As filed with the Securities and Exchange Commission on May 27, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
STAGE STORES, INC.
(Exact name of registrant as specified in its charter)
----------
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 5311 76-0407711
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
10201 MAIN STREET
HOUSTON, TEXAS 77002
TELEPHONE: (713) 667-5601
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------
MR. CARL TOOKER
STAGE STORES, INC.
10201 MAIN STREET
HOUSTON, TEXAS 77002
TELEPHONE: (713) 667-5601
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
LANCE C. BALK, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 446-4800
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon the effective time of the merger described herein.
If any of the securities being registered on this form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
================================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
=========================================================
Title of Each Class Proposed Maximum
of Securities To Be Aggregate Amount Of
Registered Offering Price Registration Fee
=========================================================
Common Stock, $0.01
par value per share
("Common Stock") $69,981,071(1) $21,206(2)
=========================================================
(1) The Proposed Maximum Aggregate Offering Price was calculated pursuant to
Rules 457(f) and (c) of the Securities Act of 1933, as amended (the
"Securities Act"), based on the market value of the securities to be
received by Stage Stores, Inc. ("Stage Stores"). The market value of the
securities to be received by Stage Stores was calculated based on 9,035,645
shares of common stock, par value $0.01 per share, of C.R. Anthony Company
(the "CR Anthony Common Stock") outstanding as of April 2, 1997, multiplied
by $7.745 (the average of the high and low prices of the CR Anthony Common
Stock on the Nasdaq National market on April 2, 1997).
(2) Calculated pursuant to Rule 457(o). Pursuant to Rule 457(b) and Rule
0-11(a)-2 of the Securities Exchange Act of 1934, no fee is being paid
herewith because the filing fee previously paid in connection with the Proxy
Statement of C.R. Anthony Company relating to this transaction is equal to
the fee required to be paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PRELIMINARY COPY
AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MAY 27, 1997
AMENDMENT NO. 2 TO
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential. For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 or Rule 14a-12
Stage Stores, Inc.
(Name of Registrant as Specified in Its Charter)
C.R. Anthony Company
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $0.01 par value per share, of Stage Stores, Inc. ("Stage
Common Stock")
Common Stock, $0.01 par value per share, of C.R. Anthony Company ("CR
Anthony Common Stock")
(2) Aggregate number of securities to which transaction applies:
9,035,645 shares of CR Anthony Common Stock
(3) Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
The underlying value of the transaction of $69,981,071 was calculated
pursuant to Exchange Act Rule 0-11(c), based on the market value of the
securities to be received by the acquiring person. The market value of the
securities to be received by the acquiring person was calculated based on
9,035,645 shares of CR Anthony Common Stock outstanding as of April 2,
1997, multiplied by 7.745 (the average of the high and low prices of the
CR Anthony Common Stock on the Nasdaq National Market on April 2, 1997) in
accordance with Rule 0-11(a)(4).
The amount of the filing fee is $21,206, or one thirty-third of one
percent of $69,981,071
(4) Proposed maximum aggregate value of transaction:
$69,981,071
<PAGE>
(5) Total fee paid:
$21,206
[ ] Fee paid previously with preliminary materials:
- ---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- ---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- ---------------------------------------------------------------------------
(3) Filing Party:
- ---------------------------------------------------------------------------
(4) Date Filed:
- ---------------------------------------------------------------------------
<PAGE>
[C.R. ANTHONY COMPANY LETTERHEAD]
MAY 27, 1997
TO THE STOCKHOLDERS OF C.R. ANTHONY COMPANY
Dear Fellow Stockholders:
We are pleased to invite you to attend a Special Meeting of Stockholders
to be held on Wednesday, June 25, 1997 at 10:30 a. m. at the offices of the C.
R. Anthony Company (the "Company"), 701 North Broadway, Oklahoma City, Oklahoma
(the "Special Meeting").
The Notice of Special Meeting and attached Proxy Statement/Prospectus
accompanying this letter describe in detail the business to be transacted at the
Special Meeting. However, due to the importance of the Special Meeting, I would
like to take the opportunity to briefly explain its purpose.
For some time the Company's Board of Directors (the "Board") has explored
various alternatives for improving the value and liquidity associated with the
ownership of the Company's stock. The Company engaged the investment banking
firm of Houlihan, Lokey, Howard & Zukin ("Houlihan Lokey") to advise the Board
in these matters.
In mid 1996, the Company was contacted by Stage Stores, Inc. ("Stage
Stores"), a Houston based retailer of apparel in the central United States. The
purpose of the contact was to explore the possibility of a transaction involving
the Company and Stage Stores. From time to time in late July, August and early
September, 1996, the Company and Stage Stores exchanged correspondence regarding
the process that might be followed to explore the possible benefits of a
combination and the consideration that could be offered to the Company's
Stockholders.
From November, 1996 until early February, 1997, representatives of the
Company and Stage Stores met and exchanged information and conducted
negotiations. During this period, Houlihan Lokey contacted other possible merger
candidates and discussed their possible interest in a merger with the Company.
The Company was advised by Houlihan Lokey that there was some level of interest
given by three parties, but that, in its judgement, no other party was likely to
pay as high a price as that which could potentially be negotiated with Stage
Stores. During this period of time, Stage Stores submitted three proposals to
the Company, each of which proposed a merger and each of which specified the
consideration to be paid by Stage Stores to the Company's Stockholders. Each new
proposal increased the consideration Stage Stores was willing to pay the
Company's Stockholders.
In anticipation of entering into a definitive agreement with Stage Stores,
the Company solicited proposals from four investment banking firms to evaluate
the fairness of a Stage Stores' offer from a financial point of view. As a
result, the Board engaged Stephens Inc. In February, various drafts of a merger
agreement were exchanged and a final Plan and Agreement of Merger (the "Merger
Agreement") and other relevant materials were circulated to the Board for a
Special Meeting of the Board.
On March 4, 1997, the Board held a Special Meeting to discuss the final
terms of the proposed merger (the "Merger"). At that meeting, Stephens Inc.
delivered its written opinion to the Board that, as of such date, and based upon
the procedures followed, factors considered and assumptions made by Stephens
Inc., as set forth in its opinion, the consideration to be received by the
Company's disinterested Stockholders pursuant to the Merger Agreement is fair,
from a financial point of view. The Board (with Mr. Werbalowsky abstaining
because of his relationship with Houlihan Lokey) voted unanimously to approve
the Merger Agreement and the Merger and to recommend that all Stockholders
approve and adopt the Merger Agreement and the Merger. On March 5, 1997, after
the Board of Directors of Stage Stores approved the Merger, the Company and
Stage Stores signed the Merger Agreement.
At the Special Meeting, you will be asked to approve and adopt the Merger
Agreement (as amended by First Amendment thereto dated May 20, 1997) and the
Merger as well as to consider and vote upon any other matters that may
<PAGE>
properly come before the Special Meeting. Copies of the Merger Agreement and the
Opinion of Stephens Inc. are located in the attached Proxy Statement/Prospectus
as Annex A and Annex C respectively.
The Merger Agreement provides for the Merger of either the Company with
and into a wholly-owned subsidiary of Stage Stores (the "Merger Sub") or,
depending upon certain conditions, the Merger Sub with and into the Company. In
the Merger, Stage Stores will acquire all of the Company's common stock for a
minimum value (the "Base Price") of $8.00 per share plus $0.01 for every $0.05
by which the average closing price (the "Stage Average Closing Price") of Stage
Stores' common stock ("Stage Common Stock") exceeds $20.00 per share. The Stage
Average Closing Price means the average closing price expressed in dollars per
share of Stage Stores' common stock quoted on the NASDAQ National Market System
for the ten trading days selected by lot by the Company and Stage Stores out of
the twenty most recent consecutive trading days prior to and including the fifth
day preceding the closing of the Merger. The exact combination of Stage Stores'
common stock and/or cash (the "Merger Consideration") to be paid by Stage Stores
for each share of the Company's common stock will be determined using a formula
based upon the Base Price and the Stage Average Closing Price. The Merger
Consideration will consist of 100% Stage Stores' common stock if the Stage
Average Closing Price is $20.00 or higher, and the stock percentage will decline
in linear fashion to 25% of the Merger Consideration if the Stage Average
Closing Price is $15.00.
If the Stage Average Closing Price is less than $15.00, Stage Stores has
the option to terminate the Merger Agreement and pay the Company a fee of
$3,500,000 plus the Company's expenses, or to close the Merger, in which case
the Merger Consideration per share of the Company's common stock will consist of
(i) .1333 shares of Stage Common Stock, and (ii) an amount in cash equal to
$8.00 minus the product of .1333 and the Stage Average Closing Price. In any
case, the Stage Common Stock to be received by the Company's Stockholders will
be registered and freely tradable, unless the recipient is an affiliate of the
Company. So that you can see at a glance how the Merger Consideration will be
calculated and will apply to your stock position, a Merger Consideration Table
is attached to this letter as Exhibit A.
On May 23, 1997, the most recent practicable date prior to the printing of
the enclosed Proxy Statement/Prospectus, the closing price of Stage Common
Stock, as reported on NASDAQ, was $20.75 per share.
If the Stage Average Closing Price is equal to or greater than $20.00,
Stockholders will receive only Stage Common Stock (except for cash received in
lieu of fractional shares of Stage Common Stock) and, to the extent only Stage
Common Stock is received, the Merger Consideration will not be taxable to
Stockholders. If the Stage Average Closing Price is equal to or greater than
$17.00 and less than $20.00, all or a portion of the Merger Consideration will
be taxable to Stockholders. If the Stage Average Closing Price is less than
$17.00, the Merger Consideration will be fully taxable to Stockholders. Each
Stockholder will recognize gain or loss equal to the difference between (i) the
cash plus the fair market value of the Stage Common Stock received and (ii) the
Stockholder's adjusted tax basis in the Shares exchanged. We suggest that you
carefully read the section captioned "Certain Federal Income Tax Consequences"
in the Proxy Statement/Prospectus.
If the Company terminates the Merger under certain conditions, the Company
will be required to pay Stage Stores a fee of $3,500,000, plus Stage Stores'
expenses.
The Merger Agreement and the Merger are subject to approval by the
Stockholders of the Company and certain other conditions including adequate
financing by Stage Stores. If approved by the Stockholders, the Merger is
expected to close in July of this year. However, the Company does not know at
this time what the exact Effective Time of the Merger or the Stage Average
Closing Price will be. You are urged to consult with your brokers and financial
advisors prior to the Special Meeting to obtain market price information for
Stage Stores' common stock, which is traded on NASDAQ ("STGE").
The Board (with Mr. Werbalowsky abstaining because of his relationship
with Houlihan Lokey) has unanimously determined that the Merger is fair to, and
in the best interests of, the Company's Stockholders, has approved the Merger
Agreement and the Merger, and recommends that the Stockholders vote in favor of
approval and adoption
2
<PAGE>
of the Merger Agreement at the Special Meeting. Approval of the Merger Agreement
and the Merger requires the affirmative vote of two-thirds of the Company's
Stockholders.
In view of the importance of the action to be taken at the Special
Meeting, we urge you to review carefully the accompanying Notice of Special
Meeting of Stockholders and the Proxy Statement/Prospectus, which contains
information about the Company and Stage Stores and describes in detail the
Merger Agreement, the Merger and certain related matters.
Your vote is very important. Whether or not you are able to attend the
Special Meeting, please complete, sign, date and return the enclosed proxy card
as soon as possible. A postage-paid envelope is enclosed for your convenience.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARDS. If the Merger
is approved at the Special Meeting, you will be notified shortly thereafter of
the procedure to be followed to exchange your stock certificates for the Merger
Consideration. See "THE MERGER Procedures for Exchange of CR Anthony Common
Stock Certificates." If you attend the Special Meeting, you may revoke your
proxy and, if you wish, vote your shares in person.
We look forward to seeing you at the Special Meeting.
Sincerely yours,
/s/ John J. Wiesner
John J. Wiesner
Chairman of the Board
3
<PAGE>
EXHIBIT A
C.R. ANTHONY\STAGE STORES
MERGER CONSIDERATION TABLE
PER SHARE OF C. R. ANTHONY COMPANY STOCK
Amount of Base Shares of Amount of
Stage Average Base Price Price Stage Stock Base Price to
Closing (Merger to be Paid In to be be
Price (1) Value)(2) Stock Delivered(3) Paid in Cash(3)
--------- --------- ----- ------------ ---------------
Less than $15 (4) (4) (4) (4)
$15.00 $8.00 $2.00 .133 $6.00
$16.00 $8.00 $3.20 .200 $4.80
$17.00 $8.00 $4.40 .258 $3.60
$18.00 $8.00 $5.60 .311 $2.40
$19.00 $8.00 $6.80 .357 $1.20
$20.00 $8.00 $8.00 .400 - 0 -
$21.00 $8.20 $8.20 .390 - 0 -
$22.00 $8.40 $8.40 .381 - 0 -
$23.00 $8.60 $8.60 .374 - 0 -
$24.00 $8.80 $8.80 .366 - 0 -
$25.00 $9.00 $9.00 .360 - 0 -
Greater than
$25.00 (2) (2) (3) - 0 -
- --------------------
(1) The value of Stage Common Stock (the "Stage Average Closing Price") used
to determine the exact combination of Stage Common Stock and/or cash (the
"Merger Consideration") the holder of each share of the Company's common
stock will receive will be the average closing price of Stage Common Stock
for 10 days selected at random out of the 20 trading days (the "Pricing
Window") prior to and including the fifth trading day before the closing
of the Merger. For example, if the closing is July 2, 1997, the closing
prices for Stage Common Stock during the Pricing Window (ending on June
25, 1997) will be collected, 10 will be selected at random and the average
will be computed.
If the Stage Average Closing Price is equal to or greater than $20.00,
Stockholders will receive only Stage Common Stock (except for cash
received in lieu of fractional shares of Stage Common Stock) and, to the
extent only Stage Common Stock is received, the Merger Consideration will
not be taxable to Stockholders. If the Stage Average Closing Price is
equal to or greater than $17.00 and less than $20.00, all or a portion of
the Merger Consideration will be taxable to Stockholders. If the Stage
Average Closing Price is less than $17.00, the Merger Consideration will
be fully taxable to Stockholders. Each Stockholder will recognize gain or
loss equal to the difference between (i) the cash plus the fair market
value of the Stage Common Stock received and (ii) the Stockholder's
adjusted tax basis in the Shares exchanged. Stockholders should refer to
the section of the accompanying Proxy Statement/Prospectus entitled "THE
MERGER AGREEMENT -- Certain Federal Income Tax Consequences."
(2) "Base Price" per CR Anthony share means $8.00 plus $0.01 for every $0.05
by which the Stage Average Closing Price exceeds $20.00.
4
<PAGE>
(3) That number of shares of Stage Common Stock which, if valued at the Stage
Average Closing Price, have a value equal to X multiplied by the Base
Price; and an amount of cash equal to the Base Price multiplied by the
remainder of one minus X, where:
X = 1- ((20-Y) x .15) and
Y = the lesser of 20 or the Stage Average Closing Price;
(4) If the Stage Average Closing Price is less than $15.00 and Stage Stores
elects to waive the condition set forth in Section 6(a)(xv) of the Merger
Agreement and permit the closing of the Merger, the Merger Consideration
per each share of the Company's common stock shall consist of (a) .1333
shares of Stage Common Stock, and (b) an amount in cash equal to $8.00
minus the product of .1333 and the Stage Average Closing Price.
NOTE: IF ANY FRACTIONAL INTEREST OF A SHARE OF STAGE COMMON STOCK WOULD BE
DELIVERABLE AS CONSIDERATION FOR THE MERGER, STAGE STORES, IN LIEU OF DELIVERING
SUCH FRACTIONAL SHARES, MAY PAY AN AMOUNT IN CASH EQUAL TO THE VALUE OF SUCH
FRACTIONAL INTEREST.
5
<PAGE>
[CR ANTHONY COMPANY LETTERHEAD]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
May 27, 1997
A Special Meeting of Stockholders of C.R. Anthony Company, an Oklahoma
corporation (the "Company"), will be held on June 25, 1997 at 10:30 a.m., local
time, at the Company's offices at 701 North Broadway, Oklahoma City, Oklahoma
73102, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger (the "Merger Agreement") and the merger (the "Merger")
between the Company and Stage Stores. The Merger Agreement provides for the
Merger of either the Company with and into a wholly-owned subsidiary of Stage
Stores (the "Merger Sub") or, depending upon certain conditions, the Merger Sub
with and into the Company. In the Merger, Stage Stores will acquire all of the
Company's common stock for a minimum value (the "Base Price") of $8.00 per share
plus $0.01 for every $0.05 by which the average closing price of Stage Stores'
common stock (the "Stage Average Closing Price") exceeds $20.00 per share. The
Stage Average Closing Price means the average closing price expressed in dollars
per share of Stage Stores' common stock quoted on the NASDAQ National Market
System for the ten trading days selected by lot by the Company and Stage Stores
out of the twenty most recent consecutive trading days prior to and including
the fifth day preceding the closing of the Merger. The exact combination of
Stage Stores' common stock and/or cash (the "Merger Consideration") to be paid
by Stage Stores for each share of the Company's common stock will be determined
using a formula based upon the Base Price and the Stage Average Closing Price.
The Merger Consideration will consist of 100% of Stage Stores' common stock if
the Stage Average Closing Price is $20.00 or higher, and the stock percentage
will decline in linear fashion to 25% of the Merger Consideration if the Stage
Average Closing Price is $15.00. If the Stage Average Closing Price is less than
$15.00, Stage Stores has the option to terminate the Merger Agreement and pay
the Company a fee of $3,500,000 plus the Company's expenses, or to close the
Merger, in which case the Merger Consideration per share of the Company's common
stock will consist of (i) .1333 shares of Stage Stores' common stock, and (ii)
an amount in cash equal to $8.00 minus the product of .1333 and the Stage
Average Closing Price. In any case, the Stage Stores' stock to be received by
the Company's Stockholders will be registered and freely tradable, unless the
recipient is an affiliate of the Company.
2. To transact such other business as may properly come before the Special
Meeting, or any adjournments or postponements thereof.
Only holders of the Company's shares of record at the close of business on
May 20, 1997 will be entitled to notice of and to vote at the Special Meeting or
any adjournment or postponement thereof. The affirmative vote of two-thirds of
the holders of the outstanding shares entitled to vote thereon is required to
approve and adopt the Merger Agreement and the Merger.
If the Merger Consideration includes cash (other than cash in lieu of
fractional shares), the holders of shares entitled to vote at the Special
Meeting who do not vote in favor of the Merger and who comply with the
provisions of Section 1091 of the Oklahoma General Corporation Act will have the
right to dissent to the Merger and to obtain payment for their shares. A copy of
Section 1091 is attached as Annex D to the accompanying Proxy
Statement/Prospectus. Stockholders who wish to exercise their statutory
appraisal rights must submit a written demand for appraisal prior to the Special
Meeting and comply with the other procedural requirements of Section 1091. A
proxy or vote against the Merger shall not constitute such a demand.
Stockholders electing to take such action must do so by separate written demand
as set forth in Section 1091. Although Stockholders who wish to pursue their
appraisal rights may not vote in favor of the Merger, they need not specifically
vote against the Merger to preserve their appraisal rights.
<PAGE>
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU ARE ABLE TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS
SOON AS POSSIBLE. A POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF
YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE THE
STOCKHOLDER VOTE IS TAKEN BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
SECRETARY OF THE COMPANY OR BY SUBMITTING A LATER DATED PROXY. IN ADDITION, IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND, IF YOU WISH, VOTE
YOUR SHARES IN PERSON.
THE BOARD OF DIRECTORS (WITH ONE DIRECTOR ABSTAINING BECAUSE OF HIS
RELATIONSHIP WITH THE COMPANY'S INVESTMENT ADVISOR) UNANIMOUSLY RECOMMENDS THAT
YOU VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER AT THE SPECIAL MEETING.
Dated this 27th day of May, 1997.
By Order of the Board of Directors
/s/ Michael E. McCreery
Michael E. McCreery
Vice Chairman and Chief Administrative Officer
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.
2
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
SUBJECT TO COMPLETION
DATED MAY 27, 1997
CR ANTHONY COMPANY
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 1997
----------
STAGE STORES, INC.
PROSPECTUS
----------
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to holders ("Stockholders") of shares of common stock, par value $.01
per share ("Shares"), of C.R. Anthony Company ("CR Anthony") in connection with
the solicitation of proxies by the Board of Directors of CR Anthony (the "CR
Anthony Board") for use at the special meeting of Stockholders (including any
adjournments or postponements thereof) (the "Special Meeting") to be held at CR
Anthony's offices at 701 North Broadway, Oklahoma City, Oklahoma 73102 on June
25, 1997 at 10:30 a.m., local time. At the Special Meeting, Stockholders will
consider and vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of March 5, 1997, between Stage Stores, Inc. ("Stage Stores")
and CR Anthony, as amended by First Amendment thereto dated May 20, 1997, a copy
of which is attached hereto as Annex A (the "Merger Agreement"). The Merger
Agreement provides for the merger (the "Merger") of either CR Anthony with and
into a wholly-owned subsidiary of Stage Stores (the "Merger Sub") or the Merger
Sub with and into CR Anthony. The Merger will become effective upon the filing
of the Certificate of Merger (the "Certificate of Merger") with the Secretary of
State of the state of the Surviving Corporation (as defined below) or at such
time thereafter as is agreed upon by the parties and specified in the
Certificate of Merger, in accordance with applicable law (the "Effective Time").
The structure of the Merger will either be a forward merger or a reverse merger,
as may be determined by Stage Stores on the basis of the percentage (the "Stage
Stock Percentage") of the total merger consideration paid, plus amounts paid to
the holders of CRA Options (as defined in the Merger Agreement) and the
Dissenting Shares (as defined below) that is represented by common stock, $.01
par value per share, of Stage Stores (the "Stage Common Stock"). If the Merger
is a forward merger, the Merger Sub shall survive with all its rights,
privileges, powers and franchises unaffected by the Merger and the separate
corporate existence of CR Anthony shall cease. If the Merger is a reverse
merger, CR Anthony shall survive with all its rights, privileges, powers and
franchises unaffected by the Merger and the separate corporate existence of the
Merger Sub shall cease.
The Merger Agreement provides for the Merger of either CR Anthony with and
into a wholly-owned subsidiary of Stage Stores (the "Merger Sub") or, depending
upon certain conditions, the Merger Sub with and into CR Anthony. In the Merger,
Stage Stores will acquire each outstanding share of voting common stock, par
value $.01 per share, of CR Anthony (the "Shares") (excluding Shares owned by
holders (the "Dissenting Stockholders") who shall have properly exercised their
appraisal rights, if any, under the Oklahoma General Corporation Act, as amended
(the "Oklahoma Act")), for a minimum value (the "Base Price") of $8.00 per share
plus $0.01 for every $0.05 by which the Stage Average Closing Price exceeds
$20.00 per share. The Stage Average Closing Price means the average closing
price expressed in dollars per share of Stage Common Stock quoted on the NASDAQ
National Market System for the ten trading days selected by lot by CR Anthony
and Stage Stores out of the twenty most recent consecutive trading days prior to
and including the fifth day preceding the closing of the Merger. The exact
combination of Stage Common Stock and/or cash (the "Merger Consideration") to be
paid by Stage Stores for each share of CR Anthony's common stock will be
determined using a formula based upon the Base Price and the Stage Average
Closing Price. The Merger Consideration will consist of 100% Stage Common Stock
(except for cash received in lieu of fractional shares of Stage Common Stock) if
the Stage Average Closing Price is $20.00 or higher, and the stock percentage
will decline in linear fashion to 25% of the Merger Consideration if the Stage
Average Closing Price is $15.00.
If the Stage Average Closing Price is less than $15.00, Stage Stores has the
option to terminate the Merger Agreement and pay CR Anthony a fee of $3,500,000
plus CR Anthony's expenses, or to close the Merger, in which case the Merger
Consideration per share of CR Anthony's common stock will consist of (i) .1333
shares of Stage Common Stock, and (ii) an amount in cash equal to $8.00 minus
the product of .1333 and the Stage Average Closing Price. In
<PAGE>
any case, the Stage Common Stock to be received by CR Anthony's Stockholders
will be registered and freely tradable, unless the recipient is an affiliate of
CR Anthony. See "SUMMARY - The Merger" for a table which illustrates the type
and value of the Merger Consideration the holder of each Share will receive.
On May 23, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing price of Stage Common Stock, as
reported on NASDAQ, was $20.75 per share.
As discussed in greater detail herein, the Stage Average Closing Price used
to determine the number of shares of Stage Common Stock the holder of each Share
will receive will be the average closing price of Stage Common Stock for 10 days
selected at random out of the 20 trading days (the "Pricing Window") prior to
and including the fifth trading day before the closing of the Merger. For
example, if the closing is July 2, 1997, the closing prices for Stage Common
Stock during the Pricing Window (ending on June 25, 1997) will be collected, 10
will be selected at random and the average will be computed. Based on the above
formula, Stockholders will receive as the Merger Consideration cash and/or Stage
Common Stock with a value of at least $8.00. However, at the time of the Special
Meeting, Stockholders may not know with absolute certainty the type or value of
the consideration which they will receive in the Merger. It is currently
anticipated that the Effective Time of the Merger will be shortly after the date
of the Special Meeting. There can be no assurance as to the exact date of the
Effective Time of the Merger or as to the Stage Average Closing Price.
Stockholders are urged to consult with their brokers, dealers or financial
advisors prior to or around the time of the Special Meeting to obtain market
price information for Stage Common Stock.
This Proxy Statement/Prospectus also constitutes a prospectus of Stage
Stores with respect to shares of Stage Common Stock to be issued. Stage Common
Stock is listed for trading under the symbol "STGE" on the NASDAQ National
Market System ("NASDAQ"). The Shares are listed for trading under the symbol
"CRAU" on the NASDAQ. On February 18, 1997, the last trading day prior to public
announcement of the proposed Merger, the closing prices of Stage Common Stock
and the Shares, as reported on NASDAQ, were $18.31 per share and $5.75 per
share, respectively. On May 23, 1997, the most recent practicable date prior to
the printing of this Proxy Statement/Prospectus, the closing prices of Stage
Common Stock and the Shares, as reported on NASDAQ were $20.75 per share and
$7.88 per share, respectively.
Approval of the Merger Agreement and the Merger requires the affirmative
vote of two-thirds (66 2/3%) of the holders of the outstanding Shares entitled
to vote thereon.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to holders of Shares on or about May 27, 1997.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 27, 1997.
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CR ANTHONY
OR STAGE STORES. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OF AN OFFER OR
PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CR ANTHONY
OR STAGE STORES SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
This proxy statement/prospectus incorporates by reference certain documents
which are not presented herein or delivered herewith. Stage Stores and CR
Anthony each undertakes to provide copies of such documents (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into such documents), without charge, to any person, including any
beneficial owner of shares, to whom this proxy statement/prospectus is
delivered, upon written or oral request to, in the case of documents relating to
stage stores: Stage Stores, Inc., 10201 Main Street, Houston, Texas 77002,
Attention: Investor Relations (telephone (713) 667-5601; fax (713) 669-2709),
and, in the case of documents relating to CR Anthony: C.R. Anthony Company, 701
North Broadway, Oklahoma City, Oklahoma 73102, Attention: Investor Relations
(telephone (405) 278-7671; fax (405) 278-7662). In order to ensure timely
delivery of such documents, any request should be made by June 6, 1997.
AVAILABLE INFORMATION
CR Anthony and Stage Stores are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by CR Anthony and Stage Stores with the
Commission can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and should be
available at the Commission's Regional Offices at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains
a Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, reports, proxy statements and other
information concerning CR Anthony and Stage Stores may be inspected at the
offices of the NASDAQ Stock Market, 1735 K Street, N.W., Washington, D.C.
20006-1500.
Stage Stores has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, supplements, and exhibits thereto, the
"Registration Statement"), of which this Proxy Statement/Prospectus is a part,
under the Securities Act of 1933, as amended, with respect to the Stage Common
Stock to be issued pursuant to the Merger Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which were omitted in accordance with
the rules and regulations of the Commission. Such omitted information can be
inspected at and obtained from the Commission and the NASDAQ in the manner set
forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of Stage Stores, which have been filed with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
1. Stage Stores' Annual Report on Form 10-K/A for the 52 weeks ended
February 1, 1997 ("Stage Stores' Form 10-K").
2. Stage Stores' Current Report on Form 8-K dated March 5, 1997.
3
<PAGE>
3. Stage Stores' Current Report on Form 8-K dated May 27, 1997.
4. The description of the Shares set forth in Stage Stores' Registration
Statement on Form 8-A filed pursuant to Section 12 of the Exchange Act,
and any amendment or report filed for the purpose of updating such
description.
The following documents of CR Anthony, which have been filed with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
1. CR Anthony's Annual Report on Form 10-K for the year ended February 1,
1997 ("CR Anthony's Form 10-K").
2. CR Anthony's Current Report on Form 8-K dated February 19, 1997.
3. CR Anthony's Current Report on Form 8-K dated March 5, 1997.
4. The description of the Shares set forth in CR Anthony's Registration
Statement on Form 8-A filed January 10, 1996 pursuant to Section 12 of
the Exchange Act, and any amendment or report filed for the purpose of
updating such description.
All documents and reports filed with the Commission by Stage Stores and CR
Anthony pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement/Prospectus and prior to the termination of the
offering of Stage Common Stock contemplated hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of filing of such documents or reports.
All information appearing in this Proxy Statement/Prospectus or in any
document incorporated herein by reference is not necessarily complete and is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference or
filed as exhibits to the Registration Statement and should be read together with
such information and documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
The information contained (or incorporated by reference) herein with respect
to CR Anthony and its subsidiaries has been provided by CR Anthony. The
information contained (or incorporated by reference) herein with respect to
Stage Stores and its subsidiaries has been provided by Stage Stores. Neither
Stage Stores nor CR Anthony warrants the accuracy of information relating to the
other party.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE FREE OF CHARGE UPON
REQUEST FROM STAGE STORES, INC., 10201 MAIN STREET, HOUSTON, TEXAS 77025,
ATTENTION: INVESTOR RELATIONS, TELEPHONE NUMBER (713) 667-5601; AND FROM C.R.
ANTHONY COMPANY, 701 NORTH BROADWAY, OKLAHOMA CITY, OKLAHOMA 73102, ATTENTION:
INVESTOR RELATIONS, TELEPHONE NUMBER (405) 278-7671; FAX (405) 278-7662. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
JUNE 6, 1997.
4
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
SUMMARY 7
The Companies 7
The Merger 8
Recommendation of the CR Anthony Board 10
Opinion of Special Advisor to the CR Anthony Board 10
The Special Meeting 10
The Merger Agreement 11
Certain Federal Income Tax Consequences 12
Dissenter's Rights 12
The Termination Option Agreement 12
Regulatory Approvals Required 13
Interests of Directors and Executive Officers of CR Anthony in the
Merger 14
Recent Developments 14
Selected Historical Consolidated Financial and Operating Data 15
Unaudited Historical and Pro Forma Per Share Data 19
Comparative Market Prices and Dividends 20
THE SPECIAL MEETING 21
Purpose of Special Meeting 21
Date, Place and Time 21
Record Date; Quorum 21
Votes Required 21
Proxies; Voting and Revocation 22
Dissenters' Rights 22
Solicitation of Proxies 22
Other Matters 22
THE MERGER 23
General 23
Merger Consideration 23
Background of the Merger 25
Stage Stores' Reasons for the Merger 27
Certain Forward-Looking Information 28
Recommendation of the CR Anthony Board;
CR Anthony's Reasons for the Merger 28
Opinion of Special Advisor to the CR Anthony Board 29
Interests of Directors and Executive Officers of CR Anthony in the
Merger 33
Effective Time 34
Procedures for Exchange of CR Anthony Common Stock Certificates 34
Stock Exchange Listing 35
Delisting and Deregistration of Shares 35
Financing and Expenses Related to the Merger 35
Accounting Treatment 35
Certain Federal Income Tax Consequences 35
THE MERGER AGREEMENT 38
Board Representation 38
The Merger 38
Consideration to be Paid in the Merger 38
Dissenting Shares 41
CR Anthony Stock Options 41
Representations and Warranties 41
No Solicitation 41
Fees and Expenses 42
Conditions to the Merger 42
Termination 43
Indemnification 44
5
<PAGE>
SECTION PAGE
Stockholders Meeting 44
Notices, Consents, Approvals, Filings 44
Employee Benefit Matters 45
Amendment 45
Timing 45
TERMINATION OPTION AGREEMENT 45
Grant of Option 45
Exercise of Option 45
Certain Repurchases 46
Registration Rights 46
Profit Limitation 46
Adjustment upon Changes in Capitalization 47
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA 48
THE COMPANIES 53
OTHER LEGAL MATTERS; REGULATORY APPROVAL 53
General 53
Antitrust 53
State Takeover Statutes 53
RESTRICTIONS ON RESALES OF STAGE COMMON STOCK BY AFFILIATES 54
DESCRIPTION OF STAGE STORES CAPITAL STOCK 55
Stage Common Stock 55
Stage Stores Class B Common Stock 55
Stage Stores Preferred Stock 56
COMPARISON OF STOCKHOLDER RIGHTS 56
Authorized Capital Stock 56
Voting Rights 56
Board of Directors 56
Payment of Dividends to Stockholders 57
Special Meeting of Stockholders 57
Stockholder Consent to Action without a Meeting 57
Liquidation Rights 57
Amendment of Bylaws 57
Amendment of Certificate of Incorporation 58
Indemnification of Officers and Directors 58
Removal of Directors 58
Stockholder Rights Plans 58
EXPERTS 58
LEGAL MATTERS 59
ANNEX A - AGREEMENT AND PLAN OF MERGER A-1
ANNEX B - TERMINATION OPTION AGREEMENT B-1
ANNEX C - STEPHENS INC. OPINION C-1
ANNEX D - GENERAL CORPORATION LAW OF THE STATE OF OKLAHOMA D-1
ANNEX E - FORM OF EMPLOYMENT AGREEMENT E-1
ANNEX F - FORM OF AMENDED SEVERANCE AGREEMENT F-1
ANNEX G - FORM OF OPTION CANCELLATION AGREEMENT G-1
6
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS, THE ANNEXES HERETO AND THE DOCUMENTS REFERRED TO HEREIN.
STOCKHOLDERS ARE URGED TO REVIEW CAREFULLY THIS PROXY STATEMENT/PROSPECTUS, THE
MERGER AGREEMENT ATTACHED HERETO AS ANNEX A AND THE OTHER ANNEXES ATTACHED
HERETO. REFERENCES TO A PARTICULAR YEAR ARE TO THE FISCAL YEAR WHICH IS THE 52
OR 53 WEEK PERIOD ENDING ON THE SATURDAY CLOSEST TO JANUARY 31 OF THE FOLLOWING
CALENDAR YEAR (E.G., A REFERENCE TO "1996" IS A REFERENCE TO THE FISCAL YEAR
ENDED FEBRUARY 1, 1997).
THE COMPANIES
C.R. ANTHONY COMPANY
C.R. Anthony Company, an Oklahoma corporation, is a regional retailer of
moderately priced family apparel operating under the names "Anthonys" and
"Anthonys Limited" with the majority of its stores in smaller communities
throughout the southwestern and midwestern United States. CR Anthony's operating
philosophy is to offer brand apparel, including footwear, for the entire family
at price levels that provide value to the customer relative to other options
available. All of the stores operated by CR Anthony offer value priced
merchandise with a focus on casual men's, women's and children's apparel and
shoes. Denim has historically been the largest category for CR Anthonys, under
the Chic, Lee, Levi, Wrangler and various other labels. At February 1, 1997, CR
Anthony operated 224 stores, predominantly located in strip shopping centers, of
which 199 stores are currently operated under the name "Anthonys" and 24 under
the name "Anthonys Limited." CR Anthony's stores are located in thirteen states,
primarily in Arkansas, Kansas, Louisiana, Montana, New Mexico, Oklahoma and
Texas. The principal executive office of CR Anthony is located at 701 North
Broadway, Oklahoma City, Oklahoma 73102, telephone number (405) 278-7400.
STAGE STORES, INC.
Stage Stores, Inc., a Delaware corporation, is a retail apparel company
that operates retail stores featuring well known, brand name family apparel in
over 200 small towns and communities across the central United States. As of
February 1, 1997, Stage Stores operated 315 stores through its "Stage", "Bealls"
and "Palais Royal" trade names in 19 states throughout the central United
States. Approximately 78% of these stores are located in small markets and
communities with as few as 4,000 people. The remainder of Stage Stores' stores
operate in metropolitan areas, primarily in suburban Houston. Stage Stores'
merchandise offerings include a carefully edited but broad selection of branded,
moderately priced, fashion apparel, accessories, fragrances and cosmetics and
footwear for women, men and children. Over 85% of 1996 sales consisted of
branded merchandise, including nationally recognized brands such as Levi
Strauss, Liz Claiborne, Chaps/Ralph Lauren, Calvin Klein, Guess, Hanes, Nike,
Reebok and Haggar Apparel. Stage Stores' principal executive offices are located
at 10201 Main Street, Houston, Texas 77002, telephone number (713) 667-5601.
7
<PAGE>
THE MERGER
GENERAL
The Board of Directors of CR Anthony (the "CR Anthony Board") (with one
director abstaining due to his relationship with CR Anthony's investment banker)
has unanimously approved the Agreement and Plan of Merger, dated March 5, 1997,
as amended, between Stage Stores and CR Anthony.
The Merger Agreement provides for the merger of either CR Anthony with and
into the Merger Sub or, depending upon certain conditions, the Merger Sub with
and into CR Anthony. The Merger will become effective upon the filing of the
Certificate of Merger with the Secretary of State of the state of the Surviving
Corporation or at such time thereafter as is agreed upon by the parties and
specified in the Certificate of Merger, in accordance with applicable law. At
the Effective Time, if a forward merger is effected, the separate existence of
CR Anthony shall cease and the Merger Sub shall continue as the surviving
corporation or, if a reverse merger is effected, the separate existence of
Merger Sub shall cease and CR Anthony shall continue as the surviving
corporation.
BOARD OF DIRECTORS
The Merger Agreement provides that the directors and officers of the Merger
Sub in office at and as of immediately prior to the Effective Time will be the
directors and officers of the Surviving Corporation. Pursuant to the Merger
Agreement, Specialty Retailers, Inc. ("SRI"), a wholly-owned subsidiary of Stage
Stores, may be the Merger Sub. The officers of SRI are identical to the officers
of Stage Stores and the directors of SRI are Carl Tooker and Joshua Beckenstein.
If SRI is not the Merger Sub, then the directors and officers of the Merger Sub
anticipated to be in office at and as of immediately prior to the Effective Time
are as follows:
Name Position
---- --------
Carl Tooker Chairman, President and Chief Executive Officer
James Marcum Director, Executive Vice President/Chief Financial Officer
Charles M. Sledge Secretary
CONSIDERATION TO BE PAID IN THE MERGER
In the Merger, Stage Stores will acquire each outstanding Share (excluding
Shares owned by Dissenting Stockholders) for a minimum value (the "Base Price")
of $8.00 per share plus $0.01 for every $0.05 by which the Stage Average Closing
Price exceeds $20.00 per share. The Stage Average Closing Price means the
average closing price expressed in dollars per share of Stage Common Stock
quoted on the NASDAQ National Market System for the ten trading days selected by
lot by CR Anthony and Stage Stores out of the twenty most recent consecutive
trading days prior to and including the fifth day preceding the closing of the
Merger. The exact combination of Stage Common Stock and/or cash (the "Merger
Consideration") to be paid by Stage Stores for each share of CR Anthony's common
stock will be determined using a formula based upon the Base Price and the Stage
Average Closing Price. The Merger Consideration will consist of 100% Stage
Common Stock (except for cash received in lieu of fractional shares of Stage
Common Stock) if the Stage Average Closing Price is $20.00 or higher, and the
stock percentage will decline in linear fashion to 25% of the Merger
Consideration if the Stage Average Closing Price is $15.00.
If the Stage Average Closing Price is less than $15.00, Stage Stores has the
option to terminate the Merger Agreement and pay CR Anthony a fee of $3,500,000
plus CR Anthony's expenses, or to close the Merger, in which case the Merger
Consideration per share of CR Anthony's common stock will consist of (i) .1333
shares of Stage Common Stock, and (ii) an amount in cash equal to $8.00 minus
the product of .1333 and the Stage Average Closing Price. In any case, the Stage
Common Stock to be received by CR Anthony's Stockholders will be registered and
freely tradable, unless the recipient is an affiliate of CR Anthony.
The table below illustrates, depending upon the Stage Average Closing
Price, the type and value of the Merger Consideration the holder of each Share
will receive, including the total price for each Share and the ratio of Stage
Common Stock to cash to be received as the Merger Consideration for each Share.
8
<PAGE>
CR ANTHONY/STAGE STORES
MERGER CONSIDERATION TABLE
(PER SHARE OF CR ANTHONY STOCK)
Amount of Base Shares of
Stage Average Base Price Price Stage Stock Amount of
Closing (Merger to be Paid In to be Base Price to be
Price (1) Value)(2) Stock Delivered(3) Paid in Cash(3)
--------- --------- ----- ------------ ---------------
Less than $15 (4) (4) (4) (4)
$15.00 $8.00 $2.00 .133 $6.00
$16.00 $8.00 $3.20 .200 $4.80
$17.00 $8.00 $4.40 .258 $3.60
$18.00 $8.00 $5.60 .311 $2.40
$19.00 $8.00 $6.80 .357 $1.20
$20.00 $8.00 $8.00 .400 - 0 -
$21.00 $8.20 $8.20 .390 - 0 -
$22.00 $8.40 $8.40 .381 - 0 -
$23.00 $8.60 $8.60 .374 - 0 -
$24.00 $8.80 $8.80 .366 - 0 -
$25.00 $9.00 $9.00 .360 - 0 -
Greater than
$25.00 (2) (2) (3) - 0 -
--------------------
(1) The value of Stage Common Stock (the "Stage Average Closing Price") used to
determine the exact combination of Stage Common Stock and/or cash (the
"Merger Consideration") the holder of each share of the Company's common
stock will receive will be the average closing price of Stage Common Stock
for 10 days selected at random out of the 20 trading days (the "Pricing
Window") prior to and including the fifth trading day before the closing of
the Merger. For example, if the closing is July 2, 1997, the closing prices
for Stage Common Stock during the Pricing Window (ending on June 25, 1997)
will be collected, 10 will be selected at random and the average will be
computed.
If the Stage Average Closing Price is equal to or greater than $20.00,
Stockholders will receive only Stage Common Stock (except for cash received
in lieu of fractional shares of Stage Common Stock) and, to the extent only
Stage Common Stock is received, the Merger Consideration will not be taxable
to Stockholders. If the Stage Average Closing Price is equal to or greater
than $17.00 and less than $20.00, all or a portion of the Merger
Consideration will be taxable to Stockholders. If the Stage Average Closing
Price is less than $17.00, the Merger Consideration will be fully taxable to
Stockholders. Each Stockholder will recognize gain or loss equal to the
difference between (i) the cash plus the fair market value of the Stage
Common Stock received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged. See "THE MERGER AGREEMENT -- Certain Federal Income Tax
Consequences."
(2) "Base Price" per CR Anthony share means $8.00 plus $0.01 for every $0.05 by
which the Stage Average Closing Price exceeds $20.00.
(3) That number of shares of Stage Common Stock which, if valued at the Stage
Average Closing Price, have a value equal to X multiplied by the Base Price;
and an amount of cash equal to the Base Price multiplied by the remainder of
one minus X, where:
X = 1- ((20-Y) x .15) and
Y = the lesser of 20 or the Stage Average Closing Price
(4) If the Stage Average Closing Price is less than $15.00 and Stage Stores
elects to waive the condition set forth in Section 6(a)(xv) of the Merger
Agreement and permit the closing of the Merger, the Merger Consideration per
each share of CR Anthony stock shall consist of (a) .1333 shares of Stage
Common Stock, and (b) an amount in cash equal to $8.00 minus the product of
.1333 and the Stage Average Closing Price.
If any fractional interest of a share of Stage Common Stock would, except
for this sentence, be deliverable as consideration for the Merger, Stage Stores,
in lieu of delivering such fractional shares, may pay an amount in cash equal to
the value of such fractional interest.
Based on the closing price of Stage Common Stock of $20.75 on May 23, 1997,
the most recent practicable date prior to the printing of this Proxy
Statement/Prospectus, each Share would be converted into the right to receive
0.393 shares of Stage Common Stock. However, the market value and type of
consideration Stockholders will receive at the Effective Time will depend upon
the Stage Average Closing Price, which will not be determined earlier than June
25, 1997, the date of the Special Meeting. It is currently anticipated that the
Effective Time will be shortly after the date of the Special Meeting. Since
Stage Stores' initial public offering on October 24, 1996, the market price of
Stage Common Stock has not closed below $17.25 per share. See "SUMMARY -
Comparative Market Prices and Dividends." However, there can be no assurance
that the future market prices of Stage Common Stock (including the Pricing
Window) will reflect historical trading levels. Stockholders are urged to
consult with their brokers, dealers or financial advisors prior to or around the
time of the Special Meeting to obtain current market price information for Stage
Common Stock. See "THE MERGER AGREEMENT."
9
<PAGE>
RECOMMENDATION OF THE CR ANTHONY BOARD
THE CR ANTHONY BOARD (WITH ONE DIRECTOR ABSTAINING BECAUSE OF HIS
RELATIONSHIP WITH CR ANTHONY'S INVESTMENT BANKER) HAS UNANIMOUSLY DETERMINED
THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS, HAS APPROVED THE MERGER
AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE STOCKHOLDERS APPROVE AND ADOPT
THE MERGER AGREEMENT AND THE MERGER. See "THE MERGER - Recommendation of the CR
Anthony Board; CR Anthony's Reasons for the Merger."
OPINION OF SPECIAL ADVISOR TO THE CR ANTHONY BOARD
At the March 4, 1997 meeting of the CR Anthony Board, Stephens Inc., CR
Anthony's special advisor to the Board, delivered its written opinion that, as
of such date, based upon the procedures followed, factors considered and
assumptions made by Stephens Inc. as set forth in such opinion, the
consideration to be received by the disinterested Stockholders in the Merger is
fair to them from a financial point of view. A copy of the opinion of Stephens
Inc. dated March 4, 1997 is attached hereto as Annex C. STOCKHOLDERS ARE URGED
TO READ CAREFULLY THE COMPLETE TEXT OF THE STEPHENS INC. OPINION. See "THE
MERGER - Opinion of Special Advisor to the CR Anthony Board."
THE SPECIAL MEETING
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the CR Anthony Board for use at a special meeting of
Stockholders to be held on June 25, 1997 at CR Anthony's offices at 701 North
Broadway, Oklahoma City, Oklahoma 73102, at 10:30 a.m., local time. The purpose
of the Special Meeting is to consider and vote upon a proposal to approve and
adopt the Merger Agreement and the Merger.
RECORD DATE
The CR Anthony Board has fixed the close of business on May 20, 1997 as the
record date (the "Record Date") for the determination of Stockholders entitled
to notice of, and to vote at, the Special Meeting. Only holders of record of
Shares on the Record Date are entitled to vote at the Special Meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the Stockholders will consider and vote upon a
proposal to approve and adopt the Merger Agreement and the Merger, as well as
any other matters as may properly come before the Special Meeting. The Merger
Agreement provides for, among other things, the merger of CR Anthony with and
into the Merger Sub pursuant to which the Merger Sub will be the surviving
corporation, or the merger of Merger Sub with and into CR Anthony pursuant to
which CR Anthony will be the surviving corporation.
VOTES REQUIRED
The affirmative vote of two-thirds (66 2/3%) of the holders of the
outstanding Shares on the Record Date is required to approve and adopt the
Merger Agreement and the Merger. Each Share is entitled to one vote on each
matter on which the holders of Shares are entitled to vote.
As of the Record Date, directors and executive officers of CR Anthony, and
their affiliates, were beneficial owners of an aggregate of 69,014 Shares,
representing less than 1% of the Shares then outstanding. The directors and
executive officers of CR Anthony have indicated that they intend to vote their
Shares in favor of approval and adoption of the Merger Agreement.
10
<PAGE>
THE MERGER AGREEMENT
CONDITIONS TO THE MERGER
Pursuant to the Merger Agreement, the obligations of Stage Stores and the
Merger Sub to consummate the transactions to be performed by it in connection
with the Closing (as defined below) are subject to the satisfaction or written
waiver of the following conditions: (i) the representations and warranties of CR
Anthony set forth in ss.3 of the Merger Agreement shall be true and correct at
and as of the Closing Date (as defined below); (ii) CR Anthony shall have
performed and complied with all of its covenants under the Merger Agreement
through the Closing Date; (iii) the affirmative vote of two-thirds of the
holders of the outstanding Shares shall have been obtained; (iv) CR Anthony and
its subsidiaries shall have procured all of the consents, waivers, amendments or
other actions specified in the Merger Agreement; (v) no action, suit, or
proceeding shall be pending or threatened before any court, administrative
agency or arbitrator wherein an unfavorable judgment would, among other things,
prevent consummation of the Merger; (vi) there shall have been no CRA Material
Adverse Effect (as defined in the Merger Agreement); (vii) CR Anthony shall have
certified that each of the conditions specified above is satisfied in all
respects; (viii) the Registration Statement (as defined below) of Stage Stores,
of which this Proxy Statement/Prospectus is a part, shall have been declared
effective under the Securities Act (as defined below), by the Commission (as
defined below); (ix) CR Anthony shall have delivered evidence of the
cancellation of all outstanding options, warrants and other equity interests;
(x) the Stage Common Stock that will be issued in the Merger shall have been
approved for listing on NASDAQ; (xi) all applicable waiting periods under the
Hart-Scott-Rodino Act shall have expired; (xii) each of Stage Stores and the
Merger Sub shall have received from counsel to CR Anthony opinions as to
corporate and tax matters dated as of the Closing Date; (xiii) CR Anthony shall
have terminated, to the extent requested by Stage Stores, any and all existing
stockholders agreements to which CR Anthony is a party; (xiv) no Triggering
Event (as defined in the Merger Agreement) shall have occurred; (xv) the Stage
Average Closing Price shall not be less than $15.00; (xvi) no more than 7.5% of
the outstanding Shares constitute Dissenting Shares; (xvii) Stage Stores and
Specialty Retailers (as defined) shall have received the cash proceeds of
certain financing; and (xviii) all actions to be taken in connection with
consummation of the Merger by CR Anthony shall be reasonably satisfactory to
Stage Stores and the Merger Sub. See "THE MERGER AGREEMENT-Conditions to the
Merger."
Pursuant to the Merger Agreement, the obligations of CR Anthony to
consummate the transactions to be performed by it in connection with the Closing
are subject to the satisfaction or written waiver of the following conditions:
(i) the representations and warranties of Stage Stores set forth in ss.4 of the
Merger Agreement shall be true and correct at and as of the Closing Date; (ii)
each of Stage Stores and the Merger Sub shall have performed and complied with
all of its covenants under the Merger Agreement through the Closing Date; (iii)
the Registration Statement shall have become effective under the Securities Act;
(iv) the Stage Common Stock that will be issued in the Merger shall have been
approved for listing on NASDAQ; (v) no action, suit, or proceeding shall be
pending or threatened before any court, administrative agency or arbitrator
wherein an unfavorable judgment would prevent consummation of the Merger; (vi)
there shall have been no SSI Material Adverse Effect (as defined in the Merger
Agreement); (vii) each of Stage Stores and the Merger Sub shall have certified
that each of the conditions specified above is satisfied in all respects; (viii)
the Requisite CRA Stockholder Approval (as defined in the Merger Agreement)
shall have been obtained; (ix) all applicable waiting periods under the
Hart-Scott-Rodino Act shall have expired; (x) CR Anthony shall have received
from counsel to Stage Stores and the Merger Sub opinions as to corporate and tax
matters dated as of the Closing Date; and (xi) all actions to be taken in
connection with consummation of the Merger by each of Stage Stores and the
Merger Sub shall be reasonably satisfactory in form and substance to CR Anthony.
See "THE MERGER AGREEMENT-Conditions to the Merger."
EFFECTIVE TIME OF THE MERGER
The closing of the Merger will take place at 10:00 a.m. on the second
business day following the date on which the last to be fulfilled or waived of
the conditions set forth in the section "Conditions to Closing" of the Merger
Agreement are fulfilled or waived in accordance with the Merger Agreement (the
"Closing Date"), unless another date, time or place is agreed to in writing by
the parties to the Merger Agreement. The Merger will become effective upon the
filing of the Certificate of Merger with the Secretary of State of the state of
the Surviving Corporation, or at such later time as is specified in the
Certificate of Merger.
11
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
If the Stage Stock Percentage equals or exceeds 80%, the Merger will be
structured as a reverse merger with CR Anthony surviving, and should qualify as
a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Stage Stock Percentage is less than 80% and is
greater than or equal to 50%, the Merger is likely to be structured as a forward
merger of CR Anthony into Merger Sub, with Merger Sub surviving and should
qualify as a reorganization under Section 368(a) of the Code. In either such
event, generally (i) neither Stage, Merger Sub nor CR Anthony will recognize any
gain or loss, (ii) a Stockholder who receives solely Stage Common Stock will not
recognize any gain or loss, and (iii) a Stockholder who receives both Stage
Common Stock and cash will not recognize loss but will recognize gain, if any,
to the extent of the lesser of (x) the cash received or (y) the excess of the
sum of the fair market value of the Stage Common Stock and the amount of cash
received over such Stockholder's adjusted tax basis in the Shares exchanged.
If the Stage Stock Percentage is less than 80%, it is possible that the
Merger will be structured as a reverse merger with CR Anthony surviving. If the
Stage Stock Percentage is less than 50%, the Merger will be structured as a
reverse merger with CR Anthony surviving. In either such case, the Merger will
not constitute a reorganization under Section 368(a) of the Code, and will be
fully taxable to Stockholders. Each Stockholder will recognize gain or loss
equal to the difference between (i) the cash plus the fair market value of the
Stage Common Stock received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged.
THE TAX CONSEQUENCES DISCUSSED ABOVE MAY NOT APPLY TO CERTAIN CATEGORIES OF
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN
STOCKHOLDERS AND STOCKHOLDERS WHOSE SHARES WERE ACQUIRED AS COMPENSATION.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING ANY FEDERAL, STATE, LOCAL OR
OTHER TAX CONSEQUENCES (INCLUDING ANY TAX RETURN FILING OR OTHER TAX REPORTING
REQUIREMENTS) OF THE MERGER.
DISSENTERS' RIGHTS
In the event that any portion of the Merger Consideration will be cash
(other than cash in lieu of fractional shares), Shares that are outstanding
immediately prior to the Effective Time and that are held by Stockholders who
have not voted in favor of the Merger or consented thereto in writing and who
have demanded properly in writing appraisal for such Shares in accordance with
Section 1091 of the Oklahoma Act (collectively, the "Dissenting Shares") shall
not be converted into or represent the right to receive the Merger
Consideration. Such Stockholders shall be entitled to receive payment of the
appraised value of such shares of stock held by them in accordance with the
provisions of such Section 1091, except that all Dissenting Shares held by
Stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Dissenting Shares under such
Section 1091 shall thereupon be deemed to be authorized and unissued shares of
the corporation surviving the Merger pursuant to Section 1091(L) of the Oklahoma
Act.
THE TERMINATION OPTION AGREEMENT
The Termination Option Agreement provides for the grant by CR Anthony to
Stage Stores of an irrevocable option (the "Stock Option") to purchase up to
1,798,093 Shares, or such other number of Shares that equals 19.9% of the issued
and outstanding Shares at the time of exercise of the Stock Option, at a price
of $8.00 per Share (the "Exercise Price"), payable in cash in accordance with
the terms of the Termination Option Agreement.
The Termination Option Agreement provides that the Stock Option may be
exercised by Stage Stores, in whole or in part, at any time or from time to time
after (A) any of the events described in subsection (ii) or (iii) of the
definition of Triggering Event (as defined below) has occurred prior to the
Effective Time, (B) the CR Anthony Board shall approve, endorse or recommend any
CRA Acquisition Proposal (as defined below) within six months of the termination
of the Merger Agreement or (C) any Person (as defined in the Merger Agreement)
or Group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934)
within six months of the termination of the Merger Agreement acquires beneficial
ownership of more than 50% of the outstanding common stock of CR Anthony. For
the purposes of the Termination Option Agreement, "Triggering Event" means any
of the following events: (i) the CR Anthony Board shall have failed to
recommend, shall have withdrawn or shall have modified, in a manner adverse to
either Stage Stores or Merger Sub, its recommendation or approval of the Merger
Agreement for any reason other than as provided in ss. 7(a) of the Merger
Agreement; (ii) the CR Anthony Board shall have approved, endorsed or
recommended any CRA Acquisition Proposal; (iii) CR Anthony shall have entered
into any Contract (as defined in the Merger Agreement) to
12
<PAGE>
consummate any CRA Acquisition Proposal; (iv) the Merger Agreement shall not
have received the Requisite CRA Stockholder Approval (as defined in the Merger
Agreement) and at the time of such event an offer or proposal to affect a CRA
Acquisition Proposal shall have been made; (v) the representations and
warranties of CR Anthony set forth in ss.3 of the Merger Agreement shall cease
to be true and correct at and as of the Closing Date and such failure shall
result in a CRA Material Adverse Effect (as defined in the Merger Agreement); or
(vi) CR Anthony shall not have performed and complied with all of its covenants
hereunder through the Closing Date and such failure shall result in a CRA
Material Adverse Effect. As used herein, CRA Acquisition Proposal means any
proposal (other than any proposal by Stage Stores or the Merger Sub with respect
to the Merger) regarding (i) any merger, consolidation, share exchange, business
combination or other similar transaction or series of related transactions
involving CR Anthony or any of its subsidiaries; (ii) any sale, lease, exchange,
transfer or other disposition of the assets of CR Anthony or any of its
subsidiaries; and (iii) any offer to purchase, tender offer, exchange offer or
any similar transaction or series of related transactions made by any person
involving the outstanding shares of any class of capital stock of CR Anthony or
the filing of any statement on Schedule 14D-1 with the Commission in connection
therewith.
The Termination Option Agreement provides that the Stock Option will
terminate upon the earlier of (i) the Effective Time of the Merger; or (ii) the
date six months following any termination of the Merger Agreement.
The Termination Option Agreement provides that, at the request of Stage
Stores at any time during which the Stock Option is exercisable (the "Repurchase
Period"), CR Anthony will repurchase from Stage Stores the Stock Option, or any
portion thereof, for a price equal to the amount by which the Market/Tender
Offer Price (as defined in the Termination Option Agreement) for Shares as of
the date Stage Stores gives notice of its intent to exercise its right to "put"
the Stock Option to CR Anthony exceeds the Exercise Price, multiplied by the
number of Shares purchasable pursuant to the Stock Option (or portion thereof
with respect to which Stage Stores is exercising its right to "put" the Stock
Option to CR Anthony).
The Termination Option Agreement provides that in no event will Stage
Stores's Total Profit (as defined therein) exceed $4 million and, if it
otherwise would exceed such amount, Stage Stores, at its sole election, will
either (i) deliver to CR Anthony for cancellation Shares previously purchased by
Stage Stores, (ii) pay cash or other consideration to CR Anthony, or (iii)
undertake any combination thereof, so that Stage Stores's Total Profit will not
exceed $4 million after taking into account the foregoing actions. Further, the
Stock Option may not be exercised for a number of Shares as would, as of the
date of the exercise notice, result in a Notional Total Profit (as defined in
the Termination Option Agreement) of more than $4 million, and, if exercise of
the Stock Option otherwise would exceed such amount, Stage Stores, at its
discretion, may increase the price per Share to be paid by Stage Stores pursuant
to the Stock Option for that number of Shares set forth in the exercise notice
so that the Notional Total Profit will not exceed $4 million. See "Termination
Option Agreement."
