SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 23, 1995
PROFFITT'S, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of incorporation)
0-15907 62-0331040
(Commission File Number) (IRS Employer Identification No.)
P.O. Box 9388
Alcoa, TN 37701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(615) 983-7000
<PAGE>
Item 5. Other Events.
On October 23, 1995, Proffitt's, Inc. ("Proffitt's") and
Younkers, Inc. ("Younker's) jointly announced the signing of
an Agreement and Plan of Merger (the "Agreement") pursuant
to which Baltic Merger Corporation, a newly organized and
wholly-owned subsidiary of Proffitt's ("Baltic"), will be
merged with and into Younkers, which will continue as the
surviving corporation and a wholly-owned subsidiary of
Proffitt's (the "Merger"). The Agreement provides that upon
and by virtue of the Merger becoming effective, each issued
and outstanding share of Younkers' Common Stock, $0.01 par
value per share ("Younkers Common Stock"), except for
certain shares of Younkers Common Stock held by Younkers in
treasury or owned by Proffitt's or any subsidiary of
Younkers which will be cancelled, will be converted into the
right to receive ninety-eight one-hundredths (.98) of a
share of Proffitt's Common Stock, $0.10 par value per share,
subject to certain adjustments more particularly described
in the Agreement.
Pursuant to General Instruction F to Form 8-K, the press
release issued October 23, 1995, concerning the merger is
incorporated herein by reference and is attached hereto as
Exhibit 20.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are filed as a part of this
report:
Exhibit
Number Description
2 Agreement and Plan of Merger Among Proffitt's, Inc.,
Baltic Merger Corporation and Younkers, Inc. Dated as
of October 22, 1995.
20 Press Release dated October 23, 1995.
99 Discussion Piece for Financial Analysts' Questions
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
PROFFITT'S, INC.
Date: October 24, 1995 /s/ R. Brad Martin
---------------- ------------------
R. Brad Martin
(Printed)
Chairman of the Board
and Chief Executive
Officer
(Title)
Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
PROFFITT'S, INC.,
BALTIC MERGER CORPORATION
AND
YOUNKERS, INC.
Dated as of October 22, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger . . . . . . . . . . . . . . . . 1
Section 1.2 Effective Time . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . 2
Section 1.4 Charter and By-laws . . . . . . . . . . . . 2
Section 1.5 Conversion of Securities . . . . . . . . . 2
Section 1.6 Parent to Make Certificates Available . . . 3
Section 1.7 Dividends; Transfer Taxes; Withholding . . 4
Section 1.8 No Fractional Securities . . . . . . . . . 5
Section 1.9 Return of Exchange Fund . . . . . . . . . . 5
Section 1.10 Adjustment of Conversion Number . . . . . . 5
Section 1.11 No Further Ownership Rights in Company
Common Stock . . . . . . . . . . . . . . . . . . . . 6
Section 1.12 Closing of Company Transfer Books . . . . . 6
Section 1.13 Lost Certificates . . . . . . . . . . . . . 6
Section 1.14 Affiliates . . . . . . . . . . . . . . . . 6
Section 1.15 Dissenters' Rights . . . . . . . . . . . . 6
Section 1.16 Further Assurances . . . . . . . . . . . . 6
Section 1.17 Closing . . . . . . . . . . . . . . . . . . 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUB . . . . . . . . . . . . . . . . . 7
Section 2.1 Organization, Standing and Power . . . . . 7
Section 2.2 Capital Structure . . . . . . . . . . . . . 8
Section 2.3 Authority . . . . . . . . . . . . . . . . . 9
Section 2.4 Consents and Approvals; No Violation . . . 9
Section 2.5 SEC Documents and Other Reports . . . . . 10
Section 2.6 Registration Statement and Joint Proxy
Statement . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Absence of Certain Changes or Events . . 11
Section 2.8 Permits and Compliance . . . . . . . . . 12
Section 2.9 Tax Matters . . . . . . . . . . . . . . . 12
Section 2.10 Actions and Proceedings . . . . . . . . . 13
Section 2.11 Certain Agreements . . . . . . . . . . . 13
Section 2.12 ERISA . . . . . . . . . . . . . . . . . . 13
Section 2.13 Compliance with Certain Laws . . . . . . 14
Section 2.14 Liabilities . . . . . . . . . . . . . . . 15
Section 2.15 Labor Matters . . . . . . . . . . . . . . 15
Section 2.16 Intellectual Property . . . . . . . . . . 15
Section 2.17 Opinion of Financial Advisor . . . . . . 15
Section 2.18 Pooling of Interests; Reorganization . . 16
Section 2.19 Required Vote of Parent Stockholders . . 16
Section 2.20 Ownership of Shares . . . . . . . . . . . 16
Section 2.21 Operations of Sub . . . . . . . . . . . . 16
Section 2.22 Brokers . . . . . . . . . . . . . . . . . 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY . . . . . . . . . . . . . . . . . 16
<PAGE>
Section 3.1 Organization, Standing and Power . . . . 17
Section 3.2 Capital Structure . . . . . . . . . . . . 17
Section 3.3 Authority . . . . . . . . . . . . . . . . 18
Section 3.4 Consents and Approvals; No Violation . . 18
Section 3.5 SEC Documents and Other Reports . . . . . 19
Section 3.6 Registration Statement and Joint Proxy
Statement . . . . . . . . . . . . . . . . . . . . . 19
Section 3.7 Absence of Certain Changes or Events . . 20
Section 3.8 Permits and Compliance . . . . . . . . . 20
Section 3.9 Tax Matters . . . . . . . . . . . . . . . 21
Section 3.10 Actions and Proceedings . . . . . . . . . 22
Section 3.11 Certain Agreements . . . . . . . . . . . 22
Section 3.12 ERISA . . . . . . . . . . . . . . . . . . 22
Section 3.13 Compliance with Certain Laws . . . . . . 24
Section 3.14 Liabilities . . . . . . . . . . . . . . . 24
Section 3.15 Labor Matters . . . . . . . . . . . . . . 24
Section 3.16 Intellectual Property . . . . . . . . . . 25
Section 3.17 Opinion of Financial Advisor . . . . . . 25
Section 3.18 State Takeover Statutes and Shareholder
Rights Plan . . . . . . . . . . . . . . . . . . . . 25
Section 3.19 Required Vote of Company Stockholders . . 25
Section 3.20 Pooling of Interests; Reorganization . . 26
Section 3.21 Brokers . . . . . . . . . . . . . . . . . 26
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS . . 26
Section 4.1 Conduct of Business Pending the Merger . 26
Section 4.2 No Solicitation . . . . . . . . . . . . . 30
Section 4.3 Third Party Standstill Agreements . . . . 30
Section 4.4 Pooling of Interests; Reorganization . . 31
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . 31
Section 5.1 Stockholder Meetings . . . . . . . . . . 31
Section 5.2 Preparation of the Registration
Statement and the Joint
Proxy Statement . . . . . . . . . . . . . . . 32
Section 5.3 Access to Information . . . . . . . . . . 32
Section 5.4 Compliance with the Securities Act;
Pooling Period . . . . . . . . . . . . . . . . . . 33
Section 5.5 NASDAQ Listing . . . . . . . . . . . . . 34
Section 5.6 Fees and Expenses . . . . . . . . . . . . 34
Section 5.7 Company Stock Options; Stock Purchase
Plan . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.8 Reasonable Best Efforts; Pooling of
Interests . . . . . . . . . . . . . . . . . . . . . 38
Section 5.9 Public Announcements . . . . . . . . . . 39
Section 5.10 Real Estate Transfer and Gains Tax . . . 39
Section 5.11 State Takeover Laws . . . . . . . . . . . 39
Section 5.12 Indemnification; Directors and Officers
Insurance . . . . . . . . . . . . . . . . . . . . . 39
Section 5.13 Notification of Certain Matters . . . . . 40
Section 5.14 Directors . . . . . . . . . . . . . . . . 40
Section 5.15 Designation of Directors . . . . . . . . 40
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER . . . . . . 41
<PAGE>
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . . . . 41
Section 6.2 Conditions to Obligation of the Company
to Effect
the Merger . . . . . . . . . . . . . . . . . . 42
Section 6.3 Conditions to Obligations of Parent and
Sub to Effect
the Merger . . . . . . . . . . . . . . . . . . 43
ARTICLE VII TERMINATION. AMENDMENT AND WAIVER . . . . . . 44
Section 7.1 Termination . . . . . . . . . . . . . . . 44
Section 7.2 Effect of Termination . . . . . . . . . . 46
Section 7.3 Amendment . . . . . . . . . . . . . . . . 46
Section 7.4 Waiver . . . . . . . . . . . . . . . . . 46
ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . 47
Section 8.1 Non-Survival of Representations,
Warranties and Agreements . . . . . . . . . . . . . 47
Section 8.2 Notices . . . . . . . . . . . . . . . . . 47
Section 8.3 Interpretation . . . . . . . . . . . . . 48
Section 8.4 Counterparts . . . . . . . . . . . . . . 48
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . . . . . 48
Section 8.6 Governing Law . . . . . . . . . . . . . . 48
Section 8.7 Assignment . . . . . . . . . . . . . . . 49
Section 8.8 Severability . . . . . . . . . . . . . . 49
Section 8.9 Enforcement of this Agreement . . . . . . 49
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 22, 1995
(this "Agreement"), among PROFFITT'S, INC., a Tennessee
corporation ("Parent"), BALTIC MERGER CORPORATION, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), and
YOUNKERS, INC., a Delaware corporation (the "Company") (Sub and
the Company being hereinafter collectively referred to as the
"Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub
and the Company have approved and declared advisable the merger
of Sub and the Company (the "Merger"), upon the terms and subject
to the conditions set forth herein, whereby each issued and
outstanding share of Common Stock, par value $0.01 per share, of
the Company ("Company Common Stock") not owned directly or
indirectly by Parent or the Company will be converted into shares
of Parent Common Stock, par value $.10 per share ("Parent Common
Stock");
WHEREAS, the respective Boards of Directors of Parent and
the Company have determined that the Merger is in furtherance of
and consistent with their respective long-term business
strategies and is in the best interest of their respective
stockholders;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded
for accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Delaware General
Corporation Law (the "Del.C."), Sub shall be merged with and into
the Company at the Effective Time (as hereinafter defined).
Following the Merger, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving
<PAGE>
corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance
with the Del.C.
Section 1.2 Effective Time. The Merger shall become
effective when a Certificate of Merger (the "Certificate of
Merger"), executed in accordance with the relevant provisions of
the Del.C., is filed with the Secretary of State of the State of
Delaware; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide
for a later date of effectiveness of the Merger not more than 30
days after the date the Certificate of Merger is filed. When
used in this Agreement, the term "Effective Time" shall mean the
later of the date and time at which the Certificate of Merger is
filed or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on
the date of the Closing (as defined in Section 1.17), or as
promptly thereafter as practicable.
Section 1.3 Effects of the Merger. The Merger shall have
the effects set forth in the Del.C.
Section 1.4 Charter and By-laws. At the Effective Time,
the Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be amended
so that Article Fourth of such Restated Certificate of
Incorporation reads in its entirety as follows: "The total number
of shares of all classes of capital stock which the Corporation
shall have authority to issue is 100 shares of Common Stock, par
value $.01 per share." As so amended, such Restated Certificate
of Incorporation shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law. At the Effective Time,
the By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by the
Certificate of Incorporation of the Surviving Corporation or by
applicable law.
Section 1.5 Conversion of Securities. As of the Effective
Time, by virtue of the Merger and without any action on the part
of Sub, the Company or the holders of any securities of the
Constituent Corporations:
(a) Each issued and outstanding share of common stock,
par value $.01 per share, of Sub shall be converted into one
validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held
in the treasury of the Company or by any wholly-owned
Subsidiary of the Company and any shares of Company Common
Stock owned by Parent or by any wholly-owned Subsidiary of
Parent shall be cancelled and no capital stock of Parent or
<PAGE>
other consideration shall be delivered in exchange therefor;
provided, however, that shares of Company Common Stock held
in the treasury to fund the deferred compensation plans of
W. Thomas Gould and Robert M. Mosco (the "Deferred Comp
Shares") will be converted into the right to receive on the
same terms and conditions as provided in such plans
authorized but unissued shares of Parent Common Stock
calculated by multiplying the Conversion Number (as
hereafter defined) times the number of Deferred Comp Shares.
(c) Subject to the provisions of Section 1.10 hereof,
each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares
to be cancelled in accordance with Section 1.5(b)) shall be
converted into .98 (such number being the "Conversion
Number") validly issued, fully paid and nonassessable shares
of Parent Common Stock. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and each holder
of a certificate formerly representing any such shares shall
cease to have any rights with respect thereto, except the
right to receive any dividends and other distributions in
accordance with Section 1.7, certificates representing the
shares of Parent Common Stock into which such shares are
converted and any cash, without interest, in lieu of
fractional shares to be issued or paid in consideration
therefor upon the surrender of such certificate in
accordance with Section 1.6. Each certificate shall, from
and after the Effective Time until surrendered in exchange
for Parent Common Stock, for all purposes be deemed to
represent the number of shares of Parent Common Stock
calculated by taking the number of shares represented by the
certificate times the Conversion Number.
