affiliates contrary
to such covenants and (ii) because the legal remedies of Buyer may be
inadequate in the event of a breach of, or other failure to perform, any
of the covenants and obligations set forth in this Section 6.9, Buyer
may, in addition to obtaining any other remedy or relief available to it
(including, without limitation, damages at law), obtain specific
enforcement of this Section 6.9 and other equitable remedies. Seller
also acknowledges and agrees that no breach by Buyer of, or other
failure by Buyer to perform, any of the covenants or obligations of
Buyer under this Agreement or otherwise shall relieve Seller of any of
its obligations under this Section 6.9.
6.10. Books and Records; Personnel. (a) Seller acknowledges and agrees
that from and after the Closing the Company will be entitled to own and
possess, subject to the next succeeding sentence, all documents, books,
records, agreements and financial data of any sort relating to the Company,
its Subsidiaries or the Business. Seller agrees to deliver and cause its
Affiliates to deliver, prior to the Closing, all such books and records in
their possession to the Company or, to the extent such books and records are
not readily separable from the books and records of Seller or any of its
Affiliates relating to their businesses other than the Business, true and
complete copies of such books and records.
(b) From and after the Closing Date:
(i) Buyer shall not, and shall cause the Company not to, dispose
of or destroy any of the books and records of the Company or its
Subsidiaries relating to periods prior to the Closing ("Books and
Records) in a manner or at a time inconsistent with Seller's ordinary
policies and procedures with respect to document retention as in effect
prior to the Closing without first offering to turn over possession
thereof to Seller by written notice to Seller at least 30 days prior to
the proposed date of such disposition or destruction.
(ii) Buyer shall, and shall cause the Company to, allow Seller
and its agents reasonable access to all Books and Records during normal
working hours at Buyer's principal place of business or at any location
where the Books and Records are stored, and Seller shall have the right,
at its own expense, to make copies of any Books and Records; provided,
however, that any such access or copying shall be had or done (A) in
such a manner so as not to interfere with the normal conduct of Buyer's
or the Company's business and (B) for a legitimate business purpose
(such as tax preparation) that does not involve direct or indirect
competition with the Business.
(iii) Buyer shall, and shall cause the Company to, make available
to Seller upon written request (A) copies of any Books and Records, (B)
Buyer's and the Company's personnel to assist Seller in locating and
obtaining any Books and Records, and (C) any of Buyer's and the
Company's personnel whose assistance or participation is reasonably
required by Seller or any of its Affiliates in anticipation of, or
preparation for, existing or future Actions, Tax returns or other
matters in which Seller or any of its Affiliates is involved.
(iv) Seller shall reimburse Buyer, the Company or its
Subsidiaries for the reasonable out-of-pocket expenses incurred by any
of them in performing the covenants contained in this Section 6.10 and
shall protect and accord confidential treatment to the information
disclosed pursuant to this Section 6.10 as provided in Section 6.9.1.
6.11. Use of Certain Names and Marks. Seller acknowledges and confirms
that: (i) from and after the Closing, neither Seller nor any of its
Affiliates has or shall have any rights in the Company Marks, and (ii) neither
Seller nor any of its Affiliates will contest the ownership or validity of any
rights of Buyer or the Company in or to any of the Company Marks, or
registrations (or applications for registration) thereof. Promptly following
the Closing, Seller will deliver to the Company or, at the option of Buyer
destroy, all letterhead, invoices and other documents bearing any of the
Company Marks and related symbols. Neither Seller nor any of its Affiliates
shall have any right, after the Closing, to use or exploit any of the Company
Marks, or any name confusingly similar thereto.
6.12. Further Assurances. Each party, upon the request from time to
time of any other party hereto after the Closing, and without further
consideration, will do each and every act and thing as may be necessary or
reasonably requested to consummate the transactions contemplated hereby in an
orderly fashion.
6.13. Reimbursement by the Parties. To the extent that Seller, on the
one hand, or the Company or Buyer, on the other hand, receives any payment
after the Closing which belongs to the other party, it shall promptly pay over
such payment to the other party.
6.14. Open and Closed Stores. Seller shall cause the Company and its
Subsidiaries to operate as of the Closing Date all of the stores listed under
the caption "Open Stores in the document entitled "Open Stores, Store
Commitments and Store Closings initialed by the parties (the "Section 6.14
Letter). Until the Closing, Seller shall cause the Company and its
Subsidiaries not to make any commitment or expenditure with respect to any
store location not open on the date hereof without the written consent of
Buyer (which consent may be withheld in Buyer's sole discretion), except for
store locations specified in the Section 6.14 Letter under the caption
"Permitted Future Store Locations. Seller shall cause the Company and its
Subsidiaries to close the stores listed under the caption "Stores to be Closed
in the Section 6.14 Letter on or prior to the applicable date specified
therein if such date occurs prior to the Closing Date (and if not so closed by
such applicable date prior to the Closing Date, such stores shall be deemed
closed prior to such date for all purposes of this Agreement, including,
without limitation, the definition of Excluded Liabilities).
6.15. Financial Statement Deliveries. As soon as reasonably practicable
following the date hereof and in any event not later than 50 days after the
date hereof (or in the case of clause (c) below, such later date as shall be
specified by Buyer), Seller shall cause to be delivered to Buyer, at the cost
and expense of Seller, each of the following:
(a) The consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1994 and the related statements of
earnings, stockholders' equity and cash flows for the fiscal year then
ended, accompanied by the notes thereto and the unqualified report
thereon of KPMG Peat Marwick and similar financial statements for each
of the two preceding fiscal years accompanied by the notes thereto and
the unqualified report thereon of KPMG Peat Marwick.
(b) The unaudited consolidated balance sheets of the Company and
its Subsidiaries as of March 31, 1995, July 1, 1995 and October 1, 1995
and related unaudited consolidated statements of earnings and
stockholders equity and cash flows for the Company and its Subsidiaries
for the three-month and year-to-date periods then ended, together with
comparable information for the same periods in 1994 and a review report
thereon of KPMG Peat Marwick (the expense of which report up to $45,000
shall be borne by Buyer).
(c) Such additional financial statements of the Company and its
Subsidiaries for such periods and dates as Buyer shall request for the
purpose of permitting Buyer to make required filings pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act).
Seller shall cause all financial statements (including the notes thereto)
referred to in this Section 6.15 to be prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
specified therein (other than as a result of the Accounting Policy Changes),
and to present fairly in all material respects, the consolidated financial
position and results of operations of the Company and its Subsidiaries for the
periods specified therein, subject in the case of financial statements for
interim periods to an absence of footnotes and to normal year-end audit
adjustments which will not in the aggregate be material. In the case of any
financial statements referred to in this Section 6.15 that reflect the
Accounting Policy Changes, Seller shall deliver to Buyer with such financial
statements, a written reconciliation showing the effects of the Accounting
Policy Changes on such financial statements. Seller shall cause KPMG Peat
Marwick to consent in writing (and to deliver such consent to Buyer) to the
inclusion of its report on the financial statements referred to in clause (a)
of this Section 6.15 in any filings made by Buyer under the Securities Act or
the Exchange Act.
6.16. Insurance Policies. Seller will cause insurance coverage to
remain in effect following the Closing for claims made under the Insurance
Policies following the Closing in respect of events occurring prior to the
Closing ("Post-Closing Claims), and will not take or fail to take any action
that would impair the ability of the Company and its Subsidiaries to make
claims thereunder or to obtain the benefits afforded them thereby in
accordance with the terms of the Insurance Policies as in effect on the date
hereof; provided, however, that following the Closing, the Company and any
Subsidiary shall not be entitled to make claims under the Insurance Policies
in respect of Post-Closing Claims to the extent that the Company or the
applicable Subsidiary has been fully compensated for its Losses in respect of
such Post-Closing Claims by reason of the operation of Section 10 hereof.
6.17. Divestiture.If at any time prior to or subsequent to the Closing,
Buyer shall cease to operate or shall vacate or transfer to any Person, or
shall agree to cease to operate or to vacate or transfer to any Person, any
store designated as a "Seller Store or "Buyer Store listed on the document
captioned "Divestiture and Failed Consent Store Schedule initialed by the
parties (the "Store Schedule) (any store so listed on such schedule being
referred to in this Section 6.17 and in Section 6.18 as an "Affected Store)
as the result of any agreement with or order of any Governmental Authority
(including, without limitation, an order consented to by Buyer) related to any
written inquiry, investigation or complaint by any Governmental Authority
received by Buyer prior to or within one year after the Closing, the parties
agree as follows:
6.17.1. Open Stores. If the Affected Store is listed on the
Store Schedule under the caption "Open Store Schedule, Seller shall,
upon written notice thereof furnished to Seller by Buyer at any time
within 30 days following the cessation of operations, vacation or
transfer of such Affected Store pursuant to such agreement or order,
promptly pay to Buyer an amount in cash equal to 3 multiplied by, in the
case of a Seller Store, the store contribution for such store as listed
on the Open Store Schedule or, in the case of a Buyer Store, the store
contribution for such store for the fiscal year of Buyer ended January
28, 1995 as certified to Seller by Buyer (and calculated in accordance
with Buyer's customary methods of calculation thereof) (any such store
contribution of either a Seller Store or a Buyer Store being referred to
herein as "Store Contribution), but in no event shall the amount of any
such payment be less than $250,000; provided that in respect of any
Seller Store that was in operation for less than all of the Company's
fiscal year ended December 31, 1994 or opened thereafter (a "New Seller
Store) or any Buyer Store that was in operation for less than all of
Buyer's fiscal year ended January 28, 1995 or opened thereafter (a "New
Buyer Store), the Store Contribution shall be equal to the Assumed Store
Contribution. The term "Assumed Store Contribution shall mean 66% of the
weighted average Store Contribution (such weighting to be based on sales
volumes) for the applicable fiscal year for Similar Sales Volume Stores
of Seller in the case of a New Seller Store or of Buyer in the case of a
New Buyer Store. The term "Similar Sales Volume Stores shall mean (i)
in the case of a New Seller Store, Seller Stores (other than New Seller
Stores) that produced sales volume for the fiscal year of Seller ended
December 31, 1994 equal to at least 90% and not more than 110% of the
sales volume of the applicable New Seller Store for the most recent full
12 calendar months for which such New Seller Store has been in operation
prior to the Closing Date (or if such New Seller Store has been in
operation for less than 12 full calendar months prior to the Closing
Date, then the annualized sales volume based upon the number of full
calendar months for which such New Seller Store has been in operation
prior to the Closing Date) and (ii) in the case of a New Buyer Store,
Buyer Stores (other than New Buyer Stores) that produced sales volume
for the fiscal year of Buyer ended January 28, 1995 equal to at least
90% and not more than 110% of the sales volume of the applicable New
Buyer Store for the most recent full 12 calendar months for which such
New Buyer Store has been in operation prior to the Closing Date (or if
such New Buyer Store has been in operation for less than 12 full
calendar months prior to the Closing Date, then the annualized sales
volume based upon the number of full calendar months for which such New
Buyer Store has been in operation prior to the Closing Date.)
6.17.2. Closed Stores. If the Affected Store is listed on the
Store Schedule under the caption "Closed Stores Schedule, Seller shall,
subject to the provisions of this Section 6.17.2 regarding dispute
resolution, upon written notice thereof furnished to Seller by Buyer at
any time or from time to time within two years following any such
cessation of operations, vacation or transfer of such Affected Store
pursuant to such agreement or order, promptly pay to Buyer an amount (in
aggregate) that constitutes 50% of Buyer's Closed Store Damages with
respect to such cessation, vacation or transfer, but in no event more
than $250,000. "Buyer's Closed Store Damages shall mean the present
value (applying a discount rate of 9%) of all actual Losses that are
incurred by Buyer as a result of such cessation, vacation or transfer,
after netting out from such amount the present value (applying a
discount rate of 9%) of all actual Losses that Buyer reasonably would
have been expected to incur if such store had been voluntarily closed by
Buyer in the ordinary course of business. If the parties fail to agree
upon the amount payable from Seller to Buyer in the event of an
occurrence subject to this Section 6.17.2, the parties shall first use
commercially reasonable efforts to resolve such disagreement among
themselves. If such disagreement shall not have been resolved within 30
days following delivery of a notice by Buyer to Seller referred to in
the first sentence of this Section 6.17.2, the dispute shall be
submitted to Alternative Accountants for resolution within 30 calendar
days after submission. The determination of the Alternative Accountants
as to the resolution of any dispute shall be binding and conclusive upon
all parties hereto. All determinations pursuant to this Section 6.17
shall be in writing and shall be delivered to the parties hereto. Any
award made pursuant to this Section 6.17 may be entered in and enforced
by any court referred to in Section 11.1 hereof and the parties hereby
consent and submit themselves to the jurisdiction of any such court for
purposes of the enforcement of any such award.
Buyer agrees to keep Seller generally apprised of the status of any
written inquiry, investigation or complaint by any Governmental Authority that
may result in an event to which this Section 6.17 would apply. Buyer and
Seller agree that the provisions of this Section 6.17 constitute a material
inducement upon which each is relying and will rely in entering into this
Agreement and any other agreements relating hereto or contemplated hereby, and
that the Purchase Price has been determined in light of the provisions of this
Section 6.17. Buyer and Seller acknowledge and agree that the amount of
Losses that will be incurred by Buyer will be difficult or impossible to
determine if an event occurs which is the subject matter of this Section 6.17
and that the payments required under this Section 6.17 are intended to
compensate Buyer for such Losses and to be the sole remedy for such Losses.
Buyer shall have no duty to take any action in respect of any such event for
the purpose of mitigating such Losses.
6.18. Failed Consents.
If prior to the first anniversary of the Closing Date, neither Seller
nor Buyer has received any written objection from a lessor or sublessor (a
"Landlord) under a lease or other Contractual Obligation for any Seller Store
indicating that a consent or other approval (a "Consent) of such Landlord is
required under such lease or other Contractual Obligation in connection with
the transactions contemplated hereby, a Consent shall be deemed to have been
delivered with respect to such lease or other Contractual Obligation (a
"Delivered Lease). If prior thereto either Seller or Buyer has received any
such written objection from a Landlord, the related lease or other Contractual
Obligation shall not be considered a Delivered Lease until (a) two (2) years
have elapsed from the Closing Date without the commencement of legal
proceedings by such Landlord against Seller, Buyer, the Company or any of its
Subsidiaries or (b) such Landlord irrevocably withdraws its objections in
writing or legal proceedings having been commenced within two years after the
Closing Date are discontinued with prejudice or otherwise finally resolved
against such Landlord without further right of appeal on the part of such
Landlord. If legal proceedings are commenced against Seller, Buyer, the
Company or any Subsidiary regarding any such Consent more than two (2) years
after the Closing Date, Buyer shall be responsible for defending such action at
Buyer's sole cost and expense.
If at any time prior to or subsequent to the Closing, Buyer or any of
its Subsidiaries shall be required by court order, judgment or other
proceeding, or any settlement of any such proceeding, to cease to operate or
to vacate any Affected Store (other than a Store covered by a Delivered Lease)
designated as a "Seller Store on the Store Schedule (an "Eviction), or shall
reasonably agree to an increase in the rent (including, without limitation,
rent retroactive to the Closing) (a "Rent Increase) for any Affected Store
(other than a Store covered by a Delivered Lease) designated as a Seller Store
on the Store Schedule, in either case as the result of any alleged breach or
default under, or lessor's or sublessor's right of termination under, the
lease or other Contractual Obligation applicable to such store primarily as a
result of the transactions contemplated hereby, the parties agree as follows:
6.18.1. Evictions. In the case of an Eviction:
(i) If such Affected Store is listed on the Store Schedule
under the caption "Open Store Schedule, Seller shall, upon written
notice thereof furnished to Seller by Buyer at any time within 30
days following the cessation of operations or vacation of such
Affected Store, promptly pay to Buyer an amount in cash equal to 3
multiplied by the Store Contribution for such store but in no
event less than $250,000.
(ii) If such Affected Store is listed on the Store Schedule
under the caption "Closed Stores Schedule, Seller shall, subject
to the provisions of this Section 6.18.1(ii) regarding dispute
resolution, upon written notice thereof furnished to Seller by
Buyer at any time or from time to time within two years following
any such cessation of operations or vacation of such Affected
Store, promptly pay to Buyer an amount that constitutes 50% of
Buyer's Closed Store Damages with respect to such cessation or
vacation, but in no event more than $250,000. If the parties fail
to agree upon the amount payable from Seller to Buyer in the event
of an occurrence subject to this clause (ii), such dispute shall
be resolved in the manner and on the terms set forth for the
resolution of disputes in Section 6.17.2 (with references therein
to Section 6.17.2 being understood to apply to this clause (ii)).
6.18.2. Rent Increases. In the event of a Rent Increase:
(i) If such Affected Store is listed on the Store Schedule
under the caption "Open Store Schedule Seller shall, upon written
notice thereof furnished to Seller by Buyer at any time within 30
days following the date Buyer, the Company, any Subsidiary or any
of their respective Affiliates enters into an agreement providing
for a Rent Increase with respect to such Affected Store, promptly
pay to Buyer in cash an amount equal to 50% of the present value
(applying a discount rate of 9%) of the increase in rent for the
remainder of the current lease term and, only if the rent increase
is applicable thereto, any available renewals thereof under the
applicable lease. A rent increase shall not be deemed a Rent
Increase unless the existing minimum or base rent (the "Original
Minimum Rent) for the applicable lease is increased from such
Original Minimum Rent to a new minimum rent (the "New Minimum
Rent) more than the sum of the Original Minimum Rent and the
percentage rent (if any) paid on such lease for the most recent
twelve-month period ending prior to the Closing Date governing
percentage rent and the breakpoint used to calculate the
percentage rent is adjusted to reflect the New Minimum Rent. In
no event shall the amount required to be paid under this Section
6.18.2(i) exceed the amount which Seller would be required to pay
under Section 6.18.1(i) if the applicable store were subject to an
Eviction.
(ii) If such Affected Store is listed on the Store Schedule
under the caption "Closed Stores Schedule, Seller shall have no
liability for any Rent Increase.
Buyer agrees to keep Seller generally apprised of the status of any
matter that may result in an event to which this Section 6.18 would apply.
Buyer and Seller agree that the provisions of this Section 6.18 constitute a
material inducement upon which each is relying and will rely in entering into
this Agreement and any other agreements relating hereto or contemplated
hereby, and that the Purchase Price has been determined in light of the
provisions of this Section 6.18. Buyer and Seller acknowledge and agree that
the amount of Losses that will be incurred by Buyer will be difficult or
impossible to determine if an event occurs which is the subject matter of this
Section 6.18 and that the payments required under this Section 6.18 are
intended to compensate Buyer for such Losses and to be the sole remedy for
such Losses. Buyer shall have no duty to take any action in respect of any
such event for the purpose of mitigating such Losses
6.19. No Solicitation or Employment. Except as provided by law, for a
period beginning on the date hereof and ending two years after the Closing
Date, neither the Seller nor any of its Affiliates shall solicit to employ or
employ any individual who is an employee of the Company or any of its
Subsidiaries on the date hereof, or at any time following the date hereof, and
who on or prior to the Closing Date occupies a home office position (other
than a secretarial or clerical position) or a management position, unless at
least six months shall have elapsed following the Closing and following the
cessation of such individual's employment with Buyer or any of its Affiliates.
The restrictions of this Section 6.19 shall not apply to any individual listed
on the document entitled "Listed Employees initialed by the parties to the
extent specified therein. Any individual specified therein shall be treated
for purposes of Section 9 of this Agreement and all other purposes as between
the parties in the manner specified in such document.
6.20. Manchester, CT and Staten Island, NY Stores; Etc. Prior to the
Closing, Seller or any Affiliate of Seller and the Company shall enter into
leases for the stores of the Company open or to be opened in Manchester,
Connecticut and Staten Island, New York on the terms set forth in Schedule
6.20.
7. Conditions to the Obligation to Close of Buyer. The obligations of Buyer
at the Closing to purchase the Shares and to execute and deliver the Closing
Agreements to which it is party are subject to the satisfaction, at or prior
to the Closing, of all of the following conditions, compliance with which, or
the occurrence of which, may be waived prior to the Closing in writing by
Buyer in its sole discretion:
7.1. Representations, Warranties and Covenants.
7.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Seller contained in this Agreement or
any Closing Agreement that include qualifications as to materiality or
Material Adverse Effect shall be true and correct as of the Closing and
all other representations and warranties of Seller contained in this
Agreement or any Closing Agreement shall be true and correct in all
material respects as of the Closing, in each case with the same force and
effect as if such representations and warranties were made at and as of
the Closing.
7.1.2. Performance of Agreements. Seller shall have performed
and satisfied in all material respects all covenants and agreements
required by this Agreement or any Closing Agreement to be performed or
satisfied by it at or prior to the Closing.
7.1.3. Closing Certificate. At the Closing, Seller shall furnish
to Buyer an unqualified certificate, signed by the President or Chief
Financial Officer of Seller, dated the Closing Date, to the effect that
the conditions specified in Sections 7.1.1 and 7.1.2 hereof have been
satisfied.
7.2. Closing Agreements. At or prior to the Closing, the parties
thereto other than Buyer shall have entered into each of the following
Agreements (the "Closing Agreements), in substantially the form thereof
attached hereto without change other than such changes as may be reasonably
satisfactory to Buyer:
(i) a Transitional Services Agreement having substantially the
terms set forth in Schedule 7.2(i) (the "Transitional Services
Agreement);
(ii) the Preferred Stock Subscription Agreement;
(iii) the Standstill and Registration Rights Agreement.
7.3. Legality; Governmental Authorization; Litigation. Buyer's
purchase of and payment for the Shares, and the consummation of the other
transactions contemplated hereby, shall not be prohibited by any Legal
Requirement (other than any Permit). All necessary filings, if any, pursuant
to the HSR Act shall have been made and all applicable waiting periods
thereunder shall have expired or been terminated. No Action shall have been
instituted at or prior to the Closing by any Governmental Authority that seeks
to delay, enjoin or otherwise make illegal the consummation of the
transactions contemplated hereby; provided that if such Action shall have been
instituted by a non-federal Governmental Authority, there must be a reasonable
likelihood that the result of such Action could be to delay, enjoin or
otherwise make illegal Buyer's purchase of the Shares or the consummation of
any other transaction contemplated hereby.
7.4. Affiliate Debt. There shall not be outstanding any Affiliate
Debt. In addition, there shall not be outstanding any Debt or other advances
owed to the Company or any Subsidiary by Seller or any of its Affiliates or by
any present or former employee, stockholder or director of Seller.
7.5. Financing. Buyer shall have obtained the funds to be provided
pursuant to the Commitment Letter, unless Buyer shall have failed to have
obtained such funds exclusively as a result of Buyer's failure to pay any fees
or expenses required to be paid by Buyer under the Commitment Letter.
7.6. Opinion of Counsel. Seller shall have furnished Buyer with
favorable opinions of Davis Polk & Wardwell and Arthur V. Richards, general
counsel of Seller, each dated the Closing Date, in substantially the forms of
Exhibits C-1 and C-2 hereto.
7.7. General. Seller shall have furnished Buyer with such officers'
certificates, good standing certificates, incumbency certificates and other
customary closing documents as it may reasonably request in connection with
the transactions contemplated hereby, including, without limitation (i) an
instrument of assumption by Seller of the Excluded Liabilities, (ii) either a
"sworn affidavit or a "qualifying statement that complies with Section 1445 of
the Code and (iii) such director and officer resignation letters as Buyer may
reasonably have requested of any of the officers or directors of the Company
or any Subsidiary prior to Closing.
8. Conditions to the Obligation to Close of Seller. The obligations of
Seller at the Closing to sell and transfer the Shares and to execute and
deliver the Closing Agreements to which it is party are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by Seller in its sole discretion:
8.1. Representations, Warranties and Covenants.
8.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement or
any Closing Agreement that include qualifications as to materiality
shall be true and correct as of the Closing and all other
representations and warranties of Buyer contained in this Agreement or
any Closing Agreement shall be true and correct in all material respects
as of the Closing, in each case with the same force and effect as if such
representations and warranties were made at and as of the Closing.
8.1.2. Performance of Agreements. Buyer shall have performed and
satisfied in all material respects all covenants and agreements required
by this Agreement or any Closing Agreement to be performed or satisfied
by Buyer at or prior to the Closing.
8.1.3. Officer's Certificate. At the Closing, Buyer shall
furnish to Seller an unqualified certificate signed by the President or
Senior Vice President - Finance and Chief Financial Officer of Buyer
dated the Closing Date, to the effect that the conditions specified in
Sections 8.1.1 and 8.1.2 hereof have been satisfied.
8.2. Closing Agreements; Buyer Stock. At or prior to the Closing,
Buyer shall have entered into each of the Closing Agreements to which it is
party, such agreements being in substantially the form attached hereto without
change other than such changes as may be reasonably satisfactory to Seller,
and Buyer shall have issued to Seller the Buyer Stock.
8.3. Legality; Government Authorization; Litigation. Seller's sale of
the Shares, and the consummation of the other transactions contemplated
hereby, shall not be prohibited by any Legal Requirement (other than any
Permit). All necessary filings, if any, pursuant to the HSR Act shall have
been made and all applicable waiting periods thereunder shall have expired or
been terminated. No Action shall have been instituted at or prior to the
Closing by any Governmental Authority that seeks to delay, enjoin or otherwise
make illegal the consummation of the transactions contemplated hereby;
provided that if such Action shall have been instituted by a non-federal
Governmental Authority there must be a reasonable likelihood that the result
of such Action could be to delay, enjoin or otherwise make illegal Seller's
sale of the Shares or the consummation of any other transaction contemplated
hereby.
8.4. Opinion of Counsel. Buyer shall have furnished Seller with
favorable opinions of Ropes & Gray and Jay Meltzer, Senior Vice President,
General Counsel and Secretary of Buyer, each dated the Closing Date, in
substantially the forms of Exhibits D-1 and D-2 hereto.
8.5. General. Seller shall have received copies of such officers'
certificates, good standing certificate, incumbency certificates and other
customary closing documents as it may reasonably request in connection with
the transactions contemplated hereby.
9. Employment and Employee Benefits Arrangements.
9.1. Definitions. As used in this Agreement:
(a) the term "Employee means an individual who, as of the Closing
Date, is employed (including persons absent from active service by
reason of layoff, illness, disability, or leave of absence, whether paid
or unpaid) by the Company or any of its Subsidiaries.
(b) the term "Former Employee means an individual who at any time
prior to the Closing Date was employed by the Company or any of its
Subsidiaries, but excluding any such person who is an Employee.
(c) the term "Company Plan means each "employee benefit plan as
defined at Section 3(3) of ERISA which (i) is maintained, sponsored,
contributed to, or participated in by Seller, the Company, any
Subsidiary, any other Person in the same Controlled Group as any of the
foregoing, or any of their respective predecessors, and (ii) covers or
benefits one or more Employees or their spouses or dependents or with
respect to which the Company or any of its Subsidiaries has or may have
a material Liability.
(d) the term "Benefit Arrangement means each plan, arrangement,
contract, policy or practice (any of the foregoing, an "arrangement) of
Seller, the Company, any Subsidiary, any other Person in the same
Controlled Group as any of the foregoing, or any of their respective
predecessors, which arrangement (i) provides any of the following
benefits, coverages or insurance: pension, profit-sharing, savings,
bonus, stock bonus, supplemental pension, deferred compensation
(including so-called "excess or "top-hat deferred compensation), health
(including dental, vision, prescription drug and hospitalization), life
insurance, short-term disability, long-term disability, severance,
salary continuation, holiday, vacation, sick leave, scholarship, tuition
assistance, dependent care spending, employee assistance, relocation,
company car or automobile allowance, stock options, stock purchase,
restricted stock, stock appreciation rights, phantom stock, or any other
retirement, welfare, fringe benefit, or other employment- or
service-related benefit (including any arrangement that facilitates the
provision of such benefits, such as a "cafeteria plan or spending
account under Section 125 of the Code); (ii) covers or benefits one or
more Employees or their spouses or dependents or with respect to which
the Company or any Subsidiary has or may have a material Liability; and
(iii) is not a Company Plan.
(e) the term "Seller's Employee Stock Ownership Plan means the
Melville Corporation and Subsidiaries Employee Stock Ownership Plan, as
amended from time to time.
(f) the term "Seller's 401(k) Profit Sharing Plan means the 401k
Profit Sharing Plan of Melville Corporation and Affiliated Companies.
9.2. Disposition of Company Plans and Benefit Arrangements. Except as
otherwise provided in this Agreement, Seller shall take such steps as are
necessary to ensure that, as of the Closing, the Company and its Subsidiaries
shall cease to participate in all Company Plans and Benefit Arrangements,
other than those Company Plans and Benefit Arrangements, if any, sponsored and
maintained solely by the Company or its Subsidiaries. At Buyer's request,
Seller shall continue to cover Employees (and eligible spouses or dependents)
under the Company Plans which provide medical, life insurance and disability
benefits, from the Closing Date until such day after the Closing Date not
later than April 30, 1996 as Buyer shall specify (the "Benefit Transition
Period). Buyer shall pay the cost (including any employee contributions
received by Buyer) of such coverage on the basis of an equitable allocation
determined in accordance with the Transitional Services Agreement. Seller
acknowledges Buyer's interest in integrating Employees into benefit programs
currently maintained or to be established by Buyer, and to that end agrees
promptly to transfer to Buyer such employee- and benefits-related records and
other information relating to Employees and Former Employees as Buyer may
reasonably request, and otherwise to cooperate with Buyer. If so requested by
Buyer, Seller shall make reasonable endeavors, including correspondence and
cooperation with insurers or service providers to facilitate the creation or
continuation by Buyer of transition plans or arrangements for Employees similar
to those Company Plans and Benefit Arrangements which provide welfare benefits
or insurance coverage. Except as provided in Section 9.3, Section 9.4 or
Section 9.5, after the Benefit Transition Period, Buyer shall make available
to Employees medical, life-insurance and disability benefits on terms
substantially comparable to those generally available to other employees of
Buyer and its subsidiaries or to those available under the applicable Company
Plan, without limitation for preexisting conditions other than any such
condition or limitation (including, without limitation, preexisting condition
exclusions, waiting periods, actively-at-work requirements, and other similar
exclusions and conditions) as to which the relevant Company Plan provided only
a conditional waiver and as to which the Employee (or in the case of his or
her spouse or dependents, such spouse or dependents) had not, as of the
Closing, satisfied the relevant conditions for such waiver. Buyer may
provide, at Buyer's expense, or cause the Company and its Subsidiaries to
continue or provide, at the Company's or its Subsidiaries' expense, such other
benefits, if any, as Buyer in its sole discretion shall determine.