REGULATORY APPROVALS REQUIRED
Certain aspects of the Merger will require notifications to, and/or
approvals from, certain federal authorities. There can be no assurance that
regulatory approvals will be granted.
On April 4, 1997 pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), CR Anthony and Stage Stores each filed
with the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") a
Notification and Report Form with respect to the Merger. On May 4, 1997, the
waiting period under the HSR Act expired without a request from the FTC for
additional information.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
OF CR ANTHONY IN THE MERGER
The executive officers of CR Anthony and certain of the directors of CR
Anthony have interests in the Merger in addition to their interests as
Stockholders. Such interests relate to, among other things: (i) the exchange of
all outstanding options to purchase CR Anthony shares for cash, and (ii) the
receipt of salary, benefits and severance pay under Employment Agreements and
Amended Severance Agreements with Stage Stores in exchange for cancelling
existing Severance Compensation Agreements with CR Anthony.
13
<PAGE>
RECENT DEVELOPMENTS
On May 8, 1997, Stage Stores commenced tender offers (the "Tender Offers")
to purchase for cash up to 100% (but not less than a majority in principal
amount outstanding) of each of its 10% Senior Notes due 2000, 11% Series B
Senior Subordinated Notes due 2003 and 11% Series D Senior Notes due 2003
(collectively, the "Existing Notes") and related consents (the "Consent
Solicitations") to modify certain terms in the indentures under which the
Existing Notes were issued.
On May 23, 1997, Stage Stores commenced an offering (the "Offering") of $200
million of Senior Notes due 2005 and $100 million of Senior Subordinated Notes
due 2007. The gross proceeds of the Offering will be used to fund the Tender
Offers and payments associated with the Consent Solicitations, to pay fees and
expenses related to the Offering and the Tender Offers and related Consent
Solicitations, and for general corporate purposes.
Concurrently with the Offering, Stage Stores will enter into a new credit
facility with a group of lenders (the "New Credit Agreement"). The New Credit
Agreement will provide for a $100.0 million working capital and letter of credit
facility and a $100.0 million expansion revolving credit facility. The Offering,
the Tender Offers and Consent Solicitations, and the New Credit Agreement are
collectively referred to herein as the "Refinancing." Consummation of each of
the Offering, the Tender Offers and the Consent Solicitations, and the New
Credit Agreement are conditioned upon the completion of each other. Consummation
of the Merger is not a condition to the completion of the Offering or the Tender
Offers. Consummation of the Refinancing is not a condition to the completion of
the Merger. As a result of the Refinancing, Stage Stores will have an increased
amount of long-term debt. See "UNAUDITED PRO FORMA COMBINED FINANCIAL DATA" and
the risk factors contained in Stage Stores' Securities Exchange Commission
filings, including Stage Stores' Form 10-K.
Stage Stores believes the Refinancing will provide it with a more flexible
capital structure which will: (i) increase its working capital facilities to
support its operations; (ii) extend the average maturities of its debt; (iii)
lower its weighted average cost of borrowing and (iv) provide increased
financial flexibility to support its growth strategy.
14
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
CR ANTHONY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA. The selected
historical consolidated financial data with respect to CR Anthony for the five
fiscal years ending February 1, 1997 as reflected in CR Anthony's Form 10-K are
incorporated herein by reference.
CR ANTHONY SUPPLEMENTAL CONSOLIDATED FINANCIAL AND OPERATING DATA. Set forth
below is certain supplemental consolidated financial and operating data with
respect to CR Anthony. As discussed in Note (2), certain reclassifications have
been made to the historical CR Anthony costs and expenses, as presented in CR
Anthony's Form 10-K, to reflect classifications of certain types of costs and
expenses similar to those of Stage Stores. All dollar amounts are stated in
thousands, except for share and per share data.
C.R. ANTHONY COMPANY
SUPPLEMENTAL CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------------------
Pro
Forma
Fiscal
1996 1995 1994 1993 1992(1)
--------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Net sales ................... $ 288,392 $ 304,451 $ 302,241 $ 302,858 $ 307,561
Cost of sales and related
buying, occupancy and
distribution expenses(2) .... 217,719 231,314 227,446 230,146 234,564
--------- --------- --------- --------- ---------
Gross profit (2) ............ 70,673 73,137 74,795 72,712 72,997
Selling, general, and
administrative expenses (2) . 60,944 67,550 66,573 65,743 69,366
Operating income ............ 9,729 5,587 8,222 6,969 3,631
Interest, net ............... 1,806 2,577 2,165 2,207 2,731
--------- --------- --------- --------- ---------
Income before income tax
expense ..................... 7,923 3,010 6,057 4,762 900
Income tax expense .......... 3,090 924 2,362 1,905 351
--------- --------- --------- --------- ---------
Net income .................. $ 4,833 $ 2,086 $ 3,695 $ 2,857 $ 549
========= ========= ========= ========= =========
Net income per common share . $ 0.53 $ 0.23 $ 0.41 $ 0.32 $ 0.06
========= ========= ========= ========= =========
Weighted average common
stock and common stock
equivalents outstanding ..... 9,140 9,005 9,003 9,000 9,000
========= ========= ========= ========= =========
Margin and other data:
Gross profit margin(2) ...... 24.5% 24.0% 24.7% 24.0% 23.7%
Selling, general and
administrative expense
rate(2) ..................... 21.1% 22.2% 22.0% 21.7% 22.6%
Operating income margin ..... 3.4% 1.8% 2.7% 2.3% 1.2%
Comparable store sales
percentage increases
(decrease)(3) ............... (4.1)% (1.3)% (3.8)% (3.6)% (0.9)%
Depreciation and
amortization ................ $ 4,315 $ 4,862 $ 3,817 $ 3,280 $ 3,446
Capital expenditures ........ 5,868 4,812 5,298 4,706 3,959
Balance Sheet data:
Working capital ............. 63,546 62,199 54,116 52,676 50,262
Total assets ................ 118,728 117,060 109,392 96,195 91,279
Long-term debt .............. 14,742 25,183 15,859 17,023 17,042
Stockholders' equity ........ 72,059 67,135 65,049 53,275 44,953
</TABLE>
15
<PAGE>
NOTES TO C.R. ANTHONY COMPANY SUPPLEMENTAL CONSOLIDATED
FINANCIAL AND OPERATING DATA
(1) On August 3, 1992, CR Anthony emerged from bankruptcy proceedings pursuant
to the confirmed Reorganization Plan. For financial reporting purposes, the
effective date of the Reorganization Plan was July 26, 1992, the last day of
the second fiscal quarter of fiscal 1992. CR Anthony adopted fresh-start
reporting in accordance with the recommended accounting principles for
entities emerging from Chapter 11 as set forth in the American Institute of
Certified Accountants Statement of Position 90-7, FINANCIAL REPORTING BY
ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE. Accordingly, the
results of operations reported subsequent to July 26, 1992 are not prepared
on a basis comparable to the prior periods. Fiscal year 1992 financial and
operating data are presented on a pro forma basis as if the effective date
of the Plan of Reorganization had occurred as of the beginning of that
fiscal year.
(2) Reclassifications have been made to certain historical CR Anthony costs and
expenses to reflect a presentation similar to that of Stage Stores. Certain
store occupancy expenses (including depreciation) and buying expenses have
been reclassified to "Cost of sales and related buying, occupancy and
distribution expenses." CR Anthony includes these costs and expenses as
"Selling, general and administrative expenses" and as "Depreciation and
amortization." Additionally, advertising expenses and depreciation and
amortization (not otherwise reclassified to cost of sales) have been
reclassified to "Selling, general and administrative expenses."
(3) Reflect data only from comparable stores. Comparable stores are those stores
which were open for the entire period in that fiscal year and the
immediately preceding fiscal year.
16
<PAGE>
STAGE STORES SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING
DATA. Set forth below is selected consolidated historical financial and
operating data of Stage Stores for the periods indicated. The selected
consolidated historical financial and operating data were derived from Stage
Stores' Consolidated Financial Statements. Certain reclassifications of prior
year data have been made to conform to the 1996 reporting format. These
reclassifications had no impact on operating income or net income (loss) for the
years presented. The information in the table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Stage Stores' Consolidated Financial Statements, both of which
are incorporated by reference to the Stage Stores' Form 10-K (Commission File
No. 000-21011) for the year ended February 1, 1997. All dollar amounts are
stated in thousands, except for per share data.
STAGE STORES, INC.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------------------
1996(1) 1995(2) 1994 1993(3) 1992
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ...................... $ 776,550 $ 682,624 $ 581,463 $ 557,422 $ 504,401
Cost of sales and related
buying, occupancy and
distribution expenses .......... 532,563 468,347 398,659 384,843 350,136
--------- --------- --------- --------- ---------
Gross profit ................... 243,987 214,277 182,804 172,579 154,265
Selling, general and
administrative expenses ........ 172,579 149,102 126,200 $ 115,008 99,523
Store opening and closure costs 2,838 3,689 5,647 199 120
--------- --------- --------- --------- ---------
Operating income(4) ............ 68,570 61,486 50,957 57,372 54,622
Interest, net(5) ............... 45,954 43,989 40,010 36,377 31,771
Other non-operating expense .... -- -- -- -- 2,276
--------- --------- --------- --------- ---------
Income before income tax and
extraordinary item ............. 22,616 17,497 10,947 20,995 20,575
Income tax expense ............. 8,594 6,767 4,317 7,569 8,340
--------- --------- --------- --------- ---------
Income before extraordinary item 14,022 10,730 6,630 13,426 12,235
Extraordinary item ............. (16,081) -- (308) (16,208) --
--------- --------- --------- --------- ---------
Net income (loss) .............. $ (2,059) $ 10,730 $ 6,322 $ (2,782) $ 12,235
========= ========= ========= ========= =========
Earnings (loss) per common
share(6) ....................... $ (0.13) $ 0.84 $ 0.51 $ (0.41) $ 0.82
========= ========= ========= ========= =========
Weighted average shares
outstanding(7) ................. 15,927 12,726 12,393 12,342 12,093
========= ========= ========= ========= =========
MARGIN AND OTHER DATA: (8)
Gross profit margin ............ 31.4% 31.4% 31.4% 31.0% 30.6%
Selling, general and
administrative expense rate .... 22.2% 21.8% 21.7% 20.6% 19.7%
Operating income margin (4) .... 8.8% 9.0% 8.8% 10.3% 10.8%
Adjusted operating income
margin (9) ..................... 9.2% 9.4% 9.2% 8.4% 8.7%
Comparable store sales growth
(10) ........................... 3.3% 0.8% 4.1% 6.3% 1.8%
Adjusted operating income(9) ... $ 71,628 $ 63,996 $ 53,677 $ 46,828 $ 43,680
Depreciation and amortization .. 14,181 12,816 9,997 9,259 9,065
Capital expenditures ........... 26,096 28,638 19,706 8,503 7,631
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital ................ 235,219 170,108 148,229 156,782 214,430
Total assets ................... 509,283 408,254 366,243 343,406 403,824
Long-term debt ................. 298,453 380,039 349,775 347,468 296,587
Redeemable preferred stock ..... -- -- -- -- 17,500
Stockholders' equity (deficit)
(11) ........................... 92,266 (72,314) (81,193) (87,727) (9,605)
</TABLE>
17
<PAGE>
NOTES TO STAGE STORES, INC. SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OPERATING DATA
(1) During October 1996, Stage Stores successfully completed an initial public
offering of its common stock (the "Offering"). The net proceeds were used
primarily to retire the 12 3/4% Senior Discount Debentures due 2000 (the
"Senior Discount Debentures"). In addition, Stage Stores replaced its
working capital facility during January 1997. As a result of these
transactions, Stage Stores recorded an extraordinary charge of $16.1
million, net of applicable income taxes of $9.8 million.
(2) 1995 includes 53 weeks.
(3) During 1993, Stage Stores completed the refinancing of its existing debt and
preferred stock (the "Refinancing"). As a result of the Refinancing, Stage
Stores recorded an after-tax extraordinary charge of $16.2 million.
(4) Operating income and operating income margin decreased during 1994 compared
to 1993 due primarily to the impact of the implementation of an accounts
receivable securitization program (the "Accounts Receivable Program," see
Note 3 to Stage Stores' Consolidated Financial Statements) combined with a
$5.2 million provision associated with the closure of a majority of the
stores operated under the Fashion Bar name (the "Store Closure Plan").
(5) Net interest expense includes $2.4 million and $5.2 million for 1993 and
1992, respectively, that represented the interest expense associated with
Stage Stores' accounts receivable facility outstanding prior to the Accounts
Receivable Program.
(6) Historical earnings (loss) per common share reflects the impact of a .94727
for 1 reverse stock split of the common stock consummated concurrently with
the Offering. Loss per common share for 1996 and 1993 includes the impact of
the extraordinary item associated with the Offering and Refinancing,
respectively, which reduced earnings per common share by $1.01 and $1.31,
respectively.
(7) Includes Class B Common Stock.
(8) Store and other data excludes Bealls stores closed under the Bealls 1988
store closure program, except as otherwise noted in Note 9 below and also
excludes the Fashion Bar stores included in the Store Closure Plan.
Comparable store sales growth for 1995 has been determined based on a
comparable fifty-two week period. Sales are considered comparable after a
store has been in operation fourteen months.
(9) Adjusted operating income represents operating income adjusted to eliminate
store opening and closure costs and the impact on operating income of Stage
Stores' proprietary credit card program (including the Accounts Receivable
Program) as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Service charge income billed to
cardholders ...................... $ 48,555 $ 41,321 $ 35,183 $ 32,547 $ 29,670
Return paid to certificateholders ..... 11,428 11,529 8,200 3,219 --
Servicing and bad debt expense ........ 37,626 28,551 22,504 21,374 18,608
Other ................................. (279) 62 1,552 (2,789) --
-------- -------- -------- -------- --------
Total impact of proprietary credit card
program on operating income ...... (220) 1,179 2,927 10,743 11,062
Store opening and closure costs ....... 2,838 3,689 5,647 199 120
Operating income ...................... 68,570 61,486 50,957 57,372 54,622
-------- -------- -------- -------- --------
Adjusted operating income ............. $ 71,628 $ 63,996 $ 53,677 $ 46,828 $ 43,680
======== ======== ======== ======== ========
</TABLE>
Although adjusted operating income and adjusted operating income margin do
not represent operating income or any other measure of financial performance
under generally accepted accounting principles, Stage Stores believes they
are helpful in understanding the profitability of Stage Stores' retailing
operations prior to the impact of its credit card program, the Accounts
Receivable Program and store opening and closure costs.
(10) Comparable store sales growth including the stores which were part of the
Store Closure Plan and the 1988 Bealls store closure plan was as follows:
Fiscal Year
----------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(in thousands)
Comparable store sales
growth ............... 3.3% 0.5% 3.2% 5.4% 1.8%
------ ------ ------ ------ ------
Excluding the six Bealls stores located on the border of Mexico which were
adversely affected by the peso devaluation in 1994, comparable store sales
growth for 1995 would have increased to 3.0%
(11) Beginning in 1993, stockholders' deficit includes the impact of the
extraordinary charge associated with the Refinancing ($16.2 million) and the
dividend associated with a cash distribution (the "Distribution") to Stage
Stores' stockholders ($74.8 million). Stockholders' equity at the end of
1996 reflects the impact of the Offering.
18
<PAGE>
UNAUDITED HISTORICAL AND
PRO FORMA PER SHARE DATA
The following table shows comparative per share information for Stage Stores
and CR Anthony on both a historical and a pro forma basis for the periods
presented. The unaudited pro forma per share information is presented to show
the pro forma effects of the Merger. The Merger will be reported using the
purchase method of accounting for business combinations. Pro forma income before
extraordinary items and dividends per share are presented as if the Merger had
occurred at the beginning of the periods shown below and book value per share is
presented as if the Merger had occurred as of the dates shown below. See
"UNAUDITED PRO FORMA COMBINED FINANCIAL DATA" for a more detailed analysis of
the pro forma effects of the Merger. Such pro forma information assumes that
approximately 9,035,645 Shares were outstanding at the time of the Merger, and
that such Shares will be converted into shares of Stage Common Stock at a
conversion rate of 0.393 shares of Stage Common Stock for each Share. The
unaudited pro forma per share information is based on the respective historical
consolidated financial statements of Stage Stores and CR Anthony and should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
which are a part of the separate Annual Reports on Form 10-K for the fifty-two
weeks ended February 1, 1997 filed by Stage Stores and CR Anthony and which are
incorporated by reference in this Proxy Statement/Prospectus, and the Selected
Historical Consolidated Financial and Operating Data shown elsewhere in this
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
CR ANTHONY
STAGE STORES CR ANTHONY EQUIVALENT STAGE STORES
HISTORICAL (a) HISTORICAL PRO FORMA(b) PRO FORMA(b)
-------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
COMPARATIVE PER SHARE DATA:
Income per common share from
continuing operations for the:
52 weeks ended February 1, 1997 ... $ .88 $ .53 $ 0.43 $ 1.10
Cash dividends per common share for the:
52 weeks ended February 1, 1997 ... -- -- -- --
Book value per common share as of:
February 1, 1997 .................. 3.96 7.97 2.18 5.55
</TABLE>
- -------
(a) All Stage Stores historical per share calculations give effect to the .94727
for one reverse stock split which occurred on October 30, 1996 for
stockholders of record on October 30, 1996.
(b) The unaudited pro forma comparative per share data is calculated based on
(i) the average number of fully diluted outstanding shares of Stage Common
Stock for the period assuming the Merger occurred effective at the beginning
of the period for income before extraordinary items per common share and
(ii) the number of outstanding shares of Stage Common Stock as of February
1, 1997 assuming the Merger occurred effective as of such dates for book
value per common share. The unaudited pro forma comparative per share data
is calculated assuming a Stage Average Closing Price of $20.75 (the closing
price of Stage Common Stock on May 23, 1997) and the resulting exchange
ratio of .393 to 1. Assuming a Stage Average Closing Price of $15.00 and the
resulting exchange ratio of .133 to 1, pro forma income per common share
from continuing operations and the book value per common share would be
$1.11 and $3.82, respectively.
CR Anthony equivalent pro forma share data represents the Stage Stores pro
forma data multiplied by the exchange ratio of .393 to 1. Assuming a Stage
Average Closing Price of $15.00 and the resulting exchange ratio of .133 to
1, the equivalent pro forma income per common share from continuing
operations and the equivalent book value per common share would be $0.15 and
$0.51, respectively. Additionally, each share of CR Anthony common stock
would receive $6.00 in cash.
19
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
The Shares and shares of Stage Common Stock are listed and principally
traded on the NASDAQ National Market. The tables below set forth, for the fiscal
quarters indicated, the high and low closing sale prices of the Shares and
shares of Stage Common Stock as reported on the NASDAQ National Market, in each
case based on published financial sources. These prices do not include retail
mark-up, mark-down or commission. No dividends were declared by CR Anthony or
Stage Stores during the periods presented.
CR ANTHONY
COMMON STOCK
----------------
HIGH LOW
1996 -- Fiscal Year Ended February 1, 1997
Quarter ended November 2 4.50 3.53
Quarter ended February 1 6.38 3.88
1997 -- Fiscal Year Ending January 31, 1998
Quarter ended May 3 8.13 5.38
Quarter ending August 2 (through May 23, 1997) 8.00 7.75
STAGE STORES
COMMON STOCK
----------------
HIGH LOW
1996 -- Fiscal Year Ended February 1, 1997
Quarter ended November 2 19.25 18.25
Quarter ended February 1 20.50 17.38
1997 -- Fiscal Year Ending January 31, 1998
Quarter ended May 3 24.50 17.25
Quarter ending August 2 (through May 23, 1997) 23.00 20.63
Prior to the listing of the Shares on the NASDAQ National Market, a limited
public trading market existed for the Shares. Throughout the first fiscal
quarter ended May 4, 1996, trading in the Shares was limited and sporadic and
did not, in the view of CR Anthony, constitute an established public trading
market. During the second fiscal quarter ended August 3, 1996 and through August
6, 1996, market making and trading activity in the Shares increased. During such
time period, the high and low sales price for the Shares ranged from $1.25 to
$4.13, as posted on the Nasdaq Over the Counter Bulletin Board. These prices do
not include retail mark-up, mark-down or commission.
On February 18, 1997, the last full day of trading prior to the public
announcement of the proposed Merger, the closing prices on the NASDAQ National
Market of the Shares and of Stage Common Stock were $5.75 per share and $18.31
per share, respectively. On May 23, 1997, the most recent practicable date prior
to the printing of this Proxy Statement/Prospectus, the closing price on the
NASDAQ Composite Tape of Stage Common Stock and of the Shares were $20.75 per
share and $7.88 per share, respectively.
Stockholders are urged to obtain a current market quotation for their Shares
and the Stage Common Stock.
It is a condition to CR Anthony's and Stage Stores' respective obligations
to consummate the Merger that the shares of Stage Common Stock to be issued
pursuant to this Proxy Statement/Prospectus shall have been approved for listing
on NASDAQ, subject to official notice of issuance.
20
<PAGE>
THE SPECIAL MEETING
PURPOSE OF SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the CR Anthony Board for use at the Special Meeting.
The purpose of the Special Meeting is to consider and vote upon the approval and
adoption of the Merger Agreement and to transact such other business as may
properly come before the Meeting.
THE CR ANTHONY BOARD (WITH ONE DIRECTOR ABSTAINING DUE TO HIS RELATIONSHIP
WITH CR ANTHONY'S INVESTMENT BANKER) HAS UNANIMOUSLY (i) DETERMINED THAT THE
MERGER AGREEMENT, THE TRANSACTIONS CONTEMPLATED THEREBY, AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS, (ii) APPROVED THE MERGER
AGREEMENT AND THE MERGER AND (iii) RECOMMENDED THAT THE STOCKHOLDERS APPROVE AND
ADOPT THE MERGER AGREEMENT AND THE MERGER.
This Proxy Statement/Prospectus also constitutes a prospectus furnished by
Stage Stores with respect to shares of Stage Common Stock to be issued to
holders of Shares upon consummation of the Merger.
DATE, PLACE AND TIME
The Special Meeting will be held at CR Anthony's offices at 701 North
Broadway, Oklahoma City, Oklahoma 73102, on June 25, 1997, commencing at 10:30
a.m., local time.
RECORD DATE; QUORUM
The CR Anthony Board has fixed the close of business on May 20, 1997 as the
Record Date for the determination of Stockholders entitled to notice of, and to
vote at, the Special Meeting. As of the Record Date, there were issued and
outstanding 9,035,645 Shares entitled to vote at the Special Meeting. Each
holder of Shares outstanding on the Record Date is entitled to one vote for each
Share so held, exercisable in person or by properly executed and delivered
proxy, at the Special Meeting. The presence of the holders of at least a
majority of the Shares outstanding on the Record Date, whether present in person
or by properly executed and delivered proxy, will constitute a quorum for
purposes of the Special Meeting.
VOTES REQUIRED
The affirmative vote of the holders of at least two-thirds (66 2/3%) of the
holders of the outstanding Shares entitled to vote at the Special Meeting is
required to approve and adopt the Merger Agreement.
As of the Record Date, directors and executive officers of CR Anthony and
their affiliates were beneficial owners of an aggregate of 69,014 Shares
(representing less than 1% of the Shares then outstanding). The directors and
executive officers of CR Anthony who own Shares have indicated that they intend
to vote their Shares in favor of approval and adoption of the Merger Agreement.
The Merger Agreement to be considered at the Special Meeting involves a
matter of great importance to the Stockholders. Accordingly, Stockholders are
urged to read and carefully consider the information presented in this Proxy
Statement/Prospectus and are urged to complete, date, sign and promptly return
the enclosed proxy card in the accompanying prepaid envelope.
STOCK CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY CARD. IF THE
MERGER IS CONSUMMATED, STOCKHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR
EXCHANGING THEIR SHARES FOR SHARES OF STAGE COMMON STOCK WHEN THE MERGER IS
CONSUMMATED.
21
<PAGE>
PROXIES; VOTING AND REVOCATION
Each properly executed proxy received prior to the vote at the Special
Meeting will be voted in the manner directed therein by the holder of Shares. A
holder of Shares may vote by proxy if he or she is unable to attend the Special
Meeting in person, or wishes to have his or her Shares voted by proxy even if he
or she does attend the Special Meeting. IF A PROXY IS SUBMITTED BUT NO
DIRECTIONS ARE GIVEN THEREIN, SHARES REPRESENTED BY THE PROXY WILL BE VOTED FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, THE MERGER AND ANY OTHER
PROPOSALS RECOMMENDED BY THE BOARD.
BECAUSE THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY STOCKHOLDERS
REQUIRES THE AFFIRMATIVE VOTE OF TWO-THIRDS (66 2/3%) OF THE HOLDERS OF THE
SHARES OUTSTANDING AS OF THE RECORD DATE, THE FAILURE TO SUBMIT A PROXY,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
APPROVAL OF THE MERGER AGREEMENT.
A proxy may be revoked by the person giving such proxy at any time before it
is exercised by (i) providing written notice of such revocation to the Secretary
of CR Anthony, (ii) submitting a proxy having a later date or (iii) appearing at
the Special Meeting and voting in person.
DISSENTERS' RIGHTS
In the event that any portion of the Merger Consideration is cash (other
than cash in lieu of fractional shares), Shares that are outstanding immediately
prior to the Effective Time and that are held by Stockholders who have not voted
in favor of the Merger or consented thereto in writing and who have demanded
properly in writing appraisal for such Shares in accordance with Section 1091 of
the Oklahoma Act (collectively, the "Dissenting Shares") shall not be converted
into or represent the right to receive the Merger Consideration. Such
Stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of such Section 1091,
except that all Dissenting Shares held by Stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Dissenting Shares under such Section 1091 shall thereupon be
deemed to be authorized and unissued shares of the Surviving Corporation
pursuant to Section 1091(L) of the Oklahoma Act.
SOLICITATION OF PROXIES
CR Anthony will pay the expenses of soliciting proxies from the holders of
Shares. This solicitation is being made by mail, telephone, telegram and other
means of communication. Officers and employees of CR Anthony may also take part
in the solicitation, but will not receive additional compensation for doing so
other than reimbursement of any out-of-pocket expenses incurred in connection
therewith. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of Shares held of record by such persons, and
CR Anthony will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith. Except as disclosed
herein, neither CR Anthony nor any person acting on its behalf currently intends
to employ, retain or compensate any person to make solicitations or
recommendations to holders of Shares on its behalf concerning the Merger.
STOCKHOLDERS OF CR ANTHONY SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
OTHER MATTERS
The CR Anthony Board knows of no other matters that will be presented for
action at the Special Meeting. If, however, any other matter properly comes
before the Special Meeting, the persons named in the proxy or their substitutes
will vote thereon in accordance with their discretion.
22
<PAGE>
THE MERGER
GENERAL
The following information with respect to the Merger is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is included in this Proxy Statement/Prospectus as Annex A and incorporated
herein by reference. The Merger Agreement sets forth the terms and conditions
upon which the Merger is to be effected.
If the Merger Agreement and the Merger are approved and adopted by the
holders of two-thirds (66 2/3%) of the outstanding Shares entitled to vote at
the Special Meeting, CR Anthony will be merged with and into Merger Sub or,
depending upon certain conditions, Merger Sub will be merged with and into CR
Anthony.
The Merger Agreement provides for the merger of either CR Anthony with and
into the Merger Sub or, depending upon certain conditions, the Merger Sub with
and into CR Anthony. The Merger will become effective upon the filing of the
Certificate of Merger with the Secretary of State of the state of the Surviving
Corporation or at such time thereafter as is agreed upon by the parties and
specified in the Certificate of Merger, in accordance with applicable law. At
the Effective Time, if a forward merger is effected, the separate existence of
CR Anthony shall cease and the Merger Sub shall continue as the surviving
corporation or, if a reverse merger is effected, the separate existence of
Merger Sub shall cease and CR Anthony shall continue as the surviving
corporation.
MERGER CONSIDERATION
In the Merger, Stage Stores will acquire each outstanding Share (excluding
Shares owned by Dissenting Stockholders) for a minimum value (the "Base Price")
of $8.00 per share plus $0.01 for every $0.05 by which the Stage Average Closing
Price exceeds $20.00 per share. The Stage Average Closing Price means the
average closing price expressed in dollars per share of Stage Common Stock
quoted on the NASDAQ National Market System for the ten trading days selected by
lot by CR Anthony and Stage Stores out of the twenty most recent consecutive
trading days prior to and including the fifth day preceding the closing of the
Merger. The exact combination of Stage Common Stock and/or cash (the "Merger
Consideration") to be paid by Stage Stores for each share of CR Anthony's common
stock will be determined using a formula based upon the Base Price and the Stage
Average Closing Price. The Merger Consideration will consist of 100% Stage
Common Stock (except for cash received in lieu of fractional shares of Stage
Common Stock) if the Stage Average Closing Price is $20.00 or higher, and the
stock percentage will decline in linear fashion to 25% of the Merger
Consideration if the Stage Average Closing Price is $15.00.
If the Stage Average Closing Price is less than $15.00, Stage Stores has the
option to terminate the Merger Agreement and pay CR Anthony a fee of $3,500,000
plus CR Anthony's expenses, or to close the Merger, in which case the Merger
Consideration per share of CR Anthony's common stock will consist of (i) .1333
shares of Stage Common Stock, and (ii) an amount in cash equal to $8.00 minus
the product of .1333 and the Stage Average Closing Price. In any case, the Stage
Common Stock to be received by CR Anthony's Stockholders will be registered and
freely tradable, unless the recipient is an affiliate of CR Anthony.
The value of Stage Common Stock used to determine the number of shares of
Stage Common Stock the holder of each Share will receive will be the average
closing price of Stage Common Stock for 10 days selected at random out of the
Pricing Window. For example, if the closing is July 2, 1997, the closing prices
for Stage Common Stock during the Pricing Window (ending on June 25, 1997) will
be collected, 10 will be selected at random and the average will be computed.
Based on the above formula, Stockholders will receive as the Merger
Consideration cash and/or Stage Common Stock with a value of at least $8.00.
However, at the time of the Special Meeting, Stockholders may not know with
absolute certainty the type or value of the consideration which they will
receive in the Merger.
The table below illustrates, depending upon the Stage Average Closing
Price, the type and value of the Merger Consideration the holder of each Share
will receive, including the total price for each Share and the ratio of Stage
Common Stock to cash to be received as the Merger Consideration for each Share.
23
<PAGE>
CR ANTHONY/STAGE STORES
MERGER CONSIDERATION TABLE
(PER SHARE OF CR ANTHONY STOCK)
Amount of Base Shares of Amount of
Stage Average Base Price Price Stage Stock Base Price to
Closing (Merger to be Paid In to be be
Price (1) Value)(2) Stock Delivered(3) Paid in Cash(3)
--------- --------- ----- ------------ ---------------
Less than $15 (4) (4) (4) (4)
$15.00 $8.00 $2.00 .133 $6.00
$16.00 $8.00 $3.20 .200 $4.80
$17.00 $8.00 $4.40 .258 $3.60
$18.00 $8.00 $5.60 .311 $2.40
$19.00 $8.00 $6.80 .357 $1.20
$20.00 $8.00 $8.00 .400 - 0 -
$21.00 $8.20 $8.20 .390 - 0 -
$22.00 $8.40 $8.40 .381 - 0 -
$23.00 $8.60 $8.60 .374 - 0 -
$24.00 $8.80 $8.80 .366 - 0 -
$25.00 $9.00 $9.00 .360 - 0 -
Greater than
$25.00 (2) (2) (3) - 0 -
- --------------------
(1) The value of Stage Common Stock (the "Stage Average Closing Price") used to
determine the exact combination of Stage Common Stock and/or cash (the
"Merger Consideration") the holder of each share of the Company's common
stock will receive will be the average closing price of Stage Common Stock
for 10 days selected at random out of the 20 trading days (the "Pricing
Window") prior to and including the fifth trading day before the closing of
the Merger. For example, if the closing is July 2, 1997, the closing prices
for Stage Common Stock during the Pricing Window (ending on June 25, 1997)
will be collected, 10 will be selected at random and the average will be
computed.
If the Stage Average Closing Price is equal to or greater than $20.00,
Stockholders will receive only Stage Common Stock (except for cash received
in lieu of fractional shares of Stage Common Stock) and, to the extent only
Stage Common Stock is received, the Merger Consideration will not be taxable
to Stockholders. If the Stage Average Closing Price is equal to or greater
than $17.00 and less than $20.00, all or a portion of the Merger
Consideration will be taxable to Stockholders. If the Stage Average Closing
Price is less than $17.00, the Merger Consideration will be fully taxable to
Stockholders. Each Stockholder will recognize gain or loss equal to the
difference between (i) the cash plus the fair market value of the Stage
Common Stock received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged. See "THE MERGER AGREEMENT -- Certain Federal Income Tax
Consequences."
(2) "Base Price" per CR Anthony share means $8.00 plus $0.01 for every $0.05 by
which the Stage Average Closing Price exceeds $20.00.
(3) That number of shares of Stage Common Stock which, if valued at the Stage
Average Closing Price, have a value equal to X multiplied by the Base Price;
and an amount of cash equal to the Base Price multiplied by the remainder of
one minus X, where:
X = 1- ((20-Y) x .15) and
Y = the lesser of 20 or the Stage Average Closing Price
(4) If the Stage Average Closing Price is less than $15.00 and Stage Stores
elects to waive the condition set forth in Section 6(a)(xv) of the Merger
Agreement and permit the closing of the Merger, the Merger Consideration per
each share of CR Anthony stock shall consist of (a) .1333 shares of Stage
Common Stock, and (b) an amount in cash equal to $8.00 minus the product of
.1333 and the Stage Average Closing Price.
If any fractional interest of a share of Stage Common Stock would, except
for this sentence, be deliverable as consideration for the Merger, Stage Stores,
in lieu of delivering such fractional shares, may pay an amount in cash equal to
the value of such fractional interest.
Based on the closing price of Stage Common Stock of $20.75 on May 23, 1997,
the most recent practicable date prior to the printing of this Proxy
Statement/Prospectus, each Share would be converted into the right to receive
0.393 shares of Stage Common Stock. However, the market value and type of
consideration Stockholders will receive at the Effective Time will depend upon
the Stage Average Closing Price, which will not be determined earlier than June
25, 1997, the date of the Special Meeting. It is currently anticipated that the
Effective Time will be shortly after the date of the Special Meeting. Since
Stage Stores' initial public offering on October 24, 1996, the market price of
Stage Common Stock has not closed below $17.25 per share. See "SUMMARY -
Comparative Market Prices and Dividends." However, there can be no assurance
that the future market prices of Stage Common Stock (including the Pricing
Window) will reflect historical trading levels. Stockholders are urged to
consult with their brokers, dealers or financial advisors prior to or around the
time of the Special Meeting to obtain current market price information for Stage
Common Stock. See "THE MERGER AGREEMENT - Basic Transaction."
24
<PAGE>
BACKGROUND OF THE MERGER
In August 1992, the U. S. Bankruptcy Court approved a Plan of Reorganization
which provided that substantially all the CR Anthony's pre-petition liabilities
to unsecured creditors were forgiven in exchange for receiving all of the newly
issued shares of common stock of the reorganized CR Anthony. Pursuant to the
Plan of Reorganization, shares of CR Anthony stock were exempt from registration
for non-affiliated shareholders. From late 1992 until mid-1996, transactions in
CR Anthony stock were reported in the OTC Bulletin Board; however, trading
activity was limited and did not represent an adequate source of liquidity for
shareholders desiring to sell CR Anthony stock.
For some time the CR Anthony Board had explored various alternatives for
improving the value and liquidity associated with ownership of CR Anthony stock.
In April 1995, the CR Anthony Board directed Mr. Jack Wiesner, CR Anthony's
Chairman and Chief Executive Officer, to select an investment banker to advise
the CR Anthony Board regarding the various alternatives which could be
considered to enhance shareholder value and liquidity. Proposals from several
investment banking firms were considered and on May 22, 1995, CR Anthony engaged
the firm of Houlihan, Lokey, Howard and Zukin ("Houlihan Lokey"). From June,
1995 to December, 1995, the CR Anthony Board and CR Anthony's management worked
with Houlihan Lokey in evaluating several alternatives. Actions which were
considered included: (i) soliciting a transaction involving the sale of a
substantial portion or all of CR Anthony stock, (ii) a recapitalization
utilizing a stock repurchase program or the possible use of an employee stock
ownership plan ("ESOP"), (iii) a registration of CR Anthony's currently issued
shares followed by listing of those shares on a national exchange, and (iv) an
initial public offering of newly issued shares of stock. During the course of
the 1995 engagement, Houlihan Lokey solicited offers from selected third parties
regarding the possible sale of CR Anthony; however, no attractive offers were
produced as a result of these efforts. The CR Anthony Board decided not to
pursue any of the options available involving the sale or repurchase of CR
Anthony stock; accordingly, the Houlihan Lokey 1995 engagement was terminated on
December 12, 1995. In order to achieve liquidity of CR Anthony stock, the CR
Anthony Board believed that the best course of action was for CR Anthony to
proceed with the registration of all issued shares of stock. The registration
statement was filed with the Commission on October 18, 1995 and became effective
on December 21, 1995.
On March 26, 1996 during a regular meeting of the CR Anthony Board, the CR
Anthony Board discussed that trading activity continued to be nominal and the
price was accordingly depressed. During Spring 1996, CR Anthony's management and
the CR Anthony Board again considered the advisability of a stock repurchase
program to improve shareholder value and liquidity and to invest in CR Anthony
stock for possible future use under an employee benefit plan. In evaluating the
causes for the thin trading and low valuation, the CR Anthony Board considered
that CR Anthony stock had a relatively small "public float" due to the
concentration of ownership in the hands of relatively few shareholders and that
a repurchase program would further decrease the "public float." Accordingly, the
CR Anthony Board concluded it would be better to list CR Anthony stock on a
national exchange and develop appropriate investor relation programs to acquaint
investment analysts with CR Anthony's business strategy. In April 1996, CR
Anthony's management evaluated the alternative national market exchanges.
Following management's recommendation, on June 10, 1996, the CR Anthony Board
approved an application to list CR Anthony stock on NASDAQ with a preference, if
qualified, for listing on the National Market System. On August 7, 1996, CR
Anthony stock was listed on NASDAQ under the symbol "CRAU."
Over the past several years, the Board of Directors of Stage Stores (the
"Stage Stores Board") has implemented its plan of forming a team of highly
qualified managers to execute Stage Stores' growth strategy. A key component of
Stage Stores' growth strategy has been to pursue and consummate strategic
acquisitions. The Stage Stores Board believes that Stage Stores can benefit from
strategic acquisitions by (i) applying its buying and merchandising
capabilities, sales promotion techniques and customer service methods, (ii)
introducing its proven management systems, and (iii) consolidating overhead
functions. Beginning in November 1995, the Stage Stores Board began discussing
CR Anthony as a potential acquisition candidate. In May 1996, the Stage Stores
Board directed Mr. Joshua Bekenstein, a member of the Stage Stores Board, to
contact Mr. Wiesner regarding a possible combination of the companies.
In early June, 1996, Mr. Bekenstein contacted Mr. Wiesner by telephone
regarding the interest of Stage Stores in exploring a transaction involving
Stage Stores and CR Anthony. Mr. Bekenstein invited Mr. Wiesner to visit with
him in New York. While in New York attending to other business matters during
the week of June 17, 1996, Mr. Wiesner and Mr. Michael Tanner (CR Anthony's
President and Chief Operating Officer) met with Mr. Bekenstein in the offices of
Kirkland & Ellis, counsel for Stage Stores. The conversation at this meeting was
devoted to a general discussion of the possible benefits of a combination of
Stage Stores and CR Anthony.
25
<PAGE>
From time to time in late July, August and early September, 1996, Mr.
Wiesner and Mr. Bekenstein exchanged correspondence regarding the process that
might be followed to explore the possible benefits of a combination and the
consideration that might be offered to CR Anthony shareholders. Both the CR
Anthony Board and the Stage Stores Board were kept informed and discussed the
possible circumstances under which they would be willing to explore such a
transaction.
During the week of September 17, 1996, Mr. Wiesner contacted other members
of the CR Anthony Board and recommended, and the other members of the CR Anthony
Board concurred, that Houlihan Lokey should be engaged again to represent CR
Anthony in evaluating its strategic alternatives in light of the improvement in
CR Anthony's stock price since being listed on NASDAQ, including its
negotiations with Stage Stores. The CR Anthony Board determined that the terms
of this engagement should be consistent with the 1995 engagement except that
Houlihan Lokey would be compensated on a contingency (only if the transaction
closed) basis, rather than on a monthly retainer basis. The CR Anthony Board
further determined that the engagement of Houlihan Lokey was appropriate in view
of the familiarity that Houlihan Lokey had with CR Anthony and the fact that
such familiarity would permit Houlihan Lokey to proceed in a timely and
cost-effective manner. On September 27, 1996, a Letter Agreement was signed
between CR Anthony and Houlihan Lokey.
During September 1996, various drafts of a proposed Confidentiality and
Standstill Agreement were exchanged between CR Anthony and Stage Stores. CR
Anthony and Stage Stores signed the Confidentiality and Standstill Agreement
effective as of September 25, 1996, by which each of them agreed to provide the
other with certain confidential and proprietary information from time to time as
requested.
On November 7, 1996, Messrs. Wiesner, Tanner, and Michael McCreery, CR
Anthony's Vice Chairman & Chief Administrative Officer, and Michael Jacobs,
Managing Director, and Brett Wyard, Associate, of Houlihan Lokey, met with
Messrs. James Marcum, Stage Stores' Executive Vice President and Chief Financial
Officer, and Mark Hess, Stage Stores' Vice President-Strategic Planning, and Mr.
Spencer Hart, Vice President of Credit Suisse First Boston Corporation ("CSFB"),
Stage Store's financial advisor, in Houston to discuss the mechanics of a
potential offer and, among other things, the timetable for conducting due
diligence. During the week of November 17, 1996, representatives of Stage Stores
and CSFB conducted a due diligence review of CR Anthony in Oklahoma City. During
the week of December 2, 1996, representatives of CR Anthony and Houlihan Lokey
conducted a due diligence review of Stage Stores in Houston.
On December 12, 1996, the Stage Stores Board authorized Mr. Carl Tooker,
Stage Stores' President and Chief Executive Officer to extend a written merger
proposal to CR Anthony which proposed that the consummation of its proposed
merger would result in the holders of CR Anthony stock receiving, in exchange
for each share of CR Anthony stock, .25 shares of Stage Stores' stock. On
December 13, 1996 and in response to Mr. Tooker's letter, the CR Anthony Board
held a telephonic meeting and determined that although it remained interested in
a combination of CR Anthony and Stage Stores, the Stage Stores offer was not
satisfactory. On December 18, 1996, the CR Anthony Board held a telephonic board
meeting during which Houlihan Lokey provided an overview of the discussions with
Stage Stores, a financial analysis of the recent Stage Stores proposal, a
valuation analysis of CR Anthony, and a proforma merger and valuation analysis
of a combined CR Anthony\Stage Stores entity. Throughout the month of December,
1996, Michael Jacobs of Houlihan Lokey contacted other possible merger
candidates and discussed their possible interest in a merger with CR Anthony. CR
Anthony was advised by Houlihan Lokey that there was some level of interest
given by three parties, but that, in its judgement, no other party was likely to
pay as high a price as that which could potentially be negotiated with Stage
Stores.
On January 15, 1997, Messrs. Wiesner, McCreery and Tanner of CR Anthony,
Martin Stringer, of McKinney, Stringer & Webster, legal counsel for CR Anthony,
and Mr. Wyard of Houlihan Lokey, met in Oklahoma City with Messrs. Tooker,
Marcum and Hess of Stage Stores. The representatives of Stage Stores shared
their rationale for the valuation reflected in Stage Stores' letter to CR
Anthony dated December 12, 1996. On January 27, 1997, Messrs. Jacobs and Eric
Siegert, Director of Houlihan Lokey, and Mr. Stringer met with Messrs. Tooker
and Marcum at Stage Stores' offices in Houston to discuss valuation and
structural issues. Over the ensuing days, Mr. Jacobs had ongoing discussions
with Mr. Tooker and Mr. Marcum relating to the terms of a potential revised
offer. On January 30, 1997, the Stage Stores Board authorized Mr. Tooker to
submit a revised proposal to CR Anthony. Stage Stores proposed on that date that
the holders of CR Anthony stock would receive, in exchange for each share of CR
Anthony stock, .20 shares of Stage Stores stock and $4.00 in cash.
26
<PAGE>
On February 4, 1997, the CR Anthony Board met in Kansas City to discuss the
merits of Stage Stores' January 30, 1997 proposal. The CR Anthony Board received
the following: (i) updated valuation reports from Houlihan Lokey, which
reflected lower than originally expected fourth quarter operating results, (ii)
a briefing by Houlihan Lokey concerning other contacts made by Houlihan Lokey to
solicit other bids, (iii) a presentation by management concerning prospects for
profit improvement and the impact on stockholder value if no merger occurred,
and (iv) a presentation by Messrs. Tooker and Marcum regarding Stage Stores'
history, business strategies and prospects for growth. The CR Anthony Board
directed CR Anthony's management and its advisors to proceed with negotiations
to finalize a proposal with Stage Stores that the CR Anthony Board could vote
upon to either recommend or not recommend to the CR Anthony stockholders. The CR
Anthony Board further instructed CR Anthony's management to begin a search
process for an advisor to provide a fairness opinion in the event a transaction
was negotiated.
In the days following the February 4, 1997 meeting of the CR Anthony Board,
Mr. Jacobs of Houlihan Lokey had ongoing discussions with Mr. Tooker, Mr. Marcum
and representatives of CSFB. On February 10, 1997, with the approval of Stage
Stores Board, Mr. Tooker delivered a revised offer that proposed the
consummation of a merger which would result in the holders of CR Anthony stock
receiving, in exchange for each share of CR Anthony stock, $8.00 in aggregate
value in cash and shares of Stage Stores stock. The value of Stage Stores stock
would be determined on the basis of its average market price during an agreed
upon period prior to the effective date of the merger. The aggregate value per
share received by the holders of CR Anthony stock would be increased by $0.01
per share for each $0.04 increment by which the average market price of Stage
Stores stock during the agreed upon period exceeded $22.00. Over the next two
days representatives of both companies continued negotiations, and, on February
11, 1997, Mr. Tooker delivered a revised offer which modified the proposal such
that the CR Anthony shareholders would receive consideration over the $8.00 per
share minimum offer on the basis of $0.01 for every $0.05 increment that Stage
Stores' stock exceeded $20.00 per share during the agreed upon period. At that
point, CR Anthony and Stage Stores agreed to attempt to negotiate a merger
agreement with terms and conditions acceptable to both parties.
On February 19, 1997, CR Anthony and Stage Stores issued a joint press
release announcing that merger discussions were taking place. Shortly
thereafter, the first draft of a merger agreement was delivered by counsel for
Stage Stores to CR Anthony and its advisors. During the week of February 17,
1997, CR Anthony's management solicited proposals from Principal Financial
Securities, Inc., Morgan Keegan & Company, Inc., Stephens Inc., and Rauscher
Pierce Refsnes, Inc. to evaluate the fairness of the transaction from a
financial point of view on behalf of CR Anthony. On February 21, 1997, the CR
Anthony Board took action to engage Stephens Inc., which commenced its work
immediately.
On February 24, 1997, Messrs. McCreery, Stringer, Jacobs, Siegert and Wyard
met with Mr. Tooker, Mr. Marcum, representatives of CSFB and representatives of
Kirkland & Ellis in Stage Stores' offices in Houston. Various drafts of the
merger agreement were exchanged over the course of the next several days and CR
Anthony, Stage Stores and their respective advisors updated their due diligence
reviews. On February 24, 1997, drafts of the merger agreement and other relevant
materials were circulated to the CR Anthony Board and the Stage Stores Board for
special meetings to be held on March 4, 1997.
At the March 4, 1997 meeting of the CR Anthony Board, Stephens Inc.
delivered its written opinion that, as of such date, based upon the procedures
followed, factors considered and assumptions made by Stephens Inc. as set forth
in such opinion, the consideration to be received by the disinterested
Stockholders in the Merger is fair to them from a financial point of view. The
CR Anthony Board (with Jeffrey Werbalowsky abstaining because of his
relationship with Houlihan Lokey) voted unanimously to approve the Merger
Agreement and the Merger and to recommend that all shareholders approve and
adopt the Merger Agreement and the Merger. On March 4 and March 5, 1997, the
Stage Stores Board met and on March 5, 1997, voted unanimously to approve the
Merger Agreement. On March 5, 1997, CR Anthony and Stage Stores entered into the
Merger Agreement and the Termination Option Agreement and a press release
announcing the signing of the Merger Agreement was issued. On May 20, 1997, CR
Anthony and Stage Stores entered into a First Amendment to the Agreement and
Plan of Merger in order to clarify certain provisions thereof.
STAGE STORES' REASONS FOR THE MERGER
Stage Stores believes that the consummation of the Merger will provide an
opportunity for Stage Stores to expand as a retailer of moderately priced,
branded, fashion apparel into underserved, small markets throughout the central
United States. The Merger is consistent with Stage Stores' growth strategy which
is to expand through both organic store development and strategic acquisitions.
Stage Stores believes that CR Anthony is an excellent fit because (i) CR Anthony
stores are located in states which are the same as or are contiguous to states
in which Stage Stores currently
27
<PAGE>
operates, (ii) there are a relatively small number of markets in which the two
companies overlap, (iii) a majority of the CR Anthony stores are in markets
which fit Stage Stores' demographic profile and (iv) a majority of the CR
Anthony stores are comparable in size to Stage Stores' stores in similar
markets. The addition of the CR Anthony stores will not only expand the
geographic reach of Stage Stores, but it is expected that there will be
meaningful synergies between CR Anthony and Stage Stores in the form of both
cost savings and revenue enhancements. Stage Stores believes that cost savings
alone from the Merger should be at least $10 million per year once the
operations are fully integrated and will result from, among other things, the
reduction of administrative, distribution, information systems, advertising,
credit and other support functions and enhanced purchasing efficiencies.
CERTAIN FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus contains certain forward-looking information
including information provided in "THE MERGER-Stage Stores' Reasons for the
Merger" and "UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF STAGE STORES." The
Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking information to encourage companies to provide prospective
information about their companies without fear of litigation so long as such
information is identified as forward-looking and is accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the information. Stage
Stores and CR Anthony identify the following important factors which could cause
Stage Stores' and CR Anthony's actual results to differ materially from any such
results which might be projected, forecast, estimated or budgeted by Stage
Stores or CR Anthony in forward-looking information. All of such factors are
difficult to predict and many are beyond the control of Stage Stores and CR
Anthony. Accordingly, while Stage Stores and CR Anthony believe that the
assumptions underlying the forward-looking information are reasonable for
purposes of the development of estimates of cost savings as reflected in the
Unaudited Pro Forma Combined Financial Data of Stage Stores, as well as, certain
improvements in sales volume and gross margins related to the acquisition of CR
Anthony as a result of implementing Stage Stores' merchandising, distribution,
credit card and other operational programs which Stage Stores believes can be
reorganized as a result of the Merger, there can be no assurances that such
assumptions will approximate actual experience or that all such cost savings and
improvements in sales volume and gross margins, will be realized, and in such
event, actual results could differ materially from the predictions herein. These
important factors include: (i) future economic conditions in the regional and
national markets in which Stage Stores and CR Anthony compete, including, among
other things, changes in inflation rates, (ii) government regulation of the
retail apparel industry, (iii) the ability to carry out marketing and sales
plans and (iv) the risk factors included in Stage Stores' SEC filings, including
the Annual Report on Form 10-K for the fiscal year ended February 1, 1997.
RECOMMENDATION OF THE CR ANTHONY BOARD; CR ANTHONY'S REASONS FOR THE MERGER
The CR Anthony Board (with one director abstaining due to his relationship
with CR Anthony's investment banker) has unanimously determined that the Merger
Agreement and the transactions contemplated thereby are fair to, and in the best
interests of, the Stockholders, has approved the Merger Agreement and the
Merger, and recommends that the Stockholders approve and adopt the Merger
Agreement and the Merger.
In approving the Merger Agreement and the Merger and recommending that
Stockholders approve and adopt the Merger Agreement and the Merger, the Board
considered a number of factors, including, but not limited to, the following:
(i) the terms and conditions of the Merger Agreement;
(ii) the presentations by management of CR Anthony (at CR Anthony Board
meetings on February 4, 1997 and at various other board meetings)
regarding the financial condition, results of operations, business and
prospects of CR Anthony, including the prospects of CR Anthony if CR
Anthony were to remain independent;
(iii) the trading price of the Shares over the last three years, and that
the $8.00 per Share value of the consideration to be paid in the Merger
(based on the closing price for the Stage Common Stock on the NASDAQ on
February 18, 1997) represents a premium of approximately 39% over the
$5.75 closing trade price for the Shares on NASDAQ on February 18, 1997;
28
<PAGE>
(iv) the views expressed by CR Anthony's investment banker, that there
appeared to be a limited number of parties with which CR Anthony would
be a good strategic fit, and that it was unlikely that any other party
would propose a transaction that was more favorable to CR Anthony and
its Stockholders;
(v) the presentation by Stephens Inc. at the March 4, 1997 CR Anthony Board
meeting and the written opinion of Stephens Inc. on March 4, 1997, to
the effect that, as of such date, and based upon the assumptions made,
matters considered and limits of review as set forth in such opinion,
the consideration to be received by the disinterested Stockholders
pursuant to the Merger Agreement is fair to the Stockholders from a
financial point of view;
(vi) the recommendation of management that the Merger Agreement and the
Merger be approved;
(vii) the Merger Agreement permits the CR Anthony Board, in the exercise of
its fiduciary duties, to engage in negotiations with or to furnish
information to third parties in response to unsolicited, written
alternative acquisition proposals after the date of the Merger
Agreement;
(viii) the Merger Agreement permits the CR Anthony Board, in the exercise of
its fiduciary duties, to terminate the Merger Agreement in favor of a
superior alternative acquisition proposal, although such termination
will trigger the payment by CR Anthony of a fee of $3,500,000 to Stage
Stores and the exercisability of the Stock Option by Stage Stores; and
(ix) the merger of CR Anthony with Stage Stores offers the opportunity for
substantial synergy and the transaction structure allows the
Stockholders to participate in the ownership of the combined entity.
The CR Anthony Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the CR Anthony
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it.
It is expected that, if the Merger is not consummated, CR Anthony's current
management, under the general direction of the CR Anthony Board, will continue
to manage CR Anthony as an ongoing business in accordance with CR Anthony's
current long-term strategic plan.
A copy of the written opinion of Stephens Inc., dated March 4, 1997, which
sets forth the procedures followed, factors considered and assumptions made by
Stephens Inc., is attached hereto as Annex C. STOCKHOLDERS ARE URGED TO READ
CAREFULLY THE COMPLETE TEXT OF THE STEPHENS INC. OPINION.
OPINION OF SPECIAL ADVISOR TO THE CR ANTHONY BOARD
Stephens Inc. was engaged to render to the CR Anthony Board an opinion as to
the fairness, from a financial point of view, to the disinterested Stockholders
of the consideration to be received by such Stockholders in the Merger. Stephens
Inc., as part of its investment banking business, is regularly engaged in the
valuation of companies and their securities in connection with business
reorganizations, private placements, negotiated underwritings, mergers and
acquisitions, and valuations for estate, corporate, and other purposes. In the
ordinary course of business, Stephens Inc. and its affiliates at any time may
hold long or short positions, and may trade or otherwise effect transactions, as
principal or for the accounts of customers, in debt or equity securities or
options on securities of CR Anthony and of Stage Stores.
At the March 4, 1997 meeting of the CR Anthony Board, Stephens Inc.
delivered its written opinion that, as of such date, based upon the procedures
followed, factors considered and assumptions made by Stephens Inc. as set forth
in such opinion, the consideration to be received by the disinterested
Stockholders in the Merger is fair to them from a financial point of view. A
COPY OF THE OPINION OF STEPHENS INC. DATED MARCH 4, 1997 IS ATTACHED HERETO AS
ANNEX C. STOCKHOLDERS ARE URGED TO READ CAREFULLY THE COMPLETE TEXT OF THE
STEPHENS INC. OPINION.
In connection with rendering its opinion Stephens Inc.: (i) reviewed a draft
of the Agreement and Plan of Merger between Stage Stores and CR Anthony dated
February 27, 1997; (ii) analyzed certain publicly available financial statements
and reports regarding CR Anthony and Stage Stores; (iii) reviewed certain
publicly available reports on CR Anthony and Stage Stores prepared by securities
analysts; (iv) analyzed certain internal financial
29
<PAGE>
statements and other financial and operating data (including financial
projections) concerning CR Anthony prepared by management of CR Anthony; (v)
discussed with management of CR Anthony the operations of and future business
prospects for CR Anthony and the anticipated financial consequences of the
Merger to CR Anthony; (vi) discussed with management of Stage Stores the
operations of and future business prospects for Stage Stores and the anticipated
financial consequences of the Merger to Stage Stores; (vii) reviewed the
reported prices and trading activity for the common stock of CR Anthony and
Stage Stores; (viii) compared the financial performance of CR Anthony and of
Stage Stores and the prices and trading activity of the common stock of CR
Anthony and of Stage Stores with that of certain other comparable publicly
traded companies and their securities; (ix) reviewed the financial terms, to the
extent publicly available, of certain comparable transactions; and (x) performed
such other analyses and provided such other services as it deemed appropriate.
The Board of Directors of CR Anthony did not impose any limitations upon the
scope of Stephens Inc.'s investigation with respect to Stephens Inc. rendering
its opinion. Although Stephens Inc. evaluated the financial terms of the Merger
in rendering its opinion, Stephens Inc. was not asked to, and did not, recommend
the specific merger consideration.
In rendering its opinion, Stephens Inc. relied on the accuracy and
completeness of the information and financial data provided to it by CR Anthony
and Stage Stores, and its opinion is based upon such information. Stephens Inc.
inquired into the reliability of such information and financial data only to the
limited extent necessary to provide a reasonable basis for its opinion,
recognizing that it is rendering only an informed opinion and not an appraisal
or certification of value. With respect to the financial projections prepared by
management of CR Anthony, Stephens Inc. assumed that they were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the future financial performance of CR Anthony. Stephens Inc.'s
opinion should not be deemed to constitute a recommendation by such firm to any
Stockholder on how to vote with respect to the Merger.
The following is a summary of the analyses on which Stephens Inc. based its
opinion. The results of the valuation methods described in this summary were
discussed with the CR Anthony Board on March 4, 1997.
HISTORICAL STOCK PRICE PERFORMANCE OF CR ANTHONY AND PURCHASE PRICE PREMIUM
ANALYSIS. The minimum equity value represented by the consideration to be paid
by Stage Stores to Stockholders is $8.00 per share. Stephens Inc. compared the
minimum equity value per share of the consideration to be paid by Stage Stores
to Stockholders to CR Anthony's closing Share price on February 18, 1997 (the
last trading day prior to the announcement of the Merger) of $5.75, its 30-day
average closing price (prior to the announcement of the Merger) of $5.38, and
its high and low closing Share prices (since August 7, 1996, the date CR
Anthony's Shares were listed on NASDAQ and prior to the announcement of the
Merger) of $6.38 and $3.63, respectively, and noted purchase price premiums of
39.1%, 48.8%, 25.5%, and 120.7%, respectively.