Section 1.6 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize
a commercial bank reasonably acceptable to the Company (or such
other person or persons as shall be acceptable to Parent and the
Company) to act as Exchange Agent hereunder (the "Exchange
Agent"). As soon as practicable after the Effective Time, Parent
shall deposit with the Exchange Agent, in trust for the holders
of shares of Company Common Stock converted in the Merger,
certificates representing the shares of Parent Common Stock
issued pursuant to Section 1.5(c) in exchange for outstanding
certificates representing shares of Company Common Stock and
cash, as required to make payments in lieu of any fractional
shares pursuant to Section 1.8 (such cash and shares of Parent
Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the certificates representing the Parent
Common Stock contemplated to be delivered pursuant to Section
1.5(c) out of the Exchange Fund. Except as contemplated by
<PAGE>
Sections 1.6, 1.8 and 1.9, the Exchange Fund shall not be used
for any other purpose.
(b) Exchange Procedures. As soon as practicable after
the Effective Time, Parent shall cause the Exchange Agent to mail
to each record holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall be in
customary form, shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent,
and shall contain instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing
shares of Parent Common Stock and cash in lieu of fractional
shares). Upon surrender for cancellation to the Exchange Agent
of a Certificate, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock into which the
shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash
in lieu of any fractional share in accordance with Section 1.8
and certain dividends and other distributions in accordance with
Section 1.7, and any Certificate so surrendered shall forthwith
be cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after
the Effective Time on Parent Common Stock, or are payable to the
holders of record thereof on or after the Effective Time, will be
paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock and no cash payment
in lieu of fractional shares will be paid to any such person
pursuant to Section 1.8 until such person surrenders the related
Certificate or Certificates, as provided in Section 1.6. Subject
to the effect of applicable law, there shall be paid to each
record holder of a new certificate representing such Parent
Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to the shares of
Parent Common Stock represented by such new certificate and
having a record date on or after the Effective Time and a payment
date prior to such surrender; (ii) at the appropriate payment
date or as promptly as practicable thereafter, the amount of any
dividends or other distributions payable with respect to such
shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a
payment date on or subsequent to such surrender; and (iii) at the
time of such surrender or as promptly as practicable thereafter,
the amount of any cash payable with respect to a fractional share
of Parent Common Stock to which such holder is entitled pursuant
to Section 1.8. In no event shall the person entitled to receive
such dividends or other distributions be entitled to receive
<PAGE>
interest on such dividends or other distributions. If any cash
or certificate representing shares of Parent Common Stock is to
be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such
shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Parent or the Exchange Agent
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code or under any provision
of state, local or foreign tax law. To the extent that amounts
are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made
by Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or
scrip representing fractional shares of Parent Common Stock shall
be issued upon the surrender for exchange of Certificates
pursuant to this Article I, and no Parent dividend or other
distribution or stock split shall relate to any fractional share,
and no fractional share shall entitle the owner thereof to vote
or to any other rights of a security holder of Parent. In lieu
of any such fractional share, each holder of Company Common Stock
who would otherwise have been entitled to a fraction of a share
of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined
by multiplying (i) the per share closing price on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") of Parent Common Stock on the date of the Effective
Time (or, if the shares of Parent Common Stock do not trade on
NASDAQ on such date, the first date of trading of shares of
Parent Common Stock on NASDAQ after the Effective Time) by (ii)
the fractional interest to which such holder would otherwise be
entitled. As promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional
share interests, the Exchange Agent shall so notify the Parent,
and the Parent shall deposit such amount with the Exchange Agent
and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in
accordance with the terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former
<PAGE>
stockholders of the Company for one year after the Effective Time
shall be delivered to Parent, upon demand of Parent, and any such
former stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock. Neither
Parent nor the Surviving Corporation shall be liable to any
former holder of Company Common Stock for any such shares of
Parent Common Stock, cash and dividends and distributions held in
the Exchange Fund which is delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
Section 1.10 Adjustment of Conversion Number. In the event
of any reclassification, stock split or stock dividend with
respect to Parent Common Stock, any change or conversion of
Parent Common Stock into other securities, any other dividend or
distribution with respect to the Parent Common Stock other than
normal quarterly cash dividends as the same may be adjusted from
time to time pursuant to the terms of this Agreement (or if a
record date with respect to any of the foregoing should occur),
or any issuance of securities (other than rights) pursuant to
either the Parent Rights Plan (as hereinafter defined) or the
Company Rights Plan (as hereinafter defined) prior to the
Effective Time, appropriate and proportionate adjustments, if
any, shall be made to the Conversion Number, and all references
to the Conversion Number in this Agreement shall be deemed to be
to the Conversion Number as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common
Stock. All shares of Parent Common Stock issued pursuant to the
terms hereof (including any cash paid pursuant to Section 1.8)
shall be deemed to have been issued in full satisfaction of all
rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall
thereafter be made on the records of the Company. If, after the
Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates
shall be cancelled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but
consistent with the practices the Parent applies to its own
stockholders), as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent
<PAGE>
will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash in lieu
of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 1.8 and any dividends or
other distributions to which the holders thereof are entitled
pursuant to Section 1.7.
Section 1.14 Affiliates. Certificates surrendered for
exchange by any "affiliate" (as determined pursuant to Section
5.4) of the Company for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations promulgated thereunder, shall not be
exchanged until Parent has received a written agreement from such
Person as provided in Section 5.4 hereof.
Section 1.15 Dissenters' Rights. In accordance with
Section 262 of the Del.C., no appraisal rights shall be available
to holders of the Company's Common Stock in connection with the
Merger.
Section 1.16 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments or assurances
or any other acts or things are necessary, desirable or proper
(a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations,
or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of either Constituent Corporation,
all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
Section 1.17 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") and all actions
specified in this Agreement to occur at the Closing shall take
place at the principal executive offices of Parent, 115
Calderwood Drive, Alcoa, Tennessee, at 10:00 a.m., local time, no
later than the second business day following the day on which the
last of the conditions set forth in Article VI shall have been
fulfilled or waived or at such other time and place as Parent and
the Company shall agree.
ARTICLE II
<PAGE>
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant
to the Company as follows:
Section 2.1 Organization, Standing and Power. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Tennessee, and has the requisite
corporate power and authority to carry on its business as now
being conducted. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of
Parent is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized and
has the requisite corporate power and authority to carry on its
business as now being conducted, except where the failure to be
so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined) on Parent.
Parent and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or
the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent. For purposes of this Agreement (a) "Material Adverse
Change" or "Material Adverse Effect" means, when used with
respect to Parent or the Company, as the case may be, any change
or effect that is materially adverse to the assets, liabilities,
results of operation or financial condition of Parent and its
Subsidiaries, taken as a whole, or the Company and its
Subsidiaries, taken as a whole, as the case may be, and (b)
"Subsidiary" means any corporation, partnership, joint venture or
other legal entity of which Parent or the Company, as the case
may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of
directors or other governing body of such corporation,
partnership, joint venture or other legal entity.
Section 2.2 Capital Structure. As of the Effective Time,
the authorized capital stock of Parent will consist of
100,000,000 shares of Parent Common Stock and 10,000,000 shares
of Preferred Stock, par value $1.00 per share (the "Parent
Preferred Stock"). At the close of business on October 19, 1995,
(i) 10,241,555 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights; (ii) 1,690,000
shares of Parent Common Stock were reserved for future issuance
pursuant to Parent's 1994 Long-Term Incentive Plan and the 1987
Stock Option Plan; (iii) 350,000 shares of Parent Common Stock
<PAGE>
were reserved for future issuance pursuant to Parent's 1994
Employee Stock Purchase Plan; (iv) 1,421,801 shares of Parent
Common Stock were reserved for future issuance pursuant to the
terms of the Series A Cumulative Convertible Exchangeable
Preferred Stock; and (v) 2,019,906 shares of Parent Common Stock
were reserved for future issuance pursuant to the terms of the
4 3/4% Convertible Subordinated Debentures Due 2003. Six Hundred
Thousand (600,000) shares of Parent's Series A Cumulative
Convertible Exchangeable Preferred Stock were issued and
outstanding. No other shares of Preferred Stock were issued and
outstanding. All of the shares of Parent Common Stock issuable
in exchange for Company Common Stock at the Effective Time in
accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free
of preemptive rights. As of the date of this Agreement, except
for (a) this Agreement, (b) stock options covering not in excess
of 1,215,000 shares of Parent Common Stock (collectively, the
"Parent Stock Options"), (c) the conversion provision of the
Series A Preferred Stock, (d) the 1994 Employee Stock Purchase
Plan, (e) the 4 3/4% Convertible Subordinated Debentures due
2003, (f) contingent stock grants of 35,000 shares of Parent
Common Stock to key executives, and (g) securities issuable
pursuant to the stock purchase rights declared as a dividend on
March 28, 1995 (the "Parent Rights") and the rights agreement
dated as of March 28, 1995 between Parent and Union Planters
National Bank (the "Parent Rights Agreement") ( the Parent Rights
and the Parent Rights Agreement are collectively the "Parent
Rights Plan"), there are no options, warrants, calls, rights or
agreements to which Parent or any of its Subsidiaries is a party
or by which any of them is bound obligating Parent or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of Parent
or any of its Subsidiaries or obligating Parent or any of its
Subsidiaries to grant, extend or enter into any such option,
warrant, call, right or agreement. Each outstanding share of
capital stock of each Subsidiary of Parent is duly authorized,
validly issued, fully paid and nonassessable and, except as
disclosed in the Parent SEC Documents (as hereinafter defined),
each such share is owned by Parent or another Subsidiary of
Parent, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of
any nature whatsoever.
Section 2.3 Authority. The respective Boards of Directors
of Parent and Sub have on or prior to the date of this Agreement
declared the Merger advisable and approved this Agreement in
accordance with the applicable law. Each of Parent and Sub has
all requisite corporate power and authority to enter into this
Agreement and, subject to approval by the stockholders of Parent
of this Agreement, the issuance of Parent Common Stock in
connection with the Merger (the "Share Issuance"), and the
amendment of Parent's 1994 Long-Term Incentive Plan to increase
the number of authorized shares (collectively, the "Parent
<PAGE>
Stockholders' Approvals"), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub, subject
to (x) approval by the stockholders of Parent and (y) the filing
of appropriate Merger documents as required by the Del.C. This
Agreement has been duly executed and delivered by Parent and Sub
and (assuming the valid authorization, execution and delivery of
this Agreement by the Company) this Agreement constitutes the
valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with its terms. The Share
Issuance and the filing of a registration statement on Form S-4
with the SEC by Parent under the Securities Act of 1933, as
amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger
(together with any amendments or supplements thereto, whether
prior to or after the effective date thereof, the "Registration
Statement") have been duly authorized by Parent's Board of
Directors. The Parent Common Stock, when issued, will be
registered under the Securities Act and Exchange Act and
registered or exempt from registration under any applicable state
securities or "blue sky" laws ("Blue Sky Laws").
Section 2.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions
described in the second sentence of this Section 2.4 have been
obtained and all filings and obligations described in this
Section 2.4 have been made, the execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof
will not, result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give to others a
right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or result in
the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or any
of its Subsidiaries under, any provision of (i) the Charter or
By-laws of Parent, (ii) any provision of the comparable charter
or organization documents of any of Parent's Subsidiaries, (iii)
any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its
Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such
violations, defaults, rights, liens, security interests, charges
or encumbrances that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent, or prevent or
materially delay the consummation of any of the transactions
contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and
<PAGE>
state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of
this Agreement by Parent or Sub or is necessary for the
consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or
in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
the Securities Act and the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities
of other states in which the Company or any of its Subsidiaries
is qualified to do business, (iii) such filings and consents as
may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions
contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state
takeover laws (the "State Takeover Approvals"), (v) such filings
as may be required in connection with the taxes described in
Section 5.11, (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be
required under the laws of any foreign country in which the
Company or any of its Subsidiaries conducts any business or owns
any property or assets, (vii) such filings and consents as may be
required under any state or foreign laws pertaining to debt
collection, the issuance of payment instruments or money
transmission, (viii) applicable requirements, if any, of Blue Sky
Laws and NASDAQ, and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually
or in the aggregate, have a Material Adverse Effect on Parent, or
prevent or materially delay the consummation of any of the
transactions contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has
filed all required documents with the SEC since January 1, 1993
(the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and, at the respective times they were filed, none
of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The consolidated financial statements (including, in
each case, any notes thereto) of Parent included in the Parent
SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except,
<PAGE>
in the case of the unaudited statements, as permitted by Form 10-
Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the
consolidated financial position of Parent and its consolidated
Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of
unaudited statements, to any other adjustments described therein
and normal year-end audit adjustments). Except as disclosed in
the Parent SEC Documents or as required by generally accepted
accounting principles, Parent has not, since January 28, 1995,
made any change in the accounting practices or policies applied
in the preparation of financial statements.
Section 2.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by Parent or
Sub for inclusion or incorporation by reference in the
Registration Statement or the joint proxy statement/prospectus
included therein (together with any amendments or supplements
thereto, the "Joint Proxy Statement") relating to the Stockholder
Meetings (as defined in Section 5.1) will (i) in the case of the
Registration Statement, at the time it becomes effective, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein not misleading or (ii) in the case
of the Joint Proxy Statement, at the time of the mailing of the
Joint Proxy Statement, the time of each of the Stockholder
Meetings and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any
event with respect to Parent, its officers and directors or any
of its Subsidiaries shall occur which is required to be described
in the Joint Proxy Statement or the Registration Statement, such
event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the stockholders of Parent and the
Company. The Registration Statement will comply (with respect to
Parent) as to form in all material respects with the provisions
of the Securities Act, and the Joint Proxy Statement will comply
(with respect to Parent) as to form in all material respects with
the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in Parent SEC Documents filed with the SEC prior to the
date of this Agreement, since January 28, 1995, (A) Parent and
its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is
not in the ordinary course of business or that would result in a
Material Adverse Effect on Parent, excluding any changes and
effects resulting from changes in economic, regulatory or
<PAGE>
political conditions or changes in conditions generally
applicable to the industries in which Parent and Subsidiaries of
Parent are involved and except for any such changes or effects
resulting from this Agreement, the transactions contemplated
hereby or the announcement thereof; (B) Parent and its
Subsidiaries have not sustained any loss or interference with
their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance)
that has had a Material Adverse Effect on Parent; (C) other than
any indebtedness incurred by Parent after the date hereof as
permitted by Section 4.1(a)(vi), there has been no material
change in the consolidated indebtedness of Parent and its
Subsidiaries, and no dividend or distribution of any kind
declared, paid or made by Parent on any class of its stock,
except for regular semi-annual dividends of not more than $ 1.625
per share on Parent Series A Preferred Stock; and (D) there has
been no event causing a Material Adverse Effect on Parent,
excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in
conditions generally applicable to the industries in which Parent
and Subsidiaries of Parent are involved and except for any such
changes or effects resulting from this Agreement, the
transactions contemplated hereby or the announcement thereof.