9.3. Employment. Buyer may identify by separate letter to Seller
individuals who will not continue in the employ of the Company or its
Subsidiaries after the Closing, but any such individual, if employed
immediately prior to the Closing, shall be treated for purposes of this
Agreement as having been terminated following the Closing. Individuals who are
Employees but who for any reason are not in active service at the Closing
("Non-Active Employees), other than individuals described in the preceding
sentence, shall be entitled to resume work for the Company or its Subsidiaries
if and when they are able and willing to return to active service, subject to
such limitations and restrictions, consistent with applicable law, as may
apply under the Company's or Buyer's employment policies as in effect at the
time of such return. Buyer shall cause the Company to retain all obligations
relating to all vacation and personal holidays to which each individual who is
an Employee immediately prior to the Closing is entitled as of the Closing
under the applicable Company Plan or Benefit Arrangement in effect on the date
hereof, and each such Employee shall be entitled to use and to be compensated
for such vacation, sick days and personal holidays for the period ending
December 31, 1995 under such Company Plan or Benefit Arrangement and for the
period commencing January 1, 1996 in accordance with Buyer's policies and
practices.
9.4. Liabilities Retained or Assumed by Seller. From and after the
Closing, the Seller shall, at its sole cost and expense, continue to provide
and administer the benefits set forth below that are currently provided
through Company Plans and Benefit Arrangements, and shall reimburse Buyer for
other benefits to the extent specified below.
(a) With respect to all Employees and their dependents, Seller
shall provide and be liable for any and all medical, dental, vision and
life insurance claims incurred, and other welfare and fringe benefits
that are incurred or payable or for which claims for payment are made,
on or before the Closing Date. In the case of any individual described
in the first or second sentences of Section 9.4(b) who is receiving
long-term disability benefits or worker's compensation (or employer's
liability) benefits at the Closing, and his or her spouse and eligible
dependents, Seller shall also provide and be liable for any and all
welfare benefits and fringe benefits in accordance with the terms of the
applicable Company Plan or Benefit Arrangement (including workers'
compensation program) or a comparable replacement plan or arrangement of
Seller, including without limitation any extended benefits, waiver of
premium, survivor health, COBRA, conversion and any other applicable
continuation of coverage provision, until such time, if any, as such
individual returns to active service with the Company and its
Subsidiaries, and without limiting the foregoing Seller shall be liable
for all claims under such benefit programs that are incurred prior to
the time such individual returns to active service with the Company and
its Subsidiaries. In the case of any other individual who is described
in the first or second sentences of Section 9.4(b) or who is not
described in Section 9.4(b) but is receiving short-term disability
(including salary continuation) benefits at the Closing (or who later
receives short-term disability or salary-continuation benefits in respect
of an injury, illness or other condition sustained or occurring on or
prior to the Closing), and the spouse and eligible dependents of any
such individual, Seller shall reimburse Buyer for any and all welfare
benefit claims (other than short-term disability payments) incurred and
fringe benefits provided prior to such time, if any, as such individual
returns to active service with the Company and its Subsidiaries.
Following the return to active service with the Company and its
Subsidiaries of an individual described in the second sentence of
Section 9.4(b), Seller shall continue to be liable for any continuing
worker's compensation medical benefits to the individual, but Buyer
shall be liable for other welfare and fringe benefits (including
dependent coverage) and for any future workers' compensation claims with
respect to the individual. For purpose of this Section, a claim will be
deemed to have been incurred when an individual is provided with
medical, dental, vision or other services that are covered expenses and
give rise to the claim; provided that a claim for life insurance or
similar death benefits will be deemed to have been incurred at time of
death (except that any life insurance waiver-of-premium claims shall be
deemed to have been incurred as of the date of disability).
(b) Seller from and after the Closing shall continue to provide
and be liable for long-term disability benefits in accordance with the
terms of the applicable Company Plan or Benefit Arrangement (or under a
comparable plan or arrangement of Seller) to each individual who as of
the Closing is receiving long-term disability benefits or who later
becomes entitled to long-term disability benefits relating to an injury,
illness or other condition sustained or occurring on or prior to the
Closing Date. Seller from and after the Closing shall continue to
provide and be liable for workers' compensation benefits and employer's
liability benefits in accordance with the terms of the applicable
workers' compensation program and applicable law to each individual who
as of the Closing is receiving workers' compensation benefits or
employer's liability benefits or who later becomes entitled to workers'
compensation benefits or employer's liability benefits relating to an
injury, illness or other condition sustained or occurring on or prior to
the Closing Date.
(c) Without limiting the foregoing, Seller shall provide and
remain liable for any and all continuation of coverage required under
Sections 601 through 608 of ERISA and Section 4980B of the Code with
respect to any person as to whom the qualifying event (as defined at
Section 6503 of ERISA) occurred at or prior to the Closing, other than
individuals identified pursuant to the first sentence of Section 9.3.
(d) Without limiting the foregoing, Seller shall be liable for
all Compensation (including deferred compensation and severance) and
benefits related claims and liabilities arising prior to or on or after
the Closing Date, including without limitation all claims and
liabilities under Company Plans and Benefit Arrangements, with respect
to any Person (and such Person's spouse and dependents and beneficiaries)
who is or becomes a Former Employee or who dies prior to the Closing.
(e) Any Liability for welfare and fringe benefits for which
Seller is liable pursuant to this Section 9 shall not be reflected in
the Closing Balance Sheet.
9.5. Certain Severance Arrangements. Buyer agrees that any Employee
whose employment is involuntarily terminated by Buyer other than for cause
during the period commencing on the Closing Date and ending on the day which
is six months after the Closing Date and who furnishes Buyer with a fully
executed release satisfactory to Buyer (and the period, if any, within which
such release may be revoked has expired) shall receive a severance benefit
consisting of (i) cash severance determined in accordance with Schedule 9.5,
plus (ii) any non-cash benefits to which the Employee would be entitled if the
terms of Schedule 9.5A rather than the terms of Schedule 9.5 were applied, in
each case based on the Employee's rate of pay, salary grade (or position) and
service as of the Closing Date; provided, that Seller shall be liable and
shall reimburse Buyer for the amount by which any cash severance determined in
accordance with Schedule 9.5 in respect of an involuntary termination other
than for cause during such six-month period exceeds the applicable cash
severance amount set forth in Schedule 9.5A, in each case based on the
Employee's rate of pay, salary grade (or position) and service as of the
Closing Date.
9.6. Qualified Plans. Buyer shall take such steps as are necessary to
enable Employees entitled to receive an eligible rollover distribution (as
defined at Section 402(c)(4) of the Code) from Seller's Employee Stock
Ownership Plan in connection with the Purchase to transfer the distribution in
accordance with Section 402(c) of the Code to a tax-qualified plan maintained
by Buyer. In the case of Seller's 401(k) Profit Sharing Plan, Seller shall
cause account balances for affected participants to be transferred on a
non-elective basis pursuant to section 414(l) of the Code to one or more
401(k) plan or plans designated by Buyer. Buyer shall not be obligated to
cause its plans to accept (i) any eligible rollover distribution or other
transfer in respect of an individual who is not employed by Buyer or its
subsidiaries at the time of the transfer, (ii) any assets other than cash or
other property acceptable to the trustee of the recipient plan, or (iii) any
transfer unless and until Buyer is reasonably satisfied that the transferor
plan is, and Seller is reasonably satisfied that the transferee plan is, at
the time of transfer, qualified under section 401(a) of the Code. In respect
of any Employee described in clause (i) of the preceding sentence who becomes
entitled to a distribution under Seller's 401(k) Profit Sharing Plan upon
termination of employment after the Closing by the Company and its
Subsidiaries, and as to any other Employee with respect to records under
Buyer's control, Buyer agrees to cooperate with Seller in obtaining all
necessary consents in respect of any distribution to be made from Seller's
401(k) Profit Sharing plan to such individual.
9.7. Service Credit. Buyer shall take such steps as are necessary to
ensure that for purposes of determining service for eligibility and, for
qualified plans other than any defined benefit plan maintained by Buyer,
vesting service under any of Buyer's employee benefit plans for which an
Employee is otherwise eligible, an Employee's service shall include his or her
service for the Company and the Persons in the same Controlled Group as the
Company prior to Closing. Nothing herein shall be construed as requiring that
pre-Closing service be credited under Buyer's plans for purposes of
determining benefit accrual except for purposes of determining any
individual's benefit under a vacation or severance plan.
9.8. WARN Act. Buyer shall indemnify Seller and its Affiliates and
hold each of them harmless from and against any Losses which may be incurred
or suffered by any of them under the Worker Adjustment and Retraining
Notification Act or any state or Puerto Rico plant closing or notification law
arising out of, or relating to, any actions taken by Buyer or the Company or
any Subsidiary after the Closing. Seller shall indemnify Buyer and its
Affiliates (including, without limitation, the Company and each Subsidiary of
the Company from and after the Closing) and hold each of them harmless from
and against any Losses that may be incurred or suffered by any of them under
the Worker Adjustment and Retraining Notification Act or any state or Puerto
Rico plant closing or notification law arising out of, or relating to, any
actions taken by Seller or the Company or any Subsidiary of the Company before
the Closing.
10. Indemnification.
10.1. Indemnification. Seller (in its capacity as indemnifying party,
the "Indemnifying Party) hereby agrees to indemnify each of Buyer and its
Affiliates (including, without limitation, the Company and each Subsidiary of
the Company from and after the Closing) (each in its capacity as indemnified
party, an "Indemnitee) and hold each of Buyer and such Affiliates harmless,
and Buyer (in its capacity as indemnifying party, the "Indemnifying Party)
hereby agrees to indemnify Seller and its Affiliates other than the Company or
any Subsidiary of the Company (each in its capacity as indemnified party, an
"Indemnitee) and hold each of Seller and such Affiliates harmless, from,
against and in respect of any and all Losses arising from or related to any of
the following:
10.1.1. Seller. In the case of Seller as Indemnifying Party:
(i) any breach of or inaccuracy in (or any allegation by
any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or
warranty made by or on behalf of Seller in this Agreement
(including, without limitation, the Schedules hereto) or in any
Closing Agreement or other document, instrument or certificate
delivered pursuant hereto (as such representation or warranty
would read if all qualifications as to knowledge, materiality or
Material Adverse Effect were deleted therefrom);
(ii) any breach or violation of any covenant or agreement
made by Seller in this Agreement (including, without limitation,
the Schedules hereto) or in any document, instrument or
certificate delivered pursuant hereto;
(iii) any Excluded Liability;
(iv) any Liability of the Company or any of its
Subsidiaries for Taxes (other than Taxes for which Seller
indemnifies Buyer pursuant to Section 6.7) of any Person other
than the Company or such Subsidiaries;
(v) any Liability of the Company related to Company Plans
and Benefit Arrangements to the extent they relate to Persons
other than Employees; or
(vi) any Liability of the Company or any of its
Subsidiaries arising solely as a result of the Company or any of
its Subsidiaries being a member of a group of companies or other
entities controlled by Seller or any other Person (other than the
Company or any of its Subsidiaries) prior to the Closing; or
(vii) any Liability asserted by any Governmental Authority
against the Company or any Subsidiary with respect to the escheat
of any unclaimed funds or asset which are asserted to have become
payable to such Governmental Authority (x) prior to the Closing
Date, or (y) subsequent to the Closing Date as a consequence of
specific transactions or events that occurred prior to the Closing
Date (such as the sale of gift certificates, etc.) to the extent
such amounts claimed by such Governmental Authority, when treated
in the same manner as other Liabilities in such category on the
Company Net Assets Statement (i.e., the obligation to redeem gift
certificates), result in the total obligations of the Company and
its Subsidiaries exceeding the amount carried on the Company Net
Assets Statement for such category of Liability.
10.1.2. Buyer. In the case of Buyer as Indemnifying Party:
(i) any breach of or inaccuracy in (or any allegation by
any third party of facts which, if true as alleged, would
constitute such a breach or inaccuracy in) any representation or
warranty made by or on behalf of Buyer in this Agreement
(including, without limitation, the Schedules hereto) or in any
Closing Agreement or other document, instrument or certificate
delivered pursuant hereto;
(ii) any breach or violation of any covenant or agreement
made by Buyer in this Agreement (including, without limitation,
the Schedules hereto) or in any document, instrument or
certificate delivered pursuant hereto;
(iii) any Liability of Seller or any of its Affiliates
arising out of, with respect to or in connection with any
Guarantee of any Lease of the Company or any of its Subsidiaries
other than to the extent the obligations under such Guarantee or
Lease constitute an Excluded Liability; or
(iv) any Liability incurred by Seller or any of its
Affiliates at any time after the Closing arising out of, with
respect to or in connection with the Business or any matter or
circumstance involving the Company or any of its Subsidiaries,
other than (a) any Excluded Liabilities (b) any Losses covered by
Section 6.7 or the indemnity in Section 10.1.1. or (c) any Losses
arising out of an illegal or tortious course of conduct on the
part of Seller or any of its Affiliates.
10.2. Time Limitation on Indemnification. Notwithstanding the
foregoing, no claim may be made or suit instituted under any provision of this
Section 10 more than 90 days following the availability of the audited
financial statements of Buyer for its fiscal year ending nearest to January
31, 1997 (the "General Survival Period) except for Reserved Claims. The term
"Reserved Claims shall mean (a) all claims as to which any Indemnitee has
given any Indemnifying Party notice on or prior to the end of the General
Survival Period or, if later, for a claim referred to in clause (c) or (d) of
this sentence, on or prior to the end of the period by which such claim may be
made in accordance with this Section 10.2, (b) all claims by any Indemnitee
based upon an alleged or actual breach of or inaccuracy in the representations
or warranties contained in Sections 4.1, 4.19, 5.1 or 5.7 or contained in
Section 3.1.2 or 3.1.3(b) of the Preferred Stock Subscription Agreement (but
only insofar as said Section 3.1.3(b) relates to the General Corporation Law
of the State of Delaware), (c) all claims by any Indemnitee based upon an
alleged or actual breach of or inaccuracy in the representations or warranties
contained in Section 4.15, (d) all claims based upon an alleged or actual
breach of or inaccuracy in the representations or warranties contained in
Section 4.14 and all claims pursuant to clause (vii) of Section 10.1.1, (e) all
claims pursuant to clauses (ii), (iii), (iv), (v) or (vi) of Section 10.1.1 or
clause (ii), (iii) or (iv) of Section 10.1.2 and (f) all claims based upon
fraud. As to the Reserved Claims referred to in clause (c) of the definition
thereof, no claim may be made or suit instituted after five years from the
Closing Date. As to Reserved Claims referred to in clause (d) of the
definition thereof, no claim may be made or suit instituted after thirty (30)
days after the expiration of the applicable statute of limitations. As to
Reserved Claims referred to in clause (a), (b), (e) or (f) of the definition
thereof, any claim may be made or suit instituted at any time without
limitation.
10.3. Monetary Limitations on Seller's Indemnification. Except with
respect to claims (i) arising out of the representations or warranties
contained in Section 4.1, 4.14 or 4.19, (ii) under clauses (ii), (iii), (iv),
(v) or (vi) of Section 10.1.1 hereof, or (iii) referred to in clause (f) of
the definition of Reserved Claims, Seller as Indemnifying Party shall not have
any obligation to indemnify Buyer or any of its Affiliates as Indemnitees under
Section 10.1.1 in respect of any Loss incurred by Buyer and/or any of its
Affiliates as Indemnitees unless the aggregate cumulative total of all Losses
(other than Losses arising out of claims referred to in clauses (i), (ii) and
(iii) of this sentence) incurred by Buyer and/or any of its Affiliates as
Indemnitees exceeds $10,000,000, whereupon Buyer and each of its Affiliates as
Indemnitees shall be entitled to indemnification for the aggregate cumulative
amount of such Losses in excess of $5,000,000. With respect to claims
referred to in clauses (i), (ii) or (iii) of the first sentence of this
Section 10.3, no such minimum dollar limitation shall apply.
10.4. Certain Matters of Construction. References in this Section 10 to
claims with respect to or based upon a representation or warranty set forth in
a particular Section or Schedule shall be deemed to include without limitation
claims relating to such representations or warranties based upon the
certificates to be furnished pursuant to Sections 7.1.3 and 8.1.3 hereof.
10.5. Third Party Claims. Promptly after the receipt by any Indemnitee
of notice of the commencement of any Action against such Indemnitee by a
third party (other than any Action relating to Taxes or any Tax Return, which
shall be governed by Section 6.7) such Indemnitee shall, if a claim with
respect thereto is or may be made against any Indemnifying Party pursuant to
this Section 10, give such Indemnifying Party written notice thereof. The
failure to give such notice shall not relieve any Indemnifying Party from any
obligation hereunder except where, and then solely to the extent that, such
failure actually and materially prejudices the rights of such Indemnifying
Party. Such Indemnifying Party shall have the right to defend such Action, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnitee, provided that the Indemnifying Party so
notifies the Indemnitee within 15 days after receipt of such notice and then
actually commences the defense of such Action, and otherwise the Indemnitee
shall have the right to defend such Action and the Indemnifying Party will
reimburse the Indemnitee promptly and periodically for the costs of defending
against such Action, including attorneys' fees and expenses. If the
Indemnifying Party is defending such Action, the Indemnitee may retain
separate co-counsel at its sole cost and expense and may participate in
defense of such Action. The Indemnifying Party will not be liable for any
judgment or settlement with respect to such Action effected without its prior
written consent (unless the Indemnifying Party is not conducting the defense
of such Action pursuant to the provisions of this Section 10.5).
10.6. No Circular Recovery. Seller hereby agrees that it will not make
any claim for indemnification against Buyer, Company or any of its
Subsidiaries by reason of the fact that it or any of its officers, directors,
agents or other representatives was a controlling person, director, officer,
employee, agent or other representative of the Company or any of its
Subsidiaries or was serving as such for another Person at the request of the
Company or any Subsidiary of the Company (whether such claim is for Losses of
any kind or otherwise and whether such claim is pursuant to any statute,
Charter, By-law, Contractual Obligation or otherwise) with respect to any
Action brought by Buyer or any of its Affiliates against Seller (whether such
Action is pursuant to this Agreement, applicable law, or otherwise).
10.7. Nature of Indemnification Payments. Any and all indemnification
payments pursuant to this Section 10 shall be deemed for all purposes to be
adjustments to the Purchase Price.
10.8. Exclusive Remedy. Notwithstanding anything to the contrary in
this Section 10, Section 6.7 hereof (and not this Section 10) shall be the
exclusive remedy for any breach of or inaccuracy in any representation or
warranty contained in Section 4.12 and any claim in respect of Taxes referred
to in said Section 6.7, and no claim may be made or suit instituted under
Section 6.7 after 30 days after the expiration of the applicable statute of
limitations. After the Closing, this Section 10 (other than as set forth in
the immediately preceding sentence) will provide the exclusive remedy for any
breach of or inaccuracy in any representation or warranty referred to in this
Section 10, any breach or violation of any covenant or other agreement
referred to in this Section 10 (other than as provided in Section 3.4), or
other claim arising out of this Agreement, any Closing Agreement or the
transactions contemplated hereby or thereby. Without limiting the generality
of the foregoing, Buyer and, effective at the Closing, the Company and its
Subsidiaries hereby waive all rights for contribution or any other rights of
recovery (except as otherwise provided in this Section 10) with respect to any
Losses arising under or related to Environmental Laws that it might have by
statute or otherwise against Seller insofar as such rights relate to the real
property listed on Schedule 4.5.1 or any real property subject to any Lease.
Notwithstanding anything in this Agreement to the contrary, (a) Seller shall
not be responsible for indemnifying Buyer or any of its Affiliates (including
the Company and any of its Subsidiaries after the Closing) for any Losses
pursuant to this Section 10 (to the extent such indemnification relates to
environmental conditions, contamination, release of Hazardous Substances or
any other environmental matters (each, an "Environmental Condition)) unless
(i) Buyer or any of its Affiliates is required to incur such Losses pursuant
to any Environmental Law or any Governmental Order or by any Governmental
Authority or (ii) in the reasonable judgment of Buyer, investigation,
remediation, clean up or any other action is required in connection with such
Environmental Condition due to a substantial risk to human health or the
environment; provided that Buyer shall exercise all reasonable efforts to (A)
limit or reduce any such remediation or cleanup to the extent reasonable and
(B) conduct such remediation or cleanup efficiently and taking into account
economic considerations to the same extent as would a prudent business person.
Prior to undertaking any remediation, cleanup or other action (other than
investigation) referred to in clause (ii) of the immediately preceding
sentence with respect to any Environmental Condition which has resulted from
the actions of a lessee of the Company or any of its Subsidiaries or a known
third party, Buyer shall notify such lessee or known third party of such
Environmental Condition in writing and shall request therein that such lessee
or known third party undertake or pay for such cleanup, remediation or other
action. If such lessee or known third party (i) does not agree in writing,
and in Buyer's reasonable judgment does not otherwise agree, to undertake or
pay for such cleanup, remediation or other action within 60 days of receipt of
such notice from Buyer, (ii) does so agree within such time period but in
Buyer's reasonable judgment does not have the resources to comply with such
agreement, or (iii) does so agree within such time period but does not
diligently pursue such cleanup, remediation or other action, Buyer may
undertake such cleanup, remediation or other action. Buyer shall, prior to or
after commencing cleanup, remediation or other action (other than
investigation) in accordance with this Section 10.8, take such actions as
Seller shall reasonably request, at the cost and expense of Seller, for the
purpose of making any such lessee or known third party undertake or pay for
such cleanup, remediation or other action, including without limitation
pursuing the remedies available to the Company or any of its Subsidiaries
under the Stock Purchase Agreement dated as of April 20, 1994 between
Marshalls, Inc. and NYDS Holding Limited.
11. Consent to Jurisdiction; Jury Trial Waiver.
11.1. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the Federal
courts located in the County of New York, State of New York, and in the event
that such Federal courts shall not have subject matter jurisdiction over the
relevant proceeding, then of the state courts located in the County of New
York, State of New York, for the purpose of any Action arising out of or based
upon this Agreement or any Closing Agreement or relating to the subject matter
hereof or thereof or the transactions contemplated hereby or thereby, (ii)
hereby waives, and agrees to cause each of its Subsidiaries and Affiliates to
waive, to the extent not prohibited by applicable law, and agrees not to
assert, and agrees not to allow any of its Subsidiaries and Affiliates to
assert, by way of motion, as a defense or otherwise, in any such Action, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution,
that any such proceeding brought in one of the above-named courts is improper,
or that this Agreement or any other Closing Agreement, or the subject matter
hereof or thereof, may not be enforced in or by such court and (iii) hereby
agrees not to commence or to permit any of its Subsidiaries or Affiliates to
commence any Action arising out of or based upon this Agreement or any Closing
Agreement or relating to the subject matter hereof or thereof other than
before one of the above-named courts nor to make any motion or take any other
action seeking or intending to cause the transfer or removal of any such
Action to any court other than one of the above-named court whether on the
grounds of inconvenient forum or otherwise. Each party hereby consents to
service of process in any such proceeding in any manner permitted by New York
law, and agrees that service of process by registered or certified mail,
return receipt requested, at its address specified pursuant to Section 13.9
hereof is reasonably calculated to give actual notice.
11.2. Waiver of Jury Trial. To the extent not prohibited by applicable
law that cannot be waived, each of the parties hereto hereby waives, and
agrees to cause each of its Subsidiaries and Affiliates to waive, and
covenants that neither it nor any of its Subsidiaries or Affiliates will
assert (whether as plaintiff, defendant or otherwise) any right to trial by
jury in any forum in respect of any issue or Action arising out of or based
upon this Agreement or any other Closing Agreement or the subject matter hereof
or thereof or in any way connected with or related or incidental to the
transactions contemplated hereby, in each case whether now existing or
hereafter arising. Seller acknowledges that it has been informed by Buyer
that this Section 11.2 constitutes a material inducement upon which Buyer is
relying and will rely in entering into this Agreement and any other agreements
relating hereto or contemplated hereby. Any party hereto may file an original
counterpart or a copy of this Section 11.2 with any court as written evidence
of the consent of each such party to the waiver of its right to trial by jury.
12. Termination.
12.1. Termination of Agreement. This Agreement may be terminated by the
parties only as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(b) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Seller herein or
pursuant hereto or in any Closing Agreement containing qualifications as
to materiality or Material Adverse Effect shall have been inaccurate
when made, or any other representation or warranty made by or on behalf
of Seller herein or in any Closing Agreement shall have been inaccurate
in any material respect when made, or in each case if then made would be
so inaccurate, and such inaccuracy is not capable of cure or if capable
of cure is not so cured within a reasonable period following notice of
such inaccuracy, (ii) in the event that Seller materially breaches or
violates any covenant or agreement contained herein or in any Closing
Agreement to be performed by Seller and such breach or violation is not
capable of cure or if capable of cure is not so cured within a
reasonable period following notice of such breach or violation, or (iii)
if the Closing shall not have occurred on or before January 31, 1996 by
reason of the failure of any condition set forth in Section 7 hereof to
be satisfied (unless the failure results primarily from the failure of
any representation or warranty made by or on behalf of Buyer herein or in
any Closing Agreement containing qualifications as to materiality or
Material Adverse Effect to be true and correct or any other
representation or warranty made by or on behalf of Buyer herein or in
any Closing Agreement to be true and correct in all material respects or
from the material breach or violation by Buyer of any covenant or
agreement contained herein or in any Closing Agreement.
(c) Seller may terminate this Agreement by giving written notice
to Buyer at any time prior to the Closing (i) in the event that any
representation or warranty made by or on behalf of Buyer herein or
pursuant hereto or in any Closing Agreement containing qualifications as
to materiality or Material Adverse Effect shall have been inaccurate
when made, or any other representation or warranty made by or on behalf
of Buyer herein or in any Closing Agreement shall have been inaccurate
in any material respect when made, or in each case if then made would be
so inaccurate, and such inaccuracy is not capable of cure or if capable
of cure is not so cured within a reasonable period following notice of
such inaccuracy, (ii) in the event that Buyer materially breaches or
violates any covenant or agreement contained herein or in any Closing
Agreement to be performed by Buyer and such breach or violation is not
capable of cure or if capable of cure is not so cured within a
reasonable period following notice of such breach or violation, or (iii)
if the Closing shall not have occurred on or before January 31, 1996 by
reason of the failure of any condition set forth in Section 8 hereof to
be satisfied (unless the failure results primarily from the failure of
any representation or warranty made by or on behalf of Seller herein or
in any Closing Agreement containing qualifications as to materiality or
Material Adverse Effect to be true and correct or any other
representation or warranty made by or on behalf of Seller herein or in
any Closing Agreement to be true and correct in all material respects or
from the material breach or violation by Seller of any covenant or
agreement contained herein or in any Closing Agreement).
12.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, all obligations of the parties hereunder
(other than the obligations under Sections 6.3, 6.8, 6.9 (insofar as Section
6.9 relates to Buyer and its Subsidiaries), 11.1, 11.2, 13.1, 13.2, 13.8,
13.9, 13.11 and 13.13, which shall survive termination) shall terminate
without any liability of any party to any other party; provided, however, that
no termination shall relieve any party from any liability arising from or
relating to breach prior to termination.
13. Miscellaneous.
13.1. Entire Agreement; Waivers. This Agreement, the Closing Agreements
and the Confidentiality Agreement constitute the entire agreement among the
parties hereto pertaining to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter. No waiver of any provision of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), shall constitute a continuing waiver unless
otherwise expressly provided nor shall be effective unless in writing and
executed (i) in the case of a waiver by Buyer, by Buyer and (ii) in the case
of a waiver by Seller, by Seller.
13.2. Amendment or Modification. The parties hereto may not amend or
modify this Agreement except in such manner as may be agreed upon by a written
instrument executed by Buyer and Seller.
13.3. Survival, etc. All representations, warranties, covenants and
agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, the Schedules hereto), or pursuant to any
document, certificate or other instrument referred to herein or delivered in
connection with the transactions contemplated hereby, shall be deemed to have
been material and relied upon by the parties hereto, notwithstanding any
investigation made by or on behalf of any of the parties hereto or any
opportunity therefor (including without limitation the availability for review
of any document), and, subject to the provisions of Section 10, shall survive
the execution and delivery of this Agreement and the Closing. Neither the
period of survival nor the liability of any party with respect to such party's
representations, warranties covenants and agreements shall be reduced by any
investigation made at any time by or on behalf of any party. If written
notice of a claim has been given prior to the expiration of any time period
set forth herein for any such notice by a party in whose favor such
representations, warranties, covenants or agreements have been made to any
party that made such representations, warranties, covenants or agreements,
then the relevant representations, warranties, covenants or agreements shall
survive as to such claim until such claims have been finally resolved.
13.4. Independence of Representations and Warranties. The parties
hereto intend that each representation, warranty, covenant and agreement
contained herein shall have independent significance. If any party has
breached any representation, warranty, covenant or agreement contained herein
in any respect, the fact that there exists any other representation, warranty,
covenant or agreement relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that such party is in breach of the first
representation, warranty, covenant or agreement.
13.5. Severability. In the event that any provision hereof (including,
without limitation, any of the provisions of Section 6.9 hereof) would, under
applicable law, be invalid or unenforceable in any respect, such provision
shall (to the extent permitted under applicable law) be construed by modifying
or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof
(including, without limitation, each of the provisions of Section 6.9 hereof)
are severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
13.6. Knowledge. Whenever reference is made herein to the knowledge of
any Person with respect to any matter, it is understood that such knowledge
extends only to the officers of such Person (and in the case of Seller, the
officers of the Company or any of its Subsidiaries) having responsibility for
the areas of such Person's (and in the case of Seller, also the Company's or
any of its Subsidiaries') business covering such matter, which officers have
made an inquiry that is reasonably appropriate to determine the accuracy of the
statement in question or, in the case of Actions, have made an inquiry that is
reasonably appropriate to determine the existence of Actions threatened in
writing against such Person (and in the case of Seller, against the Company or
any of its Subsidiaries).
