SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 8, 1996
PROFFITT'S, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 0-15907 62-0331040
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.
P.O. Box 9388
Alcoa, TN 37701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 983-7000
Item 5. Other Events.
On November 8, 1996, Proffitt's, Inc. and G.R. Herberger's, Inc. jointly
announced the signing of an Agreement and Plan of Merger. Pursuant to
General Instruction F to Form 8-K, the following information is incorporated
herein by reference and is attached hereto: (i) Agreement and Plan of
Merger Among Proffitt's, Inc., Prairie Merger Corporation and G.R.
Herberger's, Inc. dated November 8, 1996 (Exhibit 2); (ii) press release
dated November 8, 1996 (Exhibit 20); and (iii) Discussion Information
prepared for a November 12, 1996 Financial Analysts'/Investors' Presentation
(Exhibit 99).
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., Prairie
Merger Corporation and G.R. Herberger's, Inc. dated November
8, 1996.
20 Press release dated November 8, 1996.
99 Discussion Information for Financial Analysts' Presentation
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: November 19, 1996 /S/ R. Brad Martin
R. Brad Martin
(Printed)
Chairman of the Board
and Chief Executive
Officer
(Title)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 8, 1996 (this
"Agreement"), among PROFFITT'S, INC., a Tennessee corporation
("Parent"), PRAIRIE MERGER CORPORATION, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Sub"), and G. R. HERBERGER'S, INC.,
a Delaware corporation (the "Company") (Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
WITNESSETH:
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 $0.04 per share, of the Company ("Company Common Stock") not
owned directly or indirectly by 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). As a result of
the Merger, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation").
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
Certificate of Incorporation of the Company shall be amended and
restated to read in the form attached hereto as Exhibit A until
thereafter changed or amended as provided therein or by applicable law.
At the Effective Time, the By-laws of Sub, 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 $.04 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 shall be canceled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(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 canceled in
accordance with Section 1.5(b) and Dissenting Shares (as defined in
Section 1.15)) shall be converted into such number of validly
issued, fully paid and nonassessable shares of Parent Common Stock
as determined by dividing 4,000,000 by the number of issued and
outstanding shares of Company Common Stock as of the Effective Time
(the "Conversion Number"). All such shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall
automatically be canceled 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 (collectively, the "Merger Consideration")
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"). At the
Closing, Parent shall deliver to and deposit with the Exchange
Agent, in trust for the holders of shares of Company Common Stock
converted in the Merger, certificate(s) 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, as soon as practicable after the Effective Time, 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"). At the Closing, Parent shall
deliver to the Company a true and complete copy of the Depositary
Agreement between Parent and the Exchange Agent pertaining to the
Exchange Fund and an original receipt of the Exchange Agent
acknowledging receipt of the certificate(s). The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the
certificate(s) and cash representing the Parent Common Stock
contemplated to be delivered pursuant to Section 1.5(c) out of the
Exchange Fund. Except as contemplated by 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 canceled.
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
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 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 Nasdaq Stock Market National Market
("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 stockholders of the
Company 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 the Parent 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 canceled 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 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.
(a) Notwithstanding any provision of this Merger Agreement to
the contrary, each outstanding share of Company Common Stock held
by a holder who has demanded and perfected his or her appraisal
rights in accordance with Section 262 of the Del.C. and who has not
effectively withdrawn or lost his right to such appraisal (a
"Dissenting Share"), shall not be converted into, become
exchangeable for or represent a right to receive the Merger
Consideration pursuant to Section 1.5 hereof but the holder thereof
shall only be entitled to such rights as are granted by the Del.C.
and shall not be entitled to vote or to exercise any other rights
of a stockholder of the Company. Each holder of Dissenting Shares
who becomes entitled to payment therefor pursuant to the Del.C.
shall receive such payment from the Surviving Corporation in
accordance with the Del.C.
(b) Notwithstanding the provisions of Section 1.15(a) hereof
if any stockholder who demands appraisal with respect to a share of
his Company Common Stock under the Del.C. shall effectively
withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, such share shall cease to be a Dissenting Share
and shall automatically be converted into, become exchangeable for
and represent only the right to receive the Merger Consideration,
without interest thereon, any cash in lieu of fractional shares
pursuant to Section 1.8 hereof and any dividends or other
distributions pursuant to Section 1.7 hereof, upon surrender of a
Certificate.