Section 2.8 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for Parent or any of its
Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Parent
Permits"), except where the failure to have any of the Parent
Permits would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, and, as of the date of this
Agreement, no suspension or cancellation of any of the Parent
Permits is pending or, to the Knowledge of Parent (as hereinafter
defined herein), threatened, except where the suspension or
cancellation of any of the Parent Permits would not, individually
or in the aggregate, have a Material Adverse Effect on Parent.
Neither Parent nor any of its Subsidiaries is in violation of (A)
its charter, by-laws or other organizational documents, (B) any
applicable law, ordinance, administrative or governmental rule or
regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its
Subsidiaries, except, in the case of clauses (A), (B) and (C),
for any violations that, individually or in the aggregate, would
not have a Material Adverse Effect on Parent. Except as
disclosed in the Parent SEC Documents filed prior to the date of
this Agreement, there is no contract or agreement that is
material to the business, financial condition or results of
operations of Parent and its Subsidiaries, taken as a whole.
Except as set forth in the Parent SEC Documents, prior to the
date of this Agreement, no event of default or event that, but
for the giving of notice or the lapse of time or both, would
<PAGE>
constitute an event of default exists or, upon the consummation
by Parent of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee
of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which
Parent or any of its Subsidiaries is a party or by which Parent
or any such Subsidiary is bound or to which any of the
properties, assets or operations of Parent or any such Subsidiary
is subject, other than any defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
"Knowledge of Parent" means the actual knowledge of the Chief
Executive Officer and Chief Financial Officer of the Parent.
Section 2.9 Tax Matters. Each of Parent and its
Subsidiaries has filed all Tax Returns required to have been
filed (or extensions have been duly obtained) and has paid all
Taxes required to have been paid by it, except where failure to
file such Tax Returns or pay such Taxes would not, in the
aggregate, have a Material Adverse Effect on Parent. For
purposes of this Agreement: (i) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty,
imposed by any governmental authority and (ii) "Tax Return" means
any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth
in the Parent SEC Documents, there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental
Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the present or former directors,
officers, employees, consultants, agents or stockholders of
Parent or any of its Subsidiaries, as such, any of its or their
properties, assets or business or any Parent Plan (as hereinafter
defined) that, individually or in the aggregate, would have a
Material Adverse Effect on Parent. As of the date of this
Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations
pending or, to the Knowledge of Parent, threatened against or
involving Parent or any of its Subsidiaries or any of its or
their present or former directors, officers, employees,
consultants, agents or stockholders, as such, any of its or their
properties, assets or business or any Parent Plan that,
individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on Parent. As of the date hereof, there
are no actions, suits, labor disputes or other litigation, legal
or administrative proceedings or governmental investigations
<PAGE>
pending or, to the Knowledge of Parent, threatened against or
affecting Parent or any of its Subsidiaries or any of its or
their present or former officers, directors, employees,
consultants, agents or stockholders, as such, or any of its or
their properties, assets or business relating to the transactions
contemplated by this Agreement.
Section 2.11 Certain Agreements. As of the date of this
Agreement, neither Parent nor any of its Subsidiaries is a party
to any oral or written agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
Section 2.12 ERISA. Each Parent Plan complies in all
material respects with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Code and all other
applicable statutes and governmental rules and regulations,
including but not limited to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and (i) no
"reportable event" (within the meaning of Section 4043 of ERISA)
has occurred with respect to any Parent Plan, (ii) neither Parent
nor any of its ERISA Affiliates (as hereinafter defined) has
withdrawn from any Parent Multiemployer Plan (as hereinafter
defined) or instituted, or is currently considering taking, any
action to do so, except for Proffitt's of Tri-Cities, Inc.'s
withdrawal from Belk Employees' Group Life Insurance and Medical
Plan to the extent that it no longer pays retiree life benefits
(iii) no action has been taken, or is currently being considered,
to terminate any Parent Plan subject to Title IV of ERISA, and
(iv) Parent and its ERISA Affiliates have complied in all
material respects with the continued medical coverage
requirements of COBRA. No Parent Plan, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived. With
respect to any Parent Plan which is subject to Title IV of ERISA,
the present value of the liabilities (as determined on a
terminated plan basis) do not exceed the fair market value of the
Plan assets as of the most recent valuation date. With respect
to the Parent Plans, no event has occurred in connection with
which Parent or any ERISA Affiliate would be subject to any
liability under the terms of such Parent Plans, ERISA, the Code
or any other applicable law which would have a Material Adverse
Effect on Parent. All Parent Plans that are intended to be
qualified under Section 401(a) of the Code have been determined
by the Internal Revenue Service to be so qualified, and to the
Knowledge of Parent, there is no reason why any Parent Plan is
not so qualified in operation. Neither Parent nor any of its
ERISA Affiliates has been notified by any Parent Multiemployer
Plan that such Parent Multiemployer Plan is currently in
<PAGE>
reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Parent Multiemployer
Plan intends to terminate or has been terminated under Section
4041A of ERISA. Neither Parent nor any of its ERISA Affiliates
has any liability or obligation under any welfare plan to provide
benefits after termination of employment to any employee or
dependent other than as required by ERISA or as disclosed in the
Parent Annual Report. As used herein, (i) "Parent Plan" means a
"pension plan" (as defined in Section 3(2) of ERISA (other than a
Parent Multiemployer Plan)) or a "welfare plan" (as defined in
Section 3(l) of ERISA) established or maintained by Parent or any
of its ERISA Affiliates or as to which Parent or any of its ERISA
Affiliates has contributed or otherwise may have any liability,
(ii) "Parent Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Parent or any of
its ERISA Affiliates is or has been obligated to contribute or
otherwise may have any liability, and (iii) with respect to any
person, "ERISA Affiliate" means any trade or business (whether or
not incorporated) which is under common control or would be
considered a single employer with such person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b)
of ERISA and the regulations promulgated thereunder.
Section 2.13 Compliance with Certain Laws. The properties,
assets and operations of Parent and its Subsidiaries are in
compliance in all material respects with all applicable federal,
state, local and foreign laws, rules and regulations, orders,
decrees, judgments, permits and licenses relating to public and
worker health and safety (collectively, "Worker Safety Laws") and
the protection and clean-up of the environment and activities or
conditions related thereto, including, without limitation, those
relating to the generation, handling, disposal, transportation or
release of hazardous materials (collectively, "Environmental
Laws"), except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
With respect to such properties, assets and operations, including
any previously owned, leased or operated properties, assets or
operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices,
incidents, actions or plans of Parent or any of its Subsidiaries
that may interfere with or prevent compliance or continued
compliance in all material respects with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or
prevention as would not, individually or in the aggregate with
any such other interference or prevention, have a Material
Adverse Effect on Parent. The term "hazardous materials" shall
mean those substances that are regulated by or form the basis for
liability under any applicable Environmental Laws.
Section 2.14 Liabilities. Except as fully reflected or
reserved against in the financial statements included in the
Parent Annual Report, or disclosed in the footnotes thereto,
Parent and its Subsidiaries had no liabilities (including,
<PAGE>
without limitation, tax liabilities) at the date of such
financial statements, absolute or contingent, other than
liabilities that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent, and had no liabilities
(including, without limitation, tax liabilities) that were not
incurred in the ordinary course of business. Except as so
reflected, reserved or disclosed, Parent and its Subsidiaries
have no commitments, other than any commitments which,
individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
Section 2.15 Labor Matters. Neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or
labor contract. Neither Parent nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons
employed by or otherwise performing services primarily for Parent
or any of its Subsidiaries (the "Parent Business Personnel"), and
there is no unfair labor practice complaint or grievance against
Parent or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency pending or threatened in
writing with respect to the Parent Business Personnel, except
where such unfair labor practice, complaint or grievance would
not have a Material Adverse Effect on Parent. There is no labor
strike, dispute, slowdown or stoppage pending or, to the
Knowledge of Parent, threatened against or affecting Parent or
any of its Subsidiaries which may interfere with the respective
business activities of Parent or any of its Subsidiaries, except
where such dispute, strike or work stoppage would not have a
Material Adverse Effect on Parent.
Section 2.16 Intellectual Property. Parent and its
Subsidiaries have all patents, trademarks, trade names, service
marks, trade secrets, copyrights and other proprietary
intellectual property rights (collectively, "Intellectual
Property Rights") as are necessary in connection with the
business of Parent and its Subsidiaries, taken a whole, except
where the failure to have such Intellectual Property Rights would
not have a Material Adverse Effect on Parent. Neither Parent nor
any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that,
individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
Section 2.17 Opinion of Financial Advisor. Parent has
received the written opinion of Smith Barney Inc., dated the date
hereof, to the effect that, as of such date, the Conversion
Number (as defined in such opinion) is fair to Parent from a
financial point of view, a copy of which opinion will be
delivered to the Company promptly after the date of this
Agreement.
Section 2.18 Pooling of Interests; Reorganization. To the
Knowledge of Parent, neither Parent nor any of its Subsidiaries
has (i) taken any action or failed to take any action which
<PAGE>
action or failure would jeopardize the treatment of the Merger as
a pooling of interests for accounting purposes or (ii) taken any
action or failed to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 2.19 Required Vote of Parent Stockholders. The
affirmative vote of a majority of the votes eligible to be cast
on the approval of this Agreement is required to approve this
Agreement. The affirmative vote of a majority of the votes cast
on the Share Issuance is required to approve the Share Issuance
and to amend Parent's 1994 Long-Term Incentive Plan, provided
that the total votes cast on each proposal represents a majority
of the outstanding shares of Parent Common Stock. No other vote
of the stockholders of Parent is required by law, the Charter or
By-laws of Parent or otherwise in order for Parent to consummate
the Merger and the transactions contemplated hereby.
Section 2.20 Ownership of Shares. Neither Parent nor any of
its Subsidiaries (i) "Beneficially Owns" or is the "Beneficial
Owner" of (as such terms are defined in the Company's Rights
Agreement), or (ii) "owns", as such term is defined in Section
203 of the Del.C., any Shares of Company Common Stock.
Section 2.21 Operations of Sub. Sub is a direct, wholly-
owned subsidiary of Parent, was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations
only as contemplated hereby.
Section 2.22 Brokers. No broker, investment banker or
other person, other than Smith Barney Inc., the fees and expenses
of which will be paid by Parent (and as reflected in an agreement
between Smith Barney Inc. and Parent, a copy of which has been
furnished to the Company), is entitled to any broker's, finder's
or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite corporate power and authority to carry on its business
as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the
<PAGE>
requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to carry on its
business as now being conducted, except where the failure to be
so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company and each of
its Subsidiaries are duly qualified to do business, and are in
good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their
activities makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.2 Capital Structure. As of the Effective Time,
the authorized capital stock of the Company will consist of
20,000,000 shares of Company Common Stock, par value $0.01 per
share, and 1,000,000 shares of Preferred Stock, par value $0.01
per share ("Company Preferred Stock"). At the close of business
on October 16, 1995, (i) 8,985,810 shares of Company Common Stock
were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights, (ii)
153,080 shares of Company Common Stock were held in the treasury
of the Company or by the Subsidiaries of the Company, and (iii)
not more than 738,563 shares of Company Common Stock were
reserved for future issuance pursuant to the Company's 1990 Stock
Option Plan, 1991 Stock Option Plan, the 1993 Long-Term Incentive
Plan, or pursuant to any plans assumed by the Company in
connection with any acquisition, business combination or similar
transaction (collectively, the "Company Stock Option Plans"). No
shares of Company Preferred Stock are outstanding. As of the
date of this Agreement, except for stock options covering not in
excess of 712,263 shares of Company Common Stock issued under the
Company Stock Option Plans (collectively, the "Company Stock
Options") and securities issuable under the Company Rights Plan
(as hereinafter defined), there are no options, warrants, calls,
rights or agreements to which the Company or any of its
Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call,
right or agreement. Each outstanding share of capital stock of
each Subsidiary of the Company that is a corporation is duly
authorized, validly issued, fully paid and nonassessable and,
except as disclosed in the Company SEC Documents (as hereinafter
defined), each such share is owned by the Company or another
Subsidiary of the Company, free and clear of all security
interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever.