DISCOUNTED CASH FLOW ANALYSIS OF CR ANTHONY. Stephens Inc. calculated the
present value of the future streams of after-tax cash flows that CR Anthony
could be expected to produce over a five-year period. The analysis utilized
financial and operating information relating to the business, operations and
prospects of CR Anthony provided by CR Anthony's management and relied on
certain assumptions with respect to CR Anthony's future business and operations.
After-tax cash flows were calculated as the unlevered after-tax earnings plus
depreciation and amortization less net changes in non-cash working capital and
capital expenditures. Stephens Inc. calculated terminal values for CR Anthony in
the fiscal year 2002 by applying to projected earnings before interest, taxes,
depreciation and amortization ("EBITDA") a range of multiples of 4.75x to 5.75x.
Stephens Inc.'s determination of the appropriate range of multiples was based on
an assessment of current trading multiples of the Family Apparel Retail
Comparable Companies, acquisition multiples of the Comparable Transactions and
on Stephens Inc.'s general experience in valuations of companies. The cash flow
streams and terminal values were then discounted to present values using a range
of discount rates of 11.0% - 13.0%, which were chosen based on several
assumptions regarding factors such as the inflation rate, interest rates, the
inherent business risk in CR Anthony's business, and the weighted average cost
of capital of CR Anthony. The analysis yielded a range of reference values for
the CR Anthony equity between $70.0 million and $80.0 million. Since the
consideration to be paid is within the range of reference values so derived,
Stephens Inc. believes that the discounted cash flow analysis supports the
fairness of the consideration to be paid.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES COMPARABLE TO CR ANTHONY.
Using publicly available information, Stephens Inc. compared selected financial
data of CR Anthony with similar data of selected companies engaged in businesses
considered by Stephens Inc. to be reasonably comparable to those of CR Anthony.
30
<PAGE>
Specifically, Stephens Inc. included in its review: The Bon-Ton Stores, Inc.,
Carson Pirie Scott & Co., Goody's Family Clothing, Inc., Gottschalks Inc.,
Jacobson Stores Inc., Proffitt's, Inc. and Stein Mart, Inc. (the "Family Apparel
Retail Comparable Companies").
Stephens Inc. compared market price as a multiple of the estimated fiscal
year 1997 and fiscal year 1998 earnings per share ("EPS"), based on estimates
obtained from Institutional Brokers Estimate System ("IBES") and market value as
a multiple of latest twelve months ("LTM") book value. Stephens Inc. also
compared the market capitalization as a multiple of (i) LTM sales, (ii) LTM
EBITDA and (iii) LTM earnings before interest and taxes ("EBIT"). For purposes
of the foregoing calculations, "market value" is equal to the closing price per
share on February 28, 1997 multiplied by the number of shares outstanding and
"market capitalization" is equal to the market value plus net debt. Stephens
Inc. determined that these multiples were as follows: (i) "market price of CR
Anthony" (defined as the minimum per share consideration to be received by the
Stockholders) to fiscal year 1997 EPS for CR Anthony was 15.1x, compared to the
market price to estimated fiscal year 1997 EPS for the Family Apparel Retail
Comparable Companies which ranged from 11.8x to 25.5x with a median of 16.6x and
a mean of 17.0x; (ii) market price of CR Anthony to estimated fiscal year 1998
EPS for CR Anthony was 12.1x, compared to the market price to estimated fiscal
year 1998 EPS for the Family Apparel Retail Comparable Companies which ranged
from 8.6x to 15.9x with a median of 11.6x and a mean of 12.6x; (iii) "market
value of CR Anthony" (defined as the market price of CR Anthony multiplied by
the number of shares outstanding) to LTM book value for CR Anthony was 1.1x,
compared to market value to book value for the Family Apparel Retail Comparable
Companies which ranged from 0.6x to 4.6x with a median of 1.4x and a mean of
1.8x; (iv) "market capitalization of CR Anthony" (defined as market value of CR
Anthony plus net debt) to LTM sales for CR Anthony was 0.3x, compared to market
capitalization to LTM sales for the Family Apparel Retail Comparable Companies
which ranged from 0.4x to 1.0x with a median of 0.4x and a mean of 0.6x; (v)
market capitalization of CR Anthony to LTM EBITDA for CR Anthony was 6.3x,
compared to market capitalization to LTM EBITDA for the Family Apparel Retail
Comparable Companies which ranged from 5.9x to 16.5x with a median of 11.1x and
a mean of 11.0x; (vi) market capitalization of CR Anthony to LTM EBIT for CR
Anthony was 9.1x compared to market capitalization to LTM EBIT for the Family
Apparel Retail Comparable Companies which ranged from 7.8x to 85.9x with a
median of 15.1x and a mean of 27.0x.
ANALYSIS OF SELECTED COMPARABLE TRANSACTIONS. Stephens Inc. reviewed a set
of nine completed transactions since January 1994 in the family apparel retail
industry which Stephens Inc. considered to be reasonably comparable to the
Merger (the "Comparable Transactions"). The total transaction value for the
Comparable Transactions ranged in value from $27.3 million to $1,545.7 million.
The Comparable Transactions included the following: Proffitt's, Inc. / G.R.
Herberger's Inc.; Proffitt's, Inc. / Parisian, Inc.; The May Department Stores
Company / Strawbridge & Clothier; Stage Stores, Inc. / Uhlmans Inc.; Proffitt's,
Inc. / Younkers, Inc.; PHC Holding Company / Peebles Inc.; The TJX Companies,
Inc. / Marshalls of Roseville, Minn., Inc.; Federated Department Stores, Inc. /
Broadway Stores, Inc.; The Bon-Ton Stores, Inc. / Adam, Meldrum & Anderson Co.,
Inc. For each transaction, Stephens Inc. compared the "transaction value"
(defined as equity consideration paid) as a multiple of (i) LTM net income and
(ii) LTM book value, as well as the "total transaction value" (defined as the
transaction value plus net debt assumed) as a multiple of (i) LTM sales, (ii)
LTM EBITDA, and (iii) LTM EBIT. Stephens Inc. determined that these multiples
were as follows: (i) transaction value to LTM net income for CR Anthony was
16.1x, compared to the Comparable Transactions which ranged from 6.1x to 45.3x
with a median of 21.8x and a mean of 22.2x; (ii) transaction value to LTM book
value for CR Anthony was 1.1x, compared to the Comparable Transactions which
ranged from 0.8x to 8.2x with a median of 1.2x and a mean of 2.2x; (iii) total
transaction value to LTM sales for CR Anthony was 0.3x, compared to the
Comparable Transactions which ranged from 0.2x to 0.8x with a median of 0.6x and
a mean of 0.5x; (iv) total transaction value to LTM EBITDA for CR Anthony was
6.6x, compared to the Comparable Transactions which ranged from 5.3x to 14.3x
with a median of 9.2x and a mean of 9.8x; (v) total transaction value to LTM
EBIT for CR Anthony was 9.5x, compared to the Comparable Transactions which
ranged from 7.5x to 51.0x with a median of 12.2x and a mean of 18.7x.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES COMPARABLE TO STAGE STORES.
Using publicly available information, Stephens Inc. compared selected financial
data of Stage Stores with similar data of selected companies engaged in
businesses considered by Stephens Inc. to be reasonably comparable to those of
Stage Stores. Specifically, Stephens Inc. included in its review the Family
Apparel Retail Comparable Companies.
31
<PAGE>
Stephens Inc. compared market price as a multiple of the estimated fiscal
year 1997 and fiscal year 1998 EPS, based on estimates obtained from IBES and
market value as a multiple of LTM book value. Stephens Inc. also compared the
market capitalization as a multiple of (i) LTM sales, (ii) LTM EBITDA and (iii)
LTM EBIT. For purposes of the foregoing calculations, "market value" is equal to
the closing price per share on February 28, 1997 multiplied by the number of
shares outstanding and "market capitalization" is equal to the market value plus
net debt. Stephens Inc. determined that these multiples were as follows: (i)
market price to estimated fiscal year 1997 EPS for Stage Stores was 24.7x,
compared to the market price to estimated fiscal year 1997 EPS for the Family
Apparel Retail Comparable Companies which ranged from 11.8x to 25.5x with a
median of 16.6x and a mean of 17.0x; (ii) market price to estimated fiscal year
1998 EPS for Stage Stores was 15.7x, compared to the market price to estimated
fiscal year 1998 EPS for the Family Apparel Retail Comparable Companies which
ranged from 8.6x to 15.9x with a median of 11.6x and a mean of 12.6x; (iii)
market value to LTM book value for Stage Stores was 6.1x, compared to market
value to book value for the Family Apparel Retail Comparable Companies which
ranged from 0.6x to 4.6x with a median of 1.4x and a mean of 1.8x; (iv) market
capitalization to LTM sales for Stage Stores was 1.0x, compared to market
capitalization to LTM sales for the Family Apparel Retail Comparable Companies
which ranged from 0.4x to 1.0x with a median of 0.4x and a mean of 0.6x; (v)
market capitalization to LTM EBITDA for Stage Stores was 9.5x, compared to
market capitalization to LTM EBITDA for the Family Apparel Retail Comparable
Companies which ranged from 5.9x to 16.5x with a median of 11.1x and a mean of
11.0x; (vi) market capitalization to LTM EBIT for Stage Stores was 11.4x
compared to market capitalization to LTM EBIT for the Family Apparel Retail
Comparable Companies which ranged from 7.8x to 85.9x with a median of 15.1x and
a mean of 27.0x.
No company or transaction used in the "Analysis of Selected Publicly Traded
Companies Comparable to CR Anthony", "Analysis of Selected Comparable
Transactions" or "Analysis of Selected Publicly Traded Companies Comparable to
Stage Stores" as a comparison is identical to CR Anthony, Stage Stores or the
contemplated transaction. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in operating and financial characteristics and
other factors that could affect the public trading, acquisition, or other values
of the Family Apparel Retail Comparable Companies or the Comparable Transactions
or the company or transaction to which they are being compared.
STAGE STORES' COMMON STOCK PRICE AND TRADING VOLUME REVIEW. Stephens Inc.
reviewed the daily closing market price performance and trading volume of Stage
Common Stock since its initial public offering on October 24, 1996. The closing
price on February 28, 1997 (the last day reviewed prior to the March 4, 1997
meeting of the CR Anthony Board) was $21.25 per share. The closing price on
February 18, 1997 (that last trading day prior to the announcement of the
Merger) was $18.31 per share. The high and low closing prices for Stage Common
Stock from October 24, 1996 through February 28, 1997 were $21.25 and $17.25.
The average daily trading volume for Stage Stores since October 24, 1996 has
been 241,466 shares. The average daily trading volume for Stage Stores since
October 28, 1996 (which excludes Stage Stores' first trading date) has been
231,129 shares.
PRO FORMA COMBINATION ANALYSIS. Stephens Inc. analyzed certain pro forma
effects resulting from the Merger, including the potential impact of the Merger
on Stage Stores' projected EPS, using various synergy estimates as furnished by
the managements of Stage Stores and CR Anthony. After adjusting for the
synergies and making the appropriate pro forma adjustments, the Merger is
expected to be dilutive for the fiscal year ending January 1998, neutral for
fiscal year ending January 1999 and accretive for the fiscal year ending January
2000 and each fiscal year thereafter.
The summary of the Stephens Inc. analyses set forth above is a general
description of the material elements of its presentation to the CR Anthony Board
on March 4, 1997. The summary is not, however, a complete description of the
analyses performed, or the matters considered, by Stephens Inc. in rendering its
opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Stephens
Inc. believes that the analyses must be considered as a whole and that selecting
portions of the analyses, without considering all analyses, would create an
incomplete view of the processes underlying its opinion. In its analyses,
Stephens Inc. made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of CR Anthony. The analyses by Stephens Inc. are not
necessarily indicative of actual values, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the value
32
<PAGE>
of businesses do not purport to be appraisals nor do they necessarily reflect
the prices at which businesses actually may be sold. Because such analyses are
inherently subject to uncertainty, none of CR Anthony's management, the board of
directors of CR Anthony or Stephens Inc., or any other person assumes
responsibility for their accuracy.
CR Anthony has agreed to pay Stephens Inc. a fee of $150,000 in
consideration for Stephens Inc.'s opinion. The $150,000 fee was due upon
delivery of the opinion. In addition, CR Anthony has agreed to reimburse
Stephens Inc. for its out-of-pocket expenses, including the reasonable fees and
disbursements of counsel, and to indemnify Stephens Inc. against certain
liabilities, including liabilities under the federal securities laws.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS OF CR ANTHONY IN THE MERGER
In addition to their interests in the Merger as Stockholders, the directors
and executive officers of CR Anthony will have the following interests in the
Merger:
EMPLOYMENT AND SEVERANCE AGREEMENTS. Currently, CR Anthony has Executive
Severance Compensation Agreements with John J. Wiesner, Michael J. Tanner,
Michael E. McCreery and William A. North. The Executive Severance Compensation
Agreements contain both employment and severance terms. Effective on the Closing
Date of the Merger, the Executive Severance Compensation Agreements will be
replaced with separate employment agreements ("Employment Agreements") and
severance agreements ("Amended Severance Agreements") between Stage Stores and
these individuals.
The Employment Agreements provide for the continuation of each employee's
current monthly salary, except for Mr. North, whose salary will be reduced. See
CR Anthony's Form 10-K. The Employment Agreements may be terminated by Stage
Stores or the employee (i) upon ninety days written notice in the case of
Messrs. Wiesner and McCreery, and (ii) upon thirty days written notice in the
case of Messrs. Tanner and North. In the case of Messrs. Wiesner, McCreery and
North, the Employment Agreements may not be terminated before January 31, 1998,
except for cause. The Employment Agreement of Mr. Tanner may be terminated at
will by either party. The Employment Agreements also provide for participation
in all other bonus and benefit plans available to executives of Stage Stores, as
is the case with the Executive Severance Compensation Agreements. Mr. Wiesner's
Employment Agreement will also provide for his appointment to the Board of
Directors of Stage Stores. The Form of the Employment Agreement is attached
hereto as Annex E.
Under the existing Executive Severance Compensation Agreements with CR
Anthony, Messrs. Wiesner, McCreery, Tanner and North are entitled to severance
payments of $733,333, $533,333, $533,333 and $167,667, respectively. In the case
of Messrs. Wiesner and McCreery, the Amended Severance Agreements with Stage
Stores increase these severance payments by $405,000 and $200,000, respectively.
In the case of Messrs. Tanner and North, the Amended Severance Agreements with
Stage Stores provide that the severance payments remain the same as currently in
effect. The Form of the Amended Severance Agreement is attached hereto as Annex
F.
Stage Stores also intends to enter into a memorandum of understanding (the
"Memorandum") with another CR Anthony executive officer, Christopher M. Zender.
The Memorandum will provide for a slightly increased monthly salary of $10,416
and may be terminated upon sixty days written notice by either Stage Stores or
Mr. Zender, but in any event not before May 31, 1998 except for cause; however,
Mr. Zender can terminate his employment at any time after January 31, 1998 by
giving sixty days written notice. The Memorandum will also provide that Mr.
Zender's current severance pay of $185,000 will be increased by $9,000-$45,000,
depending upon the length of his service with Stage Stores.
As with the executive officers of CR Anthony, Stage Stores anticipates that
it will retain the services of other employees of CR Anthony, on a case by case
basis, and to the extent it does, it intends to provide salary and benefits at
least equal to those currently in effect.
OPTION CANCELLATION AGREEMENTS. As participants in the Stock Option Plan (as
defined below) and as a condition to the Merger, Messrs. Wiesner, Tanner,
McCreery, North and Zender, along with outside directors James J. Gaffney, Alan
Melamed, Willard C. Shull, III, and Jeffrey I. Werbalowsky, and all other
participants in the Stock Option Plan, have executed option cancellation
agreements with CR Anthony (the "Option Cancellation Agreements"). In exchange
for their agreement not to exercise their options under the Stock Option Plan
prior to,
33
<PAGE>
or at, the Effective Time, all participants in the Stock Option Plan will
receive a cash payment (the "Option Cancellation Payment") which is tied to the
Base Price per CR Anthony Share, the total options granted, and the weighted
average exercise price of the options (which may differ slightly on a
participant by participant basis). "Base Price" per CR Anthony share means $8.00
plus $0.01 for every $0.05 by which the Stage Average Closing Price exceeds
$20.00. See "THE MERGER AGREEMENT-CR Anthony/Stage Stores Merger Consideration
Table." Assuming that the Base Price is $8.00, the number of options held by,
and the Option Cancellation Payments to be paid to, the directors and executive
officers if the Merger occurs (after deducting the exercise price) will be
approximately as follows: Wiesner (325,000/$1,475,000), Tanner
(160,000/$740,000), McCreery (215,000/$960,000), North (85,000/$365,000), Zender
(7,500/$37,500), and Messrs. Gaffney, Melamed, Shull and Werbalowsky
(60,000/$216,000 each). The Form of the Option Cancellation Agreement is
attached hereto as Annex G.
The CR Anthony Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby. See "THE MERGER AGREEMENT - CRA Stock Options, - and -
Employee Benefit Plans."
EFFECTIVE TIME
The Merger will become effective upon the filing of the Certificate of
Merger with the Secretary of State of the state of the Surviving Corporation or
at such later time as is specified in the Certificate of Merger, in accordance
with applicable law. Such filing will be made on the Closing Date of the Merger,
which will be the second business day following the date on which the last to be
fulfilled or waived of the conditions of the Merger shall be fulfilled or
waived, or shortly thereafter.
PROCEDURES FOR EXCHANGE OF CR ANTHONY COMMON STOCK CERTIFICATES
Upon consummation of the Merger, Stage Stores will make available to the
Exchange Agent for the benefit of the holders of Shares, for exchange,
certificates evidencing shares of Stage Common Stock in amounts required to be
exchanged for Shares in the Merger, plus cash, if any, as required in the
Merger.
As promptly as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of a certificate or certificates formerly representing
Shares ("Certificates") (i) the letter of transmittal (which specifies that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates evidencing shares of Stage Common Stock.
Upon surrender to the Exchange Agent of a Certificate for cancellation,
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
evidencing a number of shares of Stage Common Stock determined pursuant to the
Merger Agreement.
Once the Merger is consummated, no dividends or other distributions declared
or made after the Effective Time with respect to Stage Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Stage Common Stock
represented thereby, and no cash payment in lieu of any fractional shares shall
be paid to any such holder, until the holder of such Certificate shall surrender
such Certificate. Subject to the effect of escheat, tax or other applicable
laws, following surrender of any such Certificate, the holder of whole shares of
Stage Common Stock issued in exchange therefor will be paid without interest (i)
the amount of any cash payable with respect to a fractional share of Stage
Common Stock to which such holder is entitled and the amount of dividends or
other distributions with a record date after the Effective Time and theretofore
paid with respect to such whole shares of Stage Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Stage
Common Stock.
At the Effective Time, the stock transfer books of CR Anthony shall be
closed and there shall be no further registration of transfers of Shares
thereafter on the records of CR Anthony. From and after the Effective Time, the
holder of Certificates representing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided herein or by law.
34
<PAGE>
STOCK EXCHANGE LISTING
Prior to the Effective Time, Stage Stores will file an application to list
the shares of Stage Common Stock to be issued in connection with the Merger on
NASDAQ, subject to official notice of issuance. It is a condition to the
parties' obligations to consummate the Merger that such shares shall have been
approved for listing, subject to official notice of issuance. The shares of
Stage Common Stock are traded on NASDAQ under the symbol "STGE."
DELISTING AND DEREGISTRATION OF SHARES
If the Merger is consummated, the Shares (common stock of CR Anthony) will
be delisted from NASDAQ and will be deregistered under the Exchange Act.
FINANCING AND EXPENSES RELATED TO THE MERGER
Based upon the current market price of the Stage Common Stock, Stage Stores
does not expect to have to pay any portion of the Merger Consideration in cash
(except for cash paid in lieu of fractional shares of Stage Common Stock).
However, Stage Stores expects to use cash on hand as well as the proceeds from
the issuance of approximately $40 million of new indebtedness to retire the CR
Anthony indebtedness in its entirety and to fund incremental working capital and
capital expenditure requirements associated with the Merger. Stage Stores has
the capacity to borrow such amount from its existing revolving credit facility.
As of March 31, 1997, Stage Stores had available borrowings of $50 million under
its revolving credit facility.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
in accordance with generally accepted accounting principles ("GAAP").
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income tax
consequences of the Merger to Stockholders who hold the Shares as capital
assets. The discussion set forth below is for general information only and may
not apply to certain categories of holders of Shares subject to special
treatment under the Code, such as foreign holders and holders who acquired such
Shares pursuant to the exercise of employee stock options or otherwise as
compensation. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, retroactively
or prospectively, and to possibly differing interpretations.
Further, complex rules apply where, under certain attribution rules, a
holder of Shares is deemed to own stock owned and, in some cases, constructively
owned, by certain family members, by certain estates and trusts of which the
holder is a beneficiary, and by certain affiliated entities, as well as stock
subject to an option actually or constructively owned by the holder or such
other persons. Each holder that believes it may be subject to these rules should
consult its tax advisor.
TAX CONSEQUENCES OF THE MERGER GENERALLY. If the Stage Average Closing Price
is equal to or greater than $20.00, Stockholders will receive only Stage Common
Stock (except for cash received in lieu of fractional shares of Stage Common
Stock) and, to the extent only Stage Common Stock is received, the Merger
Consideration will not be taxable to Stockholders. If the Stage Average Closing
Price is equal to or greater than $17.00 and less than $20.00, all or a portion
of the Merger Consideration will be taxable to Stockholders. If the Stage
Average Closing Price is less than $17.00, the Merger Consideration will be
fully taxable to Stockholders. In such event, each Stockholder will recognize
gain or loss equal to the difference between (i) the cash plus the fair market
value of the Stage Common Stock received and (ii) the Stockholder's adjusted tax
basis in the Shares exchanged.
If the Stage Stock Percentage equals or exceeds 80%, the Merger will be
structured as a reverse merger of Merger Sub into CR Anthony with the CR Anthony
entity surviving, and should qualify as a reorganization under Section 368(a) of
the Code. In such event, generally (i) neither Stage, Merger Sub nor CR Anthony
will recognize any gain or loss, (ii) a Stockholder who receives solely Stage
Common Stock will not recognize any gain or loss, and (iii) a Stockholder who
receives both Stage Common Stock and cash will not recognize loss but will
recognize gain, if any, to the extent of the lesser of (x) the cash received or
(y) the excess of the sum of the fair market value of the Stage Common Stock and
the amount of cash received over such Stockholder's adjusted tax basis in the
Shares exchanged.
35
<PAGE>
If the Stage Stock Percentage is less than 80% and is greater than or equal
to 50%, the Merger is likely to be structured as a forward merger of CR Anthony
into Merger Sub, with Merger Sub surviving and should qualify as a
reorganization under Section 368(a) of the Code. In such event, generally (i)
neither Stage, Merger Sub nor CR Anthony will recognize any gain or loss, and
(ii) a Stockholder who receives a combination of cash and shares of Stage Common
Stock in exchange for such Stockholder's Shares pursuant to the Merger will not
recognize loss but will recognize gain, if any, to the extent of the lesser of
(x) the cash received or (y) the excess of the sum of the fair market value of
the Stage Common Stock and the amount of cash received over a Stockholder's
adjusted tax basis in the Shares exchanged.
If the Stage Stock Percentage is less than 80% it is possible that the
merger will be structured as a reverse merger with CR Anthony surviving. If the
Stage Stock Percentage is less than 50%, the Merger will be structured as a
reverse merger with CR Anthony surviving. In either such case, the Merger will
not constitute a reorganization under Section 368(a) of the Code, and will be
taxable to Stockholders. Each Stockholder will recognize gain or loss equal to
the difference between (i) the cash plus the fair market value of the Stage
Common Stock received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged.
TAX CONSEQUENCES IF THE MERGER IS STRUCTURED AS A MERGER WHICH QUALIFIES AS A
REORGANIZATION UNDER SECTION 368(A) OF THE CODE
EXCHANGE OF SHARES SOLELY FOR STAGE COMMON STOCK. A Stockholder who,
pursuant to the Merger, exchanges all of the Shares actually owned by such
Stockholder solely for shares of Stage Common Stock (and who does not exchange
any Shares for cash) will not recognize any gain or loss upon such exchange.
Such Stockholder may recognize gain or loss, however, to the extent cash is
received in lieu of a fractional share of Stage Common Stock, as discussed
below. The aggregate tax basis of the shares of Stage Common Stock received in
such exchange will be equal to the aggregate tax basis of the Shares surrendered
therefor, and the holding period of Stage Common Stock will include the period
during which the Shares surrendered in exchange therefor were held.
CASH RECEIVED IN LIEU OF A FRACTIONAL INTEREST OF STAGE COMMON STOCK. Cash
received in lieu of a fractional share of Stage Common Stock will generally be
treated as received in redemption of such fractional interest. Accordingly, a
Stockholder who receives cash in lieu of afractional share will recognize gain
or loss equal to the difference between the amount of cash received and the
portion of the adjusted tax basis of the Shares allocable to such fractional
interest. Such gain or loss will constitute capital gain or loss, and will
generally be long-term capital gain or loss if the holding period for such
Shares was greater than one year as of the date of the exchange pursuant to the
Merger.
EXCHANGE OF SHARES FOR STAGE COMMON STOCK AND CASH. A Stockholder who,
pursuant to the Merger, exchanges all of the Shares actually owned by such
Stockholder for a combination of shares of Stage Common Stock and cash will not
recognize any loss on such exchange. Such Stockholder will realize gain equal to
the excess, if any, of the cash and the aggregate fair market value of Stage
Common Stock received pursuant to the Merger over such Stockholder's adjusted
tax basis in the Shares exchanged therefor, but will recognize gain equal to the
lesser of the realized gain or the cash received.
Any gain recognized by a Stockholder who receives a combination of Stage
Common Stock and cash pursuant to the Merger will be treated as capital gain
unless the receipt of the cash has the effect of the distribution of a dividend
for federal income tax purposes, in which case such recognized gain will be
treated as ordinary dividend income to the extent of such Stockholder's ratable
share of CR Anthony's accumulated earnings and profits. Any gain that is treated
as capital gain will be long-term capital gain if the holding period for such
shares is greater than one year as of the date of the exchange pursuant to the
Merger.
For purposes of determining whether the cash received has the effect of a
distribution of a dividend for federal income tax purposes, a Stockholder is
treated as if such Stockholder first exchanged all of such Stockholder's Shares
solely for Stage Common Stock and then Stage Stores immediately redeemed a
portion of such Stage Common Stock in exchange for the cash such Stockholder
actually received. Under this analysis, in general, if the receipt of cash in
this deemed redemption by such holder results in a "substantially
disproportionate" reduction in the holder's voting stock interest in Stage
Stores or is "not essentially equivalent to a dividend," the receipt of the cash
will not have the effect of the distribution of a dividend. For purposes of this
determination, the holder's voting stock interest in Stage Stores before the
deemed redemption is compared to such holder's interest in Stage Stores after
the deemed redemption, taking into account in each case any Stage Stores stock
constructively owned by such holder as a result of the application of the
attribution rules of the Code. Generally, if (taking into account actual
ownership and ownership by attribution) the holder's interest in the voting
stock of Stage Stores has declined, as a result of the deemed redemption, by
more than 20%, then the receipt of cash will not be taxed as a dividend.
However, even if such interest in the voting stock of Stage Stores has declined,
as a result of the deemed redemption, by 20% or less, then generally, in the
case of a minority
36
<PAGE>
stockholder who is neither an officer or director of Stage Stores or who
exercises no control over Stage Stores corporate affairs, the receipt of cash
still likely would not be taxed as a dividend. Each Stockholder should consult
with his or her own tax advisor as to whether the receipt of the cash has the
effect of a distribution of a dividend, and, if so, the consequences thereof.
The aggregate tax basis of Stage Common Stock received by a Stockholder who
exchanges such Stockholder's Shares for a combination of Stage Common Stock and
cash will be the same as the aggregate tax basis of the Shares surrendered
therefor, decreased by the cash received and increased by the amount of gain
recognized, if any (including any portion of such gain that is treated as a
dividend). The holding period of the Stage Common Stock received will include
the holding period of the Shares surrendered therefor.
TAX CONSEQUENCES IF THE MERGER IS STRUCTURED AS A REVERSE MERGER OF MERGER SUB
INTO CR ANTHONY WHICH DOES NOT QUALIFY AS A REORGANIZATION UNDER SECTION 368(A)
OF THE CODE
If the Stage Stock Percentage is less than 80%, it is possible that the
Merger will be structured as a reverse merger with CR Anthony surviving, which
does not constitute a reorganization within the meaning of Section 368(a) of the
Code.
In this transaction, a Stockholder would recognize gain or loss equal to the
difference between (i) the sum of the fair market value of the Stage Common
Stock and the cash received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged. Such gain or loss generally would be capital gain or loss,
long-or short-term depending upon whether the Stockholder has held the Shares
for more than one year. The Stockholder would take a tax basis in the Stage
Common Stock equal to its fair market value on the date of the exchange and the
Stockholder's holding period would begin on such date.
BACKUP WITHHOLDING
Under the Code, a Stockholder may be subject, under certain circumstances,
to backup withholding at a 31% rate with respect to the amount of cash received
pursuant to the Merger unless such holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules. Any amounts
withheld under the backup withholding rules are not an additional tax and may be
refunded or credited against the holder's federal income tax liability, provided
the required information is furnished to the Internal Revenue Service.
THE ABOVE DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF STOCKHOLDERS
SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN STOCKHOLDERS AND
STOCKHOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER,
INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES (INCLUDING ANY TAX
RETURN FILING OR OTHER TAX REPORTING REQUIREMENTS) OF THE MERGER.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated by reference and a copy of which
is attached as Annex A to this Proxy Statement/Prospectus. Capitalized terms not
otherwise defined herein or in the following summary shall have the meanings set
forth in the Merger Agreement.
BOARD REPRESENTATION
The Merger Agreement provides that the directors and officers of the Merger
Sub in office at and as of immediately prior to the Effective Time will be the
directors and officers of the Surviving Corporation. Pursuant to the Merger
Agreement, SRI may be the Merger Sub. The officers of SRI are identical to the
officers of Stage Stores and the directors of SRI are Carl Tooker and Joshua
Beckenstein. If SRI is not the Merger Sub, then the directors and officers of
the Merger Sub anticipated to be in office at and as of immediately prior to the
Effective Time are as follows:
37
<PAGE>
Name Position
---- --------
Carl Tooker Chairman, President and Chief Executive Officer
James Marcum Director, Executive Vice President/Chief Financial Officer
Charles M. Sledge Secretary
THE MERGER
The Merger Agreement provides for the merger of either CR Anthony with and
into the Merger Sub or the Merger Sub with and into CR Anthony. The Merger will
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the state of the Surviving Corporation or at such time thereafter as
is agreed upon by the parties and specified in the Certificate of Merger, in
accordance with applicable law. The structure of the Merger will either be a
forward merger or a reverse merger, as may be determined by Stage Stores on the
basis of the Stage Stock Percentage. If the Merger is a forward merger, the
Merger Sub shall survive with all its rights, privileges, powers and franchises
unaffected by the Merger and the separate corporate existence of CR Anthony
shall cease. If the Merger is a reverse merger, CR Anthony shall survive with
all its rights, privileges, powers and franchises unaffected by the Merger and
the separate corporate existence of the Merger Sub shall cease. Immediately
following the Merger, if whichever entity survives the Merger in accordance with
the preceding sentences (the "Surviving Corporation") is not Specialty
Retailers, Inc., a Texas corporation and wholly-owned subsidiary of Stage Stores
("Specialty Retailers"), the Surviving Corporation may be merged into Specialty
Retailers with Specialty Retailers being the surviving corporation of that
merger.
CONSIDERATION TO BE PAID IN THE MERGER
In the Merger, Stage Stores will acquire each outstanding Share (excluding
Shares owned by Dissenting Stockholders) for a minimum value (the "Base Price")
of $8.00 per share plus $0.01 for every $0.05 by which the Stage Average Closing
Price exceeds $20.00 per share. The Stage Average Closing Price means the
average closing price expressed in dollars per share of Stage Common Stock
quoted on the NASDAQ National Market System for the ten trading days selected by
lot by CR Anthony and Stage Stores out of the twenty most recent consecutive
trading days prior to and including the fifth day preceding the closing of the
Merger. The exact combination of Stage Common Stock and/or cash (the "Merger
Consideration") to be paid by Stage Stores for each share of CR Anthony's common
stock will be determined using a formula based upon the Base Price and the Stage
Average Closing Price. The Merger Consideration will consist of 100% Stage
Common Stock (except for cash received in lieu of fractional shares of Stage
Common Stock) if the Stage Average Closing Price is $20.00 or higher, and the
stock percentage will decline in linear fashion to 25% of the Merger
Consideration if the Stage Average Closing Price is $15.00.
If the Stage Average Closing Price is less than $15.00, Stage Stores has the
option to terminate the Merger Agreement and pay CR Anthony a fee of $3,500,000
plus CR Anthony's expenses, or to close the Merger, in which case the Merger
Consideration per share of CR Anthony's common stock will consist of (i) .1333
shares of Stage Common Stock, and (ii) an amount in cash equal to $8.00 minus
the product of .1333 and the Stage Average Closing Price. In any case, the Stage
Common Stock to be received by CR Anthony's Stockholders will be registered and
freely tradable, unless the recipient is an affiliate of CR Anthony.
As noted above, each outstanding Share (excluding Shares owned by Dissenting
Stockholders) will be converted into the right to receive the Merger
Consideration. The value of Stage Common Stock used to determine the number of
shares of Stage Common Stock the holder of each Share will receive will be the
average closing price of Stage Common Stock for 10 days selected at random out
of the Pricing Window. For example, if the closing is July 2, 1997, the closing
prices for Stage Common Stock during the Pricing Window (ending on June 25,
1997) will be collected, 10 will be selected at random and the average will be
computed. There can be no assurance of the number of Shares of Stage Common
Stock the holder of each Share will receive because the Merger Consideration
will depend upon the Stage Average Closing Price. Stockholders will receive as
the Merger Consideration cash and/or Stage Common Stock with a value of at least
$8.00. However, at the time of the Special Meeting, Stockholders may not know
with absolute certainty the type or value of the consideration which they will
receive in the Merger.
The table below illustrates, depending upon the Stage Average Closing Price,
the type and value of the Merger Consideration the holder of each Share will
receive, including the total price for each Share and the ratio of Stage Common
Stock to cash to be received as the Merger Consideration for each Share.
38
<PAGE>
CR ANTHONY/STAGE STORES
MERGER CONSIDERATION TABLE
(PER SHARE OF CR ANTHONY STOCK)
Amount of Base Shares of
Stage Average Base Price Price Stage Stock Amount of
Closing (Merger to be Paid In to be Base Price to be
Price (1) Value)(2) Stock Delivered(3) Paid in Cash(3)
--------- --------- ----- ------------ ---------------
Less than $15 (4) (4) (4) (4)
$15.00 $8.00 $2.00 .133 $6.00
$16.00 $8.00 $3.20 .200 $4.80
$17.00 $8.00 $4.40 .258 $3.60
$18.00 $8.00 $5.60 .311 $2.40
$19.00 $8.00 $6.80 .357 $1.20
$20.00 $8.00 $8.00 .400 - 0 -
$21.00 $8.20 $8.20 .390 - 0 -
$22.00 $8.40 $8.40 .381 - 0 -
$23.00 $8.60 $8.60 .374 - 0 -
$24.00 $8.80 $8.80 .366 - 0 -
$25.00 $9.00 $9.00 .360 - 0 -
Greater than
$25.00 (2) (2) (3) - 0 -
- --------------------
(1) The value of Stage Common Stock (the "Stage Average Closing Price") used to
determine the exact combination of Stage Common Stock and/or cash (the
"Merger Consideration") the holder of each share of the Company's common
stock will receive will be the average closing price of Stage Common Stock
for 10 days selected at random out of the 20 trading days (the "Pricing
Window") prior to and including the fifth trading day before the closing of
the Merger. For example, if the closing is July 2, 1997, the closing prices
for Stage Common Stock during the Pricing Window (ending on June 25, 1997)
will be collected, 10 will be selected at random and the average will be
computed.
If the Stage Average Closing Price is equal to or greater than $20.00,
Stockholders will receive only Stage Common Stock (except for cash received
in lieu of fractional shares of Stage Common Stock) and, to the extent only
Stage Common Stock is received, the Merger Consideration will not be taxable
to Stockholders. If the Stage Average Closing Price is equal to or greater
than $17.00 and less than $20.00, all or a portion of the Merger
Consideration will be taxable to Stockholders. If the Stage Average Closing
Price is less than $17.00, the Merger Consideration will be fully taxable to
Stockholders. Each Stockholder will recognize gain or loss equal to the
difference between (i) the cash plus the fair market value of the Stage
Common Stock received and (ii) the Stockholder's adjusted tax basis in the
Shares exchanged. See "THE MERGER AGREEMENT -- Certain Federal Income Tax
Consequences."
(2) "Base Price" per CR Anthony share means $8.00 plus $0.01 for every $0.05 by
which the Stage Average Closing Price exceeds $20.00.
(3) That number of shares of Stage Common Stock which, if valued at the Stage
Average Closing Price, have a value equal to X multiplied by the Base Price;
and an amount of cash equal to the Base Price multiplied by the remainder of
one minus X, where:
X = 1- ((20-Y) x .15) and
Y = the lesser of 20 or the Stage Average Closing Price
(4) If the Stage Average Closing Price is less than $15.00 and Stage Stores
elects to waive the condition set forth in Section 6(a)(xv) of the Merger
Agreement and permit the closing of the Merger, the Merger Consideration per
each share of CR Anthony stock shall consist of (a) .1333 shares of Stage
Common Stock, and (b) an amount in cash equal to $8.00 minus the product of
.1333 and the Stage Average Closing Price.
If any fractional interest of a share of Stage Common Stock would, except
for this sentence, be deliverable as consideration for the Merger, Stage Stores,
in lieu of delivering such fractional shares, may pay an amount in cash equal to
the value of such fractional interest.
Based on the closing price of Stage Common Stock of $20.75 on May 23, 1997,
the most recent practicable date prior to the printing of this Proxy
Statement/Prospectus, each Share would be converted into the right to receive
0.393 shares of Stage Common Stock. However, the market value and type of
consideration Stockholders will receive at the Effective Time will depend upon
the Stage Average Closing Price, which will not be determined earlier than June
25, 1997, the date of the Special Meeting. It is currently anticipated that the
Effective Time will be shortly after the date of the Special Meeting. Since
Stage Stores' initial public offering on October 24, 1996, the market price of
Stage Common Stock has not closed below $17.25 per share. See "SUMMARY
Comparative Market Prices and Dividends." However, there can be no assurance
that the future market prices of Stage Common Stock (including the Pricing
Window) will reflect historical trading levels. Stockholders are urged to
consult with their brokers, dealers or financial advisors prior to or around the
time of the Special Meeting to obtain current market price information for Stage
Common Stock.
39
<PAGE>
DISSENTING SHARES
In the event that any portion of the Merger Consideration will be cash
(other than cash in lieu of fractional shares), Shares that are outstanding
immediately prior to the Effective Time and that are held by Stockholders who
have not voted in favor of the Merger or consented thereto in writing and who
have demanded properly in writing appraisal for such Shares in accordance with
Section 1091 of the Oklahoma Act shall not be converted into or represent the
right to receive the Merger Consideration. Such Stockholders shall be entitled
to receive payment of the appraised value of such Shares held by them in
accordance with the provisions of such Section 1091, except that all Dissenting
Shares held by Stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Dissenting Shares
under such Section 1091 shall thereupon be deemed to be authorized and unissued
shares of the Surviving Corporation pursuant to Section 1091(L) of the Oklahoma
Act.
CR ANTHONY STOCK OPTIONS
The Merger Agreement provides that, at the Effective Time, all options
outstanding (including those covered by Option Cancellation Agreements) under CR
Anthony's 1992 Stock Option Plan as amended and restated effective January 10,
1997 and certain contracts dated June 10, 1996 with certain parties pursuant to
such plan (the "Stock Option Plan") that are unexercised, whether or not then
exercisable (the "CR Anthony Options"), shall be automatically cancelled by
virtue of the Merger and the holders of the CR Anthony Options shall be entitled
to receive in cash the remainder of (A) the Base Price (as defined in the Merger
Agreement) which would be payable with respect to the Shares the subject of such
CR Anthony Option LESS (B) the exercise price and any other amounts payable by
the holder with respect to such CR Anthony Option. Further, except as otherwise
agreed to by Stage Stores and CR Anthony, the Merger Agreement provides that (i)
the Stock Option Plan shall terminate as of the Effective Time and any rights to
receive CR Anthony Options or any other interest in respect of the capital stock
of CR Anthony or any of its Subsidiaries thereunder shall be terminated as of
the Effective Time, and (ii) CR Anthony shall take all action necessary to
ensure that following the Effective Time no participant in the Stock Option Plan
or other plans, programs or arrangements shall have any right thereunder to
acquire or participate in changes in value of equity securities of CR Anthony,
the Surviving Corporation, the Merger Sub or any of their respective
Subsidiaries and to terminate all such plans effective as of the Effective Time.
As required by the Merger Agreement, CR Anthony has delivered to Stage
Stores executed Option Cancellation Agreements from the holders of all CR
Anthony Options pursuant to which each such holder has agreed not to exercise
his or her CR Anthony Options prior to the Effective Time in exchange for the
Option Cancellation Payments.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of CR
Anthony and Stage Stores. These include representations by CR Anthony with
respect to organization, qualification, and corporate power, capitalization of
CR Anthony and its subsidiaries, authorization of transaction, noncontravention,
filings with the Commission, financial statements, absence of certain
developments, litigation, undisclosed liabilities, taxes, environmental matters,
employee matters, labor matters, employee benefit plans, proprietary rights,
contracts, books and records, insurance, real property, transactions with
affiliates, accounts receivable, inventory, sufficiency of assets, board
recommendation, brokers' fees, disclosure and certain tax-free reorganization
requirements.
Stage Stores also made certain representations and warranties with respect
to organization, capitalization, authorization of transaction, noncontravention,
filings with the Commission, financial statements, disclosure, investment
company, absence of certain developments, litigation, taxes, environmental,
employee benefits plan, books and records, insurance and broker's fee. No
representations and warranties made by CR Anthony or Stage Stores will survive
beyond the Effective Time.
NO SOLICITATION
The Merger Agreement provides that from and after the date of the Merger
Agreement until the termination of the Merger Agreement, CR Anthony shall not,
and it shall not authorize or permit any of its Subsidiaries (as defined in the
Merger Agreement), officers, directors or employees or any advisors or agents
retained by CR Anthony or its Subsidiaries, directly or indirectly, to (i)
solicit, initiate or knowingly encourage or induce the making of any CRA
Acquisition Proposal, (ii) negotiate with any third party with respect to any
CRA Acquisition Proposal, (iii) endorse or recommend the CRA Acquisition
Proposal of any third party or (iv) enter into any Contract (as defined in the
Merger
40
<PAGE>
Agreement) with any third party with the intent to effect any CRA Acquisition
Proposal. Notwithstanding the foregoing, nothing in ss.5(i) of the Merger
Agreement shall be construed to prohibit CR Anthony or its board of directors
from taking any actions or permitting any events described above (other than any
action described in clause (i) above) to the extent that the board of directors
of CR Anthony shall conclude in good faith, based upon the written advice of
McKinney, Stringer and Webster, P.C., that such action is required in order for
the board of directors to act in a manner that is consistent with its fiduciary
obligations under applicable law. CR Anthony shall promptly advise Stage Stores
orally and in writing of the receipt of any CRA Acquisition Proposal or similar
inquiry, the basic CRA Acquisition Proposal terms, and the identity of the
proposed acquiror. For purposes of the Merger Agreement, "CRA Acquisition
Proposal" means any proposal (other than any proposal by Stage Stores or the
Merger Sub with respect to the Merger) regarding (i) any merger, consolidation,
share exchange, business combination or other similar transaction or series of
related transactions involving CR Anthony or any Subsidiary of CR Anthony; (ii)
any sale, lease, exchange, transfer or other disposition of the assets of CR
Anthony or any of its Subsidiaries; and (iii) any offer to purchase, tender
offer, exchange offer or any similar transaction or series of related
transactions made by any Person (as defined in the Merger Agreement) involving
the outstanding shares of any class of capital stock of CR Anthony or the filing
of any Statement on Schedule 14D-1 with the Commission in connection therewith.
FEES AND EXPENSES
The Merger Agreement provides that, except as set forth in Section 7 of the
Merger Agreement, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring the expenses.
CONDITIONS TO THE MERGER
Pursuant to the Merger Agreement, the obligations of Stage Stores and the
Merger Sub to consummate the transactions to be performed by it in connection
with the Closing are subject to the satisfaction or written waiver of the
following conditions: (i) the representations and warranties of CR Anthony set
forth in ss.3 of the Merger Agreement shall be true and correct at and as of the
Closing Date; (ii) CR Anthony shall have performed and complied with all of its
covenants under the Merger Agreement through the Closing Date; (iii) the
affirmative vote of two-thirds of the holders of the outstanding Shares shall
have been obtained; (iv) CR Anthony and its subsidiaries shall have procured all
of the consents, waivers, amendments or other actions specified in the Merger
Agreement; (v) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator (other than as
excepted in the Merger Agreement) wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would, among other things, prevent consummation
of any of the transactions contemplated by the Merger Agreement; (vi) there
shall have been no CRA Material Adverse Effect (as defined in the Merger
Agreement); (vii) CR Anthony shall have delivered to Stage Stores and the Merger
Sub a certificate to the effect that each of the conditions specified in (i)
through (vi) above is satisfied in all respects; (viii) the Registration
Statement on Form S-4 of Stage Stores, of which this Proxy Statement/Prospectus
is a part (together with all amendments, supplements and exhibits thereto, the
"Registration Statement"), shall have been declared effective under the
Securities Act of 1933, as amended (the "Securities Act"), by the Securities and
Exchange Commission (the "Commission") and shall not be the subject of any stop
order or proceedings seeking a stop order; (ix) CR Anthony shall have delivered
to the Merger Sub evidence satisfactory to the Merger Sub of the cancellation of
all outstanding options, warrants and other equity interests; (x) the Stage
Common Stock that will be issued in the Merger shall have been approved for
listing on NASDAQ subject to official notice of issuance; (xi) all applicable
waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act and
under the laws of any foreign jurisdiction shall have expired or otherwise been
terminated; (xii) each of Stage Stores and the Merger Sub shall have received
from counsel to CR Anthony opinions as to corporate and tax matters dated as of
the Closing Date; (xiii) CR Anthony shall have terminated, to the extent
requested by Stage Stores, any and all existing stockholders agreements, and any
and all similar agreements or arrangements, to which CR Anthony is a party;
(xiv) no Triggering Event (as defined in the Merger Agreement) shall have
occurred; (xv) the Stage Average Closing Price shall not be less than $15.00;
(xvi) no more than 7.5% of the outstanding Shares constitute Dissenting Shares;
(xvii) Stage Stores and Specialty Retailers shall have received the cash
proceeds of financing necessary to consummate the Merger, pay all costs and
expenses associated therewith and provide for the ongoing working capital needs
of the Surviving Corporation at commercially reasonable rates and otherwise on
terms satisfactory to Specialty Retailers; and (xviii) all actions to be taken
by CR Anthony in connection with consummation of the transactions contemplated
in the Merger Agreement and all certificates, opinions, instruments, and other
documents required to affect the transactions shall be reasonably satisfactory
in form and substance to Stage Stores and the Merger Sub.
41
<PAGE>
Pursuant to the Merger Agreement, the obligations of CR Anthony to
consummate the transactions to be performed by it in connection with the Closing
are subject to the satisfaction or written waiver of the following conditions:
(i) the representations and warranties of Stage Stores set forth in ss.4 of the
Merger Agreement shall be true and correct at and as of the Closing Date; (ii)
each of Stage Stores and the Merger Sub shall have performed and complied with
all of its covenants under the Merger Agreement through the Closing Date; (iii)
the Registration Statement shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceeding for that purpose shall have been
initiated by the Commission; (iv) the Stage Common Stock that will be issued in
the Merger shall have been approved for listing on NASDAQ, subject to official
notice of issuance; (v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator (other
than as excepted in the Merger Agreement) wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would, among other things, prevent
consummation of any of the transactions contemplated by the Merger Agreement;
(vi) there shall have been no SSI Material Adverse Effect (as defined in the
Merger Agreement); (vii) each of Stage Stores and the Merger Sub shall have
delivered to CR Anthony a certificate to the effect that each of the conditions
specified in (i) through (vi) above is satisfied in all respects; (viii) the
Requisite CRA Stockholder Approval (as defined in the Merger Agreement) shall
have been obtained; (ix) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act and under the laws of any foreign
jurisdiction shall have expired or otherwise been terminated; (x) CR Anthony
shall have received from counsel to Stage Stores and the Merger Sub opinions as
to corporate and tax matters dated as of the Closing Date; and (xi) all actions
to be taken by each of Stage Stores and the Merger Sub in connection with
consummation of the transactions contemplated in the Merger Agreement and all
certificates, opinions, instrument, and other documents required to affect the
transactions shall be reasonably satisfactory in form and substance to CR
Anthony.
TERMINATION
The Merger Agreement may be terminated and the transactions contemplated
thereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the Stockholders, in any one of the
following circumstances: (i) by mutual written consent duly authorized by the
Boards of Directors of Stage Stores and CR Anthony; (ii) by either Stage Stores
or CR Anthony by giving written notice at any time prior to the Effective Time,
if the Closing (as defined in the Merger Agreement) has not occurred on or
before July 15, 1997, by reason of the failure of any condition precedent under
ss.ss.6(a) or 6(b) of the Merger Agreement (excluding subparagraphs (i) and (ii)
of each such subsection) (whereupon all rights and obligations of Stage Stores
and CR Anthony under the Merger Agreement shall terminate without any liability
of either to the other except as provided in ss.7(b) of the Merger Agreement);
(iii) by either Stage Stores or CR Anthony by giving written notice at any time
prior to the Effective Time, if the Closing has not occurred on or before July
15, 1997, by reason of the other party's breach of any material representation,
warranty or covenant contained in the Merger Agreement, of which the
nonbreaching party has notified the breaching party of the breach, and the
breach has continued without cure for a period of 10 days after the notice of
breach or such lesser period as remains between the date of the notice and July
15, 1997 (whereupon all rights and obligations of Stage Stores and CR Anthony
under the Merger Agreement shall terminate without any liability of either to
the other, except for any liability of any party then in breach, including any
liability as provided in ss. 7(b) of the Merger Agreement).
The Merger Agreement also provides for certain consequences of terminating
the Merger Agreement and abandoning the transactions contemplated thereby prior
to the Effective Time as follows: (i) if the Merger Agreement is terminated by
either Stage Stores or the Merger Sub due to the occurrence of a Triggering
Event, then CR Anthony must pay to Stage Stores upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses and charges
incurred by Stage Stores, Specialty Retailers and the Merger Sub in connection
with the Merger Agreement); (ii) if the Requisite CRA Stockholder Approval (as
defined in the Merger Agreement) is not obtained at the Special Meeting but no
Triggering Event has occurred and no CRA Acquisition Proposal (as defined above)
has been made, then CR Anthony must reimburse Stage Stores for all expenses and
charges incurred by Stage Stores, Specialty Retailers or the Merger Sub in
connection with the Merger Agreement; (iii) if the Merger Agreement is
terminated by Stage Stores because of the failure to satisfy the conditions set
forth in (A) ss.6(a)(xv) or (B) ss.6(a)(xvii) of the Merger Agreement other than
as a result of CRA Material Adverse Effect (as defined in the Merger Agreement),
then Stage Stores shall pay to CR Anthony upon such termination, in immediately
available funds, a fee of $3,500,000 (plus all expenses and charges incurred by
CR Anthony in connection with the Merger Agreement; (iv) the Termination Option
Agreement becomes immediately exercisable in accordance with its terms (A) if
any of the events described in subsection (ii) or (iii) of the definition of
Triggering Event (as defined in the Merger Agreement) occur, (B) the CR Anthony
Board shall approve, endorse or recommend any CRA Acquisition Proposal within
six months of the termination of this Agreement or (C) any Person (as defined in
the Merger Agreement) or Group (as defined in Section 13(d)(3) of the Securities
Exchange
42
<PAGE>
Act of 1934) within six months of the termination of the Merger Agreement
acquires beneficial ownership of more than 50% of the outstanding common stock
of CR Anthony; (v) if the Merger Agreement is terminated by CR Anthony because
the board of directors of Stage Stores has withdrawn its approval of the Merger
Agreement for any reason, other than as provided in ss. 7(a) of the Merger
Agreement, then Stage Stores must reimburse CR Anthony for all expenses and
charges incurred by CR Anthony in connection with the Merger Agreement.
INDEMNIFICATION
The Merger Agreement provides that the certificate of incorporation and
by-laws of the entity which becomes the Surviving Corporation as in effect at
and as of immediately prior to the Effective Time will remain unchanged by the
Merger and be the certificate of incorporation and by-laws of the surviving
corporation.
The Merger Agreement further provides that to the extent commercially
available on terms no less favorable to Stage Stores than the proposal submitted
to Stage Stores prior to the date thereof, Stage Stores shall provide each
individual who served as a director or officer of CR Anthony at any time prior
to the Effective Time with liability insurance for a period customary for
policies of this nature after the Effective Time on terms no less favorable in
coverage and amount than any applicable insurance in effect immediately prior to
the Effective Time.
STOCKHOLDERS MEETING
The Merger Agreement provides that CR Anthony will call a special meeting of
its Stockholders (the "Special Meeting") as soon as reasonably practicable in
order that the Stockholders may consider and vote upon the adoption and approval
of the Merger Agreement and the Merger in accordance with the corporation law or
other law governing mergers in the state of incorporation of the Surviving
Corporation. CR Anthony will mail the Combined Disclosure Document (as defined
in the Merger Agreement) to its Stockholders as soon as reasonably practicable.
The Combined Disclosure Document will contain the affirmative recommendations of
the CR Anthony Board in favor of the adoption and approval of the Merger
Agreement and the Merger. Notwithstanding the foregoing, nothing should be
construed to require any director of CR Anthony to take any actions or permit
any events described above to the extent that the CR Anthony Board shall
conclude in good faith, based upon the written advice of legal counsel to the
board or such director, that such action is prohibited in order for the director
to act in a manner that is consistent with his fiduciary obligations under
applicable laws.
NOTICES, CONSENTS, APPROVALS, FILINGS
The Merger Agreement provides that CR Anthony and Stage Stores will (and CR
Anthony will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(d) and ss.4(d) of the Merger
Agreement. The Merger Agreement further provides that CR Anthony will: (i) give
any notices (and will cause each of its Subsidiaries to give any notices) to any
governmental authority or third parties, and will use all commercially
reasonable best efforts to obtain (and will cause each of its Subsidiaries to
use all commercially reasonable best efforts to obtain) any governmental
authority or third party consents, necessary to the consummation of the
transactions contemplated hereby, including any consents, waivers, amendment or
other action required with respect to the Contracts (as defined in the Merger
Agreement) and other matters listed on Schedules 3(d), 3(p) and 3(s) of the
Merger Agreement (all costs incurred in connection with such notices and
consents shall be borne by CR Anthony; and (ii) file any Notification and Report
Forms (as defined in the Merger Agreement) or other form or report and related
material that the parties may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act (as defined in the Merger Agreement) or with any
other governmental entity under the laws of any foreign jurisdiction, will use
all commercially reasonable best efforts to obtain (and CR Anthony will cause
each of its Subsidiaries to use all commercially reasonable best efforts to
obtain) an early termination of any applicable waiting period, and will make any
further filings pursuant thereto that may be necessary, proper, or advisable.
See "OTHER LEGAL MATTERS; REGULATORY APPROVAL - Antitrust."
43
<PAGE>
EMPLOYEE BENEFIT MATTERS
Stage Stores intends to keep the current CR Anthony health plans in
place until January 1, 1998 at which time the CR Anthony health plans will be
terminated and all employees will be eligible to participate in the Stage Stores
health plans. All former CR Anthony employees will be eligible to participate in
the Stage Stores 401(k) Plan and, with respect to matching and vesting levels,
will receive credit for years of service with CR Anthony. With respect to the
Specialty Retailers, Inc. Restated Retirement Plan, CR Anthony employees will be
treated as new employees as of the consummation of the Merger and will not
receive credit for years of service with CR Anthony.
AMENDMENT
CR Anthony and Stage Stores may mutually amend any provision of the Merger
Agreement at any time prior to the Effective Time with the prior authorization
of their respective boards of directors; PROVIDED, HOWEVER, that any amendment
effected subsequent to stockholder approval will be subject to the restrictions
contained in the Texas Act (as defined in the Merger Agreement) and the Oklahoma
Act. No amendment or other modification of any provision of the Merger Agreement
and no waiver of any provision of it or any right or benefit under it shall be
valid unless the same shall be in writing and signed by CR Anthony and Stage
Stores. No waiver by any party of any default, misrepresentation, or breach of
warranty or covenant under the Merger Agreement, whether intentional or not,
shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant under the Merger Agreement or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
TIMING
The exact timing and details for the Merger will depend upon legal
requirements and a variety of other factors. Although Stage Stores and CR
Anthony have agreed to cause the Merger to be consummated on the terms set forth
above and in the Merger Agreement, there can be no assurance as to the timing of
the Merger.
TERMINATION OPTION AGREEMENT
The following is a summary of the material terms of the Termination Option
Agreement. This summary is not a complete description of the terms and
conditions of the Termination Option Agreement and is qualified in its entirety
by reference to the full text of the Termination Option Agreement, which is
incorporated by reference and a copy of which has been filed with the Commission
as an exhibit to the Form 8-K of Stage Stores dated March 5, 1997. The
Termination Option Agreement is attached hereto as Annex B. Capitalized terms
not otherwise defined herein or in the following summary shall have the meanings
set forth in the Termination Option Agreement.
GRANT OF OPTION
The Termination Option Agreement provides for the grant by CR Anthony to
Stage Stores of an irrevocable option (the "Stock Option") to purchase up to
1,798,093 Shares, or such other number of Shares as equals 19.9% of the issued
and outstanding Shares at the time of exercise of the Stock Option, at a price
of $8.00 per Share (the "Exercise Price"), payable in cash in accordance with
the terms of the Termination Option Agreement.