13.7. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
such transferees, successors and assigns shall be deemed to be a party hereto
for all purposes hereof); provided, however, that (i) Seller may not assign or
transfer (by operation of law or otherwise) any of its rights or obligations
hereunder, (ii) Buyer may assign its rights and obligations hereunder (other
than to issue the Buyer Stock) to an Affiliate of Buyer (but Buyer shall not
be relieved of its obligations hereunder), and (iii) no transfer or assignment
by any party shall relieve such party of any of its obligations hereunder.
13.8. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing (including telecopy or
similar teletransmission), addressed as follows:
If to Seller, to it at: Melville Corporation
One Theall Road
Rye, New York 10580
Telecopier: 914-925-4052Attention: Chief
Executive Officer, Chief Financial
Officer and General Counsel
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: 212-450-5744
Attention: Dennis S. Hersch
If to Buyer, to it at: The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Telecopier: 508-390-2457
Attention: President and General Counsel
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: Arthur G. Siler, Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) in the case of any notice or communication sent other
than by mail, on the date actually delivered to such address (evidenced, in
the case of delivery by overnight courier, by confirmation of delivery from
the overnight courier service making such delivery, and in the case of a
telecopy, by receipt of a transmission confirmation form or the addressee's
confirmation of receipt), or (b) in the case of any notice or communication
sent by mail, three Business Days after being sent, if sent by registered or
certified mail, with first-class postage prepaid. Each of the parties hereto
shall be entitled to specify a different address by giving notice as aforesaid
to each of the other parties hereto.
13.9. Public Announcements. At all times at or before the Closing, no
party hereto will issue or make any reports, statements or releases to the
public or generally to the suppliers or other Persons to whom Buyer or the
Company sells goods or provides services or with whom Buyer or the Company
otherwise has significant business relationships with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other party hereto, which consent shall not be unreasonably withheld. If any
party hereto is unable to obtain, after reasonable effort, the approval of its
public report, statement or release from the other parties hereto and such
report, statement or release is, in the opinion of legal counsel to such
party, required by law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other parties with a copy
thereof. Each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
13.10. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are
not intended to be full or accurate descriptions of the content thereof and
shall not affect the construction hereof.
13.11. Third Party Beneficiaries. Except as otherwise provided in
Section 10, nothing in this Agreement is intended or shall be construed to
entitle any Person other than the parties, the Company or their respective
transferees, successors and assigns permitted hereby to any claim, cause of
action, remedy or right of any kind.
13.12. Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties on separate counterparts each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
13.13. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the State of New
York, without giving effect to any choice or conflict of law provision or rule
that would cause the application of the law of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Stock Purchase Agreement to be executed, as of the
date first above written by their respective officers thereunto duly
authorized.
SELLER: MELVILLE CORPORATION
By /s/ H. Rosenthal
Name: Harvey Rosenthal
Title: President
BUYER: THE TJX COMPANIES, INC.
By Donald G. Campbell
Name: Donald G. Campbell
Title: Chief Financial Officer
Exhibit A
[Form of Preferred Stock Subscription Agreement]
Exhibit B
[Form of Standstill and Registration Rights Agreement]
Exhibit C
[Forms of Legal Opinions of Seller's Counsel]
Exhibit D
[Forms of Legal Opinions of Buyer's Counsel]
Amendment Number One
To
Stock Purchase Agreement
This Amendment Number One (this "Amendment") is made as of the 17th day
of November, 1995, between The TJX Companies, Inc., a Delaware corporation
(the "Buyer"), and Melville Corporation, a New York corporation (the
"Seller"), to the Stock Purchase Agreement between Buyer and Seller dated as
of October 14, 1995 (the "Stock Purchase Agreement").
Recitals
1. Seller and Buyer desire to amend certain provisions of the Stock
Purchase Agreement and to add certain additional provisions to the Stock
Purchase Agreement, all as set forth below.
2. Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms as set forth in the Stock Purchase
Agreement.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below and in the Stock Purchase Agreement, the parties
hereto hereby agree as follows:
1. Amendment.
1.1. Section 3.4.
1.1.1. Section 3.4(a) of the Stock Purchase Agreement is hereby
amended and restated in its entirety as follows:
"As promptly as possible following the Closing Date, the Company
shall prepare a consolidated balance sheet of the Company and its
Subsidiaries as of a time immediately prior to the Closing (the
"Closing Balance Sheet") in accordance with generally accepted
accounting principles applied consistently with the Company's past
practices used in the preparation of the Annual Financials, except
that inventory will be determined using the first-in first-out
inventory cost method and without regard to the Company's adoption
of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," and the change in the Company's accounting policy
with respect to the capitalization of internally developed
software (the "Accounting Policy Changes"). The inventory
reflected on the Closing Balance Sheet shall include all
merchandise inventory recorded in the Company's books and records
calculated in accordance with generally accepted accounting
principles consistently applied by the Company, utilizing the
retail method for the store inventory and the cost method for the
warehouse and distribution centers as consistently applied by the
Company in preparation of the Annual Financials, except inventory
cost will be determined using the first-in first-out inventory
method. Amounts reflected on the Closing Balance Sheet for those
elements, accounts or items to be included in the calculation of
Company Net Assets shall include all known and estimated assets
and liabilities as of the Closing Date consistent with the
Company's fiscal year-end cutoff procedures.
Coopers & Lybrand, L.L.P. ("Coopers") shall perform
procedures agreed upon by the parties and Coopers (as set forth in
Appendix B to Schedule 3.4B, but as modified by Appendix C to
Schedule 3.4B with respect to certain inventory matters) in
connection with the elements, accounts or items of the Closing
Balance Sheet that are to be included in the calculation of
Company Net Assets for the purposes of issuing a report (the
"Coopers Report") thereon detailing the results of such procedures
as applied by Coopers in accordance with standards established by
the American Institute of Certified Public Accountants (and prior
to the issuance by Coopers of such report, KPMG Peat Marwick and
representatives of the Seller and the Company reasonably
designated by the Seller shall have the opportunity to review
Coopers' work papers and to be present during the performance of
all such procedures and the procedures described in Appendix C to
Schedule 3.4B). Adjustments proposed by Coopers to the elements,
accounts or items of the Closing Balance Sheet to be included in
the calculation of Company Net Assets will be aggregated and to
the extent the total of such adjustments exceeds $750,000 (the
"Adjustment Basket") on a net basis, such excess adjustments shall
be reflected in the Closing Balance Sheet for the purpose of
calculating Company Net Assets (it being understood that the
Shrink Adjustment shall not be included in the Adjustment Basket,
but rather that in calculating the amount of Company Net Assets
the Shrink Adjustment shall be made on a dollar-for-dollar basis
in accordance with the next succeeding paragraph and Schedule
3.4A). Coopers shall furnish the Coopers Report to the Seller and
Buyer as soon as reasonably practicable, but in any event not
later than the date of delivery of the Company Net Assets
Statement.
Between the Closing Date and February 10, 1996, all inventory
will be physically counted and a shrink adjustment calculated in
accordance with the Warehouse Inventory Procedures and the Store
Inventory Procedures described in Appendix C to Schedule 3.4B (the
"Shrink Adjustment"). In calculating Company Net Assets, the
inventory value reflected on the Closing Balance Sheet shall be
adjusted by the amount of the Shrink Adjustment. Buyer, Seller
and their respective accountants shall have the opportunity to
observe the physical count of the inventory.
As soon as reasonably practicable after completion of the
physical inventories and calculation of the Shrink Adjustment,
Coopers shall prepare and deliver a Company Net Assets Statement in
substantially the form of Schedule 3.4A, which will include a
calculation of the Cash Purchase Price in the form of Appendix A
thereto. Assets and liabilities on the Company Net Assets
Statement will be equal to such items in the Closing Balance Sheet
except as otherwise specified in Schedule 3.4A and will exclude
the impact of the Accounting Policy Changes and will reflect
property on the gross cost basis. The Company Net Assets
Statement will exclude those assets and liabilities detailed in
Schedule 3.4B, including Appendix A thereto, under the columns
titled "Items to be Assumed/Retained by Seller" and "Other
Adjustments." "Company Net Assets" shall mean the net asset
figure appearing on the Company Net Assets Statement.
Schedule 3.4B sets forth Company Net Assets as set forth on
an estimated basis as of October 30, 1995. The "Target Net Asset
Amount" shall mean $968,372,000 (which amount equals the net asset
figure shown under the column styled "Estimated Statement of Net
Assets" on said Schedule 3.4B)."
Buyer shall cause the Company and its Subsidiaries to
maintain through January 31, 1996 the shortage component of the
field and store management incentive program of the Company and
its Subsidiaries as in effect prior to Closing.
1.1.2. The Notes to Schedule 3.4A to the Stock Purchase Agreement
are hereby amended by adding the following:
"8) Merchandise inventories, FIFO - Balance is taken from the
Closing Balance Sheet adjusted by the Shrink Adjustment."
1.1.3. There is hereby added a new Appendix C to Schedule 3.4B to
the Stock Purchase Agreement in the form of such Appendix C attached to
this Amendment.
1.1.4. Note 2 to Schedule 3.4A to the Stock Purchase Agreement is
hereby amended and restated in its entirety as follows:
"2) Cash - Balance represents change funds in each open store
plus all petty cash funds."
1.1.5. The second sentence of Note 1 to Schedule 3.4B is hereby
amended by deleting the words "home office" and substituting therefor
the word "all."
1.2. Section 4.1.7. Section 4.1.7 of the Stock Purchase Agreement is
hereby amended by deleting the first two sentences therefrom and substituting
therefor the following sentence:
"Except as set forth on Schedule 4.1.7, the Company has no
Subsidiaries."
Schedule 4.1.7 attached to the Stock Purchase Agreement is hereby
deleted in its entirety and replaced by Schedule 4.1.7 attached to this
Amendment.
1.3. Section 6.14 and Section 6.18. The following stores shall be
deemed to be included under the caption "Permitted Future Store Locations" on
the Section 6.l4 Letter and designated as a Seller Store under the caption
"Open Store Schedule" on the Store Schedule:
#697 Fresno, CA
#695 Chicago (6 Corners), IL
#034 E. Islip, N.Y
1.4. Section 9.5. Schedule 9.5 and Schedule 9.5A attached to the Stock
Purchase Agreement are hereby deleted in their entirety and replaced by
Schedule 9.5 and Schedule 9.5A attached to this Amendment.
1.5. New Section 14. There is hereby added to the Stock Purchase
Agreement the following new Section 14:
"14. ADDITIONAL PROVISIONS.
14.1. Selden, New York Store (Marshalls No. 454). In order to
confirm the continuation of an existing arrangement involving Bob's of
Selden, NY, Inc. ("Bob's-Selden") and the Company, Seller agrees to
cause Bob's-Selden to enter into an agreement (the "Bob's-Selden
Agreement") to pay to Buyer on the first day of each calendar month
beginning with December, 1995 through and including December, 2018, in
immediately available funds, the amount set forth below during the
respective periods set forth below:
Period Monthly Payment
12/1/95 - 12/31/98 $10,989.08
1/1/99 - 3/31/2000 $19,844.33
4/1/2000 - 12/31/2003 $19,398.25
1/1/2004 - 12/31/2008 $20,685.50
1/1/2009 - 3/31/2010 $21,972.83
4/1/2010 - 12/31/2013 $21,377.42
1/1/2014 - 12/31/2018 $22,664.67
; provided, however, that such payment obligations shall terminate upon
termination of the lease of the retail store currently leased by
Bob's-Selden to which such payment obligations relate. Any amount not
paid on the specified date shall bear interest at the rate of 10% per
annum. Seller shall cause Bob's, Inc. to provide a guarantee of the
foregoing payment obligations (the "Bob's Parent Guarantee). Seller
shall provide Buyer with executed original copies of the Bob's-Selden
Agreement and the Bob's Parent Guarantee within 30 days following the
Closing.
14.2. Marshalls of Honolulu, HI, Inc. Radius Restriction.
Reference is hereby made to that certain Lease between Victoria Ward,
Limited and Marshalls of Honolulu, HI., Inc. (the "Honolulu Lease").
Seller shall, and shall cause its affiliates (as defined in the Honolulu
Lease) to, take no action which shall permit the landlord under the
Honolulu Lease to collect additional rent as a result of the
circumstances described in Section 6.02 of the Honolulu Lease. Buyer
hereby agrees with Seller that the Seller's retail store divisions
(other than the Company and its Subsidiaries), as currently operated,
do not constitute a "business similar to or competing with the business
conducted at the demised premises" within the meaning of Section 6.02 of
the Honolulu Lease, and accordingly, operating such divisions as
currently operated does not violate the provisions of this Section 14.2.
14.3. Various Equipment and Software.
14.3.1. With effect from and as of the Closing, Seller (or
the applicable Affiliate of Seller) shall assign to the Company or
one of its Subsidiaries all of Seller's or such Affiliate's right,
title and interest under the leases pursuant to which the Company
and its Subsidiaries use store point-of-sale equipment and store
RS/6000 equipment, but only to the extent such leases relate to
such equipment to be used in the retail stores of the Company and
its Subsidiaries to be open following the Closing. The obligation
to make such assignment shall cease to exist if following Seller's
use of its reasonable best efforts (and subject to the next
sentence) Seller cannot obtain any third party consent required to
effect such assignment pursuant to the applicable lease
documentation. If after use of reasonable best efforts by Seller
to obtain such consent without the requirement of the payment of
any fee to any such third party to obtain such consent, a fee is
so required to obtain such consent, then Buyer and Seller shall
each bear one-half of such fee or, at the election of Buyer,
Seller shall be released from any continuing obligation under this
Section 14.3.1 to obtain any such required consent or to make such
assignment. If any assignment pursuant to this Section 14.3.1 is
effected, the Company shall assume all obligations of Seller and
its Affiliates under such leases with respect to the equipment
subject to such assignment.
14.3.2. Seller and Buyer hereby agree that each of the
Company and Seller independently has full legal right, title and
ownership in and to the "Retail Expert" software, the Genesis
financial software and the software (the "Peoplesoft
Improvements") developed by the Seller, the Company and their
respective Affiliates related to the Peoplesoft software licensed
to the Seller (the "Peoplesoft Software"); provided, however, that
the Buyer and its Affiliates (including the Company and its
Subsidiaries) shall not have any right to the name "Retail Expert"
in respect of the "Retail Expert" software. The "Retail Expert"
software, the Genesis financial software and the Peoplesoft
Improvements are referred to herein collectively as the
"Applicable Software." The right, title and interest referred to
in the first sentence of this Section 14.3.2 is only in respect of
the Applicable Software as developed through the Closing. None of
the Seller or its Subsidiaries shall have any right to any
improvements made to the Applicable Software following the Closing
by Buyer or its Subsidiaries and none of Buyer or its Subsidiaries
shall have any right to any improvements made to the Applicable
Software following the Closing by Seller or its Subsidiaries. At
the option of Buyer, Seller shall sell to Buyer one copy of the
Peoplesoft Software at the per copy price originally paid by
Seller to acquire the license to the Peoplesoft Software. Seller's
obligation to effect such sale shall be subject to obtaining,
without cost to Seller, any required consent of the licensor under
such license.
14.4. ADS Project. Seller shall promptly pay over to the Company
following the Closing any rebates received under the ADS project insofar
as such rebates are attributable to the participation in such project of
the Company or any of its Subsidiaries.
14.5. American Express Corporate Cards. From and after the
Closing, the employees of the Company and its Subsidiaries who use
American Express charge cards pursuant to the corporate card program of
Seller shall cease to participate in such program and shall commence
participation in the American Express corporate card program of Buyer.
14.6. Wilsons. To the extent following the Closing, the Company
and its Subsidiaries possess any merchandise inventories held on
consignment for the Wilsons retail store chain ("Wilsons"), the Company
and its Subsidiaries will return such inventories to Wilsons.
Notwithstanding anything to the contrary set forth in the definition of
the term "Excluded Liabilities", the Company and its Subsidiaries shall
pay to Wilsons any amounts owed and unpaid to Wilsons as of the Closing
in respect of the consignment arrangements existing between Wilsons and
the Company prior to Closing to the extent a payable or other liability
in respect of such amounts is recorded on the Closing Balance Sheet and
is included in the determination of the amount of Company Net Assets.
14.7. Footaction. Notwithstanding anything to the contrary set
forth in the definition of the term "Excluded Liabilities," the Company
and its Subsidiaries shall pay to the Footaction retail store chain
("Footaction") any amounts owed and unpaid to Footaction as of the
Closing in respect of merchandise inventory purchased by the Company and
its Subsidiaries from Footaction prior to the Closing to the extent a
payable or other liability in respect of such amounts is recorded on the
Closing Balance Sheet and is included in the determination of Company
Net Assets.
14.8. Store No. 378. The Company shall pay to Seller the amount
of any cash payments or rental reductions received after the date hereof
by the Company or any of its Subsidiaries in respect of the current
lease for Store No. 378 to the extent such cash payments or rental
reductions are attributable to the obligations of the landlord to
reimburse the Company or any of its Subsidiaries for the repair of
earthquake damage previously incurred at such store. The Company shall
make such payments to Seller promptly following receipt of any such cash
payments or as and when the amounts of rental reductions would otherwise
have been payable to the landlord in the absence of the agreement of the
landlord to accept reduced rents.
2. Consent to Intercompany Transfer of Buyer Stock. Buyer hereby consents
to the transfer by Seller of the Buyer Stock to a wholly owned Subsidiary of
Seller (the "Transferee Subsidiary"); provided, that any event which causes
the Transferee Subsidiary to cease to be a wholly owned Subsidiary of Seller
shall be deemed to be a transfer of Voting Securities by Subscriber within the
meaning of the Standstill and Registration Rights Agreement. Effective upon
the transfer of the Buyer Stock to the Transferee Subsidiary, all of the terms
and provisions of the Preferred Stock Subscription Agreement and the Standstill
and Registration Rights Agreement shall be binding upon and inure to the
benefit of the Transferee Subsidiary in the capacity of the Subscriber
thereunder. Following such transfer, such terms and provisions shall also
continue to be binding upon and inure to the benefit of Seller in the capacity
of the Subscriber thereunder.
3. Effect on Stock Purchase Agreement. Except to the extent of the
amendments set forth specifically herein, all provisions of the Stock Purchase
Agreement are and shall remain in full force and effect and are hereby
ratified and confirmed in all respects, and the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver or amendment of
any provision of the Stock Purchase Agreement not specifically amended herein.
4. Execution in Counterparts; Effectiveness. This Amendment may be
executed in any number of counterparts, each of which shall be deemed for all
purposes to be an original, but all of which together shall constitute one and
the same Amendment. This Amendment shall become effective immediately upon
execution.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Amendment Number One to be executed, as of the date
first above written by their respective officers thereunto duly authorized.
SELLER: MELVILLE CORPORATION
By
Name:
Title:
BUYER: THE TJX COMPANIES, INC.
By
Name:
Title:
Standstill and Registration Rights Agreement
This Standstill Agreement (the "Agreement"), dated as of November 17,
1995, is
between Melville Corporation, a New York corporation ("Subscriber"), and The
TJX Companies, Inc., a Delaware corporation ("Issuer").
WHEREAS, simultaneously with the execution of this Agreement, Subscriber
is acquiring shares of Issuer's Series D Cumulative Convertible Preferred
Stock, par value $1.00 per share (the "Series D Preferred Stock") and shares
of Issuer's Series E Cumulative Convertible Preferred Stock, par value $1.00
per share (the "Series E Preferred Stock" and together with the Series D
Preferred Stock, the "Preferred Stock"), pursuant to a Preferred Stock
Subscription Agreement dated as of the date hereof (the "Subscription
Agreement") between Subscriber and Issuer;
WHEREAS, Subscriber and Issuer entered into the Subscription Agreement
pursuant to, and in connection with the transactions contemplated by, the
Stock Purchase Agreement dated as of October 14, 1995 (as amended, the
"Purchase Agreement") between Subscriber and Issuer; and
WHEREAS, Issuer and Subscriber desire to establish in this Agreement
certain conditions of Subscriber's relationship with Issuer;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Subscription Agreement and the Purchase Agreement,
the parties hereto agree as follows:
Article I
Definitions; Representations and Warranties
Section 1.1 Definitions. Except as otherwise specified herein, defined
terms used in this Agreement shall have the respective meanings assigned to
such terms in the Purchase Agreement. Unless otherwise specified all
references to "days" shall be deemed to be references to calendar days.
Section 1.2 Representations and Warranties of Issuer. Issuer
represents and warrants to Subscriber as follows:
(a) The execution, delivery and performance by Issuer of this
Agreement and the consummation by Issuer of the transactions
contemplated by this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action on its part.
This Agreement constitutes a legal, valid and binding agreement of
Issuer enforceable against Issuer in accordance with its terms (i) except
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and
preferential transfers, and (ii) subject to the limitations imposed by
general equitable principles (regardless of whether such enforceability
is considered in a proceeding at law or in equity); and
(b) The execution, delivery and performance of this Agreement by
Issuer does not and will not contravene or conflict with or constitute a
default under Issuer's Charter or By-laws.
Section 1.3 Representations and Warranties of Subscriber. Subscriber
represents and warrants to Issuer as follows:
(a) The execution, delivery and performance by Subscriber of this
Agreement and the consummation by Subscriber of the transactions
contemplated by this Agreement are within its corporate powers and have
been duly authorized by all necessary corporate action on its part.
This Agreement constitutes a legal, valid and binding agreement of
Subscriber enforceable against Subscriber in accordance with its terms
(i) except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, including
the effect of statutory and other laws regarding fraudulent conveyances
and preferential transfers, and (ii) subject to the limitations imposed
by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity);
(b) The execution, delivery and performance of this Agreement by
Subscriber does not and will not contravene or conflict with or
constitute a default under Subscriber's Charter or By-laws; and
(c) Subscriber "beneficially owns" (as such term is defined in
Rule 13d-3 under the Exchange Act) the shares of the Preferred Stock
issued to it pursuant to the Subscription Agreement and neither
Subscriber nor any "affiliate" or "associate" (such terms being used in
this Agreement as such terms are defined in Rule 12b-2 under the
Exchange Act), owns any other Voting Securities (as defined in Section
2.01 herein).
Article II
Term
Section 2.4 Term. The term (the "Term") of this Agreement shall
commence on the date hereof and shall continue until the date on which the
Voting Power of the Voting Securities, on a fully diluted basis, beneficially
owned by Subscriber shall represent less than three percent (3%) of the Total
Voting Power. For the purposes of this Agreement (i) the term "Voting
Securities" shall mean any securities entitled to vote generally in the
election of directors of Issuer, or any direct or indirect rights or options
to acquire any such securities or any securities (including without limitation
the Preferred Stock) convertible or exercisable into or exchangeable for such
securities, whether or not such securities are so convertible, exercisable or
exchangeable at the time of determination, (ii) the term "Voting Power" shall
mean the voting power in the general election of directors of Issuer, and
(iii) the term "Total Voting Power" shall mean the total combined Voting Power
of all the Voting Securities then outstanding and entitled to vote; provided,
however, that for purposes of this Agreement, the Voting Power of the
Preferred Stock on any date shall mean the voting power of the shares of the
Issuer's common stock, par value $1.00 per share ("Common Stock"), into which
the shares of Preferred Stock would be convertible on such date, assuming for
this purpose only that the Automatic Conversion Date (as defined in the Series
D Preferred Stock and the Series E Preferred Stock, respectively) were such
date, at the Exchange Rate (as so defined) then in effect.
Article III
Standstill and Voting Provisions
Section 3.5 Restrictions of Certain Actions by Subscriber. During the
Term, Subscriber will not, and will cause each of its affiliates and
associates not to, singly or as part of a partnership, limited partnership,
syndicate or other group (as those terms are used in Section 13(d)(3) of the
Exchange Act), directly or indirectly:
(a) acquire, offer to acquire, or agree to acquire, by purchase,
gift or otherwise, any Voting Securities, except pursuant to a stock
split, stock dividend, rights offering, recapitalization,
reclassification or similar transaction;
(b) make or in any way participate in any "solicitation" of
"proxies" to vote (as such terms are defined in Rule 14a-1 under the
Exchange Act), solicit any consent or communicate with or seek to advise
or influence any person or entity with respect to the voting of any
Voting Securities or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to Issuer;
(c) form, join or encourage the formation of, any "person"
within the meaning of Section 13(d)(3) of the Exchange Act with respect
to any Voting Securities; provided that this Section 3.01(c) shall not
prohibit any such arrangement solely among Subscriber and any of its
wholly-owned Subsidiaries;
(d) deposit any Voting Securities into a voting trust or subject
any such Voting Securities to any arrangement or agreement with respect
to the voting thereof; provided that this Section 3.01(d) shall not
prohibit any such arrangement solely among Subscriber and any of its
wholly-owned Subsidiaries;
(e) initiate, propose or otherwise solicit stockholders of the
Issuer for the approval of any stockholder proposal with respect to
Issuer as described in Rule 14a-8 under the Exchange Act, or induce or
attempt to induce any other person to initiate any such stockholder
proposal;
(f) seek election to or seek to place a representative on the
Board of Directors of Issuer or seek the removal of any member of the
Board of Directors of Issuer;
(g) call or seek to have called any meeting of the stockholders
of Issuer;
(h) otherwise act to seek to control, direct or influence the
management, policies or affairs of Issuer;
(i) except as otherwise provided in Section 4.02 or Article V,
sell or otherwise transfer in any manner any Voting Securities to any
"person" (within the meaning of Section 13(d)(3) of the Exchange Act)
who to the knowledge of Subscriber beneficially owns or who as a result
of such sale or transfer will beneficially own at least three percent
(3%) of the Total Voting Power or who, without the approval of the Board
of Directors of Issuer, has proposed a business combination or similar
transaction with, or a change of control of, Issuer or who has proposed
a tender offer for Voting Securities or who has discussed with Subscriber
the possibility of proposing a business combination or similar
transaction with, or a change in control of, Issuer or a tender offer
for Voting Securities; provided, however, that insofar as this clause
(i) has application to a sale or other transfer by Subscriber to an
institutional investor pursuant to Section 4.01, the reference to the
words "three percent (3%)" shall be deemed to be deleted from this
clause (i) and replaced with the words "five percent (5%)";
(j) solicit, seek to effect, negotiate with or provide any
information to any other party with respect to, or make any statement or
proposal, whether written or oral, to the Board of Directors of Issuer
or any director or officer of Issuer or otherwise make any public
announcement or proposal whatsoever with respect to, any form of
business combination transaction involving Issuer, including, without
limitation, a merger, exchange offer or liquidation of Issuer's assets,
or any acquisition, disposition, restructuring, recapitalization or
similar transaction with respect to Issuer; or
(k) instigate or encourage any third party to do any of the
foregoing.
If Subscriber or any of its affiliates or associates owns or acquires
any Voting Securities in violation of this Agreement, such Voting Securities
shall immediately be disposed of to persons who are not affiliates or
associates thereof but only in compliance with the provisions of this Section
3.01; provided, however, that Issuer may also pursue any other available
remedy to which it may be entitled as a result of such violation.
Section 3.6 Voting. (a) During the Term, whenever Subscriber (or any
of its affiliates or associates) shall have the right to vote their Voting
Securities, Subscriber (and any such affiliates or associates) shall (i) be
present, in person or represented by proxy, at all stockholder meetings of
Issuer so that all Voting Securities beneficially owned by it and its
affiliates and associates shall be counted for the purpose of determining the
presence of a quorum at such meetings, and (ii) subject to Section 3.02(b)
below, vote or cause to be voted, or consent with respect to, all Voting
Securities beneficially owned by it and its affiliates and associates in the
manner recommended by Issuer's Board of Directors, except that during any
period or at any time when there shall be in full force and effect a valid
order or judgment of a court of competent jurisdiction or a ruling,
pronouncement or requirement of the New York Stock Exchange, Inc. ("NYSE") to
the effect that the foregoing provisions of this Section 3.02 are invalid,
void, enforceable or not in accordance with NYSE policy, then Subscriber will,
if so requested by the Board of Directors of Issuer, vote or cause to be voted
all of its Voting Securities beneficially owned by it and its affiliates and
associates in the same proportion as the votes cast by or on behalf of the
other holders of Issuer's Voting Securities.
(b) Notwithstanding anything to the contrary contained in Section
3.02(a) above, Subscriber shall have the right to vote freely, without regard
to any request or recommendation of the Board of Directors of Issuer, with
respect to the matters specified in Section 7 of the Certificate of
Designations establishing the terms of the Series D Preferred Stock and
Section 7 of the Certificate of Designations establishing the terms of the
Series E Preferred Stock.
Article IV
Transfer Restrictions
Section 4.7 Right of First Offer. (a) If Subscriber desires to
transfer any Voting Securities, it shall in each case comply with the
provisions of Section 3.01 and give written notice ("Subscriber's Notice") to
Issuer (i) stating that it desires to make such transfer, and (ii) setting
forth the number of shares of Voting Securities proposed to be transferred (the
"Offered Shares"), the cash price per share that Subscriber proposes to be
paid for such Offered Shares (the "Offer Price"), and the other material terms
and conditions of such transfer. Subscriber's Notice shall constitute an
irrevocable offer by Subscriber to sell to Issuer the Offered Shares at the
Offer Price in cash.
(b) Within 5 Business Days after receipt of Subscriber's Notice,
Issuer may elect to purchase all (but not less than all) of the Offered Shares
at the Offer Price in cash by delivery of a notice ("Issuer's Notice") to
Subscriber stating Issuer's irrevocable acceptance of the Offer.
(c) If Issuer fails to elect to purchase all of the Offered Shares
within the time period specified in Section 4.01(b), then Subscriber may,
subject to compliance with the provisions of Section 3.01, within a period of
120 days following the expiration of the time period specified in Section
4.01(b), transfer (or enter into an agreement to transfer) all or any Offered
Shares for cash; provided, that if the purchase price per share to be paid by
any purchaser of the Offered Shares is less than 90% of the Offer Price (the
"Reduced Transfer Price"), Subscriber shall promptly provide written notice
(the "Reduced Transfer Price Notice") to Issuer of such intended transfer
(including the material terms and conditions thereof) and Issuer shall have
the right, exercisable by delivery of a written election notice to Subscriber
within five Business Days of receipt of such notice, to purchase such Offered
Shares at the Reduced Transfer Price.