Section 3.3 Authority. The Board of Directors of the
Company has on or prior to the date of this Agreement (a)
<PAGE>
declared the Merger advisable and fair to and in the best
interest of the Company and its stockholders, (b) approved this
Agreement in accordance with the Del.C., (c) resolved to
recommend the approval of this Agreement by the Company's
stockholders and (d) directed that this Agreement be submitted to
the Company's stockholders for approval. The Company has all
requisite corporate power and authority to enter into this
Agreement and, subject to approval by the stockholders of the
Company of this Agreement (which, for all purposes in this
Agreement, shall be deemed to include any necessary approval of
amendments to the Company's stock plans), to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company,
subject to (x) approval of this Agreement by the stockholders of
the Company and (y) the filing of appropriate Merger documents as
required by the Del.C. This Agreement has been duly executed and
delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by Parent and Sub)
constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The
filing of the Joint Proxy Statement with the SEC has been duly
authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions
described in this Section 3.4 have been obtained and all filings
and obligations described in this Section 3.4 have been made, the
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries
under, any provision of (i) the Certificate of Incorporation or
By-Laws of the Company, (ii) any provision of the comparable
charter or organization documents of any of the Company's
Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
Company or any of its Subsidiaries or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii),
(iii) or (iv), any such violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect on the
Company, or prevent the consummation of any of the transactions
contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is
<PAGE>
required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of
this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection, or
in compliance, with the provisions of the HSR Act, the Securities
Act and the Exchange Act, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions
contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required to obtain
the State Takeover Approvals, (v) such filings as may be required
in connection with the taxes described in Section 5.11, (vi) such
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries
conducts any business or owns any property or assets, (vii) such
filings and consents as may be required under any state or
foreign laws pertaining to debt collection, the issuance of
payment instruments or money transmission, (viii) applicable
requirements, if any, of Blue Sky Laws and NASDAQ, and (ix) such
other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent the consummation of any
of the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company
has filed all required documents with the SEC since January 1,
1993 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times
they were filed, none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements (including, in each case, any notes thereto) of the
Company included in the Company SEC Documents complied as to form
in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented
in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as at the
<PAGE>
respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in the Company SEC Documents or as
required by generally accepted accounting principles, the Company
has not, since January 28, 1995, made any change in the
accounting practices or policies applied in the preparation of
financial statements.
Section 3.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by the Company
for inclusion or incorporation by reference in the Registration
Statement or the Joint Proxy Statement will (i) in the case of
the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) in
the case of the Joint Proxy Statement, at the time of the mailing
of the Joint Proxy Statement, the time of each of the Stockholder
Meetings and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or
any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the stockholders of Parent
and the Company. The Registration Statement will comply (with
respect to the Company) as to form in all material respects with
the provisions of the Securities Act, and the Joint Proxy
Statement will comply (with respect to the Company) as to form in
all material respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except
as disclosed in the Company SEC Documents filed with the SEC
prior to the date of this Agreement, since January 28, 1995, (A)
the Company and its Subsidiaries have not incurred any material
liability or obligation (indirect, direct or contingent), or
entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or
that would result in a Material Adverse Effect on the Company,
excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in
conditions generally applicable to the industries in which the
Company and Subsidiaries of the Company are involved and except
for any such changes or effects resulting from this Agreement,
the transactions contemplated hereby or the announcement thereof;
(B) the Company and its Subsidiaries have not sustained any loss
or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not
<PAGE>
covered by insurance) that has had a Material Adverse Effect on
the Company; (C) other than any indebtedness incurred by the
Company after the date hereof as permitted by Section 4.1(b)(vi),
there has been no material change in the consolidated
indebtedness of the Company and its Subsidiaries, and no dividend
or distribution of any kind declared, paid or made by the Company
on any class of its stock; and (D) there has been no event
causing a Material Adverse Effect on the Company, excluding any
changes and effects resulting from changes in economic,
regulatory or political conditions or changes in conditions
generally applicable to the industries in which the Company and
Subsidiaries of the Company are involved and except for any such
changes or effects resulting from this Agreement, the
transactions contemplated hereby or the announcement thereof.
Section 3.8 Permits and Compliance. Each of the Company
and its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any
Governmental Entity necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Company
Permits"), except where the failure to have any of the Company
Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of
this Agreement, no suspension or cancellation of any of the
Company Permits is pending or, to the knowledge of the Company
(as hereinafter defined), threatened, except where the suspension
or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect
on Company. Neither the Company nor any of its Subsidiaries is
in violation of (A) its charter, by-laws or other organizational
documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the
Company or any of its Subsidiaries, except, in the case of
clauses (A), (B) and (C), for any violations that, individually
or in the aggregate, would not have a Material Adverse Effect on
the Company. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement, as of the date hereof
there is no contract or agreement that is material to the
business, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole. Except as set
forth in the Company SEC Documents, prior to the date of this
Agreement, no event of default or event that, but for the giving
of notice or the lapse of time or both, would constitute an event
of default exists or, upon the consummation by the Company of the
transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, contractual license
or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or
<PAGE>
operations of the Company or any such Subsidiary is subject,
other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. Set
forth in Schedule 3.8 to this Agreement is a description of (i)
all leases to which the Company or any of its Subsidiaries is a
party or by which the Company or any such Subsidiary is bound or
to which any of the properties, assets or operations of the
Company or any such Subsidiary is subject and all amendments
thereto, (ii) all contractual licenses or other agreements or
instruments involving sales in the Company stores to which the
Company or any of its Subsidiaries is a party or by which the
Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such
Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject and
all amendments thereto, and (iii) any material changes to the
amount and terms of the indebtedness of the Company and its
Subsidiaries as described in the Company Annual Report.
"Knowledge of the Company" means the actual knowledge of the
Chief Executive Officer and the Chief Financial Officer.
Section 3.9 Tax Matters. Each of the Company and its
Subsidiaries has filed all Tax Returns required to have been
filed (or extensions have been duly obtained) and has paid all
Taxes required to have been paid by it, except where failure to
file such Tax Returns or pay such Taxes would not, in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.10 Actions and Proceedings. Except as set forth
in the Company SEC Documents, there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental
Entity against or involving the Company or any of its
Subsidiaries, or against or involving any of the present or
former directors, officers, employees, consultants, agents or
stockholders of the Company or any of its Subsidiaries, as such,
any of its or their properties, assets or business or any Company
Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on the Company.
Except as set forth in the Company SEC Documents, as of the date
of this Agreement, there are no actions, suits or claims or
legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its
Subsidiaries or any of its or their present or former directors,
officers, employees, consultants, agents or stockholders, as
such, or any of its or their properties, assets or business or
any Company Plan that, individually or in the aggregate, would
have a Material Adverse Effect on the Company. As of the date
hereof, there are no actions, suits, labor disputes or other
litigation, legal or administrative proceedings or governmental
investigations pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its
Subsidiaries or any of its or their present or former officers,
directors, employees, consultants, agents or stockholders, as
<PAGE>
such, or any of its or their properties, assets or business
relating to the transactions contemplated by this Agreement.
Section 3.11 Certain Agreements. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan (other than pursuant to
provisions adopted more than two (2) years ago), any of the
benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value
of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement. No
holder of any option to purchase shares of Company Common Stock,
or shares of Company Common Stock granted in connection with the
performance of services for the Company or its Subsidiaries, is
or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option or shares as
a result of the transactions contemplated by this Agreement.
Neither the Company nor any Subsidiary is a party to any
termination benefits agreement or severance agreement or
employment agreement one trigger of which would be the
consummation of the transactions contemplated by this Agreement,
except as set forth in Schedule 3.11.
Section 3.12 ERISA.
(a) With respect to each material Company Plan (as
hereinafter defined), the Company has made (or as soon as
practicable will make) available to Parent a true and correct
copy of (i) the three most recent annual reports (Form 5500)
filed with the Internal Revenue Service (the "IRS"), (ii) such
Company Plan, (iii) each trust agreement, insurance contract or
administration agreement relating to such Company Plan, (iv) the
most recent summary plan description of each Company Plan for
which a summary plan description is required, (v) the most recent
actuarial report or valuation relating to a Company Plan subject
to Title IV of ERISA and (vi) the most recent determination
letter, if any, issued by the IRS with respect to any Company
Plan intended to be qualified under section 401(a) of the Code.
Except as would not have a Material Adverse Effect on the
Company, each Company Plan complies in all material respects with
ERISA, the Code and all other applicable statutes and
governmental rules and regulations, including but not limited to
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), and (i) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to
any Company Plan, (ii) neither the Company nor any of its ERISA
Affiliates is a contributing employer to a Company Multiemployer
Plan (as hereinafter defined) subject to Title IV of ERISA and
for which there would be withdrawal liability if on the Effective
Time the Company or any of its ERISA Affiliates withdrew from
such Company Multiemployer Plan, and (iii) no action has been
taken, or is currently being considered, to terminate any Company
<PAGE>
Plan subject to Title IV of ERISA, and (iv) the Company and its
ERISA Affiliates have complied in all material respects with the
continued medical coverage requirements of COBRA. Except as
would not have a Material Adverse Effect on the Company, no
Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived. With respect to any Company Plan
which is subject to Title IV of ERISA, the present value of the
liabilities (as determined on a terminated plan basis) do not
exceed the fair market value of the Plan assets as of the most
recent valuation date.
(b) With respect to the Company Plans, no event has
occurred in connection with which the Company or any ERISA
Affiliate would be subject to any liability under the terms of
such Company Plans, ERISA, the Code or any other applicable law
which would have a Material Adverse Effect on the Company. All
Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the Internal Revenue
Service to be so qualified, or a timely application for such
determination is now pending, and to the Knowledge of the
Company, there is no reason why any Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA
Affiliates has been notified by any Company Multiemployer Plan
that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section
4041A of ERISA. Except as disclosed in the Company SEC
Documents, neither the Company nor any of its ERISA Affiliates
has any liability or obligation under any welfare plan to provide
benefits after termination of employment to any employee or
dependent other than as required by ERISA or as disclosed in the
Company Annual Report. As used herein, (i) "Company Plan" means
a "pension plan" (as defined in Section 3(2) of ERISA (other than
a Company Multiemployer Plan)) or a "welfare plan" (as defined in
Section 3(1) of ERISA) established or maintained by the Company
or any of its ERISA Affiliates or as to which the Company or any
of its ERISA Affiliates has contributed or otherwise may have any
liability, and (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability.
(c) A copy of each material bonus, deferred
compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees,
directors, former employees or former directors of the Company
and its Subsidiaries (the "Compensation and Benefit Plans") and
any trust agreements or insurance contracts forming a part of
<PAGE>
such Compensation and Benefit Plans has been provided or made
available to Parent prior to the date hereof.
Section 3.13 Compliance with Certain Laws. The properties,
assets and operations of the Company and its Subsidiaries are in
compliance in all material respects with all applicable Worker
Safety Laws, Environmental Laws and consumer credit laws, except
for any violations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. With respect
to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or
operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices,
incidents, actions or plans of the Company or any of its
Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable
Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as would not, individually or in the
aggregate with any such other interference or prevention, have a
Material Adverse Effect on the Company. The Company will provide
such certificates and environmental studies as Parent may
reasonably request.
Section 3.14 Liabilities. Except as fully reflected or
reserved against in the financial statements included in the
Company Annual Report, or disclosed in the footnotes thereto,
the Company and its Subsidiaries had no liabilities (including,
without limitation, tax liabilities and workmen's compensation
liabilities) at the date of such financial statements, absolute
or contingent, other than liabilities that, individually or in
the aggregate, would not have a Material Adverse Effect on the
Company, and had no liabilities (including, without limitation,
tax liabilities) that were not incurred in the ordinary course of
business. Except as so reflected, reserved or disclosed, the
Company and its Subsidiaries have no commitments, other than any
commitments which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
Section 3.15 Labor Matters. Neither the Company nor any of
its Subsidiaries is a party to any collective bargaining
agreement or labor contract, except as set forth in Schedule
3.15. Neither the Company nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons
employed by or otherwise performing services primarily for the
Company or any of its Subsidiaries (the "Company Business
Personnel"), and there is no unfair labor practice complaint or
grievance against the Company or any of its Subsidiaries by the
National Labor Relations Board or any comparable state agency
pending or threatened in writing with respect to the Company
Business Personnel, except where such unfair labor practice,
complaint or grievance would not have a Material Adverse Effect
on the Company. There is no labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries which
<PAGE>
may interfere with the respective business activities of the
Company or any of its Subsidiaries, except where such dispute,
strike or work stoppage would not have a Material Adverse Effect
on the Company.
Section 3.16 Intellectual Property. The Company and its
Subsidiaries have all Intellectual Property Rights as are
necessary in connection with the business of the Company and its
Subsidiaries, taken as a whole, except where the failure to have
such Intellectual Property Rights would not have a Material
Adverse Effect on the Company. Neither the Company nor any of
its Subsidiaries has infringed any Intellectual Property Rights
of any third party other than any infringements that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.17 Opinion of Financial Advisor. The Company has
received the written opinion of Goldman, Sachs & Co., dated the
date hereof, to the effect that, as of the date hereof, the
Exchange Ratio (as defined in such opinion) is fair to the
Company's stockholders, a copy of which opinion will be delivered
to Parent promptly after the date of this Agreement.
Section 3.18 State Takeover Statutes and Stockholder Rights
Plan. (a) As of the date hereof, assuming the accuracy of
Parent's representations and warranties contained in Section 2.19
(Ownership of Shares), the Board of Directors of the Company has
taken all action so that prior to the execution hereof, the Board
of Directors has approved the Merger pursuant to Section
203(a)(1) of the Del.C. As of the date hereof, no other state
takeover statutes, including without limitation, any business
combination act, are applicable to the Merger, this Agreement and
the transactions contemplated hereby.