EXERCISE OF OPTION
The Termination Option Agreement provides that the Stock Option may be
exercised by Stage Stores, in whole or in part, at any time or from time to time
after (A) any of the events described in subsection (ii) or (iii) of the
definition of Triggering Event has occurred prior to the Effective Time, (B) the
CR Anthony Board shall approve, endorse or recommend any CRA Acquisition
Proposal within six months of the termination of the Merger Agreement or (C) any
Person (as defined in the Merger Agreement) or Group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934) within six months of the
termination of the Merger Agreement acquires beneficial ownership of more than
50% of the outstanding common stock of CR Anthony. For the purposes of the
Termination Option Agreement, "Triggering Event" means any of the following
events: (i) the CR Anthony Board shall have failed to recommend, shall have
withdrawn or shall have modified, in a manner adverse to either Stage Stores or
Merger Sub, its recommendation or approval of the Merger Agreement for any
reason other than as provided in ss. 7(a) of the Merger Agreement; (ii) the CR
Anthony Board shall have approved, endorsed or recommended any CRA Acquisition
Proposal (as defined in the Merger Agreement); (iii) CR Anthony shall have
entered into any Contract (as defined in the Merger Agreement) to consummate any
CRA Acquisition Proposal; (iv) the Merger Agreement shall not have received the
Requisite CRA Stockholder
44
<PAGE>
Approval (as defined in the Merger Agreement) and at the time of such event an
offer or proposal to affect a CRA Acquisition Proposal shall have been made; (v)
the representations and warranties of CR Anthony set forth in ss.3 of the Merger
Agreement shall cease to be true and correct at and as of the Closing Date and
such failure shall result in a CRA Material Adverse Effect (as defined in the
Merger Agreement); or (vi) CR Anthony shall not have performed and complied with
all of its covenants hereunder through the Closing Date and such failure shall
result in a CRA Material Adverse Effect.
The Termination Option Agreement provides that the Stock Option will
terminate upon the earlier of (i) the Effective Time of the Merger; or (ii) the
date six months following any termination of the Merger Agreement.
CERTAIN REPURCHASES
The Termination Option Agreement provides that, at the request of Stage
Stores at any time during which the Stock Option is exercisable (the "Repurchase
Period"), CR Anthony will repurchase from Stage Stores the Stock Option, or any
portion thereof, for a price equal to the amount by which the Market/Tender
Offer Price (as defined below) for Shares as of the date Stage Stores gives
notice of its intent to exercise its right to "put" the Stock Option to CR
Anthony exceeds the Exercise Price, multiplied by the number of Shares
purchasable pursuant to the Stock Option (or portion thereof with respect to
which Stage Stores is exercising its right to "put" the Stock Option to CR
Anthony). For purposes of the Termination Option Agreement, "Market/Tender Offer
Price" means the higher of (A) the highest price per Share paid as of such date
pursuant to any tender or exchange offer or other CRA Acquisition Proposal (as
defined in the Merger Agreement) or (B) the average of the closing sale prices
of Shares on NASDAQ for the ten trading days immediately preceding such date.
REGISTRATION RIGHTS
The Termination Option Agreement provides that in the event that Stage
Stores desires to sell any of the Shares purchased pursuant to the Stock Option
within three years after such purchase, and such sale requires in the opinion of
counsel to Stage Stores, registration of such shares under the Securities Act,
Stage Stores may, by written notice (the "Registration Notice") to CR Anthony,
request CR Anthony to register under the Securities Act all or any part of the
Shares purchased pursuant to the Stock Option ("Restricted Shares") beneficially
owned by Stage Stores (the "Registrable Securities") pursuant to a bona fide
firm commitment underwritten public offering in which Stage Stores and the
underwriters will effect as wide a distribution of such Registrable Securities
as is reasonably practicable and will use their best efforts to prevent any
person and its affiliates from purchasing through such offering Restricted
Shares representing more than 2% of the outstanding Shares on a fully diluted
basis (a "Permitted Offering"). CR Anthony (and/or any person designated by CR
Anthony) will have the option, exercisable by written notice delivered to Stage
Stores within 10 business days after the receipt of the Registration Notice, to
purchase all or any part of the Registrable Securities for cash at a price (the
"Option Price") equal to the product of (i) the number of Registrable Securities
and (ii) the Fair Market Value (as defined in the Termination Option Agreement)
of such Registrable Securities. Stage Stores is entitled to request an aggregate
of two effective registration statements under the terms of the Termination
Option Agreement.
PROFIT LIMITATION
The Termination Option Agreement provides that in no event will Stage
Stores' Total Profit (as defined below) exceed $4,000,000 and, if it otherwise
would exceed such amount Stage Stores, at its sole election, will either (i)
deliver to CR Anthony for cancellation Shares previously purchased by Stage
Stores, (ii) pay cash or other consideration to CR Anthony or (iii) undertake
any combination thereof, so that Stage Stores' Total Profit will not exceed
$4,000,000 after taking into account the foregoing actions. Further, the Stock
Option may not be exercised for a number of Shares as would, as of the date of
the Exercise Notice, result in a Notional Total Profit (as defined below) of
more than $4,000,000, and, if exercise of the Stock Option otherwise would
exceed such amount, Stage Stores, at its discretion, may increase the Price for
that number of Shares set forth in the Exercise Notice so that the Notional
Total Profit will not exceed $4,000,000. For the purposes of the Termination
Option Agreement, (A) the term "Total Profit" means the aggregate amount (before
taxes) of the following: (i) the amount received by Stage Stores pursuant to any
repurchase by CR Anthony of the Stock Option pursuant to the terms of the
Termination Option Agreement, and (ii) (x) the net cash amounts received by
Stage Stores pursuant to the sale of Restricted Shares (or any other securities
into which such shares are converted or exchanged) to any unaffiliated party,
less (y) Stage Stores' purchase price for such Shares; and (B) the term
"Notional Total Profit" with respect to any number of Restricted Shares as to
which Stage Stores proposes to exercise the Stock Option will be the Total
Profit determined as of the date of the Exercise Notice assuming that this
45
<PAGE>
Stock Option were exercised on such date for such number of Restricted Shares
and assuming that such Restricted Shares, together with all other Restricted
Shares held by Stage Stores and its affiliates as of such date, were sold for
cash at the closing market price for Shares as of the close of business on the
preceding trading day (less customary brokerage commissions).
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The Termination Option Agreement provides that in the event of any change in
the Shares by reason of stock dividends, stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Stock Option, and the
Exercise Price per share, will be adjusted appropriately.
46
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data give effect to the
Merger, the Refinancing, the Stage Stores initial public offering (the "IPO")
and related retirement of senior discount debentures and the acquisition of
Uhlmans, Inc. (the "Uhlmans Acquisition") by Stage Stores. The unaudited pro
forma financial data are based on (i) the historical consolidated financial
statements for Stage Stores, (ii) the historical consolidated financial
statements of CR Anthony reclassified to conform to Stage Stores' income
statement classifications and (iii) the assumptions and adjustments described in
the accompanying notes. The unaudited pro forma combined income statement has
been prepared as if each of the aforementioned events had occurred at the
beginning of the year and does not purport to represent what Stage Stores'
results of operations actually would have been if each of the aforementioned
events had occurred as of the date indicated or will be for any future periods.
The unaudited pro forma combined condensed balance sheet was prepared as if the
Merger and the Refinancing had occurred on the balance sheet date. The unaudited
pro forma financial data are based upon assumptions deemed appropriate by the
management of Stage Stores and do not reflect (i) certain cost savings or
improvements in sales volume or gross margin related to the acquisition of CR
Anthony which Stage Stores believes could be realized as a result of
implementing Stage Stores' merchandising, distribution, credit card and other
operational programs and (ii) certain capital expenditures anticipated as a
result of the Merger. The unaudited pro forma combined financial data is based
on the respective historical consolidated financial statements of Stage Stores
and CR Anthony and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements which are a part of the separate Annual
Reports on Form 10-K for the fifty-two weeks ended February 1, 1997 filed by
Stage Stores and CR Anthony and which are incorporated by reference in this
Proxy Statement/Prospectus, and the Selected Historical Consolidated Financial
and Operating Data shown elsewhere in this Proxy Statement/Prospectus. For the
purposes of this pro forma presentation, the Stage Average Closing Price of
$20.75 (the closing price of Stage Common Stock as of May 23, 1997) was assumed
which results in 3,548,940 shares of Stage Common Stock being issued in exchange
for the 9,035,645 Shares (an exchange rate of .393 to 1).
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
YEAR ENDED FEBRUARY 1, 1997
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Financial Data
-------------------
Pro Forma
IPO and CR Anthony Combined
Stage CR Uhlmans Acquisi Before Refinancing Pro Forma
Stores Anthony(1) Acquisition(2) tion(3) Refinancing Adjustments Combined
-------- -------- -------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ..................... $776,550 $288,392 $ 16,516(a) $ -- $1,081,458 $ -- $1,081,458
Cost of sales and related
buying, occupancy and
distribution expenses .... 532,563 217,719 12,523(b) (3,317)(e) 759,488 -- 759,488
-------- -------- -------- ------- ---------- ------- ----------
Gross profit .................. 243,987 70,673 3,993 3,317 321,970 -- 321,970
Selling, general and
administrative expenses .. 175,417 60,944 1,821(c) (6,356)(f) 231,826 -- 231,826
-------- -------- -------- ------- ---------- ------- ----------
Operating income .............. 68,570 9,729 2,172 9,673 90,144 -- 90,144
Interest, net ................. 45,954 1,806 (10,071)(d) -- (g) 37,689 3,296(h) 40,985
-------- -------- -------- ------- ---------- ------- ----------
Income before income tax and
extraordinary item ....... 22,616 7,923 12,243 9,673 52,455 (3,296) 49,159
Income tax expense(5) ......... 8,594 3,090 4,652 3,950 20,286 (1,252) 19,034
-------- -------- -------- ------- ---------- ------- ----------
Income before extraordinary
item(6) .................. $ 14,022 $ 4,833 $ 7,591 $ 5,723 (g) $ 32,169 $(2,044) $ 30,125
======== ======== ======== ======= ========== ======= ==========
Earnings per common share data:
Earnings per common share
before extraordinary item .. $ 0.88 $ 1.18 $ 1.10
======== ========== ==========
Weighted average common
shares outstanding ......... 15,927 27,273 27,273
======== ========== ==========
</TABLE>
47
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
NOTE 1--CR ANTHONY HISTORICAL FINANCIAL DATA
Reclassifications have been made to certain historical CR Anthony costs
and expenses to reflect a presentation similar to that of Stage Stores. Certain
store occupancy expenses (including depreciation) and buying expenses have been
reclassified to "Cost of sales and related buying, occupancy and distribution
expenses." In its reported financial statements, CR Anthony includes these costs
and expenses as "Selling, general and administrative expenses" and as
"Depreciation and amortization." Additionally, advertising expenses and
depreciation and amortization (not otherwise reclassified to cost of sales) are
included in "Selling, general and administrative expenses."
NOTE 2--IPO AND UHLMANS ACQUISITION
On October 24, 1996, Stage Stores completed the IPO and the related
retirement of senior discount debentures, and on June 3, 1996, Stage Stores
completed the Uhlmans Acquisition. In connection with the Uhlmans Acquisition,
Stage Stores has completed a consolidation program which absorbed the Uhlmans
general office functions, including accounting, data processing, merchandising,
personnel, credit and distribution into similar functions provided by Stage
Stores (the "Uhlmans Consolidation Program"). As a part of the acquisition
agreement with the former stockholders of Uhlmans, Stage Stores has paid
severance to each individual whose employment was terminated as a result of the
Uhlmans Consolidation Program. In addition, all leases associated with Uhlmans'
corporate offices and distribution center have been terminated.
Although the consolidation of the Uhlmans general office functions took
place over a period of three months, the unaudited pro forma combined income
statement reflects the elimination of the separate Uhlmans general office
expenses assuming the consolidation had been fully implemented at the beginning
of the period.
The accompanying pro forma adjustments for the Uhlmans Acquisition reflect
the historical operating results for Uhlmans from February 4, 1996 through June
2, 1996 (representing the period in 1996 prior to the closing of the Uhlmans
Acquisition) adjusted for the impact of the Uhlmans Consolidation Program and
related financing. The accompanying pro forma adjustments related to the IPO
reflect the issuance of the 10.75 million shares of Stage Common Stock as well
as the retirement of the Stage Stores' senior discount debentures.
(a) Uhlmans pre-acquisition net sales
(b) Adjustments to cost of sales and related buying, occupancy and
distribution expenses as follows:
Uhlmans pre-acquisition cost of sales and related
buying, occupancy and distribution expenses $ 13,030
Incremental freight due to use of Stage Stores'
distribution center ........................ 99
Uhlmans pre-acquisition buying and merchandising
personnel costs eliminated in connection with
the Uhlmans Consolidation Program ............ (606)
--------
$ 12,523
========
(c) Adjustments to selling, general and administrative expenses as
follows:
Uhlmans pre-acquisition selling, general and
administrative expenses ...................... $ 3,482
Amortization of goodwill resulting from the Uhlmans
Acquisition .................................. 136
Uhlmans' pre-acquisition general office personnel
costs eliminated in connection with the Uhlmans'
Consolidation Program ........................ (1,547)
Elimination of a professional service agreement
terminated in connection with the IPO .......... (250)
-------
$ 1,821
=======
48
<PAGE>
(d) Adjustment to net interest as follows:
Incremental interest related to the SRPC notes used
to finance the Uhlmans' Acquisition ............. $ 1,250
Amortization of debt issue costs related to the SRPC
notes ........................................... 189
Elimination of the historical interest expense and
amortization of debt issue costs associated with the
senior discount debentures retired in connection
with the IPO .................................... (10,956)
Elimination of Uhlmans' pre-acquisition interest
expense and amortization
of debt issue costs ............................. (554)
--------
$(10,071)
========
The components of the purchase price of the Uhlmans acquisition, net of
cash acquired, were as follows:
Cash acquired ................................................ $ (887)
Cash paid to Uhlmans shareholders ............................ 12,023
Uhlmans debt retired ......................................... 16,210
--------
Total purchase price, net of cash acquired ................... $ 27,346
========
The purchase price of the Uhlmans acquisition for accounting purposes was
allocated as follows to the assets purchased and the liabilities assumed based
upon their fair values:
Current assets, other than cash ............................... $ 13,923
Property equipment and leasehold improvements ................. 3,953
Goodwill ...................................................... 17,014
Other assets .................................................. 111
Liabilities assumed ........................................... (7,655)
--------
Total purchase price, net of cash acquired .................... $ 27,346
========
NOTE 3--CR ANTHONY ACQUISITION
Stage Stores has formally adopted an integration plan (the "CR Anthony
Integration Plan") to absorb CR Anthony's general office functions, including
accounting, data processing, merchandising, personnel and distribution into
similar functions provided by Stage Stores. Although the CR Anthony Integration
Plan is expected to take place over a period of twelve months, the pro forma
combined income statement reflects the elimination of the separate CR Anthony
general office and distribution center expenses assuming the consolidation had
been fully implemented at February 4, 1996.
As a part of the CR Anthony Integration Plan, Stage Stores has
specifically identified the general office employees of CR Anthony who will be
terminated as a result of the Merger. Stage Stores has contractually agreed to a
severance schedule for each of these individuals whose employment will be
terminated as a result of the Merger.
The acquisition adjustments are based on estimates of Stage Stores'
management and are not necessarily indicative of the level of permanent savings
for future periods. These pro forma adjustments only give effect to those
amounts that are directly related to the CR Anthony Integration Plan. The actual
application by Stage Stores of the CR Anthony Integration Plan could result in
different levels of savings from the amounts presented in the pro forma combined
income statement.
The accompanying pro forma combined income statement does not reflect
certain cost savings or improvements in sales volume or gross margin related to
the Merger which Stage Stores believes could be realized as a result of
implementing Stage Stores' merchandising, distribution, credit card and other
operational programs, nor does it reflect approximately $28.5 million of capital
expenditures anticipated in the CR Anthony Integration Plan. Stage Stores
expects to finance the majority of this investment through operating cash flows
and borrowings under the New Credit Agreement. If such investment, along with
the related financing, had been reflected in the unaudited pro forma combined
income statement, the incremental depreciation and interest expense would have
the following impact:
Income before income tax and extraordinary item ....... $(3,754)
=======
Income before extraordinary item ...................... $(2,327)
=======
Earnings per common share before extraordinary item ... $ (0.09)
=======
The application of purchase accounting to the Merger results in an excess
of the purchase price over the estimated fair value of the assets acquired and
liabilities assumed. This excess is treated as goodwill. Based upon the
strategic positioning of the CR Anthony stores in relation to Stage Stores'
growth strategy and the long operating history and historical profitability of
these stores, management believes a 40-year amortization period for this
goodwill is appropriate.
The pro forma combined income statement reflects the impact of the
CR Anthony Integration Plan as follows (in thousands):
(e) Adjustments to cost of sales and related buying, occupancy and
distribution expenses as follows:
49
<PAGE>
Elimination of rental expense related to the
closure of the CR Anthony distribution center $ (477)
Elimination of payroll and associated costs
associated with the termination of CR
Anthony's buying staff ................... (2,840)
-------
$(3,317)
=======
(f) Adjustments to selling, general and administrative expenses as
follows:
Elimination of CR Anthony's payroll and other
expenses associated with employees who work at
the general office which is being closed pursuant
to the CR Anthony Integration Program ........... $(7,078)
Amortization of goodwill resulting from the Merger . 722
-------
$(6,356)
=======
(g) Stage Stores will acquire all of the Shares for a minimum value of
$8.00 per share plus $0.01 for every $0.05 by which the Stage Average Closing
Price exceeds $20.00 per share. The exact combination of Stage Common Stock
and/or cash to be paid by Stage Stores for each Share will be determined using a
formula based upon the Base Price and the Stage Average Closing Price. The
Merger Consideration will consist of 100% Stage Common Stock if the Stage
Average Closing Price is $20.00 or higher, and the stock percentage will decline
in linear fashion to 25% of the Merger Consideration if the Stage Average
Closing Price is $15.00. As the Stage Average Closing Price increases over
$20.00, the value of the Shares will rise while the number of shares of Stage
Common Stock issued will decrease. As the Stage Average Closing Price decreases
below $20.00, the value of the Merger Consideration would remain the same while
the number of shares of Stage Common Stock to be issued would decrease and cash
would increase. For example, if the Stage Average Closing Price is $15.00 per
share, the number of shares of Stage Common Stock issued would be 1,205 with the
CR Anthony Stockholders receiving $54,210 of the purchase price in cash. Stage
Stores intends to fund any
50
<PAGE>
cash portion of the purchase price through borrowings. Accordingly, if the Stage
Average Closing Price decreases to $15.00 per share, net income before
extraordinary item prior to the impact of the refinancing would be $29,729 as a
result of additional interest expense resulting from additional indebtedness
used to finance the cash portion of the purchase price, pro forma weighted
average shares outstanding prior to the impact of the refinancing would be
24,929 and earnings per share before extraordinary item prior to the impact of
the refinancing would be $1.19.
NOTE 4--REFINANCING ADJUSTMENTS
(h) Adjustments to net interest as follows:
Interest expense associated with the Refinancing .. $ 29,250
Amortization of debt issue costs associated with
the Refinancing ................................ 1,686
Elimination of interest expense associated with the
Existing Notes ................................. (26,251)
Elimination of amortization of debt issue costs
associated with the Existing Notes ............. (1,389)
--------
$ 3,296
========
The pro forma presentation set forth herein assumes an interest rate of
9.25% and 9.75% for the Senior Notes and Senior Subordinated Notes,
respectively, to be issued in the Offering. A 1/4% increase or decrease in the
interest rate on the Senior Notes would impact interest expense by $500 and a
1/4% increase or decrease in the interest rate on the Senior Subordinated Notes
would impact interest expense by $250.
NOTE 5--INCOME TAXES
Pro forma adjustments to record the provision or benefit for income taxes
have been made assuming a tax rate of 38%, based upon the statutory federal and
state income tax rates. Theses adjustments result in a pro forma combined
effective tax rate of 38.7%.
NOTE 6--NON-RECURRING CHARGES
In the fiscal quarter in which the Refinancing is consummated (currently
expected to be the second quarter of 1997), Stage Stores expects to incur
non-recurring charges, net of tax, totaling approximately $16.9 million in
connection with the early retirement of the Existing Notes, the replacement of
certain existing credit agreements and the write-off of related debt issue
costs.
51
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
FEBRUARY 1, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical
------------------------ CR Anthony
Stage CR Acquisition Refinancing Pro Forma
Stores Anthony Adjustments(1)(2) Adjustments(3) Combined
ASSETS ---------- ---------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents .... $ 18,286 $ 3,139 $ (19,596)(a) $ 9,000(h) $ 10,829
Undivided interest in
accounts receivable trust ... 80,672 3,295 -- -- 83,967
Merchandise inventories ...... 187,717 84,280 -- -- 271,997
Prepaid expenses ............. 15,690 2,726 -- -- 18,416
Other current assets ......... 32,797 1,005 -- -- 33,802
---------- ---------- -------------- -------------- ----------
Total current assets .... 335,162 94,445 (19,596) 9,000 419,011
Property, equipment and
leasehold improvements, net.. 111,189 17,022 -- -- 128,211
Goodwill, net ................ 47,173 -- 28,858(b) -- 76,031
Other assets ................. 15,759 7,261 -- 6,038(i) 29,058
---------- ---------- -------------- -------------- ----------
$ 509,283 $ 118,728 $ 9,262 $ 15,038 $ 652,311
========== ========== ============== ============== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable ............. $ 54,336 $ 19,491 $ -- $ -- $ 73,827
Accrued expenses and other
current liabilities ......... 45,607 11,408 22,422(c) (21,365)(j) 58,072
---------- ---------- -------------- -------------- ----------
Total current liabilities 99,943 30,899 22,422 (21,365) 131,899
Long-term debt ............... 298,453 14,742 (14,742)(d) 53,314(k) 351,767
Other long-term liabilities .. 12,638 1,028 -- -- 13,666
Deferred income taxes ........ 5,983 -- -- -- 5,983
---------- ---------- -------------- -------------- ----------
Total liabilities ....... 417,017 46,669 7,680 31,949 503,315
---------- ---------- -------------- -------------- ----------
Common stock ................. 233 90 (54)(e) -- 269
Additional paid-in capital ... 169,811 57,307 16,298(f) -- 243,416
Accumulated deficit .......... (77,778) 14,662 (14,662)(g) (16,911)(l) (94,689)
---------- ---------- -------------- -------------- ----------
Stockholders' equity ......... 92,266 72,059 1,582 (16,911) 148,996
---------- ---------- -------------- -------------- ----------
$ 509,283 $ 118,728 $ 9,262 $ 15,038 $ 652,311
========== ========== ============== ============== ==========
</TABLE>
52
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
NOTE 1--CR ANTHONY ACQUISITION ADJUSTMENTS
The pro forma acquisition adjustments represent the estimated adjustments
necessary to state the historical assets and liabilities of CR Anthony at their
estimated fair values and the recognition of the excess of the purchase price
over the estimated fair value of the assets acquired and liabilities assumed as
goodwill. Consideration for the Merger will consist of 100% Stage Common Stock
if the Stage Average Closing Price is $20.00 or higher, and the stock percentage
will decline in linear fashion to 25% of the consideration if the Stage Average
Closing Price is $15.00. As the Stage Average Closing Price increases over
$20.00, the value of the shares of CR Anthony common stock will rise while the
number of shares of Stage Common Stock issued will decrease. As the Stage
Average Closing Price decreases below $20.00, the value of the consideration
will remain at $8.00 per share while the number of shares of Stage Common Stock
to be issued will decrease and cash will increase. For example, if the Stage
Average Closing Price is $15.00 per share, the number of shares of Stage Common
Stock issued would be 1,204,753. For purposes of this pro forma presentation, a
Stage Average Closing Price (the closing price on May 23, 1997) of $20.75 was
assumed which results in 3,548,940 shares of Stage Common Stock being issued.
The accompanying unaudited pro forma combined condensed balance sheet does
not reflect certain cost savings or improvements in sales volume or gross margin
related to the Merger which the Company believes could be realized as a result
of implementing the Company's merchandising, distribution, credit card, and
other operational programs, nor does it reflect approximately $28.5 million of
capital expenditures anticipated in the CR Anthony Integration Plan. The Company
expects to finance this investement through operating cash flows and borrowings
under the New Credit Agreement.
The acquisition adjustments shown on the pro forma combined condensed balance
sheet reflect (in thousands):
(a) Adjustments to cash as follows:
Cash paid to retire the outstanding CR Anthony Options $ (4,854)
Retirement of CR Anthony indebtedness ................ (14,742)
--------
$(19,596)
========
In accordance with EITF 85-45, CR Anthony will record a $5,017
charge in its historical financial statements upon retirement of
the outstanding CR Anthony options. Such charge is not reflected
in the accompanying pro forma income statement.
(b) Recognition of goodwill (See note 2 below)
(c) Adjustments to accrued expenses and other current liabilities as
follows:
Severance due CR Anthony employees who work at
the general office terminated pursuant to the
CR Anthony Integration Plan ........................ $ 4,300
Transaction fees ................................... 3,000
One-time costs associated with the closed facilities 15,122
-------
$22,422
=======
(d) Retirement of CR Anthony indebtedness
(e) Adjustments to common stock as follows:
Issuance of Stage Common Stock ........... $ 36
Retirement of CR Anthony common stock .... (90)
----
$(54)
====
(f) Adjustments to additional paid-in capital as follows:
Increase in Stage Stores paid-in capital as a result
of issuance of Stage Common Stock .............. $ 73,605
Elimination of CR Anthony's paid-in capital ........ (57,307)
--------
$ 16,298
========
(g) Elimination of CR Anthony's historical retained earnings
53
<PAGE>
NOTE 2--CR ANTHONY PURCHASE PRICE
The assumed components of the purchase price, net of cash acquired, are as
follows:
Cash acquired .................................... $ (3,139)
Cash paid to CR Anthony option holders ........... 4,854
Value of Stage Stores common stock issued ........ 73,641
CR Anthony debt retired .......................... 14,742
--------
Total purchase price, net of cash acquired ....... $ 90,098
========
The assumed purchase price of CR Anthony for accounting purposes is allocated as
follows to the assets purchased and the liabilities assumed based upon the
estimated fair values.
Current assets, other than cash .................. $ 91,306
Property equipment and leasehold improvements .... 17,022
Goodwill ......................................... 28,858
Other assets ..................................... 7,261
Liabilities assumed .............................. (54,349)
--------
Total purchase price, net of cash acquired ....... $ 90,098
========
54
<PAGE>
NOTE 3--REFINANCING ADJUSTMENTS
The following assumes 100% of the Existing Notes are tendered pursuant to the
Tender Offers and 100% of the consent payments have been paid pursuant to the
Consent Solicitations.
(h) Sources and uses of cash as follows:
SOURCES OF FUNDS
Notes ................................................... $ 300,000
USES OF FUNDS
Retirement of existing senior notes(1) .................. (137,250)
Retirement of existing senior subordinated notes(1) ..... (129,800)
Payment of costs associated with the Offering, the Tender
Offers and the Consent Solicitations and the New Credit
Agreement .......................................... (12,950)
Payment of accrued interest relating to debt retired .... (11,000)
---------
Net change in cash and cash equivalents ................. $ 9,000
=========
----------
(1) Includes premiums related to the Tender Offers and consent fees
related to the Consent Solicitations
(i) Adjustments to other assets as follows:
Debt issue costs associated with the Refinancing ......... $ 11,950
Write-off of debt issue costs related to the retirement of
Existing Notes ....................................... (5,912)
--------
$ 6,038
========
(j) Adjustments to accrued expenses and other current liabilites as
follows:
Reduction of income taxes payable resulting from the
extraordinary charge for loss on early retirement
of debt............................................. $(10,365)
Payment of accrued interest ............................. (11,000)
--------
$(21,365)
========
(k) Adjustments to long-term debt as follows:
Retirement of existing senior notes ............ $(130,000)
Retirement of existing senior subordinated notes (116,686)
Issuance of notes to be issued in the Offering . 300,000
---------
$ 53,314
=========
(l) Extraordinary charge, net of tax, in connection with the early
retirement of the Existing Notes, the replacement of certain
existing credit agreements and the write-off of related debt issue
costs.
55
<PAGE>
THE COMPANIES
C.R. ANTHONY COMPANY
C.R. Anthony Company, an Oklahoma corporation, is a regional retailer of
moderately priced family apparel operating under the names "Anthonys" and
"Anthonys Limited" with the majority of its stores in smaller communities
throughout the southwestern and midwestern United States. CR Anthony's operating
philosophy is to offer brand apparel, including footwear, for the entire family
at price levels that provide value to the customer relative to other options
available. All of the stores operated by CR Anthony offer value priced
merchandise with a focus on casual men's, women's and children's apparel and
shoes. Denim has historically been the largest category for CR Anthonys, under
the Chic, Lee, Levi, Wrangler and various other labels. At February 1, 1997, CR
Anthony operated 224 stores, predominantly located in strip shopping centers, of
which 199 stores are currently operated under the name "Anthonys" and 24 under
the name "Anthonys Limited." CR Anthony's stores are located in thirteen states,
primarily in Arkansas, Kansas, Louisiana, Montana, New Mexico, Oklahoma and
Texas. The principal executive office of CR Anthony is located at 701 North
Broadway, Oklahoma City, Oklahoma 73102, telephone number (405) 278-7400.
STAGE STORES, INC.
Stage Stores, Inc., a Delaware corporation, is a retail apparel company that
operates retail stores featuring well known, brand name family apparel in over
200 small towns and communities across the central United States. As of February
1, 1997, Stage Stores operated 315 stores through its "Stage", "Bealls" and
"Palais Royal" trade names in 19 states throughout the central United States.
Approximately 78% of these stores are located in small markets and communities
with as few as 4,000 people. The remainder of Stage Stores' stores operate in
metropolitan areas, primarily in suburban Houston. Stage Stores' merchandise
offerings include a carefully edited but broad selection of branded, moderately
priced, fashion apparel, accessories, fragrances and cosmetics and footwear for
women, men and children. Over 85% of 1996 sales consisted of branded
merchandise, including nationally recognized brands such as Levi Strauss, Liz
Claiborne, Chaps/Ralph Lauren, Calvin Klein, Guess, Hanes, Nike, Reebok and
Haggar Apparel. Stage Stores' principal executive offices are located at 10201
Main Street, Houston, Texas 77002, telephone number (713) 667-5601.
OTHER LEGAL MATTERS; REGULATORY APPROVAL
GENERAL
Except as otherwise disclosed herein, based on representations and warranties
made by CR Anthony in the Merger Agreement and a review of publicly available
information by CR Anthony with the Commission, Stage Stores is not aware of (i)
any license or regulatory permit that appears to be material to the business of
CR Anthony and its subsidiaries, taken as a whole, that might be adversely
affected as a result of the acquisition of Shares by Stage Stores pursuant to
the Merger, or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by Stage Stores as
contemplated herein. Should any such approval or other action be required, Stage
Stores currently contemplates that such approval or action would be sought.
ANTITRUST
Under the HSR Act, and the rules that have been promulgated thereunder by
the FTC, certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. On April 4, 1997, CR Anthony and Stage Stores
each filed with the Antitrust Division and the FTC a Notification and Report
Form with respect to the Merger. On May 4, 1997, the waiting period under the
HSR Act expired without a request from the FTC or the Antitrust Division for
additional information.
STATE TAKEOVER STATUTES
As an Oklahoma corporation, CR Anthony is subject to Section 1090.3 ("Section
1090.3") of the Oklahoma Act. Section 1090.3 would prevent an "Interested
Shareholder" (generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 1090.3) with CR Anthony for three years following the date
such person became an Interested Shareholder unless: (i) before such
56
<PAGE>
person became an Interested Shareholder, the CR Anthony Board approved the
transaction in which the Interested Shareholder became an Interested Shareholder
or approved the Business Combination, (ii) upon consummation of the transaction
which resulted in the Interested Shareholder becoming an Interested Shareholder,
the Interested Shareholder owned at least 85% of the voting stock of CR Anthony
outstanding at the time that the transaction commenced (excluding stock held by
directors who are also officers and by employee stock ownership plans that do
not allow plan participants to determine confidentially whether to tender
shares), or (iii) on or subsequent to the transaction in which such person
became an Interested Shareholder, the Business Combination is (x) approved by
the board of directors of the corporation and (y) authorized at an annual or
special meeting of shareholders by the affirmative vote of the holders of at
least two-thirds (66 2/3%) of the outstanding voting stock of CR Anthony not
owned by the Interested Shareholder. In accordance with the provisions of
Section 1090.3, the CR Anthony's Board has approved the transactions
contemplated by the Merger Agreement. Accordingly, the transactions contemplated
by the Merger Agreement are exempt from the provisions of Section 1090.3.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
CR Anthony, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Stage Stores does not know whether any of these laws will, by their terms,
apply to the Merger and has not complied with any such laws. Should any person
seek to apply any state takeover law, Stage Stores will take such action as then
appears desirable, which may include challenging the validity or applicability
of any such statute in appropriate court proceedings. In the event it is
asserted that one or more state takeover laws is applicable to the Merger, and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Merger, Stage Stores might be required to file certain
information with, or receive approvals from, the relevant state authorities.
RESTRICTIONS ON RESALES OF STAGE COMMON STOCK BY AFFILIATES
The shares of Stage Common Stock to be issued to the Stockholders in the
Merger are being registered under the Securities Act pursuant to the
Registration Statement. However, because some Stockholders are or may be
affiliates of CR Anthony at the time of the Special Meeting, such persons will
not be able to resell the Stage Common Stock received by them in the Merger
unless such Stage Common Stock is registered for resale under the Securities
Act, is sold in compliance with an exemption from the registration requirements
of the Securities Act or is sold in compliance with Rule 145 under the
Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Stage Common Stock
acquired by such affiliates of CR Anthony pursuant to the Merger will be subject
to certain restrictions. Such persons may sell Stage Common Stock under Rule 145
only if (i) Stage Stores has filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months, (ii) the Stage
Common Stock is sold in a "broker's transaction," which is defined in Rule 144
under the Securities Act as a sale in which (a) the seller does not solicit or
arrange for orders to buy the securities, (b) the seller does not make any
payment other than to a broker, (c) the broker does no more than execute the
order and receive a nominal commission and (d) the broker does not solicit
customer orders to buy the securities, and (iii) such sale and all other sales
made by such person within the preceding three months do not collectively exceed
the greater of (x) 1% of the outstanding shares of Stage Common Stock and (y)
the average weekly trading volume of Stage Common Stock on all national
securities exchanges during the four-week period preceding the sale.
57
<PAGE>
DESCRIPTION OF STAGE STORES CAPITAL STOCK
As of May 3, 1997, Stage Stores' authorized capital stock consisted of
75,000,000 shares of Common Stock, par value $0.01 per share, 3,000,000 shares
of Class B Common Stock, par value $0.01 per share, and 2,500 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). The
descriptions set forth below of the Stage Common Stock and the Stage Stores
Preferred Stock constitute brief summaries of certain provisions of the Stage
Stores Charter and the Stage Stores Bylaws and are qualified in their entirety
by reference to the relevant provisions of such documents, all of which are
filed as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part and are incorporated herein by reference.
STAGE COMMON STOCK
As of May 3, 1997, there were 22,047,899 shares of Stage Common Stock
outstanding held by 97 holders of record. The issued and outstanding shares of
Stage Common Stock are validly issued, fully paid and nonassessable. Subject to
the prior rights of the holders of any Preferred Stock and restrictions
contained in Stage Stores' indebtedness, the holders of outstanding shares of
Stage Common Stock are entitled to receive dividends out of assets legally
available therefor at such times and in such amounts as the Board may from time
to time determine.
The shares of Stage Common Stock are not redeemable or convertible, and the
holders thereof have no preemptive or subscription rights to purchase any
securities of Stage Stores. Upon liquidation, dissolution or winding up of Stage
Stores, the holders of Stage Common Stock are entitled to receive pro rata,
along with the holders of Stage Common Stock, the assets of Stage Stores which
are legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.
The Stage Common Stock is listed on NASDAQ under the symbol "STGE."
The outstanding shares of Stage Common Stock are, and the shares of Stage
Common Stock to be issued in connection with the Merger will be, fully paid and
nonassessable. Additional shares of Stage Common Stock may be issued, as
authorized by the board of directors of Stage Stores from time to time, without
stockholder approval, except any stockholder approval required by NASDAQ.
STAGE STORES CLASS B COMMON STOCK
Unless otherwise required by law, holders of the Stage Stores Class B Common
Stock are not entitled to vote on matters submitted to a vote of stockholders,
including the election of directors. Holders of Stage Stores Class B Common
Stock may elect at any time to convert any or all of such shares into Stage
Common Stock, on a share for share basis, to the extent such holder is not
prohibited from owning additional voting securities by virtue of regulatory
restrictions.
As of May 3, 1997, there were 1,250,584 shares of Stage Stores Class B
Common Stock outstanding held by one holder of record. The issued and
outstanding shares of Stage Stores Class B Common Stock are validly issued,
fully paid and nonassessable. Subject to the prior rights of the holders of any
Stage Stores Preferred Stock and restrictions contained in Stage Stores'
indebtedness, the holders of outstanding shares of Stage Stores Class B Common
Stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as the Board may from time to time determine.
The shares of Stage Stores Class B Common Stock are not redeemable or
convertible other than into shares of Stage Common Stock, and the holders
thereof have no preemptive or subscription rights to purchase any securities of
Stage Stores. Upon liquidation, dissolution or winding up of Stage Stores, the
holders of Stage Stores Class B Common Stock are entitled to receive pro rata,
along with the holders of Stage Common Stock, the assets of Stage Stores which
are legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Stage Stores
Preferred Stock then outstanding.
STAGE STORES PREFERRED STOCK
As of May 3, 1997, there were no shares of Preferred Stock outstanding. The
Stage Stores board of directors may, without further action by the Stage Stores'
stockholders, from time to time, direct the issuance of additional shares of
Preferred Stock in series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of Preferred Stock would reduce the amount of
funds
58
<PAGE>
available for the payment of dividends on shares of Stage Common Stock. Holders
of shares of Preferred Stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Stage Stores
before any payment is made to the holders of shares of Stage Common Stock. Under
certain circumstances, the issuance of shares of Preferred Stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Stage Stores'
securities or the removal of incumbent management. The Stage Stores board of
directors, without stockholder approval, may issue shares of Preferred Stock
with voting and conversion rights which could adversely affect the holders of
shares of Stage Common Stock. Stage Stores currently has no present intention to
issue any shares of Preferred Stock.
COMPARISON OF STOCKHOLDER RIGHTS
Stage Stores is a Delaware corporation subject to the provisions of the
Delaware General Corporation Law, as amended (the "Delaware Act") and CR Anthony
is an Oklahoma corporation subject to the Oklahoma Act. The rights of current
Stockholders are governed by CR Anthony's Restated Certificate of Incorporation
(the "CR Anthony Charter"), CR Anthony's Bylaws (the "CR Anthony Bylaws") and
the Oklahoma Act. If the Forward Merger is effected, upon consummation of the
Forward Merger, holders of Shares who receive Stage Common Stock in exchange for
their Shares will become stockholders of Stage Stores and, at the Effective
Time, their rights as stockholders will be determined by Stage Stores' Restated
Certificate of Incorporation (the "Stage Stores Charter"), Stage Stores' Amended
and Restated Bylaws (the "Stage Stores Bylaws") and the Delaware Act.
The following is a summary of the material differences in the rights of
Stockholders under the CR Anthony Charter and the CR Anthony Bylaws and the
rights of stockholders of Stage Stores under the Stage Stores Charter and the
Stage Stores Bylaws. The following discussion does not purport to be a complete
discussion of, and is qualified in its entirety by reference to, the Oklahoma
Act and the Delaware Act and the Stage Stores Charter, the CR Anthony Charter,
the Stage Stores Bylaws and the CR Anthony Bylaws.
CR Anthony Stage Stores
---------- ------------
AUTHORIZED CAPITAL STOCK
The authorized capital stock of CR The authorized capital stock of Stage
Anthony consists of 50,000,000 Stores consists of 75,000,000 shares of
shares of voting common stock, voting common stock, par value $0.01 per
$0.01 par value per share. share, 3,000,000 shares of
nonvoting Class B common stock, par
value $0.01 per share, and 2,500
shares of preferred stock, par value
$1.00 per share.
VOTING RIGHTS
Holders of the Shares are entitled Holders of Stage Common Stock are
to full voting rights, with one entitled to full voting rights, with
vote for each share held of record one vote for each share held of
on all matters submitted to a vote record on all matters submitted to a
of stockholders. vote of stockholders.
Holders of Stage Stores Class B Common
Stock are not entitled to vote on
matters submitted to a vote of
stockholders, including the election of
directors. Holders of Stage Stores Class
B Common Stock may elect at any time to
convert any or all of such shares into
Stage Common Stock, on a share for share
basis, to the extent such holder is not
prohibited from owning additional voting
securities by virtue of regulatory
restrictions.
BOARD OF DIRECTORS
59
<PAGE>
CR Anthony Stage Stores
---------- ------------
The CR Anthony Board is divided The Stage Stores Charter provides
into two classes of directors with that, subject to any rights of the
directors serving one-year terms. holders of any series of Preferred
The CR Anthony Charter provides Stock to elect additional directors
that the number of directors shall under specified circumstances, the
be fixed from time to time by the number of directors shall be fixed by
CR Anthony Board. Currently, the resolution adopted by the affirmative
number of CR Anthony directors is vote of the majority of the total
fixed at five. number of directors then in office.
Currently, the number of Stage Stores
directors is fixed at eight.
PAYMENT OF DIVIDENDS TO STOCKHOLDERS
The CR Anthony Bylaws provide that The Stage Stores Bylaws provide that
the CR Anthony Board may declare its board of directors may declare
dividends from time to time out of dividends at any regular or special
funds legally available therefor. meeting, in accordance with
applicable law.
As of May 3, 1997, there were no shares
of Stage Stores Preferred Stock
outstanding. The Stage Stores board of
directors may, without further action by
the Stage Stores' stockholders, from
time to time, direct the issuance of
additional shares of Stage Stores
Preferred Stock in series and may, at
the time of issuance, determine the
rights, preferences and limitations of
each series. Satisfaction of any
dividend preferences of outstanding
shares of Stage Stores Preferred Stock
would reduce the amount of funds
available for the payment of dividends
on shares of Stage Common Stock.
SPECIAL MEETING OF STOCKHOLDERS
The CR Anthony Bylaws provide that The Stage Stores Bylaws provide that
special meetings of Stockholders special meetings of stockholders may be
may be called at any time by the called only in the manner provided in
chief executive officer or by the the Stage Stores Charter. The Stage
board of directors. Stores Charter provides that, subject to
the rights of any series of Preferred
Stock, special meetings
of stockholders may be called only by
either the board of directors
pursuant to a majority vote of the
directors then in office or the
executive officer.
STOCKHOLDER CONSENT TO ACTION WITHOUT A MEETING
Section 1073 of the Oklahoma Act Under Delaware Act Section 228, unless
is substantially similar to otherwise provided in a corporation's
Section 228 of the Delaware Act. certificate of incorporation, any action
The CR Anthony Charter also required to be taken at an annual
prohibits stockholder action by meeting or special meeting of the
written consent. stockholders may be taken without such a
meeting, without prior notice and
without a vote if a consent in writing,
setting forth the action to be taken, is
signed by the holders of outstanding
stock representing the number of
shares necessary to take such action
at a meeting at which all shares
entitled to vote were present. The
Stage Stores Charter prohibits
stockholder action by written consent.
LIQUIDATION RIGHTS
60
<PAGE>
CR Anthony Stage Stores
---------- ------------
In the event of any liquidation, In the event of any liquidation,
dissolution or winding up of CR dissolution or winding up of Stage
Anthony, all assets and funds of the Stores, all assets and funds of
company remaining after the payment the company remaining after the
to the holders of any preferred stock payment to the holders of any
of any preferential amounts to which preferred stock of any preferential
such holders are entitled, shall be amounts to which such holders are
divided and distributed pro rata entitled, shall be divided and
among the holders of the Shares. distributed pro rata among the holders
of the Stage Common Stock and the Stage
Stores Class B Common Stock.
As of May 3, 1997 there were no shares
of Stage Stores Preferred Stock
outstanding. The Stage Stores board of
directors may, without further action by
the Stage Stores' stockholders, from
time to time, direct the issuance of
additional shares of Preferred Stock in
series and may, at the time of issuance,
determine the rights, preferences and
limitations of each series. Holders of
shares of Preferred Stock may be
entitled to receive a preference payment
in the event of any liquidation,
dissolution or winding-up of the Stage
Stores before any payment is made to the
holders of shares of Stage Common Stock.
See "DESCRIPTION OF STAGE STORES CAPITAL
STOCK - Stage Stores Preferred Stock."
AMENDMENT OF BYLAWS
The CR Anthony Charter provides Section 109 of the Delaware Act
that the Stockholders are provides that the stockholders
entitled to vote on the approval entitled to vote have the power to
of any amendment to or repeal of adopt, amend or repeal bylaws and
the CR Anthony bylaws. The CR that a corporation may, in its
Anthony Bylaws provide that the CR certificate of incorporation, confer
Anthony Bylaws may be altered, such powers on the board of
amended, repealed or new bylaws directors. In accordance with the
adopted by the approval of holders Stage Stores Charter, the Stage
of two-thirds (66 2/3%) of all the Stores Bylaws may be altered, amended
issued and outstanding shares of or repealed by either the affirmative
common stock of CR Anthony vote of 70% of the total number of
entitled to vote. directors then in office or the
affirmative vote of a majority of the
outstanding shares of Stage Common
Stock entitled to vote.
61
<PAGE>
CR Anthony Stage Stores
---------- ------------
AMENDMENT OF CERTIFICATE OF INCORPORATION
Section 1077 of the Oklahoma Act Section 242 of the Delaware Act provides
is substantially similar to that a Delaware corporation may amend
Section 242 of the Delaware Act. its certificate of incorporation in any
The CR Anthony Charter may be respect provided that the amendment
amended with the approval of the contains only provisions which would
holders of two-thirds (66 2/3%) of have been lawful in the original
all of the issued and outstanding certificate of incorporation. A majority
shares of common stock entitled to of the shares entitled to vote as well
vote. as a majority of shares of each class
entitled to vote thereon is required to
amend the certificate of incorporation.
Notwithstanding any provision in the
certificate of incorporation to the
contrary, the Delaware Act provides that
any shares which are adversely affected
by an amendment are entitled to vote on
that amendment. If shares of any
class are affected adversely while
other shares of that same class are
not so affected, then those shares
affected shall vote as a separate
class. Generally, the Stage Stores
Charter may be amended as prescribed
by the Delaware Act.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1031 of the Oklahoma Act Section 145 of the Delaware Act provides
is substantially similar to that a corporation may indemnify any
Section 145 of the Delaware Act. person who is a party to any action,
The CR Anthony Charter and CR suit or proceeding by reason of the fact
Anthony Bylaws provide that CR that he or she was a director, officer,
Anthony shall indemnify its employee or agent of the corporation or
directors and officers to the is or was serving at the request of the
fullest extent authorized or corporation as a director, officer,
permitted by law. employee or agent or another entity at
the request of the corporation,
provided that such person acted in good
faith and in a manner such person
reasonably believed to be in or not
opposed to the best interests of the
corporation. The Stage Stores Bylaws
provide for indemnification of officers,
directors, employees and agents, to the
extent permitted by the Delaware Act.
62
<PAGE>
CR Anthony Stage Stores
---------- ------------
REMOVAL OF DIRECTORS
Section 1027 of the Oklahoma Act Under Section 141 of the Delaware Act,
is substantially similar to any director or the entire board of
Section 141 of the Delaware Act. directors may be removed, with or
The CR Anthony Charter provides without cause, by the holders of a
that a director may be removed by majority of the shares entitled to vote
the Stockholders only for cause at an election of directors, except (i)
and with the approval of the unless the certificate of incorporation
holders of two-thirds (66 2/3%) of otherwise provides, in the case of a
all of the issued and outstanding corporation having a classified board,
shares of common stock entitled to stockholders may effect such removal
vote. CR Anthony does not have only for cause, and (ii) in the case of
cumulative voting. a corporation having cumulative voting,
if less than the entire board is to be
removed, no director may be removed
without cause if the votes cast against
his removal would be sufficient to elect
him if then cumulatively voted at an
election of the entire board of
directors or, if there are classes of
directors, at an election of the class
of directors of which he or she is a
part, and (iii) when the certificate of
incorporation provides that a class or
series, voting as a class, is entitled
to elect one or more directors, any
director so elected may be removed only
by the applicable vote of that class or
series, voting as a class. Stage Stores
does not have cumulative voting. The
Stage Stores Charter provides that no
director may be removed without cause
and without a majority vote of holders
of the Stage Common Stock.
STOCKHOLDER RIGHTS PLANS
The Oklahoma Act does not contain The Delaware Act does not contain any
any provisions allowing or provisions allowing or prohibiting
prohibiting stockholder rights stockholder rights plans. Delaware
plans. CR Anthony does not have a courts have permitted the adoption of
rights plan in effect. stockholder rights plans. Stage
Stores does not have a rights plan in
effect.
EXPERTS
The consolidated financial statements of Stage Stores and subsidiaries
incorporated in this Proxy Statement/Prospectus by reference to the Stage Stores
Annual Report on Form 10-K for the year ended February 1, 1997 have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference from CR Anthony's Annual Report on Form 10-K
for the 52 weeks ended February 1, 1997, the 53 weeks ended February 3, 1996 and
the 52 weeks ended January 29, 1995 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Stage Common Stock to be issued in connection
with the Merger and offered hereby will be passed upon by Kirkland & Ellis. In
addition, Kirkland & Ellis and McKinney, Stringer & Webster, P.C. will deliver
opinions to CR Anthony and Stage Stores, respectively, as to certain tax
matters.
63
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
STAGE STORES, INC.
AND
C.R. ANTHONY COMPANY
March 5, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. DEFINITIONS ................................................... 1
Section 2. BASIC TRANSACTION ............................................. 6
a. MERGER ALTERNATIVES ............................................... 6
b. THE CLOSING ....................................................... 7
c. ACTIONS AT THE CLOSING ............................................ 7
d. EFFECT OF MERGER .................................................. 7
e. PROCEDURE FOR PAYMENT ............................................. 9
f. CLOSING OF TRANSFER RECORDS ....................................... 9
g. DISSENTING HOLDERS OF CRA SHARES .................................. 10
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA ......................... 10
a. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER .................. 10
b. CAPITALIZATION OF CRA AND ITS SUBSIDIARIES ........................ 10
c. AUTHORIZATION OF TRANSACTION ...................................... 11
d. NONCONTRAVENTION .................................................. 11
e. FILINGS WITH THE SEC .............................................. 12
f. FINANCIAL STATEMENTS .............................................. 12
g. ABSENCE OF CERTAIN DEVELOPMENTS ................................... 12
h. LITIGATION ........................................................ 14
i. UNDISCLOSED LIABILITIES ........................................... 14
j. TAXES ............................................................. 15
k. ENVIRONMENTAL MATTERS ............................................. 16
l. EMPLOYEE MATTERS .................................................. 17
m. LABOR MATTERS ..................................................... 17
n. EMPLOYEE BENEFIT PLANS ............................................ 18
o. PROPRIETARY RIGHTS ................................................ 19
p. CONTRACTS ......................................................... 20
q. BOOKS AND RECORDS ................................................. 21
r. INSURANCE ......................................................... 21
s. REAL PROPERTY ..................................................... 22
t. TRANSACTIONS WITH AFFILIATES ...................................... 24
u. ACCOUNTS RECEIVABLE ............................................... 24
v. INVENTORY ......................................................... 24
w. SUFFICIENCY OF ASSETS ............................................. 24
x. BOARD RECOMMENDATION .............................................. 24
y. BROKERS' FEES ..................................................... 24
z. DISCLOSURE ........................................................ 25
aa. TAX-FREE REORGANIZATION REQUIREMENTS ............................. 25
Annex A - Page i
<PAGE>
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB .......... 25
a. ORGANIZATION ...................................................... 25
b. CAPITALIZATION .................................................... 25
c. AUTHORIZATION OF TRANSACTION ...................................... 26
d. NONCONTRAVENTION .................................................. 26
e. FILINGS WITH THE SEC .............................................. 26
f. FINANCIAL STATEMENTS .............................................. 26
g. DISCLOSURE ........................................................ 27
h. INVESTMENT COMPANY ................................................ 27
i. ABSENCE OF CERTAIN DEVELOPMENTS ................................... 27
j. LITIGATION ........................................................ 27
k. TAXES ............................................................. 27
l. ENVIRONMENTAL ..................................................... 27
m. EMPLOYEE BENEFITS PLAN ............................................ 28
n. BOOKS AND RECORDS ................................................. 28
o. INSURANCE ......................................................... 28
p. BROKER'S FEE ...................................................... 28
Section 5. COVENANTS ..................................................... 28
a. GENERAL ........................................................... 28
b. NOTICES AND CONSENTS .............................................. 28
c. REGULATORY MATTERS AND APPROVALS .................................. 28
d. AGREED UPON PROCEDURE LETTER/COMFORT LETTER ....................... 30
e. LISTING OF SSI SHARES ............................................. 30
f. CRA OPERATION OF BUSINESS ......................................... 30
g. FULL ACCESS ....................................................... 31
h. NOTICE OF DEVELOPMENTS ............................................ 32
i. ACQUISITION PROPOSALS ............................................. 32
j. AFFILIATE AGREEMENTS .............................................. 32
k. CLOSING DOCUMENTS ................................................. 32
l. DIRECTORS AND OFFICER'S INSURANCE ................................. 32
m. SEVERANCE AGREEMENTS .............................................. 33
n. OPTION CANCELLATION AGREEMENTS .................................... 33
Section 6. CONDITIONS TO CLOSING ......................................... 33
a. CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB ................... 33
b. CONDITIONS TO OBLIGATIONS OF CRA .................................. 35
Section 7. TERMINATION AND ITS CONSEQUENCES .............................. 36
a. TERMINATION OF AGREEMENT .......................................... 36
b. CONSEQUENCES OF CERTAIN TERMINATIONS .............................. 37
Section 8. MISCELLANEOUS ................................................. 37
a. SURVIVAL .......................................................... 37
b. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS ........................... 37
c. NO THIRD PARTY BENEFICIARIES ...................................... 38
d. ENTIRE AGREEMENT .................................................. 38
e. SUCCESSION AND ASSIGNMENT ......................................... 38
Annex A - Page ii
<PAGE>
f. COUNTERPARTS ...................................................... 38
g. HEADINGS .......................................................... 38
h. NOTICES ........................................................... 38
i. GOVERNING LAW ..................................................... 39
j. AMENDMENTS AND WAIVERS ............................................ 39
k. SEVERABILITY ...................................................... 39
l. EXPENSES .......................................................... 39
m. CONSTRUCTION ...................................................... 39
n. INCORPORATION OF EXHIBITS AND SCHEDULES ........................... 40
o. WAIVER OF JURY TRIAL .............................................. 40
p. TIME IS OF THE ESSENCE; COMPUTATION OF TIME ....................... 40
q. SPECIFIC PERFORMANCE .............................................. 40
Disclosure Schedule - Exceptions to Representations and Warranties
Exhibit A - Form of Termination Option Agreement
Annex A - Page iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of March 5,
1997, by and between Stage Stores, Inc., a Delaware corporation ("SSI"), and
C.R. Anthony Company, an Oklahoma corporation ("CRA"). SSI and CRA are referred
to collectively herein as the "PARTIES."
RECITALS
The respective boards of directors of SSI and CRA have determined
that it would be consistent with and in furtherance of the long-term business
strategy of SSI and CRA, and that it would be fair to and in the best interests
of CRA and its stockholders, to engage in a transaction whereby CRA and the
Merger Sub (as defined below) will merge on the terms described herein (the
"MERGER").
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Section 1. DEFINITIONS.
"AFFECTED PROPERTY" has the meaning ascribed to such term in ss.
3(k).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"BASE PRICE" per CRA Share means $8.00 PLUS 1(cent) for every
5(cent) by which the SSI Average Closing Price exceeds $20.00.
"BENEFIT PLAN" has the meaning ascribed to such term in ss. 3(n).
"BOARD MEETING" has the meaning set forth in ss.3(x) below.
"CERTIFICATE OF MERGER" has the meaning set forth in ss.2(c) below.
"CLOSING" has the meaning set forth in ss.2(b) below.
"CLOSING DATE" has the meaning set forth in ss.2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED DISCLOSURE Document" means the disclosure document
combining the Prospectus and the Definitive CRA Proxy Materials.
"COMPANY SECURITIES" has the meaning set forth in ss.3(b)(i) below.
<PAGE>
"CONTRACT" means any loan or credit agreement, note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument, Benefit Plan or practice or other agreement,
obligation, instrument or commitment of any nature whether written or oral.
"CRA ACQUISITION PROPOSAL" shall mean any proposal (other than any
proposal by SSI or the Merger Sub with respect to the Merger) regarding (i) any
merger, consolidation, share exchange, business combination or other similar
transaction or series of related transactions involving CRA or any Subsidiary of
CRA; (ii) any sale, lease, exchange, transfer or other disposition of the assets
of CRA or any of its Subsidiaries; and (iii) any offer to purchase, tender
offer, exchange offer or any similar transaction or series of related
transactions made by any Person involving the outstanding shares of any class of
capital stock of CRA or the filing of any Statement on Schedule 14D-1 with the
SEC in connection therewith.
"CRA INFORMATION" has the meaning set forth in ss.3(z) below.
"CRA MATERIAL ADVERSE EFFECT" means any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of CRA and its Subsidiaries taken as a whole including, without
limitation, any change which will, or can reasonably be expected to, cause a
loss or losses to SSI which, individually or in the aggregate, exceed
$1,000,000.
"CRA OPTIONS" has the meaning set forth in ss.2(d)(vi) below.
"CRA SHARE" means a share of CRA common stock, par value $.01 per
share.
"CRA STOCKHOLDER" means any Person who or which holds any CRA
Shares.
"CRA STOCKHOLDER VOTE" has the meaning set forth in ss.5(c)(ii)
below.
"DEFINITIVE CRA PROXY MATERIALS" means the definitive proxy
materials relating to the CRA Stockholder Vote.
"DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 and ss.4
below.
"EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, license, permit, authorization, approval,
consent, court order, judgment, decree, injunction, code, requirement or
agreement with any governmental authority, and all common law (x) relating to
pollution (or the cleanup thereof or the filing of information with respect
thereto), human health or the protection of air, surface water, ground water,
drinking water supply, land (including land surface or subsurface), plant and
animal life or any other natural resource, or (y) concerning exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production or disposal of Regulated Substances, in each case
as amended and as now or hereafter in effect. The term Environmental Law
includes, without limitation, (i) the Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Water Pollution Control Act, the
Clean Air Act, the Clean Water Act, the Solid Waste Disposal
Annex A - Page 2
<PAGE>
Act (including the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984), the Toxic Substances Control Act,
the Insecticide, Fungicide and Rodenticide Act, the Occupational Safety and
Health Act of 1970, each as amended and as now or hereafter in effect, and (ii)
any common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to or threatened as a result of the presence of, exposure to, or ingestion of,
any Regulated Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any person who, together with CRA, is
treated as a single employer under Sections 414(b), 414(c), 414(m) or 414(o) of
the Code.
"EXCHANGE AGENT" means Chase Mellon Shareholder Services, L.L.C.
"EXECUTIVE SEVERANCE AGREEMENTS" means the Executive Severance
Compensation Agreements, dated as of April 1, 1995, between CRA and each of John
J. Wiesner, Michael E. McCreery, Michael J. Tanner and William A. North, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in ss.3(f) below.
"GAAP" means at any time, the United States generally accepted
accounting principles as in effect at that time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"IMPROVEMENTS" has the meaning set forth in ss.3(s)(iii) below.
"IRS" means the Internal Revenue Service.
"LEASED REAL PROPERTY" has the meaning set forth in ss.3(s)(ii)
below.
"LEASES" has the meaning set forth in ss.3(s)(ii) below.
"MERGED CORPORATION" means any corporation whose separate corporate
existence is extinguished as a result of the Merger.
"MERGER CONSIDERATION" has the meaning set forth in ss.2(d)(v)
below.