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
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, business, 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 November 4, 1996, (i) 23,988,148 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) 3,957,382 shares of
Parent Common Stock were reserved for future issuance pursuant to
Parent's 1994 Long-Term Incentive Plan, the 1987 Stock Option Plan and
the Parisian Stock Option Plans; (iii) 336,587 shares of Parent Common
Stock were reserved for future issuance pursuant to Parent's 1994
Employee Stock Purchase Plan; and (iv) 2,019,906 shares of Parent Common
Stock were reserved for future issuance pursuant to the terms of the
Parent's 4 3/4% Convertible Subordinated Debentures Due 2003. 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, free of preemptive rights and be entitled to the benefits
of the Parent Rights Plan under the terms thereof. As of the date of
this Agreement, except for (a) this Agreement, (b) stock options
covering not in excess of 2,700,000 shares of Parent Common Stock
(collectively, the "Parent Stock Options"), (c) the 1994 Employee Stock
Purchase Plan, (d) the 4 3/4% Convertible Subordinated Debentures due
2003, (e) contingent stock grants of 141,000 shares of Parent Common
Stock to key executives, and (f) 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 to issue Parent Common
Stock in connection with the Merger (the "Share Issuance") 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 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 (as defined in Section 2.4) 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. Except as
disclosed on Schedule 2.4 hereto, and 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 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 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, (vi) 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, (vii)
applicable requirements, if any, of Blue Sky Laws and the Nasdaq Stock
Market, and (viii) 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, 1994 (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, 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 February 3, 1996, made any change in the
accounting practices or policies applied in the preparation of financial
statements.
Section 2.6 Registration Statement and 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 proxy
statement of the Company included therein (together with any amendments
or supplements thereto, the "Proxy Statement") relating to the
Stockholder Meeting (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 Proxy
Statement, at the time of the mailing of the Proxy Statement, the time
of the Company Stockholder Meeting 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 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 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.
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 February 3, 1996, (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 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; and (D) there has been no event causing a
Material Adverse Effect on Parent, 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 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, Chief Financial Officer and the Senior Vice President and
General Counsel of the Parent.
Section 2.9 Tax Matters. Except as previously disclosed to
Company, 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 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 Multi-employer 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 nor has Parent or any of its
ERISA Affiliates been assessed any pension withdrawal liability or any
liability for withdrawal from a Parent multi employer welfare plan,
(iii) no action has been taken, or is currently being considered, to
terminate any Parent Plan subject to Title IV of ERISA, except for Younkers,
Inc.'s termination of the Brandeis Employees Pension Plan, 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. The Parent will grant credit to employees of the Company who
continue employment after the Effective Date for those periods of
service with the Company prior to the Effective Date for eligibility and
vesting purposes (but not for benefit accrual purposes) under any
Employee Plan sponsored or maintained by the Parent or any ERISA
Affiliate under which such employees might, after the Effective Date, be
covered but for eligibility requirements. Further, coverage under a
Company-sponsored health plan shall be credited for purposes of
preexisting condition limitation periods and deductibles and out-of-pocket
maximums. Neither Parent nor any of its ERISA Affiliates has
been notified by any Parent Multi employer Plan that such Parent Multi
employer Plan is currently in reorganization or insolvency under and
within the meaning of Section 4241 or 4245 of ERISA or that such Parent
Multi employer 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 SEC
Documents. As used herein, (i) "Parent Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Parent Multi employer
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 Multi employer Plan"
means a "multi employer 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. To the Knowledge of
Parent, 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 SEC
Disclosure Documents, or disclosed in the footnotes thereto, or as
previously disclosed to the Company, Parent and its Subsidiaries had no
liabilities (including, 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. Except as set forth on Schedule 2.15
hereto, 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 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 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 2.18 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 2.19 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 2.20 Brokers. No broker, investment banker or other
person, other than Salomon Brothers Inc., the fees and expenses of which
will be paid by Parent (and as reflected in an agreement between Salomon
Brothers 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 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 25,000,000
shares of Company Common Stock, par value $0.04 per share. At the close
of business on October 28, 1996, (i) 8,024,678 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)
13,835,247 shares of Company Common Stock were held in the treasury of
the Company. Except for the Company's obligation to issue shares of
Company Common Stock pursuant to the Company's 401(k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "ESOP") in
accordance with the terms of the ESOP (which number of shares so issued
will depend on individual participant elections), 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 Schedule 3.2 hereto, 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. At least 75% of the non-abstaining
members of the Board of Directors of the Company have on or prior to the
date of this Agreement (a) declared the Merger advisable and fair to and
in the best interest of the Company, its stockholders and the ESOP
participants with regard to their indirect beneficial interests in
Company Common Stock, (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 approval of amendments to the Company's ESOP required under
Section 3.22), 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
provision of information relating to the Company for inclusion in the
Proxy Statement has been duly authorized by the Company's Board of
Directors.