(b) The Company has taken all necessary action so
that, as of the Effective Time, (i) neither the Company nor
Parent will have any obligations under the rights of the Company
Stockholders declared as a dividend on October 30, 1994 (the
"Rights") or the Company's Rights Agreement between the Company
and Norwest Bank Minnesota, N.A. , dated as of
October 30,1994 (the "Rights Agreement") (the Rights and Rights
Agreement collectively are the "Company Rights Plan") and (ii)
the holders of the Rights will have no rights under the Rights or
the Rights Agreement.
Section 3.19 Required Vote of Company Stockholders. The
affirmative vote of the holders of not less than a majority of
the outstanding shares of Company Common Stock is required to
approve the transactions contemplated by this Agreement. No
other vote of the stockholders of the Company is required by law,
the Certificate of Incorporation or By-laws of the Company or
otherwise in order for the Company to consummate the Merger and
the transactions contemplated hereby.
<PAGE>
Section 3.20 Pooling of Interests; Reorganization. To the
knowledge of the Company, neither it nor any of its Subsidiaries
or Affiliates has, or will have, (i) taken any action or failed
to take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action
which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a)
of the Code.
Section 3.21 Brokers. No broker, investment banker or
other person, other than Goldman, Sachs & Co., the fees and
expenses of which will be paid by the Company (and are reflected
in an agreement between Goldman, Sachs & Co. and the Company, a
copy of which has been furnished to Parent), is entitled to any
broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Except as expressly permitted
by clauses (i) through (ix) of this Section 4.1(a), during the
period from the date of this Agreement through the Effective
Time, Parent shall, and shall cause each of its Subsidiaries to,
in all material respects carry on its business in the ordinary
course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the
services of its current officers and employees and preserve its
relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement, Parent shall
not, and shall not permit any of its Subsidiaries to, without the
prior written consent of the Company:
(i) (w) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions
in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such
(other than (A) regular semi-annual dividends of not more
than $1.625 per share on Parent Series A Preferred Stock
declared and paid on dates consistent with past practice and
(B) dividends and other distributions by Subsidiaries), (x)
other than in the case of any Subsidiary, split, combine or
reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu
<PAGE>
of or in substitution for shares of its capital stock or (y)
subject to the limitations of Section 4.4 and 5.9(b),
purchase, redeem or otherwise acquire any shares of capital
stock of Parent or any other securities thereof or those of
any Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or
other securities;
(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any
other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than (A)
the issuance of stock options and shares of Parent Common
Stock to employees of Parent or any of its Subsidiaries in
the ordinary course of business consistent with past
practice, (B) the issuance of Parent securities pursuant to
the Parent Rights Plan, and (C) the issuance by any wholly-
owned Subsidiary of Parent of its capital stock to Parent or
another wholly-owned Subsidiary of Parent;
(iii) amend its charter or by-laws; provided,
however, that Parent may amend its Charter to increase its
authorized capital stock ;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof or otherwise
acquire or agree to acquire any assets, unless (i) the
entering into a definitive agreement relating to or the
consummation of such acquisition, merger, consolidation or
purchase would not (A) impose any material delay in the
obtaining of, or significantly increase the risk of not
obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Entity
necessary to consummate the Merger or the expiration or
termination of any applicable waiting period, (B)
significantly increase the risk of any Governmental Entity
entering an order prohibiting the consummation of the Merger
or (C) significantly increase the risk of not being able to
remove any such order on appeal or otherwise, and (ii) in
the case of any individual acquisition, merger,
consolidation or purchase, the equity value of which does
not exceed $50 million;
(v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets,
other than (A) transactions that are in the ordinary course
of business consistent with past practice and not material
to Parent and its Subsidiaries taken as a whole, (B) as may
be required by any Governmental Entity and (C) subject to
<PAGE>
Sections 4.4 and 5.9(b), dispositions involving an aggregate
consideration not in excess of $50 million;
(vi) incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances
or capital contributions to, or other investments in, any
other person, other than (A) in the ordinary course of
business consistent with past practice, and (B)
indebtedness, loans, advances, capital contributions and
investments between Parent and any of its wholly-owned
Subsidiaries or between any of such wholly-owned
Subsidiaries;
(vii) knowingly violate or knowingly fail to
perform any material obligation or duty imposed upon it or
any Subsidiary by any applicable material federal, state or
local law, rule, regulation, guideline or ordinance;
(viii) take any action, other than reasonable and
usual actions in the ordinary course of business consistent
with past practice, with respect to accounting policies or
procedures (other than actions required to be taken by
generally accepted accounting principles); or
(ix) authorize, recommend or announce an intention to
do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing.
(b) Actions by the Company. Except as expressly
permitted by clauses (i) through (xiii) of this Section 4.1(b),
during the period from the date of this Agreement through the
Effective Time, the Company, subject to Section 4.2 hereof,
shall, and shall cause each of its Subsidiaries to, in all
material respects, carry on its business in, the ordinary course
of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the
services of its current officers and employees and preserve its
relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement, the Company,
subject to Section 4.2 hereof, shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of
Parent:
(i) (w) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions
in respect of, any of its capital stock, or otherwise make
any payments to its stockholders in their capacity as such,
(x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize
<PAGE>
the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (y)
purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any other securities thereof or any
rights, warrants or options to acquire any such shares or
other securities;
(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any
other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than the
issuance of shares of Company Common Stock upon the exercise
of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms or the
issuance of Company securities pursuant to the Company
Rights Plan;
(iii) amend its charter or by-laws;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a portion of the assets
of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof or otherwise acquire or
agree to acquire any assets other than transactions that are
in the ordinary course of business consistent with past
practice and that are not material;
(v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets,
other than (A) transactions that are in the ordinary course
of business consistent with past practice and not material
to the Company and its Subsidiaries taken as a whole and (B)
as may be required by any Governmental Entity;
(vi) incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances
or capital contributions to, or other investments in, any
other person, other than (A) indebtedness for borrowed money
incurred in the ordinary course of business consistent with
past practice and (B) indebtedness, loans, advances, capital
contributions and investments between the Company and any of
its wholly-owned Subsidiaries or between any of such wholly-
owned Subsidiaries;
(vii) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or any
Subsidiary;
(viii) enter into or adopt, or amend any existing,
severance plan, agreement or arrangement or enter into or
<PAGE>
amend any Company Plan or employment or consulting
agreement, other than as required by law;
(ix) increase the compensation payable or to become
payable to its officers or employees, except for increases
in the ordinary course of business consistent with past
practice in salaries or wages of employees of the Company or
any of its Subsidiaries who are not officers of the Company
or any of its Subsidiaries, or grant any severance or
termination pay to, or enter into any employment or
severance agreement with, any director or officer of the
Company or any of its Subsidiaries, or establish, adopt,
enter into, or, except as may be required to comply with
applicable law, amend or take action to enhance or
accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or
employee;
(x) knowingly violate or knowingly fail to perform any
material obligation or duty imposed upon it or any
Subsidiary by any applicable material federal, state or
local law, rule, regulation, guideline or ordinance;
(xi) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with
past practice, with respect to accounting policies or
procedures (other than actions required to be taken by
generally accepted accounting principles);
(xii) make any tax election or settle or compromise
any material federal, state, local or foreign income tax
liability; or
(xiii) authorize, recommend, propose or announce an
intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of
the foregoing.
Section 4.2 No Solicitation. From and after the date
hereof, neither Parent nor the Company will, and each will use
its best efforts to cause any of its officers, directors,
employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries not to,
directly or indirectly, solicit, initiate or encourage (including
by way of furnishing information) any takeover proposal or offer
from any person, or engage in or continue discussions or
negotiations relating thereto; provided, however, that either
Parent or the Company may engage in discussions or negotiations
with, or furnish information concerning itself and its
Subsidiaries, business, properties or assets to, any third party
<PAGE>
which makes a Takeover Proposal (as hereinafter defined) if the
Board of Directors of either Parent or the Company concludes in
good faith on the basis of the advice of its outside counsel
(Barnes & Thornburg and Sullivan & Cromwell, respectively) that
the failure to take such action would violate the fiduciary
obligations of such Board under applicable law. Each of Parent
and the Company will promptly (but in no case later than 24
hours) notify the other of any Takeover Proposal, including the
material terms and conditions thereof (provided that neither need
disclose the identity of the person or group making such Takeover
Proposal). As used in this Agreement, "Takeover Proposal" shall
mean any proposal or offer, or any expression of interest by any
third party relating to Parent's or the Company's willingness or
ability to receive or discuss a proposal or offer, other than a
proposal or offer by Parent or any of its Subsidiaries or as
permitted under this Agreement, for a tender or exchange offer, a
merger, consolidation or other business combination involving
either Parent or the Company or any of their respective
Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the
assets of, either Parent or the Company or any of their
respective Subsidiaries.
Section 4.3 Third Party Standstill Agreements. During the
period from the date of this Agreement through the Effective
Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which
the Company or any of its Subsidiaries is a party (other than any
involving Parent), unless the Board of Directors of the Company
concludes in good faith on the basis of the advice of its outside
counsel (who may be its regularly engaged outside counsel), that
the failure to terminate, amend, modify or waive any such
confidentiality or standstill agreement would violate the
fiduciary obligations of the Board under applicable law. Subject
to such fiduciary duties, during such period, the Company agrees
to enforce, to the fullest extent permitted under applicable law,
the provisions of any such agreements, including, but not limited
to, obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During
the period from the date of this Agreement through the Effective
Time, unless the other party shall otherwise agree in writing,
none of Parent, the Company or any of their respective
Subsidiaries or Affiliates shall (a) knowingly take or fail to
take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interests for accounting
purposes or (b) knowingly take or fail to take any action which
action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a)
of the Code. Between the date of this Agreement and the Effective
Time, Parent and the Company each shall take all reasonable
<PAGE>
actions necessary to cause the characterization of the Merger as
a pooling of interests for accounting purposes if such a
characterization were jeopardized by action taken by Parent or
the Company, respectively, prior to the Effective Time.
Following the Effective Time, Parent shall not knowingly take any
action, or fail to take any action, that would jeopardize the
characterization of the Merger as a "pooling of interests" for
accounting purposes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. Except to the extent
legally required for the discharge by the board of directors of
its fiduciary duties as advised by counsel, the Company and
Parent each shall call a meeting of its stockholders
(respectively, the "Company Stockholder Meeting" and the "Parent
Stockholder Meeting" and, collectively, the "Stockholder
Meetings") to be held as promptly as practicable for the purpose
of considering the approval of this Agreement (in the case of the
Company) and the Parent Stockholders' Approvals (in the case of
Parent). The Company and Parent will, through their respective
Boards of Directors, recommend to their respective stockholders
approval of such matters and shall not withdraw such
recommendation; provided, however, that a Board of Directors
shall not be required to make, and shall be entitled to withdraw,
such recommendation if such Board concludes in good faith on the
basis of the advice of Sullivan & Cromwell in the case of the
Company and Barnes & Thornburg in the case of Parent that the
making of, or the failure to withdraw, such recommendation would
violate the fiduciary obligations of such Board under applicable
law. The Boards of Directors of the Company, Parent and Sub will
not rescind their respective declarations that the Merger is
advisable, fair to and in the best interest of such company and
its shareholders unless, in any such case, any such Board
concludes in good faith on the basis of the advice of Sullivan &
Cromwell in the case of the Company and Barnes & Thornburg in the
case of Parent that the failure to rescind such determination
would violate the fiduciary obligations of such Board under
applicable law. The Company and Parent shall coordinate and
cooperate with respect to the timing of such meetings and shall
use their reasonable best efforts to hold such meetings on the
same day.
Section 5.2 Preparation of the Registration Statement and
the Joint Proxy Statement. The Company and Parent shall promptly
prepare and file with the SEC the Joint Proxy Statement and
Parent shall prepare and file with the SEC the Registration
Statement, in which the Joint Proxy Statement will be included as
a prospectus. Each of Parent and the Company shall use its
reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as
<PAGE>
practicable after such filing. As promptly as practicable after
the Registration Statement shall have become effective, each of
Parent and the Company shall mail the Joint Proxy Statement to
its respective stockholders. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any
applicable state securities laws in connection with the issuance
of Parent Common Stock in the Merger, and the Company shall
furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection
with any such action. No amendment or supplement to the Joint
Proxy Statement or the Registration Statement will be made by
Parent or the Company without the prior approval of the other
party. Parent and the Company each will advise the other,
promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in
any jurisdiction, or of any request by the SEC for amendment of
the Joint Proxy Statement or the Registration Statement or
comments thereon and responses thereto or requests by the SEC for
additional information.
Section 5.3 Access to Information. Subject to currently
existing contractual and legal restrictions applicable to Parent
or to the Company or any of their Subsidiaries, each of Parent
and the Company shall, and shall cause each of its Subsidiaries
to, afford to the accountants, counsel, financial advisors and
other representatives of the other party hereto reasonable access
to, and permit them to make such inspections as they may
reasonably require of, during normal business hours during the
period from the date of this Agreement through the Effective
Time, all their respective properties, books, contracts,
commitments and records (including, without limitation, the work
papers of independent accountants, if available and subject to
the consent of such independent accountants) and, during such
period, Parent and the Company shall, and shall cause each of its
Subsidiaries to, furnish promptly to the other (i) a copy of each
report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal
or state securities laws and (ii) all other information
concerning its business, properties and personnel as the other
may reasonably request. No investigation pursuant to this
Section 5.4 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations
of the parties hereto. All information obtained by Parent or the
Company pursuant to this Section 5.3 shall be kept confidential
in accordance with the Confidentiality Agreement dated August 30,
1995 between Parent and the Company (the "Confidentiality
Agreement").
<PAGE>
Section 5.4 Compliance with the Securities Act; Pooling
Period.