"MERGER SUB" means either SRI or a Delaware corporation wholly-owned
by SSI and formed solely for the purpose of consummating the Merger.
"NASDAQ" has the meaning set forth in the definition of "SSI AVERAGE
CLOSING PRICE" below.
Annex A - Page 3
<PAGE>
"OPTION CANCELLATION Agreement" has the meaning set forth in ss.5(n)
below.
"OPTION PLAN" means CRA's 1992 Amended and Restated Stock Option
Plan dated January 10, 1997, and certain contracts dated June 10, 1996 with
certain parties pursuant to such plan as in effect on the date hereof.
"OKLAHOMA ACT" means the Oklahoma General Corporation Act, as
amended.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice, including, without limitation, the
quantity and frequency of transactions, retail store leases, inventory
transactions, payroll expenses and marketing costs, considering, however, the
circumstances that CRA will not survive the consummation of the Merger
contemplated hereby.
"OWNED REAL PROPERTY" has the meaning set forth in ss.3(s)(i) below.
"PARTY" or "PARTIES" has the meaning set forth in the preface.
"PBGC" has the meaning set forth in ss.3(n)(vi) below.
"PERMITTED ENCUMBRANCES" has the meaning set forth in ss.3(s)(i)
below.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PROSPECTUS" means the final prospectus relating to the registration
of SSI Shares under the Securities Act.
"PROPRIETARY RIGHTS" has the meaning set forth in ss. 3(o) below.
"PUBLIC REPORTS" has the meaning set forth in ss.3(f) below.
"REAL PROPERTY" has the meaning set forth in ss.3(s)(ii) below.
"REAL PROPERTY LAWS" has the meaning set forth in ss.3(s)(v) below.
"REAL PROPERTY PERMITS" has the meaning set forth in ss.3(s)(iv)
below.
"REGISTRATION STATEMENT" has the meaning set forth in ss.5(c)(i)
below.
"REGULATED SUBSTANCES" means pollutants, contaminants, hazardous or
toxic substances, compounds or related materials or chemicals, hazardous
materials, hazardous waste, flammable materials, explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products (including, but not limited to,
waste petroleum and petroleum products).
Annex A - Page 4
<PAGE>
"REQUISITE CRA STOCKHOLDER APPROVAL" has the meaning set forth in
ss.3(c) below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, equity or other encumbrance, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SEVERANCE PAY PLAN" means the C.R. Anthony Company Severance Pay
Plan, dated as of August 3, 1992, as amended.
"SRI" means Specialty Retailers, Inc., a Texas corporation and
wholly-owned subsidiary of SSI.
"SSI AVERAGE CLOSING PRICE" means the average closing price
expressed in dollars per SSI Share quoted on the NASDAQ National Market System
("NASDAQ") for the ten trading days selected by lot by CRA and SSI out of the
twenty most recent consecutive trading days prior to and including the fifth
trading day preceding the Closing Date. For purposes hereof, selection by lot
shall mean that all of the twenty most recent trading days are each identified
on separate pieces of paper, placed in a receptacle, and each of the Parties
draws a number in alternating manner, beginning with CRA, until the ten trading
days are selected.
"SSI FINANCIAL STATEMENTS" has the meaning set froth in ss.4(f)
below.
"SSI INFORMATION" has the meaning set froth in ss.4(g) below.
"SSI MATERIAL ADVERSE EFFECT" means any change in or effect on the
business of SSI or any of its Subsidiaries that, individually or in the
aggregate, is or will be materially adverse to the business, operations
(including the income statement), properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or regulatory status of
SSI and its Subsidiaries taken as a whole.
"SSI PUBLIC REPORTS" has the meaning set forth in ss.4(f) below.
"SSI SHARE" means a share of SSI common stock, $.01 par value per
share.
"SSI STOCK PERCENTAGE" has the meaning set forth in ss.2(a) below.
"SUBSEQUENT SSI EXCHANGE ACT REPORTS" has the meaning set forth in
ss.5(c)(i).
Annex A - Page 5
<PAGE>
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.
"SURVIVOR'S ACT" means the corporation law or other law governing
mergers in the state of incorporation of the Surviving Corporation.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, real property gains, registration, value added, excise, natural
resources, severance, stamp, occupation, windfall profits, environmental (under
Section 59A of the Code), customs, duties, real property, personal property,
capital stock, social security (or similar), unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or similar items in
respect of the foregoing (whether disputed or not).
"TAX RETURN" means any return, report, declaration, claim for
refund, information return or other document (including any related or
supporting schedule, statement or information) filed or required to be filed in
connection with the determination, assessment or collection of any Tax of any
party or the administration of any laws, regulations or administrative
requirements relating to any Tax (including any amendment thereof).
"TERMINATION OPTION Agreement" means the option granted by CRA to
SSI on the date hereof, a copy of which is attached as EXHIBIT A.
"TEXAS ACT" means the Texas Business Corporation Act, as amended.
"TRIGGERING EVENT" means any of the following events: (i) the board
of directors of CRA shall have failed to recommend, shall have withdrawn or
shall have modified, in a manner adverse to either SSI or Merger Sub, its
recommendation or approval of this Agreement for any reason other than as
provided in ss. 7(a); (ii) the board of directors of CRA shall have approved,
endorsed or recommended any CRA Acquisition Proposal; (iii) CRA shall have
entered into any Contract to consummate any CRA Acquisition Proposal; (iv) this
Agreement shall not have received the Requisite CRA Stockholder Approval and at
the time of such event an offer or proposal to affect a CRA Acquisition Proposal
shall have been made; (v) the representations and warranties set forth in ss.3
hereunder shall cease to be true and correct at and as of the Closing Date and
such failure shall result in a CRA Material Adverse Effect; or (vi) CRA shall
not have performed and complied with all of its covenants hereunder through the
Closing and such failure shall result in a CRA Material Adverse Effect.
Section 2. BASIC TRANSACTION.
a. MERGER ALTERNATIVES . On and subject to the terms and conditions
of this Agreement, the Merger will take place at the Effective Time. The
structure of the Merger will either be a forward merger with the Merger Sub
surviving or a reverse merger with CRA surviving, as may
Annex A - Page 6
<PAGE>
be determined by SSI on the basis of what percentage ("SSI STOCK PERCENTAGE") of
the total merger consideration paid, plus amounts paid to the holders of CRA
Options and the Dissenting Shares pursuant to ss.ss.2(d)(vi) and (g) below is
represented by SSI Stock. If the SSI Stock Percentage is less than 80% and
greater than 50% the Merger Sub shall continue after the Merger with all its
rights, privileges, powers and franchises unaffected by the Merger and the
separate corporate existence of CRA shall cease. If the SSI Stock Percentage is
greater than or equal to 80% or less than or equal to 50%, CRA shall continue
after the Merger with all its rights, privileges, powers and franchises
unaffected by the Merger and the separate corporate existence of the Merger Sub
shall cease. From and after the Effective Time, whichever entity survives the
Merger in accordance with the preceding sentences shall be referred to herein as
the "SURVIVING CORPORATION" and whichever entity ceases to exist shall be
referred to as the "MERGED CORPORATION." Immediately following the Merger, if
the Surviving Corporation is not SRI, the Surviving Corporation may be merged
into SRI with SRI being the surviving corporation of that merger. The Parties
will take all steps necessary to cause the Merger to comply with applicable
requirements of local law regarding corporate mergers.
b. THE CLOSING . The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Kirkland &
Ellis in New York, New York, commencing at 10:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at or after the Closing itself) or such other date as the Parties may mutually
determine (the "CLOSING DATE").
c. ACTIONS AT THE CLOSING . At the Closing, (i) CRA and the CRA
Stockholders will deliver to Merger Sub and SSI the various certificates,
instruments, and documents referred to in ss.6(a) below, (ii) Merger Sub and SSI
will deliver to CRA the various certificates, instruments, and documents
referred to in ss.6(b) below, (iii) the Parties will file with the Secretary of
State of the state of incorporation of the Surviving Corporation a certificate
of merger in due and proper form (the "CERTIFICATE OF MERGER"), and (iv) SSI
will deliver to the Exchange Agent in the manner provided below in this ss.2 the
certificate evidencing SSI Shares issued in the Merger.
d. EFFECT OF MERGER .
i. GENERAL. The Merger shall become effective at the time
(the "EFFECTIVE TIME") the Parties file the Certificate of Merger
with the Secretary of State of the state of incorporation of the
Surviving Corporation. The Merger shall have the effect set forth in
the Survivor's Act. The Surviving Corporation may, at any time after
the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of the Merged
Corporation in order to fully carry out and effectuate the Merger.
ii. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the entity which becomes the Surviving Corporation
as in effect at and as of immediately prior to the Effective Time
will remain unchanged by the Merger and be the Certificate of
Incorporation of the Surviving Corporation.
Annex A - Page 7
<PAGE>
iii. BY-LAWS. The By-laws of the entity which becomes the
Surviving Corporation as in effect at and as of immediately prior to
the Effective Time will remain unchanged by the Merger and be the
By-laws of the Surviving Corporation.
iv. DIRECTORS AND OFFICERS. The directors and officers of
the Merger Sub in office at and as of immediately prior to the
Effective Time will be the directors and officers of the Surviving
Corporation.
v. CONVERSION OF CRA SHARES. At and as of the Effective
Time, as long as the SSI Average Closing Price is at least $15.00
per share, each CRA Share then outstanding shall by virtue of the
Merger be converted into the right to receive the following
(collectively the "MERGER CONSIDERATION"): 2. that number of SSI
Shares which, if valued at the SSI Average Closing Price have a
value equal to X multiplied by the Base Price; and 3. an amount of
cash equal to the Base Price multiplied by the remainder of one
MINUS X, where:
X = 1 - ((20 - Y) x .15) and
Y = the lesser of 20 or the SSI Average Closing Price;
PROVIDED, HOWEVER, that if the SSI Average Closing Price is less
than $15.00 and SSI elects to waive the condition set forth in
ss.6(a)(xv) and permit the Closing, the Merger Consideration shall
consist of (a) .1333 SSI Shares and (b) an amount in cash equal to
$8.00 minus the product of .1333 and the SSI Average Closing Price.
If any fractional interest of an SSI Share would, except for this
sentence, be deliverable in connection with this ss.2, SSI, in lieu
of delivering such fractional shares, may pay an amount in cash
equal to the value thereof. No CRA Share that is exchanged in
connection with the transactions contemplated by this Agreement
shall be deemed to be outstanding or to have any rights other than
those set forth above in this ss.2(d)(v) after the Effective Time.
vi. CRA OPTIONS. CRA shall take such action as may be
necessary or appropriate in order that, at the Effective Time, all
options outstanding (including those covered by Option Cancellation
Agreements) under the Option Plan that are unexercised, whether or
not then exercisable (the "CRA OPTIONS"), shall be automatically
cancelled by virtue of the Merger and the holders of the CRA Options
shall be entitled to receive in cash the remainder of (A) the Base
Price which would be payable with respect to the CRA Shares the
subject of such CRA Option LESS (B) the exercise price and any other
amounts payable by the holder with respect to such CRA Option.
Further, except as otherwise agreed to by the Parties, (i) the
Option Plan shall terminate as of the Effective Time and any rights
to receive Options or any other interest in respect of the capital
stock of CRA or any of its Subsidiaries thereunder shall be
terminated as of the Effective Time, and (ii) CRA shall take all
action necessary to ensure that following the Effective Time no
participant in the Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire or
participate in changes in value of equity securities
Annex A - Page 8
<PAGE>
of CRA, the Surviving Corporation, the Merger Sub or any of their
respective Subsidiaries and to terminate all such plans effective as
of the Effective Time.
vii. The adjustment provided herein with respect to any
options which are "incentive stock options" (as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"))
shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
e. PROCEDURE FOR PAYMENT .
i. Immediately after the Effective Time, (A) SSI will
furnish to the Exchange Agent a stock certificate (issued in the
name of the Exchange Agent or its nominee) representing that number
of SSI Shares equal to the product of (I) that number of SSI Shares
referred to in ss. 2(d)(v)(A) above multiplied by (II) the number of
outstanding CRA Shares, (B) SSI will cause the Exchange Agent to
mail a letter of transmittal for the holder to use in surrendering
the certificates which represented his or its CRA Shares in exchange
for a certificate representing the number of SSI Shares to which
that holder is entitled; PROVIDED, that certificates surrendered for
exchange by any Person constituting an "affiliate" of CRA for
purposes of Rule 144(c) under the Securities Act shall not be
exchanged for certificates representing SSI Shares until SSI shall
have received from such Person any documents referred to in ss.6(a)
below, if any, requiring delivery or execution by such Person, and
(C) SSI shall pay an amount equal to the cash portion of the Merger
Consideration per CRA Share times the number of outstanding CRA
Shares into an account designated by the Exchange Agent.
ii. SSI will not pay any dividend or make any distribution
on SSI Shares (with a record date at or after the Effective Time) to
any record holder of outstanding CRA Shares until the holder
surrenders for exchange that holder's certificates which represented
CRA Shares. SSI instead will pay the dividend or make the
distribution to the Exchange Agent in trust for the benefit of the
holder pending surrender and exchange. SSI may cause the Exchange
Agent to invest any cash the Exchange Agent receives from SSI as a
dividend or distribution in one or more permitted investments
determined by SSI; PROVIDED, HOWEVER, that the terms and conditions
of the investments shall be such as to permit the Exchange Agent to
make prompt payments of cash to the holders of outstanding CRA
Shares as necessary. SSI may cause the Exchange Agent to pay over to
SSI any net earnings with respect to the investments, and SSI will
replace promptly any cash which the Exchange Agent loses through
investments. In no event, however, will any holder of outstanding
CRA Shares be entitled to any interest or earnings on the dividend
or distribution pending surrender for exchange of his or its
certificates which represent CRA Shares.
iii. SSI may cause the Exchange Agent to return any SSI
Shares and dividends and distributions thereon remaining unclaimed
90 days after the Effective Time, and thereafter each remaining
record holder of outstanding CRA Shares shall be entitled to look to
SSI (subject to abandoned property, escheat, and other similar
Annex A - Page 9
<PAGE>
laws) as a general creditor thereof with respect to SSI Shares and
dividends and distributions thereon to which that record holder is
entitled upon surrendering its certificates.
iv. SSI and CRA shall share equally all charges and expenses
of the Exchange Agent.
f. CLOSING OF TRANSFER RECORDS . After the close of business on the
Closing Date, no transfers of CRA Shares outstanding prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation.
g. DISSENTING HOLDERS OF CRA SHARES. Notwithstanding any provision
of this Agreement to the contrary, CRA Shares that are outstanding immediately
prior to the Effective Time and that are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who have demanded
properly in writing appraisal for such CRA Shares in accordance with Section
1091 of the Oklahoma Act (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of stock held by them in accordance with the provisions of such Section
1091, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such Dissenting Shares under such Section 1091 shall thereupon
be deemed to be authorized and unissued shares of the Surviving Corporation
pursuant to Section 1091(L) of the Oklahoma Act.
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA. CRA represents and
warrants to the Merger Sub and SSI that the statements contained in this ss.3
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
ss.3), except as set forth in the disclosure schedule delivered concurrently
with this Agreement (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule of CRA
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this ss.3.
a. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER . Each of CRA
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation. Each of CRA
and its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required. Each of CRA and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
b. CAPITALIZATION OF CRA AND ITS SUBSIDIARIES .
i. CRA's authorized capital stock consists solely of
50,000,000 authorized shares of common stock, of which 9,035,645
shares are presently issued and outstanding, which shares are held
of record by the persons set forth on Schedule 3(b) in the amounts
set forth opposite such Person's name. No shares of CRA's capital
stock are held as treasury shares. 1,082,500 shares of common stock
are reserved for issuance upon the exercise of outstanding CRA
Options at a weighted
Annex A - Page 10
<PAGE>
average exercise price of $3.67 per CRA share. Except as set forth
above or in Schedule 3(b), CRA does not have (i) any shares of
common stock or preferred stock reserved for issuance, or (ii) any
outstanding or authorized option, warrant, right, call or commitment
relating to its capital stock or any outstanding securities or
obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire from it, any shares of
its capital stock (collectively, "COMPANY SECURITIES"). There are no
(i) outstanding obligations of CRA or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities or
(ii) authorized or outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to CRA or any of
its Subsidiaries. Except as set forth in Schedule 3(b), there are no
preemptive or other subscription rights with respect to any shares
of CRA's capital stock and all of the issued and outstanding shares
of capital stock of CRA have been duly authorized, validly issued,
are fully paid and are nonassessable. There are no voting trusts,
proxies or any other agreements or understandings with respect to
the voting of the capital stock of CRA or any of its Subsidiaries
(other than not more than 79,053 CRA shares subject to voting
trusts).
ii. All Subsidiaries of CRA are listed on Schedule 3(b).
Except as otherwise disclosed in Schedule 3(b), neither CRA nor any
Subsidiary owns any shares of stock of any corporation or any equity
interest in a partnership, joint venture or other business entity,
and neither CRA nor any of its Subsidiaries controls any other
corporation, partnership, joint venture or other business entity by
means of ownership, management contract or otherwise. Except for
directors' qualifying shares listed on Schedule 3(b), if any, all of
the outstanding capital stock of, or other ownership interests in,
each Subsidiary of CRA is owned beneficially and of record by CRA,
directly or indirectly, is validly issued, fully paid and
nonassessable and free and clear of any preemptive rights,
restrictions on transfer, Taxes or Security Interests or any other
limitation or restriction except as provided under the Securities
Act or state securities laws. There are no authorized or outstanding
securities of CRA or any of its Subsidiaries convertible into or
exchangeable for, no options, warrants, or other rights to acquire
from CRA or any of its Subsidiaries, and no other contract,
understanding or arrangement (whether or not contingent) granting to
any person the right to subscribe for, or providing for the issuance
or sale of, any capital stock or other ownership interest in, or any
other securities of, any such Subsidiary. There are no outstanding
obligations of CRA or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or
other ownership interests in any such Subsidiary.
c. AUTHORIZATION OF TRANSACTION . CRA has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; PROVIDED, HOWEVER, that CRA cannot consummate the Merger unless and
until it receives the Requisite CRA Stockholder Approval. This Agreement has
been duly authorized by the board of directors of CRA, has been duly executed
and delivered on behalf of CRA, and constitutes the valid and legally binding
obligation of CRA, enforceable and in effect in accordance with its terms and
conditions. The only vote of the CRA Stockholders required to consummate the
Merger is the affirmative vote of two-
Annex A - Page 11
<PAGE>
thirds of the holders of the outstanding CRA Shares pursuant to the bylaws of
CRA and Sections 1081 and 1082 of the Oklahoma Act (the "REQUISITE CRA
STOCKHOLDER APPROVAL").
d. NONCONTRAVENTION . Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of CRA or its Subsidiaries is subject
or any provision of the charter or bylaws of any of CRA or its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party a put right or repurchase obligation or
the right to accelerate, terminate, modify or cancel, or require any notice,
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of CRA or its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets including any Proprietary Rights), except for
any such matters which are set forth on Schedule 3(d). Other than in connection
with the provisions of the Hart-Scott-Rodino Act, the Texas Act, the Oklahoma
Act, the Securities Exchange Act, the Securities Act, the state securities laws
and the laws of any foreign jurisdiction, none of CRA or its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
e. FILINGS WITH THE SEC . CRA has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (including any exhibits and amendments thereto). Each such filing
complied with the Securities Act and the Securities Exchange Act in all material
respects when filed. No such filing, when filed, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
f. FINANCIAL STATEMENTS . CRA has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "PUBLIC REPORTS"). The financial statements included in or
incorporated by reference into the Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its subsidiaries for the indicated periods, are consistent with the books and
records of CRA and its Subsidiaries, and comply with the material provisions of
Regulations S-K and S-X of the Securities Act. Attached as Schedule 3(f) are the
unaudited consolidated balance sheet, income statement and cash-flow statement
of CRA and its Subsidiaries as of and for the fiscal quarter and fiscal year
ended February 1, 1997 (together with the Public Reports and including the
related notes and schedules, the "FINANCIAL STATEMENTS") which have been
prepared in accordance with GAAP on a basis consistent with the Public Reports,
except for footnote disclosures, applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its Subsidiaries for the indicated periods, and are consistent with the books
and records of CRA and its Subsidiaries. The financial statements to be
delivered pursuant to ss.5(f)(viii) will be derived from the accounting books
and records of CRA, will provide adequate disclosure of material changes to the
accounts or business of CRA and its Subsidiaries and will be prepared in
accordance with GAAP
Annex A - Page 12
<PAGE>
and otherwise on the same basis as the Financial
Statements, except that the monthly financial statements delivered pursuant to
ss. 5(f)(viii) may be subject to normal year-end adjustments.
g. ABSENCE OF CERTAIN DEVELOPMENTS . Except as expressly disclosed
in Schedule 3(g), since February 1, 1997 there has not been any material adverse
change to the financial condition, business, properties, results of operations
or prospects of CRA and its Subsidiaries. Except as disclosed in the Financial
Statements or as set forth in Schedule 3(g), and except for this Agreement and
the transactions contemplated hereby, since February 1, 1997, each of CRA and
its Subsidiaries has been operated in the Ordinary Course of Business. Without
limiting the generality of the foregoing, except as set forth on Schedule 3(g)
or as expressly contemplated by this Agreement, since February 1, 1997 none of
CRA nor any of its Subsidiaries has:
i. experienced any changes in any relationship with its
suppliers, customers, distributors, brokers, lessors or others,
other than changes in the Ordinary Course of Business;
ii. sold, leased, transferred, or assigned any of assets,
tangible or intangible, other than for fair consideration in the
Ordinary Course of Business;
iii. entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases or licenses)
involving more than $50,000.00 individually to which it is a party
or by which it is bound nor modified the terms of any such existing
contract or agreement (except for usual and ordinary purchase orders
executed for merchandise held for resale in the Ordinary Course of
Business and leases of certain real property as expressly disclosed
in Schedule 3(s)(i) or (ii));
iv. engaged in any activity which has resulted in any
acceleration or delay of the collection of its accounts or notes
receivables or any delay in the payment of its accounts payables, in
each case other than in the Ordinary Course of Business;
v. (nor has any other party) accelerated, terminated,
modified or cancelled any permit or agreement, contract, lease or
license other than in the Ordinary Course of Business or involving
more than $50,000.00 individually to which it is a party or by which
it is bound;
vi. suffered any damage, destruction or loss, whether or not
covered by insurance, affecting any material property or assets
owned or used by it;
vii. adopted, modified, amended or terminated any bonus,
profit-sharing, incentive, severance, or other similar plan
(including any Benefit Plan), contract, or commitment for the
benefit of any of its directors, officers, or employees, or
otherwise made any change in the employment terms (including any
increase in the base compensation) for any of its officers and
employees described in ss.3(l);
Annex A - Page 13
<PAGE>
viii. made any capital expenditure or any other investment
(or series of related investments) in excess of $50,000.00 other
than leasehold improvements and fixtures in retail stores made in
the Ordinary Course of Business;
ix. entered into any capital lease involving more than
$50,000.00 individually, issued any note, bond, or other debt
security or created, incurred, assumed, modified or guaranteed any
indebtedness or other liability;
x. imposed or suffered to exist any Security Interest on any
of its assets outside the Ordinary Course of Business or on any of
the CRA Shares; or transferred, leased, licensed, or sold, any
assets other than in the Ordinary Course of Business;
xi. cancelled, compromised, waived, or released any right or
claim (or series of related material rights and claims) in excess of
$50,000.00 in the aggregate;
xii. made or authorized any change in its charter or
by-laws;
xiii. issued, sold, or otherwise disposed of any of its
capital stock, or granted, modified or amended any options,
warrants, stock appreciation rights, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock or participate in any change in the value thereof;
xiv. made or been subject to change in its accounting
practices, procedures or methods or in its cash management
practices;
xv. entered into or become party to any agreement,
arrangement or transaction with any of its Affiliates or any of
their respective directors, officers, employees or stockholders,
including, without limitation, any (i) loan or advance funds, or
made any other payments, to any of its directors, officers,
employees, stockholders or Affiliates or (ii) creation or discharge
of any intercompany account;
xvi. paid or declared any dividend or other distribution in
cash or kind with respect to their respective capital stock or
redeemed, repurchased or otherwise acquired any such stock;
xvii. experienced any adverse changes with respect to the
Proprietary Rights;
xviii. experienced any material changes in the amount or
scope of coverage of insurance now carried by them; or
xix. committed to do any of the foregoing.
h. LITIGATION . Except as set forth in Schedule 3(h), there are no
judgments, decrees, lawsuits, actions, proceedings, claims, complaints,
injunctions, orders or investigations by or before any governmental authority
pending or threatened against CRA or its Subsidiaries
Annex A - Page 14
<PAGE>
(i) relating to CRA, any Subsidiary, their respective businesses, the
Proprietary Rights, or any product alleged to have been manufactured or sold by
CRA or any of its Subsidiaries, or (ii) seeking to enjoin the transactions
contemplated hereby. To CRA's knowledge, there are no existing facts or
circumstances which give any reason to believe that any such action, suit,
proceeding, hearing or investigation may be brought or threatened against CRA or
any of its Subsidiaries.
i. UNDISCLOSED LIABILITIES . Other than those reflected in the
Financial Statements (including the notes thereto) or disclosed in Schedule
3(i), there are no material liabilities of CRA or its Subsidiaries of any kind
or nature whatsoever, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, other than liabilities incurred in
the Ordinary Course of Business since February 1, 1997.
j. TAXES .
i. Copies of all Tax Returns now subject or potentially
subject to IRS audit are attached to Schedule 3(j). Except as set
forth on Schedule 3(j), each of CRA and its Subsidiaries has duly
and timely filed all Tax Returns required to be filed by it, all
such Tax Returns have been prepared in compliance with all
applicable laws and regulations and are true, correct and complete
in all respects. Except as set forth in Schedule 3(j), all Taxes
owed by each of CRA and its Subsidiaries, whether or not shown on
any Tax Return, have been timely paid. CRA and its Subsidiaries have
maintained adequate provision for Taxes payable by CRA and its
Subsidiaries as of February 1, 1997, and such provision and funds
(as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practices of each of CRA and its
Subsidiaries in filing its Tax Returns) will be adequate for Taxes
payable by CRA and its Subsidiaries as of the Closing Date. There
are no Security Interests on any of the assets of CRA or any of its
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax. CRA has made available to the Merger Sub
correct and complete copies of (A) its federal income Tax returns
for the last five (5) taxable years and the corresponding balance
sheets of CRA as of the end of such years and (B) other Tax Returns
as requested by the Merger Sub.
ii. Except as set forth on Schedule 3(j):
(1). each taxable period of CRA and each of its Subsidiaries
either (A) has been audited by the relevant taxing authority or (B)
has closed, so that no further assessment or collection of Tax may
occur and such taxable period is not subject to review by any
relevant taxing authority;
(2). neither CRA nor any of its Subsidiaries is the subject
of a Tax audit or examination, has consented to extend the time, or
is the beneficiary or any extension of time, in which any Tax may be
assessed or collected by any taxing authority;
Annex A - Page 15
<PAGE>
(3). neither CRA nor any of its Subsidiaries has received,
or expects to receive, from any taxing authority any written notice
of proposed adjustment, deficiency, underpayment of Taxes or any
other such notice which has not been satisfied by payment or been
withdrawn, and no claims have been asserted relating to such Taxes
against CRA or any such Subsidiary;
(4). CRA and each of its Subsidiaries has withheld and paid
all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
similar third party;
(5). neither CRA nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code;
(6). neither CRA nor any of its Subsidiaries will be
required, as a result of (A) a change in accounting method for a Tax
period beginning on or before the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any corresponding
provision of state, local or foreign Tax law) in taxable income for
any Tax period beginning on or after the Closing Date, or (B) any
"closing agreement," as described in Section 7121 of the Code (or
any corresponding provision of state, local or foreign Tax law), to
include any item or income in or exclude any item of deduction from
any Tax period beginning on or after the Closing Date;
(7). each of CRA and its Subsidiaries has disclosed on its
income Tax Returns all positions taken therein that could give rise
to an accuracy-related penalty under Section 6662 of the Code (or
any corresponding provision of Tax law);
(8). neither CRA 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 Section 280G or
Section 162(m) of the Code;
(9). within the last five years, no claim has been made by a
taxing authority in a jurisdiction where any of CRA or its
Subsidiaries does not pay Taxes or file Tax Returns that such entity
is or may be subject to Taxes assessed by such jurisdiction;
(10). neither CRA nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii);
(11). neither CRA nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement; and
(12). since August 3, 1992, neither CRA nor any of its
Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the
common parent of which was CRA) or (B) has any liability
Annex A - Page 16
<PAGE>
for the Taxes of any Person (other than CRA and its Subsidiaries)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract,
or otherwise.
iii. Schedule 3(j) sets forth as of February 4, 1996, the
amount and expiration date of any net operating loss, net capital
loss, unused foreign tax credit, and other unused credit of CRA and
its Subsidiaries.
k. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3(k), (i)
CRA and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws, (ii) without limiting the generality of the foregoing, CRA
and its Subsidiaries have obtained and complied with, and are in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental Laws for the occupation of their respective facilities
and the operation of their respective business, and a list of all such permits,
licenses and other authorizations is set forth on Schedule 3(k), (iii) the real
property currently owned or operated by CRA or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on or under
the properties and buildings thereon) (the "AFFECTED Property") does not contain
any Regulated Substance, (iv) neither CRA nor any of its Subsidiaries has
received any written or oral notice that CRA or any of its Subsidiaries may be
liable under or in violation of the Comprehensive Environmental Response,
Compensation and Control Act, 42 U.S.C. ss. 9601, ET SEQ. or any other
Environmental Laws in connection with any operations of, or waste disposal by,
CRA or any of its Subsidiaries, (v) neither CRA nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any Regulated Substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or could give rise to liabilities, or investigatory, corrective
or remedial obligations of CRA or any of its Subsidiaries under Environmental
Laws, including without limitation, any liability or obligation for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorneys' fees, pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, or the
Solid Waste Disposal Act, as amended, or any other Environmental Laws, (vi) CRA,
its Subsidiaries and the Affected Property are not presently subject to a suit
or judgment arising under any Environmental Law, and (vii) all documents filed
by or on behalf of CRA or any of its Subsidiaries with any governmental
authority pursuant to any Environmental Law in connection with the transactions
contemplated hereby were true, correct and complete in all material respects and
did not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
l. EMPLOYEE MATTERS. Schedule 3(l) contains a true and complete list
of (i) the employees currently employed by CRA and its Subsidiaries who received
annual compensation in 1996 (or who could receive annual compensation in 1997)
of $85,000.00 or more, indicating the title of and a description of any
agreements concerning such employees and the rate of all current compensation
payable by CRA or its Subsidiaries to each such employee and (ii) the directors
of each of CRA and its Subsidiaries.
m. LABOR MATTERS . Except as set forth on Schedule 3(m), (i) neither
CRA nor any of its Subsidiaries has entered into any collective bargaining
agreements with respect to the
Annex A - Page 17
<PAGE>
employees, (ii) there are no written personnel policies applicable to the
employees generally, other than employee manuals, true and complete copies of
which have previously been provided to Merger Sub, (iii) there is no labor
strike, dispute, slowdown or work stoppage or lockout pending or to CRA's best
knowledge after due investigation, threatened against or affecting CRA or any of
its Subsidiaries and during the past two years there has been no such action,
(iv) to CRA's knowledge after due investigation, no union organization campaign
is in progress with respect to any of the employees, and no question concerning
representation exists respecting such employees, (v) there is no unfair labor
practice, charge or complaint pending or threatened against CRA or any
Subsidiary of it, and (vi) CRA has not entered into any agreement, arrangement
or understanding restricting its ability to terminate the employment of any or
all of its employees at any time, for any lawful or no reason, without penalty
or liability. Neither CRA nor any Subsidiary of it has engaged in any plant
closing or employee layoff activities within the last two (2) years that would
violate or in any way implicate the Worker Adjustment Retraining and
Notification ("WARN") Act of 1988, as amended, or any similar state or local
plant closing or mass layoff statute, rule or regulation.
n. EMPLOYEE BENEFIT PLANS.
i. Schedule 3(n) lists all bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock and stock
option plans, all employment or severance contracts, health and
medical insurance plans, life insurance and disability insurance
plans and other employee benefit plans, policy contracts, agreements
or arrangements, whether written or oral, which cover employees or
former employees of CRA and its Subsidiaries or with respect to
which CRA or any of its Subsidiaries has any actual or potential
liability, including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of ERISA (the "BENEFIT PLANS").
Except as set forth on Schedule 3(n), no Benefit Plan is or was
collectively bargained for or has terms requiring assumption by the
Merger Sub or the Surviving Corporation. No Benefit Plan is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA),
neither CRA nor any of its ERISA Affiliates has incurred any
withdrawal liability with respect to any multiemployer plan or any
liability in connection with the termination or reorganization of
any multiemployer plan and no Benefit Plan provides health or other
welfare benefits to former employees other than in compliance with
Section 4980B of the Code or similar State law ("COBRA").
ii. To the extent applicable, each Benefit Plan (and its
related trust) is maintained and administered in compliance in all
material respects with the applicable provisions of ERISA, the Code
and any other laws (including compliance with all reporting and
disclosure obligations) and, if intended to be tax qualified,
Sections 401(a) and 501(a) of the Code. Each Benefit Plan which is
intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter that it is so qualified
(which favorable determination letter covers changes mandated by the
Tax Reform Act of 1986 and subsequent related regulations) and none
of CRA or its Subsidiaries is aware of any facts of circumstances
which could adversely affect any of such favorable determination
letters.
Annex A - Page 18
<PAGE>
iii. No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by CRA or any ERISA Affiliate
with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently
or formerly maintained or contributed to by any of them. Except as
disclosed on Schedule 3(n), the fair market value of the assets of
each single-employer plan equals or exceeds the accrued benefit
liabilities thereunder. With respect to each Benefit Plan which is
an employee pension benefit plan (as defined in Section 3(2) of
ERISA), all required contributions which are due for all periods
ending prior to or as of the Closing Date have been made, all such
contributions which are not due as of the Closing Date have been
properly accrued, and none of CRA or any ERISA Affiliate has
incurred any accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA). With respect to each other Benefit Plan, all
contributions, premiums or other payments which are due have been
made or, if not due as of the Closing Date, have been properly
accrued. With respect to each Benefit Plan which is a Section 401(k)
plan, CRA and each of its Subsidiaries contribute all employee
pre-tax contributions to the appropriate trust as soon as possible
after the end of each payroll period.
iv. CRA and each of its Subsidiaries has complied with the
requirements of COBRA.
v. None of CRA, any Subsidiary of it or to CRA's knowledge,
any other Person has engaged in any transaction with respect to any
Benefit Plan which could subject CRA or any of its Subsidiaries to
any Tax or penalty (civil or otherwise) imposed by ERISA, the Code
or other applicable law. No actions, suits, investigations or claims
with respect to the Benefit Plans (other than routine claims for
benefits) are pending or threatened and none of CRA or any of its
Subsidiaries has any knowledge of any facts which could give rise to
or be reasonably expected to give rise to any such actions, suits or
claims.
vi. No liability to the Pension Benefit Guaranty Corporation
(the "PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Benefit Plan that is
subject to Title IV of ERISA, no reportable event within the meaning
of Section 4043 of ERISA has occurred with respect to any such
Benefit Plan and the PBGC has not commenced or threatened the
termination of any Benefit Plan. None of the assets of CRA or any of
its Subsidiaries is the subject of any Security Interest arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
CRA nor any of its Subsidiaries has been required to post any
security under Section 307 of ERISA or Section 401(a)(29) of the
Code, and neither CRA nor any of its Subsidiaries has any knowledge
of any facts which could reasonably be expected to give rise to such
Security Interest or such posting of security.
vii. Except as disclosed above, neither CRA nor any ERISA
Affiliate has any actual or potential liability with respect to any
employee pension or welfare benefit plan which is maintained or
sponsored by CRA or any ERISA Affiliate.
Annex A - Page 19
<PAGE>
viii. With respect to each Benefit Plan, CRA has provided to
Merger Sub true, complete and correct copies, to the extent
applicable, of (i) all documents pursuant to which such Benefit
Plans are maintained, funded and administered, (ii) the most recent
annual report (Form 5500 series) filed with the IRS report, (iv) the
most recent financial statement, (v) all governmental rulings,
determinations and opinions (and any pending requests).
o. PROPRIETARY RIGHTS. Except as set forth in Schedule 3(o), CRA and
its Subsidiaries own and possess all right, title and interest in, free and
clear of all Security Interests except as provided in Schedule 3(p), or have a
valid, enforceable and effective written license to use, all patents, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, and all goodwill associated therewith,
copyrights, copyright registrations, copyrights applications, mask works, trade
names, corporate names, trade dress, technology, inventions, computer software,
data and documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, and all other intellectual
property and proprietary information or rights used in or necessary for the
operation of the business of CRA and its Subsidiaries as presently conducted and
presently proposed to be conducted (collectively, its "PROPRIETARY RIGHTS").
Schedule 3(o) contains a complete and accurate list of 3. all patented and
registered Proprietary Rights; 4. all pending patent applications and
applications for the registration of other Proprietary Rights; 5. all trade and
corporate names owned or used by CRA or any of its Subsidiaries; 6. all computer
software (other than mass-marketed software) owned or used by CRA or any
Subsidiary; and 7. all licenses or other agreements to or from third parties
regarding any of the Proprietary Rights. Except as set forth in Schedule 3(o),
there is not pending or threatened against CRA or any of its Subsidiaries any
claim by any third party contesting the validity, enforceability, use or
ownership of any Proprietary Right, and, to the knowledge of CRA or any of its
Subsidiaries, there are no grounds for any such claim. Except as set forth in
Schedule 3(o), neither CRA nor any of its Subsidiaries has received any notice
of, nor is aware of any facts which indicate a likelihood of, any infringement
or misappropriation by, or conflict with, any third party with respect to any of
the Proprietary Rights, nor are they aware of any infringement, misappropriation
or conflict which will occur as a result of continued operation of the business
of CRA and its Subsidiaries as currently conducted or as currently proposed to
be conducted. All Proprietary Rights owned or used by CRA and its Subsidiaries
prior to the Closing Date will be owned or available for use on identical terms
and conditions immediately after the Closing Date. CRA and its Subsidiaries have
no knowledge of any Proprietary Rights that any competitor or other Person has
developed which reasonably could be expected to supersede or make obsolete any
product or process used by, or otherwise result in any Material Adverse Change
in the business of, CRA or any Subsidiary of it.
3. CONTRACTS. Schedule 3(p) describes all Contracts (except for
usual and ordinary purchase orders executed for merchandise held for resale in
the Ordinary Course of Business), to which CRA or any of its Subsidiaries is a
party or is otherwise bound, of the type described below:
i. all agreements or commitments for the purchase by CRA of
machinery, equipment or other personal property other than those
that are for amounts not to exceed $50,000.00;
Annex A - Page 20
<PAGE>
ii. all capitalized leases, pledges, conditional sale or
title retention agreements involving the payment of more than
$50,000.00;
iii. all employment agreements and commitments, all
consulting or severance agreements or arrangements and all other
agreements between CRA or any of its Subsidiaries and any Affiliate
of CRA or such Subsidiary or any officer, director or employee of
CRA or such Subsidiary;
iv. all agreements relating to the consignment or lease of
personal property (whether CRA or any of its Subsidiaries is lessee,
sublessee, lessor or sublessor), other than such agreements that
provide for annual payments of less than $50,000.00;
v. all license, royalty or other agreements relating to the
Proprietary Rights;
vi. all agreements containing commitments of suretyship,
guarantee or indemnification (except for (a) warranties for products
sold provided by CRA or any of its Subsidiaries in the Ordinary
Course of Business and (b) agreements having a contract value, in
the aggregate of $50,000.00 or less);
vii. all agreements prohibiting CRA or any of its
Subsidiaries from freely engaging in the business presently
conducted by CRA and its Subsidiaries in any geographic area;
viii. any agreement other than those covered by clauses (i)
through (vii) above involving payment or receipt of more than
$50,000.00 in the aggregate in any calendar year; and
ix. any agreement other than those covered by clauses (i)
through (viii) involving non-competition agreements or nondisclosure
covenants intended to protect the Proprietary Rights of CRA and its
Subsidiaries.
Neither CRA nor any of its Subsidiaries has received written notice from the
other parties to any such Contracts that it intends to terminate or materially
alter the provisions of such Contracts either as a result of transactions
contemplated hereby or otherwise, except as disclosed in Schedule 3(p), and
neither CRA nor any of its Subsidiaries has given notice to any other party to
any such Contract that it intends to terminate or materially alter the
provisions of any such Contract except as disclosed in Schedule 3(p). Except as
set forth in Schedule 3(p), neither CRA nor any of its Subsidiaries has received
notice that it is in, nor has either CRA or any of its Subsidiaries given notice
of, any default or claimed, purported or alleged default, and neither CRA nor
any of its Subsidiaries is aware of any facts that, with notice or lapse of
time, or both, would constitute a default (or give rise to a termination right)
on the part of any party in the performance of any obligation to be performed
under any of the Contracts. True and complete copies of all written Contracts,
including any amendments thereto, have been delivered to the Merger Sub and such
documents constitute the legal, valid and binding obligation of CRA or any of
its Subsidiaries that are a party thereto and each other
Annex A - Page 21
<PAGE>
party purportedly obligated thereunder. Except as specifically set forth in
Schedule 3(p), neither CRA nor any of its Subsidiaries is a party to any
contract, agreement or understanding which contains a "change in control,"
"potential change in control" or similar provision.
q. BOOKS AND RECORDS. The stock records of CRA fairly and accurately
reflect in all material respects the record ownership of all of the outstanding
shares of CRA's capital stock. The other books and records of CRA and its
Subsidiaries, including financial records and books of account, are complete and
accurate in all material respects and have been maintained in accordance with
sound business practices.
r. INSURANCE. Schedule 3(r) contains an accurate and complete
description of all policies of fire, liability, workmen's compensation and other
forms of insurance owned or held by CRA and its Subsidiaries.
s. REAL PROPERTY .
i. OWNED Properties. Schedule 3(s)(i) sets forth a list of
all owned U.S. real property and owned foreign real property
(collectively, the "OWNED REAL PROPERTY") used by each of CRA and
its Subsidiaries in the operation of their respective businesses.
With respect to each such parcel of Owned Real Property: (i) except
as set forth in Schedule 3(s)(i) or Schedule 3(p), such parcel is
free and clear of all encumbrances, except Permitted Encumbrances;
(ii) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any person the right of use
or occupancy of any portion of such parcel; and (iii) there are no
outstanding actions or rights of first refusal to purchase such
parcel, or any portion thereof or interest therein. For purposes of
this Section 3(s), "PERMITTED ENCUMBRANCES" shall mean (a) statutory
liens for current taxes or other governmental charges with respect
to the Owned Real Property not yet due and payable or the amount or
validity of which is being contested in good faith by appropriate
proceedings by CRA or any of its Subsidiaries, as the case may be,
and for which appropriate reserves have been established in
accordance with GAAP; (b) mechanics and similar statutory liens
arising or incurred in the ordinary course of business for amounts
which are not delinquent and which would not have a material adverse
effect on each of CRA or any of its Subsidiaries; (c) zoning,
entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Real Property
which are not violated by the current use and operation of the Real
Property; and (d) covenants, conditions, restrictions, easements and
other similar matters of record affecting title to the Real Property
which do not materially impair the occupancy or use of the Real
Property for the purposes for which it is currently used.
ii. LEASED Properties. Schedule 3(s)(ii) sets forth a list
of all of the leased and subleased parcels of real property subject
to leases and subleases, as amended, (the "LEASES") in favor of CRA
or its Subsidiaries which evidence leasehold or subleasehold
interests of CRA or its Subsidiaries in such properties (the "LEASED
REAL PROPERTY"; the "OWNED REAL PROPERTY" and the "LEASED REAL
PROPERTY" collectively
Annex A - Page 22
<PAGE>
the "REAL PROPERTY") and designates those Leases which require
consent of a lessor or sublessor in connection with the transactions
contemplated by this Agreement. CRA has made available to SSI its
lease files maintained in its normal course of business which
contain copies or originals of all Leases and other material
information pertaining to the Leased Real Property. With respect to
each of the Leases: (i) the Lease is valid, enforceable and in full
force and effect; (ii) the Lease will continue to be valid,
enforceable and in full force and effect on identical terms
following the Closing, except for any lessor or sublessor consents
which may be required in connection with the transactions
contemplated by this Agreement; (iii) neither CRA nor any Subsidiary
thereof, nor any other party to the Lease, is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute such a breach or default or permits termination,
modification or acceleration under the Lease, except for any lessor
or sublessor consents which may be required in connection with the
transactions contemplated by this Agreement; (iv) no party to the
Lease has repudiated any part thereof; (v) the Lease has not been
further modified in any material respect; (vi) neither CRA nor any
of its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the Lease, except as
disclosed in other Schedules to this Agreement; (vii) there exists
no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the Lease, except as
disclosed in other Schedules to this Agreement; and (ix) CRA and its
Subsidiaries are in substantial compliance with all applicable laws
and regulations pertaining to the use and occupancy of the Lease.
iii. CONDITION AND OPERATION OF IMPROVEMENTS. All buildings
and all components of all buildings, structures and other
improvements included within the Owned Real Property (the
"IMPROVEMENTS"), including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and
parking equipment systems and facilities included therein, are in
good condition and repair and adequate to operate such facilities as
currently used. There are no facts or conditions affecting any of
the Improvements which would, individually or in the aggregate,
interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated or
intended to be used, occupied or operated. There are no structural
deficiencies or latent defects affecting any Improvements located
upon the Owned Real Property. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines
and systems and other similar systems serving the Owned Real
Property are installed and operating and are sufficient to enable
the Owned Real Property to continue to be used and operated in the
manner currently being used and operated, and any so-called hook-up
fees or other associated charges have been fully paid. Each
Improvement has direct access to a public street adjoining the Owned
Real Property. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other
improvement not included in the Owned Real Property.
Annex A - Page 23
<PAGE>
iv. PERMITS. All certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively,
the "REAL PROPERTY PERMITS") of all governmental authorities having
jurisdiction over the Real Property, required or appropriate to the
current operation of the Owned Real Property, have been issued to
CRA or its Subsidiaries and are in full force and effect. Neither
CRA nor any of its Subsidiaries has received or been informed by a
third party of the receipt by it of any notice from any governmental
authority having jurisdiction over the Owned Real Property
threatening a suspension, revocation, modification or cancellation
of any Real Property Permit and, to the best knowledge of CRA and
its Subsidiaries, there is no basis for the issuance of any such
notice or the taking of any such action.
v. COMPLIANCE WITH LAWS. The Owned Real Property is in full
compliance with all applicable building, zoning, subdivision and
other land use and similar laws affecting the Owned Real Property
(collectively, the "REAL PROPERTY LAWS"), and neither CRA nor any of
its Subsidiaries has received any notice of violation or claimed
violation of any Real Property Law. There is no pending or, to the
best knowledge of each of CRA and its Subsidiaries, any anticipated
change in any Real Property Law that will have or result in a
significant adverse effect upon the ownership, alteration, use,
occupancy or operation of the Owned Real Property or any portion
thereof. No current use by the CRA or any of its Subsidiaries of the
Owned Real Property is dependent on a nonconforming use or other
approval from a governmental authority, the absence of which would
significantly limit the use of any such Owned Real Property.
t. TRANSACTIONS WITH AFFILIATES . Except as set forth on Schedule
3(t), none of CRA's officers, directors, or any of their respective Affiliates
is involved in any business arrangement or relationship with CRA or its
Subsidiaries (whether written or oral) involving more than $100,000 in any year
in the aggregate, and none of CRA's officers, directors, or any of their
respective Affiliates owns any property or right, tangible or intangible, which
is used by CRA or its Subsidiaries involving more than $100,000 in any year in
the aggregate.
u. ACCOUNTS RECEIVABLE. Except as listed on Schedule 3(u) hereto,
all accounts and notes receivable of CRA and its Subsidiaries reflected on CRA
Financial Statements, and all accounts and notes receivable arising subsequent
to the date of CRA Financial Statements, in each case, have arisen in the
Ordinary Course of Business, and the reserves for doubtful accounts set forth on
CRA Financial Statements have been established in accordance with past custom
and practice and are substantially adequate in light of the previous
collectibility experience with respect to accounts receivables generated by CRA
and its Subsidiaries.
v. INVENTORY. The inventory stock of CRA and its Subsidiaries held
on account of CRA to the extent reflected on the Financial Statements is or was,
prior to the sale thereof, in good and merchantable condition, and suitable and
usable or salable in the Ordinary Course of Business for the purposes for which
intended and has been accounted for using the retail method of accounting in
accordance with GAAP.
Annex A - Page 24
<PAGE>
w. SUFFICIENCY OF ASSETS. The assets currently owned by CRA or any
of its Subsidiaries, or leased by CRA or any such Subsidiary pursuant to any
lease agreement entered into in the Ordinary Course of Business or otherwise
disclosed to the Merger Sub, constitute all of the assets necessary to conduct
the business of CRA and its Subsidiaries in the Ordinary Course of Business as
at February 1, 1997 and at the date hereof.
x. BOARD RECOMMENDATION . The board of directors of CRA, at a
meeting duly called and held on March 4, 1997 (the "BOARD MEETING"), has by
unanimous vote of those directors present (other than the interested director
who shall have abstained from voting) 2. determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together, are fair
to and in the best interests of the stockholders of CRA, 3. adopted resolutions
to recommend that the holders of the CRA Shares approve this Agreement and the
transactions contemplated, herein, including the Merger, and 4. adopted
resolutions providing that the Options shall be treated, and the Option Plan
shall terminate, in accordance with in ss.2(d)(vi).
y. BROKERS' FEES . None of CRA and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
similar agent (other than a fee to Houlihan Lokey Howard & Zukin consisting of
an amount in cash equal to (i) 1 % multiplied by the addition of (a) the Merger
Consideration and (b) the aggregate cash payments to CRA option holders pursuant
to ss.2(d)(vi) and (ii) $204,875 and a fairness opinion fee of $150,000 to
Stephens Inc.) with respect to the transactions contemplated by this Agreement.
z. DISCLOSURE . The CRA Information contained in (i) the Prospectus
and the Registration Statement will not contain 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 contained therein not misleading, and (ii) the
Definitive CRA Proxy Materials will not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or which omits to state any material fact
necessary in order to make the statements therein not false or misleading. As
used herein, "CRA INFORMATION" means all information with respect to CRA or any
of its Subsidiaries provided for use in the Prospectus, the Registration
Statement or the Definitive CRA Proxy Materials, as the case may be. The
Definitive CRA Proxy Materials, insofar as they relate to CRA, including any
amendments thereto, will comply as to form and otherwise in all material
respects, with the applicable requirements of the Securities Act, the Securities
Exchange Act and the rules and regulations thereunder.
aa. TAX-FREE REORGANIZATION REQUIREMENTS . i. CRA is not aware of
any plan or intention by any shareholder, to sell, exchange or otherwise dispose
of any SSI Shares that will be received pursuant to this Agreement; 3. the
Merger Sub will acquire at least 90 percent of the fair market value of the net
assets, and at least 70 percent of the fair market value of the gross assets,
held by CRA immediately prior to the Merger. For purposes of this
representation, amounts paid by CRA in respect of Dissenting Shares, CRA assets
used to pay CRA's expenses of the Merger, and all redemptions and distributions
made by CRA in contemplation of the Merger will be included as assets of CRA
held immediately prior to the Merger; 4. CRA liabilities assumed by the
Surviving Corporation and liabilities to which the CRA assets are subject were
incurred by CRA in the ordinary course of its business; and 5. CRA is not an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
Annex A - Page 25
<PAGE>
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB. SSI
represents and warrants to CRA (and will cause the Merger Sub to represent and
warrant) that the statements contained in this ss.4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this ss.4), except as set forth in the
Disclosure Schedule of SSI. The Disclosure Schedule of SSI will be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this ss.4.
a. ORGANIZATION . Each of SSI and the Merger Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
b. CAPITALIZATION . The authorized capital stock of SSI consists of
(i) 75,000,000 shares of common stock, $.01 par value per share, of which
22,033,303 shares are issued and outstanding, (ii) 3,000,000 shares of Class B
common stock, par value $.01 per share of which 1,250,584 are issued and
outstanding and (iii) 2,500 shares of preferred stock, $1.00 par value per
share, none of which are issued and outstanding. All of the SSI Shares to be
issued in the Merger have been duly authorized and, upon consummation of the
Merger, will be validly issued, fully paid and nonassessable. Notwithstanding
the foregoing, CRA acknowledges that, after the date hereof and prior to the
Effective Time, SSI may issue additional SSI Shares.
c. AUTHORIZATION OF TRANSACTION . SSI has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the board of directors of
SSI, has been duly executed and delivered on behalf of SSI, and constitutes the
valid and legally binding obligation of SSI, enforceable and in effect in
accordance with its terms and conditions.
d. NONCONTRAVENTION . Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of SSI or the Merger Sub is
subject or any provision of the charter or bylaws of either of SSI or the Merger
Sub or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party a put right or repurchase
obligation or the right to accelerate, terminate, modify or cancel, or require
any notice under, any material agreement, contract, lease, license, instrument,
or other material arrangement to which either of SSI or the Merger Sub is a
party or by which it is bound or to which any of its material assets is subject,
except for any such matters which, both individually and in the aggregate, would
not have a SSI Material Adverse Effect or restrict either SSI's or the Merger
Sub's ability to consummate the transactions contemplated hereby. Other than in
connection with the provisions of the Hart-Scott-Rodino Act, the Texas Act, the
Oklahoma Act, the Securities Exchange Act, the Securities Act, the state
securities laws and the laws of any foreign jurisdiction, neither SSI nor the
Merger Sub needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
Annex A - Page 26
<PAGE>
e. FILINGS WITH THE SEC . SSI has made all filings with the SEC that
it has been required to make within the past three years under the Securities
Act and the Securities Exchange Act (including any exhibits and amendments
thereto). Each such filing complied with the Securities Act and the Securities
Exchange Act in all material respects when filed. No such filing, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
f. FINANCIAL STATEMENTS . SSI has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "SSI PUBLIC REPORTS"). The financial statements included in
or incorporated by reference into the SSI Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of SSI and its
Subsidiaries as of the indicated dates and the results of operations of SSI and
its subsidiaries for the indicated periods, are consistent with the books and
records of SSI and its Subsidiaries, and comply with the material provisions of
Regulations S-K and S-X of the Securities Act. Attached as Schedule 4(f) are the
unaudited consolidated balance sheet, income statement and cash-flow statement
of SSI and its Subsidiaries as of and for the fiscal year ended February 1, 1997
(together with the SSI Public Reports and including the related notes and
schedules, the "SSI FINANCIAL STATEMENTS") which have been prepared in
accordance with GAAP on a basis consistent with the SSI Public Reports, except
for footnote disclosures, applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of SSI and its
Subsidiaries as of the indicated dates and the results of operations of SSI and
its Subsidiaries for the indicated periods, and are consistent with the books
and records of SSI and its Subsidiaries.
g. DISCLOSURE . The SSI Information contained in the Definitive CRA
Proxy Materials and the Registration Statement will not, on the date the
Registration Statement becomes effective, and the SSI Subsequent Exchange Act
Reports will not, contain 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 contained therein not misleading. As used herein, "SSI INFORMATION"
means all information with respect to SSI or any of its Subsidiaries provided
for use in the Prospectus, Definitive CRA Proxy or the Registration Statement.
h. INVESTMENT COMPANY . Neither SSI nor the Merger Sub is an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
i. ABSENCE OF CERTAIN DEVELOPMENTS . Except as expressly disclosed
in SSI's Filings with the SEC or in the Subsequent SSI Exchange Act Reports,
there has not been any SSI Material Adverse Effect.
j. LITIGATION . Except as disclosed in SSI's filings with the SEC or
the Subsequent SSI Exchange Act Reports, there are no judgments, decrees,
lawsuits, actions, proceedings, claims, complaints, injunctions, orders or
investigations by or before any governmental authority pending or threatened
against SSI or its Subsidiaries (i) which could reasonably be expected to have
an SSI Material Adverse Effect, or (ii) seeking to enjoin the transactions
Annex A - Page 27
<PAGE>
contemplated hereby. To SSI's knowledge, there are no existing facts or
circumstances which give any reason to believe that any such action, suit,
proceeding, hearing or investigation may be brought or threatened against SSI or
any of its Subsidiaries.
k. TAXES . Except for such failures or omissions which could not
reasonably be expected to result in an SSI Material Adverse Effect:
i. each of SSI and its Subsidiaries has duly and timely
filed all Tax Returns required to be filed by it, all such Tax
Returns have been prepared in compliance with all applicable laws
and regulations and are true, correct and complete in all respects;
ii. all Taxes owed by each of SSI and its Subsidiaries,
whether or not shown on any Tax Return, have been timely paid; and
iii. SSI and its Subsidiaries have maintained adequate
provision for Taxes payable by SSI and its Subsidiaries.
l. ENVIRONMENTAL . Except for such failures or violations which
could not reasonably be expected to result in an SSI Material Adverse Effect,
SSI and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws.
m. EMPLOYEE BENEFITS PLAN . Except as disclosed in SSI's filings
with the SEC or in a Subsequent SSI Exchange Act Report, SSI has no material
liability for any unfunded or underfunded Benefit Plans or any material
withdrawal liability with respect to any multiemployer plan or any liability in
connection with the termination or reorganization of any multiemployer plan
which liability could reasonably be expected to have an SSI Material Adverse
Effect.
n. BOOKS AND RECORDS. The stock records of SSI fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of SSI's capital stock. The other books and records of SSI
and its Subsidiaries, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
o. INSURANCE . SSI and each of its Subsidiaries is insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
SSI and its Subsidiaries. Neither SSI nor any of its Subsidiaries has received
notice of cancellation or termination with respect to any material insurance
policy of SSI or its Subsidiaries.
p. BROKER'S FEE . None of SSI and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Agreement other than
to Credit Suisse First Boston Corporation or in connection with the financing of
such transactions.
Annex A - Page 28
<PAGE>
Section 5. COVENANTS. The Parties agree as follows with respect to
the period from and after the execution of this Agreement.
a. GENERAL . Each of the Parties will use all commercially
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in ss.6 below) and to assist SSI and SRI in any
efforts to renegotiate the terms of any of CRA's existing financing or other
material contracts.
b. NOTICES AND CONSENTS . CRA will give any notices (and will cause
each of its Subsidiaries to give any notices) to any governmental authority or
third parties, and will use all commercially reasonable best efforts to obtain
(and will cause each of its Subsidiaries to use all commercially reasonable best
efforts to obtain) any governmental authority or third party consents, necessary
to the consummation of the transactions contemplated hereby, including any
consents, waivers, amendment or other action required with respect to the
Contracts and other matters listed on Schedules 3(d), 3(p) and 3(s) above. All
costs incurred in connection with such notices and consents shall be borne by
CRA.
c. REGULATORY MATTERS AND APPROVALS . Each of the Parties will (and
CRA will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(d) and ss.4(d) above. Without
limiting the generality of the foregoing:
i. SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE
SECURITIES LAWS. CRA will prepare and file with the SEC on or before
March 31, 1997 or as soon as practicable thereafter preliminary
proxy materials under the Securities Exchange Act relating to the
CRA Stockholder Vote. SSI and the Merger Sub will prepare and file
with the SEC a registration statement under the Securities Act
relating to the offering and issuance of the SSI Shares to be issued
in connection with the Merger (the "REGISTRATION STATEMENT"). The
filing Party in each instance will use all commercially reasonable
best efforts to respond to the comments of the SEC thereon and will
make any further filings (including amendments and supplements) in
connection therewith that may be necessary, proper, or advisable.