Section 3.4 Consents and Approvals; No Violation. Except as
disclosed on Schedule 3.4 hereto, and 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
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 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, (vi) 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, (vii) applicable
requirements, if any, of Blue Sky Laws and NASDAQ, and (viii) 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 Reports. The Company has provided Parent the items
listed on Schedule 3.5 hereto (the "Company Disclosure Documents"). As
of their respective dates, none of the Company Disclosure 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
Disclosure Documents were prepared in accordance with generally accepted
accounting principles 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
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
adjustments consistent with past practices and the absence of notes
thereto). Except as disclosed in the Company Disclosure Documents or as
required by generally accepted accounting principles, the Company has
not, since February 3, 1996, made any change in the accounting practices
or policies applied in the preparation of financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of
the information to be supplied by the Company for inclusion in the
Registration Statement or the 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 Proxy
Statement, at the time of the mailing of the Proxy Statement, the time
of the Company Stockholder Meeting (as defined in Section 5.1) 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 Proxy Statement or the Registration
Statement, such event shall be so described, and the Company shall
cooperate with Parent in preparing an appropriate amendment or
supplement shall be promptly filed with the SEC by Parent and thereafter
disseminated to the stockholders of the Company.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company Disclosure Documents and except as disclosed on
Schedule 3.7 hereto, since February 3, 1996, (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 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, except for any such changes or effects resulting from this
Agreement, the transactions contemplated hereby or the announcement
thereof. Schedule 3.5 hereto includes a schedule of indebtedness
evidenced by an agreement of the Company.
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 Disclosure Documents provided prior
to the date of this Agreement, as of the date hereof there is no
contract or agreement that is material (which, for the purpose of this
sentence, shall be limited to contracts involving $100,000 or more and
not terminable on 30-days' notice and excluding purchase of inventory in
the ordinary course of business) 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 Disclosure 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 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 material leases (including all store leases, commitments for
store leases and commitments for the construction or renovation of
stores, which shall be deemed material for purposes of this sentence) 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
of the Company.
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 Disclosure 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. 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, are reasonably likely to have a Material Adverse
Effect on the Company. Except as set forth on Schedule 3.10 hereto, 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 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, except for Purchase Option Agreements entered by the Company
in the ordinary course of its business which grant the Company the right
to repurchase certain shares of the Company Common Stock upon the
occurrence of certain events, 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 the ESOP), 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. 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 and except as permitted by this Agreement.
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 Multi employer 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 Multi employer Plan, and (iii) no
action has been taken, or is currently being considered, to terminate
any Company 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, and excluding those matters
addressed in Section 3.22, 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 Multi employer Plan that such Company Multi employer Plan is
currently in reorganization or insolvency under and within the meaning
of Section 4241 or 4245 of ERISA or that such Company Multi employer
Plan intends to terminate or has been terminated under Section 4041A of
ERISA. Except as disclosed in the Company Disclosure 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 Multi employer 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 Multi employer Plan" means a "Multi
employer 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 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 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. To the Knowledge of
the Company, 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 Disclosure
Documents or except as disclosed on Schedule 3.14, 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 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 received notice that the
Company has, and to the Knowledge of the Company, the Company has not
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 Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated November 8, 1996, that, as of such date, the
Conversion Number is fair from a financial point of view to the holders
of the Company's Common Stock, a copy of which opinion will be delivered
to Parent promptly after the date of this Agreement.
Section 3.18 State Takeover Statutes. As of the date hereof,
assuming the accuracy of Parent's representations and warranties
contained in Section 2.17 (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.
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.
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 Merrill Lynch, Pierce, Fenner & Smith Incorporated,
the fees and expenses of which will be paid by the Company (and are
reflected in an agreement between Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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.
Section 3.22 ESOP. As of the Effective Time, the Company in
cooperation with Parent will have amended the ESOP (i) to eliminate the
obligation of the Company to repurchase shares, (ii) to eliminate the
fair market value committee, (iii) to eliminate the obligation of the
ESOP Trustee to purchase stock for the 401(k) Employee Stock Purchase
Plan from the Company and to require the purchase of Parent Common Stock
on the open market, and (iv) any other amendments necessary to
accomplish the transactions contemplated by this Agreement.
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 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 of or in
substitution for shares of its capital stock or (y) 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, (C) the issuance by any
wholly-owned Subsidiary of Parent of its capital stock to Parent or
another wholly-owned Subsidiary of Parent, and (D) in a transaction
permitted under Section 4.1(a)(iv);
(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 acquisitions,
mergers, consolidations or purchases, the equity value of which does
not exceed $50 million in the aggregate;
(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 or not material to Parent and its Subsidiaries taken as a
whole, (B) as may be required by any Governmental Entity, (C)
dispositions involving an aggregate consideration not in excess of $50
million, and (D) transactions between and among Parent and any of its
Subsidiaries;
(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)(x) 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 except dividends in the amount of no more than
$0.14 per share may be declared and paid consistent with past practices,
(y) 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 of or in substitution for
shares of its capital stock or (z) 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 except such purchases or redemptions that are pursuant
to existing agreements to which the Company is a party. Nothing herein
shall preclude the Company from terminating any and all options pursuant
to which the Company has the right to repurchase shares of the Company
Common Stock;
(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 as necessary to satisfy participant elections
under the Company's 401(k) aspect of the ESOP;
(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 amend any Company Plan,
including the ESOP (with respect to which consent shall not by
unreasonably withheld by Parent), or employment or consulting agreement,
other than as required by law, provided, however, that the Company may
enter into (x) a bonus agreement and consulting agreement with Robert J.