(d) If Issuer fails to elect to purchase the Offered Shares at the
Offer Price (or, if applicable, the Reduced Transfer Price) within the
relevant time period specified in Section 4.01(b) (or, if applicable, Section
4.01(c)) and Subscriber shall not have transferred or entered into an
agreement to transfer the Offered Shares prior to the expiration of the
120-day period specified in Section 4.01(c), the right of the first offer
under this Section 4.01 shall again apply in connection with any subsequent
transfer of such Offered Shares.
(e) Any purchase of Voting Securities by Issuer pursuant to this
Section 4.01 shall be on a mutually determined closing date which shall be not
less than 30 days nor more than 45 days after the last notice is given with
respect to such purchase. The closing shall be held at 10:00 A.M., local
time, at the principal office of Issuer, or at such other time or place as the
parties mutually agree.
(f) On the closing date, Subscriber shall deliver (i) certificates
representing the shares of Voting Securities being sold, free and clear of any
Lien, and (ii) such other documents, including evidence of ownership and
authority, as Issuer may reasonably request. The purchase price shall be paid
by wire transfer of immediately available funds no later than 2:00 P.M. on the
closing date.
(g) This Section 4.01 shall not apply to Subscriber's sale of Voting
Securities in an underwritten public offering registered under the Securities
Act pursuant to Article V.
Section 4.8 Rights Pursuant to a Tender Offer. Subscriber shall have
the right to sell or exchange all its Voting Securities pursuant to a tender
or exchange offer for at least a majority of the Voting Securities (an
"Offer"). However, prior to such sale or exchange, Subscriber shall give
Issuer the opportunity to purchase such Voting Securities in the following
manner:
(i) Subscriber shall give notice (the "Tender Notice") to Issuer
in writing of its intention to sell or exchange Voting Securities in
response to an Offer no later than three calendar days prior to the
latest time (including any extensions) by which Voting Securities must
be tendered in order to be accepted pursuant to such Offer, specifying
the amount of Voting Securities proposed to be tendered by Subscriber
(the "Tendered Shares") and the purchase price per share specified in
the Offer at the time of the Tender Notice.
(ii) Issuer shall have the right to purchase all, but not part,
of the Tendered Shares exercisable by giving written notice (an
"Exercise Notice") to Subscriber at least two calendar days prior to the
latest time after delivery of the Tender Notice by which Voting
Securities must be tendered in order to be accepted pursuant to the
Offer (including any extensions thereof) and depositing in escrow (or
similar arrangement) a sum in cash sufficient to purchase all Tendered
Shares at the price then being offered in the Offer, without regard to
any provision thereof with respect to proration or conditions to the
offeror's obligation to purchase. The delivery by Issuer of an Exercise
Notice and deposit of funds as provided above in response to a Tender
Notice will, except as provided below, constitute an irrevocable
agreement by Issuer to purchase, and Subscriber to sell, the Tendered
Shares in accordance with the terms of this Section 4.02, whether or not
the Offer or any other tender or exchange offer (a "Competing Tender
Offer") for Voting Securities that was outstanding during the Offer is
consummated.
(iii) The purchase price to be paid by Issuer for any Voting
Securities purchased by it pursuant to this Section 4.02 shall be the
highest price offered or paid in the Offer or in any Competing Tender
Offer. For purposes hereof, the price offered or paid in a tender or
exchange offer for Voting Securities shall be deemed to be the price
offered or paid pursuant thereto, without regard to any provisions
thereof with respect to proration or conditions to the offeror's
obligation to purchase. If the purchase price per share specified in
the Offer includes any property other than cash (the "Offer Noncash
Property"), the purchase price per share at which Issuer shall be
entitled to purchase all, but not part, of the Tendered Shares shall be
(y) the amount of cash per share, if any, specified in such Offer (the
"Cash Portion"), plus (z) an amount of cash per share equal to the value
of the Offer Noncash Property per share (the "Cash Value of Offer
Noncash Property"), as determined in good faith by the mutual agreement
of the parties hereto, or if the parties cannot agree, by a nationally
recognized investment banking firm selected by mutual agreement of the
parties. If Issuer exercises its right of first refusal by giving an
Exercise Notice, the closing of the purchase of the Voting Securities
with respect to such right (the "Closing") shall take place at 3:00
p.m., local time (or, if earlier, two hours before the latest time by
which Voting Securities must be tendered in order to be accepted
pursuant to the Offer), on the last day on which Voting Securities must
be tendered in order to be accepted pursuant to the Offer (including any
extensions thereof) (the "Latest Tender Date"), and Issuer shall pay the
purchase price for the Voting Securities specified above. Subscriber
shall be entitled to rescind its Tender Notice at any time prior to the
Latest Tender Date by Notice in writing to Issuer; provided, however,
that if on or before the Latest Tender Date, Issuer publicly announces
that Issuer has approved, proposed or entered into an agreement with
respect to (either individually or together with any other persons) a
recapitalization, reorganization or business combination with respect to
Issuer or all or substantially all of its assets, Subscriber shall be
entitled to rescind its Tender Notice by notice in writing to Issuer at
any time prior to the Closing on the Latest Tender Date. If Subscriber
rescinds its Tender Notice pursuant to the immediately preceding
sentence, Issuer's Exercise Notice with respect to such Offer shall be
deemed to be immediately rescinded and Subscriber's disposition of its
Voting Securities in response to the Offer with respect to which the
Tender Notice is rescinded or any other Offer shall again be subject to
all of the provisions of this Section 4.02.
(iv) If Issuer does not exercise its right of first refusal set
forth in this Section 4.02 within the time specified for such exercise
by giving an Exercise Notice, then Subscriber shall be free to accept,
for all its Voting Securities, the Offer with respect to which the
Tender Notice was given (including any increases and extensions thereof).
Section 4.9 Assignment of Rights. Issuer may assign any of its rights
of first refusal under this Article IV to any Subsidiary or Affiliate of
Issuer without the consent of Subscriber, provided, however, that no such
assignment shall relieve Issuer of any of its obligations pursuant to this
Article IV. In the event that Issuer elects to exercise a right of first
refusal under this Article IV, Issuer may specify in its Exercise Notice (or
thereafter prior to purchase) another such Person as its designee to purchase
the Voting Securities to which such notice relates.
Article V
Registration Rights
Section 5.10 Registration Upon Request. At any time commencing on the
date hereof and continuing thereafter, Subscriber shall have the right to make
written demand upon Issuer, on not more than two separate occasions (subject
to the provisions of this Section 5.01), to register under the Securities Act,
shares of Series E Preferred Stock or shares of Common Stock received by
Subscriber upon conversion or redemption of shares of Preferred Stock (such
shares of Series E Preferred Stock and Common Stock being referred to as the
"Subject Stock"), and Issuer shall use its best efforts to cause such shares
to be registered under the Securities Act as soon as reasonably practicable so
as to permit the sale thereof promptly; provided, however, that each such
demand shall cover at least $40 million liquidation preference of Series E
Preferred Stock (or any balance thereof exceeding $15 million) or 2 million
shares of Common Stock (subject to adjustment for stock splits, reverse stock
splits, stock dividends and similar events after the date hereof). In
connection therewith, Issuer shall prepare, and within 120 days of the receipt
of the request, file, on Form S-3 if permitted or otherwise on the appropriate
form, a registration statement under the Securities Act to effect such
registration. Subscriber agrees to provide all such information and materials
and to take all such action as may be reasonably required in order to permit
Issuer to comply with all applicable requirements of the Securities Act, the
rules and regulations thereunder and the Securities and Exchange Commission
(the "SEC") and to obtain any desired acceleration of the effective date of
such registration statement. If the offering to be registered is to be
underwritten, the managing underwriter shall be selected by Subscriber and
shall be reasonably satisfactory to Issuer and Subscriber shall enter into an
underwriting agreement containing customary terms and conditions.
Notwithstanding the foregoing, Issuer (i) shall not be obligated to prepare or
file more than one registration statement other than for purposes of a stock
option or other employee benefit or similar plan during any twelve-month
period and (ii) shall be entitled to postpone for a reasonable period of time,
the filing of any registration statement otherwise required to be prepared and
filed by Issuer if (A) Issuer is, at such time, conducting or about to conduct
an underwritten public offering of securities and is advised by its managing
underwriter or underwriters in writing (with a copy to Subscriber), that such
offering would, in its or their opinion, be materially adversely affected by
the registration so requested, or (B) Issuer determines in its reasonable
judgment and in good faith that the registration and distribution of the
shares of Subject Stock would interfere with any announced or imminent
material financing, acquisition, disposition, corporate reorganization or
other material transaction of a similar type involving Issuer. In the event
of such postponement, Subscriber shall have the right to withdraw the request
for registration by giving written notice to Issuer within 20 days after
receipt of the notice of postponement (and, in the event of such withdrawal,
such request shall not be counted for purposes of determining the number of
registrations to which Subscriber is entitled pursuant to this Section 5.01).
Issuer shall not grant to any other holder of its securities, whether
currently outstanding or issued in the future (other than as provided in the
Share Purchase Agreement dated as of April 15, 1992 among Issuer and the other
parties thereto and the Exchange Agreement dated as of August 20, 1992 among
the same parties, as presently in effect, relating to Issuer's former Series A
Cumulative Convertible Preferred Stock and its New Series A Cumulative
Convertible Preferred Stock (collectively, the "Series A Agreements")), any
incidental or piggyback registration rights with respect to any registration
statement filed pursuant to a demand registration under this Section 5.01.
Without the prior consent of Subscriber (other than as provided in the Series
A Agreements), Issuer will not permit any other holder of its securities to
participate in any offering made pursuant to a demand registration under this
Section 5.01.
In the event that Issuer does not redeem all of the then outstanding
shares of Series D Preferred Stock pursuant to Section 4(b) of the Certificate
of Designation of the Series D Preferred Stock (unless Subscriber shall have
elected to convert any such shares following receipt of notice of redemption
pursuant to Section 4(a) of such Certificate), (i) Subscriber shall be
entitled to an additional demand right under the first sentence of this
Section 5.01, subject to the minimum offering amounts requirement referred to
above and (ii) Issuer shall, from time to time, at Subscriber's reasonable
request, provide an opportunity for senior officers of Subscriber to meet with
senior officers of Issuer to discuss the business and affairs of Issuer.
Section 5.11 Incidental Registration Rights. If Issuer proposes to
register any of its Common Stock under the Securities Act (other than (i)
pursuant to Section 5.01 hereof, (ii) securities to be issued pursuant to a
stock option or other employee benefit or similar plan, and (iii) securities
proposed to be issued in exchange for other securities or assets (other than
cash) or in connection with a merger or consolidation with another
corporation), Issuer shall, as promptly as practicable, give written notice to
Subscriber of Issuer's intention to effect such registration. If, within 15
days after receipt of such notice, Subscriber submits a written request to
Issuer specifying not less than one million shares of Common Stock
constituting Subject Stock that are then beneficially owned by Subscriber and
that Subscriber proposes to sell or otherwise dispose of in accordance with
this Section 5.02, Issuer shall use its best efforts to include the shares
specified in Subscriber's request in such registration. Subscriber may
exercise its rights under this Section 5.02 on no more than three separate
occasions; provided that if the number of securities that Subscriber had
initially requested be included in a registration under this Section 5.02 is
reduced pursuant to clause (C) below and Subscriber withdraws from such
registration, then Subscriber's request shall not be counted as one of such
three requests. If the offering pursuant to such registration statement is to
be made by or through underwriters, the Subscriber and such underwriter shall
execute an underwriting agreement in customary form. If the managing
underwriter reasonably determines in good faith and advises Subscriber that
the inclusion in the registration statement of all the Common Stock proposed
to be included by all holders of Common Stock entitled to participate (other
than on a demand basis) would interfere with the successful marketing of the
securities proposed to be registered, then Issuer will include in such
registration that number of such shares of Common Stock which does not exceed
the number which such managing underwriter reasonably determines in good faith
can be sold without interfering with the successful marketing of the
securities proposed to be registered based upon the following order of
priority: (A) first, the securities Issuer proposes to sell, (B) second, the
securities any participant exercising demand registration rights proposes to
sell and (C) third, the securities of each other Person who is entitled to
participate (other than on a demand basis) in such registration (including
Subscriber) on a pro rata basis based on the number of shares of Common Stock
owned by each such Person; provided that if the number of securities that
Subscriber had initially requested be included in a registration under this
Section 5.02 is reduced pursuant to clause (C), Subscriber may withdraw all
securities from such registration. No registration effected under this
Section 5.02 shall relieve Issuer of its obligation to effect any registration
upon request under Section 5.01. If Subscriber has been permitted to
participate in a proposed offering pursuant to this Section 5.02, Issuer
thereafter may determine either not to file a registration statement relating
thereto, or to withdraw such registration statement, or otherwise not to
consummate such offering, without any liability hereunder. Any underwriters
participating in a distribution of Subject Stock pursuant to Sections 5.01 and
5.02 hereof shall use all reasonable efforts to effect as wide a distribution
as is reasonably practicable, and in no event shall any sale (other than a
sale to underwriters making such a distribution) of shares of Subject Stock be
made knowingly to any person (including its affiliates or associates and any
group in which that person or its affiliates or associates shall be a member
if Subscriber or underwriters know of the existence of such a group or
affiliate or associate) that, after giving effect to such sale, would
beneficially own at least three percent (3%) of the Total Voting Power.
Subscriber shall use all reasonable efforts to secure the agreement of the
underwriters, in connection with any underwritten offering of its Subject
Stock, to comply with the foregoing.
Section 5.12 Registration Mechanics. In connection with any offering
of shares of Subject Stock registered pursuant to Section 5.01 and 5.02
herein, Issuer shall (i) furnish to Subscriber such number of copies of any
prospectus (including preliminary and summary prospectuses) and conformed
copies of the registration statement (including amendments or supplements
thereto and, in each case, all exhibits) and such other documents as it may
reasonably request, but only while Issuer shall be required under the
provisions hereof to cause the registration statement to remain current;
(ii)(A) use its best efforts to register or qualify the Subject Stock covered
by such registration statement under such blue sky or other state securities
laws for offer and sale as Subscriber shall reasonably request and (B) keep
such registration or qualification in effect for so long as the registration
statement remains in effect; provided, however, that Issuer shall not be
obligated to qualify to do business as a foreign corporation under the laws of
any jurisdiction in which it shall not then be qualified or to file any
general consent to service of process in any jurisdiction in which such a
consent has not been previously filed or subject itself to taxation in any
jurisdiction wherein it would not otherwise be subject to tax but for the
requirements of this Section 5.03; (iii) use its best efforts to cause all
shares of Subject Stock covered by such registration statement to be
registered with or approved by such other federal or state government agencies
or authorities as may be necessary in the opinion of counsel to Issuer to
enable Subscriber to consummate the disposition of such shares of Subject
Stock; (iv) at any time when a prospectus relating thereto is required to be
delivered under the Securities Act notify Subscriber upon discovery that, or
upon the happening of any event as a result of which, the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
in the light of the circumstances under which they were made, and (subject to
the good faith determination of Issuer's Board of Directors as to whether to
permit sales under such registration statement), at the request of Subscriber
promptly prepare and furnish to it a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in the light of the circumstances under
which they were made; (v) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC; (vi) use its best efforts to
list, if required by the rules of the applicable securities exchange or, if
securities of the same class are then so listed, the Subject Stock covered by
such registration statement on the New York Stock Exchange or on any other
securities exchange on which Subject Stock is then listed; and (vii) before
filing any registration statement or any amendment or supplement thereto, and
as far in advance as is reasonably practicable, furnish to Subscriber and its
counsel copies of such documents. In connection with the closing of any
offering of Subject Stock registered pursuant to Section 5.01 or 5.02, Issuer
shall (x) furnish to the underwriter, if any, unlegended certificates
representing ownership of the Subject Stock being sold in such denominations as
requested and (y) instruct any transfer agent and registrar of the Subject
Stock to release any stop transfer orders with respect to such Subject Stock.
Upon any registration becoming effective pursuant to Section 5.01 or 5.02,
Issuer shall use its best efforts to keep such registration statement
effective for a period of 60 days (or 90 days, if Issuer is eligible to use
a Form S-3, or successor form) or such shorter period as shall be necessary to
effect the distribution of the Subject Stock.
Subscriber agrees that upon receipt of any notice from Issuer of the
happening of any event of the kind described in subdivision (iv) of this
Section 5.03, it will forthwith discontinue its disposition of Subject Stock
pursuant to the registration statement relating to such Subject Stock until
its receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (iv) of this Section 5.03 and, if so directed by
Issuer, will deliver to Issuer all copies then in its possession of the
prospectus relating to such Subject Stock current at the time of receipt of
such notice. If Subscriber's disposition of Subject Stock is discontinued
pursuant to the foregoing sentence, unless Issuer thereafter extends the
effectiveness of the registration statement to permit dispositions of Subject
Stock by Subscriber for an aggregate of 60 days (or 90 days, if Issuer is
eligible to use a Form S-3, or successor form), whether or not consecutive,
the registration statement shall not be counted for purposes of determining
the number of registrations to which Subscriber is entitled pursuant to
Section 5.01.
Section 5.13 Expenses. Subscriber shall pay all agent fees and
commissions and underwriting discounts and commissions related to shares of
Subject Stock being sold by Subscriber and the fees and disbursements of its
counsel and accountants and Issuer shall pay all fees and disbursements of its
counsel and accountants in connection with any registration pursuant to this
Article V. All other fees and expenses in connection with any registration
statement (including, without limitation, all registration and filing fees,
all printing costs, all fees and expenses of complying with securities or blue
sky laws) shall (i) in the case of a registration pursuant to Section 5.01, be
borne by Issuer and (ii) in the case of a registration pursuant to Section
5.02, be shared pro rata based upon the respective market values of the
securities to be sold by Issuer, Subscriber and any other holders
participating in such offering provided, that Subscriber shall not pay any
expenses relating to work that would otherwise be incurred by Issuer
including, but not limited to, the preparation and filing of periodic reports
with the SEC.
Section 5.14 Indemnification and Contribution. In the case of any
offering registered pursuant to this Article V, Issuer agrees to indemnify and
hold Subscriber, each underwriter, if any, of the Subject Stock under such
registration and each person who controls any of the foregoing within the
meaning of Section 15 of the Securities Act, and any officer, employee or
partner of the foregoing, harmless against any and all losses, claims, damages
or liabilities (including reasonable legal fees and other reasonable expenses
incurred in the investigation and defense thereof) to which they or any of
them may become subject under the Securities Act or otherwise (collectively
"Losses"), insofar as any such Losses shall arise out of or shall be based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such Subject
Stock (as amended if Issuer shall have filed with the SEC any amendment
thereof), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the prospectus relating to the sale of such Subject
Stock (as amended or supplemented if Issuer shall have filed with the SEC any
amendment thereof or supplement thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided, however, that the indemnification contained in this
Section 5.05 shall not apply to such Losses which shall arise out of or shall
be based upon any such untrue statement or alleged untrue statement, or any
such omission or alleged omission, which shall have been made in reliance upon
and in conformity with information furnished in writing to Issuer by
Subscriber or any such underwriter, as the case may be, specifically for use
in connection with the preparation of the registration statement or prospectus
contained in the registration statement or any such amendment thereof or
supplement therein.
In the case of each offering registered pursuant to this Article V,
Subscriber agrees and each underwriter, if any, participating therein shall
severally agree, substantially in the same manner and to the same extent as
set forth in the preceding paragraph, to indemnify and hold harmless Issuer
and each person, if any, who controls Issuer within the meaning of Section 15
of the Securities Act, and the directors and officers of Issuer, with respect
to any statement in or omission from such registration statement or prospectus
contained in such registration statement (as amended or as supplemented, if
amended or supplemented as aforesaid) if such statement or omission shall have
been made in reliance upon and in conformity with information furnished in
writing to Issuer by Subscriber or such underwriter, as the case may be,
specifically for use in connection with the preparation of such registration
statement or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
Notwithstanding the provisions of this Section 5.05, no underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission, and the
Subscriber registering shares pursuant to Section 5.01 or Section 5.02 shall
not be required to contribute any amount in excess of the amount by which the
total price at which the securities of the Subscriber were offered to the
public (less underwriters' discounts and commissions) exceeds the amount of
any damages which the Subscriber has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
Each party indemnified under this Section 5.05 shall, promptly after
receipt of notice of the commencement of any claim against such indemnified
party in respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the commencement thereof. The failure of any
indemnified party to so notify an indemnifying party shall not relieve the
indemnifying party from any liability in respect of such action which it may
have to such indemnified party on account of the indemnity contained in this
Section 5.05, unless (and only to the extent) the indemnifying party was
prejudiced by such failure, and in no event shall such failure relieve the
indemnifying party from any other liability which it may have to such
indemnified party. In case any action in respect of which indemnification may
be sought hereunder shall be brought against any indemnified party and it
shall notify an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it may desire, jointly with any other indemnifying party similarly
notified, to assume the defense thereof through counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 5.05 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof, other than
reasonable costs of investigation (unless such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to those available to such
indemnifying party in which event such indemnified party, and any other
indemnified party to which any different or additional defenses apply, shall
be reimbursed by the indemnifying party for the reasonable expenses incurred
in connection with retaining one separate legal counsel for all such
indemnified parties). No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any claim or pending or threatened
proceeding in respect of which the indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability arising out of such claim or proceeding.
If the indemnification provided for in this Section 5.05 is unavailable
to an indemnified party or is insufficient to hold such indemnified party
harmless from any Losses in respect of which this Section 5.05 would otherwise
apply by its terms (other than by reason of exceptions provided herein), then
each applicable indemnifying party, in lieu of indemnifying such an
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is appropriate to reflect the relative benefits
received by and fault of the indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the offering to which
such contribution relates as well as any other relevant equitable
considerations. The relative benefit shall be determined by reference to,
among other things, the amount of proceeds received by each party from the
offering to which such contribution relates. The relative fault shall be
determined by reference to, among other things, each party's relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, and the opportunity to correct and prevent any
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party is connection with any investigation or proceeding, to
the extent such party would have been indemnified for such expenses if the
indemnification provided for in this Section 5.05 was available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.05 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1993 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Section 5.15 Limitations on Registration Rights. Notwithstanding
anything to the contrary in this Article V, all rights of Subscriber under
this Article V shall be subject to the provisions of the Series A Agreements.
To the extent that any of the provisions of this Article V conflict with any
provisions of the Series A Agreements, the provisions of the Series A
Agreements shall control and there shall be no breach of or default under
Article V of this Agreement to the extent the performance of any term of
Article V of this Agreement would cause a breach of or default under either of
the Series A Agreements.
Section 5.16 Holdback Agreements. If and to the extent requested by
the managing underwriter or underwriters, in the case of any underwritten
public offering, Subscriber agrees not to effect, except as part of such
registration, any sale of shares of Common Stock or Preferred Stock during the
14 days prior to, and during the 90-day period beginning on, the effective
date of such registration statement.
Article VI
Miscellaneous
Section 6.17 Enforcement. Subscriber, on the one hand, and Issuer, on
the other, acknowledge and agree that irreparable damage would occur if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties will be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically its provisions in any court having jurisdiction,
this being in addition to any other remedy to which they may be entitled at law
or in equity.
Section 6.18 Entire Agreement; Waivers. This Agreement, the other
Closing Agreements, the Confidentiality Agreement and the Purchase Agreement
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties with respect to such subject matter. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), shall constitute a
continuing waiver unless otherwise expressly provided nor shall be effective
unless in writing and executed (i) in the case of a waiver by Issuer, by
Issuer and (ii) in the case of a waiver by Subscriber, by Subscriber.
Section 6.19 Amendment or Modification. The parties hereto may not
amend or modify this Agreement except in such manner as may be agreed upon by
a written instrument executed by Issuer and Subscriber.
Section 6.20 Survival. All representations, warranties, covenants and
agreements made by or on behalf of any party hereto in this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
Section 6.21 Successors and Assigns. All the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and assigns (each
of which such transferees, successors and assigns shall be deemed to be a
party hereto for all purposes hereof); provided, however, that (i) neither
Issuer nor Subscriber may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the other (except as set forth
in Section 4.03) and (iii) no transfer or assignment by any party shall
relieve such party of any of its obligations hereunder.
Section 6.22 Severability. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining
provisions without including any that may be declared unenforceable.
Section 6.23 Headings. Descriptive headings are for convenience only
and will not control or affect the meaning or construction of any provision of
this Agreement.
Section 6.24 Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties, and
each such executed counterpart will be an original instrument.
Section 6.25 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing (including
telecopy or similar teletransmission), addressed as follows:
If to Seller, to it at: Melville Corporation
One Theall Road
Rye, New York 10580
Telecopier: 914-925-4052
Attention: Chief Executive Officer, Chief
Financial
Officer and General Counsel
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: 212-450-5744
Attention: Dennis S. Hersch
If to Issuer to it at: The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Telecopier: 508-390-2457
Attn: President and General Counsel
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: Arthur G. Siler, Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) in the case of any notice or communication sent other
than by mail, on the date actually delivered to such address (evidenced, in
the case of delivery by overnight courier, by confirmation of delivery from
the overnight courier service making such delivery, and in the case of a
telecopy, by receipt of a transmission confirmation form or the addressee's
confirmation of receipt), or (b) in the case of any notice or communication
sent by mail, three Business Days after being sent, if sent by registered or
certified mail, with first-class postage prepaid. Each of the parties hereto
shall be entitled to specify a different address by giving notice as aforesaid
to each of the other parties hereto.
Section 6.26 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive law of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the law of any other jurisdiction.
Section 6.27 Termination. This Agreement may be terminated by Issuer
and Subscriber by mutual written consent at any time prior to the Closing, and
this Agreement shall automatically terminate immediately upon the termination
of the Purchase Agreement in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Standstill and
Registration Rights Agreement to be executed as of the date first referred to
above.
THE TJX COMPANIES, INC.
By: ____________________________________
Name:
Title:
MELVILLE CORPORATION
By: ____________________________________
Name:
Title:
PREFERRED STOCK SUBSCRIPTION AGREEMENT
between
The TJX Companies, Inc.
as Issuer
and
Melville Corporation,
as Subscriber
Dated as of November 17, 1995
TABLE OF CONTENTS
1. Definitions............................................................1
1.1. Incorporation of Purchase Agreement Definitions............1
1.2. Cross Reference Table......................................1
1.3. Certain Definitions........................................2
2. issuance of preferred shares...........................................3
2.1. Issuance...................................................3
2.2. Time and Place of Closing..................................3
2.3. Delivery...................................................3
3. Representations and Warranties of Issuer...............................3
3.1. Corporate Matters, etc.....................................3
3.2. Litigation, etc............................................6
3.3. Disclosure.................................................6
3.4. Change in Condition........................................6
3.5. Tax Matters................................................8
4. Representations and Warranties of Subscriber...........................9
4.1. Corporate Matters..........................................9
4.2. Authorization and Enforceability...........................9
4.3. Non-Contravention, etc.....................................9
4.4. Investment Intent.........................................10
4.5. Litigation................................................11
5. Access to Premises and Information....................................11
6. Conditions to the Obligation to Close of Issuer.......................11
6.1. Representations, Warranties and Covenants.................12
6.2. Conditions under Purchase Agreement.......................12
6.3. Other Agreements..........................................12
7. Conditions to the Obligation to Close of subscriber...................12
7.1. Representations, Warranties and Covenants.................12
7.2. Conditions under Purchase Agreement.......................13
7.3. Other Agreements..........................................13
7.4. Opinion of Counsel........................................13
8. Miscellaneous.........................................................13
8.1. Entire Agreement; Waivers.................................13
8.2. Amendment or Modification.................................13
8.3. Survival..................................................13
8.4. Knowledge.................................................14
8.5. Successors and Assigns....................................14
8.6. Notices...................................................14
8.7. Headings, etc.............................................15
8.8. Third-Party Beneficiaries.................................15
8.9. Preparation for Closing...................................15
8.10. Counterparts..............................................15
8.11. Governing Law.............................................15
8.12. Termination...............................................15
EXHIBITS
Exhibit A - Certificate of Designation of Series D Cumulative Preferred Stock
Exhibit B - Certificate of Designation of Series E Cumulative Preferred Stock
PREFERRED STOCK SUBSCRIPTION AGREEMENT
This Preferred Stock Subscription Agreement (this "Agreement") is made as
of the 17th day of November, 1995, between The TJX Companies, Inc., a Delaware
corporation (the "Issuer"), and Melville Corporation, a New York corporation
(the "Subscriber").
Recitals
1. Issuer and Subscriber are parties to a Stock Purchase Agreement
dated as of October 14, 1995 (as amended, the "Purchase Agreement") pursuant
to which Issuer has agreed to purchase from the Subscriber, and the Subscriber
has agreed to sell to Issuer, all of the issued and outstanding shares of
capital stock (the "Target Shares") of Marshalls of Roseville, Minn., Inc., a
Minnesota corporation.
2. As part of the Purchase Price for the Target Shares, Issuer has
agreed to issue and sell to the Subscriber, and the Subscriber has agreed to
acquire and accept from Issuer, the Preferred Shares (as defined below).
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below and in the Purchase Agreement, the parties
hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1. Incorporation of Purchase Agreement Definitions. Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
same meanings herein as the meanings ascribed to such terms in the Purchase
Agreement.
1.2. Cross Reference Table. The following terms defined in this
Agreement in the Sections set forth below shall have the respective meanings
therein defined:
Term Definition
"Conversion Shares" Section 3.1.2
"Issuer" Preamble
"Purchase Agreement" Recitals
"Securities Act" Section 4.4(b)
"Subscriber" Preamble
"Target Shares" Recitals
1.3. Certain Definitions. The following terms shall have the following
meanings:
1.3.1. Common Stock. The term "Common Stock shall mean the Common
Stock, par value $1 per share, of Issuer.
1.3.2. Commission. The term "Commission shall mean the
Securities and Exchange Commission.
1.3.3. Exchange Act. The term "Exchange Act shall mean the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
1.3.4. Exchange Act Documents. The term "Exchange Act Documents
shall mean each of the following:
(i) Issuer's Annual Reports on Form 10-K for each of its
fiscal years ended January 28, 1995, January 29, 1994 and January
30, 1993;
(ii) Issuer's Quarterly Reports on Form 10-Q for the fiscal
quarters ended April 29, 1995 and July 29, 1995;
(iii) Issuer's proxy or information statement relating to
meetings of, or actions taken without a meeting by, the
stockholders of Issuer since January 28, 1995; and
(iv) the Current Reports on Form 8-K and all other reports,
statements and schedules filed by Issuer under the Exchange Act
since January 28, 1995.