(a) Prior to the Effective Time, the Company shall
deliver to Parent a list of names and addresses of those persons
who were, in the opinion of the Company, at the time of the
Company Stockholder Meeting referred to in Section 5.1
"affiliates" of the Company within the meaning of Rule 145 under
the Securities Act and for the purposes of applicable
interpretations regarding the pooling-of-interests method of
accounting. The Company shall provide to Parent such
information and documents as Parent shall reasonably request for
purposes of reviewing such list. There shall be added to such
list the names and addresses of any other person (within the
meaning of Rule 145) which Parent reasonably identifies (by
written notice to the Company within ten business days after
Parent's receipt of such list) as being a person who may be
deemed to be an Affiliate of the Company within the meaning of
Rule 145; provided, however, that no such person identified by
Parent shall be added to the list of Affiliates of the Company if
Parent shall receive from the Company, on or before the Effective
Time, an opinion of counsel reasonably satisfactory to Parent to
the effect that such person is not an Affiliate. The Company
shall reasonably exercise all reasonable efforts to deliver or
cause to be delivered to Parent, prior to the Effective Time,
from each of such Affiliates of the Company identified in the
foregoing list, an affiliate letter in customary form dated as
of the Closing Date.
(b) If the Merger would otherwise qualify for pooling-
of-interests accounting treatment, shares of Parent Common Stock
issued to such Affiliates of the Company in exchange for Shares
shall not be transferable until such time as financial results
covering at least 30 days of combined operations of Parent and
the Company have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies,
regardless whether each such Affiliates has provided the written
agreement referred to in this Section, except to the extent
permitted by, and in accordance with, Accounting Series Release
135 and Staff Accounting Bulletins 65 and 76. Any shares of
Company Common Stock held by such Affiliates shall not be
transferable, regardless whether each such Affiliate has provided
the written agreement referred to in this Section, if such
transfer, either alone or in the aggregate with other transfers
by Affiliates, would preclude Parent's ability to account for the
business combination to be effected by the Merger as a pooling of
interests. The Company shall not register the transfer of any
Certificate, unless such transfer is made in compliance with the
foregoing. Parent shall not be required to maintain the
effectiveness of the S-4 Registration Statement or any other
registration statement under the Securities Act for the purposes
of resale of Parent Common Stock by such Affiliates received in
the Merger and the certificates representing Parent Common Stock
received by such Affiliates shall bear a customary legend
<PAGE>
regarding applicable Securities Act restrictions and the
provisions of this Section.
Section 5.5 NASDAQ Listing. Parent shall use its
reasonable best efforts to list on NASDAQ, upon official notice
of issuance, the shares of Parent Common Stock to be issued in
connection with the Merger.
Section 5.6 Fees and Expenses.
(a) Except as provided in this Section 5.6 and Section
5.10, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby including, without limitation,
the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and
expenses, provided that all printing expenses and filing fees
shall be divided equally between Parent and the Company.
(b) (i) If any event referred to in Section 7.1(h)
occurs, this Agreement is terminated thereafter by the Company or
Parent (whether or not pursuant to such clause) and prior to such
termination the stockholders of the Company did not approve this
Agreement, then the Company shall (without prejudice to any other
rights of Parent against the Company) pay to Parent a fee of $6.0
million in cash, such payment to be made promptly, but in no
event later than the second business day following such
termination.
(ii) If:
(A) this Agreement is terminated by the
Company pursuant to Section 7.1(d) and within twelve months after
such a termination a Superior Company Acquisition Transaction (as
hereinafter defined) occurs;
(B) (x) this Agreement is terminated by the
Company or Parent at a time when Parent is entitled to terminate
this Agreement pursuant to Section 7.1(e), (y) prior to the
Company Stockholder Meeting but after the date of this Agreement
a Company Third Party Acquisition Event has occurred and (z) by
reason thereof or otherwise the event referred to in clause (D)
of the definition of Company Third Party Acquisition Event (the
"Company Clause D Event") occurs after the date hereof but prior
to the first anniversary of such termination;
(C) this Agreement is terminated by the
Company or Parent pursuant to Section 7.1(g); or
(D) this Agreement is terminated by Parent
pursuant to Section 7.1(h) following the occurrence of a Company
Third Party Acquisition Event;
<PAGE>
then, in each case, the Company shall (without prejudice to any
other rights of Parent against the Company) pay to Parent a fee
of $6.0 million in cash, such payment to be made promptly, but in
no event later than the second business day following, in the
case of clause (A), the Superior Company Acquisition Transaction,
or, in the case of clause (B), the later of such termination and
such Company Clause D Event or, in the case of clause (C) or (D),
such termination.
A "Company Third Party Acquisition Event" means any of the
following events: (A) any Person other than Parent or its
Affiliates, acquires or becomes the beneficial owner of 30% or
more of the outstanding shares of Company Common Stock; (B) any
new group is formed which, at the time of formation, beneficially
owns 30% or more of the outstanding shares of Company Common
Stock (other than a group which includes or may reasonably be
deemed to include Parent or any of its Affiliates); (C) any
Person (other than Parent or its Affiliates) shall have commenced
a tender or exchange offer for 30% or more of the then
outstanding shares of Company Common Stock or publicly proposed
any bona fide merger, consolidation or acquisition of all or
substantially all the assets of the Company, or other similar
business combination involving the Company; (D) the Company
enters into, or announces that it proposes to enter into, an
agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination
involving the Company or the acquisition of a substantial
interest in, or a substantial portion of the assets, business or
operations of, the Company (other than the transactions
contemplated by this Agreement); (E) any Person (other than
Parent or its Affiliates) is granted any option or right,
conditional or otherwise, to acquire or otherwise become the
beneficial owner of shares of Company Common Stock which,
together with all shares of Company Common Stock beneficially
owned by such Person, results or would result in such Person
being the beneficial owner of 30% or more of the outstanding
shares of Company Common Stock; or (F) there is a public
announcement with respect to a plan or intention by the Company
or any Person, other than Parent and its Affiliates, to effect
any of the foregoing transactions. For purposes of this Section
5.6, the terms "group" and "beneficial owner" shall be defined by
reference to Section 13(d) of the Exchange Act.
A "Superior Company Acquisition Transaction" means the event
referred to in clause (D) of Company Third Party Acquisition
Event provided that the financial and other terms of the
transaction referred to therein are, when considered in the
aggregate, more favorable to the Company's stockholders than the
financial and other terms of the Merger.
(c) (i) If any event referred to in Section 7.1(i)
occurs, this Agreement is terminated thereafter by the Company or
Parent (whether or not pursuant to such clause) and prior to such
termination the stockholders of Parent did not approve this
<PAGE>
Agreement, then Parent shall (without prejudice to any other
rights of Company against Parent) pay to the Company a fee of
$6.0 million in cash, such payment to be made promptly, but in no
event later than the second business day following such
termination.
(ii) If:
(A) (x) this Agreement is terminated by the
Company or Parent at a time when the Company is entitled to
terminate this Agreement pursuant to Section 7.1(f), (y) prior to
the Parent Stockholder Meeting but after the date of this
Agreement a Parent Third Party Acquisition Event has occurred and
(z) by reason thereof or otherwise the event referred to in
clause (D) of the definition of Parent Third Party Acquisition
Event (the "Parent Clause D Event") occurs after the date hereof
but prior to the first anniversary of such termination; or
(B) this Agreement is terminated by the
Company pursuant to Section 7.1(i) following the occurrence of a
Parent Third Party Acquisition Event (as hereinafter defined);
then, in each case, Parent shall (without prejudice to any other
rights of the Company against Parent) pay to the Company a fee of
$6.0 million in cash, such payment to be made promptly, but in no
event later than the second business day following, in the case
of clause (A), the later of such termination and such Parent
Clause D Event or, in the case of clause (B), such termination.
A "Parent Third Party Acquisition Event" means any of the
following events: (A) any Person acquires or becomes the
beneficial owner of 30% or more of the outstanding shares of
Parent Common Stock (other than by reason of an issuance of
shares of Parent Common Stock permitted by Section 4.1(a)); (B)
any new group is formed which, at the time of formation,
beneficially owns 30% or more of the outstanding shares of Parent
Common Stock (other than a group which includes or may reasonably
be deemed to include Parent or any of its Affiliates); (C) any
Person shall have commenced a tender or exchange offer for 30% or
more of the then outstanding shares of Parent Common Stock or
publicly proposed any bona fide merger, consolidation or
acquisition of all or substantially all the assets of Parent, or
other similar business combination involving Parent; (D) Parent
enters into, or announces that it proposes to enter into, an
agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination
involving Parent (other than this Agreement) or the acquisition
of a substantial interest in, or a substantial portion of the
assets, business or operations of, Parent (in either case, except
as expressly permitted by Section 6.1 hereof) or (E) there is a
public announcement with respect to a plan or intention by any
Person to effect any of the foregoing transactions.
<PAGE>
(d) Parent and the Company acknowledge that the
agreements contained in Section 5.6(b) are an integral part of
the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Sub and the Company would
not enter into this Agreement. Accordingly, if either Parent or
the Company fails promptly to pay the amount due pursuant to
Section 5.6(b), and, to obtain such payment, Company, on the one
hand, or Parent or Sub, on the other hand, commences a suit which
results in a judgment for the fee set forth in Section 5.6(b) or
5.6(c), the Company or Parent, as the case may be, shall pay to
Parent or Sub, on the one hand, or the Company, on the other
hand, its costs and expenses (including attorneys' fees) in
connection with such suit together with interest on the amount of
the fee at the prime rate of NationsBank of North Carolina, N.A.,
in effect on the date such payment was required to be made.
Section 5.7 Company Stock Options; Stock Purchase Plan.
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of the Company or the
holder thereof, each unexpired and unexercised option to purchase
shares of Company Common Stock (a "Company Stock Option"), under
the Company Stock Option Plans, or otherwise granted by the
Company outside of any Company Stock Option Plan, will be assumed
by Parent as hereinafter provided. At the Effective Time, by
virtue of the Merger and without any further action on the part
of the Company or the holder thereof, each Company Stock Option
will be automatically converted into an option (the "Parent Stock
Option") to purchase a number of shares of Parent Common Stock
equal to the number of shares of Company Common Stock that could
have been purchased under such Company Stock Option multiplied by
the Conversion Number, at a price per share of Parent Common
Stock equal to the per share option exercise price specified in
the Company Stock Option, divided by the Conversion Number. Such
Parent Stock Option shall otherwise be subject to the same terms
and conditions as such Company Stock Option. At the Effective
Time, (i) all references in the Company Stock Option Plans, the
applicable stock option or other awards agreements issued
thereunder and in any other Company Stock Options to the Company
shall be deemed to refer to Parent; (ii) Parent shall assume the
Company Stock Option Plans and all of the Company's obligations
with respect to the Company Stock Options; and (iii) Parent shall
issue to each holder of an outstanding Company Stock Option a
document evidencing the foregoing assumption by Parent. It is
the intention of the parties that, subject to applicable law, the
Company Stock Options assumed by Parent qualify, following the
Effective Time, as incentive stock options, as defined in Section
422 of the Code, to the extent that the Company Stock Options
qualified as incentive stock options prior to the Effective Time
and the adjustments referred to in this Section 5.7(a) shall be
effected in a manner which is consistent with Section 424(a) of
the Code.
<PAGE>
(b) In respect of each Company Stock Option as
converted into a Parent Stock Option pursuant to Section 5.7(a)
and assumed by Parent, and the shares of Parent Common Stock
underlying such option, Parent shall file as soon as practicable
after the Effective Time with the Securities and Exchange
Commission, and keep current the effectiveness of, a registration
statement on Form S-8 or other appropriate form for as long as
such options remain outstanding (and maintain the current status
of the prospectus with respect thereto).
(c) The Company agrees that it will not grant any
stock options, restricted stock, stock appreciation rights or
limited stock appreciation rights and will not permit cash
payments to holders of Company Stock Options in lieu of the
substitution therefor of Parent Stock Options, as described in
this Section 5.7.
Section 5.8 Reasonable Best Efforts; Pooling of Interests.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including, but not
limited to: (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by,
any Governmental Entity (including those in connection with the
HSR Act and State Takeover Approvals), (ii) the obtaining of all
necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or
reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated
by this Agreement. No party to this Agreement shall consent to
any voluntary delay of the consummation of the Merger at the
behest of any Governmental Entity without the consent of the
other parties to this Agreement, which consent shall not be
unreasonably withheld.
(b) Each of Parent and the Company agrees to take,
together with their respective accountants, all actions
reasonably necessary in order to obtain a favorable determination
(if required) from the SEC that the Merger may be accounted for
<PAGE>
as a pooling of interests in accordance with generally accepted
accounting principles.
(c) Each party shall use all reasonable best efforts
to not take any action, or enter into any transaction, which
would cause any of its representations or warranties contained in
this Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement.
(d) Notwithstanding anything to the contrary contained
in this Agreement, (i) neither Parent nor the Company shall be
obligated to use its reasonable best efforts or to take any
action pursuant to this Section 5.8 if the Board of Directors of
Parent or the Company, as the case may be, shall conclude in good
faith on the basis of the advice of Sullivan & Cromwell in the
case of the Company and Barnes & Thornburg in the case of Parent
that such action would violate the fiduciary obligations of such
Board under applicable law, and (ii) in connection with any
filing or submission required or action to be taken by either
Parent or the Company to effect the Merger and to consummate the
other transactions contemplated hereby, the Company shall not,
without Parent's prior written consent, commit to any material
divestiture transaction, and neither Parent nor any of its
Affiliates shall be required to divest or hold separate or
otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, the
Company or any of the material businesses, or assets of Parent or
any of its Affiliates or that otherwise would have a Material
Adverse Effect on Parent.