Sullivan, in substantially the form attached hereto as Exhibits B,
respectively, and (y) an agreement with Barry T. Ross in substantially
the form attached hereto as Exhibit C;
(ix) except as set forth in Section 4.1(b)(viii), increase the
compensation payable or to become payable to its officers or employees,
except for increases (including bonuses and incentive payments) in the
ordinary course of business consistent with past practice in salaries or
wages of officers or employees of the Company, 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; provided, however,
that nothing herein shall prohibit the Company from making a
discretionary contribution to the ESOP for the Company's fiscal year
ending February 1, 1997, in an amount consistent with past practices of
the Company and not to exceed 10% of eligible employee compensation;
(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 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 (Sommer & Barnard, PC and Briggs and Morgan, P.A.,
respectively) that the failure to take such action would violate the
fiduciary obligations of such Board under applicable law; and provided
further that, Parent and the Company may, in the initial press release
concerning the transactions contemplated hereby, state that the
consummation of the Merger is subject to several conditions, including
expiration of the waiting period under the HSR Act, an effective
registration statement, approval of the stockholders of the Company, an
opinion of Coopers & Lybrand that the Merger will qualify for pooling-of-
interests accounting, and the continued exercise of fiduciary duties
by the Boards of Directors of Parent and the Company. 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 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 Meeting. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary
duties as advised by counsel, the Company shall call a meeting of its
stockholders (the "Company Stockholder Meeting") to be held as promptly
as practicable for the purpose of considering the approval of this
Agreement. The Company will, through its Board of Directors, recommend
to its 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 Briggs and Morgan, P.A. that the making of, or the failure to
withdraw, such recommendation would violate the fiduciary obligations of
such Board under applicable law. The Board of Directors of the Company
will not rescind its declaration that the Merger is advisable, fair to
and in the best interest of the Company and its stockholders unless, in
any such case, any such Board concludes in good faith on the basis of
the advice of Briggs and Morgan, P.A. that the failure to rescind such
determination would violate the fiduciary obligations of such Board
under applicable law.
Section 5.2 Preparation of the Registration Statement and the
Proxy Statement. The Company and Parent shall promptly prepare and the
Parent shall file with the SEC the Registration Statement, in which a
prospectus in the form of a proxy statement will be included. 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 practicable after such filing. As promptly as practicable
after the Registration Statement shall have become effective, the
Company shall mail the Proxy Statement which constitutes Parent's
prospectus (as furnished by Parent) to its 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 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 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
5.3 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 September 30, 1996 between Parent and
the Company (the "Confidentiality Agreement").
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 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 the form attached hereto as
Exhibit D, 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 of 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 before the Effective Date, 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 regarding applicable Securities Act restrictions and the
provisions of this Section.
(c) Parent shall use its reasonable best efforts to file a
registration statement on Form S-8 with the SEC relating to the
interests and underlying shares for the ESOP as soon as reasonably
practicable following the Effective Date and shall use its reasonable
best efforts to maintain the effectiveness of such registration
statement on Form S-8 (or appropriate successor form) until the
termination of the ESOP.
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) 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 and such Superior Company Acquisition Transaction is
thereafter consummated (whether or not within such twelve month
period);
(B) this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(f); or
(C) this Agreement is terminated by Parent pursuant to Section
7.1(g) following the occurrence of a Company Third Party
Acquisition Event;
then, in each case, the Company shall (without prejudice to any
other rights of Parent against the Company) pay to Parent a fee of
$4.25 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 consummation of the Superior Company Acquisition
Transaction, or, in the case of clause (B) or (C), the earlier of
the consummation of the Company Third Party Acquisition Event or
twelve months after 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) If this Agreement is terminated by the Company pursuant to
Section 7.1(h) following the occurrence of a Parent Third Party
Acquisition Event (as hereinafter defined) then Parent shall (without
prejudice to any other rights of the Company against Parent) pay to the
Company a fee of $4.25 million in cash, such payment to be made
promptly, but in no event later than the second business day following
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 4.1 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.
(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 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 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 5.7 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
Briggs and Morgan, P.A. in the case of the Company and Sommer & Barnard,
PC 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, neither the Company nor Parent shall,
without the other'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 5.8 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 the Nasdaq Stock
Market.