1.3.5. Preferred Shares. The term "Preferred Shares shall mean
the Series D Shares and the Series E Shares.
1.3.6. Securities Act. The term "Securities Act is defined in
Section 3.2.
1.3.7. Series D Preferred Stock. The term "Series D Preferred
Stock shall mean the Series D Cumulative Convertible Preferred Stock,
par value $1 per share, of Issuer containing the terms and provisions
set forth in the Certificate of Designation attached hereto as Exhibit A.
1.3.8. Series E Preferred Stock. The term "Series E Preferred
Stock shall mean the Series E Cumulative Convertible Preferred Stock,
par value $1 per share, of Issuer containing the terms and provisions
set forth in the Certificate of Designation attached hereto as Exhibit B.
1.3.9. Series D Shares. The term "Series D Shares shall mean
250,000 shares of Series D Preferred Stock.
1.3.10. Series E Shares. The term "Series E Shares shall mean
1,500,000 shares of Series E Preferred Stock.
2. issuance of preferred shares.
2.1. Issuance. Upon the terms, subject to the conditions, and in
reliance on the representations, warranties and covenants set forth herein,
Issuer agrees to issue and sell to Subscriber, and Subscriber agrees to
acquire and accept from Issuer, the Preferred Shares at the Closing as part of
the Purchase Price.
2.2. Time and Place of Closing. The closing of the issuance and sale
of the Preferred Shares (the "Closing) shall take place at the same location
as, and contemporaneously with, the closing under the Purchase Agreement (the
day on which the Closing takes place being referred to herein as the "Closing
Date).
2.3. Delivery. At the Closing, Issuer will deliver to Subscriber a
certificate or
certificates evidencing all of the Series D Shares registered in the name of
Subscriber and a separate certificate or certificates evidencing all of the
Series E Shares registered in the name of Subscriber.
3. Representations and Warranties of Issuer. In order to induce Subscriber
to enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Issuer represents and warrants to Subscriber as follows:
3.1. Corporate Matters, etc.
3.1.1. Incorporation and Authority of Issuer. Issuer is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and
authority, corporate and otherwise, to enter into this Agreement, to
carry out and perform its obligations hereunder, to consummate the
transactions contemplated hereby and to carry on its business as
currently conducted, except for the failure to have any power and
authority (other than corporate power and authority) that has not had
and could not reasonably be expected to have a Material Adverse Effect
on Issuer. Issuer is duly qualified or licensed to do business as a
foreign corporation, and is in good standing as such, in all
jurisdictions where the nature of Issuer's activities or its ownership
or leasing of property require such qualification, except for such
failures to be so qualified as have not had and will not have a Material
Adverse Effect on Issuer. Issuer has heretofore furnished to Subscriber
a true and complete copy of the Charter and By-laws of Issuer in the
form currently in effect and as will be in effect as of the Closing.
3.1.2. Authorization and Enforceability. This Agreement has been
duly authorized, executed and delivered by Issuer and is Enforceable
against Issuer. When issued in accordance with the terms of this
Agreement, the Preferred Shares will be duly authorized, validly issued,
fully paid and nonassessable and will be free and clear of any Lien or
other right or claim (or any restriction on transfer or voting) and will
not be subject to any preemptive or similar rights. Issuer has
authorized and reserved for issuance upon conversion or redemption of
the Preferred Shares a sufficient number of shares of Common Stock (the
"Conversion Shares), and the Conversion Shares will, upon such issuance
in accordance with the terms of the Charter of Issuer, be duly
authorized, validly issued, fully paid and nonassessable and will be
free and clear of any Lien or other right or claim (or any restriction on
transfer or voting) and will not be subject to any preemptive or similar
rights.
3.1.3. Non-Contravention, etc.
(a) No approval, consent, waiver, authorization or other order
of, and no filing, registration, qualification or recording with, any
Governmental Authority or any other Person is required to be obtained or
made by or on behalf of Issuer or any of its Subsidiaries in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby, except for (i)
satisfaction of the requirements of the Hart-Scott-Rodino Antitrust
Improvements of 1976, as amended (the "HSR Act) and (ii) any item
required to be obtained from or made with any Person other than a
Governmental Authority the failure to obtain or make which, individually
or in the aggregate, have and could reasonably be expected to have
neither a Material Adverse Effect on Issuer nor a material adverse
effect on the ability of Issuer to consummate the transactions
contemplated hereby. Neither the execution, delivery and performance of
this Agreement nor the consummation of any of the transactions
contemplated hereby (including, without limitation, performance by
Issuer of its obligations under the other Closing Agreements and its
obligations in respect of the Preferred Shares in accordance with their
terms) does or will constitute, result in or give rise to (i) a breach
or violation or default under any Legal Requirement applicable to Issuer
or any of its Subsidiaries (assuming the accuracy of the representations
and warranties of Subscriber in Section 4.4), (ii) a breach of or a
default under any Charter or By-Laws provision of Issuer or any of its
Subsidiaries, (iii) the acceleration of the time for performance of any
obligation under any Contractual Obligation of Issuer or any of its
Subsidiaries, (iv) the imposition of any Lien upon or the forfeiture of
any asset of Issuer or any of its Subsidiaries, (v) a breach of or a
default under any Contractual Obligation of Issuer or any of its
Subsidiaries, or (vi) termination, right of termination, modification of
terms or change in benefits or burdens under any Contractual Obligation
of Issuer or any of its Subsidiaries, other than in the case of clauses
(i), (iii), (iv), (v) and (vi) such as, individually or in the
aggregate, have and could reasonably be expected to have neither a
Material Adverse Effect on Issuer nor a material adverse effect on the
ability of Issuer to consummate the transactions contemplated hereby
(including, without limitation, Issuer's ability to perform its
obligations under the other Closing Agreements and its obligations in
respect of the Preferred Shares in accordance with their terms).
(b) Neither the execution, delivery or performance of this
Agreement, the consummation of the transactions contemplated hereby
(including, without limitation, performance by Issuer of its obligations
under the other Closing Agreements and its obligations in respect of the
Preferred Shares in accordance with their terms), nor the terms of the
Preferred Shares, do or will constitute, result in or give rise to a
breach or violation of or default under the Series A Agreements (as
defined in the Standstill and Registration Rights Agreement) or any
provision of the General Corporation Law of the State of Delaware.
3.1.4. Capitalization. The authorized capital stock of Issuer
consists of 150,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, par value $1 per share ("Issuer Preferred Stock), and
of such shares of Issuer Preferred Stock 250,000 shares have been
designated as Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock), 1,650,000 shares have been designated as
Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock), 250,000 shares have been designated as Series D Preferred Stock
and 1,500,000 shares have been designated as Series E Preferred Stock.
As of September 30, 1995, there were issued and outstanding 72,407,253
shares of Common Stock, 250,000 shares of Series A Stock and 1,650,000
shares of Series C Stock. Other than the issued and outstanding Issuer
Preferred Stock and other than equity securities of Issuer issued to
directors, officers or employees of Issuer or its Subsidiaries in
connection with their service to Issuer or its Subsidiaries ("Employee
Securities), as of September 30, 1995, there were no other securities of
Issuer outstanding convertible into or exchangeable for capital stock or
other voting securities of Issuer or any other outstanding options or
rights to acquire capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities
of Issuer. All outstanding shares of capital stock of Issuer have been
duly authorized and validly issued and are fully paid and nonassessable.
Except as contemplated by this Agreement or as set forth in this Section
and except for changes since September 30, 1995 resulting from the grant
or exercise of Employee Securities since such date, there are
outstanding (a) no shares of capital stock or other voting securities of
Issuer, (b) no securities of Issuer convertible into or exchangeable for
shares of capital stock or voting securities of Issuer, and (c) no
options or other rights to acquire from Issuer, and no obligation of
Issuer to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities
of Issuer (the items in clauses (a), (b) and (c) being referred to
collectively as the "Issuer Securities). Except as set forth in the
Charter of Issuer or in connection with Employee Securities, there are
no outstanding obligations of Issuer or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Issuer Securities.
3.2. Litigation, etc. There is no Action against Issuer or any of its
Subsidiaries, pending or, to the knowledge of Issuer, threatened, which could
reasonably be expected to have a Material Adverse Effect on Issuer. There is
no Action pending or, to the knowledge of Issuer, threatened, that seeks
recission of, seeks to enjoin the consummation of, or otherwise relates to,
this Agreement or any of the transactions contemplated hereby and that could
reasonably be expected to have a Material Adverse Effect on Issuer or a
material adverse effect on Issuer's ability to consummate the transactions
contemplated hereby. No Governmental Order specifically directed at Issuer or
any of its Subsidiaries has been issued which has had or could reasonably be
expected to have a Material Adverse Effect on Issuer.
3.3. Disclosure. Issuer has heretofore delivered to Subscriber true and
complete copies of each of the Exchange Act Documents and each registration
statement of Issuer filed pursuant to the Securities Act of 1933, as amended
(the "Securities Act), since January 28, 1995. Each Exchange Act Document,
when filed with the Commission, conformed in all material respects to the
requirements of the Exchange Act and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading. Each such registration statement,
as amended or supplemented, if applicable, filed pursuant to the Securities
Act as of the date such registration statement or amendment thereto became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The consolidated financial statements, and
the related notes thereto, included in the Exchange Act Documents were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods specified therein (except for such
changes as are noted therein, all of which changes have been concurred in by
Coopers) and present fairly in all material respects the financial position of
Issuer and its Subsidiaries as of the dates indicated therein and the results
of their operations and cash flows for the periods covered thereby, subject in
the case of interim financial statements to an absence of footnotes and to
normal year-end audit adjustments which will not in the aggregate be material.
3.4. Change in Condition. Except for the matters set forth in Schedule
3.4 or in connection with the sale of all of the issued and outstanding
capital stock of Hit or Miss, Inc. or as contemplated by this Agreement, the
Purchase Agreement or any other Closing Agreement, since July 29, 1995:
(a) The business of Issuer has been conducted only in the
ordinary course of business consistent with past practice;
(b) Neither Issuer nor any of its Subsidiaries has, except in
the ordinary course of business consistent with past practice:
(i) incurred or otherwise become liable in respect of any
Debt or become liable in respect of any Guarantee, other than Debt
or any Guarantee between Issuer and its wholly owned Subsidiaries
or between wholly owned Subsidiaries of Issuer;
(ii) mortgaged or pledged any Asset or subjected any
material Asset to any Lien;
(iii) declared or made any Distribution (other than (A)
cash dividends on its capital stock in usual amounts, (B)
repurchases of outstanding capital stock through Issuer's publicly
announced share repurchase program and other repurchases not
material in amount and (C) Distributions from any Subsidiary of
Issuer to Issuer);
(iv) sold, leased to others or otherwise disposed of any of
its material Assets except as contemplated by clause (iii) of this
Section 3.4(b));
(v) purchased a material amount of Equity Securities of any
Person other than of a direct or indirect wholly owned Subsidiary
of Issuer, or a material amount of assets (other than inventory)
of any Person or assets constituting a business, or been party to
any merger, consolidation or other business combination or entered
into any Contractual Obligation relating to any such purchase,
merger, consolidation or business combination;
(vi) made any loan, advance or capital contribution to or
investment in any Person material in amount other than loans,
advances or capital contributions to or investments in or to its
wholly owned Subsidiaries and other than advances to suppliers in
the ordinary course of business;
(vii) canceled or compromised any Debt or claim in any
material amount other than those between Issuer and a wholly owned
Subsidiary or between wholly owned Subsidiaries of Issuer or owed
by Issuer or any wholly owned Subsidiary of Issuer;
(viii) sold, transferred, licensed or otherwise disposed of
any material intellectual or intangible property rights;
(ix) waived or released or permitted to lapse any right of
material value; or
(x) instituted, settled or agreed to settle any material
Action;
(c) Neither Issuer nor any of its Subsidiaries has had any
change in its relationships with its employees, agents, customers or
suppliers, except as has not and could not reasonably be expected to
have a Material Adverse Effect;
(d) Except for Employee Securities, there has been no amendment
of any material provision of any Equity Security of Issuer;
(e) Neither Issuer nor any of its Affiliates has entered into
any Contractual Obligation to do any of the things referred to in
clauses (a) through (d) above; and
(f) No Material Adverse Effect on Issuer has occurred.
3.5. Tax Matters.
3.5.1. To Issuer's knowledge, (a) all material Tax Returns
required to be filed on or before the date hereof by, or with respect to
Issuer or any Subsidiary have been duly and timely filed (taking into
account extensions); (b) no position is reflected in a Tax Return
referred to in (a) for which the applicable limitation period has not
expired (and for which a closing agreement has not been entered into)
which (x) was not, at the time such Tax Return was filed, supported by
substantial authority (as determined for purposes of Section 6662 of the
Code, or any predecessor provision, and any comparable provisions of
applicable federal, state, or local tax statutes, rules or regulations)
and (y) would have a Material Adverse Effect if decided against the
taxpayer; (c) Issuer and its Subsidiaries have timely paid, withheld or
made provision for all Taxes shown as due and payable on any Tax Return
and have timely paid, withheld, or made provision for all material
Taxes, whether or not shown on any Tax Return; (d) no Liens for Taxes
upon the assets of Issuer or any Subsidiary exist; (e) no claim has ever
been made by an authority in a jurisdiction where any of Issuer and its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
3.5.2. Issuer and each of its Subsidiaries is a member of the
affiliated group, within the meaning of Section 1504(a) of the Code, of
which Issuer is the common parent (the "Affiliated Group), and such
Affiliated Group files a consolidated federal Income Tax Return.
Neither Issuer nor any of its Subsidiaries has at any time been a member
of an affiliated group filing a consolidated federal Income Tax Return
other than a group, the common parent of which is Issuer. To Issuer's
knowledge, all Income Taxes shown on any Tax Return of the Affiliated
Group have been paid for each taxable period during which any of Issuer
and its Subsidiaries was a member of the Affiliated Group.
3.5.3. To Issuer's knowledge, each of Issuer and its Subsidiaries
has withheld and paid all material Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, foreign person, or other
third party.
3.5.4. Other than the proposed assessment made by the IRS
regarding the receipt of construction allowances, there is no dispute or
claim concerning any material Tax liability of any of Issuer and its
Subsidiaries either (A) claimed or raised by any taxing authority in
writing or (B) as to which Issuer has knowledge based upon personal
contact with any agent of such taxing authority.
4. Representations and Warranties of Subscriber. In order to induce Issuer
to enter into and perform this Agreement and to consummate the transactions
contemplated hereby, Subscriber represents and warrants to Issuer as follows
(and, as provided in Section 4.4, agrees with Issuer):
4.1. Corporate Matters. Subscriber is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to enter into this
Agreement, to carry out and perform its obligations hereunder and to
consummate the transactions contemplated hereby.
4.2. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by Subscriber and is Enforceable against
Subscriber.
4.3. Non-Contravention, etc. No approval, consent, waiver,
authorization or other order of, and no filing, registration, qualification or
recording with, any Governmental Authority or any other Person (other than any
party to any Lease-In other than the Company or any Subsidiary) is required to
be obtained or made by or on behalf of Subscriber or the Company or any of its
Subsidiaries in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby, except
for (i) satisfaction of the requirements of the HSR Act, (ii) items listed on
Schedule 4.1.4 to the Purchase Agreement, which shall have been obtained or
made and shall be in full force and effect at the Closing (subject to the
materiality exception set forth at the end of the next sentence) and (iii) any
other of the foregoing items required to be obtained from or made with any
Person other than any Governmental Authority the failure to obtain or make
which, individually or in the aggregate, have and could reasonably be expected
to have neither a Material Adverse Effect nor a material adverse effect on the
ability of Subscriber to consummate the transactions contemplated hereby.
Except as set forth on Schedule 4.1.4 to the Purchase Agreement, neither the
execution, delivery and performance of this Agreement nor the consummation of
any of the transactions contemplated hereby (including, without limitation,
the execution, delivery and performance of the other Closing Agreements) does
or will constitute, result in or give rise to (i) a breach or violation or
default under any Legal Requirement applicable to Subscriber, the Company or
any of its Subsidiaries, (ii) a breach of or a default under any Charter or
By-Laws provision of Subscriber, the Company or any of its Subsidiaries, (iii)
the acceleration of the time for performance of any obligation under any
Contractual Obligation (other than any Lease-In) of Subscriber, the Company or
any of its Subsidiaries, (iv) the imposition of any Lien upon or the
forfeiture of any Asset, other than any Asset held under any Lease-In, (v) a
breach of or a default under any Contractual Obligation (other than any
Lease-In) of Subscriber, the Company or any of its Subsidiaries, or (vi) right
to any severance payments other than by operation of law (including without
limitation if such payments become due only if employment is terminated
following the Closing), termination, right of termination, modification of
terms or change in benefits or burdens under any Contractual Obligation (other
than any Lease-In), other than in the case of clauses (i) through (vi) such as,
individually or in the aggregate, have and could reasonably be expected to
have neither a Material Adverse Effect nor a material adverse effect on the
ability of Subscriber to consummate the transactions contemplated hereby.
4.4. Investment Intent.
(a) Subscriber is acquiring the Preferred Shares hereunder for
its own account, for investment, and not with a view to, or for sale in
connection with, any distribution thereof within the meaning of the
Securities Act (as hereafter defined).
(b) Subscriber understands and agrees that the Preferred Shares
and, if any are issued, the Conversion Shares will not be registered or
qualified under the Securities Act or state "blue-sky or other
securities laws and therefore cannot be resold unless they are
registered under the Securities Act and applicable state laws or unless
an exemption from such registration requirement is available.
(c) Subscriber is able to bear the economic risk of holding the
Preferred Shares and, if any are issued, the Conversion Shares for an
indefinite period of time and is experienced and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the risks and merits of acquiring the Preferred Shares, and,
if any are issued, the Conversion Shares. Subscriber acknowledges that
the Preferred Shares and, if any are issued, the Conversion Shares will
bear a legend to the effect that transfers are restricted unless (i) the
transfer is exempt from the registration requirements under the
Securities Act and Issuer receives an opinion of counsel reasonably
satisfactory to Issuer to that effect or (ii) the transfer is made
pursuant to an effective registration statement under the Securities Act.
(d) Subscriber understands that Issuer is under no obligation to
effect a registration of the Preferred Shares or, if any are issued, the
Conversion Shares under the Securities Act, except to the extent set
forth in the Standstill and Registration Rights Agreement.
(e) Subscriber is an Accredited Investor within the definition
set forth in Rule 501(a) of the Securities Act.
(f) Nothing in this Section 4.4 shall limit or qualify the
representations, warranties, covenants or agreements made by Issuer
herein or in the Purchase Agreement or any other Closing Agreement or in
any certificate or document delivered pursuant hereto or thereto.
Issuer acknowledges and agrees that the purpose of this Section 4.4 is
solely to ensure that the sale of the Preferred Shares pursuant hereto
complies with the distribution restrictions of the Securities Act and the
distribution restrictions of other applicable securities laws.
4.5. Litigation. There is no Action against the Company or any
Subsidiary, pending or, to the knowledge of Subscriber, threatened, which
could reasonably be expected to have a Material Adverse Effect, except for
such of the foregoing as are described in Schedule 4.17 to the Purchase
Agreement. Except as set forth on Schedule 4.17 to the Purchase Agreement,
there is no Action pending or, to the knowledge of Subscriber, threatened with
respect to which Subscriber or any of its Affiliates, on the one hand, and the
Company or any of its Subsidiaries, on the other hand, are or would be
parties. There is no Action pending or, to the knowledge of Subscriber,
threatened, that seeks rescission of, seeks to enjoin the consummation of, or
otherwise relates to, this Agreement or any of the transactions contemplated
hereby and that could reasonably be expected to have a Material Adverse Effect
or a material adverse effect on Subscriber's ability to consummate the
transactions contemplated hereby. No Governmental Order specifically directed
at the Company or any of its Subsidiaries has been issued which has had or
could reasonably be expected to have a Material Adverse Effect.
5. Access to Premises and Information. Prior to the Closing, Issuer will
permit Subscriber and its representatives to have access to its premises and
documents, books and records and to make copies during normal business hours
(or to have copies made and delivered to Subscriber) of such financial and
operating data and other information with respect to Issuer and its
Subsidiaries as Subscriber or any of its representatives shall reasonably
request; provided, however, that Subscriber and its representatives shall not
have any such access to, or right to copies of, any competitively sensitive
information of Issuer or any of its Affiliates. In addition, Issuer shall
cause its management (including senior officers) to be available to Subscriber
at such times, and from time to time, as Subscriber may reasonably request in
connection with the transactions contemplated hereby and to discuss the
business and affairs of Issuer and its Subsidiaries; provided, however, that
Subscriber shall not be entitled to receive as a result of such availability
any competitively sensitive information of Issuer or any of its Affiliates.
In addition, so long as the Standstill and Registration Rights Agreement
remains in effect, Issuer will deliver to Subscriber copies of all of Issuer's
filings with the Commission pursuant to the Exchange Act or the Securities Act
no later than five Business Days following the date on which the same are
filed with the Commission.
6. Conditions to the Obligation to Close of Issuer. The obligation of
Issuer at the Closing to issue and sell the Preferred Shares is subject to the
satisfaction, at or prior to the Closing, of all the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by Issuer in its sole discretion:
6.1. Representations, Warranties and Covenants.
6.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Subscriber contained in this Agreement
that include qualifications as to materiality or Material Adverse Effect
shall be true and correct as of the Closing and all other
representations and warranties of Subscriber contained in this Agreement
shall be true and correct in all material respects as of the Closing, in
each case with the same force and effect as if such representations and
warranties were made at and as of the Closing.
6.1.2. Performance of Agreements. Subscriber shall have
performed and satisfied in all material respects all covenants and
agreements required by this Agreement to be performed or satisfied by it
at or prior to the Closing.
6.1.3. Closing Certificate. At the Closing, Subscriber shall
furnish to Issuer an unqualified certificate, signed by the President or
Chief Financial Officer of Subscriber, dated the Closing Date, to the
effect that the conditions specified in Sections 6.1.1 and 6.1.2 hereof
have been satisfied.
6.2. Conditions under Purchase Agreement. All conditions to the
closing under the Purchase Agreement set forth in Section 7 thereof shall have
been satisfied or waived in accordance with the provisions of said Section 7.
6.3. Other Agreements. At or prior to the Closing, Subscriber shall
have entered into the Standstill and Registration Rights Agreement, such
agreement being in substantially the form thereof attached as an exhibit to
the Purchase Agreement without change other than such changes as may be
reasonably satisfactory to Issuer.
7. Conditions to the Obligation to Close of subscriber. The obligations of
Subscriber at the Closing to acquire and accept the Preferred Shares is
subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing in writing by Subscriber in its sole discretion:
7.1. Representations, Warranties and Covenants.
7.1.1. Continued Accuracy of Representations and Warranties. All
representations and warranties of Issuer contained in this Agreement
that include qualifications as to materiality or Material Adverse Effect
shall be true and correct as of the Closing and all other
representations and warranties of Issuer contained in this Agreement
shall be true and correct in all material respects as of the Closing, in
each case with the same force and effect as if such representations and
warranties were made at and as of the Closing.
7.1.2. Performance of Agreements. Issuer shall have performed
and satisfied in all material respects all covenants and agreements
required by this Agreement to be performed or satisfied by Issuer at or
prior to the Closing.
7.1.3. Officer's Certificate. At the Closing, Issuer shall
furnish to Subscriber an unqualified certificate signed by the President
or Senior Vice President - Finance and Chief Financial Officer of Issuer
dated the Closing Date, to the effect that the conditions specified in
Sections 7.1.1 and 7.1.2 hereof have been satisfied.
7.2. Conditions under Purchase Agreement. All conditions to the
closing under the Purchase Agreement set forth in Section 8 thereof shall have
been satisfied or waived in accordance with the provisions of said Section 8.
7.3. Other Agreements. At or prior to the Closing, Issuer shall have
entered into the Standstill Agreement and Registration Rights Agreement, such
agreement being in substantially the form thereof attached as an exhibit to
the Purchase Agreement without change other than such changes as may be
reasonably satisfactory to Subscriber.
7.4. Opinion of Counsel. Issuer shall have furnished Subscriber with
favorable opinions of Ropes & Gray and Jay Meltzer, Senior Vice President,
General Counsel and Secretary of Issuer, each dated the Closing Date in
substantially the forms of Exhibits D-1 and D-2 to the Purchase Agreement.
8. Miscellaneous.
8.1. Entire Agreement; Waivers. This Agreement, the other Closing
Agreements, the Confidentiality Agreement and the Purchase Agreement
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties with respect to such subject matter. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), shall constitute a
continuing waiver unless otherwise expressly provided nor shall be effective
unless in writing and executed (i) in the case of a waiver by Issuer, by
Issuer and (ii) in the case of a waiver by Subscriber, by Subscriber.
8.2. Amendment or Modification. The parties hereto may not amend or
modify this Agreement except in such manner as may be agreed upon by a written
instrument executed by Issuer and Subscriber.
8.3. Survival. All representations, warranties, covenants and
agreements made by or on behalf of any party hereto in this Agreement or
pursuant to any document, certificate or other instrument referred to herein
or delivered in connection with the transactions contemplated hereby shall
survive for the General Survival Period as specified in Section 10 of the
Purchase Agreement except for the representations and warranties in Sections
3.1.2 and 3.1.3(b) (but only insofar as Section 3.1.3(b) relates to the
General Corporation Law of the State of Delaware).
8.4. Knowledge. Whenever reference is made in this Agreement to the
knowledge of any Person with respect to any matter, it is understood that such
knowledge extends only to the officers of such Person (and in the case of
Subscriber, the officers of the Company or any of its Subsidiaries) having
responsibility for the areas of such Person's (and in the case of Subscriber,
also the Company's or any of its Subsidiaries') business covering such matter,
which officers have made an inquiry that is reasonably appropriate to
determine the accuracy of the statement in question.
8.5. Successors and Assigns. All the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and permitted assigns
(each of which such transferees, successors and assigns shall be deemed to be
a party hereto for all purposes hereof); provided, however, that (i) neither
Issuer nor Subscriber may assign or transfer (by operation of law or otherwise)
any of its rights or obligations hereunder without the prior written consent
of the other and (iii) no transfer or assignment by any party shall relieve
such party of any of its obligations hereunder.
8.6. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing (including telecopy or
similar teletransmission), addressed as follows:
If to Subscriber to it at:Melville Corporation
One Theall Road
Rye, New York 10580
Telecopier: 914-925-4052Attention: Chief
Executive Officer, Chief Financial
Officer and General Counsel
With a copy to: Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: 212-450-5744
Attention: Dennis S. Hersch
If to Issuer to it at: The TJX Companies, Inc.
770 Cochituate Road
Framingham, MA 01701
Telecopier: 508-390-2457
Attn: President and General Counsel
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: Arthur G. Siler, Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) in the case of any notice or communication sent other
than by mail, on the date actually delivered to such address (evidenced, in
the case of delivery by overnight courier, by confirmation of delivery from
the overnight courier service making such delivery, and in the case of a
telecopy, by receipt of a transmission confirmation form or the addressee's
confirmation of receipt), or (b) in the case of any notice or communication
sent by mail, three Business Days after being sent, if sent by registered or
certified mail, with first-class postage prepaid. Each of the parties hereto
shall be entitled to specify a different address by giving notice as aforesaid
to each of the other parties hereto.
8.7. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are
not intended to be full or accurate descriptions of the content thereof and
shall not affect the construction hereof.
8.8. Third-Party Beneficiaries. Nothing in this Agreement is intended
or shall be construed to entitle any Person other than the parties or their
respective permitted transferees, successors and assigns hereby to any claim,
cause of action, remedy or right of any kind.
8.9. Preparation for Closing. Each party will use its reasonable best
efforts to bring about the fulfillment of each of the conditions precedent to
the obligations of the other parties hereto set forth in this Agreement.
8.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
8.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive law of the State of New York,
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the law of any other jurisdiction.
8.12. Termination. This Agreement may be terminated by Issuer and
Subscriber by mutual written consent at any time prior to the Closing, and
this Agreement shall automatically terminate immediately upon the termination
of the Purchase Agreement in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Preferred Stock Subscription Agreement to be
executed, as of the date first above written by their respective officers
thereunto duly authorized.
SUBSCRIBER: MELVILLE CORPORATION
By____________________________
Name:
Title:
ISSUER: THE TJX COMPANIES, INC.
By____________________________
Name:
Title:
FOR IMMEDIATE RELEASE
MELVILLE CORPORATION COMPLETES SALE
OF MARSHALLS DIVISION TO THE TJX COMPANIES
RYE, NEW YORK, November 20, 1995 -- Melville Corporation
(NYSE:MES) today announced that it has completed the previously announced sale
of its Marshalls division to The TJX Companies, Inc., (NYSE:TJX) for a total
purchase price of $550 million, consisting of $375 million in cash and $175
million in TJX convertible preferred stock, subject to certain customary
post-closing adjustments.
Stanley Goldstein, Chairman and Chief Executive Officer of
Melville, said, "The closing of this transaction completes the first step of
Melville's strategic restructuring program. Our plan is to create three highly
focused independent retailing companies in the chain drug, footwear and toy
industries. These businesses will be better positioned financially and
competitively to flourish in the changing retail environment, which we believe
will benefit the long-term interests of our shareholders.
"We are working to complete the sales of Wilsons and This End
Up during the first half of 1995, as well as the consolidation and spinoff of
the footwear company and Kay-Bee Toys.
"We are enthusiastic about the progress we are making in
implementing our restructuring plan, which we currently expect will lead to an
aggregate pre-tax profit improvement of approximately $100 million for the
three new independent companies by 1997," Mr. Goldstein said.
Marshalls is an off-price retailer operating 501 stores in 40
states and Puerto Rico as of October 1995. Marshalls' sales in 1994
represented $2.8 billion of Melville's total 1994 sales of $11.3 billion.
TJX operates the T.J. Maxx chain of off-price stores which
totaled 581 stores nationwide as of October 1995. Its other divisions include
Chadwick's of Boston, Winners Apparel Ltd. and Home Goods.
Melville operates specialty retail stores nationwide in four
business segments: prescription drugs, health and beauty care; apparel;
footwear; and toys and home furnishings. Its retail divisions include CVS,
Meldisco, Footaction, Kay-Bee, and Linens 'n Things among others.
