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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PROFFITT'S, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
TENNESSEE 62-0331040 5311
(State or other Jurisdiction of (IRS Employer or Organization (Primary Standard Industrial
Incorporation) Identification Number) Classification Code Number)
</TABLE>
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POST OFFICE BOX 9388
ALCOA, TENNESSEE 37701
(615) 983-7000
(Address, including zip code, and telephone number, including area code
of Registrant's Principal Executive Office)
-------------------
R. BRAD MARTIN
5810 SHELBY OAKS DRIVE
MEMPHIS, TENNESSEE 38134
(901) 372-4300
(Name, Address, including zip code, and telephone number,
including area code of Agent for Service)
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Copies to:
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BRIAN J. MARTIN, ESQ. JAMES A. STRAIN
PROFFITT'S, INC. SOMMER & BARNARD
3455 HIGHWAY 80 WEST 4000 BANK ONE TOWER
JACKSON, MISSISSIPPI 39209 111 MONUMENT CIRCLE
(601) 968-5215 INDIANAPOLIS, INDIANA 46204
(317) 630-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: as soon as practicable after the effective date of the Registration
Statement, but not earlier than the date of the meeting of the shareholders of
Parisian, Inc., referred to herein.
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CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
PROPOSED MAXIMUM
TILE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.10 Par Value and
associated Preferred Stock
Purchase Rights................... 3,352,635(1) $32.125(2) $107,703,399 $37,139.10
</TABLE>
(1) Based upon the assumed maximum number of shares of common stock of the
Registrant issuable to holders of common shares of Parisian, Inc., an
Alabama corporation ("Parisian"), in the proposed merger of Casablanca
Merger Corp., a wholly owned subsidiary of the Registrant, with and into
Parisian, and shares issuable upon exercise of options to purchase shares of
Parisian to be converted into options to purchase shares of common stock of
the Registrant.
(2) Solely for purposes of calculating the registration fee under Rule 457(f)(1)
as of July 24, 1996, being within 5 days of the filing of this Registration
Statement.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION DATED JULY 29, 1996
-------------------
PROFFITT'S, INC.
PROSPECTUS
-------------------
SPECIAL MEETING OF SHAREHOLDERS OF PARISIAN, INC.
TO BE HELD ON , 1996
-------------------
This Prospectus ("Prospectus") is being furnished to the shareholders of
Parisian, Inc., an Alabama corporation ("Parisian"), in connection with the
Special Meeting of Shareholders of Parisian to be held on , 1996 or any
adjournments or postponements thereof (the "Parisian Special Meeting"). This
Prospectus relates to the proposed merger (the "Merger") of Casablanca Merger
Corp., an Alabama corporation ("Sub") and a wholly-owned subsidiary of
Proffitt's, Inc., a Tennessee corporation ("Proffitt's"), with and into Parisian
pursuant to the Agreement and Plan of Merger, dated as of July 8, 1996 (the
"Merger Agreement"), among Proffitt's, Sub and Parisian, pursuant to which
Parisian, as the surviving corporation in the Merger, is to become a
wholly-owned subsidiary of Proffitt's.
Upon effectiveness of the Merger, each outstanding share of Common Stock,
par value $0.01 per share, of Parisian (the "Parisian Common Stock"), will be
converted into the right to receive $15.00 in cash and .4006 validly issued,
fully paid and nonassessable shares of Common Stock, par value $0.10 per share,
of Proffitt's (the "Proffitt's Common Stock"). Cash will be paid in lieu of
fractional shares of Proffitt's Common Stock.
Proxies are not being solicited from shareholders of Parisian in connection
with the Parisian Special Meeting. NEITHER PROFFITT'S NOR PARISIAN IS ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Prospectus constitutes a prospectus of Proffitt's regarding up to an
aggregate 3,352,635 shares of Proffitt's Common Stock issuable to Parisian
shareholders pursuant to the Merger Agreement, and issuable upon exercise of
certain options to purchase shares of Parisian Common Stock which are to be
converted in the Merger into options to purchase shares of Proffitt's Common
Stock.