Section 5.9 Public Announcements. The initial press
release shall be a joint press release and thereafter the Company
and Parent each shall consult with the other prior to issuing any
press releases or otherwise making public announcements with
respect to the Merger and the other transactions contemplated by
this Agreement and prior to making any filings with any third
party and/or any Governmental Entity (including any national
securities interdealer quotation service) with respect thereto,
except as may be required by law or by obligations pursuant to
any listing agreement with or rules of NASDAQ.
Section 5.10 Real Estate Transfer and Gains Tax. Parent
and the Company agree that either the Company or the Surviving
Corporation will pay any state or local tax which is attributable
to the transfer of the beneficial ownership of the Company's or
its Subsidiaries' real property, if any (collectively, the "Gains
Taxes"), and any penalties or interest with respect to the Gains
Taxes, payable in connection with the consummation of the Merger.
The Company and Parent agree to cooperate with the other in the
filing of any returns with respect to the Gains Taxes, including
supplying in a timely manner a complete list of all real property
interests held by the Company and its Subsidiaries and any
information with respect to such property that is reasonably
necessary to complete such returns. The portion of the
<PAGE>
consideration allocable to the real property of the Company and
its Subsidiaries shall be determined by Parent in its reasonable
discretion. The stockholders of the Company shall be deemed to
have agreed to be bound by the allocation established pursuant to
this Section 5.10 in the preparation of any return with respect
to the Gains Taxes.
Section 5.11 State Takeover Laws. If any "fair price,"
"business combination" or "control share acquisition" statute or
other similar statute or regulation shall become applicable to
the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use their reasonable
best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to minimize the effects of any such
statute or regulation on the transactions contemplated hereby.
Section 5.12 Indemnification; Directors and Officers
Insurance. For three years from and after the Effective Time,
Parent agrees to, and to cause the Surviving Corporation to,
indemnify and hold harmless all past and present officers and
directors of the Company and of its Subsidiaries to the same
extent such persons are indemnified as of the date of this
Agreement by the Company pursuant to the Company's Restated
Certificate of Incorporation and By-Laws and indemnification
agreements in existence on the date hereof with any officers and
directors of the Company and its Subsidiaries for acts or
omissions occurring at or prior to the Effective Time; provided,
however, that Parent agrees to, and to cause the Surviving
Corporation to, indemnify and hold harmless such persons to the
fullest extent permitted by law for acts or omissions occurring
in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby. Parent
shall cause the Surviving Corporation to provide, for an
aggregate period of not less than two years from the Effective
Time, the Company's current directors and officers an insurance
and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") that
is no less favorable than the Company's existing policy or, if
substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Surviving
Corporation shall not be required to pay an annual premium for
the D&O Insurance in excess of 200 percent of the last annual
premium paid prior to the date hereof (which premium the Company
represents and warrants to be approximately $280,000.00).
Section 5.13 Notification of Certain Matters. Parent shall
use its reasonable best efforts to give prompt notice to the
Company, and the Company shall use its reasonable best efforts to
give prompt notice to Parent, of: (i) the occurrence, or non-
occurrence, of any event the occurrence, or nonoccurrence, of
which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement to
<PAGE>
be untrue or inaccurate in any material respect or (y) any
covenant, condition or agreement contained in this Agreement not
to be complied with or satisfied in all material respects, (ii)
any failure of Parent or the Company, as the case may be, to
comply in a timely manner with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder or
(iii) any change or event which would be reasonably likely to
have a Material Adverse Effect on Parent or the Company, as the
case may be; provided, however, that the delivery of any notice
pursuant to this Section 5.13 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such
notice.
Section 5.14 Directors. The directors of Sub at the
Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Charter and By-Laws.
Section 5.15 Designation of Directors. At the Effective
Time, Parent shall cause the four members of the Company's
current Executive Committee to be appointed to its board of
directors which persons shall serve until the next regularly
scheduled annual meeting of Parent or until their successors have
been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Charter and By-Laws. For the three annual meetings following the
Effective Time, Parent shall use its reasonable best efforts to
cause three or more members of the Company's Executive Committee
to be nominated for election to Parent's board of directors,
subject to fiduciary obligations under applicable law.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect
the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have
been duly approved by the requisite vote of stockholders of the
Company in accordance with applicable law and the Restated
Certificate of Incorporation and By-laws of the Company, and the
Parent Stockholders' Approvals shall have been obtained by the
requisite vote of the stockholders of Parent in accordance with
applicable rules of NASDAQ, applicable law and the Charter and
By-laws of Parent.
<PAGE>
(b) Listing on NASDAQ. The Parent Common Stock
issuable in the Merger shall have been authorized for listing on
NASDAQ, subject to official notice of issuance.
(c) HSR and Other Approvals.
(i) The waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental
Entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the
transactions contemplated hereby illegal or would have a
Material Adverse Effect on Parent (assuming the Merger had
taken place), shall have been obtained, shall have been made
or shall have occurred.
(d) Accounting. Parent shall have received an opinion
of Coopers & Lybrand, LLP, dated as of the Effective Time, in
form and substance reasonably satisfactory to Parent and the
Company, that the Merger will qualify for pooling of interests
accounting treatment under generally accepted accounting
principles if closed and consummated in accordance with this
Agreement.
(e) Registration Statement. The Registration
Statement shall have become effective in accordance with the
provisions of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have
been initiated or, to the Knowledge of Parent or the Company,
threatened by the SEC. All necessary state securities or blue
sky authorizations (including State Takeover Approvals) shall
have been received.
(f) No Order. No court or other Governmental Entity
having jurisdiction over the Company or Parent, or any of their
respective Subsidiaries, shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary
or permanent) which is then in effect and has the effect of
making the Merger or any of the transactions contemplated hereby
illegal.
(g) Certain Executive Agreements. The agreements
entered into by Parent and Mr. W. Thomas Gould and Mr. Robert M.
Mosco on the date hereof shall have remained in full force and
effect without breach thereof.
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger. The obligation of the Company to effect the
<PAGE>
Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and
Warranties. Each of Parent and Sub shall have performed in all
material respects each of its agreements contained in this
Agreement required to be performed on or prior to the Effective
Time, each of the representations and warranties of Parent and
Sub contained in this Agreement that is qualified by materiality
shall be true and correct on and as of the Effective Time as if
made on and as of such date (other than representations and
warranties which address matters only as of a certain date which
shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall
be true and correct in all material respects on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a
certain date which shall be true and correct in all material
respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and the Company
shall have received a certificate signed on behalf of each of
Parent and Sub by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an
opinion of Sullivan & Cromwell in form and substance reasonably
satisfactory to the Company, dated the Effective Time,
substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which
are consistent with the state of facts existing as of the
Effective Time, for federal income tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Sub and Parent will each be a party to that
reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent or
the Company as a result of the Merger;
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the conversion of their
shares of Company Common Stock into shares of Parent Common
Stock pursuant to the Merger, except with respect to cash,
if any, received in lieu of fractional shares of Parent
Common Stock;
(iv) the aggregate tax basis of the shares of Parent
Common Stock received in exchange for shares of Company
Common Stock pursuant to the Merger (including fractional
shares of Parent Common Stock for which cash is received)
will be the same as the aggregate tax basis of such shares
of Company Common Stock;
<PAGE>
(v) the holding period for shares of Parent Common
Stock received in exchange for shares of Company Common
Stock pursuant to the Merger will include the holder's
holding period for such shares of Company Common Stock,
provided such shares of Company Common Stock were held as
capital assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in
lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such stockholder's basis in the fractional share (as
described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Sullivan & Cromwell may receive and
rely upon representations from Parent, the Company, and others.
(c) The Company shall have received an opinion of
Barnes & Thornburg, counsel to Parent, in form and substance
reasonably satisfactory to the Company, dated the Closing Date,
to the effect that the Parent Common Stock to be issued in the
Merger will, when issued, have been duly authorized, validly
issued and shall not be subject to further assessment. In
rendering such opinion, Barnes & Thornburg may rely upon the
opinion of Tennessee counsel reasonably satisfactory to the
Company.
Section 6.3 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect
the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed in all material
respects each of its agreements contained in this Agreement
required to be performed on or prior to the Effective Time, each
of the representations and warranties of the Company contained in
this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which
address matters only as of a certain date which shall be true and
correct as of such certain date) and each of the representations
and warranties that is not so qualified shall be true and correct
in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and
warranties which address matters only as of a certain date which
shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted
by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer to such effect.
(b) Litigation. There shall not be instituted or
pending any suit, action or proceeding by a Governmental Entity
<PAGE>
or any other person as a result of this Agreement or any of the
transactions contemplated herein which, in the opinion of Barnes
& Thornburg, would have a Material Adverse Effect on Parent
(assuming for purposes of this paragraph (b) that the Merger
shall have occurred).
ARTICLE VII
TERMINATION. AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after
any approval of the matters presented in connection with the
Merger by the stockholders of the Company or Parent:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company if the other party
shall have failed to comply in any material respect with any of
its covenants or agreements contained in this Agreement required
to be complied with prior to the date of such termination, which
failure to comply has not been cured within five business days
following receipt by such other party of written notice of such
failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the
breaching party's best efforts and for so long as the breaching
party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to
this paragraph;
(c) by either Parent or the Company if there has been
(i) a breach by the other party (in the case of Parent, including
any material breach by Sub) of any representation or warranty
that is not qualified as to materiality which has the effect of
making such representation or warranty not true and correct in
all material respects or (ii) a breach by the other party (in the
case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality,
in each case which breach has not been cured within five business
days following receipt by the breaching party of written notice
of the breach; provided, however, that if any such breach is
curable by the breaching party through the exercise of the
breaching party's best efforts and for so long as the breaching
party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to
this paragraph;
(d) by Parent or the Company if the Merger has not
been effected on or prior to the close of business on June 30,
1996 (the "Termination Date"); provided, however, that the right
to terminate this Agreement pursuant to this Section 7.1(d) shall
not be available to any party whose failure to fulfill any of its
<PAGE>
obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date;
(e) by Parent or the Company if the stockholders of
the Company do not approve this Agreement at the Company
Stockholder Meeting or any adjournment or postponement thereof;
(f) by Parent or the Company if the Parent
Stockholders' Approvals are not obtained at the Parent
Stockholder Meeting or any adjournment or postponement thereof;
(g) by Parent or the Company if the Board of Directors
of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal (as hereinafter defined);
provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless and until three
business days have elapsed following delivery to Parent of a
written notice of such determination by the Board of Directors of
the Company (which written notice shall inform Parent of the
material terms and conditions of the Takeover Proposal but need
not include the identity of such third party);
(h) by Parent if (i) the Board of Directors of the
Company shall not have recommended, or shall have resolved not to
recommend, or shall have modified or withdrawn its recommendation
of the Merger or declaration that the Merger is advisable and
fair to and in the best interest of the Company and its
stockholders, or shall have resolved to do so (ii) the Board of
Directors of the Company shall have recommended to the
stockholders of the Company any Takeover Proposal or shall have
resolved to do so or (iii) a tender offer or exchange offer for
30% or more of the outstanding shares of capital stock of the
Company is commenced, and, after ten (10) business days, the
Board of Directors of the Company fails to recommend against
acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its
stockholders).
(i) by the Company if (i) the Board of Directors of
Parent shall not have recommended, or shall have resolved not to
recommend or shall have modified or withdrawn its recommendation
of the Parent Stockholders' Approvals or declaration that the
Merger is advisable and fair to and in the best interests of
Parent and its stockholders, or shall have resolved to do so,
(ii) a Parent Clause D event shall have occurred, or (iii) an
offer of the type described in (C) of Parent Third Party
Acquisition Event shall have been commenced and after ten (10)
business days, the Board of Directors of Parent fails to
recommend against acceptance of such offer by its stockholders
(including taking no position with respect to the acceptance of
such offer by its stockholders).
<PAGE>
The right of any party hereto to terminate this Agreement
pursuant to this Section 7.1 shall remain operative and in full
force and effect regardless of any investigation made by or on
behalf of any party hereto, any person controlling any such party
or any of their respective officers or directors, whether prior
to or after the execution of this Agreement.
"Superior Proposal" shall mean a bona fide proposal or offer
made by a third party to acquire the Company pursuant to a tender
or exchange offer, a merger, consolidation or other business
combination or a sale of all or substantially all of the assets
of the Company and its Subsidiaries on terms which a majority of
the members of the Board of Directors of the Company determines
in their good faith reasonable judgment (based on the advice of
independent financial advisors) to be more favorable to the
Company and to its stockholders than the transactions
contemplated hereby, provided that in making such determination
the Board considers the likelihood that such third party is able
to consummate such proposed transaction.
Section 7.2 Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company, as
provided in Section 7.1, this Agreement shall forthwith terminate
and there shall be no liability hereunder on the part of the
Company, Parent, Sub or their respective officers or directors
(except for the last sentence of Section 5.3 and the entirety of
Section 5.6, which shall survive the termination); provided,
however, that nothing contained in this Section 7.2 shall relieve
any party hereto from any liability for any willful breach of a
representation or warranty contained in this Agreement or the
breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by
the parties hereto, by or pursuant to action taken by their
respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger
by the stockholders of Parent and the Company, but, after any
such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further
approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective
Time, the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein which
may legally be waived. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in
this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.1, as the
case may be, except that the agreements set forth in Article I
and Sections 4.4 and 5.12 and this Article VIII shall survive the
Effective Time, and those set forth in Sections 5.7 and 7.2 and
this Article VIII and the Confidentiality Agreement shall survive
termination.