Each of SSI and SRI will provide CRA, and CRA will provide each of
SSI and SRI, with information and assistance necessary or desirable
in connection with the preparation of the foregoing filings and any
SEC filings or any offering memorandum or similar document by SSI or
SRI in connection with the financing of the transactions
contemplated hereby or any other required filing with the SEC that
the filing Party reasonably may request (including, in the case of
any financings by SSI or SRI, the preparation and delivery of
financial statements or related disclosure, including but not
limited to, pro forma financial data complying with the requirements
of Regulation S-X of the Securities Act). Each of SSI and the Merger
Sub will take all actions that may be necessary, proper, or
advisable under state securities laws in connection with the
offering and issuance of the SSI Shares. In addition to the
foregoing, SSI shall continue to file periodic reports with the SEC
under the Securities Exchange Act between the date of this
Annex A - Page 29
<PAGE>
Agreement and the Effective Time (the "SUBSEQUENT SSI EXCHANGE ACT
REPORTS") and, in the event of an SSI Material Adverse Effect, such
event will be adequately summarized in the Registration Statement or
the Subsequent SSI Exchange Act Reports.
ii. CRA STOCKHOLDER VOTE. CRA will call a special meeting of
its stockholders (the "CRA STOCKHOLDER VOTE") as soon as reasonably
practicable in order that the stockholders may consider and vote
upon the adoption of this Agreement and the approval of the Merger
in accordance with the Survivor's Act. CRA will mail the Combined
Disclosure Document to its stockholders as soon as reasonably
practicable. The Combined Disclosure Document will contain the
affirmative recommendations of the board of directors of CRA in
favor of the adoption of this Agreement and the approval of the
Merger Sub. Notwithstanding the foregoing, nothing in this
ss.5(c)(ii) shall be construed to require any director of CRA to
take any actions or permit any events described above to the extent
that the board of directors of CRA shall conclude in good faith,
based upon the written advice of legal counsel to the board or such
director, that such action is prohibited in order for the director
to act in a manner that is consistent with his fiduciary obligations
under applicable laws.
iii. HART-SCOTT-RODINO ACT AND OTHER FILINGS. CRA will file
any Notification and Report Forms or other form or report and
related material that the Parties may be required to file with the
Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act or with
any other governmental entity under the laws of any foreign
jurisdiction, will use all commercially reasonable best efforts to
obtain (and CRA will cause each of its Subsidiaries to use all
commercially reasonable best efforts to obtain) an early termination
of any applicable waiting period, and will make any further filings
pursuant thereto that may be necessary, proper, or advisable.
d. AGREED UPON PROCEDURE LETTER/COMFORT LETTER . In connection with
the information regarding CRA or its Subsidiaries or the transactions
contemplated by this Agreement provided by CRA or its Subsidiaries specifically
for inclusion in, or incorporation by reference into, the Prospectus, the
Registration Statement or any SEC filings by SSI or SRI in connection with the
financing of the transactions contemplated hereby, CRA shall use all
commercially reasonable efforts to cause to be delivered to the board of
directors of SSI and SRI a letter of the relevant type from Deloitte & Touche
LLP, dated the date on which such Registration Statement (or such other SSI
filings) shall become effective
Annex A - Page 30
<PAGE>
and addressed to (i) the board of directors of SSI, SRI or CRA and (ii) an
underwriter(s) as required by SSI, in form and substance reasonably satisfactory
to SSI and customary in scope and substance for letters delivered by independent
public accountants in connection with registrations or offerings of the relevant
type. In connection with the information regarding SSI or SRI or the
transactions contemplated by this Agreement provided by SSI or SRI specifically
for inclusion in, or incorporation by reference into, the Prospectus, the
Registration Statement and the Definitive CRA Proxy Materials, SSI shall use all
commercially reasonable efforts to cause to be delivered to the board of
directors of CRA a letter of the relevant type from Price Waterhouse LLP, dated
the date on which the Registration Statement shall become effective and
addressed to the board of directors of CRA, in form and substance reasonably
satisfactory to CRA and customary in scope and substance for letters delivered
by independent public accountants in connection with registrations of the
relevant type.
e. LISTING OF SSI SHARES. SSI will cause the SSI Shares that will be
issued in the Merger to be approved for listing on the NASDAQ National Market
System, subject to official notice of issuance, prior to the Effective Time.
f. CRA OPERATION OF BUSINESS. Prior to the Closing, except as
otherwise expressly provided herein, CRA shall, and shall cause each of its
Subsidiaries to:
i. except as contemplated by this Agreement, operate only in
the Ordinary Course of Business;
ii. use its reasonable best efforts to keep in full force
and effect its corporate existence and all material rights,
franchises, Proprietary Rights and goodwill relating or obtaining to
its business;
iii. use its reasonable best efforts to retain its employees
and preserve its present relationships with customers, suppliers,
contractors, distributors and such employees, and continue to
compensate such employees consistent with past practices;
iv. maintain the Proprietary Rights so as not to affect
adversely any registration or application for registration thereof
or the validity or enforcement thereof, maintain its other assets in
customary repair, order and condition and maintain insurance
reasonably comparable to that in effect on the date of this
Agreement; and in the event of any casualty, loss or damage to any
of such assets repair or replace such assets with assets of
comparable quality and value;
v. use its reasonable best efforts to obtain all
authorizations, consents, waivers, approvals or other actions
necessary or desirable to consummate the transactions contemplated
hereby (including, without limitation, paying any expenses in
connection therewith) and to cause the other conditions to SSI's and
the Merger Sub's obligation to close to be satisfied;
vi. perform in all material respects all of its obligations
under all notes, bonds, mortgages, indentures, licenses, contracts,
agreements or other instrument or obligation to which CRA or any of
its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound and not enter into,
assume or amend any such contract or commitment other than in the
Ordinary Course of Business;
vii. prepare and file all Tax Returns and other Tax reports,
filings and amendments thereto required to be filed by it, on a
timely basis; provided, that CRA
Annex A - Page 31
<PAGE>
will not file or amend any income Tax returns without the prior
written consent of SSI; and
viii. deliver to SSI and SRI (A) on or prior to March 30,
1997, the audited consolidated balance sheet, income statement and
cash-flow statement of CRA and its Subsidiaries as of and for the
fiscal year ended February 1, 1997, in a form suitable for filing in
an Annual Report on Form 10-K, together with an independent
auditor's report in respect thereof and details explaining any
adjustments or significant differences between such audited
statements and those attached as Schedule 3(f); and (B) within 15
days of each month end from the date hereof through the Closing Date
its consolidated unaudited balance sheets, income statements and
cash flow statements as of and for the immediately preceding month.
Further, prior to the Closing, without the prior written consent of the Merger
Sub or as otherwise expressly provided herein, CRA will not, and will cause each
of its Subsidiaries not to enter into any contract, agreement or commitment or
take any other action (other than in the Ordinary Course of Business and except
for any contracts or agreements related to any retail store location currently
being negotiated by CRA or as expressly disclosed in Schedule 3(s)(i) or (ii))
which, if entered into or taken prior to the date of this Agreement, would cause
any representation or warranty of CRA to be untrue in any respect or be required
to be disclosed on the Disclosure Schedule (including, without limitation,
Schedule 3(g)); or take or omit to be taken any action, or permit its Affiliates
to take or to omit to take any action, which would have a material adverse
effect on the business, financial condition or prospects of CRA or its
Subsidiaries.
g. FULL ACCESS. CRA will (and will cause each of its Subsidiaries
to) permit representatives of each of SSI, SRI and any of their respective
financing sources to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of CRA and its
Subsidiaries, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each of CRA and its
Subsidiaries. Subject to the signing of a confidentiality agreement satisfactory
in form and substance to SSI, SSI will (and will cause each of its Subsidiaries
to) permit representatives of CRA to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
SSI and its Subsidiaries, to all premises, properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to each of
SSI and its Subsidiaries. No investigation by SRI heretofore or hereafter made
shall modify or otherwise affect any representations and warranties of CRA,
which shall survive any such investigation, or the conditions to the obligation
of Merger Sub or SSI to consummate the transactions contemplated hereby.
h. NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the others of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(h), however, shall be deemed to amend or
supplement their respective Disclosure Schedules or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
i. ACQUISITION PROPOSALS. CRA shall not, and it shall not authorize
or permit any of its Subsidiaries, officers, directors or employees or any
advisors or agents retained by CRA or its
Annex A - Page 32
<PAGE>
Subsidiaries, directly or indirectly, to (i) solicit, initiate or knowingly
encourage or induce the making of any CRA Acquisition Proposal, (ii) negotiate
with any third party with respect to any CRA Acquisition Proposal, (iii) endorse
or recommend the CRA Acquisition Proposal of any third party or (iv) enter into
any Contract with any third party with the intent to effect any CRA Acquisition
Proposal. Notwithstanding the foregoing, nothing in this ss.5(i) shall be
construed to prohibit CRA or its board of directors from taking any actions or
permitting any events described above (other than any action described in clause
(i) above) to the extent that the board of directors of CRA shall conclude in
good faith, based upon the written advice of McKinney, Stringer and Webster,
P.C., that such action is required in order for the board of directors to act in
a manner that is consistent with its fiduciary obligations under applicable law.
CRA shall promptly advise SSI orally and in writing of the receipt of any CRA
Acquisition Proposal or similar inquiry, the basic CRA Acquisition Proposal
terms and the identity of the proposed acquiror.
j. AFFILIATE AGREEMENTS. Each of the Parties will use every
reasonable effort to ensure that each Person who would be deemed to be an
"affiliate" for purposes of Rule 144(c) under the Securities Act of SSI or of
CRA executes a written confirmation that such affiliate agrees to appropriate
restrictions on its ability to transfer SSI Shares in order to comply with Rule
145 under the Securities Act.
k. CLOSING DOCUMENTS. CRA shall, prior to or on the Closing Date,
execute and deliver, or cause to be executed and delivered to the Merger Sub,
the documents or instruments described in Section 6(a), the Merger Sub shall,
prior to or on the Closing Date, execute and deliver, or cause to be executed
and delivered, to CRA, the documents or instruments described in Section 6(b).
l. DIRECTORS AND OFFICER'S INSURANCE . To the extent commercially
available on terms no less favorable to SSI than the proposal submitted to SSI
prior to the date hereof, SSI shall provide each individual who served as a
director or officer of CRA at any time prior to the Effective Time with
liability insurance for a period customary for policies of this nature after the
Effective Time on terms no less favorable in coverage and amount than any
applicable insurance in effect immediately prior to the Effective Time.
m. SEVERANCE AGREEMENTS . CRA shall, prior to or on the Closing
Date, amend the Severance Pay Plan, or enter into appropriate agreements, to
provide that any Person who has entered into an Executive Severance Agreement
shall be excluded from, and shall not be entitled to, without limitation, any
payments or benefits under the Severance Pay Plan.
n. OPTION CANCELLATION AGREEMENTS . CRA shall, on or before March
31, 1997, deliver to SSI executed option cancellation agreements from the
holders of the CRA Options pursuant to which each such holder agrees not to
exercise his or her CRA Options prior to the Effective Time in exchange for the
right to receive the cash payment contemplated by ss.2(d)(vi) hereof (the
"OPTION CANCELLATION AGREEMENTS").
Annex A - Page 33
<PAGE>
Section 6. CONDITIONS TO CLOSING.
a. CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB . The obligations
of SSI and the Merger Sub to consummate the transactions to be performed by them
in connection with the Closing are subject to satisfaction of the following
conditions. The following conditions can only be waived in writing:
i. the representations and warranties set forth in ss.3
above shall be true and correct at and as of the Closing Date;
ii. CRA shall have performed and complied with all of its
covenants hereunder through the Closing;
iii. the Requisite CRA Stockholder Approval shall have been
obtained;
iv. CRA and its Subsidiaries shall have procured all of the
consents, waivers, amendments or other actions specified in ss.5(b)
above, including, without limitation, any required consents,
waivers, amendments or other actions with respect to the Contracts
and other matters listed on Schedules 3(d), 3(p) and 3(s);
v. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a CRA Material Adverse Effect or an SSI Material Adverse
Effect wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (w) prevent consummation of any of the
transactions contemplated by this Agreement, (x) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (y) affect adversely the right of the
Surviving Corporation to own the former assets, to operate the
former businesses, and to control the former Subsidiaries of CRA, or
(z) affect adversely the right of any of the former Subsidiaries of
CRA to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
vi. there shall have been no CRA Material Adverse Effect;
vii. CRA shall have delivered to SSI and the Merger Sub a
certificate to the effect that each of the conditions specified
above in ss.6(a)(i)-(vi) is satisfied in all respects;
viii. the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
Annex A - Page 34
<PAGE>
ix. CRA shall have delivered to the Merger Sub evidence
satisfactory to the Merger Sub of the cancellation of all
outstanding options, warrants and other equity interests;
x. the SSI Shares that will be issued in the Merger shall
have been approved for listing on NASDAQ, subject to official notice
of issuance;
xi. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
xii. each of SSI and the Merger Sub shall have received from
counsel to CRA opinions as to corporate and tax matters (including
that the Merger will qualify as a reorganization under Section
368(a)(2)(D) of the Code) dated as of the Closing Date and addressed
to, and in form and substance reasonably satisfactory to, each of
SSI and the Merger Sub;
xiii. CRA shall have terminated, to the extent requested by
SSI, any and all existing stockholders agreements, and any and all
similar agreements or arrangements, to which CRA is a party;
xiv. no Triggering Event shall have occurred;
xv. the SSI Average Closing Price shall not be less than
$15.00;
xvi. no more than 7.5% of the outstanding CRA Shares
constitute Dissenting Shares;
xvii. SSI and SRI shall have received the cash proceeds of
financing necessary for SSI and SRI to consummate the Merger as
contemplated herein, pay all costs and expenses associated therewith
and provide for the ongoing working capital needs of the Surviving
Corporation at commercially reasonable rates and otherwise on terms
satisfactory to SRI; and
xviii. all actions to be taken by CRA in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
affect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to SSI and Merger Sub.
b. CONDITIONS TO OBLIGATIONS OF CRA . The obligation of CRA to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions. The following conditions
can only be waived in writing.
Annex A - Page 35
<PAGE>
i. the representations and warranties set forth in ss.4
above shall be true and correct at and as of the Closing Date;
ii. each of SSI and the Merger Sub shall have performed and
complied with all of its covenants hereunder through the Closing;
iii. the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
iv. the SSI Shares that will be issued in the Merger Sub
shall have been approved for listing on the NASDAQ National Market
System, subject to official notice of issuance;
v. no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a material adverse effect on CRA or SSI wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (w) prevent consummation of any of the transactions
contemplated by this Agreement, (x) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation, (y) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former
businesses, and to control the former Subsidiaries of CRA, or (z)
affect adversely the right of any of the former Subsidiaries of CRA
to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
vi. There shall have been no SSI Material Adverse Effect.
vii. each of SSI and the Merger Sub shall have delivered to
CRA a certificate to the effect that each of the conditions
specified above in ss.6(b)(i)-(vi) is satisfied in all respects;
viii. the Requisite CRA Stockholder Approval shall have been
obtained;
ix. all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
x. CRA shall have received from counsel to SSI and the
Merger Sub opinions as to corporate and tax matters (including that
the Merger will qualify as a
Annex A - Page 36
<PAGE>
reorganization under Section 368(a)(2)(D) of the Code) dated as of
the Closing Date and addressed to, and in form and substance
reasonably satisfactory to, CRA; and
xi. all actions to be taken by each of SSI and the Merger
Sub in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instrument, and other
documents required to affect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to CRA.
Section 7. TERMINATION AND ITS CONSEQUENCES.
a. TERMINATION OF Agreement . The Parties may terminate this
Agreement by mutual written consent at any time prior to the Effective Time. In
addition, any Party may terminate this Agreement with the prior authorization of
its board of directors (whether before or after stockholder approval) as
provided below:
i. Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the failure of any condition precedent under ss.ss.6(a) or
6(b) hereof (excluding subparagraphs (i) and (ii) of each such
subsection). Whereupon all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any
other Party except as provided in ss.7(b).
ii. Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the other Party's breach of any material representation,
warranty or covenant contained in this Agreement, of which the
nonbreaching Party has notified the breaching Party of the breach,
and the breach has continued without cure for a period of 10 days
after the notice of breach or such lesser period as remains between
the date of the notice and July 15, 1997. If any Party terminates
this Agreement pursuant to this ss.7(a)(ii), all rights and
obligations of the Parties hereunder shall terminate without any
liability of any Party to the other Party, except for any liability
of any Party then in breach, including any liability as provided in
ss. 7(b).
b. CONSEQUENCES OF CERTAIN TERMINATIONS.
i. In consideration of the time and expense (including
foregoing other opportunities) that SSI and SRI have invested in the
transactions contemplated hereby, if this Agreement is terminated by
either SSI or the Merger Sub due to the occurrence of a Triggering
Event, then CRA shall pay to SSI upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by SSI, SRI and the Merger Sub in connection
with this Agreement).
ii. If the Requisite CRA Stockholder Approval is not
obtained at the CRA Stockholder Vote but no Triggering Event has
occurred and no CRA
Annex A - Page 37
<PAGE>
Acquisition Proposal has been made, then CRA shall reimburse SSI for
all expenses and charges incurred by SSI, SRI or the Merger Sub in
connection with this Agreement.
iii. If this Agreement is terminated by SSI because of the
failure to satisfy the conditions set forth in (A) ss.6(a)(xv) or
(B) ss.6(a)(xvii) other than as a result of CRA Material Adverse
Effect, then SSI shall pay to CRA upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by CRA in connection with this Agreement).
iv. Concurrently with the execution of this Agreement, SSI
and CRA have entered into the Termination Option Agreement which
will become immediately exercisable in accordance with its terms (A)
if any of the events described in subsection (ii) or (iii) of the
definition of Triggering Event occur, (B) the board of directors of
CRA shall approve, endorse or recommend any CRA Acquisition Proposal
within six months of the termination of this Agreement or (C) any
Person or Group (as defined in Section 13(d)(3) of the Securities
Exchange Act) within six months of the termination of this Agreement
acquires beneficial ownership of more than 50% of the outstanding
common stock of CRA.
v. If this Agreement is terminated by CRA because the board
of directors of SSI shall have withdrawn its approval of this
Agreement for any reason, other than as provided in ss. 7(a), then
SSI shall reimburse CRA for all expenses and charges incurred by CRA
in connection with this Agreement.
vi. The Parties hereto acknowledge that the agreements made
in this ss.7(b) are integral to this Agreement and without such
agreements the Parties would not enter into this Agreement.
Section 8. MISCELLANEOUS.
a. SURVIVAL . None of the representations, warranties, and covenants
of the Parties (other than the provisions in ss.7 above) will survive the
Effective Time.
b. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS . Other than required by
this Agreement, no Party shall issue any press release or make any public
announcement (including SEC filings) prior to the Effective Time and relating to
the subject matter of this Agreement without the prior written approval of the
other Parties; PROVIDED, HOWEVER, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use all commercially reasonable best efforts to advise the
other Parties prior to making the disclosure).
b. NO THIRD PARTY BENEFICIARIES . This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
Annex A - Page 38
<PAGE>
d. ENTIRE AGREEMENT . This Agreement (including the Disclosure
Schedules and the documents referred to herein) constitutes the entire agreement
between the Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, to the extent they
related in any way to the subject matter hereof, except that the Confidentiality
and Standstill Agreement dated September 25, 1996 between SRI and CRA shall
survive the execution and the termination of this Agreement.
e. SUCCESSION AND ASSIGNMENT . This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
f. COUNTERPARTS . This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
g. HEADINGS . The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
h. NOTICES . All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If To Cra: Copy To:
- ---------- --------
C.R. Anthony Company McKinney, Stringer & Webster, P.C.
701 North Broadway 101 North Broadway, Suite 800
Oklahoma City, Oklahoma 73102 Oklahoma City, OK 73102
Attention: Michael E. McCreery Attention: N. Martin Stringer
Facsimile: (405) 278-7662 Facsimile: (405) 239-7902
If To Ssi Or The Merger Sub: Copy To:
- ---------------------------- --------
Stage Stores, Inc. Kirkland & Ellis
10201 Main Street 153 East 53rd Street
Houston, Texas 77002 New York, New York 10022
Attention: James A. Marcum Attention: Lance C. Balk
Facsimile: (713) 669-2709 Facsimile: (212) 446-4900
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address
Annex A - Page 39
<PAGE>
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set
forth.
i. GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
j. AMENDMENTS AND WAIVERS . The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; PROVIDED, HOWEVER,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the Texas Act and the Oklahoma Act. No
amendment or other modification of any provision of this Agreement and no waiver
of any provision hereof or any right or benefit hereunder shall be valid unless
the same shall be in writing and signed by each of the Parties. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
k. SEVERABILITY . Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
l. EXPENSES . Except as set forth in ss.7, each of the Parties will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
m. CONSTRUCTION . The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
n. INCORPORATION OF EXHIBITS AND SCHEDULES . The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
o. WAIVER OF JURY TRIAL. The Parties hereby waive any right they may
have to trial by jury in respect of any litigation based on, arising out of,
under or in connection with this agreement or any course of conduct, course of
dealing, verbal or written statement or action of any party hereto.
p. TIME IS OF THE ESSENCE; COMPUTATION OF TIME . Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or
Annex A - Page 40
<PAGE>
the discharge of any duty hereunder shall fall upon a Saturday, Sunday, or any
date on which banks in New York, New York are authorized to be closed, the party
having such privilege or duty may exercise such privilege or discharge such duty
on the next succeeding day which is a regular business day.
q. SPECIFIC PERFORMANCE . Each of the Parties acknowledges that the
rights created hereby are unique and recognizes and affirms that in the event of
a breach of this Agreement irreparable harm would be caused, money damages may
be inadequate and an aggrieved party may have no adequate remedy at law.
Accordingly, each of the parties agrees that the other party shall have the
right, in addition to any other rights and remedies existing in its favor at law
or in equity, to enforce its rights and the obligations of the other party
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief
(without posting of bond or other security).
* * * * *
Annex A - Page 41
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
STAGE STORES, INC.
By: ________________________
Name:
Title:
C.R. ANTHONY COMPANY
By: ________________________
Name:
Title:
Annex A - Page 42
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
Stage Stores, Inc., a Delaware corporation ("SSI"), and C.R. Anthony
Company, an Oklahoma corporation ("CRA", and together with SSI, the "Parties")
have entered into an Agreement and Plan of Merger dated March 5, 1997 (the
"AGREEMENT"). The Parties desire to amend the Agreement, and are hereby entering
into this First Amendment to the Agreement and Plan of Merger as of May 20, 1997
(the "FIRST AMENDMENT"). Now, therefore, in consideration of the premises and
the mutual promises herein made, the Parties agree as follows.
SECTION 1. Section 2(a) MERGER ALTERNATIVES of the Agreement is hereby
amended by deleting the second through fourth sentences thereof and replacing
them with the following:
"The structure of the merger will either be a forward merger with the
Merger Sub surviving or a reverse merger with CRA surviving, as may be
determined by SSI, taking into account the percentage ("SSI STOCK
PERCENTAGE") of the total merger consideration paid, plus amounts paid to
the holders of CRA Options and the Dissenting Shares pursuant to "
2(d)(vi) and (g) below is represented by SSI Stock. If the SSI Stock
Percentage is less than 50%, CRA shall continue after the Merger with all
its rights, privileges, powers and franchises unaffected by the Merger,
and the separate corporate existence of the Merger Sub shall cease. If the
SSI Stock Percentage equals or exceeds 50%, either (i) CRA shall continue
after the Merger with all its rights, privileges, powers and franchises
unaffected by the Merger, and the separate corporate existence of the
Merger Sub shall cease or (ii) the Merger Sub shall continue after the
Merger with all its rights, privileges, powers and franchises unaffected
by the Merger and the separate corporate existence of CRA shall cease, as
shall be determined by SSI prior to the Effective Time."
SECTION 2. Section 3(z)(aa) TAX-FREE REORGANIZATION REQUIREMENTS of the
Agreement is hereby amended by deleting clause (i) and replacing it with the
following:
" (i) CRA is not aware of any plan or intention by any principal (5% or
greater) shareholder, to sell, exchange or otherwise dispose of any SSI
Shares that will be received pursuant to this Agreement."
SECTION 3. Section 6 CONDITIONS TO CLOSING of the Agreement is hereby
amended by:
(a) deleting paragraph (a)(xii) thereof and replacing it with the
following:
" (xii) each of SSI and the Merger Sub shall have received from counsel to
CRA opinions as to corporate and tax matters (including that the Merger
will be tax-free to each of SSI, Merger Sub and CRA for federal income tax
purposes) dated as of the Closing Date and addressed to, and in form and
substance reasonably satisfactory to, each of SSI and the Merger Sub;" and
Annex A - Page 43
<PAGE>
(b) deleting paragraph (b)(x) thereof and replacing it with the
following:
" (x) CRA shall have received from counsel to SSI and the Merger Sub
opinions as to corporate and tax matters (including that the Merger will
be tax-free to each of SSI, Merger Sub and CRA for federal income tax
purposes) dated as of the Closing Date and addressed to, and in form and
substance reasonably satisfactory to, CRA; and"
SECTION 4. Except as expressly modified in this First Amendment, the terms
and conditions of the Agreement shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the Parties hereto have executed this First Amendment
as of the date first above written.
STAGE STORES, INC.
By: ________________________________
Name:
Title:
C.R. ANTHONY COMPANY
By: ________________________________
Name:
Title:
Annex A - Page 44
<PAGE>
ANNEX B
TERMINATION OPTION AGREEMENT
TERMINATION OPTION AGREEMENT, dated as of March 5, 1997, by and
between C.R. ANTHONY COMPANY, an Oklahoma corporation (the "Grantor"), and STAGE
STORES, INC., a Delaware corporation (the "Grantee").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Grantor and the Grantee are entering into an Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, that upon the terms and subject to the conditions thereof,
the Grantor will be merged with a subsidiary of Grantor ("Sub"); and
WHEREAS, as a condition to the Grantee's willingness to enter into
the Merger Agreement, the Grantee has requested that the Grantor agree, and in
order to induce the Grantee to enter into the Merger Agreement, the Grantor has
so agreed, to grant to the Grantee an option with respect to certain shares of
the Grantor's common stock on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. The Grantor hereby grants to the Grantee an
irrevocable option (the "Stock Option") to purchase up to 1,798,093 shares of
common stock, $.01 par value per share, of the Grantor (the "the Grantor Common
Stock"), or such other number of shares of the Grantor Common Stock as equals
19.9% of the issued and outstanding shares of the Grantor Common Stock at the
time of exercise of the Stock Option, in the manner set forth below, at a price
of $8.00 per share (the "Exercise Price"), payable in cash in accordance with
Section 4 hereof. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Merger Agreement.
2. EXERCISE OF OPTION. The Stock Option may be exercised by the
Grantee, in whole or in part, at any time or from time to time after (A) any of
the events described in subsection (ii) or (iii) of the definition of Triggering
Event has occurred prior to the Effective Time, (B) the board of directors of
CRA shall approve, endorse or recommend any CRA Acquisition Proposal within six
months of the termination of the Merger Agreement or (C) any Person or Group (as
defined in Section 13(d)(3) of the Securities Exchange Act) within six months of
the termination of the Merger Agreement acquires beneficial ownership of more
than 50% of the outstanding common stock of CRA.
In the event the Grantee wishes to exercise the Stock Option, the
Grantee shall deliver to the Grantor a written notice (an "Exercise Notice")
specifying the total number of shares of the Grantor Common Stock it wishes to
purchase. Each closing of a purchase of shares the Grantor Common Stock (a
"Closing") shall occur at a place, on a date and at a time designated by the
Grantee in any Exercise Notice delivered at least two business days prior to the
date of the Closing.
a. The Stock Option shall terminate upon the earlier of: (i) the
Effective Time; or (ii) the date six months following any termination of the
Merger Agreement.
b. Notwithstanding the foregoing, the Stock Option may not be
exercised if the Grantee is in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or in the Merger
Agreement.
Annex B - Page 1
<PAGE>
3. CONDITIONS TO CLOSING. The obligation of the Grantor to issue
shares of the Grantee Common Stock to the Grantee hereunder is subject to the
conditions (which, other than the conditions described in clauses (i) and (ii)
below, may be waived by the Grantor in its sole discretion) that (i) all waiting
periods, if any, under the HSR Act applicable to the issuance of shares of the
Grantor Common Stock hereunder shall have expired or have been terminated, and
all consents, approvals, order or authorization of, or registration,
declarations or filings with, any federal administrative agency or commission or
other federal governmental authority or instrumentality, if any, required in
connection with the issuance of shares of the Grantor Common Stock hereunder
shall have been obtained or made, as the case may be; (ii) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect; and (iii)
such shares shall have been approved for listing on the NASDAQ National Market
System upon official notice of issuance.
4. CLOSING. At any Closing, (a) the Grantor will deliver to the
Grantee a single certificate in definitive form representing the number of
shares of the Grantor Common Stock designated by the Grantee in its Exercise
Notice, such certificate to be registered in the name of the Grantee, or a
nominee of the Grantee designated by the Grantee in the Exercise Notice and
shall bear the legend set forth in Section 11, and (b) the Grantee will deliver
to the Grantor the aggregate Exercise Price for the shares of the Grantor Common
Stock so designated and being purchased at such Closing by wire transfer of
immediately available funds.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to the Grantee that (a) Grantee is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Grantor and the consummation by the Grantor of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantor and no other corporate proceedings
on the part of the Grantor are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Grantor and constitutes a valid and binding obligation of
the Grantor, and, assuming this Agreement constitutes a valid and binding
obligation of the Grantee, is enforceable against the Grantor in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles, (d) the Grantor
has taken all necessary corporate action to authorize and reserve for issuance
and to permit it to issue, upon exercise of the Stock Option, and at all times
from the date hereof through the expiration of the Stock Option will have so
reserved, 1,798,093 unissued shares of Grantor Common Stock, all of which, upon
their issuance and delivery in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable, (e) upon delivery of such
shares of the Grantor Common Stock to the Grantee upon exercise of the Stock
Option, the Grantee will acquire valid title to all of such shares, free and
clear of any and all Liens of any nature whatsoever, (f) the execution and
delivery of this Agreement by the Grantor does not, and the performance of this
Agreement by the Grantor will not, (1) violate the certificate of incorporation
or by-laws of the Grantor, (2) conflict with or violate any statute, rule,
regulation, order, judgment or decree applicable to the Grantor or by which it
or any of its assets or properties is bound or affected, or (3) result in any
breach or violation of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give rise to any rights
or termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the property or assets of the Grantor pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license, or
other instrument or obligation to which the Grantor or any of its Subsidiaries
is a party or by which the Grantor or any of its assets or properties is bound
or affected (except, in the case of clauses (2) and (3) above, for violations,
breaches or defaults which would not, individually or in the aggregate, have a
material adverse effect on the Grantor and except with respect to any item
listed in Schedule 3(d) of the Merger Agreement), and (g) the execution and
delivery of this Agreement by the Grantor does not, and the performance of this
Agreement by the Grantor will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any governmental or regulatory
authority except for pre-merger notification requirements of the HSR Act and
except with respect to any item listed in Schedule 3(d) of the Merger Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee
represents and warrants to the Grantor that (a) the Grantee is a corporation
duly organized, validly existing and in good standing under the laws of
Annex B - Page 2
<PAGE>
the State of Delaware and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Grantee and the consummation by the Grantee of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantee and no other corporate proceedings
on the part of the Grantee are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Grantee and constitutes a valid and binding obligation to
the Grantee in accordance with its terms subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, (d) the execution and delivery of this Agreement by the Grantee does
not, and the performance of this Agreement by the Grantee will not (1) violate
the certificate of incorporation or by-laws of the Grantee, (2) conflict with or
violate any statute, rule, regulation, order, judgment or decree applicable to
the Grantee or by which it or any of its properties or assets is bound or
affected or (3) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the property or assets of the
Grantee pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, or other instrument or obligation to which the Grantee is a
party or by which the Grantee or any of its properties or assets is bound or
affected (except, in the case of clauses (2) and (3) above, for violations,
breaches, or defaults which would not, individually or in the aggregate, have a
material adverse effect on the Grantee), (e) the execution and delivery of this
Agreement by the Grantee does not, and the performance of this Agreement by the
Grantee will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
for pre-merger notification requirements of the HSR Act and (f) any shares of
the Grantor Common Stock acquired upon exercise of the Stock Option will be, and
the Stock Option is being, acquired by the Grantee for its own account and not
with a view to the public distribution or resale thereof in any manner which
would be in violation of applicable United States securities laws.
7. CERTAIN REPURCHASES. (a) THE GRANTEE PUT. At the request of the
Grantee at any time during which the Stock Option is exercisable pursuant to
Section 2 (the "Repurchase Period"), the Grantor (or any successor entity
thereof) shall repurchase from the Grantee the Stock Option, or any portion
therefor for a price equal to the amount by which the "Market/Tender Offer
Price" for shares of the Grantor Common Stock as of the date the Grantee gives
notice of its intent to exercise its rights under this Section 7 (defined as the
higher of (A) the highest price per share paid as of such date pursuant to any
tender or exchange offer or other acquisition proposal or (B) the average of the
closing sale prices of shares of the Grantor Common Stock on NASDAQ for the ten
trading days immediately preceding such date) exceeds the Exercise Price,
multiplied by the number of shares of the Grantor Common Stock purchasable
pursuant to the Stock Option (or portion thereof with respect to which the
Grantor is exercising its rights under this Section 7).
(b) PAYMENT AND REDELIVERY OF STOCK OPTION OR SHARES. In the
event the Grantee exercises its rights under this Section 7, the Grantor shall,
within 10 business days thereafter, pay the required amount to the Grantee in
immediately available funds and the Grantee shall surrender to the Grantor the
Stock Option, and the Grantee shall warrant that it owns the Stock Option free
and clear of any and all Liens of any kind or nature whatsoever.
8. REGISTRATION RIGHTS. In the event that the Grantee shall desire
to sell any of the shares of the Grantor Common Stock purchased pursuant to the
Stock Option within 3 years after such purchase, and such sale requires in the
opinion of counsel to the Grantor, which opinion shall be reasonable
satisfactory to the Grantee and its counsel, registration of such shares under
the Securities Act of 1933, the Grantee may, by written notice (the
"Registration Notice") to the Grantor (the "Registrant"), request the Registrant
to register under the Securities Act all or any part of the shares purchased
pursuant to the Stock Option ("Restricted Shares") beneficially owned by the
Grantee (the "Registrable Securities") pursuant to a BONA FIDE firm commitment
underwritten public offering in which the Grantee and the underwriters shall
effect as wide a distribution of such Registrable Securities as is reasonably
practicable and shall use their best efforts to prevent any person (including
any Group) and its affiliates from purchasing through such offering Restricted
Shares representing more than 2% of the outstanding shares of common stock of
the Registrant on a fully diluted basis (a "Permitted Offering"). The
Registration Notice shall include a certificate executed by the Grantee and its
proposed managing underwriter, which underwriter shall be an investment banking
firm of nationally recognized standing reasonably acceptable to the Grantor (the
"Manager"), stating that (i) it has a good faith intention to commence
Annex B - Page 3
<PAGE>
promptly a Permitted Offering and (ii) the Manager in good faith believes that,
based on the then prevailing market conditions, it will be able to sell the
Registrable Securities at a per share price to be specified in such Registration
Notice (the "Fair Market Value"). The Registrant (and/or any person designated
by the Registrant) shall thereupon have the option exercisable by written notice
delivered to the Grantee within 10 business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities and (ii) the Fair Market
Value of such Registrable Securities. Any such purchase of Registrable
Securities by the Registrant hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or its counsel at any
reasonable date and time designated by the Registrant and its designee in such
notice within 20 business days after delivery of such notice. Any payment for
the shares to be purchased shall be made by delivery at the time of such closing
of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 8 with respect to all Registrable Securities designated in the
Registration Notice, it shall use its best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities; PROVIDED, HOWEVER, that (i) the Grantee shall not be
entitled to more than an aggregate of two effective registration statements
hereunder and (ii) the Registrant will not be required to file any such
registration statement during any period of time (not to exceed 90 days after
such request in the case of clause (B) below or 120 days in the case of clauses
(A) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the judgment of the Board of Directors of the
Registrant, such information would have to be disclosed if a registration
statement were filed at that time; (B) the Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) the Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant or
any of its affiliates. If consummation of the sale of any Registrable Securities
pursuant to a registration hereunder does not occur within 120 days after the
filing with the SEC of the initial registration statement with respect thereto,
the provisions of this Section 8 shall again be applicable to any proposed
registration; PROVIDED, HOWEVER, that the Grantee shall not be entitled to
request more than two registrations pursuant to this Section 8 to be qualified
for sale under the securities or blue-sky laws of such jurisdictions as the
Grantee may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; PROVIDED, HOWEVER, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 8 are subject to
the condition that the Grantee shall provide the Registrant with such
information with respect to the Grantee's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to the Grantee
as, in the reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
A registration effected under this Section 8 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and the expenses of counsel to the Grantee, and the Registrant shall
provide to the underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings as such underwriters may reasonably require.
In connection with any such registration, the parties agree (i) to indemnify
each other and the underwriters in the customary manner and (ii) to enter into
an underwriting agreement in form and substance customary to transactions of
this type with the Manager and the other underwriters participating in such
offering.
9. PROFIT LIMITATION. (a) Notwithstanding any other provision of
this Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) exceed $4,000,000.00 and, if it otherwise would exceed such amount the
Grantee, at its sole election, shall either (i) deliver to the Grantor for
cancellation Shares previously purchased by the Grantee, (ii) pay cash or other
consideration to the Grantor or (iii) undertake any combination thereof, so that
the Grantee's Total Profit shall not exceed $4,000,000.00 after taking into
account the foregoing actions.
Annex B - Page 4
<PAGE>
(b) Notwithstanding any other provision of this Agreement, this
Stock Option may not be exercised for a number of Shares as would, as of the
date of the Exercise Notice, result in a Notional Total Profit (as defined
below) of more than $4,000,000.00, and, if exercise of the Stock Option
otherwise would exceed such amount, the Grantee, at its discretion, may increase
the Price for that number of Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed $4,000,000.00; PROVIDED, that nothing in
this sentence shall restrict any exercise of the Stock Option permitted hereby
on any subsequent date at the Price set forth in Section 1.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by the Grantee
pursuant to the Grantor's repurchase of the Stock Option pursuant to Section 7,
and (ii) (x) the net cash amounts received by the Grantee pursuant to the sale
of Restricted Shares (or any other securities into which such shares are
converted or exchanged) to any unaffiliated party, less (y) the Grantee's
purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Restricted Shares as to which the Grantee may propose to exercise
this Stock Option shall be the Total Profit determined as of the date of the
Exercise Notice, assuming that this Stock Option were exercised on such date for
such number of Restricted Shares and assuming that such Restricted Shares,
together with all other Restricted Shares held by the Grantee and its affiliates
as of such date, were sold for cash at the closing market price for the Grantor
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in the Grantor Common Stock by reason of stock dividends, stock splits,
mergers (other than the Merger), recapitalizations, combinations, exchange of
shares or the like, the type and number of shares or securities subject to the
Stock Option, and the Exercise Price per share, shall be adjusted appropriately.
11. RESTRICTIVE LEGENDS. Each certificate representing shares of the
Grantor Common Stock issued to the Grantee hereunder shall initially be endorsed
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER
AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED MARCH 5, 1997, A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER HEREOF.
12. BINDING EFFECT; NO Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, and permitted assigns. Except as expressly provided in this
Agreement, neither this Agreement nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the written
consent of the other party. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any Restricted Shares sold by a party in
compliance with the provisions of Section 8 shall, upon consummation of such
sale, be free of the restrictions imposed with respect to such shares by this
Agreement, in no event will any transferee of any Restricted Shares be entitled
to the rights of the Grantee hereunder. Certificates representing shares sold in
a registered public offering pursuant to Section 8 shall not be required to bear
the legend set forth in Section 11.
Annex B - Page 5
<PAGE>
13. INCORPORATION BY REFERENCE. The provisions of Sections 5(a) and
(b) and 8(d)(f)(g)(h)(i)(j)(k)(m)(o) and (p) of the Merger Agreement are
incorporated herein by reference, to be read as though the references therein to
the Merger Agreement were references to this Agreement.
C.R. ANTHONY COMPANY
By: ________________________
Its:
STAGE STORES, INC.
By: ________________________
Its:
Annex B - Page 6
<PAGE>
ANNEX C
Stephens, Inc.
March 4, 1997
Board of Directors
C.R. Anthony Company
701 N. Broadway
Oklahoma City, OK 73102
Gentlemen:
We have acted as your financial advisor in connection with the
merger of C.R. Anthony Company (the "Company") with and into a wholly-owned
subsidiary of Stage Stores, Inc. ("Stage Stores") ("the Transaction"). The
consummation of the merger will result in the holders of common stock, $.01 par
value, of the Company receiving, in exchange for each share of Company common
stock, a minimum of $8.00 in aggregate value of cash and shares of common stock,
$.01 par value, of Stage Stores, in a ratio to be determined. The value of Stage
Stores common stock shall be determined on the basis of the average market price
of such stock during an agreed upon period prior to the effective date of the
Transaction. The minimum of $8.00 in aggregate value per share received by the
holders of the Company common stock shall be increased by $.01 per share for
each $.05 increment by which the average market price of Stage Stores common
stock during the agreed upon period exceeds $20.00. The terms and conditions of
the Transaction are more fully set forth in the draft of the Agreement and Plan
of Merger between Stage Stores, Inc. and C.R. Anthony Company dated February 27,
1997.
You have requested our opinion as to the fairness to the
disinterested shareholders of the Company from a financial point of view of the
consideration to be received by such shareholders in the Transaction. For the
purposes of this opinion, the term "disinterested shareholders" means holders of
the Company's one class of publicly traded common stock other than (1)
directors, officers and employees of the Company, (2) any holder of five percent
(5%) or more of the outstanding shares of such class assuming the exercise of
options beneficially owned by the holder and (3) Stage Stores and its
affiliates.
In connection with rendering our opinion we have:
(i) reviewed a draft of the Agreement and Plan of Merger between
Stage Stores, Inc. and C.R. Anthony Company dated February
27, 1997;
(ii) analyzed certain publicly available financial statements and
reports regarding the Company and Stage Stores;
(iii) reviewed certain publicly available reports on the Company
and Stage Stores prepared by securities analysts;
Investment Bankers
111 Center Street Post Office Box 3507
Little Rock, Arkansas 72203-3507 501-374-4361
Fax 501-377-2674
Annex C - Page 1
<PAGE>
(iv) analyzed certain internal financial statements and other
financial and operating data (including financial
projections) concerning the Company prepared by management
of the Company;
(v) discussed with management of the Company the operations of
and future business prospects for the Company and the
anticipated financial consequences of the Transaction to the
Company;
(vi) discussed with management of Stage Stores the operations of
and future business prospects for Stage Stores and the
anticipated financial consequences of the Transaction to
Stage Stores;
(vii) reviewed the reported prices and trading activity for the
common stock of the Company and Stage Stores;
(viii) compared the financial performance of the Company and of
Stage Stores and the prices and trading activity of the
common stock of the Company and Stage Stores with that of
certain other comparable publicly-traded companies and their
securities;
(ix) reviewed the financial terms, to the extent publicly
available, of certain comparable transactions;
(x) performed such other analyses and provided such other
services as we have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company and Stage Stores, and our opinion
is based upon such information. We have inquired into the reliability of such
information and financial data only to the limited extent necessary to provide a
reasonable basis for our opinion, recognizing that we are rendering only an
informed opinion and not an appraisal or certification of value. With respect to
the financial projections prepared by management of the Company, we have assumed
that they have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the future financial performance of the
Company.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Stephens Inc.
and its affiliates at any time may hold long or short positions, and may trade
or otherwise effect transactions as principal or for the accounts of customers,
in debt or equity securities or options on securities of the Company and of
Stage Stores. Stephens is receiving a fee, and reimbursement of its expenses, in
connection with the issuance of this fairness opinion.
Based on the foregoing and our general experience as investment bankers,
and subject to the qualifications stated herein, we are of the opinion on the
date hereof that the consideration to be received by the disinterested
shareholders of the Company in the Transaction is fair to them from a financial
point of view.
This opinion and a summary discussion of our underlying analyses and role
as your financial advisor may be included in communications to the Company's
shareholders provided that we approve of such disclosures prior to publication.
Very truly yours,
Stephens Inc.
Annex C - Page 2
<PAGE>
ANNEX D
GENERAL CORPORATION LAW
OF THE STATE OF OKLAHOMA
ss. 1091. Appraisal rights
APPRAISAL RIGHTS
A. Any shareholder of a corporation of this state who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection D of this section with respect to such shares, who continuously holds
such shares through the effective date of the merger or consolidation, who has
otherwise complied with the provisions of subsection D of this section and who
has neither voted in favor of the merger or consolidation nor consented thereto
in writing pursuant to the provisions of Section 1073 of this title shall be
entitled to an appraisal by the district court of the fair value of his shares
of stock under the circumstances described in subsections B and C of this
section. As used in this section, the word "shareholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation. The provisions of this subsection shall be effective only
with respect to mergers or consolidations consummated pursuant to an agreement
of merger or consolidation entered into after November 1, 1988.
B. 1. Except as otherwise provided for in this subsection, appraisal
rights shall be available for the shares of any class or series of stock of a
constituent corporation in a merger or consolidation, or of the acquired
corporation in a share acquisition, to be effected pursuant to the provisions of
Sections 1081, 1082, 1086, 1087, or 1091.1 of this title or Section 12 of this
act. [FN1]
2. a. No appraisal rights under this section shall be available for
the shares of any class or series of stock which, at the record date fixed to
determine the shareholders entitled to receive notice of and to vote at the
meeting of shareholders to act upon the agreement of merger or consolidation,
were either:
(1) listed on a national securities exchange; or
(2) held of record by more than two thousand
shareholders.
b. In addition, no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger if the merger
did not require for its approval the vote of the shareholders of the surviving
corporation as provided for in subsection F of Section 1081 of this title.
3. Notwithstanding the provisions of paragraph 2 of this subsection,
appraisal rights provided for in this section shall be available for the shares
of any class or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or consolidation
pursuant to the provisions of Sections 1081, 1082, 1086 or 1087 of this title to
accept for such stock anything except:
a. shares of stock of the corporation surviving or
resulting from such merger or consolidation; or
b. shares of stock of any other corporation which at the
effective date of the merger or consolidation will be
either listed on a national securities exchange or held
of record by more than two thousand shareholders; or
c. cash in lieu of fractional shares of the corporations
described in subparagraphs a and b of this paragraph; or
d. any combination of the shares of stock and cash in lieu
of the fractional shares described in subparagraphs a, b
and c of this paragraph.
Annex D - Page 1
<PAGE>
4. In the event all of the stock of a subsidiary Oklahoma
corporation party to a merger effected pursuant to the provisions of Section
1083 of this title is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of the subsidiary
Oklahoma corporation.
C. Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections D and E
of this section, shall apply as nearly as is practicable.
D. Appraisal rights shall be perfected as follows:
1. If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
shareholders, the corporation, not less than twenty (20) days prior to the
meeting, shall notify each of its shareholders entitled to such appraisal rights
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each shareholder electing to demand the appraisal of the shares of the
shareholder shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of the shares of the
shareholder. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the shareholder and that the shareholder intends
thereby to demand the appraisal of the shares of the shareholder. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
shareholder electing to take such action must do so by a separate written demand
as herein provided. Within ten (10) days after the effective date of such merger
or consolidation, the surviving or resulting corporation shall notify each
shareholder of each constituent corporation who has complied with the provisions
of this subsection and has not voted in favor of or consented to the merger or
consolidation as of the date that the merger or consolidation has become
effective; or
2. If the merger or consolidation was approved pursuant to the
provisions of Section 1073 or 1083 of this title, the surviving or resulting
corporation, either before the effective date of the merger or consolidation or
within ten (10) days thereafter, shall notify each of the shareholders entitled
to appraisal rights of the effective date of the merger or consolidation and
that appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the shareholder at the address of the
shareholder as it appears on the records of the corporation. Any shareholder
entitled to appraisal rights may, within twenty (20) days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of the shares of the shareholder. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
shareholder and that the shareholder intends to demand the appraisal of the
shares of the shareholder.
E. Within one hundred twenty (120) days after the effective date of the
merger or consolidation, the surviving or resulting corporation or any
shareholder who has complied with the provisions of subsections A and D of this
section and who is otherwise entitled to appraisal rights, may file a petition
in district court demanding a determination of the value of the stock of all
such shareholders. Provided, however, at any time within sixty (60) days after
the effective date of the merger or consolidation, any shareholder shall have
the right to withdraw the demand of the shareholder for appraisal and to accept
the terms offered upon the merger or consolidation. Within one hundred twenty
(120) days after the effective date of the merger or consolidation, any
shareholder who has complied with the requirements of subsections A and D of
this section, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the shareholder within ten (10) days after the shareholder's
written request for such a statement is received by the surviving or resulting
corporation or within ten (10) days after expiration of the period for delivery
of demands for appraisal pursuant to the provisions of subsection D of this
section, whichever is later.
F. Upon the filing of any such petition by a shareholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which,
within twenty (20) days after such service, shall file in the office of the
Annex D - Page 2
<PAGE>
court clerk of the district court in which the petition was filed a duly
verified list containing the names and addresses of all shareholders who have
demanded payment for their shares and with whom agreements as to the value of
their shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The court clerk, if
so ordered by the court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the shareholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one (1) week before the day of the hearing, in a newspaper of general
circulation published in the City of Oklahoma City, Oklahoma, or such
publication as the court deems advisable. The forms of the notices by mail and
by publication shall be approved by the court, and the costs thereof shall be
borne by the surviving or resulting corporation.
G. At the hearing on such petition, the court shall determine the
shareholders who have complied with the provisions of this section and who have
become entitled to appraisal rights. The court may require the shareholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the court clerk for
notation thereon of the pendency of the appraisal proceedings; and if any
shareholder fails to comply with such direction, the court may dismiss the
proceedings as to such shareholder.
H. After determining the shareholders entitled to an appraisal, the court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
court shall take into account all relevant factors. In determining the fair rate
of interest, the court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any shareholder entitled to participate
in the appraisal proceeding, the court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the shareholder entitled to an appraisal. Any
shareholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to the provisions of subsection F of this section and who
has submitted the certificates of stock of the shareholder to the court clerk,
if such is required, may participate fully in all proceedings until it is
finally determined that the shareholder is not entitled to appraisal rights
pursuant to the provisions of this section.
I. The court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
shareholders entitled thereto. Interest may be simple or compound, as the court
may direct. Payment shall be so made to each such shareholder, in the case of
holders of uncertificated stock immediately, and in the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The court's decree may be enforced as
other decrees in the district court may be enforced, whether such surviving or
resulting corporation be a corporation of this state or of any other state.
J. The costs of the proceeding may be determined by the court and taxed
upon the parties as the court deems equitable in the circumstances. Upon
application of a shareholder, the court may order all or a portion of the
expenses incurred by any shareholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all of
the shares entitled to an appraisal.
K. From and after the effective date of the merger or consolidation, no
shareholder who has demanded the appraisal rights of the shareholder as provided
for in subsection D of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock,
except dividends or other distributions payable to shareholders of record at a
date which is prior to the effective date of the merger or consolidation;
provided, however, that if no petition for an appraisal shall be filed within
the time provided for in subsection E of this section, or if such shareholder
shall deliver to the surviving or resulting corporation a written withdrawal of
the shareholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within sixty (60) days after the effective date of the
merger or consolidation as provided for in subsection E of this section or
thereafter with the written approval of the corporation, then the right of such
shareholder to an appraisal shall cease. Provided, however, no appraisal
proceeding in the district court shall be
Annex D - Page 3
<PAGE>
dismissed as to any shareholder without the approval of the court, and such
approval may be conditioned upon such terms as the court deems just.
L. The shares of the surviving or resulting corporation into which the
shares of such objecting shareholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
Amended by Laws 1987, c. 146, s 7, operative Nov. 1, 1987; Laws 1988, c. 323, s
19, eff. Nov. 1, 1988; Laws 1990, c. 328, s 6, eff. Sept. 1, 1990.
[FN1] Section 1090.2 of this title.
Annex D - Page 4
<PAGE>
ANNEX E
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the _ day of
March, 1997 and effective as of the "Closing Date" (defined below), between
Stage Stores, Inc., a Delaware corporation (the "Company"), and ____________
(the "Executive").
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interest of the Company to retain certain members of
the Executive Management Team of C.R. Anthony Company, including the Executive,
as employees of the Company following the Closing Date;
WHEREAS, this Agreement sets forth the compensation and other terms of
employment of the Executive as an employee of the Company; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company to guarantee that the
Executive's employment by the Company will not be terminated for any reason
during the "Initial Term" (defined below) of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following capitalized
terms shall have the following meanings:
(a) "BONUS" shall have the meaning ascribed to such term in Section 6
below.
(b) "CLOSING DATE" shall have the meaning ascribed to such term in Section
2(b) of that certain Agreement and Plan of Merger between Stage Stores,
Inc. and C.R. Anthony, Company dated March 5, 1997.
(c) "DEATH" shall mean the death of the Executive.
(d) "DISABILITY" shall have the same meaning as is then applicable under
the Company's welfare benefit plan governing long term disability income
payments. If no such plan is in effect at the time of any determination of
Disability, then Disability shall mean the Executive's absence as a result
of physical or mental illness from his duties with the Company on a
full-time basis for three (3) months.
(e) "EXECUTIVE BENEFITS" shall have the meaning ascribed to such term in
Section 4 below.
(f) "HEALTH BENEFITS" shall mean any policy, plan or program available to
executive officers of the Company which: (i) provides insurance or
indemnity against or reimbursement for expenses or loss of income incurred
as a result of or arising out of any accident, sickness, illness,
disability or other change in the executive officer's physical, emotional
or mental well being; or (ii) constitutes, contains or provides life
insurance or any other similar benefit.
(g) "INITIAL TERM" shall mean that period of time commencing on the
Effective Date and concluding on the date following six (6) months from
the Closing Date or January, 31, 1998, whichever is later. The Initial
Term shall not be shortened by Death, Disability or any other reason.
(h) "SALARY" shall have the mewing ascribed to such term in Section 3
below.
(i) "TRANSITION BONUS POOL" shall have the meaning ascribed to such term
in Section 6 below.
(j) "TRANSITION TEAM" shall have the meaning ascribed to such term in
Section 6 below.
Annex E - Page 1
<PAGE>
2. TERM, OF EXECUTIVE'S EMPLOYMENT. Executive's employment with the
Company shall commence as of the Closing Date and, except in the case of Death
or Disability as provided in Section 9 below, cannot be terminated by the
Company or Executive for any reason during the Initial Term. Upon the expiration
of the Initial Term, Executive's employment shall be extended automatically for
an indefinite period of time upon the terms contained herein but shall be
terminable at will by either party upon ninety (90) days advance, written notice
served upon the other party at any time following the Initial Term.
3. EXECUTIVE COMPENSATION. During the Initial Term and for such period of
time thereafter in which the Executive remains employed by the Company, Company
shall pay Executive the sum of ___________ Dollars ($________) per month payable
in equal semimonthly installments, and prorated at the same rate for any
fractional period thereof ("Salary").
4. EXECUTIVE BENEFITS. During the Initial Term and for such period of time
thereafter in which the Executive remains employed by the Company:
(a) Executive shall be entitled to participate in any retirement plan or
arrangement or any insurance or other welfare benefit plan, program or
arrangement made generally available to the executive officers of the
Company and on a basis reasonable in relation to the basis on which the
other executive officers of the Company are eligible to participate; and
(b) Company shall make one hundred percent (100%) of the premium or
contribution payments necessary to maintain the right of the Executive and
his spouse to receive Health Benefits.
In the event Executive remains employed by the Company after the Initial Term,
in addition to the benefits described in Sections 4(a) and 4(b), the Company
also shall establish performance goals, target bonuses and other incentive
awards for Executive that are reasonable in relation to the performance goals,
bonuses and awards established for the Company's other executive officers.
The benefits and payments provided for in this Section 4 are collectively
referred to herein as the "Executive Benefits" and shall be in addition to the
right of the Executive to receive the Bonus as further described in Section 6
below.
5. CONTINUATION OF HEALTH BENEFITS.
(a) HEALTH BENEFITS FOR EXECUTIVE. Following the termination of
Executive's employment with the Company for any reason whatsoever,
including without limitation Disability, Company shall continue to make
one hundred percent (100%) of the premium or contribution payments
necessary to maintain the right of Executive to receive the Health
Benefits until Executive's 65th birthday or Death, whichever is the
earlier to occur.
(b) HEALTH BENEFITS FOR EXECUTIVE'S SPOUSE. Following the termination of
Executive's Employment with the Company for any reason whatsoever,
including without limitation Death or Disability, Company shall continue
to make one hundred percent (100%) of the premium or contribution payments
necessary to maintain the right of Executive's spouse to receive the
Health Benefits until her 65th birthday or her death, whichever is the
earlier to occur.
6. PARTICIPATION IN TRANSITION BONUS POOL. Company agrees to fund a
Transition Bonus Pool to be paid to members of a "Transition Team", including
Executive, at a time selected by the Board of Directors of the Company following
the Closing Date but in no event later than January 31, 1998 or such later time
as the transition and consolidation of the operations of the Company with the
operations of C.R. Anthony Company is completed. The "Transition Team" shall be
comprised of certain persons currently employed by C.R. Anthony Company,
including Executive, and any other persons chosen by the Board of Directors of
Company to coordinate the transition and consolidation of the operations of the
Company with the operations of C.R. Anthony Company. Executive's portion or
share of such Transition Bonus Pool shall be referred to herein as the "Bonus".
"Transition Bonus Pool" shall mean the plan, program or fund created,
implemented or adopted by the Company to reward members of the Transition Team
for their efforts in assisting the transition and consolidation of the
operations of the
Annex E - Page 2
<PAGE>
Company with the operations of C.R. Anthony Company as more specifically defined
by the parties prior to the Closing Date.
7. APPOINTMENT TO COMPANY'S BOARD OF DIRECTORS. Company's Board of
Directors shall use its best efforts to ensure that Executive is appointed to
and thereafter duly elected, qualified and retained to the position of a member
of the Company's Board of Directors.
8. IMMEDIATE VESTING. The following rights shall be fully earned and
vested as of the Closing Date and may not be rescinded, canceled or terminated
for any reason:
(a) the right of Executive to receive the Salary during the Initial Term
and for such period of time thereafter in which the Executive remains
employed by the Company; and
(b) the right of the Executive to receive the Executive Benefits; and
(c) the right of the Executive to receive the payments specified in that
certain Amended Severance Agreement between the Company and the Executive
dated even herewith and effective as of the Closing Date; and
(d) the right of the Executive to receive the Bonus.
Provided further, to the extent allowable under the terms of the plans, programs
or policies by or under which the Executive Benefits are provided, termination
of the Executive's employment with the Company shall not result in a forfeiture
of the right to receive payment of any bonus, payment or contribution which, but
for the termination of Executive's employment would have been made to or on
behalf of Executive at some later time, not to exceed one (1) year from the
termination of the Executive's employment.