PROFFITT'S REASONS FOR THE MERGER
The Proffitt's Common Stock is listed for trading on the Nasdaq Stock Market
National Market under the symbol "PRFT." On July 8, 1996, the last trading day
prior to the announcement of the execution of the Merger Agreement, the last
sale price of Proffitt's Common Stock as reported on the Nasdaq National Market
was $34 1/2. On , 1996, the last trading day prior to the date of this
Prospectus, the last sale price of Proffitt's Common Stock as reported on the
Nasdaq National Market was $ . For a description of Proffitt's Common
Stock, see "DESCRIPTION OF PROFFITT'S CAPITAL STOCK" and "COMPARISON OF RIGHTS
OF HOLDERS OF PROFFITT'S COMMON STOCK AND PARISIAN COMMON STOCK." Parisian
shareholders are urged to obtain current market quotations for the Proffitt's
Common Stock.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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AVAILABLE INFORMATION................................................................. 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 4
SUMMARY............................................................................... 6
INTRODUCTION.......................................................................... 20
Matters To Be Considered at the Parisian Special Meeting............................ 20
Vote Required....................................................................... 20
Record Date; Stock Entitled to Vote; Quorum......................................... 20
Dissenters' Rights.................................................................. 21
Holders of Parisian Common Stock Should Not Send Stock Certificates................. 22
THE MERGER............................................................................ 22
General............................................................................. 22
Background of the Merger............................................................ 22
Recommendations of the Parisian Board; Reasons for the Merger....................... 24
Proffitt's Reasons for the Merger................................................... 26
Merger Consideration................................................................ 27
Source of Funds for the Cash Consideration.......................................... 27
Effective Time of the Merger........................................................ 28
Conversion of Shares; Procedures for Exchange of Certificates....................... 28
Resales of Proffitt's Common Stock.................................................. 29
Governmental and Regulatory Approvals............................................... 29
Certain Federal Income Tax Consequences............................................. 30
Accounting Treatment................................................................ 30
Interests of Certain Persons in the Merger.......................................... 30
Registration Rights Agreement....................................................... 32
Nasdaq National Market Listing...................................................... 32
The Guaranty and the Supplemental Indenture......................................... 32
THE MERGER AGREEMENT.................................................................. 32
Terms of the Merger................................................................. 32
Surrender and Payment............................................................... 33
Fractional Shares................................................................... 33
Conditions to the Merger............................................................ 34
Representations and Warranties...................................................... 35
Conduct of Business Pending the Merger.............................................. 35
Parisian Stock Options.............................................................. 37
No Solicitation..................................................................... 37
Indemnification; Directors and Officers Insurance................................... 38
Termination......................................................................... 38
Fees and Expenses................................................................... 39
Amendment........................................................................... 39
Waiver.............................................................................. 39
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS................................................................ 40
DESCRIPTION OF PROFFITT'S CAPITAL STOCK............................................... 46
General............................................................................. 46
Proffitt's Common Stock............................................................. 46
Proffitt's Preferred Stock.......................................................... 46
Rights Plan......................................................................... 46
Registration Rights................................................................. 47
Transfer Agent and Registrar........................................................ 47
COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S
COMMON STOCK AND PARISIAN COMMON STOCK.............................................. 47
</TABLE>
2
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PAGE
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS................................................................... 54
Proffitt's.......................................................................... 54
Parisian............................................................................ 55
BUSINESS OF PROFFITT'S................................................................ 57
BUSINESS OF PARISIAN.................................................................. 58
PARISIAN MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... 60
Results of Operations............................................................... 61
Comparison of the Three Months Ended May 4, 1996 (1996) and April 29, 1995 (1995)... 61
Comparison of the Fiscal Years Ended February 3, 1996 (1995) and January 28, 1995
(1994)................................................................................ 62
Comparison of Fiscal Years Ended January 28, 1995 (1994) and January 29, 1994
(1993)................................................................................ 63
Seasonality and Inflation........................................................... 64
Liquidity and Capital Resources..................................................... 65
Recently Issued Accounting Standards................................................ 67
LEGAL OPINIONS........................................................................ 67
EXPERTS............................................................................... 67
</TABLE>
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Appendices
Appendix I Agreement and Plan of Merger dated as July 8, 1996, among Proffitt's, Inc.,
Casablanca Merger Corp. and Parisian, Inc.