* * *
Exhibit A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES D CUMULATIVE CONVERTIBLE PREFERRED STOCK
$1.00 PAR VALUE PER SHARE
of
THE TJX COMPANIES, INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
We, Steven R. Wishner, Vice President - Finance, and Jay H. Meltzer,
Secretary, of The TJX Companies, Inc. (hereinafter called the "Corporation), a
corporation organized and existing under and by virtue of the provisions of
the General Corporation Law of the State of Delaware,
Do HEREBY CERTIFY:
FIRST: The restated certificate of incorporation, as amended (the
"Certificate of Incorporation), of the corporation authorizes the issuance of
5,000,000 shares of Preferred Stock, $1.00 par value per share ("Preferred
Stock), in one or more series, and further authorizes the Board of Directors
from time to time to provide by resolution for the issuance of shares of
Preferred Stock in one or more series not exceeding the aggregate number of
shares of Preferred Stock authorized by the Certificate of Incorporation and
to determine with respect to each such series, the voting powers, if any
(which voting powers if granted may be full or limited), designations,
preferences, the relative, participating, optional or other rights, and the
qualifications, limitations and restrictions appertaining thereto.
SECOND: The Finance Committee of the Board of Directors of the
corporation, pursuant to authority conferred on such committee by the Board of
Directors (which fixed the voting rights with respect to the shares designated
herein), at a meeting duly called and held on November 15, 1995 did duly adopt
the following resolution authorizing the creation and issuance of a series of
said Preferred Stock to be known as "Series D Cumulative Convertible Preferred
Stock, said Series D Cumulative Convertible Preferred Stock to be convertible
into the common stock, $1.00 par value per share (the "Common Stock), of the
corporation:
RESOLVED: that the Finance Committee of the Board of Directors,
pursuant to authority conferred on such Committee by the Board of Directors
(which fixed the voting rights with respect to the shares designated herein)
by the provisions of the Second Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation), of the Corporation, hereby
authorizes the issuance of a series of cumulative convertible Preferred Stock
of the Corporation and hereby fixes the voting powers, designations,
preferences, the relative, participating, optional and other rights, and the
qualifications, limitations and restrictions appertaining thereto in addition
to those set forth in said Certificate of Incorporation, as follows:
1. Designation and Number. The designation of Preferred Stock created by
this resolution shall be Series D Cumulative Convertible Preferred Stock,
$1.00 par value per share, of The TJX Companies, Inc. (the "Corporation)
(hereinafter referred to as the "Series D Preferred Stock), and the number of
shares constituting such series shall be 250,000, which number may not be
increased but may be decreased (but not below the number of shares of Series D
Preferred Stock then outstanding) from time to time by the Board of Directors.
All shares of Series D Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (excluding, until the Corporation
elects to retire them, shares which are held as treasury shares but including
shares redeemed, shares purchased and retired, shares converted pursuant to
Section 5 hereof and shares exchanged for any other security of the
Corporation) shall not be reissued and shall, upon the making of any necessary
filing with the Secretary of State of Delaware have the status of authorized
but unissued shares of the Corporation's Preferred Stock, without designation
as to series, and thereafter may be issued, but not as shares of Series D
Preferred Stock.
2. Dividend Rights.
(a) General. The holders of shares of Series D Preferred Stock shall be
entitled to receive, in preference to the holders of shares of Common Stock
and any other stock ranking as to dividends junior to the Series D Preferred
Stock, when and as declared by the Board of Directors, out of funds legally
available therefor, cumulative cash dividends, accruing from and after the
date of original issuance of the Series D Preferred Stock at an annual rate of
$1.8138 per share, and no more, as long as shares of Series D Preferred Stock
remain outstanding. Dividends shall be payable quarterly in arrears, on
January 1, April 1, July 1 and October 1 in each year commencing on the first
of such four dates which follows the date of initial issuance of the Series D
Preferred Stock (each, a "Dividend Payment Date). Each dividend will be
payable to holders of record as they appear on the stock register of the
Corporation on the record date therefor, not exceeding 60 days nor less than
10 days preceding the payment date thereof, as shall be fixed by the Board of
Directors. Dividends in arrears may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
exceeding 60 days preceding the payment date thereof, as may be fixed by the
Board of Directors of the Corporation. Dividends payable on the Series D
Preferred Stock (i) for any period greater or less than a full dividend period,
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months and (ii) for each full quarterly dividend period, shall be computed by
dividing the annual dividend rate by four. Dividends on shares of Series D
Preferred Stock shall be cumulative and shall accrue on a daily basis from the
date of original issuance thereof whether or not there shall be funds legally
available for the payment thereof and whether or not such dividends are
declared. Holders of shares of the Series D Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in
excess of Full Cumulative Dividends on such shares. No interest or sum of
money in lieu of interest shall be payable in respect of any dividend payment
or payments which may be in arrears.
(b) Requirements for Dividends on Senior Preferred Stock. The
Corporation shall not (i) declare or pay or set apart for payment any
dividends or distributions on shares of Series D Preferred Stock (other than
dividends paid in shares of stock ranking junior to any series of Preferred
Stock ranking senior to the Series D Preferred Stock as to dividends) or (ii)
make any purchase or redemption of, or any sinking fund payment for the
purchase or redemption of, shares of Series D Preferred Stock (other than a
purchase or redemption made by issue or delivery of any stock ranking junior
to any series of Preferred Stock ranking senior to the Series D Preferred
Stock as to dividends or upon liquidation, dissolution or winding up) unless
Full Cumulative Dividends on all outstanding shares of any series of Preferred
Stock ranking senior to Series D Preferred Stock through the most recent
dividend payment date prior to the date of payment of such dividend or
distribution, or effective date of such purchase, redemption or sinking fund
payment, shall have been paid in full or declared and a sufficient sum set
apart for payment thereof.
(c) Requirements for Dividends on Parity Preferred Stock. If there
shall be outstanding shares of any other class or series of Preferred Stock
ranking on a parity with the Series D Preferred Stock as to dividends, no
dividends, except as described in the next sentence, shall be declared or paid
or set apart for payment on any such other series for any period unless Full
Cumulative Dividends on the Series D Preferred Stock through the most recent
Dividend Payment Date have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment. If dividends on the Series D Preferred Stock and on any other series
of Preferred Stock ranking on a parity as to dividends with the Series D
Preferred Stock are in arrears, all dividends declared upon shares of the
Series D Preferred Stock and all dividends declared upon such other series
shall be declared pro rata so that the amounts of dividends per share declared
on the Series D Preferred Stock and such other series shall in all cases bear
to each other the same ratio that Full Cumulative Dividends per share at the
time on the shares of Series D Preferred Stock and on such other series bear
to each other.
(d) Requirements for Dividends on Junior Stock. The Corporation shall
not (i) declare or pay or set apart for payment any dividends or distributions
on any stock ranking as to dividends junior to the Series D Preferred Stock
(other than dividends paid in shares of stock ranking junior to the Series D
Preferred Stock as to dividends) or (ii) make any purchase or redemption of,
or any sinking fund payment for the purchase or redemption of, any stock
ranking as to dividends or upon liquidation, dissolution or winding up junior
to the Series D Preferred Stock (other than a purchase or redemption made by
issue or delivery of any stock ranking junior to the Series D Preferred Stock
as to dividends or upon liquidation, dissolution or winding up) unless Full
Cumulative Dividends on all outstanding shares of Series D Preferred Stock
through the most recent Dividend Payment Date prior to the date of payment of
such dividend or distribution, or effective date of such purchase, redemption
or sinking fund payment, shall have been paid in full or declared and a
sufficient sum set apart for payment thereof; provided, however, that unless
prohibited by the terms of any other outstanding series of Preferred Stock,
any moneys theretofore deposited in any sinking fund with respect to any
Preferred Stock of the Corporation in compliance with this Section 2(d) and
the provisions of such sinking fund may thereafter be applied to the purchase
or redemption of such Preferred Stock in accordance with the terms of such
sinking fund regardless of whether at the time of such application Full
Cumulative Dividends on all outstanding shares of Series D Preferred Stock
through the most recent Dividend Payment Date shall have been paid in full or
declared and a sufficient sum set apart for payment thereof.
3. Liquidation Preferences.
(a) Senior Preferred Stock. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether from capital or surplus) shall be made to or set apart
for the holders of the Series D Preferred Stock upon liquidation, dissolution
or winding up, the holders of each class or series of Preferred Stock ranking
senior to the Series D Preferred Stock upon liquidation, dissolution or
winding up shall be entitled to receive full payment of their liquidation
preferences.
(b) Order of Payments among Parity Preferred Stock. In the event of
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Corporation (whether from capital or surplus) shall be made to or set
apart for the holders of any class or series of stock of the Corporation
ranking junior to the Series D Preferred Stock upon liquidation, dissolution or
winding up, the holders of the shares of Series D Preferred Stock and the
holders of each other class or series of Preferred Stock ranking on a parity
with Series D Preferred Stock upon liquidation, dissolution or winding up
shall be entitled to receive liquidation payments according to the following
priorities:
First,
The holders of the shares of Series D Preferred Stock shall receive $100
per share and the holders of shares of each such other class or series of
Preferred Stock shall receive the full respective liquidation preferences
(including any premiums) to which they are entitled; and
Second,
The holders of shares of Series D Preferred Stock and the holders of
shares of each such other class or series of Preferred Stock shall each
receive an amount equal to Full Cumulative Dividends with respect to their
respective shares through and including the date of final distribution to such
holders, but such holders shall not be entitled to any further payment.
No payment (in either of the First step or Second step provided above) on
account of any liquidation, dissolution or winding up of the Corporation shall
be made to holders of any such other class or series of Preferred Stock or to
the holders of Series D Preferred Stock unless there shall likewise be paid at
the same time to the holders of the Series D Preferred Stock and the holders
of each such other class or series of Preferred Stock like proportionate
amounts of the same payments (as to each of the First step or the Second step
above), such proportionate amounts to be determined ratably in proportion to
the full amounts to which the holders of all outstanding shares of Series D
Preferred Stock and the holders of all outstanding shares of each such other
class or series of Preferred Stock are respectively entitled (in either the
First step or the Second step, as the case may be) with respect to such
distribution.
For purposes of this Section 3, neither a consolidation or merger of the
Corporation with or into another corporation nor a merger of any other
corporation with or into the Corporation or a sale or transfer of all or any
part of the Corporation's assets for cash, securities or other property will
be deemed a liquidation, dissolution or winding up of the Corporation.
(c) Junior Stock. After payment shall have been made in full to the
holders of Series D Preferred Stock and to the holders of each such other
class or series of Preferred Stock as provided in this Section 3 upon
liquidation, dissolution or winding up of the Corporation, any other series or
class or classes of stock ranking junior to the Series D Preferred Stock upon
liquidation, dissolution or winding up shall, subject to the respective terms
and provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed upon such liquidation, dissolution
or winding up, and the holders of Series D Preferred Stock shall not be
entitled to share therein.
4. Mandatory Redemption by the Corporation.
(a) Obligation to Redeem Out of Asset Sale or Stock Sale Proceeds.
Except as provided by this Section 4, shares of Series D Preferred are not
redeemable by the Corporation. If at any time after the Initial Issuance Date
and not less than 10 Business Days before the Automatic Conversion Date the
Corporation shall consummate any Sale, then the Corporation shall apply the
full amount of the Sale Proceeds received by the Corporation in respect of
such Sale to redeem all then outstanding shares of Series D Preferred Stock
(or, if fewer, as many such shares as can be redeemed at the Call Price out of
such Sale Proceeds). Upon any such redemption, the Corporation shall deliver
to the holders of shares of Series D Preferred Stock, in accordance with the
provisions of this Certificate, in exchange for each share so redeemed, cash
in an amount equal to the sum of (i) the Call Price in effect on the date of
redemption plus (ii) Full Cumulative Dividends thereon to the date fixed for
redemption. If fewer than all the outstanding shares of Series D Preferred
Stock are to be redeemed, shares to be redeemed shall be selected by the
Corporation from outstanding shares of this Series not previously redeemed by
lot or pro rata (as nearly as may be practicable) or by any other method
determined by the Board of Directors of the Corporation in its sole discretion
to be equitable.
(b) Notice of Redemption. The Corporation will provide notice of any
redemption of shares of Series D Preferred Stock to holders of record of the
Series D Preferred Stock to be redeemed not less than 10 nor more than 60 days
prior to the date fixed for such redemption. Such notice shall be provided by
first-class mail postage prepaid, to each holder of record of the Series D
Preferred Stock to be redeemed, at such holder's address as it appears on the
stock register of the Corporation; provided, however, that failure to give such
notice or any defect therein shall not affect the validity of the proceeding
for redemption of any of the shares of Series D Preferred Stock. Each such
mailed notice shall state, as appropriate, the following:
(i) the redemption date (which shall be no later than the Automatic
Conversion Date);
(ii) the amount of the Sale Proceeds;
(iii) the number of shares of Series D Preferred Stock to be redeemed
and, if less than all the shares held by any holder are to be redeemed, the
number of such shares to be redeemed from such holder;
(iv) the Call Price;
(v) the place or places where certificates for such shares are to be
surrendered for redemption;
(vi) the amount of Full Cumulative Dividends per share of Series D
Preferred Stock to be redeemed through and including such redemption date, and
that dividends on shares of Series D Preferred Stock to be redeemed will cease
to accrue on such redemption date unless the Corporation shall default in
payment of the Call Price plus such Full Cumulative Dividends thereon;
(vii) the Exchange Rate as of the date of such notice (it being
understood that the Exchange Rate may thereafter fluctuate in accordance with
the terms set forth in the definition thereof), and that the right of holders
to convert shares of Series D Preferred Stock to be redeemed will terminate at
the close of business on the Business Day next preceding the date fixed for
redemption (unless the Corporation shall default in the payment of the Call
Price plus such Full Cumulative Dividends thereon).
(c) Mechanics of Redemption.
(i) Upon surrender in accordance with the aforesaid notice of the
certificate for any shares so redeemed (duly endorsed or accompanied by
appropriate instruments of transfer), the holders of record of such shares
shall be entitled to receive an amount of cash constituting the Call Price
plus Full Cumulative Dividends thereon, without interest.
(ii) The Corporation's obligation to provide funds upon redemption in
accordance with this Section 4 shall be deemed fulfilled if, on or before a
redemption date, the Corporation shall deposit with a bank or trust company,
or an affiliate of a bank or trust company, having an office or agency in New
York, New York and having a capital and surplus of at least $50,000,000
according to its last published statement of condition, or shall set aside or
make other reasonable provision for the payment of cash required to be
delivered by the Corporation pursuant to this Section 4 upon the occurrence of
the related redemption of Series D Preferred Stock and for cash required to
pay Full Cumulative Dividends and cash in lieu of fractional shares on the
shares of Series D Preferred Stock to be redeemed as required by this Section
4, in trust for the account of the holders of such shares of Series D
Preferred Stock to be redeemed (and so as to be and continue to be available
therefor), with (in the case of deposits with a bank or trust company)
irrevocable instructions and authority to such bank or trust company that such
funds be delivered upon redemption of the shares of Series D Preferred Stock
so called for redemption. If such notice of redemption shall have been given,
and if on the date fixed for redemption funds necessary for the redemption
shall have been irrevocably either set aside by the Company separate and apart
from its other funds or assets in trust for the account of the holders of the
shares of Series D Preferred Stock to be redeemed (and so as to be and
continue to be available therefor) or the Company shall have made other
reasonable provision therefor, then, notwithstanding that the certificates
evidencing any shares of the Series D Preferred Stock so called for redemption
shall not have been surrendered, the shares represented thereby shall be
deemed no longer outstanding, dividends with respect to such shares shall
cease to accrue on the date fixed for redemption (provided that holders of
shares of Series D Preferred Stock at the close of business on a record date
for any payment of dividends shall be entitled to receive Full Cumulative
Dividends payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares following such record date and
prior to such Dividend Payment Date) and all rights with respect to such
shares shall forthwith after such date cease and terminate, except for the
rights of the holders to receive the funds payable pursuant to this Section 4
without interest upon surrender of their certificates therefor.
(iii) Each redemption of shares of Series D Preferred Stock pursuant to
this Section 4 shall be deemed to have been made as of the close of business
on the applicable redemption date, so that the rights of the holder of such
shares of Series D Preferred Stock shall, to the extent of such redemption,
cease at such time.
5. Conversion.
(a) Automatic Conversion. Unless earlier converted pursuant to Section
5(b) at the option of the holder, on the Automatic Conversion Date each
outstanding share of the Series D Preferred Stock shall convert automatically
(the "Automatic Conversion) into (i) shares of Common Stock at the Exchange
Rate in effect on the Automatic Conversion Date and (ii) the right to receive
an amount in cash equal to Full Cumulative Dividends on such share to the
Automatic Conversion Date.
(b) Optional Conversion by Holder. Shares of Series D Preferred Stock
may be converted, in whole or in part, at the option of the holder thereof
("Optional Conversion), at any time after the giving of any notice of
redemption by the Corporation pursuant to Section 4 and not later than the
close of business on the Business Day prior to the Automatic Conversion Date,
into (i) shares of Common Stock at the Exchange Rate in effect on the Optional
Conversion Date and (ii) the right to receive an amount in cash equal to Full
Cumulative Dividends on such share to the Optional Conversion Date; provided
that only the shares of Series D Preferred Stock that were subject to such
notice of redemption may be converted in an Optional Conversion.
Notwithstanding the foregoing, the Corporation may, at its option, in lieu of
delivering shares of Common Stock on the Optional Conversion Date, deliver
cash in an aggregate amount equal to the aggregate Closing Price (on the
Trading Day preceding the Optional Conversion Date) of the number of shares of
Common Stock otherwise so deliverable (together, in any event, with Full
Cumulative Dividends thereon to the Optional Conversion Date); provided,
however, that the Corporation may so deliver cash in lieu of shares of Common
Stock only if the aggregate Closing Price (on the Trading Day preceding the
Optional Conversion Date) of such shares of Common Stock deliverable on the
Optional Conversion Date is equal to or greater than the aggregate liquidation
preference of the shares of Series D Preferred Stock to be converted.
Optional Conversion of shares of Series D Preferred Stock may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
the Corporation or in blank (and, if applicable, payment of an amount equal to
the dividend payable on such shares), to the office of any transfer agent for
the Series D Preferred Stock or to any other office or agency maintained by
the Corporation for that purpose and otherwise in accordance with the Optional
Conversion procedures established by the Corporation. Each Optional
Conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the foregoing requirements shall have
been satisfied (the "Optional Conversion Date").
If any shares of Series D Preferred Stock shall be called for
redemption, the right to convert the shares designated for redemption shall
terminate at the close of business on the Business Day preceding the date
fixed for redemption.
(c) Mechanics of Conversion.
(i) Upon surrender in accordance with the aforesaid provisions of the
certificate for any shares so converted (duly endorsed or accompanied by
appropriate instruments of transfer), the holder of record of such shares
shall be entitled to receive the applicable number of shares of Common Stock
(calculated to the nearest 1/1,000,000th of a share) (and cash representing
fractional share settlements in respect thereof) at the applicable Exchange
Rate plus Full Cumulative Dividends thereon, without interest.
(ii) Before any holder of shares of Series D Preferred Stock shall
receive certificates for shares of Common Stock in respect of the conversion
of shares of Series D Preferred Stock (or cash representing fractional share
settlements in respect thereof) such holder shall surrender the certificate or
certificates of shares of Series D Preferred Stock duly endorsed if required
by the Corporation, at the office of the Corporation and, if certificates for
shares of Common Stock are to be received by such holder, shall state in
writing the name or names and the denominations in which such holder wishes
the certificate or certificates for the Common Stock to be issued. The
Corporation will, as soon as practicable after receipt thereof, issue and
deliver to such holder, or such holder's designee or designees, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with a certificate or certificates
representing any shares of Series D Preferred Stock which are not to be
converted, but which shall have constituted part of the certificate or
certificates for shares of Series D Preferred Stock so surrendered.
(iii) The Corporation's obligation to deliver shares of Common Stock and
provide funds upon conversion in accordance with this Section 5 shall be
deemed fulfilled if, on or before a conversion date, the Corporation shall
deposit with a bank or trust company, or an affiliate of a bank or trust
company, having an office or agency in New York, New York and having a capital
and surplus of at least $50,000,000 according to its last published statement
of condition, or shall set aside or make other reasonable provision for the
issuance of, such number of shares of Common Stock as are required to be
delivered by the Corporation pursuant to this Section 5 upon the occurrence of
the related conversion of Series D Preferred Stock (and for the payment of
cash required to be delivered by the Corporation pursuant to this Section 5 if
the Corportion so elects in the case of an Optional Conversion of Series D
Preferred Stock) and for cash required to be paid in lieu of the issuance of
fractional share amounts and to pay Full Cumulative Dividends on the shares of
Series D Preferred Stock to be converted as required by this Section 5, in
trust for the account of the holders of such shares of Series D Preferred
Stock to be converted (and so as to be and continue to be available therefor),
with (in the case of deposits with a bank or trust company) irrevocable
instructions and authority to such bank or trust company that such shares and
funds be delivered upon conversion of the shares of Series D Preferred Stock so
to be converted. If on the Automatic Conversion Date shares of Common Stock
and funds (if any) necessary for the conversion shall have been irrevocably
either set aside by the Company separate and apart from its other funds or
assets in trust for the account of the holders of the shares of Series D
Preferred Stock to be converted (and so as to be and continue to be available
therefor) or the Company shall have made other reasonable provision therefor,
then, notwithstanding that the certificates evidencing any shares of the
Series D Preferred Stock so subject to conversion shall not have been
surrendered, the shares represented thereby shall be deemed no longer
outstanding, dividends with respect to such shares shall cease to accrue on
the date fixed for conversion (provided that holders of shares of Series D
Preferred Stock at the close of business on a record date for any payment of
dividends shall be entitled to receive the Full Cumulative Dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such record date and prior to such
Dividend Payment Date) and all rights with respect to such shares shall
forthwith after such date cease and terminate, except for the rights of the
holders to receive the shares of Common Stock and funds (if any) payable
pursuant to this Section 5 without interest upon surrender of their
certificates therefor. Holders of shares of Series D Preferred Stock at the
close of business on a dividend payment record date shall be entitled to
receive the dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the Optional Conversion of such shares following
such record date and prior to such Dividend Payment Date. However, shares of
Series D Preferred Stock surrendered for Optional Conversion after the close of
business on a dividend payment record date and before the opening of business
on the corresponding Dividend Payment Date (except shares converted after the
issuance of a notice of redemption with respect to a redemption date during
such period) must be accompanied by payment in cash of an amount equal to the
dividend payable on such shares on such Dividend Payment Date. A holder of
shares of Series D Preferred Stock on a dividend record date who (or whose
transferee) surrenders any such shares for conversion into shares of Common
Stock on the corresponding Dividend Payment Date will receive the dividend
payable by the Corporation on such shares of Series D Preferred Stock on such
Dividend Payment Date, and the converting holder need not include payment of
the amount of such dividend upon surrender of shares of Series D Preferred
Stock for conversion. Except as provided above, upon any conversion of shares
of Series D Preferred Stock, the Corporation shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on such shares of
Series D Preferred Stock as to which conversion has been effected or for
dividends or distributions on the shares of Common Stock issued upon such
conversion.
(iv) Holders of shares of Series D Preferred Stock that are converted
shall not be entitled to receive dividends declared and paid on such shares of
Common Stock, and such shares of Common Stock shall not be entitled to vote,
until such shares of Common Stock are issued upon the surrender of the
certificates representing such shares of Series D Preferred Stock and upon
such surrender such holders shall be entitled to receive such dividends
declared and paid on such shares of Common Stock subsequent to such conversion
date. Amounts payable in cash in respect of the shares of Series D Preferred
Stock or in respect of such shares of Common Stock shall not bear interest.
(v) Each conversion of shares of Series D Preferred Stock into Common
Stock shall be deemed to have been made as of the close of business on the
applicable conversion date, so that the rights of the holder of such shares of
Series D Preferred Stock shall, to the extent of such conversion, cease at
such time and the person or persons entitled to receive shares of the Common
Stock upon conversion of such shares shall be treated for all purposes as
having become the record holder or holders of the Common Stock at such time;
provided, however, that if an event that results in an adjustment to the
Exchange Rate is declared or occurs with respect to the shares of Common
Stock, and the record date for any such action is on or after the close of
business on the date on which notice of such conversion is given, but prior to
the close of business on the date of such conversion, then the person or
persons entitled to receive shares of the Common Stock upon conversion of
shares of Series D Preferred Stock shall be treated for purposes of such
action as having become the record holder or holders of the Common Stock at
the close of business on the Trading Day next preceding the date on which
notice of such conversion is given.
(vi) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock upon conversion
of shares of Series D Preferred Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of
any transfer involved in the delivery of shares registered in a name other
than the name in which such shares of Series D Preferred Stock were formerly
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(d) Adjustments to the Exchange Rate. The Exchange Rate shall be
subject to adjustment from time to time as provided below in this paragraph
(d).
(i) If the Corporation shall pay or make a dividend or other
distribution with respect to its Common Stock in shares of Common Stock
(including by way of reclassification of any shares of its Common Stock)
to all holders of Common Stock, the Exchange Rate in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Exchange Rate by a
fraction of which the numerator shall be the sum of the number of shares
of Common Stock outstanding at the close of business on the date fixed
for such determination plus the total number of shares of Common Stock
constituting such dividend or other distribution, and of which the
denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination, such
increase to become effective immediately after the opening of business
on the day following the date fixed for such determination.
(ii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exchange Rate in
effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately
increased, and, conversely, in case outstanding shares of Common Stock
shall be combined into a smaller number of shares of Common Stock, the
Exchange Rate in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately reduced, such increases or reductions, as the case may
be, to become effective immediately after the opening of business on the
day following the day upon which such subdivision or combination becomes
effective.
(iii) If the Corporation shall, after the date hereof, issue rights or
warrants, in each case other than the Rights, to all holders of its
Common Stock entitling them (for a period not exceeding 45 days from the
date of such issuance) to subscribe for or purchase shares of Common
Stock at a price per share less than the Fair Market Value of the Common
Stock on the record date for the determination of stockholders entitled
to receive such rights or warrants, then in each case the Exchange Rate
shall be adjusted by multiplying the Exchange Rate in effect on such
record date, by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such
rights or warrants, immediately prior to such issuance, plus the number
of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants, immediately prior to
such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase pursuant to such rights or
warrants would purchase at such Fair Market Value (determined by
multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such Fair
Market Value). Such adjustment shall become effective at the opening of
business on the Business Day next following the record date for the
determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered
after the expiration of such rights or warrants, the Exchange Rate shall
be readjusted to the Exchange Rate which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been
made upon the basis of the issuance of rights or warrants in respect of
only the number of shares of Common Stock actually delivered.
(iv) If the Corporation shall pay a dividend or make a distribution to
all holders of its Common Stock consisting of evidences of its
indebtedness or other assets (including shares of capital stock of the
Corporation other than Common Stock but excluding any cash dividends or
any dividends or other distributions referred to in clauses (i) and (ii)
above), or shall issue to all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (other than
those referred to in clause (iii) above and other than Rights), then in
each such case the Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date for such dividend or
distribution or for the determination of stockholders entitled to
receive such rights or warrants, as the case may be, by a fraction of
which the numerator shall be the Fair Market Value per share of the
Common Stock on such record date, and of which the denominator shall be
such Fair Market Value per share of Common Stock less the fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) as of such record date of the portion of the assets
or evidences of indebtedness so distributed, or of such subscription
rights or warrants, applicable to one share of Common Stock. Such
adjustment shall become effective on the opening of business on the
Business Day next following the record date for such dividend or
distribution or for the determination of stockholders entitled to
receive such rights or warrants, as the case may be.
(v) Any share of Common Stock issuable in payment of a dividend or
other distribution shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend or other
distribution for purposes of calculating the number of outstanding
shares of Common Stock under subparagraph (ii) above.
(vi) Anything in this paragraph (d) notwithstanding, the Corporation
shall be entitled to make such upward adjustments in the Exchange Rate,
in addition to those required by this paragraph (d), as the Corporation
in its sole discretion shall determine to be advisable, in order that
any stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible
into or exchangeable for stock (or any transaction which could be treated
as any of the foregoing transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) hereafter made by the
Corporation to its stockholders shall not be taxable.
(vii) In any case in which this paragraph (d) shall require that an
adjustment as a result of any event become effective at the opening of
business on the Business Day next following a record date and the date
fixed for conversion pursuant to paragraph (a) occurs after such record
date, but before the occurrence of such event, the Corporation may in
its sole discretion elect to defer the following until after the
occurrence of such event: (A) issuing to the holder of any shares of
Series D Preferred Stock surrendered for conversion the additional
shares of Common Stock issuable upon such conversion over the shares of
Common Stock issuable before giving effect to such adjustment; and (B)
paying to such holder any amount in cash in lieu of a fractional share
of Common Stock pursuant to Section 6(d).
(viii)For purposes hereof, an "adjustment in the Exchange Rate means,
and shall be implemented by, an adjustment of the nature and amount
specified, effected in the manner specified, in each of the Upper
Exchange Rate, the Middle Exchange Rate and the Lower Exchange Rate. If
an adjustment is made to the Exchange Rate pursuant to this paragraph
(d), a proportionate adjustment in the same direction shall also be made
on the Automatic Conversion Date to the Current Market Price solely to
determine which of clauses (a), (b) or (c) of the definition of Exchange
Rate will apply on the Automatic Conversion Date. Such adjustment shall
be made by multiplying the Current Market Price by a fraction of which
the numerator shall be the Exchange Rate immediately after such
adjustment pursuant to this paragraph (d) and the denominator shall be
the Exchange Rate immediately before such adjustment. All adjustments
to the Exchange Rate shall be calculated to the nearest 1/1,000,000th
of a share of Common Stock. No adjustment in the Exchange Rate shall be
required unless such adjustment would require an increase or decrease of
at least one percent in the Exchange Rate; provided, however, that any
adjustments which by reason of this subparagraph are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All adjustments to the Exchange Rate shall be made
successively.