9. EFFECT OF DEATH OR DISABILITY. Executive's employment with the Company
shall terminate automatically and immediately upon Death and may be terminated
on thirty (30) days advance written notice to the Executive following a
determination of Disability provided that within thirty (30) days after written
notice is given to the Executive, the Executive shall not have returned to the
full-time performance of the Executive's duties with the Company. Provided,
however, that Company shall continue to be obligated to make any payments and
provide any benefits which were vested in accordance with the terms of Section 8
of this Agreement or otherwise at the time of Death or Disability. In the event
of Death, any payments which would have been made to or on behalf of Executive
but for Death, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or if there be no such
designee to the Executive's estate. In the event of Disability any payments
which would have been to or on behalf of Executive but for such Disability,
shall be paid to Executive or his guardian or personal representative as the
case may be. Any payments or contributions necessary to maintain the right of
Executive, if living, and Executive's spouse, if living, to receive the Health
Benefits in accordance with the provisions of Section 5 above shall be made
directly to the plan, trust, fund or insurance company or other entity as may be
necessary.
10. SUCCESSOR TO THE COMPANY. Company shall cause any successor or assign
(whether direct or ir direct, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place.
11. ASSIGNABILITY. Neither this Agreement nor any rights of the Executive
hereunder shall be assignable or transferable by the Executive; PROVIDED HOWEVER
this Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
12. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, as follows:
Annex E - Page 3
<PAGE>
If to the Company:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77002
If by mail or delivery to the Executive:
-------------------------------
-------------------------------
-------------------------------
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in a
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
Provisions or conditions at the same or at any prior or subsequent time. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements relating hereto, and no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of State of Oklahoma. The invalidity, or
unenforceability of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument. Company represents and
warrants that it has the right and authority to enter into this Agreement and to
grant the rights and render the performances contemplated hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"COMPANY" STAGE STORES, INC.,
a Delaware corporation
By:_________________________________
Carl E. Tooker, President and
Chief Executive Officer
"EXECUTIVE"
By:_________________________________
Annex E - Page 4
<PAGE>
ANNEX F
FORM OF AMENDED SEVERANCE AGREEMENT
This Amended Severance Agreement ("Agreement") is entered into as of the _
day of March, 1997 and effective as of the "Closing Date" (defined below),
between Stage Stores, Inc., a Delaware corporation (the "Company"), and
______________ (the "Executive").
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company to retain certain members
of the Executive Management Team of C.R. Anthony Company, including the
Executive, as employees of the Company following the Closing Date;
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interest of the Company to offer the Amended
Severance Payment (defined below) to the Executive as an inducement to encourage
Executive to cancel and forfeit any rights that the Executive may have under
that certain Executive Severance Compensation Agreement between C.R. Anthony
Company and Executive dated April 1, 1995 (the "Anthony's Severance Rights");
and
WHEREAS, the Executive has agreed to waive and forfeit the Anthony's
Severance Rights in exchange for the payment of the Amended Severance Payment on
the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge , the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following capitalized
terms shall have the following meanings:
(a) "CLOSING DATE" shall have the meaning ascribed to such term in Section
2(d)(i) of that certain Agreement and Plan of Merger between Stage Stores, Inc.
and C.R. Anthony Company dated March 5, 1997.
(b) "DEATH" shall mean the death of the Executive.
(c) "DISABILITY" shall have the same meaning as is then applicable under
the Company's welfare benefit plan governing long term disability income
payments. If no such plan is in effect at the time of any determination of
Disability, then Disability shall mean the Executive's absence as a result of
physical or mental illness from his duties with the Company on a full-time basis
for three (3) months.
(d) "AMENDED SEVERANCE PAYMENT" shall have the meaning ascribed to such
term in Section 3 below.
2. WAIVER OF SEVERANCE RIGHTS. Executive waives and relinquishes any
rights under that certain Executive Severance Compensation Agreement between
C.R. Anthony Company and Executive dated April 1, 1995. Executive further agrees
to execute any documents necessary to evidence the cancellation or termination
of such agreement or the waiver or relinquishment of Executive's rights
thereunder as Company may reasonably request.
3. AMENDED SEVERANCE PAYMENT. Company shall pay Executive
_________________ Dollars ($_________) as follows:
(a) _____________________ Dollars ($_________) in good funds
on __________; and
[(b) _____________ Dollars ($_______) in ____________ (__)
equal installments of __________________ Dollars ($______) per month
payable in good funds on the ___ calendar day of each month
beginning__________.]
Annex F - Page 1
<PAGE>
The payments provided for in this Section 3 are collectively referred to herein
as the "Amended Severance Payment."
4. IMMEDIATE VESTING. The right of the Executive to receive the Amended
Severance Payment shall immediately vest as of the Closing Date and may not be
rescinded, canceled, terminated or forfeited for any reason.
5. EFFECT OF DEATH OR DISABILITY.. Neither Death nor Disability shall
affect the right of the Executive to receive the Amended Severance Payment. In
the event of Death, any payments which would have been made to Executive but for
Death, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or if there be no such designee
to the Executive's estate. In the event of Disability any payments which would
have been to Executive but for such Disability, shall be paid to Executive or
his guardian or personal representative as the case may be.
6. SUCCESSOR TO THE COMPANY. Company shall cause any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place.
7. ASSIGNABILITY. Executive's right to receive the Amended Severance
Payment shall be freely assignable by Executive.
8. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, as follows:
Annex F - Page 2
<PAGE>
If to the Company:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77002
If by mail or delivery to the Executive:
-------------------------------
-------------------------------
-------------------------------
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in a
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
Provisions or conditions at the same or at any prior or subsequent time. This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements relating hereto, and no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shal1 be governed by and construed
in accordance with the laws of State of Oklahoma. The invalidity, or
unenforceability of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. Th is Agreement may be executed in one or more
counterparts, each of which shall be deemed to e an original but all of which
together will constitute one and the same instrument.
IN WITNESS, WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY" STAGE STORES, INC.
a Delaware corporation
By:______________________________
Carl E. Tooker, President and
Chief Executive Officer
"EXECUTIVE"
By:______________________________
Annex F - Page 3
<PAGE>
ANNEX G
FORM OF OPTION CANCELLATION AGREEMENT
This Option Cancellation Agreement (the "Agreement") is entered into as of
March 19, 1997 (the "Effective Date"), by and between C. R. Anthony Company, an
Oklahoma corporation (the "Corporation"), and __________ (the "Holder"). The
Corporation and the Holder are collectively referred to in this Agreement as the
"Parties."
WHEREAS, the Corporation has adopted the C. R. Anthony 1992 Stock Option
Plan as amended and restated effective January 10, 1997 (the "Option Plan");
WHEREAS, pursuant to the terms of the Option Plan the Corporation and the
Holder have entered into one or more Stock Option Agreements and as a result the
Holder has been granted the right and option (the "Option" or "Options") to
purchase shares (the "Option Shares") of the Corporation's common stock in the
amount(s) and at purchase (exercise) price(s) set forth in the Stock Option
Agreements, all as more specifically set forth in Exhibit A to this Agreement,
which is incorporated herein by reference;
WHEREAS, the Option Plan and the Stock Option Agreements provide that if
there is a Change of Control in the Corporation, the Options granted shall be
immediately exercisable in full, and define "Change of Control" to mean the
occurrence of any one of certain specified events including the consummation of
a merger pursuant to which the shareholders of the Corporation immediately prior
to the merger do not have beneficial ownership immediately following the merger
of at least 51% of the combined voting power of the outstanding voting
securities of the corporation resulting from the merger;
WHEREAS, on March 5, 1997, the Corporation entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Stage Stores, Inc. ("Stage Stores")
which, if and when approved by the shareholders of the Corporation, (i) will
result in the merger of the Corporation (the "Merger") to become effective at
the time (the "Effective Time") the Corporation and Stage Stores file the
Certificate of Merger, and (ii) will result in the shareholders of the
Corporation immediately prior to the Merger not having beneficial ownership
following the Merger of at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from the Merger;
WHEREAS, the Parties agree that the Merger constitutes a Change of Control
under the terms of the Option Plan and the Stock Option Agreements to which they
are parties and the Options granted the Holder shall be immediately exercisable
in full at the Effective Time; and
WHEREAS, Section 5(n) of the Merger Agreement requires that as a condition
to closing the Merger the Corporation shall, on or before March 31, 1997,
deliver to Stage Stores executed cancellation agreements from the holders of all
Options under the Option Plan wherein all Options outstanding under the Option
Plan that are unexercised, whether or not then exercisable, shall be
automatically cancelled by virtue of the Merger and the holders shall be
entitled to receive consideration in the form of cash.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the Parties agree as
follows:
1. OBLIGATIONS OF THE HOLDER. The Holder agrees not to exercise his or her
Options prior to, or at, the Effective Time in exchange for the right to receive
the cash payment (the "Option Cancellation Payment") set forth in Section 2 of
this Agreement.
2. OBLIGATIONS OF THE CORPORATION. Not later than five (5) business days
after the Closing Date (as defined below), the Corporation shall pay to the
Holder by check the Holder's Option Cancellation Payment which shall equal the
product of the number of the Holder's Option Shares times the remainder of (a)
the Base Price per share of the Corporation's common stock to be paid by Stage
Stores under the Merger Agreement, less (b) the Weighted Average Exercise Price
of the Options and any other amounts payable by the Holder with respect to the
Options, all as set forth in Exhibit A. The "Base Price" per share means $8.00
plus one cent ($.0l) for every five cents ($.05) by which the SSI Average
Closing Price exceeds $20.00 The "SSI Average Closing Price" means the average
closing price expressed in dollars per share of Stage Store stock quoted on the
NASD, Nasdaq National Market System for the ten trading days
Annex G - Page 1
<PAGE>
selected by lot by the Corporation and Stage Stores out of the twenty most
recent consecutive trading days prior to and including the fifth trading day
preceding the date of the closing of the transactions contemplated by the Merger
Agreement (the "Closing Date"). In any event, the obligations of the Corporation
to the Holder under this Agreement are entirely contingent on the closing of the
Merger.
3. CANCELLATION OF THE OPTIONS; TERMINATION OF THE OPTION PLAN AND THE
STOCK OPTION AGREEMENTS. The Holder understands and agrees that (a) as of the
Effective Time, the Options held by the Holder shall be automatically cancelled
by virtue of the Merger, (b) as of the Effective Time, the Option Plan and the
Option Agreements shall terminate and any of the Holder's rights to receive
Options, Option Shares, or any other interest in respect to the capital stock of
the Corporation or any of its subsidiaries under the Option Plan and the Option
Agreements shall terminate, and (c) following the Effective Time, the Holder
shall not have any right under the Option Plan and the Option Agreements to
acquire or participate in changes in the value of equity securities of the
Corporation, any corporation which survives the Merger, any subsidiary formed by
Stage Stores as a result of the Merger, or any of their respective subsidiaries.
4. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The Parties represent
and warrant to each other that Exhibit A attached to this Agreement is accurate.
The Corporation represents and warrants to the Holder that the execution and
performance of this Agreement has been duly authorized and that all necessary
corporate action has been taken. The Holder represents and warrants to the
Corporation that he or she has been provided with any and all information he or
she has requested of the Corporation concerning the Corporation and the Merger,
that he or she has been given the opportunity to ask questions of, and to
receive answers from, the Corporation concerning the Corporation and the Merger,
and that he or she has sought and received the advice of such accountants,
attorneys and other representatives as he or she deems appropriate prior to
entering into this Agreement.
5. TERM. The term of this Agreement will begin on the Effective Date and
will expire on the earlier of (a) payment by the Corporation of the Option
Cancellation Payment to the Holder, (b) the date the Corporation notifies the
Holder in writing that the Merger will not be consummated, or (c) December 31,
1997.
6. CONSTRUCTION AND VENUE. The Parties agree that this Agreement will be
construed and governed by the laws of the State of Oklahoma and that the
prevailing party in any dispute to enforce this Agreement will be entitled to
recover its costs and a reasonable attorney's fee. The Parties further agree
that the venue for any action to enforce this agreement shall be in Oklahoma
County, Oklahoma unless otherwise mutually agree upon in writing.
7. ENTIRE AGREEMENT; AMENDMENT. There are no verbal understandings between
the Parties. This Agreement contains the entire agreement between the Parties
and cannot be changed, modified, amended or supplemented except by a written
agreement signed by both Parties.
8. FURTHER ACTIONS. Each of the Parties agrees to take any such action as
may be reasonably required by the other party in order to record, effectuate,
consummate or implement the transaction contemplated by this Agreement.
9. SECTION HEADINGS. Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Corporation and the Holder have signed this
Option Cancellation Agreement consisting of three pages and Exhibit A as of the
Effective Date.
The Holder The Corporation
C.R. Anthony Company
_________________________________ By:----------------------------------
Name: __________________________ Name:--------------------------------
Address: ________________________ Title:-------------------------------
________________________
Annex G - Page 2
<PAGE>
EXHIBIT A
TO
OPTION CANCELLATION AGREEMENT
BETWEEN C.R. ANTHONY AND_____________
STOCK OPTIONS OUTSTANDING
Grant Exercise Number of
Date Price Options Granted
----------------------------------------------------------------------
$
------------------------
Total Options Granted:
------------------------
Weighted Average Exercise Price: $
------------------------
Amounts other than Exercise Price Owed by
Holder: $
------------------------
Annex G - Page 3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended (the
"Delaware Act") permits indemnification of the directors and officers of Stage
Stores, Inc. ("Stage Stores") involved in a civil or criminal action, suit or
proceeding, including, under certain circumstances, suits by or in the right of
Stage Stores, for any expenses, including attorneys' fees, and (except in the
case of suits by or in the right of Stage Stores) any liabilities which they may
have incurred in consequence of such action, suit or proceeding under the
conditions stated in said Section.
Article IX of Stage Stores' Restated Certificate of Incorporation
provides, in substance, for indemnification by Stage Stores of its directors and
officers in accordance with the provisions of the Delaware Act.
In addition, Stage Stores has purchased insurance coverage under
policies which insure Stage Stores for amounts which Stage Stores is required or
permitted to pay as indemnification of directors and certain officers of Stage
Stores and its subsidiaries, and which insure directors and certain officers of
Stage Stores and its subsidiaries against certain liabilities which might be
incurred by them in such capacities and for which they are not entitled to
indemnification by Stage Stores.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS. The following documents are exhibits to the
Registration Statement.
2.1 Agreement and Plan of Merger, dated as of March 5, 1997,
between Stage Stores, Inc. and C.R. Anthony Company.
2.2 Amendment No. 1, dated May 20, 1997, to Agreement and Plan of
Merger, originally dated March 5, 1997, between Stage Stores,
Inc. and C.R. Anthony Company (included as Annex A to the
Proxy Statement/Prospectus filed as part of this Registration
Statement).
2.3 Termination Option Agreement, dated as of March 5, 1997,
between C.R. Anthony Company and Stage Stores, Inc. (included
as Annex B to the Proxy Statement/Prospectus filed as part of
this Registration Statement).
5.1 Opinion of Kirkland & Ellis.
8.1 Opinion of Kirkland & Ellis as to Tax matters.
8.2 Opinion of McKinney, Stringer & Webster, P.C.
23.1 Consent of Price Waterhouse LLP (Stage Stores).
23.2 Consent of Deloitte & Touche LLP (CR Anthony).
23.3 Consent of Kirkland & Ellis (included in Exhibits 5.1 and 8.1
to this Registration Statement).
23.4 Consent of McKinney, Stringer & Webster, P.C. (included in
Exhibit 8.2 to this Registration Statement).
23.5 Consent of Stephens Inc.
24.1 Powers of Attorney (included on signature page hereto).
99.1 Form of Proxy Card.
II-1
<PAGE>
99.2 Form of Opinion of Stephens Inc. (included as Annex C to the
Proxy Statement/Prospectus filed as part of this Registration
Statement).
B. FINANCIAL STATEMENT SCHEDULES. The following documents are
financial statement schedules to the Registration Statement.
Not Applicable.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(a) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof;
(b) (1) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form;
(2) That every prospectus (i) that is filed pursuant to
paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act, and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue;
(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in the documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request; and
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being involved therein, that was not
the subject of and included in the Registration Statement when it became
effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on May 27, 1997.
STAGE STORES, INC.
By: /s/ CARL TOOKER
Name: Carl Tooker
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl Tooker and James Marcum and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Stage Stores, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration statement and power of attorney have been signed on May 27, 1997,
by the following persons in the capacities indicated with respect to Stage
Stores, Inc.:
Signature Capacity
--------- --------
/s/ CARL TOOKER President, Chief Executive Officer, and Director
Carl Tooker (Principal Executive Officer)
/s/ JAMES MARCUM Executive Vice President and Chief Financial Officer
James Marcum (Principal Financial and Accounting Officer)
/s/ JOSHUA BECKENSTEIN
Joshua Beckenstein Director
/s/ ADAM KIRSCH
Adam Kirsch Director
/s/ PETER MULVIHILL
Peter Mulvihill Director
II-3
<PAGE>
/s/ ROBERT HUTH
Robert Huth Director
/s/ RICHARD JOLOSKY
Richard Jolosky Director
/s/ HAL COMPTON
Hal Compton Director
II-4
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
STAGE STORES, INC.
AND
C.R. ANTHONY COMPANY
March 5, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. DEFINITIONS......................................................1
Section 2. BASIC TRANSACTION................................................7
(a) MERGER ALTERNATIVES........................................7
(b) THE CLOSING................................................7
(c) ACTIONS AT THE CLOSING.....................................7
(d) EFFECT OF MERGER...........................................8
(e) PROCEDURE FOR PAYMENT......................................9
(f) CLOSING OF TRANSFER RECORDS...............................10
(g) DISSENTING HOLDERS OF CRA SHARES..........................10
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA...........................11
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER..........11
(b) CAPITALIZATION OF CRA AND ITS SUBSIDIARIES................11
(c) AUTHORIZATION OF TRANSACTION..............................12
(d) NONCONTRAVENTION..........................................12
(e) FILINGS WITH THE SEC......................................13
(f) FINANCIAL STATEMENTS......................................13
(g) ABSENCE OF CERTAIN DEVELOPMENTS...........................13
(h) LITIGATION................................................15
(i) UNDISCLOSED LIABILITIES...................................16
(j) TAXES.....................................................16
(k) ENVIRONMENTAL MATTERS.....................................18
(l) EMPLOYEE MATTERS..........................................18
(m) LABOR MATTERS.............................................19
(n) EMPLOYEE BENEFIT PLANS....................................19
(o) PROPRIETARY RIGHTS........................................21
(p) CONTRACTS.................................................22
(q) BOOKS AND RECORDS.........................................23
(r) INSURANCE.................................................23
(s) REAL PROPERTY.............................................23
(t) TRANSACTIONS WITH AFFILIATES..............................26
(u) ACCOUNTS RECEIVABLE.......................................26
(v) INVENTORY.................................................26
(w) SUFFICIENCY OF ASSETS.....................................26
(x) BOARD RECOMMENDATION......................................26
(y) BROKERS' FEES.............................................27
(z) DISCLOSURE................................................27
i
<PAGE>
PAGE
(aa) TAX-FREE REORGANIZATION REQUIREMENTS......................27
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB............27
(a) ORGANIZATION..............................................27
(b) CAPITALIZATION............................................28
(c) AUTHORIZATION OF TRANSACTION..............................28
(d) NONCONTRAVENTION..........................................28
(e) FILINGS WITH THE SEC......................................28
(f) FINANCIAL STATEMENTS......................................28
(g) DISCLOSURE................................................29
(h) INVESTMENT COMPANY........................................29
(i) ABSENCE OF CERTAIN DEVELOPMENTS...........................29
(j) LITIGATION................................................29
(k) TAXES.....................................................29
(l) ENVIRONMENTAL.............................................30
(m) EMPLOYEE BENEFITS PLAN....................................30
(n) BOOKS AND RECORDS.........................................30
(o) INSURANCE.................................................30
(p) BROKER'S FEE..............................................30
Section 5. COVENANTS.......................................................30
(a) GENERAL...................................................30
(b) NOTICES AND CONSENTS......................................31
(c) REGULATORY MATTERS AND APPROVALS..........................31
(d) AGREED UPON PROCEDURE LETTER/COMFORT LETTER...............32
(e) LISTING OF SSI SHARES.....................................33
(f) CRA OPERATION OF BUSINESS.................................33
(g) FULL ACCESS...............................................34
(h) NOTICE OF DEVELOPMENTS....................................34
(i) ACQUISITION PROPOSALS.....................................35
(j) AFFILIATE AGREEMENTS......................................35
(k) CLOSING DOCUMENTS.........................................35
(l) DIRECTORS AND OFFICER'S INSURANCE.........................35
(m) SEVERANCE AGREEMENTS......................................35
(n) OPTION CANCELLATION AGREEMENTS............................36
ii
<PAGE>
PAGE
Section 6. CONDITIONS TO CLOSING...........................................36
(a) CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB...........36
(b) CONDITIONS TO OBLIGATIONS OF CRA..........................38
Section 7. TERMINATION AND ITS CONSEQUENCES................................39
(a) TERMINATION OF AGREEMENT..................................39
(b) CONSEQUENCES OF CERTAIN TERMINATIONS......................40
Section 8. MISCELLANEOUS...................................................41
(a) SURVIVAL..................................................41
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS...................41
(c) NO THIRD PARTY BENEFICIARIES..............................41
(d) ENTIRE AGREEMENT..........................................41
(e) SUCCESSION AND ASSIGNMENT.................................41
(f) COUNTERPARTS..............................................41
(g) HEADINGS..................................................41
(h) NOTICES...................................................41
(i) GOVERNING LAW.............................................42
(j) AMENDMENTS AND WAIVERS....................................42
(k) SEVERABILITY..............................................43
(l) EXPENSES..................................................43
(m) CONSTRUCTION..............................................43
(n) INCORPORATION OF EXHIBITS AND SCHEDULES...................43
(o) WAIVER OF JURY TRIAL......................................43
(p) TIME IS OF THE ESSENCE; COMPUTATION OF TIME...............43
(q) SPECIFIC PERFORMANCE......................................43
Disclosure Schedule - Exceptions to Representations and Warranties
Exhibit A - Form of Termination Option Agreement
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of March 5,
1997, by and between Stage Stores, Inc., a Delaware corporation ("SSI"), and
C.R. Anthony Company, an Oklahoma corporation ("CRA"). SSI and CRA are referred
to collectively herein as the "PARTIES."
RECITALS
The respective boards of directors of SSI and CRA have determined
that it would be consistent with and in furtherance of the long-term business
strategy of SSI and CRA, and that it would be fair to and in the best interests
of CRA and its stockholders, to engage in a transaction whereby CRA and the
Merger Sub (as defined below) will merge on the terms described herein (the
"MERGER").
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
Section 1. DEFINITIONS.
"AFFECTED PROPERTY" has the meaning ascribed to such term in ss.
3(k).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"BASE PRICE" per CRA Share means $8.00 PLUS 1(cent) for every
5(cent) by which the SSI Average Closing Price exceeds $20.00.
"BENEFIT PLAN" has the meaning ascribed to such term in ss. 3(n).
"BOARD MEETING" has the meaning set forth in ss.3(x) below.
"CERTIFICATE OF MERGER" has the meaning set forth in ss.2(c) below.
"CLOSING" has the meaning set forth in ss.2(b) below.
"CLOSING DATE" has the meaning set forth in ss.2(b) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED DISCLOSURE DOCUMENT" means the disclosure document
combining the Prospectus and the Definitive CRA Proxy Materials.
<PAGE>
"COMPANY SECURITIES" has the meaning set forth in ss.3(b)(i) below.
"CONTRACT" means any loan or credit agreement, note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument, Benefit Plan or practice or other agreement,
obligation, instrument or commitment of any nature whether written or oral.
"CRA ACQUISITION PROPOSAL" shall mean any proposal (other than any
proposal by SSI or the Merger Sub with respect to the Merger) regarding (i) any
merger, consolidation, share exchange, business combination or other similar
transaction or series of related transactions involving CRA or any Subsidiary of
CRA; (ii) any sale, lease, exchange, transfer or other disposition of the assets
of CRA or any of its Subsidiaries; and (iii) any offer to purchase, tender
offer, exchange offer or any similar transaction or series of related
transactions made by any Person involving the outstanding shares of any class of
capital stock of CRA or the filing of any Statement on Schedule 14D-1 with the
SEC in connection therewith.
"CRA INFORMATION" has the meaning set forth in ss.3(z) below.
"CRA MATERIAL ADVERSE EFFECT" means any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of CRA and its Subsidiaries taken as a whole including, without
limitation, any change which will, or can reasonably be expected to, cause a
loss or losses to SSI which, individually or in the aggregate, exceed
$1,000,000.
"CRA OPTIONS" has the meaning set forth in ss.2(d)(vi) below.
"CRA SHARE" means a share of CRA common stock, par value $.01 per
share.
"CRA STOCKHOLDER" means any Person who or which holds any CRA
Shares.
"CRA STOCKHOLDER VOTE" has the meaning set forth in ss.5(c)(ii)
below.
"DEFINITIVE CRA PROXY MATERIALS" means the definitive proxy
materials relating to the CRA Stockholder Vote.
"DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 and ss.4
below.
"EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, license, permit, authorization, approval,
consent, court order, judgment, decree, injunction, code, requirement or
agreement with any governmental authority, and all common law (x) relating to
pollution (or the cleanup thereof or the filing of information with respect
thereto), human health or the protection of air, surface water, ground water,
drinking water supply, land (including land surface or subsurface), plant and
animal life or any other natural resource, or
2
<PAGE>
(y) concerning exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production or
disposal of Regulated Substances, in each case as amended and as now or
hereafter in effect. The term Environmental Law includes, without limitation,
(i) the Comprehensive Environmental Response Compensation and Liability Act of
1980, the Water Pollution Control Act, the Clean Air Act, the Clean Water Act,
the Solid Waste Disposal Act (including the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984), the Toxic
Substances Control Act, the Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act of 1970, each as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Regulated Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any person who, together with CRA, is
treated as a single employer under Sections 414(b), 414(c), 414(m) or 414(o) of
the Code.
"EXCHANGE AGENT" means Chase Mellon Shareholder Services, L.L.C.
"EXECUTIVE SEVERANCE AGREEMENTS" means the Executive Severance
Compensation Agreements, dated as of April 1, 1995, between CRA and each of John
J. Wiesner, Michael E. McCreery, Michael J. Tanner and William A. North, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in ss.3(f) below.
"GAAP" means at any time, the United States generally accepted
accounting principles as in effect at that time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"IMPROVEMENTS" has the meaning set forth in ss.3(s)(iii) below.
"IRS" means the Internal Revenue Service.
"LEASED REAL PROPERTY" has the meaning set forth in ss.3(s)(ii)
below.
"LEASES" has the meaning set forth in ss.3(s)(ii) below.
"MERGED CORPORATION" means any corporation whose separate corporate
existence is extinguished as a result of the Merger.
3
<PAGE>
"MERGER CONSIDERATION" has the meaning set forth in ss.2(d)(v)
below.
"MERGER SUB" means either SRI or a Delaware corporation wholly-owned
by SSI and formed solely for the purpose of consummating the Merger.
"NASDAQ" has the meaning set forth in the definition of "SSI AVERAGE
CLOSING PRICE" below.
"OPTION CANCELLATION AGREEMENT" has the meaning set forth in ss.5(n)
below.
"OPTION PLAN" means CRA's 1992 Amended and Restated Stock Option
Plan dated January 10, 1997, and certain contracts dated June 10, 1996 with
certain parties pursuant to such plan as in effect on the date hereof.
"OKLAHOMA ACT" means the Oklahoma General Corporation Act, as
amended.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice, including, without limitation, the
quantity and frequency of transactions, retail store leases, inventory
transactions, payroll expenses and marketing costs, considering, however, the
circumstances that CRA will not survive the consummation of the Merger
contemplated hereby.
"OWNED REAL PROPERTY" has the meaning set forth in ss.3(s)(i) below.
"PARTY" or "PARTIES" has the meaning set forth in the preface.
"PBGC" has the meaning set forth in ss.3(n)(vi) below.
"PERMITTED ENCUMBRANCES" has the meaning set forth in ss.3(s)(i)
below.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PROSPECTUS" means the final prospectus relating to the registration
of SSI Shares under the Securities Act.
"PROPRIETARY RIGHTS" has the meaning set forth in ss. 3(o) below.
"PUBLIC REPORTS" has the meaning set forth in ss.3(f) below.
"REAL PROPERTY" has the meaning set forth in ss.3(s)(ii) below.
4
<PAGE>
"REAL PROPERTY LAWS" has the meaning set forth in ss.3(s)(v) below.
"REAL PROPERTY PERMITS" has the meaning set forth in ss.3(s)(iv)
below.
"REGISTRATION STATEMENT" has the meaning set forth in ss.5(c)(i)
below.
"REGULATED SUBSTANCES" means pollutants, contaminants, hazardous or
toxic substances, compounds or related materials or chemicals, hazardous
materials, hazardous waste, flammable materials, explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products (including, but not limited to,
waste petroleum and petroleum products).
"REQUISITE CRA STOCKHOLDER APPROVAL" has the meaning set forth in
ss.3(c) below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, equity or other encumbrance, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SEVERANCE PAY PLAN" means the C.R. Anthony Company Severance Pay
Plan, dated as of August 3, 1992, as amended.
"SRI" means Specialty Retailers, Inc., a Texas corporation and
wholly-owned subsidiary of SSI.
"SSI AVERAGE CLOSING PRICE" means the average closing price
expressed in dollars per SSI Share quoted on the NASDAQ National Market System
("NASDAQ") for the ten trading days selected by lot by CRA and SSI out of the
twenty most recent consecutive trading days prior to and including the fifth
trading day preceding the Closing Date. For purposes hereof, selection by lot
shall mean that all of the twenty most recent trading days are each identified
on separate pieces of paper, placed in a receptacle, and each of the Parties
draws a number in alternating manner, beginning with CRA, until the ten trading
days are selected.
"SSI FINANCIAL STATEMENTS" has the meaning set froth in ss.4(f)
below.
5
<PAGE>
"SSI INFORMATION" has the meaning set froth in ss.4(g) below.
"SSI MATERIAL ADVERSE EFFECT" means any change in or effect on the
business of SSI or any of its Subsidiaries that, individually or in the
aggregate, is or will be materially adverse to the business, operations
(including the income statement), properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or regulatory status of
SSI and its Subsidiaries taken as a whole.
"SSI PUBLIC REPORTS" has the meaning set forth in ss.4(f) below.
"SSI SHARE" means a share of SSI common stock, $.01 par value per
share.
"SSI STOCK PERCENTAGE" has the meaning set forth in ss.2(a) below.
"SUBSEQUENT SSI EXCHANGE ACT REPORTS" has the meaning set forth in
ss.5(c)(i).
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.
"SURVIVOR'S ACT" means the corporation law or other law governing
mergers in the state of incorporation of the Surviving Corporation.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, real property gains, registration, value added, excise, natural
resources, severance, stamp, occupation, windfall profits, environmental (under
Section 59A of the Code), customs, duties, real property, personal property,
capital stock, social security (or similar), unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or similar items in
respect of the foregoing (whether disputed or not).
"TAX RETURN" means any return, report, declaration, claim for
refund, information return or other document (including any related or
supporting schedule, statement or information) filed or required to be filed in
connection with the determination, assessment or collection of any Tax of any
party or the administration of any laws, regulations or administrative
requirements relating to any Tax (including any amendment thereof).
"TERMINATION OPTION AGREEMENT" means the option granted by CRA to
SSI on the date hereof, a copy of which is attached as EXHIBIT A.
"TEXAS ACT" means the Texas Business Corporation Act, as amended.
6
<PAGE>
"TRIGGERING EVENT" means any of the following events: (i) the board
of directors of CRA shall have failed to recommend, shall have withdrawn or
shall have modified, in a manner adverse to either SSI or Merger Sub, its
recommendation or approval of this Agreement for any reason other than as
provided in ss. 7(a); (ii) the board of directors of CRA shall have approved,
endorsed or recommended any CRA Acquisition Proposal; (iii) CRA shall have
entered into any Contract to consummate any CRA Acquisition Proposal; (iv) this
Agreement shall not have received the Requisite CRA Stockholder Approval and at
the time of such event an offer or proposal to affect a CRA Acquisition Proposal
shall have been made; (v) the representations and warranties set forth in ss.3
hereunder shall cease to be true and correct at and as of the Closing Date and
such failure shall result in a CRA Material Adverse Effect; or (vi) CRA shall
not have performed and complied with all of its covenants hereunder through the
Closing and such failure shall result in a CRA Material Adverse Effect.
Section 2. BASIC TRANSACTION.
(a) MERGER ALTERNATIVES. On and subject to the terms and conditions
of this Agreement, the Merger will take place at the Effective Time. The
structure of the Merger will either be a forward merger with the Merger Sub
surviving or a reverse merger with CRA surviving, as may be determined by SSI on
the basis of what percentage ("SSI STOCK PERCENTAGE") of the total merger
consideration paid, plus amounts paid to the holders of CRA Options and the
Dissenting Shares pursuant to ss.ss.2(d)(vi) and (g) below is represented by SSI
Stock. If the SSI Stock Percentage is less than 80% and greater than 50% the
Merger Sub shall continue after the Merger with all its rights, privileges,
powers and franchises unaffected by the Merger and the separate corporate
existence of CRA shall cease. If the SSI Stock Percentage is greater than or
equal to 80% or less than or equal to 50%, CRA shall continue after the Merger
with all its rights, privileges, powers and franchises unaffected by the Merger
and the separate corporate existence of the Merger Sub shall cease. From and
after the Effective Time, whichever entity survives the Merger in accordance
with the preceding sentences shall be referred to herein as the "SURVIVING
CORPORATION" and whichever entity ceases to exist shall be referred to as the
"MERGED CORPORATION." Immediately following the Merger, if the Surviving
Corporation is not SRI, the Surviving Corporation may be merged into SRI with
SRI being the surviving corporation of that merger. The Parties will take all
steps necessary to cause the Merger to comply with applicable requirements of
local law regarding corporate mergers.
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Kirkland &
Ellis in New York, New York, commencing at 10:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at or after the Closing itself) or such other date as the Parties may mutually
determine (the "CLOSING DATE").
(c) ACTIONS AT THE CLOSING. At the Closing, (i) CRA and the CRA
Stockholders will deliver to Merger Sub and SSI the various certificates,
instruments, and documents referred to in ss.6(a) below, (ii) Merger Sub and SSI
will deliver to CRA the various certificates, instruments,
7
<PAGE>
and documents referred to in ss.6(b) below, (iii) the Parties will file with the
Secretary of State of the state of incorporation of the Surviving Corporation a
certificate of merger in due and proper form (the "CERTIFICATE OF MERGER"), and
(iv) SSI will deliver to the Exchange Agent in the manner provided below in this
ss.2 the certificate evidencing SSI Shares issued in the Merger.
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time
(the "EFFECTIVE TIME") the Parties file the Certificate of Merger
with the Secretary of State of the state of incorporation of the
Surviving Corporation. The Merger shall have the effect set forth in
the Survivor's Act. The Surviving Corporation may, at any time after
the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of the Merged
Corporation in order to fully carry out and effectuate the Merger.
(ii) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the entity which becomes the Surviving Corporation
as in effect at and as of immediately prior to the Effective Time
will remain unchanged by the Merger and be the Certificate of
Incorporation of the Surviving Corporation.
(iii) BY-LAWS. The By-laws of the entity which becomes the
Surviving Corporation as in effect at and as of immediately prior to
the Effective Time will remain unchanged by the Merger and be the
By-laws of the Surviving Corporation.
(iv) DIRECTORS AND OFFICERS. The directors and officers of the
Merger Sub in office at and as of immediately prior to the Effective
Time will be the directors and officers of the Surviving
Corporation.
(v) CONVERSION OF CRA SHARES. At and as of the Effective
Time, as long as the SSI Average Closing Price is at least $15.00
per share, each CRA Share then outstanding shall by virtue of the
Merger be converted into the right to receive the following
(collectively the "MERGER CONSIDERATION"): (A) that number of SSI
Shares which, if valued at the SSI Average Closing Price have a
value equal to X multiplied by the Base Price; and (B) an amount of
cash equal to the Base Price multiplied by the remainder of one
MINUS X, where:
X = 1 - ((20 - Y) x .15) and
Y = the lesser of 20 or the SSI Average Closing Price;
PROVIDED, HOWEVER, that if the SSI Average Closing Price is less
than $15.00 and SSI elects to waive the condition set forth in
ss.6(a)(xv) and permit the Closing, the Merger Consideration shall
consist of (a) .1333 SSI Shares and (b) an amount in cash equal to
$8.00 minus the product of .1333 and the SSI Average Closing Price.
If any
8
<PAGE>
fractional interest of an SSI Share would, except for this sentence,
be deliverable in connection with this ss.2, SSI, in lieu of
delivering such fractional shares, may pay an amount in cash equal
to the value thereof. No CRA Share that is exchanged in connection
with the transactions contemplated by this Agreement shall be deemed
to be outstanding or to have any rights other than those set forth
above in this ss.2(d)(v) after the Effective Time.
(vi) CRA OPTIONS. CRA shall take such action as may be
necessary or appropriate in order that, at the Effective Time, all
options outstanding (including those covered by Option Cancellation
Agreements) under the Option Plan that are unexercised, whether or
not then exercisable (the "CRA OPTIONS"), shall be automatically
cancelled by virtue of the Merger and the holders of the CRA Options
shall be entitled to receive in cash the remainder of (A) the Base
Price which would be payable with respect to the CRA Shares the
subject of such CRA Option LESS (B) the exercise price and any other
amounts payable by the holder with respect to such CRA Option.
Further, except as otherwise agreed to by the Parties, (i) the
Option Plan shall terminate as of the Effective Time and any rights
to receive Options or any other interest in respect of the capital
stock of CRA or any of its Subsidiaries thereunder shall be
terminated as of the Effective Time, and (ii) CRA shall take all
action necessary to ensure that following the Effective Time no
participant in the Option Plan or other plans, programs or
arrangements shall have any right thereunder to acquire or
participate in changes in value of equity securities of CRA, the
Surviving Corporation, the Merger Sub or any of their respective
Subsidiaries and to terminate all such plans effective as of the
Effective Time.
(vii) The adjustment provided herein with respect to any
options which are "incentive stock options" (as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "CODE"))
shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(e) PROCEDURE FOR PAYMENT.
(i) Immediately after the Effective Time, (A) SSI will
furnish to the Exchange Agent a stock certificate (issued in the
name of the Exchange Agent or its nominee) representing that number
of SSI Shares equal to the product of (I) that number of SSI Shares
referred to in ss. 2(d)(v)(A) above multiplied by (II) the number of
outstanding CRA Shares, (B) SSI will cause the Exchange Agent to
mail a letter of transmittal for the holder to use in surrendering
the certificates which represented his or its CRA Shares in exchange
for a certificate representing the number of SSI Shares to which
that holder is entitled; PROVIDED, that certificates surrendered for
exchange by any Person constituting an "affiliate" of CRA for
purposes of Rule 144(c) under the Securities Act shall not be
exchanged for certificates representing SSI Shares until SSI shall
have received from such Person any documents referred
9
<PAGE>
to in ss.6(a) below, if any, requiring delivery or execution by such
Person, and (C) SSI shall pay an amount equal to the cash portion of
the Merger Consideration per CRA Share times the number of
outstanding CRA Shares into an account designated by the Exchange
Agent.
(ii) SSI will not pay any dividend or make any distribution on
SSI Shares (with a record date at or after the Effective Time) to
any record holder of outstanding CRA Shares until the holder
surrenders for exchange that holder's certificates which represented
CRA Shares. SSI instead will pay the dividend or make the
distribution to the Exchange Agent in trust for the benefit of the
holder pending surrender and exchange. SSI may cause the Exchange
Agent to invest any cash the Exchange Agent receives from SSI as a
dividend or distribution in one or more permitted investments
determined by SSI; PROVIDED, HOWEVER, that the terms and conditions
of the investments shall be such as to permit the Exchange Agent to
make prompt payments of cash to the holders of outstanding CRA
Shares as necessary. SSI may cause the Exchange Agent to pay over to
SSI any net earnings with respect to the investments, and SSI will
replace promptly any cash which the Exchange Agent loses through
investments. In no event, however, will any holder of outstanding
CRA Shares be entitled to any interest or earnings on the dividend
or distribution pending surrender for exchange of his or its
certificates which represent CRA Shares.
(iii) SSI may cause the Exchange Agent to return any SSI Shares
and dividends and distributions thereon remaining unclaimed 90 days
after the Effective Time, and thereafter each remaining record
holder of outstanding CRA Shares shall be entitled to look to SSI
(subject to abandoned property, escheat, and other similar laws) as
a general creditor thereof with respect to SSI Shares and dividends
and distributions thereon to which that record holder is entitled
upon surrendering its certificates.
(iv) SSI and CRA shall share equally all charges and expenses
of the Exchange Agent.
(f) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, no transfers of CRA Shares outstanding prior to the Effective Time
shall be made on the stock transfer books of the Surviving Corporation.
(g) DISSENTING HOLDERS OF CRA SHARES. Notwithstanding any provision
of this Agreement to the contrary, CRA Shares that are outstanding immediately
prior to the Effective Time and that are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who have demanded
properly in writing appraisal for such CRA Shares in accordance with Section
1091 of the Oklahoma Act (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of stock held by them in accordance with
10
<PAGE>
the provisions of such Section 1091, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such Dissenting Shares under such
Section 1091 shall thereupon be deemed to be authorized and unissued shares of
the Surviving Corporation pursuant to Section 1091(L) of the Oklahoma Act.
Section 3. REPRESENTATIONS AND WARRANTIES OF CRA. CRA represents and
warrants to the Merger Sub and SSI that the statements contained in this ss.3
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
ss.3), except as set forth in the disclosure schedule delivered concurrently
with this Agreement (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule of CRA
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this ss.3.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of CRA
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation. Each of CRA
and its Subsidiaries is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required. Each of CRA and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) CAPITALIZATION OF CRA AND ITS SUBSIDIARIES.
(i) CRA's authorized capital stock consists solely of
50,000,000 authorized shares of common stock, of which 9,035,645
shares are presently issued and outstanding, which shares are held
of record by the persons set forth on Schedule 3(b) in the amounts
set forth opposite such Person's name. No shares of CRA's capital
stock are held as treasury shares. 1,082,500 shares of common stock
are reserved for issuance upon the exercise of outstanding CRA
Options at a weighted average exercise price of $3.67 per CRA share.
Except as set forth above or in Schedule 3(b), CRA does not have (i)
any shares of common stock or preferred stock reserved for issuance,
or (ii) any outstanding or authorized option, warrant, right, call
or commitment relating to its capital stock or any outstanding
securities or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire from it, any
shares of its capital stock (collectively, "COMPANY SECURITIES").
There are no (i) outstanding obligations of CRA or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities or (ii) authorized or outstanding stock appreciation,
phantom stock, profit participation or similar rights with respect
to CRA or any of its Subsidiaries. Except as set forth in Schedule
3(b), there are no preemptive or other subscription rights with
respect to any shares of CRA's capital stock and all of the issued
and outstanding shares of capital stock of CRA have been duly
authorized, validly issued, are fully paid and are nonassessable.
There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the capital stock of
CRA
11
<PAGE>
or any of its Subsidiaries (other than not more than 79,053 CRA
shares subject to voting trusts).
(ii) All Subsidiaries of CRA are listed on Schedule 3(b).
Except as otherwise disclosed in Schedule 3(b), neither CRA nor any
Subsidiary owns any shares of stock of any corporation or any equity
interest in a partnership, joint venture or other business entity,
and neither CRA nor any of its Subsidiaries controls any other
corporation, partnership, joint venture or other business entity by
means of ownership, management contract or otherwise. Except for
directors' qualifying shares listed on Schedule 3(b), if any, all of
the outstanding capital stock of, or other ownership interests in,
each Subsidiary of CRA is owned beneficially and of record by CRA,
directly or indirectly, is validly issued, fully paid and
nonassessable and free and clear of any preemptive rights,
restrictions on transfer, Taxes or Security Interests or any other
limitation or restriction except as provided under the Securities
Act or state securities laws. There are no authorized or outstanding
securities of CRA or any of its Subsidiaries convertible into or
exchangeable for, no options, warrants, or other rights to acquire
from CRA or any of its Subsidiaries, and no other contract,
understanding or arrangement (whether or not contingent) granting to
any person the right to subscribe for, or providing for the issuance
or sale of, any capital stock or other ownership interest in, or any
other securities of, any such Subsidiary. There are no outstanding
obligations of CRA or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or
other ownership interests in any such Subsidiary.
(c) AUTHORIZATION OF TRANSACTION. CRA has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; PROVIDED, HOWEVER, that CRA cannot consummate the Merger unless and
until it receives the Requisite CRA Stockholder Approval. This Agreement has
been duly authorized by the board of directors of CRA, has been duly executed
and delivered on behalf of CRA, and constitutes the valid and legally binding
obligation of CRA, enforceable and in effect in accordance with its terms and
conditions. The only vote of the CRA Stockholders required to consummate the
Merger is the affirmative vote of two-thirds of the holders of the outstanding
CRA Shares pursuant to the bylaws of CRA and Sections 1081 and 1082 of the
Oklahoma Act (the "REQUISITE CRA STOCKHOLDER APPROVAL").
(d) NONCONTRAVENTION. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of CRA or its Subsidiaries is subject
or any provision of the charter or bylaws of any of CRA or its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party a put right or repurchase obligation or
the right to accelerate, terminate, modify or cancel, or require any notice,
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of CRA or its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result
12
<PAGE>
in the imposition of any Security Interest upon any of its assets including any
Proprietary Rights), except for any such matters which are set forth on Schedule
3(d). Other than in connection with the provisions of the Hart-Scott-Rodino Act,
the Texas Act, the Oklahoma Act, the Securities Exchange Act, the Securities
Act, the state securities laws and the laws of any foreign jurisdiction, none of
CRA or its Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement.
(e) FILINGS WITH THE SEC. CRA has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act (including any exhibits and amendments thereto). Each such filing
complied with the Securities Act and the Securities Exchange Act in all material
respects when filed. No such filing, when filed, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(f) FINANCIAL STATEMENTS. CRA has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "PUBLIC REPORTS"). The financial statements included in or
incorporated by reference into the Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its subsidiaries for the indicated periods, are consistent with the books and
records of CRA and its Subsidiaries, and comply with the material provisions of
Regulations S-K and S-X of the Securities Act. Attached as Schedule 3(f) are the
unaudited consolidated balance sheet, income statement and cash-flow statement
of CRA and its Subsidiaries as of and for the fiscal quarter and fiscal year
ended February 1, 1997 (together with the Public Reports and including the
related notes and schedules, the "FINANCIAL STATEMENTS") which have been
prepared in accordance with GAAP on a basis consistent with the Public Reports,
except for footnote disclosures, applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of CRA and its
Subsidiaries as of the indicated dates and the results of operations of CRA and
its Subsidiaries for the indicated periods, and are consistent with the books
and records of CRA and its Subsidiaries. The financial statements to be
delivered pursuant to ss.5(f)(viii) will be derived from the accounting books
and records of CRA, will provide adequate disclosure of material changes to the
accounts or business of CRA and its Subsidiaries and will be prepared in
accordance with GAAP and otherwise on the same basis as the Financial
Statements, except that the monthly financial statements delivered pursuant to
ss. 5(f)(viii) may be subject to normal year-end adjustments.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly disclosed
in Schedule 3(g), since February 1, 1997 there has not been any material adverse
change to the financial condition, business, properties, results of operations
or prospects of CRA and its Subsidiaries. Except as disclosed in the Financial
Statements or as set forth in Schedule 3(g), and except for this Agreement and
the transactions contemplated hereby, since February 1, 1997, each of CRA and
its Subsidiaries has been operated in the Ordinary Course of Business. Without
limiting the generality
13
<PAGE>
of the foregoing, except as set forth on Schedule 3(g) or as expressly
contemplated by this Agreement, since February 1, 1997 none of CRA nor any of
its Subsidiaries has:
(i) experienced any changes in any relationship with its
suppliers, customers, distributors, brokers, lessors or others,
other than changes in the Ordinary Course of Business;
(ii) sold, leased, transferred, or assigned any of assets,
tangible or intangible, other than for fair consideration in the
Ordinary Course of Business;
(iii) entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases or licenses)
involving more than $50,000.00 individually to which it is a party
or by which it is bound nor modified the terms of any such existing
contract or agreement (except for usual and ordinary purchase orders
executed for merchandise held for resale in the Ordinary Course of
Business and leases of certain real property as expressly disclosed
in Schedule 3(s)(i) or (ii));
(iv) engaged in any activity which has resulted in any
acceleration or delay of the collection of its accounts or notes
receivables or any delay in the payment of its accounts payables, in
each case other than in the Ordinary Course of Business;
(v) (nor has any other party) accelerated, terminated,
modified or cancelled any permit or agreement, contract, lease or
license other than in the Ordinary Course of Business or involving
more than $50,000.00 individually to which it is a party or by which
it is bound;
(vi) suffered any damage, destruction or loss, whether or not
covered by insurance, affecting any material property or assets
owned or used by it;
(vii) adopted, modified, amended or terminated any bonus,
profit-sharing, incentive, severance, or other similar plan
(including any Benefit Plan), contract, or commitment for the
benefit of any of its directors, officers, or employees, or
otherwise made any change in the employment terms (including any
increase in the base compensation) for any of its officers and
employees described in ss.3(l);
(viii) made any capital expenditure or any other investment (or
series of related investments) in excess of $50,000.00 other than
leasehold improvements and fixtures in retail stores made in the
Ordinary Course of Business;
(ix) entered into any capital lease involving more than
$50,000.00 individually, issued any note, bond, or other debt
security or created, incurred, assumed, modified or guaranteed any
indebtedness or other liability;
14
<PAGE>
(x) imposed or suffered to exist any Security Interest on any
of its assets outside the Ordinary Course of Business or on any of
the CRA Shares; or transferred, leased, licensed, or sold, any
assets other than in the Ordinary Course of Business;
(xi) cancelled, compromised, waived, or released any right or
claim (or series of related material rights and claims) in excess of
$50,000.00 in the aggregate;
(xii) made or authorized any change in its charter or by-laws;
(xiii) issued, sold, or otherwise disposed of any of its capital
stock, or granted, modified or amended any options, warrants, stock
appreciation rights, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its
capital stock or participate in any change in the value thereof;
(xiv) made or been subject to change in its accounting
practices, procedures or methods or in its cash management
practices;
(xv) entered into or become party to any agreement,
arrangement or transaction with any of its Affiliates or any of
their respective directors, officers, employees or stockholders,
including, without limitation, any (i) loan or advance funds, or
made any other payments, to any of its directors, officers,
employees, stockholders or Affiliates or (ii) creation or discharge
of any intercompany account;
(xvi) paid or declared any dividend or other distribution in
cash or kind with respect to their respective capital stock or
redeemed, repurchased or otherwise acquired any such stock;
(xvii) experienced any adverse changes with respect to the
Proprietary Rights;
(xviii) experienced any material changes in the amount or scope
of coverage of insurance now carried by them; or
(xix) committed to do any of the foregoing.
(h) LITIGATION. Except as set forth in Schedule 3(h), there are no
judgments, decrees, lawsuits, actions, proceedings, claims, complaints,
injunctions, orders or investigations by or before any governmental authority
pending or threatened against CRA or its Subsidiaries (i) relating to CRA, any
Subsidiary, their respective businesses, the Proprietary Rights, or any product
alleged to have been manufactured or sold by CRA or any of its Subsidiaries, or
(ii) seeking to enjoin the transactions contemplated hereby. To CRA's knowledge,
there are no existing facts or circumstances which give any reason to believe
that any such action, suit, proceeding, hearing or investigation may be brought
or threatened against CRA or any of its Subsidiaries.
15
<PAGE>
(i) UNDISCLOSED LIABILITIES. Other than those reflected in the
Financial Statements (including the notes thereto) or disclosed in Schedule
3(i), there are no material liabilities of CRA or its Subsidiaries of any kind
or nature whatsoever, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, other than liabilities incurred in
the Ordinary Course of Business since February 1, 1997.
(j) TAXES.
(i) Copies of all Tax Returns now subject or potentially
subject to IRS audit are attached to Schedule 3(j). Except as set
forth on Schedule 3(j), each of CRA and its Subsidiaries has duly
and timely filed all Tax Returns required to be filed by it, all
such Tax Returns have been prepared in compliance with all
applicable laws and regulations and are true, correct and complete
in all respects. Except as set forth in Schedule 3(j), all Taxes
owed by each of CRA and its Subsidiaries, whether or not shown on
any Tax Return, have been timely paid. CRA and its Subsidiaries have
maintained adequate provision for Taxes payable by CRA and its
Subsidiaries as of February 1, 1997, and such provision and funds
(as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practices of each of CRA and its
Subsidiaries in filing its Tax Returns) will be adequate for Taxes
payable by CRA and its Subsidiaries as of the Closing Date. There
are no Security Interests on any of the assets of CRA or any of its
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax. CRA has made available to the Merger Sub
correct and complete copies of (A) its federal income Tax returns
for the last five (5) taxable years and the corresponding balance
sheets of CRA as of the end of such years and (B) other Tax Returns
as requested by the Merger Sub.
(ii) Except as set forth on Schedule 3(j):
(A) each taxable period of CRA and each of its Subsidiaries
either (A) has been audited by the relevant taxing authority or (B)
has closed, so that no further assessment or collection of Tax may
occur and such taxable period is not subject to review by any
relevant taxing authority;
(B) neither CRA nor any of its Subsidiaries is the subject of
a Tax audit or examination, has consented to extend the time, or is
the beneficiary or any extension of time, in which any Tax may be
assessed or collected by any taxing authority;
(C) neither CRA nor any of its Subsidiaries has received, or
expects to receive, from any taxing authority any written notice of
proposed adjustment, deficiency, underpayment of Taxes or any other
such notice which has not been
16
<PAGE>
satisfied by payment or been withdrawn, and no claims have been
asserted relating to such Taxes against CRA or any such Subsidiary;
(D) CRA and each of its Subsidiaries has withheld and paid
all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
similar third party;
(E) neither CRA nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code;
(F) neither CRA nor any of its Subsidiaries will be required,
as a result of (A) a change in accounting method for a Tax period
beginning on or before the Closing Date, to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of
state, local or foreign Tax law) in taxable income for any Tax
period beginning on or after the Closing Date, or (B) any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law), to
include any item or income in or exclude any item of deduction from
any Tax period beginning on or after the Closing Date;
(G) each of CRA and its Subsidiaries has disclosed on its
income Tax Returns all positions taken therein that could give rise
to an accuracy-related penalty under Section 6662 of the Code (or
any corresponding provision of Tax law);
(H) neither CRA 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 Section 280G or
Section 162(m) of the Code;
(I) within the last five years, no claim has been made by a
taxing authority in a jurisdiction where any of CRA or its
Subsidiaries does not pay Taxes or file Tax Returns that such entity
is or may be subject to Taxes assessed by such jurisdiction;
(J) neither CRA nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii);
(K) neither CRA nor any of its Subsidiaries is a party to any
Tax allocation or sharing agreement; and
(L) since August 3, 1992, neither CRA nor any of its
Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the
common parent of which was CRA) or (B) has any liability
17
<PAGE>
for the Taxes of any Person (other than CRA and its Subsidiaries)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(iii) Schedule 3(j) sets forth as of February 4, 1996, the
amount and expiration date of any net operating loss, net capital
loss, unused foreign tax credit, and other unused credit of CRA and
its Subsidiaries.
(k) ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3(k), (i)
CRA and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws, (ii) without limiting the generality of the foregoing, CRA
and its Subsidiaries have obtained and complied with, and are in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental Laws for the occupation of their respective facilities
and the operation of their respective business, and a list of all such permits,
licenses and other authorizations is set forth on Schedule 3(k), (iii) the real
property currently owned or operated by CRA or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on or under
the properties and buildings thereon) (the "AFFECTED PROPERTY") does not contain
any Regulated Substance, (iv) neither CRA nor any of its Subsidiaries has
received any written or oral notice that CRA or any of its Subsidiaries may be
liable under or in violation of the Comprehensive Environmental Response,
Compensation and Control Act, 42 U.S.C. ss. 9601, ET SEQ. or any other
Environmental Laws in connection with any operations of, or waste disposal by,
CRA or any of its Subsidiaries, (v) neither CRA nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any Regulated Substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or could give rise to liabilities, or investigatory, corrective
or remedial obligations of CRA or any of its Subsidiaries under Environmental
Laws, including without limitation, any liability or obligation for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorneys' fees, pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, or the
Solid Waste Disposal Act, as amended, or any other Environmental Laws, (vi) CRA,
its Subsidiaries and the Affected Property are not presently subject to a suit
or judgment arising under any Environmental Law, and (vii) all documents filed
by or on behalf of CRA or any of its Subsidiaries with any governmental
authority pursuant to any Environmental Law in connection with the transactions
contemplated hereby were true, correct and complete in all material respects and
did not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) EMPLOYEE MATTERS. Schedule 3(l) contains a true and complete
list of (i) the employees currently employed by CRA and its Subsidiaries who
received annual compensation in 1996 (or who could receive annual compensation
in 1997) of $85,000.00 or more, indicating the title of and a description of any
agreements concerning such employees and the rate of all current compensation
payable by CRA or its Subsidiaries to each such employee and (ii) the directors
of each of CRA and its Subsidiaries.
18
<PAGE>
(m) LABOR MATTERS. Except as set forth on Schedule 3(m), (i) neither
CRA nor any of its Subsidiaries has entered into any collective bargaining
agreements with respect to the employees, (ii) there are no written personnel
policies applicable to the employees generally, other than employee manuals,
true and complete copies of which have previously been provided to Merger Sub,
(iii) there is no labor strike, dispute, slowdown or work stoppage or lockout
pending or to CRA's best knowledge after due investigation, threatened against
or affecting CRA or any of its Subsidiaries and during the past two years there
has been no such action, (iv) to CRA's knowledge after due investigation, no
union organization campaign is in progress with respect to any of the employees,
and no question concerning representation exists respecting such employees, (v)
there is no unfair labor practice, charge or complaint pending or threatened
against CRA or any Subsidiary of it, and (vi) CRA has not entered into any
agreement, arrangement or understanding restricting its ability to terminate the
employment of any or all of its employees at any time, for any lawful or no
reason, without penalty or liability. Neither CRA nor any Subsidiary of it has
engaged in any plant closing or employee layoff activities within the last two
(2) years that would violate or in any way implicate the Worker Adjustment
Retraining and Notification ("WARN") Act of 1988, as amended, or any similar
state or local plant closing or mass layoff statute, rule or regulation.
(n) EMPLOYEE BENEFIT PLANS.
(i) Schedule 3(n) lists all bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock and stock
option plans, all employment or severance contracts, health and
medical insurance plans, life insurance and disability insurance
plans and other employee benefit plans, policy contracts, agreements
or arrangements, whether written or oral, which cover employees or
former employees of CRA and its Subsidiaries or with respect to
which CRA or any of its Subsidiaries has any actual or potential
liability, including, but not limited to, "employee benefit plans"
within the meaning of Section 3(3) of ERISA (the "BENEFIT PLANS").
Except as set forth on Schedule 3(n), no Benefit Plan is or was
collectively bargained for or has terms requiring assumption by the
Merger Sub or the Surviving Corporation. No Benefit Plan is a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA),
neither CRA nor any of its ERISA Affiliates has incurred any
withdrawal liability with respect to any multiemployer plan or any
liability in connection with the termination or reorganization of
any multiemployer plan and no Benefit Plan provides health or other
welfare benefits to former employees other than in compliance with
Section 4980B of the Code or similar State law ("COBRA").