Appendix II Alabama Business Corporation Act Sections 10-2B-13.01 through 10-2B-13.32
Appendix III Registration Rights Agreement dated as of July 8, 1996 between Proffitt's,
Inc. and Parisian, Inc.
Appendix IV Opinion of Lehman Brothers Inc.
</TABLE>
3
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING OF SECURITIES MADE HEREBY AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PROFFITT'S OR PARISIAN. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF PROFFITT'S OR PARISIAN SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Proffitt's is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Proffitt's with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
Proffitt's has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Proffitt's Common Stock to be issued in connection with the Merger
Agreement. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto. Such additional information may
be obtained from the Commission's principal office in Washington, D.C.
Statements contained in this Prospectus or in any document incorporated in this
Prospectus by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Proffitt's (Commission
File No. 0-15907) pursuant to the Exchange Act are incorporated by reference in
this Prospectus:
1. Proffitt's Annual Report on Form 10-K for the fiscal year ended February
3, 1996 and Amendment No. 1 thereto dated May 1, 1996;
2. Proffitt's Quarterly Report on Form 10-Q for the quarter ended May 4,
1996;
3. Proffitt's Current Reports on Form 8-K filed with the Commission on
February 16, 1996, April 1, 1996, and July 18, 1996, respectively;
4. The description of Proffitt's Common Stock contained in Proffitt's
Registration Statement on Form 8-A dated May 27, 1987 and Proffitt's
Registration Statement on Form S-3 dated October 19, 1993 (Registration
No. 33-70000);
5. Proffitt's Registration Statement on Form 8-A dated April 3, 1995 in
respect of the Proffitt's Share Purchase Rights Plan.
4
<PAGE>
All documents and reports filed by Proffitt's pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the date of the Parisian Special Meeting shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
dates of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such document so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE
AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST, WITHIN ONE
BUSINESS DAY OF SUCH REQUEST, TO PROFFITT'S, INC., P.O. BOX 9388, ALCOA,
TENNESSEE 37701 (TELEPHONE NUMBER: (423) 983-7000), ATTENTION: INVESTOR
RELATIONS. IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE PARISIAN
SPECIAL MEETING, REQUESTS SHOULD BE RECEIVED BY , 1996.
5
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Merger
contained elsewhere or incorporated by reference in this Prospectus. Reference
is made to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Prospectus and the
Appendices hereto. As used herein, unless the context otherwise requires,
"Parisian" means Parisian, Inc. and its consolidated subsidiaries, "Proffitt's"
means Proffitt's, Inc. and its consolidated subsidiaries and "Sub" means
Casablanca Merger Corp., a wholly-owned subsidiary of Proffitt's.
Shareholders of Parisian are urged to read this Prospectus and the
Appendices hereto and in particular the information set forth below under the
heading "Other Significant Considerations," in their entirety.
THE COMPANIES
Proffitt's and Sub. Founded in 1919, Proffitt's is a leading regional
specialty department store company offering a wide selection of fashion apparel,
accessories, cosmetics, and decorative home furnishings, featuring assortments
of premier brands and unique specialty merchandise. Proffitt's stores are
primarily anchor stores in leading regional and community malls. Proffitt's
currently operates under three divisions, the Proffitt's Division with 25
stores, the McRae's Division with 29 department stores and one specialty store
and the Younkers Division with 48 department stores. The stores operated under
the Proffitt's Division are located in Tennessee (12 stores), Virginia (8
stores), Georgia (2 stores), Kentucky (2 stores) and North Carolina (1 store).