Section 5.9 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 5.10 Indemnification; Directors and Officers Insurance.
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 maximum extent permitted by the Del.C. (including advancing fees and
expenses incurred before the final disposition of a proceeding upon
receipt of an undertaking by such director or officer to repay such
amount if it shall ultimately be determined that he or she is not
entitled to be indemnified under the Del.C.), including, but not limited
to, for acts or omissions occurring in connection with the approval of
this Agreement, the preparation of the Registration Statement 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 $11,000).
Section 5.11 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 non-occurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty contained
in this Agreement to 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 5.11 shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 5.12 Directors and Officers. The directors and officers
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 5.13 Regional Merchandising Center. Parent will cause
the Company to maintain the St. Cloud headquarters offices for a period
of not less than two years following the Effective Time, and will use
its reasonable best efforts, consistent with good business practices, to
keep the merchandising and sales promotion presence in said
headquarters, along with other support functions deemed appropriate by
Parent to support the merchandising and sales promotion functions.
Parent shall use its reasonable best efforts to cause the Surviving
Corporation to either maintain the Company's employee benefits at the
same levels and in the same form as they are currently or to bring the
Company's employees into the Parent's employee benefit plans.
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 Certificate of Incorporation and
By-laws of the Company.
(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) ESOP Trustee and Committee Approval. The ESOP Trustee and the ESOP
Committee shall have taken all necessary action for the approval of, and shall
have approved, the transactions contemplated by this Agreement.
Section 6.2 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company 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.
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
Sommer & Barnard, PC 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;
(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, Sommer & Barnard, PC may receive and rely
upon representations from Parent, the Company, and others.
(c) The Company shall have received an opinion of Sommer &
Barnard, 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, Sommer & Barnard, PC 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 or any other person as a
result of this Agreement or any of the transactions contemplated herein
which, in the opinion of Sommer & Barnard, would have a Material Adverse
Effect on Parent (assuming for purposes of this paragraph (b) that the
Merger shall have occurred).
(c) Parent shall have received an opinion from Kelly, Hannaford &
Battles, P.A., counsel to the ESOP, in form and substance reasonably
acceptable to Parent to the effect that all requisite steps have been
taken for approval by the ESOP and its participants of the transactions
contemplated by this Agreement.
(d) Dissenting Stockholders. Holders of no more than 7.5% of the
issued and outstanding shares of the Company shall have delivered to the
Company written demands for appraisal of their shares in accordance with
Section 262 of the Del.C.
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 or except as contemplated or permitted by this Agreement;
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, 1997 (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 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 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(f)
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);
(g) 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).
(h) by the Company if (i) a Parent Clause D event shall have
occurred, or (ii) 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).
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 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.
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, 5.4(c), 5.10 and
5.13, this Article VIII and the representation contained in Section 2.12
shall survive the Effective Time, and those set forth in Sections 5.6
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
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
(b) if to the Company, to:
G. R. Herberger's, Inc.
600 Mall Germain
P.O. Box H-120
St. Cloud, Minnesota 56302-0120
Telecopy: (320) 654-7040
Attn: Mr. John B. Brownson
with copies to:
Joseph P. Noack
Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telecopy: (612) 334-8650
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 (including the Confidentiality Agreement) 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
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.
[Remainder of page intentionally left blank.]
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:
By: _____________________________
Name: __________________________
Title: __________________________
PRAIRIE MERGER CORPORATION
By: /s/ R. Brad Martin
Name: R. Brad Martin
Title: President
Attest:
By: _____________________________
Name: __________________________
Title: __________________________
G. R. HERBERGER'S, INC.
By: ___________________________
Name: _________________________
Title:Chairman and Chief
Executive Officer
Attest:
By: _____________________________
Name: __________________________
Title: __________________________
EXHIBIT 20
PROFFITT'S, INC.
PROFFITT'S, INC. AND G.R. HERBERGER'S, INC.
ANNOUNCE MERGER AGREEMENT
Contacts: Proffitt's: Julia Bentley
(423) 981-6243
Herberger's: John Brownson
(320) 654-2236
The management of Proffitt's, Inc. has scheduled a conference call at
10:30 a.m. Eastern Time on Tuesday, November 12, 1996, to discuss the
proposed business combination of the two companies. To participate,
please call (904) 779-4773 (10 minutes prior to the call).
Knoxville, Tennessee and St. Cloud, Minnesota (November 8. 1996)--
- --Department store retailers Proffitt's, Inc. (NASDAQ: PRFT) and G.R.
Herberger's, Inc. ("Herberger's") jointly announced today that they have
entered into an agreement with respect to a merger in which the two
companies will be combined, with Herberger's, headquartered in St.
Cloud, Minnesota, becoming a separate division of Proffitt's, Inc.