Section 8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when
delivered personally, one day after being delivered to an
overnight courier or when telecopied (with a confirmatory copy
sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Sub, to:
Proffitt's, Inc.
5810 Shelby Oaks Drive
Memphis, Tennessee 38134
Attn.: Mr. R. Brad Martin
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Attn.: Brian J. Martin, Esquire
with copies to:
James A. Strain, Esquire
Barnes & Thornburg
11 South Meridian Street, Suite 1313
Indianapolis, Indiana 46204
(b) if to the Company, to:
Younkers, Inc.
7th and Walnut Streets
Des Moines, Iowa 50397
Attn.: Mr. W. Thomas Gould
Mr. Alan R. Raxter
with copies to:
<PAGE>
Benjamin F. Stapleton, Esquire
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Section 8.3 Interpretation. When a reference is made in
this Agreement to a Section, such reference shall be to a Section
of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation."
Section 8.4 Counterparts. This Agreement may be executed
in counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, except as provided in the last sentence of
Section 5.4, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. This
Agreement is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT,
THE COMPANY, OR SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned
by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other
parties.
Section 8.8 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon
<PAGE>
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions
contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties
hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having jurisdiction, such remedy being in addition to any other
remedy to which any party is entitled at law or in equity. Each
party hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the United States
District Court located in the State of Delaware (unless such
courts assert no jurisdiction, in which case the Company consents
to the exclusive jurisdiction of the courts of the State of
Delaware) for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated
hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and
further agrees that service of any process, summons, notice or
document by U.S. registered mail to the addresses set forth
herein shall be effective service of process for any such action,
suit or proceeding brought against the each party in such court.
Each party hereto hereby irrevocably and unconditionally waives
any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby, in the United States District Courts located
in the State of Delaware (unless such courts assert no
jurisdiction, in which case each party consents to the exclusive
jurisdiction of the courts of the State of Delaware). Each party
hereby further irrevocably and unconditionally waives and agrees
not to plead or to claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in
an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers
thereunto duly authorized all as of the date first written above.
PROFFITT'S, INC.
By: /s/ R. Brad Martin
-------------------
Name: R. Brad Martin
Title: Chairman of the
Board and Chief
Executive Officer
Attest:
/s/ James E. Glasscock
-------------------------
Name: James E. Glasscock
Title: Executive Vice President and
Chief Financial Officer
BALTIC MERGER CORPORATION
By: /s/ R. Brad Martin
-------------------------
Name: R. Brad Martin
Title: President
Attest:
/s/ James E. Glasscock
-------------------------
Name: James E. Glasscock
Title: Treasurer
YOUNKERS, INC.
By: /s/ W. Thomas Gould
-------------------------
Name: W. Thomas Gould
Title: Chairman and Chief
Executive Officer
Attest:
/s/ Alan R. Baxter
--------------------------
Name: Alan R. Raxter
Title: Executive Vice President and
Chief Financial Officer
Exhibit 20
PROFFITT'S, INC. AND YOUNKERS, INC. ANNOUNCE MERGER AGREEMENT
Contacts: Proffitt's: Julia Bentley
(615) 983-7000
(615) 981-6243
Younkers: Alan Raxter
(515) 247-7025
The management of Proffitt's, Inc. and Younkers, Inc. have
scheduled a conference call at 11:00 a.m. Eastern Time on October
23, 1995 to discuss the proposed business combination of the two
companies. To participate, please call 1-800-314-3563 (10
minutes prior to the call).
The management of Proffitt's, Inc. and Younkers, Inc. will host a
luncheon in New York at the St. Regis Hotel on November 3, 1995
at 10:00 noon to discuss the proposed merger. For luncheon
reservations, please call Beth Daley at (212) 816-7383.
Knoxville, Tennessee and Des Moines, Iowa (October 23, 1995)--
Proffitt's, Inc. (NASDAQ: PRFT) and Younkers, Inc. (NASDAQ:
YONK), two of the nation's leading regional specialty department
store companies, jointly announced today that they have entered
into an agreement with respect to a merger in which the two
companies will be combined, with Younkers, headquartered in Des
Moines, becoming a separate division of Proffitt's, Inc. The
Boards of Directors of Proffitt's, Inc. and Younkers, Inc.
approved the merger unanimously.
Under the terms of the transaction, shareholders of Younkers,
Inc. will receive .98 shares of Proffitt's, Inc. Common Stock for
each share of Younkers, Inc. Common Stock. Proffitt's will issue
approximately 8.8 million shares in the transaction, representing
a transaction equity value of approximately $253 million, based
upon Proffitt's, Inc. October 20, 1995 closing stock price of
$28.75 per share. The merger is expected to be completed in
early 1996, subject to approval by shareholders of both companies
and certain other conditions. The combination has been
structured as a tax-free transaction and will be accounted for as
a pooling of interests.
Proffitt's, Inc. is a leading regional specialty department store
company currently operating two divisions - the Proffitt's
Division with 26 stores in Tennessee, Virginia, Georgia,
Kentucky, and North Carolina and the McRae's Division with 28
department stores in Alabama, Mississippi, Florida, and
Louisiana. For the twelve months ended July 29, 1995,
Proffitt's, Inc. achieved record sales of $698 million, net
<PAGE>
income of $18.8 million, and earnings per share of $1.66.
Primarily as a result of acquisitions, the Company has grown
revenues and net earnings at annual compound rates of 51% and
53%, respectively, over the last five fiscal years.
Younkers, Inc. is a leading regional department store company
with 53 stores in Iowa, Wisconsin, Nebraska, Michigan, Illinois,
Minnesota, and South Dakota. For the twelve months ended July
29, 1995, Younkers achieved sales of $605 million, net income of
$14.6 million, and earnings per share of $1.59. The Company has
grown revenues and net earnings at annual compound rates of 14%
and 30%, respectively, over the last five fiscal years.
On a combined basis, the company will operate 107 department
stores in sixteen states with annualized revenues in excess of
$1.3 billion.
R. Brad Martin, Chairman and Chief Executive Officer of
Proffitt's, Inc., and W. Thomas Gould, Chairman and Chief
Executive Officer of Younkers, expressed their commitment to and
enthusiasm for the combination of the two companies. Mr. Martin
stated, "We are very excited about the prospect of combining
these two well-positioned, leading regional companies and
complementing our respective strengths. The newly combined
company creates one of the largest regional specialty department
store chains in the United States. This combined business will
be of a size to enjoy substantial benefits associated with
increased economies of scale in the consolidating department
store industry, while retaining the flexibility to serve our
customers effectively on a market by market basis. Our common
cultures and values and our geographical relationship make this
combination a very natural fit. We believe that our combined
strengths enhance value for our shareholders and opportunities
for our associates."
Mr. Martin further commented, "The merger with Younkers is a
terrific complement to our dynamic organization and consistent
with our strategy of operating stores in both small markets and
larger metropolitan areas. With a major presence in an
attractive and economically vibrant section of the United States,
we see opportunities for further growth in Younkers' existing
regions. Proffitt's growth orientation will create further
opportunities for the Younkers team."
Mr. Gould stated, "We believe the transaction is very favorable
for our shareholders providing them with an interest in a solid,
rapidly growing company with high performance standards and a
proven track record. Proffitt's is an ideal partner for
Younkers. Its organizational structure and management philosophy
will enable our organization to operate as a separate division
within Proffitt's, Inc., and at the same time, enjoy the benefits
of shared resources and economics of scale."
Mr. Martin also said, "The business combination is expected to be
accretive to the earnings of Proffitt's, Inc. upon the
realization of modest synergies in the combined business. The
transaction will also lower the financial leverage of Proffitt's,
<PAGE>
Inc., enhancing our capital strength and providing considerable
flexibility for the consideration of additional strategic growth
opportunities."
There will be one-time charges related to the costs of the
business combination and the restructuring of operations.
Upon the closing of this merger, Younkers will operate as a
separate department store division of Proffitt's, Inc., with its
divisional headquarters in Des Moines. Mr. Martin will continue
as Chairman and Chief Executive Officer of Proffitt's, Inc., and
Mr. Gould will remain Chairman of Younkers and be named Vice
Chairman of Proffitt's, Inc. Robert M. Mosco will remain
President of Younkers Division and be named Chief Executive
Officer of Younkers, reporting to Mr. Martin.
Mr. Gould, along with the three other individuals currently
serving on the Executive Committee of the Board of Directors of
Younkers, Inc., will be nominated to serve as Directors of
Proffitt's, Inc. The Board nominees are: Gerard K. Donnelly,
Chairman of Princeton Middletown Partners, Inc. and former
President and Chief Executive officer of H.C. Prange Company;
Donald F. Dunn, former Senior Vice President of Allied Stores
Corporation; and G. David Hurd, former Chairman and Chief
Executive Officer of The Principal Financial Group.
This announcement is neither an offer of securities nor a
solicitation of proxies. An offering will only be made by means
of a prospectus which is part of an effective registration
statement, and proxies will only be solicited pursuant to a
definitive proxy statement.
####
These materials were derived from public information
(except for estimated takeover attempt costs) and were prepared
to respond to anticipated questions about the proposed
transaction.
<TABLE>
<CAPTION>
Proffitt's, Inc.
Comparison of Merger Valuation Multiples
McRae's Younkers
LTM (1) Period LTM (1)Period
Ending Ending
January 1994 July 1995 (3)
------------ ------------
<S> <C> <C>
Enterprise Value/Revenue 0.75 x 0.49 x
Enterprise Value/EBITDA (2) 6.0 6.5
Market Value of Equity/
Tangible Book Value (3) 2.0 1.4
<FN>
(1) Latest twelve months.
(2) Earnings before interest, taxes, depreciation and amortization.
(3) Based upon October 20, 1995 stock price for Proffitt's of $28.75.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Proffitt's/Younkers
LTM Pro Forma Combined Condensed Income Statement (1)
As of July 29, 1995
Excluding Takeover Related Costs
---------------------------------
Proffitt's Younkers Combined
---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 697,989 $ 605,055 $1,303,044
========== ========== ==========
Net Income $ 18,802 $ 14,606 $ 1,470 (2) $ 34,878
Preferred Dividends 1,951 -0- 1,951
---------- ---------- ---------- ----------
Net Income to Common $ 16,851 $ 14,606 $ 1,470 (2) $ 32,927
========== ========== ========== ==========
Earnings Per Share -
Primary $ 1.66 $ 1.59 $ 1.72
========== ========== ==========
Earnings per Share -
Fully Diluted $ 1.59 $ 1.59 $ 1.67
========== ========== ==========
Weighted average common shares
Primary 10,181 9,200 9,016 (3) 19,197
Fully Diluted 13,400 9,200 9,016 (3) 22,416
<FN>
________________________
(1) Does not reflect the impact of the non-recurring charges related to the merger transacton
costs or the costs of restructuring.
(2) Estimated non-recurring costs associated with the Carson Pirie Scott & Co. takeover attempt
(tax effected @ 39%) based on discussions with management of Younkers.
(3) Shares issued in the merger of 8,806 plus common stock equivalents.
</TABLE>
Based on the latest reported twelve months earnings ending
July 31, 1995 of the two companies and adjusting for the impact
of the exchange ratio, the combined companies' pro forma earnings
per share are break-even or accretive, depending upon whether the
costs incurred by Younkers over the last twelve months in
connection with the Carson Pirie Scott bid are excluded.
<PAGE>
On a projected basis, the Company believes that earnings per
share for the combined company will be accretive when compared to
Proffitt's stand alone numbers because the modest synergies
expected to be achieved will more than offset the difference in
the two companies' projected earnings per share growth rates.
Identified synergies are targeted at minimum levels of $3 million
for 1996 and $6 million for 1997.
<PAGE>
<TABLE>
<CAPTION>
Proffitt's/Younkers
Pro Forma Combined Condensed Capitalization Table (1)
As of July 29, 1995
(000's)
Proffitt's Younkers Conbined Company
------------------ ------------------ ------------------
Percent Percent Percent
of of of
Capital- Capital- Merger Capital-
$ ization $ ization Adjustments $ ization
-------- -------- -------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Debt:
Senior Debt
Revolving Credit
Agreement $ 69,500 $ -0- $ 69,500
Real Estate and
Mortgage Notes 69,417 -0- 69,417
Notes Payable 14,425 -0- 14,425
Capital Lease
Obligations 11,541 -0- 11,541
Receivables Trust
Securities -0- 74,625 74,625
-------- -------- --------
Total Senior Debt 164,883 36% 74,625 29% 239,508 34%
Subordinated Debt:
4.75% Convertible
Subordinated
Debentures due 2003 86,250 -0- 86,250
Junior Subordinated
Debentures 14,134 -0- 14,134
-------- -------- --------
Total Debt 265,267 58% 74,625 29% 339,892 48%
Shareholders' Equity
Preferred Stock 28,850 -0- 28,850
Common Stock 1,023 91 790 (2) 1,904
Additional Paid In
Capital 118,766 125,484 (790)(2)
(1,811)(3) 241,649
Retained Earnings 39,744 57,505 97,249
-------- -------- --------
Total 188,383 183,080 369,652
Less: Treasury stock
at cost -0- (1,811) 1,811 (3) -0-
<PAGE>
-------- -------- --------
Total Shareholders'
Equity 188,383 42% 181,269 71% 369,652 52%
-------- -------- --------
Total Capitalization $453,650 100% $255,894 100% $709,544 100%
======== ======== ========
<FN>
(1) The pro forma consolidated capitalization table does not reflect the impact of non-recurring charges
related to the merger transaction costs or the costs of restructuring.
(2) To account for the par value of the 8,806 shares issued in the merger.
(3) To reflect cancellation of treasury stock.
</TABLE>