The McRae's department stores are located in Alabama (14 stores), Mississippi(12
stores), Florida (2 stores) and Louisiana (1 store). The stores operated under
the Younkers Division are located in Iowa (18 stores), Wisconsin (17 stores),
Michigan (5 stores), Nebraska (5 stores) and Illinois, Minnesota and South
Dakota (each 1 store). Proffitt's operates separate merchandising, sales
promotion and store operating divisions for the Proffitt's, McRae's and Younkers
Divisions, but operates centralized administrative and support functions, such
as accounting, information systems and credit, into which the functions of
Younkers are presently being integrated. Proffitt's is incorporated in
Tennessee, its principal executive offices are located at 115 North Calderwood,
Alcoa, Tennessee 37701, and its telephone number is (423) 983-7000. For further
information concerning Proffitt's, see "--Selected Financial and Operating
Data," "BUSINESS OF PROFFITT'S," "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
Sub was organized as an Alabama corporation on July 3, 1996 for the purpose
of consummating the Merger and the other transactions contemplated by the Merger
Agreement. Sub has no assets or business and has not carried on any activities
to date other than those incident to its formation and in connection with the
Merger and the other transactions contemplated by the Merger Agreement. Sub's
principal executive offices are located at 115 North Calderwood, Alcoa,
Tennessee 37701, and its telephone number is (423) 983-7000.
Parisian. Parisian operates 38 specialty department stores selling moderate
to better-priced fashion merchandise for the entire family. Parisian's stores
are generally anchor stores in enclosed regional and premium community malls. As
a specialty department store, a Parisian store carries apparel, cosmetics,
shoes, accessories and gifts customarily found in typical department stores, but
does not carry home furnishings, housewares, furniture, large or small
appliances or electronics. Parisian concentrates on providing value through
superior customer service, competitive pricing and strong relationships with its
customers and suppliers. Parisian seeks to create a special shopping experience
in its stores through carefully selected fashion merchandise assortments,
attractive store design, exciting visual presentations and promotional events
and personal amenities that enhance customer convenience and comfort.
Parisian was founded in 1887 and operated a single store in downtown
Birmingham, Alabama, for 76 years. Since 1985, Parisian has expanded its
operations from 12 stores in Alabama to 38 stores in eight states.
6
<PAGE>
The principal executive offices of Parisian are located at 750 Lakeshore
Parkway, Birmingham Alabama 35211, and its telephone number is (205) 940-4000.
For further information concerning Parisian, see "Selected Financial and
Operating Data," "BUSINESS OF PARISIAN," and "PARISIAN MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
THE MERGER AGREEMENT
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, Sub will be merged with and into Parisian at the
effective time of the Merger (the "Effective Time"), and Parisian will continue
as the surviving corporation and a wholly-owned subsidiary of Proffitt's.
Subject to the terms and conditions of the Merger Agreement, each share of
Parisian Common Stock issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive $15.00 in cash (the "Cash
Consideration") and .4006 (the "Conversion Number") shares of Proffitt's Common
Stock (collectively, the "Merger Consideration"). See "THE MERGER AGREEMENT."
The Merger Consideration was determined through arms-length negotiations
between Proffitt's and Parisian.
THE PARISIAN SPECIAL MEETING
Time, Date and Place. The Parisian Special Meeting will be held at ,
local time, , 1996, at .
Matters to be Considered at the Parisian Special Meeting.
At the Parisian Special Meeting, holders of shares of Parisian Common Stock
will consider and vote upon a proposal to approve the Merger Agreement. Holders
of shares of Parisian Common Stock entitled to vote also will consider and vote
upon any other matter that may properly come before the Parisian Special Meeting
or at any adjournments or postponements thereof.