("Proffitt's"). The Boards of Directors of both companies have approved
the transaction.
Proffitt's will issue 4.0 million shares of Common Stock in the
transaction, representing a transaction equity value of appropriately
$160 million, based upon Proffitt's November 1, 1996 closing stock price
of $39.875 per share. Each share of Herberger's Common Stock will be
converted into approximately .498 of a share of Proffitt's Common Stock;
there are approximately 8.025 million shares of Herberger's Common Stock
outstanding. The merger is expected to be completed in early 1997, and
is subject to certain conditions, including regulatory approval under
the Hart-Scott-Rodino Antitrust Act, an effective Registration Statement
filed with the Securities and Exchange Commission, the continued
exercise of fiduciary duties by the Boards of Directors of both
Proffitt's and Herberger's, and approval by the shareholders of
Herberger's. A Proffitt's shareholder vote is not required to approve
the merger. The combination has been structured as a tax-free
transaction and will be accounted for as a pooling of interests.
Proffitt's recently completed its business combination with Parisian,
Inc. on October 11, 1996. Proffitt's, Inc. currently operates four
department store divisions --- the Younkers Division with 48 stores in
Iowa, Wisconsin, Michigan, Nebraska, Illinois, Minnesota, and South
Dakota; the Parisian Division with 38 stores in Alabama, Georgia,
Florida, Ohio, South Carolina, Tennessee, Indiana, and Michigan; the
McRae's Division with 29 stores in Alabama, Mississippi, Florida, and
Louisiana; and the Proffitt's Division with 26 stores in Tennessee,
Virginia, Georgia, Kentucky, North Carolina, and West Virginia. For the
latest twelve months ended August 3, 1996 (which does not include the
operations of Parisian), the Company achieved record sales of $1.336
billion and record net income and fully diluted earnings per share
(before non-recurring items) of $40.7 million and $1.87, respectively.
Herberger's is an employee-owned regional department store company with
40 stores in Minnesota, Montana, Nebraska, Wisconsin, North Dakota,
South Dakota, Iowa, Colorado, Illinois, and Wyoming. For the latest
twelve months ended August 3, 1996, Herberger's recorded sales of $328.5
million and net income (before employee stock ownership plan
contribution and related charges) of $9.9 million. As of August 3,
1996, Herberger's had approximately $36 million of indebtedness.
On a combined basis, the Company will operate 181 department stores in
twenty-four states with annualized revenues in excess of $2.3 billion.
R. Brad Martin, Chairman and Chief Executive Officer of Proffitt's,
Inc., and Robert J. Sullivan, Chairman and Chief Executive Officer of
G.R. Herberger's, Inc., expressed their enthusiasm for and commitment to
the combination of the two companies. Mr. Martin stated, "This
transaction is a significant step in achieving our strategic growth
plans and further enhances Proffitt's position as one of the largest
regional specialty department store chains in the United States. Our
combination with Herberger's will increase our ability to enjoy
substantial benefits associated with economics of scale in the
consolidating department store industry, while retaining the flexibility
to serve our customers effectively on a market by market basis. We
believe that this merger will create value for our shareholders and
opportunities for our associates."
Mr. Martin further commented, "Proffitt's, Inc. operates stores in both
small markets and larger metropolitan areas. The combination with
Herberger's is a complement to our 'smaller market' strategy, where in
many cases, we are the principal branded department store. The
contiguous geographical relationship of our stores, with virtually no
market overlap, makes this combination a natural fit. With this
significant presence in an attractive section of the United States, we
see further opportunities for growth in Herberger's existing regions."
Mr. Sullivan stated, "Our combination with Proffitt's will provide our
employees and our shareholders with an interest in the fastest growing
department store company in the country and in a company with a proven
performance record. Proffitt's operating structure and 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 economies of scale. We believe Proffitt's growth
orientation will create further opportunities for the Herberger's team."
Mr. Martin concluded, "We anticipate a smooth integration of Herberger's
into our organization. We expect the merger to be accretive to the
earnings of Proffitt's, Inc. in 1997 upon the realization of modest
synergies in the combined business. The transaction will also improve
the financial leverage of Proffitt's, Inc., enhancing our capital
structure and providing flexibility for the consideration of future
strategic growth opportunities."
Upon closing the transaction, the Company will incur certain non-recurring
charges related to the costs of the transition and the restructuring of
Herberger's operations.
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.
EXHIBIT 99
Special Conference Call
Proffitt's/Herberger's Announcement
November 12, 1996
Brad Martin
This is Brad Martin, the Chairman and Chief Executive Officer of
Proffitt's, Inc. I'm joined on the call today by Julia Bentley, the
Senior VP of Investor Relations for the Company.