(ix) Before taking any action that would cause an adjustment increasing
the Exchange Rate such that the conversion price (for purposes of this
paragraph (d), an amount equal to the liquidation value per share of
Series D Preferred Stock divided by the Upper Exchange Rate as in effect
from time to time) would be below the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Upper Exchange Rate as so adjusted.
(e) Adjustment for Certain Consolidations or Mergers. In case of any
consolidation or merger to which the Corporation is a party (other than a
merger or consolidation in which the Corporation is the continuing corporation
and in which the Common Stock outstanding immediately prior to the merger or
consolidation remains unchanged), or in case of any sale or transfer to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), proper provision shall be made so that each share of the Series
D Preferred Stock shall, after consummation of such transaction, be subject to
(i) conversion at the option of the holder into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such share of Series D Preferred Stock would have been converted if the
conversion had occurred immediately prior to consummation of such transaction
(based on the Exchange Rate in effect immediately prior to such consummation),
(ii) conversion on the Automatic Conversion Date into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such share of Series D Preferred Stock would have been converted if the
conversion on the Automatic Conversion Date had occurred immediately prior to
the date of consummation of such transaction (based on the Exchange Rate in
effect immediately prior to such consummation) and (iii) redemption on any
redemption date in exchange for the kind and amount of securities, cash or
other property receivable upon consummation of such transaction by a holder of
the number of shares of Common Stock that would have been issuable at the Call
Price in effect on such redemption date upon a redemption of such share of
Series D Preferred Stock immediately prior to consummation of such
transaction; assuming in each case that such holder of Common Stock failed to
exercise rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon consummation of such transaction
(provided that if the kind or amount of securities, cash or other property
receivable upon consummation of such transaction is not the same for each
nonelecting share, then the kind and amount of securities, cash or other
property receivable upon consummation of such transaction for each nonelecting
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares). The kind and amount of securities into
which the shares of the Series D Preferred Stock shall be convertible after
consummation of such transaction shall be subject to adjustment as described
in paragraph (d) following the date of consummation of such transaction. The
Corporation may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
(f) Notice of Adjustments. Whenever the Exchange Rate is adjusted as
provided in paragraph (d), the Corporation shall:
(i) Forthwith compute the adjusted Exchange Rate and prepare a
certificate signed by the Chief Financial Officer, any Vice President, the
Treasurer or the Controller of the Corporation setting forth the adjusted
Exchange Rate, the method of calculation thereof in reasonable detail and
the facts requiring such adjustment and upon which such adjustment is
based, which certificate shall be prima facie evidence of the correctness
of the adjustment, and file such certificate forthwith with the Transfer
Agent;
(ii) Make a prompt public announcement stating that the Exchange
Rate has been adjusted and setting forth the adjusted Exchange Rate; and
(iii) Promptly mail a notice (stating that the Exchange Rate has
been adjusted and the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Exchange Rate) to the
holders of record of the outstanding shares of the Series D Preferred
Stock at or prior to the time the Corporation mails an interim statement
to its stockholders covering the fiscal quarter during which the facts
requiring such adjustment occurred but in any event within 45 days of the
end of such fiscal quarter.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than a dividend payable solely in
cash in an amount such that the aggregate cash dividend per share of Common
Stock in any fiscal quarter does not exceed 3.75% of the Current Market Price
of the Common Stock on the Trading Day next preceding the date of declaration
of such dividend, or (2) declare or authorize a redemption or repurchase of in
excess of 10% of the then outstanding shares of Common Stock; or
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants (other than Rights); or
(iii) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of the Corporation
or of any compulsory share exchange where the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent and each
office or agency maintained for conversion of shares of Series D Preferred
Stock, and shall cause to be mailed to the holders of record of the Series D
Preferred Stock, at their last addresses as they shall appear upon the stock
transfer books of the Corporation, at least 15 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
redemption, repurchase or granting of rights or warrants or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, liquidation, dissolution
or winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property (including cash)
deliverable upon such reclassification, consolidation, merger, sale, transfer,
share exchange, liquidation, dissolution or winding up. No failure to mail
such notice or any defect therein or in the mailing thereof shall affect the
validity of the corporate action required to be specified in such notice.
(h) Dividend or Interest Reinvestment Plans; Other. Notwithstanding the
foregoing provisions, the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under any such plan, and the issuance of any
shares of Common Stock or options or rights to purchase such shares pursuant
to any employee benefit plan or program of the Corporation, or pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Series D Preferred Stock was first designated,
shall not be deemed to constitute an issuance of Common Stock or exercisable,
exchangeable or convertible securities by the Corporation to which any of the
adjustment provisions described above applies. There shall be no adjustment
of the Exchange Rate in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the corporation except as
described in this Section 5. Except as expressly set forth in this Section 5,
if any action would require adjustment of the Exchange Rate pursuant to more
than one of the provisions described above, only one adjustment shall be made
and such adjustment shall be the amount of adjustment which has the highest
absolute value.
(i) For purposes of this Section 5, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held (directly or indirectly through a subsidiary) by or for the
account of the Corporation.
6. Reservation of Shares; Listing of Shares, Etc.
(a) Reservation of Shares. The Corporation shall at all times reserve
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of the Series D Preferred Stock, the full
number of shares of its Common Stock deliverable upon conversion of all shares
of Series D Preferred Stock not theretofore converted.
(b) Listing of Shares. If any shares of Common Stock required to be
reserved for purposes of conversion of the Series D Preferred Stock hereunder
require registration with or approval of any governmental authority under any
Federal or State law before such shares may be issued upon conversion, the
Corporation will in good faith and as expeditiously as possible endeavor to
cause such shares to be duly registered or approved, as the case may be. If
the Common Stock is listed on the New York Stock Exchange or any other national
securities exchange, the Corporation will, as expeditiously as possible, if
permitted by the rules of such exchange, cause to be listed and keep listed on
such exchange, upon official notice of issuance, all shares of Common Stock
issuable upon conversion of the Series D Preferred Stock.
(c) Shares Issued on Conversion to be Fully Paid, Etc. The shares of
Common Stock issuable upon conversion of the shares of Series D Preferred
Stock, when the same shall be issued in accordance with the terms hereof, are
hereby declared to be and shall be fully paid and nonassessable shares of
Common Stock in the hands of the holders thereof.
(d) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series D
Preferred Stock. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any shares of Series D Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Closing
Price of a share of Common Stock (or, if there is no such Closing Price, the
fair market value of a share of Common Stock, as determined or prescribed by
the Board of Directors) at the close of business on the Trading Day
immediately preceding the date of conversion.
(e) Other Action. If the Corporation shall take any action affecting
the Common Stock, other than action described in Section 5, that in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Series D Preferred Stock,
the Exchange Rate for the Series D Preferred Stock may be adjusted, to the
extent permitted by law, in such manner, if any, and at such time, as the
Board of Directors may determine to be equitable in the circumstances.
7. Voting Rights. Other than as required by applicable law, the Series D
Preferred Stock shall not have any voting powers either general or special
except that:
(a) Unless a greater vote or consent shall then be required by law,
the affirmative vote or consent of two-thirds of the votes to which the
holders of the outstanding shares of the Series D Preferred Stock, and each
other series of Preferred Stock of the Corporation similarly affected, if any,
voting together as a single class, are entitled shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal of
any of the provisions of the Certificate of Incorporation (including any
Certificate of Designations, Preferences and Rights or any similar document
relating to any series of Preferred Stock) of the Corporation, including any
amendment or supplement thereto, if such would materially and adversely affect
the preferences, rights, powers or privileges, qualification, limitations and
restrictions of the Series D Preferred Stock and any such other series of
Preferred Stock; provided, however, that the creation, issuance or increase in
the amount of authorized shares of any series of Preferred Stock ranking on a
parity with or junior to the Series D Preferred Stock as to the payment of
dividends or upon liquidation, dissolution or winding up will not be deemed to
materially and adversely affect such rights, powers or privileges,
qualification, limitations and restrictions.
(b) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the affirmative vote or consent of
two-thirds of the votes to which the holders of the outstanding shares of the
Series D Preferred Stock, and all other series of Preferred Stock of the
Corporation ranking on parity with shares of the Series D Preferred Stock
(either as to dividends or upon liquidation, dissolution or winding up) as to
which like voting rights have been conferred, voting together as a single
class, are entitled shall be necessary to create, authorize or issue, or
reclassify any authorized stock of the Corporation into, or create, authorize
or issue any obligation or security convertible into or evidencing a right to
purchase, any shares of any class or series of stock of the Corporation
ranking prior to the Series D Preferred Stock or ranking prior to any other
class or series of Preferred Stock of the Corporation which ranks on a parity
with the Series D Preferred Stock as to dividends or upon liquidation,
dissolution or winding up.
(c) Whenever, at any time or times, dividends payable on the shares of
Series D Preferred Stock shall be in arrears in an amount equal to at least
six full quarterly dividends on shares of the Series D Preferred Stock at the
time outstanding, the holders of the outstanding shares of Series D Preferred
Stock shall have the exclusive right, voting together as a class with holders
of shares of any one or more other series of Preferred Stock ranking on a
parity with the Series D Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up) upon which like voting rights have
been conferred and are then exercisable, to elect two (2) directors of the
Corporation for one-year terms at the Corporation's next annual meeting of
stockholders and at each subsequent annual meeting of stockholders. If the
right to elect directors shall have accrued to the holders of the Series D
Preferred Stock more than 90 days prior to the date established for the next
annual meeting of stockholders, the President of the Corporation shall, within
20 days after delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of at least 10% of all
outstanding shares of the Series D Preferred Stock, call a special meeting of
the holders of Series D Preferred Stock to be held within 60 days after the
delivery of such request for the purpose of electing such additional
directors. Upon the vesting of such right of the holders of Series D
Preferred Stock, the maximum authorized number of members of the Board of
Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the outstanding shares of
Series D Preferred Stock (either alone or together with the holders of shares
of any one or more other such series of Preferred Stock entitled to vote in
such election) as set forth above. The right of the holders of Series D
Preferred Stock to elect members of the Board of Directors of the Corporation
as aforesaid shall continue until such time as all dividends in arrears on the
Series D Preferred Stock shall have been paid in full or declared and set apart
for payment, at which time such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the event of each and every
subsequent default of the character above described.
(d) Upon termination of such special voting rights attributable to all
holders of the Series D Preferred Stock and any other such series of Preferred
Stock ranking on a parity with the Series D Preferred Stock as to dividends or
upon liquidation, dissolution or winding up and upon which like voting rights
have been conferred and are exercisable, the term of office of each director
elected by the holders of shares of Series D Preferred Stock and such parity
Preferred Stock (a "Preferred Stock Director) pursuant to such special voting
rights shall immediately terminate and the number of directors constituting
the entire Board of Directors shall be reduced by the number of Preferred
Stock Directors. Any Preferred Stock Director may be removed by, and shall
not be removed otherwise than by, a majority of the votes to which the holders
of the outstanding shares of Series D Preferred Stock and all other such
series of Preferred Stock ranking on a parity with the Series D Preferred
Stock with respect to dividends who were entitled to participate in such
Preferred Stock Directors election, voting as a single class, are entitled.
If the office of any Preferred Stock Director becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, the remaining Preferred Stock Director may choose a successor who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
(e) In connection with any right to vote, each holder of Series D
Preferred Stock shall be entitled to one vote for each share held (the holders
of shares of any other series of Preferred Stock being entitled to such number
of votes, if any, for each share of stock held as may be granted to them).
8. Ranking. The Common Stock shall rank junior to the Series D Preferred
Stock as to dividends and upon liquidation, dissolution or winding up, as
described in Sections 2 and 3. The Series A Preferred Stock and Series C
Preferred Stock shall rank senior to the Series D Preferred Stock, and the
Series D Preferred Stock shall rank on a parity with the Series E Preferred
Stock, as to dividends and upon liquidation, dissolution or winding up, in
each case as described in Section 2 or 3, respectively, provided that the
Series D Preferred Stock shall so rank on a parity with the Series C Preferred
Stock at such times as there shall be no shares of Series A Preferred Stock
outstanding. Any other class or series of stock of the Corporation shall be
deemed to rank:
(a) prior to the Series D Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up as described in Section 3,
respectively, if the holders of such class shall be entitled to the receipt of
dividends or of amounts distributable upon such a liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
the Series D Preferred Stock;
(b) on a parity with the Series D Preferred Stock, as to dividends or
upon liquidation, dissolution or winding up as described in section 3,
respectively, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series D Preferred Stock, if the holders of such class of stock and the
Series D Preferred Stock shall be entitled to the receipt of dividends or of
amounts distributable upon such a liquidation, dissolution or winding up, as
the case may be, in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation prices, without preference or
priority one over the other; and
(c) junior to the Series D Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up as described in section 3,
respectively, if the holders of Series D Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon such a liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of shares of such stock.
9. Definitions. For purposes of this Certificate of Designations,
Preferences and Rights of Series D Preferred Stock, the following terms shall
have the meanings indicated:
(a) "Automatic Conversion is defined in Section 5(a).
(b) "Automatic Conversion Date shall mean the first anniversary of
the Initial Issuance Date.
(c) "Base Number shall mean the number derived from dividing $100 by
the Initial Common Stock Price.
(d) "Business Day shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York or The
Commonwealth of Massachusetts are authorized or obligated by law or executive
order to close or a day which is or is declared a national or New York or
Massachusetts state holiday.
(i) "Call Price" of each share of Series D Preferred Stock shall mean
an amount equal to 100% of the Initial Preferred Stock Price.
(e) "Closing Price with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the New York Stock Exchange, or, if such
security is not listed or admitted to trading on such Exchange, on the
principal national securities exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security on
the over-the-counter market on the day in question as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, or a
similarly generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose.
(f) "Current Market Price shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question, provided, however, that, if any
event that results in an adjustment of the Exchange Rate occurs during the
period beginning on the first day of such ten-day period and ending on the
applicable conversion or redemption date, the Current Market Price as
determined pursuant to the foregoing shall be appropriately adjusted to
reflect the occurrence of such event.
(g) The "Exchange Rate shall be equal to (a) if the Current Market
Price on the date of determination is equal to or greater than 120% of the
Initial Common Stock Price (the "Threshold Common Stock Price), the number of
shares of Common Stock equal to 0.83333333 of the Base Number (the "Upper
Exchange Rate), (b) if the Current Market Price on the date of determination
is less than the Threshold Common Stock Price but greater than 80% of the
Initial Common Stock Price, the number of shares of Common Stock having a
value (determined at the Current Market Price) equal to the Initial Preferred
Stock Price (the "Middle Exchange Rate), and (c) if the Current Market Price
on the date of determination is equal to or less than 80% of the Initial
Common Stock Price, a number of shares of Common Stock (the "Lower Exchange
Rate) equal to 1.25 multiplied by the Base Number. The Exchange Rate is
subject to adjustment as set forth in Section 5(d).
(h) "Fair Market Value on any day shall mean the average of the
daily Closing Prices of a share of Common Stock of the Corporation on the five
(5) consecutive Trading Days selected by the Corporation commencing not more
than 20 Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex date with respect to the issuance or
distribution requiring such computation. The term "'ex' date, when used with
respect to any issuance or distribution, means the first day on which the
Common Stock trades regular way, without the right to receive such issuance or
distribution, on the exchange or in the market, as the case may be, used to
determine that day's Closing Price.
(i) "Full Cumulative Dividends shall mean, with respect to the
Series D Preferred Stock, or any other capital stock of the Corporation, as of
any date the aggregate amount of all then accumulated, accrued and unpaid
dividends payable on such shares of Series D Preferred Stock, or other capital
stock, as the case may be, in cash, whether or not earned or declared and
whether or not there shall be funds legally available for the payment thereof.
(j) "Initial Common Stock Price shall mean $15.4375 per share of
Common Stock.
(k) "Initial Issuance Date" shall mean the date on which shares of
Series D Preferred Stock are initially issued by the Company.
(l) "Initial Preferred Stock Price" shall mean $100 per share.
(m) "Lower Exchange Rate" is defined in the definition of "Exchange
Rate".
(n) "Middle Exchange Rate" is defined in the definition of "Exchange
Rate".
(o) "Optional Conversion" is defined in Section 5(b).
(p) "Optional Conversion Date" is defined in Section 5(b).
(q) "Record Date shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or in
which the Common Stock (or other applicable security) is exchanged or
converted into any combination of cash, securities or other property, the date
fixed for determination of stockholders entitled to receive such cash,
securities of other property (whether such dated is fixed by the Board of
Directors or by statute, contract or otherwise), and with respect to any
subdivision or combination of the Common Stock,
the effective date of such subdivision or combination.
(r) "Rights shall mean the rights of the Corporation which are
issuable under the Rights Agreement, or rights to purchase any capital stock
of the Corporation under any successor shareholder rights plan or plan adopted
in replacement of the Rights Agreement.
(s) "Rights Agreement" shall mean any agreement similar to the
Corporation's previous Rights Agreement dated as of April 26, 1988 between the
Corporation and State Street Bank and Trust Company, as Rights Agent, as the
same may be amended from time to time.
(t) "Sale shall mean a sale of all or substantially all of the assets
or stock of an operating division or subsidiary of the Corporation other than
TJ Maxx or Marshall's at a value of not less than a $25 million premium over
the book value of such assets or stock.
(u) "Sale Proceeds shall mean the net cash proceeds, if any (after
subtracting all fees and expenses related to such transaction), received by
the Corporation in respect of any Sale.
(v) "Series A Preferred Stock" shall mean the Corporation's New Series
A Cumulative Convertible Preferred Stock.
(w) "Series C Preferred Stock" shall mean the Corporation's $3.125
Series C Cumulative Convertible Preferred Stock.
(x) "Series E Preferred Stock" shall mean the Corporation's Series E
Cumulative Convertible Preferred Stock.
(y) "Threshold Common Stock Price is defined in the definition of
"Exchange Rate".
(z) "Trading Day shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business or (y) if the applicable
security is quoted on the National Market System of the National Association
of Securities Dealers Automated Quotation System, a day on which trades may be
made on such National Market System or (z) if the applicable security is not
so listed, admitted for trading or quoted, any day other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(aa) "Transfer Agent shall mean State Street Bank and Trust Company,
or any other national or state bank or trust company having combined capital
and surplus of at least $100,000,000 and designated by the Corporation as the
transfer agent and/or registrar of the Series D Preferred Stock, or if no such
designation is made, the Corporation.
(ab) "Upper Exchange Rate" is defined in the definition of "Exchange
Rate".
IN WITNESS WHEREOF, The TJX Companies, Inc., has caused this Certificate
of Designation to be signed by its Vice President - Finance and its Secretary
this 16th day of November, 1995.
THE TJX COMPANIES, INC.
By: /s/ STEVEN R. WISHNER
Steven R. Wishner
Vice President - Finance
Attest: /s/ JAY H. MELTZER
Jay H. Meltzer
Secretary
Exhibit B
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES E CUMULATIVE CONVERTIBLE PREFERRED STOCK
$1.00 PAR VALUE PER SHARE
of
THE TJX COMPANIES, INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
We, Steven R. Wishner, Vice President - Finance, and Jay H. Meltzer,
Secretary, of The TJX Companies, Inc. (hereinafter called the "Corporation), a
corporation organized and existing under and by virtue of the provisions of
the General Corporation Law of the State of Delaware,
Do HEREBY CERTIFY:
FIRST: The restated certificate of incorporation, as amended (the
"Certificate of Incorporation), of the corporation authorizes the issuance of
5,000,000 shares of Preferred Stock, $1.00 par value per share ("Preferred
Stock), in one or more series, and further authorizes the Board of Directors
from time to time to provide by Resolution for the issuance of shares of
Preferred Stock in one or more series not exceeding the aggregate number of
shares of Preferred Stock authorized by the Certificate of Incorporation and
to determine with respect to each such series, the voting powers, if any
(which voting powers if granted may be full or limited), designations,
preferences, the relative, participating, optional or other rights, and the
qualifications, limitations and restrictions appertaining thereto.
SECOND: The Finance Committee of the Board of Directors of the
corporation, pursuant to authority conferred on such committee by the Board of
Directors (which fixed the voting rights with respect to the shares designated
herein), at a meeting duly called and held on November 15, 1995 did duly adopt
the following Resolution authorizing the creation and issuance of a series of
said Preferred Stock to be known as "Series E Cumulative Convertible Preferred
Stock, said Series E Cumulative Convertible Preferred Stock to be convertible
into the common stock, $1.00 par value per share (the "Common Stock), of the
corporation:
RESOLVED: that the Finance Committee of the Board of Directors,
pursuant to authority conferred on such Committee by the Board of Directors
(which fixed the voting rights with respect to the shares designated herein)
by the provisions of the Second Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation), of the Corporation, hereby
authorizes the issuance of a series of cumulative convertible Preferred Stock
of the Corporation and hereby fixes the voting powers, designations,
preferences, the relative, participating, optional and other rights, and the
qualifications, limitations and restrictions appertaining thereto in addition
to those set forth in said Certificate of Incorporation, as follows:
1. Designation and Number. The designation of Preferred Stock created by
this Resolution shall be Series E Cumulative Convertible Preferred Stock,
$1.00 par value per share, of The TJX Companies, Inc. (the "Corporation)
(hereinafter referred to as the "Series E Preferred Stock), and the number of
shares constituting such series shall be 1,500,000, which number may not be
increased but may be decreased (but not below the number of shares of Series E
Preferred Stock then outstanding) from time to time by the Board of Directors.
All shares of Series E Preferred Stock which shall have been issued and
reacquired in any manner by the Corporation (excluding, until the Corporation
elects to retire them, shares which are held as treasury shares but including
shares redeemed, shares purchased and retired, shares converted pursuant to
Section 4 hereof and shares exchanged for any other security of the
Corporation) shall not be reissued and shall, upon the making of any necessary
filing with the Secretary of State of Delaware have the status of authorized
but unissued shares of the Corporation's Preferred Stock, without designation
as to series, and thereafter may be issued, but not as shares of Series E
Preferred Stock.
2. Dividend Rights.
(a) General. The holders of shares of Series E Preferred Stock shall be
entitled to receive, in preference to the holders of shares of Common Stock
and any other stock ranking as to dividends junior to the Series E Preferred
Stock, when and as declared by the Board of Directors, out of funds legally
available therefor, cumulative cash dividends, accruing from and after the
date of original issuance of the Series E Preferred Stock at an annual rate of
$7.00 per share, and no more, as long as shares of Series E Preferred Stock
remain outstanding. Dividends shall be payable quarterly in arrears, on
January 1, April 1, July 1 and October 1 in each year commencing on the first
of such four dates which follows the date of initial issuance of the Series E
Preferred Stock (each, a "Dividend Payment Date). Each dividend will be
payable to holders of record as they appear on the stock register of the
Corporation on the record date therefor, not exceeding 60 days nor less than
10 days preceding the payment date thereof, as shall be fixed by the Board of
Directors. Dividends in arrears may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
exceeding 60 days preceding the payment date thereof, as may be fixed by the
Board of Directors of the Corporation. Dividends payable on the Series E
Preferred Stock (i) for any period greater or less than a full dividend period,
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months and (ii) for each full quarterly dividend period, shall be computed by
dividing the annual dividend rate by four. Dividends on shares of Series E
Preferred Stock shall be cumulative and shall accrue on a daily basis from the
date of original issuance thereof whether or not there shall be funds legally
available for the payment thereof and whether or not such dividends are
declared. Holders of shares of the Series E Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or stock, in
excess of Full Cumulative Dividends on such shares. No interest or sum of
money in lieu of interest shall be payable in respect of any dividend payment
or payments which may be in arrears.
(b) Requirements for Dividends on Senior Preferred Stock. The
Corporation shall not (i) declare or pay or set apart for payment any
dividends or distributions on shares of Series E Preferred Stock (other than
dividends paid in shares of stock ranking junior to any series of Preferred
Stock ranking senior to the Series E Preferred Stock as to dividends) or (ii)
make any purchase or redemption of, or any sinking fund payment for the
purchase or redemption of, shares of Series E Preferred Stock (other than a
purchase or redemption made by issue or delivery of any stock ranking junior
to any series of Preferred Stock ranking senior to the Series E Preferred
Stock as to dividends or upon liquidation, dissolution or winding up) unless
Full Cumulative Dividends on all outstanding shares of any series of Preferred
Stock ranking senior to Series E Preferred Stock through the most recent
dividend payment date prior to the date of payment of such dividend or
distribution, or effective date of such purchase, redemption or sinking fund
payment, shall have been paid in full or declared and a sufficient sum set
apart for payment thereof.
(c) Requirements for Dividends on Parity Preferred Stock. If there
shall be outstanding shares of any other class or series of Preferred Stock
ranking on a parity with the Series E Preferred Stock as to dividends, no
dividends, except as described in the next sentence, shall be declared or paid
or set apart for payment on any such other series for any period unless Full
Cumulative Dividends on the Series E Preferred Stock through the most recent
Dividend Payment Date have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment. If dividends on the Series E Preferred Stock and on any other series
of Preferred Stock ranking on a parity as to dividends with the Series E
Preferred Stock are in arrears, all dividends declared upon shares of the
Series E Preferred Stock and all dividends declared upon such other series
shall be declared pro rata so that the amounts of dividends per share declared
on the Series E Preferred Stock and such other series shall in all cases bear
to each other the same ratio that Full Cumulative Dividends per share at the
time on the shares of Series E Preferred Stock and on such other series bear
to each other.
(d) Requirements for Dividends on Junior Stock. The Corporation shall
not (i) declare or pay or set apart for payment any dividends or distributions
on any stock ranking as to dividends junior to the Series E Preferred Stock
(other than dividends paid in shares of stock ranking junior to the Series E
Preferred Stock as to dividends) or (ii) make any purchase or redemption of,
or any sinking fund payment for the purchase or redemption of, any stock
ranking as to dividends or upon liquidation, dissolution or winding up junior
to the Series E Preferred Stock (other than a purchase or redemption made by
issue or delivery of any stock ranking junior to the Series E Preferred Stock
as to dividends or upon liquidation, dissolution or winding up) unless Full
Cumulative Dividends on all outstanding shares of Series E Preferred Stock
through the most recent Dividend Payment Date prior to the date of payment of
such dividend or distribution, or effective date of such purchase, redemption
or sinking fund payment, shall have been paid in full or declared and a
sufficient sum set apart for payment thereof; provided, however, that unless
prohibited by the terms of any other outstanding series of Preferred Stock,
any moneys theretofore deposited in any sinking fund with respect to any
Preferred Stock of the Corporation in compliance with this Section 2(d) and
the provisions of such sinking fund may thereafter be applied to the purchase
or redemption of such Preferred Stock in accordance with the terms of such
sinking fund regardless of whether at the time of such application Full
Cumulative Dividends on all outstanding shares of Series E Preferred Stock
through the most recent Dividend Payment Date shall have been paid in full or
declared and a sufficient sum set apart for payment thereof.
3. Liquidation Preferences.
(a) Senior Preferred Stock. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether from capital or surplus) shall be made to or set apart
for the holders of the Series E Preferred Stock upon liquidation, dissolution
or winding up, the holders of each class or series of Preferred Stock ranking
senior to the Series E Preferred Stock upon liquidation, dissolution or
winding up shall be entitled to receive full payment of their liquidation
preferences.
(b) Order of Payments among Parity Preferred Stock. In the event of
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Corporation (whether from capital or surplus) shall be made to or set
apart for the holders of any class or series of stock of the Corporation
ranking junior to the Series E Preferred Stock upon liquidation, dissolution or
winding up, the holders of the shares of Series E Preferred Stock and the
holders of each other class or series of Preferred Stock ranking on a parity
with Series E Preferred Stock upon liquidation, dissolution or winding up
shall be entitled to receive liquidation payments according to the following
priorities:
First,
The holders of the shares of Series E Preferred Stock shall receive $100
per share and the holders of shares of each such other class or series of
Preferred Stock shall receive the full respective liquidation preferences
(including any premiums) to which they are entitled; and
Second,
The holders of shares of Series E Preferred Stock and the holders of
shares of each such other class or series of Preferred Stock shall each
receive an amount equal to Full Cumulative Dividends with respect to their
respective shares through and including the date of final distribution to such
holders, but such holders shall not be entitled to any further payment.
No payment (in either of the First step or Second step provided above) on
account of any liquidation, dissolution or winding up of the Corporation shall
be made to holders of any such other class or series of Preferred Stock or to
the holders of Series E Preferred Stock unless there shall likewise be paid at
the same time to the holders of the Series E Preferred Stock and the holders
of each such other class or series of Preferred Stock like proportionate
amounts of the same payments (as to each of the First step or the Second step
above), such proportionate amounts to be determined ratably in proportion to
the full amounts to which the holders of all outstanding shares of Series E
Preferred Stock and the holders of all outstanding shares of each such other
class or series of Preferred Stock are respectively entitled (in either the
First step or the Second step, as the case may be) with respect to such
distribution.
For purposes of this Section 3, neither a consolidation or merger of the
Corporation with or into another corporation nor a merger of any other
corporation with or into the Corporation or a sale or transfer of all or any
part of the Corporation's assets for cash, securities or other property will
be deemed a liquidation, dissolution or winding up of the Corporation.
(c) Junior Stock. After payment shall have been made in full to the
holders of Series E Preferred Stock and to the holders of each such other
class or series of Preferred Stock as provided in this Section 3 upon
liquidation, dissolution or winding up of the Corporation, any other series or
class or classes of stock ranking junior to the Series E Preferred Stock upon
liquidation, dissolution or winding up shall, subject to the respective terms
and provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed upon such liquidation, dissolution
or winding up, and the holders of Series E Preferred Stock shall not be
entitled to share therein.
4. Conversion.
(a) Automatic Conversion. Unless earlier converted at the option of
the holder in accordance with the provisions of Section 4(b), on the Automatic
Conversion Date each outstanding share of the Series E Preferred Stock shall
convert automatically (the "Automatic Conversion) into (i) shares of Common
Stock at the Exchange Rate in effect on the Automatic Conversion Date and (ii)
the right to receive an amount in cash equal to Full Cumulative Dividends on
such share to the Automatic Conversion Date.
(b) Optional Conversion by Holder. Shares of Series E Preferred Stock
may be converted, in whole or in part, at the option of the holder thereof
("Optional Conversion), at any time after the Initial Issuance Date and not
later than the close of business on the Business Day prior to the Automatic
Conversion Date, into shares of Common Stock at the Upper Exchange Rate.