(ii) To the extent applicable, each Benefit Plan (and its
related trust) is maintained and administered in compliance in all
material respects with the applicable provisions of ERISA, the Code
and any other laws (including compliance with all reporting and
disclosure obligations) and, if intended to be tax qualified,
Sections 401(a) and 501(a) of the Code. Each Benefit Plan which is
intended to be qualified under Section 401(a) of the Code has
received a favorable determination
19
<PAGE>
letter that it is so qualified (which favorable determination letter
covers changes mandated by the Tax Reform Act of 1986 and subsequent
related regulations) and none of CRA or its Subsidiaries is aware of
any facts of circumstances which could adversely affect any of such
favorable determination letters.
(iii) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by CRA or any ERISA Affiliate
with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently
or formerly maintained or contributed to by any of them. Except as
disclosed on Schedule 3(n), the fair market value of the assets of
each single-employer plan equals or exceeds the accrued benefit
liabilities thereunder. With respect to each Benefit Plan which is
an employee pension benefit plan (as defined in Section 3(2) of
ERISA), all required contributions which are due for all periods
ending prior to or as of the Closing Date have been made, all such
contributions which are not due as of the Closing Date have been
properly accrued, and none of CRA or any ERISA Affiliate has
incurred any accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA). With respect to each other Benefit Plan, all
contributions, premiums or other payments which are due have been
made or, if not due as of the Closing Date, have been properly
accrued. With respect to each Benefit Plan which is a Section 401(k)
plan, CRA and each of its Subsidiaries contribute all employee
pre-tax contributions to the appropriate trust as soon as possible
after the end of each payroll period.
(iv) CRA and each of its Subsidiaries has complied with the
requirements of COBRA.
(v) None of CRA, any Subsidiary of it or to CRA's knowledge,
any other Person has engaged in any transaction with respect to any
Benefit Plan which could subject CRA or any of its Subsidiaries to
any Tax or penalty (civil or otherwise) imposed by ERISA, the Code
or other applicable law. No actions, suits, investigations or claims
with respect to the Benefit Plans (other than routine claims for
benefits) are pending or threatened and none of CRA or any of its
Subsidiaries has any knowledge of any facts which could give rise to
or be reasonably expected to give rise to any such actions, suits or
claims.
(vi) No liability to the Pension Benefit Guaranty Corporation
(the "PBGC") (except for routine payment of premiums) has been or is
expected to be incurred with respect to any Benefit Plan that is
subject to Title IV of ERISA, no reportable event within the meaning
of Section 4043 of ERISA has occurred with respect to any such
Benefit Plan and the PBGC has not commenced or threatened the
termination of any Benefit Plan. None of the assets of CRA or any of
its Subsidiaries is the subject of any Security Interest arising
under Section 302(f) of ERISA or Section 412(n) of the Code, neither
CRA nor any of its Subsidiaries has been
20
<PAGE>
required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code, and neither CRA nor any of its Subsidiaries
has any knowledge of any facts which could reasonably be expected to
give rise to such Security Interest or such posting of security.
(vii) Except as disclosed above, neither CRA nor any ERISA
Affiliate has any actual or potential liability with respect to any
employee pension or welfare benefit plan which is maintained or
sponsored by CRA or any ERISA Affiliate.
(viii) With respect to each Benefit Plan, CRA has provided to
Merger Sub true, complete and correct copies, to the extent
applicable, of (i) all documents pursuant to which such Benefit
Plans are maintained, funded and administered, (ii) the most recent
annual report (Form 5500 series) filed with the IRS report, (iv) the
most recent financial statement, (v) all governmental rulings,
determinations and opinions (and any pending requests).
(o) PROPRIETARY RIGHTS. Except as set forth in Schedule 3(o), CRA
and its Subsidiaries own and possess all right, title and interest in, free and
clear of all Security Interests except as provided in Schedule 3(p), or have a
valid, enforceable and effective written license to use, all patents, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, and all goodwill associated therewith,
copyrights, copyright registrations, copyrights applications, mask works, trade
names, corporate names, trade dress, technology, inventions, computer software,
data and documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, and all other intellectual
property and proprietary information or rights used in or necessary for the
operation of the business of CRA and its Subsidiaries as presently conducted and
presently proposed to be conducted (collectively, its "PROPRIETARY RIGHTS").
Schedule 3(o) contains a complete and accurate list of (i) all patented and
registered Proprietary Rights; (ii) all pending patent applications and
applications for the registration of other Proprietary Rights; (iii) all trade
and corporate names owned or used by CRA or any of its Subsidiaries; (iv) all
computer software (other than mass-marketed software) owned or used by CRA or
any Subsidiary; and (v) all licenses or other agreements to or from third
parties regarding any of the Proprietary Rights. Except as set forth in Schedule
3(o), there is not pending or threatened against CRA or any of its Subsidiaries
any claim by any third party contesting the validity, enforceability, use or
ownership of any Proprietary Right, and, to the knowledge of CRA or any of its
Subsidiaries, there are no grounds for any such claim. Except as set forth in
Schedule 3(o), neither CRA nor any of its Subsidiaries has received any notice
of, nor is aware of any facts which indicate a likelihood of, any infringement
or misappropriation by, or conflict with, any third party with respect to any of
the Proprietary Rights, nor are they aware of any infringement, misappropriation
or conflict which will occur as a result of continued operation of the business
of CRA and its Subsidiaries as currently conducted or as currently proposed to
be conducted. All Proprietary Rights owned or used by CRA and its Subsidiaries
prior to the Closing Date will be owned or available for use on identical terms
and conditions immediately after the Closing Date. CRA and its Subsidiaries have
no knowledge of any Proprietary Rights that any competitor or other
21
<PAGE>
Person has developed which reasonably could be expected to supersede or make
obsolete any product or process used by, or otherwise result in any Material
Adverse Change in the business of, CRA or any Subsidiary of it.
(p) CONTRACTS. Schedule 3(p) describes all Contracts (except for
usual and ordinary purchase orders executed for merchandise held for resale in
the Ordinary Course of Business), to which CRA or any of its Subsidiaries is a
party or is otherwise bound, of the type described below:
(i) all agreements or commitments for the purchase by CRA of
machinery, equipment or other personal property other than those
that are for amounts not to exceed $50,000.00;
(ii) all capitalized leases, pledges, conditional sale or
title retention agreements involving the payment of more than
$50,000.00;
(iii) all employment agreements and commitments, all consulting
or severance agreements or arrangements and all other agreements
between CRA or any of its Subsidiaries and any Affiliate of CRA or
such Subsidiary or any officer, director or employee of CRA or such
Subsidiary;
(iv) all agreements relating to the consignment or lease of
personal property (whether CRA or any of its Subsidiaries is lessee,
sublessee, lessor or sublessor), other than such agreements that
provide for annual payments of less than $50,000.00;
(v) all license, royalty or other agreements relating to the
Proprietary Rights;
(vi) all agreements containing commitments of suretyship,
guarantee or indemnification (except for (a) warranties for products
sold provided by CRA or any of its Subsidiaries in the Ordinary
Course of Business and (b) agreements having a contract value, in
the aggregate of $50,000.00 or less);
(vii) all agreements prohibiting CRA or any of its Subsidiaries
from freely engaging in the business presently conducted by CRA and
its Subsidiaries in any geographic area;
(viii) any agreement other than those covered by clauses (i)
through (vii) above involving payment or receipt of more than
$50,000.00 in the aggregate in any calendar year; and
22
<PAGE>
(ix) any agreement other than those covered by clauses (i)
through (viii) involving non-competition agreements or nondisclosure
covenants intended to protect the Proprietary Rights of CRA and its
Subsidiaries.
Neither CRA nor any of its Subsidiaries has received written notice from the
other parties to any such Contracts that it intends to terminate or materially
alter the provisions of such Contracts either as a result of transactions
contemplated hereby or otherwise, except as disclosed in Schedule 3(p), and
neither CRA nor any of its Subsidiaries has given notice to any other party to
any such Contract that it intends to terminate or materially alter the
provisions of any such Contract except as disclosed in Schedule 3(p). Except as
set forth in Schedule 3(p), neither CRA nor any of its Subsidiaries has received
notice that it is in, nor has either CRA or any of its Subsidiaries given notice
of, any default or claimed, purported or alleged default, and neither CRA nor
any of its Subsidiaries is aware of any facts that, with notice or lapse of
time, or both, would constitute a default (or give rise to a termination right)
on the part of any party in the performance of any obligation to be performed
under any of the Contracts. True and complete copies of all written Contracts,
including any amendments thereto, have been delivered to the Merger Sub and such
documents constitute the legal, valid and binding obligation of CRA or any of
its Subsidiaries that are a party thereto and each other party purportedly
obligated thereunder. Except as specifically set forth in Schedule 3(p), neither
CRA nor any of its Subsidiaries is a party to any contract, agreement or
understanding which contains a "change in control," "potential change in
control" or similar provision.
(q) BOOKS AND RECORDS. The stock records of CRA fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of CRA's capital stock. The other books and records of CRA
and its Subsidiaries, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
(r) INSURANCE. Schedule 3(r) contains an accurate and complete
description of all policies of fire, liability, workmen's compensation and other
forms of insurance owned or held by CRA and its Subsidiaries.
(s) REAL PROPERTY.
(i) OWNED PROPERTIES. Schedule 3(s)(i) sets forth a list of
all owned U.S. real property and owned foreign real property
(collectively, the "OWNED REAL PROPERTY") used by each of CRA and
its Subsidiaries in the operation of their respective businesses.
With respect to each such parcel of Owned Real Property: (i) except
as set forth in Schedule 3(s)(i) or Schedule 3(p), such parcel is
free and clear of all encumbrances, except Permitted Encumbrances;
(ii) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any person the right of use
or occupancy of any portion of such parcel; and (iii) there are no
outstanding actions or rights of first refusal to purchase such
parcel, or any portion thereof or interest therein. For purposes of
this Section 3(s), "PERMITTED
23
<PAGE>
ENCUMBRANCES" shall mean (a) statutory liens for current taxes or
other governmental charges with respect to the Owned Real Property
not yet due and payable or the amount or validity of which is being
contested in good faith by appropriate proceedings by CRA or any of
its Subsidiaries, as the case may be, and for which appropriate
reserves have been established in accordance with GAAP; (b)
mechanics and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and
which would not have a material adverse effect on each of CRA or any
of its Subsidiaries; (c) zoning, entitlement, building and other
land use regulations imposed by governmental agencies having
jurisdiction over the Real Property which are not violated by the
current use and operation of the Real Property; and (d) covenants,
conditions, restrictions, easements and other similar matters of
record affecting title to the Real Property which do not materially
impair the occupancy or use of the Real Property for the purposes
for which it is currently used.
(ii) LEASED PROPERTIES. Schedule 3(s)(ii) sets forth a list of
all of the leased and subleased parcels of real property subject to
leases and subleases, as amended, (the "LEASES") in favor of CRA or
its Subsidiaries which evidence leasehold or subleasehold interests
of CRA or its Subsidiaries in such properties (the "LEASED REAL
PROPERTY"; the "OWNED REAL PROPERTY" and the "LEASED REAL PROPERTY"
collectively the "REAL PROPERTY") and designates those Leases which
require consent of a lessor or sublessor in connection with the
transactions contemplated by this Agreement. CRA has made available
to SSI its lease files maintained in its normal course of business
which contain copies or originals of all Leases and other material
information pertaining to the Leased Real Property. With respect to
each of the Leases: (i) the Lease is valid, enforceable and in full
force and effect; (ii) the Lease will continue to be valid,
enforceable and in full force and effect on identical terms
following the Closing, except for any lessor or sublessor consents
which may be required in connection with the transactions
contemplated by this Agreement; (iii) neither CRA nor any Subsidiary
thereof, nor any other party to the Lease, is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute such a breach or default or permits termination,
modification or acceleration under the Lease, except for any lessor
or sublessor consents which may be required in connection with the
transactions contemplated by this Agreement; (iv) no party to the
Lease has repudiated any part thereof; (v) the Lease has not been
further modified in any material respect; (vi) neither CRA nor any
of its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the Lease, except as
disclosed in other Schedules to this Agreement; (vii) there exists
no writ, injunction, decree, order or judgment outstanding, nor any
litigation, pending or threatened, relating to the Lease, except as
disclosed in other Schedules to this Agreement; and (ix) CRA and its
Subsidiaries are in substantial compliance with all applicable laws
and regulations pertaining to the use and occupancy of the Lease.
24
<PAGE>
(iii) CONDITION AND OPERATION OF IMPROVEMENTS. All buildings
and all components of all buildings, structures and other
improvements included within the Owned Real Property (the
"IMPROVEMENTS"), including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air
conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and
parking equipment systems and facilities included therein, are in
good condition and repair and adequate to operate such facilities as
currently used. There are no facts or conditions affecting any of
the Improvements which would, individually or in the aggregate,
interfere in any significant respect with the use, occupancy or
operation thereof as currently used, occupied or operated or
intended to be used, occupied or operated. There are no structural
deficiencies or latent defects affecting any Improvements located
upon the Owned Real Property. All water, gas, electrical, steam,
compressed air, telecommunication, sanitary and storm sewage lines
and systems and other similar systems serving the Owned Real
Property are installed and operating and are sufficient to enable
the Owned Real Property to continue to be used and operated in the
manner currently being used and operated, and any so-called hook-up
fees or other associated charges have been fully paid. Each
Improvement has direct access to a public street adjoining the Owned
Real Property. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other
improvement not included in the Owned Real Property.
(iv) PERMITS. All certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively,
the "REAL PROPERTY PERMITS") of all governmental authorities having
jurisdiction over the Real Property, required or appropriate to the
current operation of the Owned Real Property, have been issued to
CRA or its Subsidiaries and are in full force and effect. Neither
CRA nor any of its Subsidiaries has received or been informed by a
third party of the receipt by it of any notice from any governmental
authority having jurisdiction over the Owned Real Property
threatening a suspension, revocation, modification or cancellation
of any Real Property Permit and, to the best knowledge of CRA and
its Subsidiaries, there is no basis for the issuance of any such
notice or the taking of any such action.
(v) COMPLIANCE WITH LAWS. The Owned Real Property is in full
compliance with all applicable building, zoning, subdivision and
other land use and similar laws affecting the Owned Real Property
(collectively, the "REAL PROPERTY LAWS"), and neither CRA nor any of
its Subsidiaries has received any notice of violation or claimed
violation of any Real Property Law. There is no pending or, to the
best knowledge of each of CRA and its Subsidiaries, any anticipated
change in any Real Property Law that will have or result in a
significant adverse effect upon the ownership, alteration, use,
occupancy or operation of the Owned Real Property or any portion
thereof. No current use by the CRA or any of its Subsidiaries of the
Owned Real Property is dependent on a nonconforming use or other
approval from a
25
<PAGE>
governmental authority, the absence of which would significantly
limit the use of any such Owned Real Property.
(t) TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3(t), none of CRA's officers, directors, or any of their respective Affiliates
is involved in any business arrangement or relationship with CRA or its
Subsidiaries (whether written or oral) involving more than $100,000 in any year
in the aggregate, and none of CRA's officers, directors, or any of their
respective Affiliates owns any property or right, tangible or intangible, which
is used by CRA or its Subsidiaries involving more than $100,000 in any year in
the aggregate.
(u) ACCOUNTS RECEIVABLE. Except as listed on Schedule 3(u) hereto,
all accounts and notes receivable of CRA and its Subsidiaries reflected on CRA
Financial Statements, and all accounts and notes receivable arising subsequent
to the date of CRA Financial Statements, in each case, have arisen in the
Ordinary Course of Business, and the reserves for doubtful accounts set forth on
CRA Financial Statements have been established in accordance with past custom
and practice and are substantially adequate in light of the previous
collectibility experience with respect to accounts receivables generated by CRA
and its Subsidiaries.
(v) INVENTORY. The inventory stock of CRA and its Subsidiaries held
on account of CRA to the extent reflected on the Financial Statements is or was,
prior to the sale thereof, in good and merchantable condition, and suitable and
usable or salable in the Ordinary Course of Business for the purposes for which
intended and has been accounted for using the retail method of accounting in
accordance with GAAP.
(w) SUFFICIENCY OF ASSETS. The assets currently owned by CRA or any
of its Subsidiaries, or leased by CRA or any such Subsidiary pursuant to any
lease agreement entered into in the Ordinary Course of Business or otherwise
disclosed to the Merger Sub, constitute all of the assets necessary to conduct
the business of CRA and its Subsidiaries in the Ordinary Course of Business as
at February 1, 1997 and at the date hereof.
(x) BOARD RECOMMENDATION. The board of directors of CRA, at a
meeting duly called and held on March 4, 1997 (the "BOARD MEETING"), has by
unanimous vote of those directors present (other than the interested director
who shall have abstained from voting) (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, taken together, are fair
to and in the best interests of the stockholders of CRA, (ii) adopted
resolutions to recommend that the holders of the CRA Shares approve this
Agreement and the transactions contemplated, herein, including the Merger, and
(iii) adopted resolutions providing that the Options shall be treated, and the
Option Plan shall terminate, in accordance with in ss.2(d)(vi).
(y) BROKERS' FEES. None of CRA and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
similar agent (other than a fee to Houlihan Lokey Howard & Zukin consisting of
an amount in cash equal to (i) 13/8% multiplied by the addition of (a) the
Merger Consideration and (b) the aggregate cash payments to CRA option
26
<PAGE>
holders pursuant to ss.2(d)(vi) and (ii) $204,875 and a fairness opinion fee of
$150,000 to Stephens Inc.) with respect to the transactions contemplated by this
Agreement.
(z) DISCLOSURE. The CRA Information contained in (i) the Prospectus
and the Registration Statement will not contain 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 contained therein not misleading, and (ii) the
Definitive CRA Proxy Materials will not contain any statement which, at the time
and in light of the circumstances under which it is made, is false or misleading
with respect to any material fact or which omits to state any material fact
necessary in order to make the statements therein not false or misleading. As
used herein, "CRA INFORMATION" means all information with respect to CRA or any
of its Subsidiaries provided for use in the Prospectus, the Registration
Statement or the Definitive CRA Proxy Materials, as the case may be. The
Definitive CRA Proxy Materials, insofar as they relate to CRA, including any
amendments thereto, will comply as to form and otherwise in all material
respects, with the applicable requirements of the Securities Act, the Securities
Exchange Act and the rules and regulations thereunder.
(aa) TAX-FREE REORGANIZATION REQUIREMENTS. (i) CRA is not aware of
any plan or intention by any shareholder, to sell, exchange or otherwise dispose
of any SSI Shares that will be received pursuant to this Agreement; (ii) the
Merger Sub will acquire at least 90 percent of the fair market value of the net
assets, and at least 70 percent of the fair market value of the gross assets,
held by CRA immediately prior to the Merger. For purposes of this
representation, amounts paid by CRA in respect of Dissenting Shares, CRA assets
used to pay CRA's expenses of the Merger, and all redemptions and distributions
made by CRA in contemplation of the Merger will be included as assets of CRA
held immediately prior to the Merger; (iii) CRA liabilities assumed by the
Surviving Corporation and liabilities to which the CRA assets are subject were
incurred by CRA in the ordinary course of its business; and (iv) CRA is not an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
Section 4. REPRESENTATIONS AND WARRANTIES OF SSI AND MERGER SUB. SSI
repre sents and warrants to CRA (and will cause the Merger Sub to represent and
warrant) that the statements contained in this ss.4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this ss.4), except as set forth in the
Disclosure Schedule of SSI. The Disclosure Schedule of SSI will be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this ss.4.
(a) ORGANIZATION. Each of SSI and the Merger Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) CAPITALIZATION. The authorized capital stock of SSI consists of
(i) 75,000,000 shares of common stock, $.01 par value per share, of which
22,033,303 shares are issued and outstanding, (ii) 3,000,000 shares of Class B
common stock, par value $.01 per share of which
27
<PAGE>
1,250,584 are issued and outstanding and (iii) 2,500 shares of preferred stock,
$1.00 par value per share, none of which are issued and outstanding. All of the
SSI Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid and
nonassessable. Notwithstanding the foregoing, CRA acknowledges that, after the
date hereof and prior to the Effective Time, SSI may issue additional SSI
Shares.
(c) AUTHORIZATION OF TRANSACTION. SSI has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the board of directors of
SSI, has been duly executed and delivered on behalf of SSI, and constitutes the
valid and legally binding obligation of SSI, enforceable and in effect in
accordance with its terms and conditions.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either of SSI or the Merger Sub is
subject or any provision of the charter or bylaws of either of SSI or the Merger
Sub or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party a put right or repurchase
obligation or the right to accelerate, terminate, modify or cancel, or require
any notice under, any material agreement, contract, lease, license, instrument,
or other material arrangement to which either of SSI or the Merger Sub is a
party or by which it is bound or to which any of its material assets is subject,
except for any such matters which, both individually and in the aggregate, would
not have a SSI Material Adverse Effect or restrict either SSI's or the Merger
Sub's ability to consummate the transactions contemplated hereby. Other than in
connection with the provisions of the Hart-Scott-Rodino Act, the Texas Act, the
Oklahoma Act, the Securities Exchange Act, the Securities Act, the state
securities laws and the laws of any foreign jurisdiction, neither SSI nor the
Merger Sub needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(e) FILINGS WITH THE SEC. SSI has made all filings with the SEC that
it has been required to make within the past three years under the Securities
Act and the Securities Exchange Act (including any exhibits and amendments
thereto). Each such filing complied with the Securities Act and the Securities
Exchange Act in all material respects when filed. No such filing, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(f) FINANCIAL STATEMENTS. SSI has filed an Annual Report on Form
10-K for the fiscal year ended February 3, 1996 and a Quarterly Report on Form
10-Q for the fiscal quarters ended May 4, 1996, August 3, 1996 and November 2,
1996 (together the "SSI PUBLIC REPORTS"). The financial statements included in
or incorporated by reference into the SSI Public Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered
28
<PAGE>
thereby, present fairly the financial condition of SSI and its Subsidiaries as
of the indicated dates and the results of operations of SSI and its subsidiaries
for the indicated periods, are consistent with the books and records of SSI and
its Subsidiaries, and comply with the material provisions of Regulations S-K and
S-X of the Securities Act. Attached as Schedule 4(f) are the unaudited
consolidated balance sheet, income statement and cash-flow statement of SSI and
its Subsidiaries as of and for the fiscal year ended February 1, 1997 (together
with the SSI Public Reports and including the related notes and schedules, the
"SSI FINANCIAL STATEMENTS") which have been prepared in accordance with GAAP on
a basis consistent with the SSI Public Reports, except for footnote disclosures,
applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of SSI and its Subsidiaries as of the indicated
dates and the results of operations of SSI and its Subsidiaries for the
indicated periods, and are consistent with the books and records of SSI and its
Subsidiaries.
(g) DISCLOSURE. The SSI Information contained in the Definitive CRA
Proxy Materials and the Registration Statement will not, on the date the
Registration Statement becomes effective, and the SSI Subsequent Exchange Act
Reports will not, contain 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 contained therein not misleading. As used herein, "SSI INFORMATION"
means all information with respect to SSI or any of its Subsidiaries provided
for use in the Prospectus, Definitive CRA Proxy or the Registration Statement.
(h) INVESTMENT COMPANY. Neither SSI nor the Merger Sub is an
"investment company" as defined in Section 368(a)(3)(F)(iii) of the Code.
(i) ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly disclosed
in SSI's Filings with the SEC or in the Subsequent SSI Exchange Act Reports,
there has not been any SSI Material Adverse Effect.
(j) LITIGATION. Except as disclosed in SSI's filings with the SEC or
the Subsequent SSI Exchange Act Reports, there are no judgments, decrees,
lawsuits, actions, proceedings, claims, complaints, injunctions, orders or
investigations by or before any governmental authority pending or threatened
against SSI or its Subsidiaries (i) which could reasonably be expected to have
an SSI Material Adverse Effect, or (ii) seeking to enjoin the transactions
contemplated hereby. To SSI's knowledge, there are no existing facts or
circumstances which give any reason to believe that any such action, suit,
proceeding, hearing or investigation may be brought or threatened against SSI or
any of its Subsidiaries.
(k) TAXES. Except for such failures or omissions which could not
reasonably be expected to result in an SSI Material Adverse Effect:
(i) each of SSI and its Subsidiaries has duly and timely
filed all Tax Returns required to be filed by it, all such Tax
Returns have been prepared in
29
<PAGE>
compliance with all applicable laws and regulations and are true,
correct and complete in all respects;
(ii) all Taxes owed by each of SSI and its Subsidiaries,
whether or not shown on any Tax Return, have been timely paid; and
(iii) SSI and its Subsidiaries have maintained adequate
provision for Taxes payable by SSI and its Subsidiaries.
(l) ENVIRONMENTAL. Except for such failures or violations which
could not reasonably be expected to result in an SSI Material Adverse Effect,
SSI and its Subsidiaries have complied and are in compliance with all applicable
Environmental Laws.
(m) EMPLOYEE BENEFITS PLAN. Except as disclosed in SSI's filings
with the SEC or in a Subsequent SSI Exchange Act Report, SSI has no material
liability for any unfunded or underfunded Benefit Plans or any material
withdrawal liability with respect to any multiemployer plan or any liability in
connection with the termination or reorganization of any multiemployer plan
which liability could reasonably be expected to have an SSI Material Adverse
Effect.
(n) BOOKS AND RECORDS. The stock records of SSI fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of SSI's capital stock. The other books and records of SSI
and its Subsidiaries, including financial records and books of account, are
complete and accurate in all material respects and have been maintained in
accordance with sound business practices.
(o) INSURANCE. SSI and each of its Subsidiaries is insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
SSI and its Subsidiaries. Neither SSI nor any of its Subsidiaries has received
notice of cancellation or termination with respect to any material insurance
policy of SSI or its Subsidiaries.
(p) BROKER'S FEE. None of SSI and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Agreement other than
to Credit Suisse First Boston Corporation or in connection with the financing of
such transactions.
Section 5. COVENANTS. The Parties agree as follows with respect to
the period from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use all commercially
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not
30
<PAGE>
waiver, of the closing conditions set forth in ss.6 below) and to assist SSI and
SRI in any efforts to renegotiate the terms of any of CRA's existing financing
or other material contracts.
(b) NOTICES AND CONSENTS. CRA will give any notices (and will cause
each of its Subsidiaries to give any notices) to any governmental authority or
third parties, and will use all commercially reasonable best efforts to obtain
(and will cause each of its Subsidiaries to use all commercially reasonable best
efforts to obtain) any governmental authority or third party consents, necessary
to the consummation of the transactions contemplated hereby, including any
consents, waivers, amendment or other action required with respect to the
Contracts and other matters listed on Schedules 3(d), 3(p) and 3(s) above. All
costs incurred in connection with such notices and consents shall be borne by
CRA.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will (and
CRA will cause each of its Subsidiaries to) give any notices to, make any
filings with, and use all commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(d) and ss.4(d) above. Without
limiting the generality of the foregoing:
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE
SECURITIES LAWS. CRA will prepare and file with the SEC on or before
March 31, 1997 or as soon as practicable thereafter preliminary
proxy materials under the Securities Exchange Act relating to the
CRA Stockholder Vote. SSI and the Merger Sub will prepare and file
with the SEC a registration statement under the Securities Act
relating to the offering and issuance of the SSI Shares to be issued
in connection with the Merger (the "REGISTRATION STATEMENT"). The
filing Party in each instance will use all commercially reasonable
best efforts to respond to the comments of the SEC thereon and will
make any further filings (including amendments and supplements) in
connection therewith that may be necessary, proper, or advisable.
Each of SSI and SRI will provide CRA, and CRA will provide each of
SSI and SRI, with information and assistance necessary or desirable
in connection with the preparation of the foregoing filings and any
SEC filings or any offering memorandum or similar document by SSI or
SRI in connection with the financing of the transactions
contemplated hereby or any other required filing with the SEC that
the filing Party reasonably may request (including, in the case of
any financings by SSI or SRI, the preparation and delivery of
financial statements or related disclosure, including but not
limited to, pro forma financial data complying with the requirements
of Regulation S-X of the Securities Act). Each of SSI and the Merger
Sub will take all actions that may be necessary, proper, or
advisable under state securities laws in connection with the
offering and issuance of the SSI Shares. In addition to the
foregoing, SSI shall continue to file periodic reports with the SEC
under the Securities Exchange Act between the date of this Agreement
and the Effective Time (the "SUBSEQUENT SSI EXCHANGE ACT REPORTS")
and, in the event of an SSI Material Adverse Effect, such event will
be adequately
31
<PAGE>
summarized in the Registration Statement or the Subsequent SSI
Exchange Act Reports.
(ii) CRA STOCKHOLDER VOTE. CRA will call a special meeting of
its stockholders (the "CRA STOCKHOLDER VOTE") as soon as reasonably
practicable in order that the stockholders may consider and vote
upon the adoption of this Agreement and the approval of the Merger
in accordance with the Survivor's Act. CRA will mail the Combined
Disclosure Document to its stockholders as soon as reasonably
practicable. The Combined Disclosure Document will contain the
affirmative recommendations of the board of directors of CRA in
favor of the adoption of this Agreement and the approval of the
Merger Sub. Notwithstanding the foregoing, nothing in this
ss.5(c)(ii) shall be construed to require any director of CRA to
take any actions or permit any events described above to the extent
that the board of directors of CRA shall conclude in good faith,
based upon the written advice of legal counsel to the board or such
director, that such action is prohibited in order for the director
to act in a manner that is consistent with his fiduciary obligations
under applicable laws.
(iii) HART-SCOTT-RODINO ACT AND OTHER FILINGS. CRA will file
any Notification and Report Forms or other form or report and
related material that the Parties may be required to file with the
Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act or with
any other governmental entity under the laws of any foreign
jurisdiction, will use all commercially reasonable best efforts to
obtain (and CRA will cause each of its Subsidiaries to use all
commercially reasonable best efforts to obtain) an early termination
of any applicable waiting period, and will make any further filings
pursuant thereto that may be necessary, proper, or advisable.
(d) AGREED UPON PROCEDURE LETTER/COMFORT LETTER. In connection with
the information regarding CRA or its Subsidiaries or the transactions
contemplated by this Agreement provided by CRA or its Subsidiaries specifically
for inclusion in, or incorporation by reference into, the Prospectus, the
Registration Statement or any SEC filings by SSI or SRI in connection with the
financing of the transactions contemplated hereby, CRA shall use all
commercially reasonable efforts to cause to be delivered to the board of
directors of SSI and SRI a letter of the relevant type from Deloitte & Touche
LLP, dated the date on which such Registration Statement (or such other SSI
filings) shall become effective and addressed to (i) the board of directors of
SSI, SRI or CRA and (ii) an underwriter(s) as required by SSI, in form and
substance reasonably satisfactory to SSI and customary in scope and substance
for letters delivered by independent public accountants in connection with
registrations or offerings of the relevant type. In connection with the
information regarding SSI or SRI or the transactions contemplated by this
Agreement provided by SSI or SRI specifically for inclusion in, or incorporation
by reference into, the Prospectus, the Registration Statement and the Definitive
CRA Proxy Materials, SSI shall use all commercially reasonable efforts to cause
to be delivered to the board of directors of CRA a letter of the relevant type
from
32
<PAGE>
Price Waterhouse LLP, dated the date on which the Registration Statement shall
become effective and addressed to the board of directors of CRA, in form and
substance reasonably satisfactory to CRA and customary in scope and substance
for letters delivered by independent public accountants in connection with
registrations of the relevant type.
(e) LISTING OF SSI SHARES. SSI will cause the SSI Shares that will
be issued in the Merger to be approved for listing on the NASDAQ National Market
System, subject to official notice of issuance, prior to the Effective Time.
(f) CRA OPERATION OF BUSINESS. Prior to the Closing, except as
otherwise expressly provided herein, CRA shall, and shall cause each of its
Subsidiaries to:
(i) except as contemplated by this Agreement, operate only in
the Ordinary Course of Business;
(ii) use its reasonable best efforts to keep in full force and
effect its corporate existence and all material rights, franchises,
Proprietary Rights and goodwill relating or obtaining to its
business;
(iii) use its reasonable best efforts to retain its employees
and preserve its present relationships with customers, suppliers,
contractors, distributors and such employees, and continue to
compensate such employees consistent with past practices;
(iv) maintain the Proprietary Rights so as not to affect
adversely any registration or application for registration thereof
or the validity or enforcement thereof, maintain its other assets in
customary repair, order and condition and maintain insurance
reasonably comparable to that in effect on the date of this
Agreement; and in the event of any casualty, loss or damage to any
of such assets repair or replace such assets with assets of
comparable quality and value;
(v) use its reasonable best efforts to obtain all
authorizations, consents, waivers, approvals or other actions
necessary or desirable to consummate the transactions contemplated
hereby (including, without limitation, paying any expenses in
connection therewith) and to cause the other conditions to SSI's and
the Merger Sub's obligation to close to be satisfied;
(vi) perform in all material respects all of its obligations
under all notes, bonds, mortgages, indentures, licenses, contracts,
agreements or other instrument or obligation to which CRA or any of
its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound and not enter into,
assume or amend any such contract or commitment other than in the
Ordinary Course of Business;
33
<PAGE>
(vii) prepare and file all Tax Returns and other Tax reports,
filings and amendments thereto required to be filed by it, on a
timely basis; provided, that CRA will not file or amend any income
Tax returns without the prior written consent of SSI; and
(viii) deliver to SSI and SRI (A) on or prior to March 30, 1997,
the audited consolidated balance sheet, income statement and
cash-flow statement of CRA and its Subsidiaries as of and for the
fiscal year ended February 1, 1997, in a form suitable for filing in
an Annual Report on Form 10-K, together with an independent
auditor's report in respect thereof and details explaining any
adjustments or significant differences between such audited
statements and those attached as Schedule 3(f); and (B) within 15
days of each month end from the date hereof through the Closing Date
its consolidated unaudited balance sheets, income statements and
cash flow statements as of and for the immediately preceding month.
Further, prior to the Closing, without the prior written consent of the Merger
Sub or as otherwise expressly provided herein, CRA will not, and will cause each
of its Subsidiaries not to enter into any contract, agreement or commitment or
take any other action (other than in the Ordinary Course of Business and except
for any contracts or agreements related to any retail store location currently
being negotiated by CRA or as expressly disclosed in Schedule 3(s)(i) or (ii))
which, if entered into or taken prior to the date of this Agreement, would cause
any representation or warranty of CRA to be untrue in any respect or be required
to be disclosed on the Disclosure Schedule (including, without limitation,
Schedule 3(g)); or take or omit to be taken any action, or permit its Affiliates
to take or to omit to take any action, which would have a material adverse
effect on the business, financial condition or prospects of CRA or its
Subsidiaries.
(g) FULL ACCESS. CRA will (and will cause each of its Subsidiaries
to) permit representatives of each of SSI, SRI and any of their respective
financing sources to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of CRA and its
Subsidiaries, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each of CRA and its
Subsidiaries. Subject to the signing of a confidentiality agreement satisfactory
in form and substance to SSI, SSI will (and will cause each of its Subsidiaries
to) permit representatives of CRA to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
SSI and its Subsidiaries, to all premises, properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to each of
SSI and its Subsidiaries. No investigation by SRI heretofore or hereafter made
shall modify or otherwise affect any representations and warranties of CRA,
which shall survive any such investigation, or the conditions to the obligation
of Merger Sub or SSI to consummate the transactions contemplated hereby.
(h) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the others of any material adverse development causing a breach of any
of its own representations and warranties in ss.3 and ss.4 above. No disclosure
by any Party pursuant to this ss.5(h), however, shall be
34
<PAGE>
deemed to amend or supplement their respective Disclosure Schedules or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(i) ACQUISITION PROPOSALS. CRA shall not, and it shall not authorize
or permit any of its Subsidiaries, officers, directors or employees or any
advisors or agents retained by CRA or its Subsidiaries, directly or indirectly,
to (i) solicit, initiate or knowingly encourage or induce the making of any CRA
Acquisition Proposal, (ii) negotiate with any third party with respect to any
CRA Acquisition Proposal, (iii) endorse or recommend the CRA Acquisition
Proposal of any third party or (iv) enter into any Contract with any third party
with the intent to effect any CRA Acquisition Proposal. Notwithstanding the
foregoing, nothing in this ss.5(i) shall be construed to prohibit CRA or its
board of directors from taking any actions or permitting any events described
above (other than any action described in clause (i) above) to the extent that
the board of directors of CRA shall conclude in good faith, based upon the
written advice of McKinney, Stringer and Webster, P.C., that such action is
required in order for the board of directors to act in a manner that is
consistent with its fiduciary obligations under applicable law. CRA shall
promptly advise SSI orally and in writing of the receipt of any CRA Acquisition
Proposal or similar inquiry, the basic CRA Acquisition Proposal terms and the
identity of the proposed acquiror.
(j) AFFILIATE AGREEMENTS. Each of the Parties will use every
reasonable effort to ensure that each Person who would be deemed to be an
"affiliate" for purposes of Rule 144(c) under the Securities Act of SSI or of
CRA executes a written confirmation that such affiliate agrees to appropriate
restrictions on its ability to transfer SSI Shares in order to comply with Rule
145 under the Securities Act.
(k) CLOSING DOCUMENTS. CRA shall, prior to or on the Closing Date,
execute and deliver, or cause to be executed and delivered to the Merger Sub,
the documents or instruments described in Section 6(a), the Merger Sub shall,
prior to or on the Closing Date, execute and deliver, or cause to be executed
and delivered, to CRA, the documents or instruments described in Section 6(b).
(l) DIRECTORS AND OFFICER'S INSURANCE. To the extent commercially
available on terms no less favorable to SSI than the proposal submitted to SSI
prior to the date hereof, SSI shall provide each individual who served as a
director or officer of CRA at any time prior to the Effective Time with
liability insurance for a period customary for policies of this nature after the
Effective Time on terms no less favorable in coverage and amount than any
applicable insurance in effect immediately prior to the Effective Time.
(m) SEVERANCE AGREEMENTS. CRA shall, prior to or on the Closing
Date, amend the Severance Pay Plan, or enter into appropriate agreements, to
provide that any Person who has entered into an Executive Severance Agreement
shall be excluded from, and shall not be entitled to, without limitation, any
payments or benefits under the Severance Pay Plan.
35
<PAGE>
(n) OPTION CANCELLATION AGREEMENTS. CRA shall, on or before March
31, 1997, deliver to SSI executed option cancellation agreements from the
holders of the CRA Options pursuant to which each such holder agrees not to
exercise his or her CRA Options prior to the Effective Time in exchange for the
right to receive the cash payment contemplated by ss.2(d)(vi) hereof (the
"OPTION CANCELLATION AGREEMENTS").
Section 6. CONDITIONS TO CLOSING.
(a) CONDITIONS TO OBLIGATIONS OF SSI AND MERGER SUB. The obligations
of SSI and the Merger Sub to consummate the transactions to be performed by them
in connection with the Closing are subject to satisfaction of the following
conditions. The following conditions can only be waived in writing:
(i) the representations and warranties set forth in ss.3
above shall be true and correct at and as of the Closing Date;
(ii) CRA shall have performed and complied with all of its
covenants hereunder through the Closing;
(iii) the Requisite CRA Stockholder Approval shall have been
obtained;
(iv) CRA and its Subsidiaries shall have procured all of the
consents, waivers, amendments or other actions specified in ss.5(b)
above, including, without limitation, any required consents,
waivers, amendments or other actions with respect to the Contracts
and other matters listed on Schedules 3(d), 3(p) and 3(s);
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a CRA Material Adverse Effect or an SSI Material Adverse
Effect wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (w) prevent consummation of any of the
transactions contemplated by this Agreement, (x) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (y) affect adversely the right of the
Surviving Corporation to own the former assets, to operate the
former businesses, and to control the former Subsidiaries of CRA, or
(z) affect adversely the right of any of the former Subsidiaries of
CRA to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(vi) there shall have been no CRA Material Adverse Effect;
36
<PAGE>
(vii) CRA shall have delivered to SSI and the Merger Sub a
certificate to the effect that each of the conditions specified
above in ss.6(a)(i)-(vi) is satisfied in all respects;
(viii) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
(ix) CRA shall have delivered to the Merger Sub evidence
satisfactory to the Merger Sub of the cancellation of all
outstanding options, warrants and other equity interests;
(x) the SSI Shares that will be issued in the Merger shall
have been approved for listing on NASDAQ, subject to official notice
of issuance;
(xi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
(xii) each of SSI and the Merger Sub shall have received from
counsel to CRA opinions as to corporate and tax matters (including
that the Merger will qualify as a reorganization under Section
368(a)(2)(D) of the Code) dated as of the Closing Date and addressed
to, and in form and substance reasonably satisfactory to, each of
SSI and the Merger Sub;
(xiii) CRA shall have terminated, to the extent requested by
SSI, any and all existing stockholders agreements, and any and all
similar agreements or arrangements, to which CRA is a party;
(xiv) no Triggering Event shall have occurred;
(xv) the SSI Average Closing Price shall not be less than
$15.00;
(xvi) no more than 7.5% of the outstanding CRA Shares
constitute Dissenting Shares;
(xvii) SSI and SRI shall have received the cash proceeds of
financing necessary for SSI and SRI to consummate the Merger as
contemplated herein, pay all costs and expenses associated therewith
and provide for the ongoing working capital
37
<PAGE>
needs of the Surviving Corporation at commercially reasonable rates
and otherwise on terms satisfactory to SRI; and
(xviii) all actions to be taken by CRA in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
affect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to SSI and Merger Sub.
(b) CONDITIONS TO OBLIGATIONS OF CRA. The obligation of CRA to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions. The following conditions
can only be waived in writing.
(i) the representations and warranties set forth in ss.4
above shall be true and correct at and as of the Closing Date;
(ii) each of SSI and the Merger Sub shall have performed and
complied with all of its covenants hereunder through the Closing;
(iii) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated by the
SEC;
(iv) the SSI Shares that will be issued in the Merger Sub
shall have been approved for listing on the NASDAQ National Market
System, subject to official notice of issuance;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator (other than an action, suit or proceeding in
which both (A) no governmental authority is or is threatened to be a
party and (B) there is no reasonable possibility of an outcome that
would have a material adverse effect on CRA or SSI wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (w) prevent consummation of any of the transactions
contemplated by this Agreement, (x) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation, (y) affect adversely the right of the Surviving
Corporation to own the former assets, to operate the former
businesses, and to control the former Subsidiaries of CRA, or (z)
affect adversely the right of any of the former Subsidiaries of CRA
to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(vi) There shall have been no SSI Material Adverse Effect.
38
<PAGE>
(vii) each of SSI and the Merger Sub shall have delivered to
CRA a certificate to the effect that each of the conditions
specified above in ss.6(b)(i)-(vi) is satisfied in all respects;
(viii) the Requisite CRA Stockholder Approval shall have been
obtained;
(ix) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act and under the laws of any
foreign jurisdiction shall have expired or otherwise been terminated
and the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in ss.3(d) and ss.4(d) above;
(x) CRA shall have received from counsel to SSI and the
Merger Sub opinions as to corporate and tax matters (including that
the Merger will qualify as a reorganization under Section
368(a)(2)(D) of the Code) dated as of the Closing Date and addressed
to, and in form and substance reasonably satisfactory to, CRA; and
(xi) all actions to be taken by each of SSI and the Merger Sub
in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instrument, and other
documents required to affect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to CRA.
Section 7. TERMINATION AND ITS CONSEQUENCES.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement by mutual written consent at any time prior to the Effective Time. In
addition, any Party may terminate this Agreement with the prior authorization of
its board of directors (whether before or after stockholder approval) as
provided below:
(i) Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the failure of any condition precedent under ss.ss.6(a) or
6(b) hereof (excluding subparagraphs (i) and (ii) of each such
subsection). Whereupon all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any
other Party except as provided in ss.7(b).
(ii) Any Party may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time,
if the Closing has not occurred on or before July 15, 1997, by
reason of the other Party's breach of any material representation,
warranty or covenant contained in this Agreement, of which the
nonbreaching Party has notified the breaching Party of the breach,
and the breach has continued without cure for a period of 10 days
after the notice of breach or such
39
<PAGE>
lesser period as remains between the date of the notice and July 15,
1997. If any Party terminates this Agreement pursuant to this
ss.7(a)(ii), all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to the other
Party, except for any liability of any Party then in breach,
including any liability as provided in ss. 7(b).
(b) CONSEQUENCES OF CERTAIN TERMINATIONS.
(i) In consideration of the time and expense (including
foregoing other opportunities) that SSI and SRI have invested in the
transactions contemplated hereby, if this Agreement is terminated by
either SSI or the Merger Sub due to the occurrence of a Triggering
Event, then CRA shall pay to SSI upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by SSI, SRI and the Merger Sub in connection
with this Agreement).
(ii) If the Requisite CRA Stockholder Approval is not obtained
at the CRA Stockholder Vote but no Triggering Event has occurred and
no CRA Acquisition Proposal has been made, then CRA shall reimburse
SSI for all expenses and charges incurred by SSI, SRI or the Merger
Sub in connection with this Agreement.
(iii) If this Agreement is terminated by SSI because of the
failure to satisfy the conditions set forth in (A) ss.6(a)(xv) or
(B) ss.6(a)(xvii) other than as a result of CRA Material Adverse
Effect, then SSI shall pay to CRA upon such termination, in
immediately available funds, a fee of $3,500,000 (plus all expenses
and charges incurred by CRA in connection with this Agreement).
(iv) Concurrently with the execution of this Agreement, SSI
and CRA have entered into the Termination Option Agreement which
will become immediately exercisable in accordance with its terms (A)
if any of the events described in subsection (ii) or (iii) of the
definition of Triggering Event occur, (B) the board of directors of
CRA shall approve, endorse or recommend any CRA Acquisition Proposal
within six months of the termination of this Agreement or (C) any
Person or Group (as defined in Section 13(d)(3) of the Securities
Exchange Act) within six months of the termination of this Agreement
acquires beneficial ownership of more than 50% of the outstanding
common stock of CRA.
(v) If this Agreement is terminated by CRA because the board
of directors of SSI shall have withdrawn its approval of this
Agreement for any reason, other than as provided in ss. 7(a), then
SSI shall reimburse CRA for all expenses and charges incurred by CRA
in connection with this Agreement.
40
<PAGE>
(vi) The Parties hereto acknowledge that the agreements made
in this ss.7(b) are integral to this Agreement and without such
agreements the Parties would not enter into this Agreement.
Section 8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants
of the Parties (other than the provisions in ss.7 above) will survive the
Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Other than required by
this Agreement, no Party shall issue any press release or make any public
announcement (including SEC filings) prior to the Effective Time and relating to
the subject matter of this Agreement without the prior written approval of the
other Parties; PROVIDED, HOWEVER, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use all commercially reasonable best efforts to advise the
other Parties prior to making the disclosure).
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedules and the documents referred to herein) constitutes the entire agreement
between the Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, to the extent they
related in any way to the subject matter hereof, except that the Confidentiality
and Standstill Agreement dated September 25, 1996 between SRI and CRA shall
survive the execution and the termination of this Agreement.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified
41
<PAGE>
mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
IF TO CRA: COPY TO:
C.R. Anthony Company McKinney, Stringer & Webster, P.C.
701 North Broadway 101 North Broadway, Suite 800
Oklahoma City, Oklahoma 73102 Oklahoma City, OK 73102
Attention: Michael E. McCreery Attention: N. Martin Stringer
Facsimile: (405) 278-7662 Facsimile: (405) 239-7902
IF TO SSI OR THE MERGER SUB: COPY TO:
Stage Stores, Inc. Kirkland & Ellis
10201 Main Street 153 East 53rd Street
Houston, Texas 77002 New York, New York 10022
Attention: James A. Marcum Attention: Lance C. Balk
Facsimile: (713) 669-2709 Facsimile: (212) 446-4900
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; PROVIDED, HOWEVER,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the Texas Act and the Oklahoma Act. No
amendment or other modification of any provision of this Agreement and no waiver
of any provision hereof or any right or benefit hereunder shall be valid unless
the same shall be in writing and signed by each of the Parties. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
42
<PAGE>
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Except as set forth in ss.7, each of the Parties will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) WAIVER OF JURY TRIAL. The Parties hereby waive any right they
may have to trial by jury in respect of any litigation based on, arising out of,
under or in connection with this agreement or any course of conduct, course of
dealing, verbal or written statement or action of any party hereto.
(p) TIME IS OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or the discharge of any duty hereunder shall
fall upon a Saturday, Sunday, or any date on which banks in New York, New York
are authorized to be closed, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular business day.
(q) SPECIFIC PERFORMANCE. Each of the Parties acknowledges that the
rights created hereby are unique and recognizes and affirms that in the event of
a breach of this Agreement irreparable harm would be caused, money damages may
be inadequate and an aggrieved party may have no adequate remedy at law.
Accordingly, each of the parties agrees that the other party shall have the
right, in addition to any other rights and remedies existing in its favor at law
or in equity, to enforce its rights and the obligations of the other party
hereunder not only by an action or actions for damages but also by an action or
actions for specific performance, injunctive and/or other equitable relief
(without posting of bond or other security).
* * * * *
43
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
STAGE STORES, INC.
By:________________________
Name:
Title:
C.R. ANTHONY COMPANY
By:________________________
Name:
Title:
44
EXHIBIT 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
May 23, 1997
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77002
Re: SHARES OF COMMON STOCK, $0.01 PAR VALUE
Ladies and Gentlemen:
We are acting as counsel to Stage Stores, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), of a Registration Statement on Form S-4
(Registration No. 333-______ (the "Registration Statement") pertaining to the
registration of a proposed issuance of shares of the Company's Common Stock,
$0.01 par value per share (the "Common Stock") in connection with the Merger (as
defined in the Registration Statement) with C.R. Anthony Company ("CR Anthony").
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of such documents, corporate records and other
instruments as we have deemed necessary for the purposes of this opinion,
including the following: (a) the Amended and Restated Certificate of
Incorporation of the Company; (b) the Amended and Restated Bylaws of the
Company; and (c) certain resolutions adopted by the Board of Directors of the
Company. In addition, we have made such other and further investigations as we
have deemed necessary to enable us to express the opinions hereinafter set
forth.
Based upon the foregoing and giving regard to legal considerations
that we deem relevant, and subject to the comments and qualifications set forth
below, it is our opinion that the Common Stock has been duly authorized and
validly issued and is fully paid and nonassessable.
For purposes of this opinion, we have with your permission made the
following assumptions, in each case without independent verification: (1) the
authenticity of all documents submitted to us as originals, (2) the conformity
to the originals of all documents submitted to us as copies, (3) the
authenticity of the originals of all documents submitted to us as copies, (4)
the genuineness of the signatures of persons signing all documents in connection
with which this opinion is rendered, (5) the authority of such persons signing
all documents on behalf of the parties thereto, and (6) the due authorization,
execution and delivery of all documents by the parties thereto.
<PAGE>
May 23, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the section
entitled "Legal Matters" in the prospectus included in the Registration
Statement.
We do not find it necessary for purposes of this opinion to cover,
and accordingly we do not purport to cover herein, the application of the
securities or "Blue Sky" laws of the various states to the issuance of the
Common Stock.
This opinion shall be limited to the laws of the State of Delaware.
This opinion is furnished to you in connection with the filing of
the Registration Statement, to be relied upon by you, your shareholders and the
shareholders of CR Anthony, and is not to be used, circulated, quoted or
otherwise relied upon for any other purpose.
Very truly yours,
KIRKLAND & ELLIS
EXHIBIT 8.1
[Kirkland & Ellis Letterhead]
DRAFT
May 27, 1997
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77002
Ladies and Gentlemen:
In connection with the registration by Stage Stores, Inc., a
Delaware corporation ("SSI"), of shares of common stock, par value $.01 per
share, of SSI under the Securities Act of 1933, as amended (the "Securities
Act"), on a Registration Statement on Form S-4, filed with the Securities and
Exchange Commission on ___, 1997 (with all amendments thereto, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Agreement and Plan of Merger between SSI and C.R.
Anthony Company, an Oklahoma corporation (CR Anthony"), dated as of March 5,
1997 (the "Merger Agreement"), the First Amendment to Agreement and Plan of
Merger, dated May 20, 1997 (the "First Amendment") and the Registration
Statement.
Our opinion set forth below assumes (1) the accuracy of the
statements and facts concerning the Merger (as such term is defined in the
Registration Statement) set forth in the Merger Agreement, the First Amendment
and the Registration Statement; (2) that the Merger is consummated in the manner
contemplated by, and in accordance with the terms set forth in, the Merger
Agreement and the Registration Statement; and (3) the accuracy of the
representations given to us by SSI, CR Anthony and certain CR Anthony
shareholders.
Based upon the facts and statements set forth above, our examination
and review of the documents referred to above and subject to the assumptions set
forth above, we are of the opinion that the legal conclusions set forth under
the heading "Certain Federal Income Tax Consequences" in the Registration
Statement are correct in all material respects. We express no opinion as to any
matter other than those specifically set forth herein.
Our opinion is based on current provisions of the Internal Revenue
Code of 1986, as amended, Treasury Regulations (proposed, temporary and final),
judicial decisions and Internal Revenue Service rulings, all of which are
subject to change, possibly with retroactive effect. A change in the authorities
upon which our opinion is based, any change in the facts and circumstances
surrounding the Merger, or any change or inaccuracy in the statements, facts,
assumptions and representations on which we have relied, may affect our
conclusions. We assume no responsibility to inform you of any such change or
inaccuracy that may occur or come to our attention. Moreover, there can be no
assurances that the opinion expressed herein will be accepted by the Internal
Revenue Service or, if challenged, by a court.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Legal Matters" in the Registration Statement, without admitting that we are
"experts" under the Securities Act or the rules and regulations promulgated
thereunder with respect to any part of the Registration Statement.
Very truly yours,
/s/ Kirkland & Ellis
Exhibit 8.1 - Page 1
EXHIBIT 8.2
[McKinney, Stringer & Webster Letterhead]
May 27, 1997
Stage Stores, Inc.
10201 Main Street
Houston, TX 77002
Ladies and Gentlemen:
In connection with the registration by Stage Stores, Inc. a Delaware
corporation ("SSI"), of shares of common stock, par value $0.01 per share, of
SSI under the Securities Act of 1933, as amended (the "Securities Act"), on a
Registration statement on Form S-4, filed with the Securities and Exchange
Commission on May 27, 1997 (with all amendments thereto, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Agreement and Plan of Merger between SSI and C.R.
Anthony Company, an Oklahoma corporation ("CR Anthony"), dated as of March 5,
1997 (the "Merger Agreement"), the First Amendment to Agreement and Plan of
Merger, dated May 20, 1997 (the "First Amendment"), and the Registration
Statement.
Our opinion set forth below assumes (1) the accuracy of the
statements and facts concerning the Merger (as such term is defined in the
Registration Statement) set forth in the Merger Agreement, the First Amendment
and the Registration Statement; (2) that the Merger is consummated in the manner
contemplated by, and in accordance with the terms set forth in, the Merger
Agreement, First Amendment and the Registration Statement; and (3) the accuracy
of the representations given to us by SSI, CR Anthony and certain CR Anthony
shareholders.
Based upon the facts and statements set forth above, our examination
and review of the documents referred to above and subject to the assumptions
set forth above, we are of the opinion that the legal conclusions set forth
under the heading "Certain Federal Income Tax Consequences" in the Registration
Statement are correct in all material respects. We express no opinion as to any
matter other than those specifically set forth herein.
Exhibit 8.2 - Page 1
<PAGE>
Our opinion is based on current provisions of the Internal Revenue
Code of 1986, as amended, Treasury Regulations (proposed, temporary and final),
judicial decisions and Internal Revenue Service rulings, all of which are
subject to change, possibly with retroactive effect. A change in the authorities
upon which our opinion is based, any change in the facts and circumstances
surrounding the Merger, or any change or inaccuracy in the statements, facts,
assumptions and representations on which we have relied, may affect our
conclusions. We assume no responsibility to inform you of any such change or
inaccuracy that may occur or come to our attention. Moreover, there can by no
assurances that the opinion expressed herein will be accepted by the Internal
Revenue Service or, if challenged, by a court.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Registration Statement, without admitting that we are
"experts" under the Securities Act or the rules and regulations promulgated
thereunder with respect to any part of the Registration Statement.
Very truly yours,
McKinney, Stringer & Webster, P.C.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Stage Stores
Inc. of our report dated March 12, 1997 appearing on page F-1 of Stage Stores
Inc. Annual Report on Form 10-K/A for the year ended February 1, 1997. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Houston, Texas
May 27, 1997
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Proxy Statement/Prospectus
contained in this Registration Statement of Stage Stores, Inc. on Form S-4 of
our reports dated March 12, 1997 (which express an unqualified opinion and
include an explanatory paragraph relating to C.R. Anthony Company entering into
an Agreement and Plan of Merger with Stage Stores, Inc.) appearing in
incorporated by reference in the Annual Report on Form 10-K of C.R. Anthony
Company for the fifty-two weeks ended February 1, 1997 and to reference to us
under the heading "Experts" in the Proxy Statement/Prospectus, which is part of
this Registration Statement.
Deloitte & Touche LLP
Oklahoma City, Oklahoma
May 27, 1997
EXHIBIT 23.5
[Letterhead of Stephens Inc.]
May 27, 1997
Board of Directors
C.R. Anthony
701 North Broadway
Oklahoma City, Oklahoma 73102
Gentlemen:
We hereby consent to the use of our opinion letter dated March 4, 1997 to the
Board of Directors of C.R. Anthony Company included as Annex C to the
Prospectus/Proxy Statement which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of C.R. Anthony Company with and into
Stage Stores, Inc. and to the references to such opinion in such
Prospectus/Proxy Statement under the captions "To The Stockholders of C.R.
Anthony Company," "Opinion of CR Anthony's Special Advisor to the Board," "THE
MERGER-Background of the Merger," and "THE MERGER-Opinion of CR Anthony's
Special Advisor to the Board". In giving such consent, we do not admit and we
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
issued by the Securities and Exchange Commission thereunder.
STEPHENS INC.
/s/ EARL H. CLEMMONS
Earl H. Clemmons
Senior Vice President
Managing Director
EXHIBIT 99.1
C. R. ANTHONY COMPANY
701 NORTH BROADWAY
OKLAHOMA CITY, OKLAHOMA 73102
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John J. Wiesner and Michael E. McCreery as
proxies (the "Proxies"), each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all of the
shares of Common Stock of C. R. Anthony Company held of record by the
undersigned at the close of business on _________, 1997 at the Special Meeting
of Stockholders to be held on ___________, 1997 at 10:30 A.M., or any
reconvention thereof.
1. Proposal to approve and adopt the Agreement and Plan of Merger between C. R.
Anthony Company and Stage Stores, Inc. dated March 5, 1997 (the "Merger
Agreement") and the Merger contemplated by the Merger Agreement. (THE BOARD
RECOMMENDS A VOTE "FOR")
________ FOR ________ AGAINST ________ ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD. AS TO ITEM 1, THIS
PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTIONS ARE INDICATED, IT WILL BE
VOTED FOR THE PROPOSAL.
Dated: _________________, 1997
--------------------------------
Signature of Shareholder
--------------------------------
Signature of Additional Shareholder (if any)
Please sign exactly as the stock is held. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title. If more than one trustee, all should sign.
All joint owners must sign.
DO YOU PLAN TO ATTEND? YES ( ) NO ( )
Exhibit 99.1 - Page 1