I would like to thank each of you for taking the time to join us for the
call today. The purpose of our call is to outline the proposed business
combination with Herberger's and to answer questions you may have. Due
to the nature of the transaction and the fact that we will be entering
a registration period, there will be certain issues, such as 1997
forward looking financial information, that we are prohibited from
discussing at this time. Julia will talk more about that in a few
minutes.
Proffitt's will combine its business with Herberger's in a stock-for-stock,
tax-free transaction that will be accounted for as a pooling of
interests. Proffitt's will issue 4.0 million shares of Common Stock in
the transaction, representing a transaction equity value of
approximately $152 million, based on our current stock price.
The Boards of both Companies approved the transaction last week. The
merger is expected to be completed in early 1997 and is subject to
certain conditions, including an effective registration statement filed
with the SEC, a filing under the Hart-Scott-Rodino Antitrust Act, and
approval by the shareholders of Herberger's. A Proffitt's shareholder
vote is not required to approve the merger.
Upon closing the transaction, the Company will incur certain
nonrecurring charges related to the costs of the transaction and the
restructuring of Herberger's operations,
For those of you that may be unfamiliar with Herberger's, let me take a
minute to give you an overview of the Company.
Herberger's is an employee-owned regional department store company
offering moderate to better brand name and private label fashion
apparel, shoes, accessories, cosmetics, and decorative home furnishings.
The Company's stores are generally anchor stores in enclosed regional or
community malls. Herberger's operates 40 stores in ten states,
Minnesota, Montana, Nebraska, Wisconsin, North Dakota, South Dakota,
Iowa, Colorado, Illinois, and Wyoming. They operate about 2.8 million
gross square feet of space.
Major brands carried by Herberger's include Liz Claiborne, Susan
Bristol, Jones New York, Pendleton, Chaps by Ralph Lauren, Calvin Klein,
Coach, Nine West, Estee Lauder, Clinique, and Lancome.
Herberger's was founded in 1927 and became 100% employee owned in 1972.
The Company has grown from 11 to 40 stores since 1972.
For the twelve months ended August 3, 1996, Herberger's achieved sales
of $328.5 million and net income of $9.9 million (before ESOP
contribution and related charges). At that time, they had indebtedness
of $36 million, $11 million of which was short-term borrowings on a
revolving credit facility which is expected to be repaid by year end.
Upon completion of the transaction, Proffitt's, Inc. will operate five
department store divisions, Younkers with 48 stores; Parisian with 38
stores; McRae's with 29 stores; Proffitt's with 26 stores; and
Herberger's with 40 stores. Proffitt's, Inc. is the fastest growing and
one of the largest department store companies in the country. The
combined company will operate 181 stores in 24 states with annual
revenues exceeding $2.3 billion.
I would like to discuss the rationale behind this transaction.
Proffitt's, Inc. currently operates stores in both small markets and
larger metropolitan areas. The combination with Herberger's is a
complement to our "small market" strategy, where in many cases, we are
the only branded department store. In a vast majority of Herberger's
markets, they serve as the only traditional branded department store.
This combination significantly extends our Midwestern presence,
providing a platform for future expansion. The contiguous geographical
relationship of our stores, with virtually no market overlap, makes this
combination a natural fit.
The merchandising strategies of our two companies are similar, with both
Proffitt's and Herberger's emphasizing branded and selected private
label merchandise targeted to middle- and upper-income families.
However, we believe there are opportunities to improve the merchandising
operations of the combined business through sharing of management
personnel, business strategies, vendor relationships, and private label
development. Certainly the buying power of the combined company will be
further enhanced.
While many brands at Proffitt's and Herberger's are similar, Herberger's
has not had relationships with certain key brands found at Proffitt's
stores, such as Tommy Hilfiger. With Proffitt's strong vendor
partnerships, we will be able to introduce certain of these prestige
brands into the appropriate Herberger's stores.
About 7% of Proffitt's business is private label, and about 4% of
Herberger's business is private label. While Proffitt's, Inc. will
remain primarily a branded department store company, we see selective
opportunities to increase private label offerings which should further
differentiate our stores from our competitors and enhance gross margins.
Our target is to increase private label sales to 10% to 15 % over the
next two years. The addition of Herberger's volume will increase our
ability to achieve that goal. Additionally, while Herberger's has some
very well developed key businesses, such as children's and moderate
men's and women's apparel, there are growth opportunities in
underdeveloped businesses such as shoes, cosmetics, accessories, and
better men's and women's apparel. We will continue to use the best
practices approach to develop key businesses throughout the Company,
capitalizing on the well-developed merchandise categories in each
operating division.
We believe the business combination of Proffitt's and Herberger's will
be modestly accretive to 1997 earnings per share based on the
realization of modest synergies in the combined business. The
transaction will also improve the financial leverage from Proffitt's
existing levels, enhancing our capital structure and providing
flexibility for the consideration of future strategic growth
opportunities. Upon completion of the transaction, our total debt to
capital will be below 50%, and excluding our $225 million of
subordinated debt, senior debt of the combined company will be less than
30% of capital.