Optional Conversion of shares of Series E Preferred Stock may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
the Corporation or in blank (and, if applicable, payment of an amount equal to
the dividend payable on such shares), to the office of any transfer agent for
the Series E Preferred Stock or to any other office or agency maintained by
the Corporation for that purpose and otherwise in accordance with the Optional
Conversion procedures established by the Corporation. Each Optional
Conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the foregoing requirements shall have
been satisfied (the "Optional Conversion Date").
(c) Mechanics of Conversion.
(i) Upon surrender in accordance with the aforesaid provisions of the
certificate for any shares so converted (duly endorsed or accompanied by
appropriate instruments of transfer), the holder of record of such shares
shall be entitled to receive the applicable number of shares of Common Stock
(calculated to the nearest 1/1,000,000th of a share) (and cash representing
fractional share settlements in respect thereof) at the applicable Exchange
Rate plus Full Cumulative Dividends thereon, without interest.
(ii) Before any holder of shares of Series E Preferred Stock shall
receive certificates for shares of Common Stock in respect of the conversion
of shares of Series E Preferred Stock (or cash representing fractional share
settlements in respect thereof) such holder shall surrender the certificate or
certificates of shares of Series E Preferred Stock duly endorsed if required
by the Corporation, at the office of the Corporation and, if certificates for
shares of Common Stock are to be received by such holder, shall state in
writing the name or names and the denominations in which such holder wishes
the certificate or certificates for the Common Stock to be issued. The
Corporation will, as soon as practicable after receipt thereof, issue and
deliver to such holder, or such holder's designee or designees, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with a certificate or certificates
representing any shares of Series E Preferred Stock which are not to be
converted, but which shall have constituted part of the certificate or
certificates for shares of Series E Preferred Stock so surrendered.
(iii) The Corporation's obligation to deliver shares of Common Stock and
provide funds upon conversion in accordance with this Section 4 shall be
deemed fulfilled if, on or before a conversion date, the Corporation shall
deposit with a bank or trust company, or an affiliate of a bank or trust
company, having an office or agency in New York, New York and having a capital
and surplus of at least $50,000,000 according to its last published statement
of condition, or shall set aside or make other reasonable provision for the
issuance of, such number of shares of Common Stock as are required to be
delivered by the Corporation pursuant to this Section 4 upon the occurrence of
the related conversion of Series E Preferred Stock and for cash required to be
paid in lieu of the issuance of fractional share amounts and Full Cumulative
Dividends payable in cash on the shares of Series E Preferred Stock to be
converted as required by this Section 4, in trust for the account of the
holders of such shares of Series E Preferred Stock to be converted (and so as
to be and continue to be available therefor), with (in the case of deposits
with a bank or trust company) irrevocable instructions and authority to such
bank or trust company that such shares and funds be delivered upon conversion
of the shares of Series E Preferred Stock so to be converted. If on the
Automatic Conversion Date shares of Common Stock and funds (if any) necessary
for the conversion shall have been irrevocably either set aside by the Company
separate and apart from its other funds or assets in trust for the account of
the holders of the shares of Series E Preferred Stock to be converted (and so
as to be and continue to be available therefor) or the Company shall have made
other reasonable provision therefor, then, notwithstanding that the
certificates evidencing any shares of the Series E Preferred Stock so subject
to conversion shall not have been surrendered, the shares represented thereby
shall be deemed no longer outstanding, dividends with respect to such shares
shall cease to accrue on the date fixed for conversion (provided that holders
of shares of Series E Preferred Stock at the close of business on a record
date for any payment of dividends shall be entitled to receive Full Cumulative
Dividends payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to such Dividend Payment Date) and all rights with respect to such
shares shall forthwith after such date cease and terminate, except for the
rights of the holders to receive the shares of Common Stock and funds (if any)
payable pursuant to this Section 4 without interest upon surrender of their
certificates therefor. Holders of shares of Series E Preferred Stock at the
close of business on a dividend payment record date shall be entitled to
receive the dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the Optional Conversion of such shares following
such record date and prior to such Dividend Payment Date. However, shares of
Series E Preferred Stock surrendered for Optional Conversion after the close of
business on a dividend payment record date and before the opening of business
on the corresponding Dividend Payment Date must be accompanied by payment in
cash of an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series E Preferred Stock on a
dividend record date who (or whose transferee) surrenders any such shares for
conversion into shares of Common Stock on the corresponding Dividend Payment
Date will receive the dividend payable by the Corporation on such shares of
Series E Preferred Stock on such Dividend Payment Date, and the converting
holder need not include payment of the amount of such dividend upon surrender
of shares of Series E Preferred Stock for conversion. Except as provided
above, upon any conversion of shares of Series E Preferred Stock, the
Corporation shall make no payment or allowance for unpaid dividends, whether
or not in arrears, on such shares of Series E Preferred Stock as to which
conversion has been effected or for dividends or distributions on the shares
of Common Stock issued upon such conversion.
(iv) Holders of shares of Series E Preferred Stock that are converted
shall not be entitled to receive dividends declared and paid on such shares of
Common Stock, and such shares of Common Stock shall not be entitled to vote,
until such shares of Common Stock are issued upon the surrender of the
certificates representing such shares of Series E Preferred Stock and upon
such surrender such holders shall be entitled to receive such dividends
declared and paid on such shares of Common Stock subsequent to such conversion
date. Amounts payable in cash in respect of the shares of Series E Preferred
Stock or in respect of such shares of Common Stock shall not bear interest.
(v) Each conversion of shares of Series E Preferred Stock into Common
Stock shall be deemed to have been made as of the close of business on the
applicable conversion date, so that the rights of the holder of such shares of
Series E Preferred Stock shall, to the extent of such conversion, cease at
such time and the person or persons entitled to receive shares of the Common
Stock upon conversion of such shares shall be treated for all purposes as
having become the record holder or holders of the Common Stock at such time;
provided, however, that if an event that results in an adjustment to the
Exchange Rate is declared or occurs with respect to the shares of Common
Stock, and the record date for any such action is on or after the close of
business on the date on which notice of such conversion is given, but prior to
the close of business on the date of such conversion, then the person or
persons entitled to receive shares of the Common Stock upon conversion of
shares of Series E Preferred Stock shall be treated for purposes of such
action as having become the record holder or holders of the Common Stock at
the close of business on the Trading Day next preceding the date on which
notice of such conversion is given.
(vi) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock upon conversion
of shares of Series E Preferred Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of
any transfer involved in the delivery of shares registered in a name other
than the name in which such shares of Series E Preferred Stock were formerly
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Corporation the
amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(d) Adjustments to the Exchange Rate. The Exchange Rate shall be
subject to adjustment from time to time as provided below in this paragraph
(d).
(i) If the Corporation shall pay or make a dividend or other
distribution with respect to its Common Stock in shares of Common Stock
(including by way of reclassification of any shares of its Common Stock)
to all holders of Common Stock, the Exchange Rate in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Exchange Rate by a
fraction of which the numerator shall be the sum of the number of shares
of Common Stock outstanding at the close of business on the date fixed
for such determination plus the total number of shares of Common Stock
constituting such dividend or other distribution, and of which the
denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination, such
increase to become effective immediately after the opening of business
on the day following the date fixed for such determination.
(ii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exchange Rate in
effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately
increased, and, conversely, in case outstanding shares of Common Stock
shall be combined into a smaller number of shares of Common Stock, the
Exchange Rate in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately reduced, such increases or reductions, as the case may
be, to become effective immediately after the opening of business on the
day following the day upon which such subdivision or combination becomes
effective.
(iii) If the Corporation shall, after the date hereof, issue rights or
warrants, in each case other than the Rights, to all holders of its
Common Stock entitling them (for a period not exceeding 45 days from the
date of such issuance) to subscribe for or purchase shares of Common
Stock at a price per share less than the Fair Market Value of the Common
Stock on the record date for the determination of stockholders entitled
to receive such rights or warrants, then in each case the Exchange Rate
shall be adjusted by multiplying the Exchange Rate in effect on such
record date, by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such
rights or warrants, immediately prior to such issuance, plus the number
of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants, immediately prior to
such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase pursuant to such rights or
warrants would purchase at such Fair Market Value (determined by
multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such Fair
Market Value). Such adjustment shall become effective at the opening of
business on the Business Day next following the record date for the
determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered
after the expiration of such rights or warrants, the Exchange Rate shall
be readjusted to the Exchange Rate which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made
upon the basis of the issuance of rights or warrants in respect of only
the number of shares of Common Stock actually delivered.
(iv) If the Corporation shall pay a dividend or make a distribution to
all holders of its Common Stock consisting of evidences of its
indebtedness or other assets (including shares of capital stock of the
Corporation other than Common Stock but excluding any cash dividends or
any dividends or other distributions referred to in clauses (i) and (ii)
above), or shall issue to all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (other than
those referred to in clause (iii) above and other than Rights), then in
each such case the Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date for such dividend or
distribution or for the determination of stockholders entitled to
receive such rights or warrants, as the case may be, by a fraction of
which the numerator shall be the Fair Market Value per share of the
Common Stock on such record date, and of which the denominator shall be
such Fair Market Value per share of Common Stock less the fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) as of such record date of the portion of the assets
or evidences of indebtedness so distributed, or of such subscription
rights or warrants, applicable to one share of Common Stock. Such
adjustment shall become effective on the opening of business on the
Business Day next following the record date for such dividend or
distribution or for the determination of stockholders entitled to
receive such rights or warrants, as the case may be.
(v) Any share of Common Stock issuable in payment of a dividend or
other distribution shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend or other
distribution for purposes of calculating the number of outstanding
shares of Common Stock under subparagraph (ii) above.
(vi) Anything in this paragraph (d) notwithstanding, the Corporation
shall be entitled to make such upward adjustments in the Exchange Rate,
in addition to those required by this paragraph (d), as the Corporation
in its sole discretion shall determine to be advisable, in order that
any stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible
into or exchangeable for stock (or any transaction which could be treated
as any of the foregoing transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) hereafter made by the
Corporation to its stockholders shall not be taxable.
(vii) In any case in which this paragraph (d) shall require that an
adjustment as a result of any event become effective at the opening of
business on the Business Day next following a record date and the date
fixed for conversion pursuant to paragraph (a) occurs after such record
date, but before the occurrence of such event, the Corporation may in
its sole discretion elect to defer the following until after the
occurrence of such event: (A) issuing to the holder of any shares of
Series E Preferred Stock surrendered for conversion the additional
shares of Common Stock issuable upon such conversion over the shares of
Common Stock issuable before giving effect to such adjustment; and (B)
paying to such holder any amount in cash in lieu of a fractional share
of Common Stock pursuant to Section 5(d).
(viii)For purposes hereof, an "adjustment in the Exchange Rate means,
and shall be implemented by, an adjustment of the nature and amount
specified, effected in the manner specified, in each of the Upper
Exchange Rate, the Middle Exchange Rate and the Lower Exchange Rate. If
an adjustment is made to the Exchange Rate pursuant to this paragraph
(d), a proportionate adjustment in the same direction shall also be made
on the Automatic Conversion Date to the Current Market Price solely to
determine which of clauses (a), (b) or (c) of the definition of Exchange
Rate will apply on the Automatic Conversion Date. Such adjustment shall
be made by multiplying the Current Market Price by a fraction of which
the numerator shall be the Exchange Rate immediately after such
adjustment pursuant to this paragraph (d) and the denominator shall be
the Exchange Rate immediately before such adjustment. All adjustments
to the Exchange Rate shall be calculated to the nearest 1/1,000,000th
of a share of Common Stock. No adjustment in the Exchange Rate shall be
required unless such adjustment would require an increase or decrease of
at least one percent in the Exchange Rate; provided, however, that any
adjustments which by reason of this subparagraph are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All adjustments to the Exchange Rate shall be made
successively.
(ix) Before taking any action that would cause an adjustment increasing
the Exchange Rate such that the conversion price (for purposes of this
paragraph (d), an amount equal to the liquidation value per share of
Series E Preferred Stock divided by the Upper Exchange Rate as in effect
from time to time) would be below the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Upper Exchange Rate as so adjusted.
(e) Adjustment for Certain Consolidations or Mergers. In case of any
consolidation or merger to which the Corporation is a party (other than a
merger or consolidation in which the Corporation is the continuing corporation
and in which the Common Stock outstanding immediately prior to the merger or
consolidation remains unchanged), or in case of any sale or transfer to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), proper provision shall be made so that each share of the Series
E Preferred Stock shall, after consummation of such transaction, be subject to
(i) conversion at the option of the holder into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such share of Series E Preferred Stock would have been converted if the
conversion had occurred immediately prior to consummation of such transaction
(based on the Exchange Rate in effect immediately prior to such consummation)
and (ii) conversion on the Automatic Conversion Date into the kind and amount
of securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such share of Series E Preferred Stock would have been converted if the
conversion on the Automatic Conversion Date had occurred immediately prior to
the date of consummation of such transaction (based on the Exchange Rate in
effect immediately prior to such consummation); assuming in each case that
such holder of Common Stock failed to exercise rights of election, if any, as
to the kind or amount of securities, cash or other property receivable upon
consummation of such transaction (provided that if the kind or amount of
securities, cash or other property receivable upon consummation of such
transaction is not the same for each nonelecting share, then the kind and
amount of securities, cash or other property receivable upon consummation of
such transaction for each nonelecting share shall be deemed to be the kind and
amount so receivable per share by a plurality of the nonelecting shares). The
kind and amount of securities into which the shares of the Series E Preferred
Stock shall be convertible after consummation of such transaction shall be
subject to adjustment as described in paragraph (d) following the date of
consummation of such transaction. The Corporation may not become a party to
any such transaction unless the terms thereof are consistent with the
foregoing.
(f) Notice of Adjustments. Whenever the Exchange Rate is adjusted as
provided in paragraph (d), the Corporation shall:
(i) Forthwith compute the adjusted Exchange Rate and prepare a
certificate signed by the Chief Financial Officer, any Vice President, the
Treasurer or the Controller of the Corporation setting forth the adjusted
Exchange Rate, the method of calculation thereof in reasonable detail and
the facts requiring such adjustment and upon which such adjustment is
based, which certificate shall be prima facie evidence of the correctness
of the adjustment, and file such certificate forthwith with the Transfer
Agent;
(ii) Make a prompt public announcement stating that the Exchange
Rate has been adjusted and setting forth the adjusted Exchange Rate; and
(iii) Promptly mail a notice (stating that the Exchange Rate has
been adjusted and the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Exchange Rate) to the
holders of record of the outstanding shares of the Series E Preferred
Stock at or prior to the time the Corporation mails an interim statement
to its stockholders covering the fiscal quarter during which the facts
requiring such adjustment occurred but in any event within 45 days of the
end of such fiscal quarter.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than a dividend payable solely in
cash in an amount such that the aggregate cash dividend per share of Common
Stock in any fiscal quarter does not exceed 3.75% of the Current Market Price
of the Common Stock on the Trading Day next preceding the date of declaration
of such dividend, or (2) declare or authorize a redemption or repurchase of in
excess of 10% of the then outstanding shares of Common Stock; or
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants (other than Rights); or
(iii) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of the Corporation
or of any compulsory share exchange where the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent and each
office or agency maintained for conversion of shares of Series E Preferred
Stock, and shall cause to be mailed to the holders of record of the Series E
Preferred Stock, at their last addresses as they shall appear upon the stock
transfer books of the Corporation, at least 15 days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
redemption, repurchase or granting of rights or warrants or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, liquidation,
dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
(including cash) deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, liquidation, dissolution or winding
up. No failure to mail such notice or any defect therein or in the mailing
thereof shall affect the validity of the corporate action required to be
specified in such notice.
(h) Dividend or Interest Reinvestment Plans; Other. Notwithstanding the
foregoing provisions, the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under any such plan, and the issuance of any
shares of Common Stock or options or rights to purchase such shares pursuant
to any employee benefit plan or program of the Corporation, or pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Series E Preferred Stock was first designated,
shall not be deemed to constitute an issuance of Common Stock or exercisable,
exchangeable or convertible securities by the Corporation to which any of the
adjustment provisions described above applies. There shall be no adjustment
of the Exchange Rate in case of the issuance of any stock (or securities
convertible into or exchangeable for stock) of the corporation except as
described in this Section 4. Except as expressly set forth in this Section 4,
if any action would require adjustment of the Exchange Rate pursuant to more
than one of the provisions described above, only one adjustment shall be made
and such adjustment shall be the amount of adjustment which has the highest
absolute value.
(i) For purposes of this Section 4, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held, directly or indirectly through a subsidiary, by or for the
account of the Corporation.
5. Reservation of Shares; Listing of Shares, Etc.
(a) Reservation of Shares. The Corporation shall at all times reserve
and keep available, out of its authorized and unissued stock, solely for the
purpose of effecting the conversion of the Series E Preferred Stock, the full
number of shares of its Common Stock deliverable upon conversion of all shares
of Series E Preferred Stock not theretofore converted.
(b) Listing of Shares. If any shares of Common Stock required to be
reserved for purposes of conversion of the Series E Preferred Stock hereunder
require registration with or approval of any governmental authority under any
Federal or State law before such shares may be issued upon conversion, the
Corporation will in good faith and as expeditiously as possible endeavor to
cause such shares to be duly registered or approved, as the case may be. If
the Common Stock is listed on the New York Stock Exchange or any other national
securities exchange, the Corporation will, as expeditiously as possible, if
permitted by the rules of such exchange, cause to be listed and keep listed on
such exchange, upon official notice of issuance, all shares of Common Stock
issuable upon conversion of the Series E Preferred Stock.
(c) Shares Issued on Conversion to be Fully Paid, Etc. The shares of
Common Stock issuable upon conversion of the shares of Series E Preferred
Stock, when the same shall be issued in accordance with the terms hereof, are
hereby declared to be and shall be fully paid and nonassessable shares of
Common Stock in the hands of the holders thereof.
(d) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series E
Preferred Stock. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any shares of Series E Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Closing
Price of a share of Common Stock (or, if there is no such Closing Price, the
fair market value of a share of Common Stock, as determined or prescribed by
the Board of Directors) at the close of business on the Trading Day
immediately preceding the date of conversion.
(e) Other Action. If the Corporation shall take any action affecting
the Common Stock, other than action described in Section 4, that in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Series E Preferred Stock,
the Exchange Rate for the Series E Preferred Stock may be adjusted, to the
extent permitted by law, in such manner, if any, and at such time, as the
Board of Directors may determine to be equitable in the circumstances.
6. Voting Rights. Other than as required by applicable law, the Series E
Preferred Stock shall not have any voting powers either general or special
except that:
(a) Unless a greater vote or consent shall then be required by law,
the affirmative vote or consent of two-thirds of the votes to which the
holders of the outstanding shares of the Series E Preferred Stock, and each
other series of Preferred Stock of the Corporation similarly affected, if any,
voting together as a single class, are entitled shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal of
any of the provisions of the Certificate of Incorporation (including any
Certificate of Designations, Preferences and Rights or any similar document
relating to any series of Preferred Stock) of the Corporation, including any
amendment or supplement thereto, if such would materially and adversely affect
the preferences, rights, powers or privileges, qualification, limitations and
restrictions of the Series E Preferred Stock and any such other series of
Preferred Stock; provided, however, that the creation, issuance or increase in
the amount of authorized shares of any series of Preferred Stock ranking on a
parity with or junior to the Series E Preferred Stock as to the payment of
dividends or upon liquidation, dissolution or winding up will not be deemed to
materially and adversely affect such rights, powers or privileges,
qualification, limitations and restrictions.
(b) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the affirmative vote or consent of
two-thirds of the votes to which the holders of the outstanding shares of the
Series E Preferred Stock, and all other series of Preferred Stock of the
Corporation ranking on parity with shares of the Series E Preferred Stock
(either as to dividends or upon liquidation, dissolution or winding up) as to
which like voting rights have been conferred, voting together as a single
class, are entitled shall be necessary to create, authorize or issue, or
reclassify any authorized stock of the Corporation into, or create, authorize
or issue any obligation or security convertible into or evidencing a right to
purchase, any shares of any class or series of stock of the Corporation
ranking prior to the Series E Preferred Stock or ranking prior to any other
class or series of Preferred Stock of the Corporation which ranks on a parity
with the Series E Preferred Stock as to dividends or upon liquidation,
dissolution or winding up.
(c) Whenever, at any time or times, dividends payable on the shares of
Series E Preferred Stock shall be in arrears in an amount equal to at least
six full quarterly dividends on shares of the Series E Preferred Stock at the
time outstanding, the holders of the outstanding shares of Series E Preferred
Stock shall have the exclusive right, voting together as a class with holders
of shares of any one or more other series of Preferred Stock ranking on a
parity with the Series E Preferred Stock (either as to dividends or upon
liquidation, dissolution or winding up) upon which like voting rights have
been conferred and are then exercisable, to elect two (2) directors of the
Corporation for one-year terms at the Corporation's next annual meeting of
stockholders and at each subsequent annual meeting of stockholders. If the
right to elect directors shall have accrued to the holders of the Series E
Preferred Stock more than 90 days prior to the date established for the next
annual meeting of stockholders, the President of the Corporation shall, within
20 days after delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of at least 10% of all
outstanding shares of the Series E Preferred Stock, call a special meeting of
the holders of Series E Preferred Stock to be held within 60 days after the
delivery of such request for the purpose of electing such additional
directors. Upon the vesting of such right of the holders of Series E
Preferred Stock, the maximum authorized number of members of the Board of
Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the outstanding shares of
Series E Preferred Stock (either alone or together with the holders of shares
of any one or more other such series of Preferred Stock entitled to vote in
such election) as set forth above. The right of the holders of Series E
Preferred Stock to elect members of the Board of Directors of the Corporation
as aforesaid shall continue until such time as all dividends in arrears on the
Series E Preferred Stock shall have been paid in full or declared and set apart
for payment, at which time such right shall terminate, except as herein or by
law expressly provided, subject to revesting in the event of each and every
subsequent default of the character above described.
(d) Upon termination of such special voting rights attributable to all
holders of the Series E Preferred Stock and any other such series of Preferred
Stock ranking on a parity with the Series E Preferred Stock as to dividends or
upon liquidation, dissolution or winding up and upon which like voting rights
have been conferred and are exercisable, the term of office of each director
elected by the holders of shares of Series E Preferred Stock and such parity
Preferred Stock (a "Preferred Stock Director) pursuant to such special voting
rights shall immediately terminate and the number of directors constituting
the entire Board of Directors shall be reduced by the number of Preferred
Stock Directors. Any Preferred Stock Director may be removed by, and shall
not be removed otherwise than by, a majority of the votes to which the holders
of the outstanding shares of Series E Preferred Stock and all other such
series of Preferred Stock ranking on a parity with the Series E Preferred
Stock with respect to dividends who were entitled to participate in such
Preferred Stock Directors election, voting as a single class, are entitled.
If the office of any Preferred Stock Director becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, the remaining Preferred Stock Director may choose a successor who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
(e) In connection with any right to vote, each holder of Series E
Preferred Stock shall be entitled to one vote for each share held (the holders
of shares of any other series of Preferred Stock being entitled to such number
of votes, if any, for each share of stock held as may be granted to them).
7. Ranking. The Common Stock shall rank junior to the Series E Preferred
Stock as to dividends and upon liquidation, dissolution or winding up, as
described in Sections 2 and 3. The Series A Preferred Stock and Series C
Preferred Stock shall rank senior to the Series E Preferred Stock, and the
Series D Preferred Stock shall rank on a parity with the Series E Preferred
Stock, as to dividends and upon liquidation, dissolution or winding up, in
each case as described in Section 2 or 3, respectively, provided that the
Series E Preferred Stock shall so rank on a parity with the Series C Preferred
Stock at such times as there shall be no shares of Series A Preferred Stock
outstanding. Any other class or series of stock of the Corporation shall be
deemed to rank:
(a) prior to the Series E Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up as described in Section 3,
respectively, if the holders of such class shall be entitled to the receipt of
dividends or of amounts distributable upon such a liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
the Series E Preferred Stock;
(b) on a parity with the Series E Preferred Stock, as to dividends or
upon liquidation, dissolution or winding up as described in section 3,
respectively, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series E Preferred Stock, if the holders of such class of stock and the
Series E Preferred Stock shall be entitled to the receipt of dividends or of
amounts distributable upon such a liquidation, dissolution or winding up, as
the case may be, in proportion to their respective amounts of accrued and
unpaid dividends per share or liquidation prices, without preference or
priority one over the other; and
(c) junior to the Series E Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up as described in section 3,
respectively, if the holders of Series E Preferred Stock shall be entitled to
receipt of dividends or of amounts distributable upon such a liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of shares of such stock.
8. Definitions. For purposes of this Certificate of Designations,
Preferences and Rights of Series E Preferred Stock, the following terms shall
have the meanings indicated:
(a) "Automatic Conversion is defined in Section 4(a).
(b) "Automatic Conversion Date shall mean the third anniversary of
the Initial Issuance Date.
(c) "Base Number shall mean the number derived from dividing $100 by
the Initial Common Stock Price.
(d) "Business Day shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York or The
Commonwealth of Massachusetts are authorized or obligated by law or executive
order to close or a day which is or is declared a national or New York or
Massachusetts state holiday.
(e) "Closing Price with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the New York Stock Exchange, or, if such
security is not listed or admitted to trading on such Exchange, on the
principal national securities exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security on
the over-the-counter market on the day in question as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, or a
similarly generally accepted reporting service, or if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose.
(f) "Current Market Price shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading Days
immediately prior to the date in question, provided, however, that, if any
event that results in an adjustment of the Exchange Rate occurs during the
period beginning on the first day of such ten-day period and ending on the
applicable conversion date, the Current Market Price as determined pursuant to
the foregoing shall be appropriately adjusted to reflect the occurrence of
such event.
(g) The "Exchange Rate shall be equal to (a) if the Current Market
Price on the date of determination is equal to or greater than 120% of the
Initial Common Stock Price (the "Threshold Common Stock Price), the number of
shares of Common Stock equal to 0.83333333 of the Base Number (the "Upper
Exchange Rate), (b) if the Current Market Price on the date of determination
is less than the Threshold Common Stock Price but greater than the Initial
Common Stock Price, the number of shares of Common Stock having a value
(determined at the Current Market Price) equal to the Initial Preferred Stock
Price (the "Middle Exchange Rate), and (c) if the Current Market Price on the
date of determination is equal to or less than the Initial Common Stock Price,
a number of shares of Common Stock (the "Lower Exchange Rate) equal to the
Base Number; provided that for all purposes relating to optional conversion by
a holder pursuant to Section 4(b) the Exchange Rate shall be equal to the
Upper Exchange Rate. The Exchange Rate is subject to adjustment as set forth
in Section 4(d).
(h) "Fair Market Value on any day shall mean the average of the
daily Closing Prices of a share of Common Stock of the Corporation on the five
(5) consecutive Trading Days selected by the Corporation commencing not more
than 20 Trading Days before, and ending not later than, the earlier of the day
in question and the day before the "ex date with respect to the issuance or
distribution requiring such computation. The term "'ex' date, when used with
respect to any issuance or distribution, means the first day on which the
Common Stock trades regular way, without the right to receive such issuance or
distribution, on the exchange or in the market, as the case may be, used to
determine that day's Closing Price.
(i) "Full Cumulative Dividends shall mean, with respect to the
Series E Preferred Stock, or any other capital stock of the Corporation, as of
any date the aggregate amount of all then accumulated, accrued and unpaid
dividends payable on such shares of Series E Preferred Stock, or other capital
stock, as the case may be, in cash, whether or not earned or declared and
whether or not there shall be funds legally available for the payment thereof.
(j) "Initial Common Stock Price shall mean $15.4375 per share of
Common Stock.
(k) "Initial Issuance Date" shall mean the date on which shares of
Series E Preferred Stock are initially issued by the Company.
(l) "Initial Preferred Stock Price" shall mean $100 per share.
(m) "Lower Exchange Rate" is defined in the definition of "Exchange
Rate".
(n) "Middle Exchange Rate" is defined in the definition of "Exchange
Rate".
(o) "Optional Conversion is defined in Section 4(b).
(p) "Optional Conversion Date is defined in Section 4(b).
(q) "Record Date shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or in
which the Common Stock (or other applicable security) is exchanged or
converted into any combination of cash, securities or other property, the date
fixed for determination of stockholders entitled to receive such cash,
securities of other property (whether such dated is fixed by the Board of
Directors or by statute, contract or otherwise), and with respect to any
subdivision or combination of the Common Stock,
the effective date of such subdivision or combination.
(r) "Rights shall mean the rights of the Corporation which are
issuable under the Rights Agreement, or rights to purchase any capital stock
of the Corporation under any successor shareholder rights plan or plan adopted
in replacement of the Rights Agreement.
(s) "Rights Agreement" shall mean any agreement similar to the
Corporation's previous Rights Agreement dated as of April 26, 1988 between the
Corporation and State Street Bank and Trust Company, as Rights Agent, as the
same may be amended from time to time.
(t) "Series A Preferred Stock" shall mean the Corporation's New Series
A Cumulative Convertible Preferred Stock.
(u) "Series C Preferred Stock" shall mean the Corporation's $3.125
Series C Cumulative Convertible Preferred Stock.
(v) "Series D Preferred Stock" shall mean the Corporation's Series D
Cumulative Convertible Preferred Stock.
(w) "Threshold Common Stock Price is defined in the definition of
"Exchange Rate".
(x) "Trading Day shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business or (y) if the applicable
security is quoted on the National Market System of the National Association
of Securities Dealers Automated Quotation System, a day on which trades may be
made on such National Market System or (z) if the applicable security is not
so listed, admitted for trading or quoted, any day other than a Saturday or
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(y) "Transfer Agent shall mean State Street Bank and Trust Company,
or any other national or state bank or trust company having combined capital
and surplus of at least $100,000,000 and designated by the Corporation as the
transfer agent and/or registrar of the Series E Preferred Stock, or if no such
designation is made, the Corporation.
(z) "Upper Exchange Rate" is defined in the definition of "Exchange
Rate".
IN WITNESS WHEREOF, The TJX Companies, Inc., has caused this Certificate
of Designation to be signed by its Vice President - Finance and its Secretary
this 16th day of November, 1995.
THE TJX COMPANIES, INC.
By: /s/ STEVEN R. WISHNER
Steven R. Wishner
Vice President - Finance
Attest: /s/ JAY H. MELTZER
Jay H. Meltzer
Secretary