Let me take a minute to update you on our progress regarding the
synergies process with Younkers and Parisian. As you recall, our
targeted annualized synergy/cost savings number for the $600 million
Younkers business is $10 million on an annualized basis and $6 million
during the transition year of 1996. We remain on track to achieve our
expected $6 million in expense savings for 1996. Our annualized target
for the $675 million Parisian business is $12 million, with $7 million
of savings expected in the transition year of 1997. Plans are in place
to achieve these targets as well.
Of course, we also anticipate meaningful synergies with the Herberger's
transaction. As soon as practical, designated teams of managers from
both Proffitt's and Herberger's will begin their work in identifying
synergies and best practices that allow us to most effectively and
efficiently operate our existing business and to further position the
Company for additional growth. Relatively quickly, there will be
opportunities to eliminate duplicate overhead expenses (such as legal
and accounting fees) and to increase our purchasing power in areas such
as supply purchasing. We expect to have the Herberger's-related
synergies identified and quantified shortly after closing the
transaction, and we will share these with you at that time.
Herberger's does not issue a proprietary credit card, but instead has a
co-branded VISA card with very limited penetration. We will consider
extending our proprietary card base to the Herberger's chain which we
believe could enhance sales and improve profitability over time.
Herberger's EBITDA for the last 12 months ended August 3, 1996 was $24
million, or 7.4% of sales, Proffitt's LTM EBITDA margin (including
Parisian and before non-recurring items related to the Younkers merger)
was 10.2%. Our goal is to increase our combined EBITDA margin
(including Herberger's) to approximately 11% in 1997. Our operating
margins should be enhanced through targeted sales growth opportunities,
margin improvement, and the realization of meaningful cost savings
identified through the Younkers, Parisian, and Herberger's synergy
processes.
This transaction is a significant step in achieving Proffitt's strategic
growth plans and further enhances Proffitt's position as one of the
largest regional specialty department store chains in the United States.
Our combination with Herberger's will increase our ability to enjoy
substantial benefits associated with economies of scale in the
consolidating department store industry, while
retaining the flexibility to serve our customers effectively on a market
by market basis. We believe that this merger will create value for our
shareholders and opportunities for our associates.
I will now ask Julia Bentley to comment on our timetable for closing the
transaction and our planned communications throughout the next couple of
months.
Julia Bentley
After the call today, I will be available by phone to clarify any items
discussed on today's call or covered in the press release. As Brad
mentioned earlier, we are entering a registration period, so there will
be some topics, such as certain forward-looking financial information,
that we will be prohibited from discussing. I will note that on October
28, 1996, we released via press release and conference call, certain
1996 income statement guidance that remains unchanged. We are still
comfortable with 1996 revenues in the 1.565 billion to 1.585 billion
range and fully diluted earnings per share of $2.24 (prior to
nonrecurring items). Our previous 1997 targets of revenues in the
$2.120 billion to $2.150 billion range and fully diluted earnings per
share of $2.75 are of course subject to change based on the Herberger's
transaction. Shortly after the closing of the transaction, we will be
in a position to provide revised targets for 1997.
The 1996 and 1997 forward-looking statements I just mentioned as well as
forward-looking statements made by Brad are premised on many factors,
and actual results might differ materially from projected results if
there are any material changes in our assumptions. Forward-looking
information and statements are based on a series of projections and
estimates and involve certain risks and uncertainties. Potential risks
and uncertainties include such factors as the level of consumer spending
for apparel and other merchandise carried by the Company, the
competitive pricing environment within the department store industry,
the effectiveness of planned advertising campaigns, appropriate
inventory management, the realization of planned synergies, and
effective cost containment.
We expect to file Hart-Scott-Rodino in mid-November, and we expect to
file our registration statement with the SEC by the end of November and
that it will be effective by the end of December or early January. The
registration statement will contain historical pro forma financial
information which will be available to the public once effective. We
anticipate the transaction will close in early 1997, hopefully in
conjunction with our fiscal year end, February 1, 1997.
Proffitt's will release third quarter results on Thursday, November 21
at the close of business as planned, and we will have our regularly
scheduled conference call on Friday, November 22 at 10:00 a.m. ET. The
dial in number is 816-650-0777.
Again, please call me at 423-981-6243 today or anytime in the next few
days if I can be of assistance.
Brad Martin
Thank you, Julia. We would now be happy to answer questions about the
transaction.
(After questions) While we are very excited about the transaction with
Herberger's and the recently completed combination with Parisian, our
management teams remain focused on the important Christmas season and on
achieving our Operating plans for the remainder of the year.
Thanks for your time and interest.