Vote Required
Each holder of Parisian Common Stock is entitled to one vote per share held
of record on the record date described below. The Merger Agreement must be
approved by the affirmative vote of holders of not less than two-thirds of the
shares of Parisian Common Stock entitled to vote on approval of the Merger
Agreement. Holders of options to purchase Parisian Common Stock will not be
entitled to receive notice of, or to vote at, the Parisian Special Meeting.
Abstentions will be counted as shares present for purposes of determining a
quorum, but will have the effect of votes against approval of the Merger
Agreement. See "THE PARISIAN SPECIAL MEETING--Vote Required."
Record Date. The record date for the determination of holders of Parisian
Common Stock entitled to notice of and to vote at the Parisian Special Meeting
is , 1996. On that date, there were 7,355,846.189 shares of Parisian
Common Stock issued and outstanding held by a total of 88 record holders.
Security Ownership of Management. As of July 12, 1996, directors and
executive officers of Parisian and their affiliates were beneficial owners of an
aggregate of 2,038,448 (approximately 27.7%) of the outstanding shares of
Parisian Common Stock. As of July 12, 1996, certain investment partnerships
affiliated with Lehman Brothers Inc. ("Lehman Brothers") owned an aggregate of
3,557,359 (approximately 48.4%) of the outstanding shares of Parisian Common
Stock.
7
<PAGE>
THE MERGER
Effect of Merger. At the Effective Time, Sub will be merged with and into
Parisian, which will continue as the surviving corporation in the Merger. As a
result of the Merger, Parisian will become a wholly-owned subsidiary of
Proffitt's. At the Effective Time, each issued and outstanding share of Parisian
Common Stock will be converted into the right to receive the Merger
Consideration. Cash will be paid in lieu of fractional shares of Proffitt's
Common Stock. See "THE MERGER--Merger Consideration" and "THE MERGER
AGREEMENT--Fractional Shares."
Recommendation of the Parisian Board of Directors. The Board of Directors of
Parisian (the "Parisian Board") has determined that the Merger is in the best
interests of Parisian and the shareholders of Parisian and has unanimously
recommended that the shareholders of Parisian vote for approval of the Merger
Agreement.
For additional information with respect to the determination made by, and
the recommendation of, the Parisian Board, see "THE MERGER--Recommendation of
the Parisian Board; Reasons for the Merger."
Effective Time of the Merger. The Merger will become effective upon the
filing of Articles of Merger with the Secretary of State of the State of
Alabama. The filing of the Articles of Merger will occur on the date of the
closing of the transactions contemplated by the Merger Agreement (anticipated to
be on before October 15, 1996), or as promptly thereafter as practicable. See
"THE MERGER AGREEMENT--Conditions to the Merger."
Interests of Certain Persons in the Merger. In considering the
recommendation of the Parisian Board, shareholders of Parisian should be aware
that certain members of Parisian management and of the Parisian Board have
interests in the Merger that are in addition to the interests of shareholders
generally, which may create potential conflicts of interest. See "THE
MERGER--Interests of Certain Persons in the Merger."
Registration Rights Agreement. Proffitt's and Parisian have entered into a
registration rights agreement (the "Registration Rights Agreement") granting the
shareholders of Parisian certain rights to have the shares of Proffitt's Common
Stock acquired by them in the Merger registered for resale under the Securities
Act. See "DESCRIPTION OF PROFFITT'S CAPITAL STOCK--Registration Rights."
Conditions to the Merger. The obligations of Proffitt's, Sub and Parisian to
consummate the Merger are subject to various conditions, including, among other
things, obtaining the requisite shareholder approval, the authorization for
listing on the Nasdaq National Market of the shares of Proffitt's Common Stock
issuable pursuant to the Merger Agreement, the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the effectiveness of the Registration
Statement or the availability of an applicable exemption from the registration
requirements of the Securities Act, the absence of any order or other legal
restraint or prohibition preventing the consummation of the Merger, and that
there shall not be instituted or pending any action or proceeding by anyone as a
result of the Merger Agreement which in the opinion of counsel to Proffitt's or
Parisian would have a material adverse effect on Proffitt's or Parisian, as the
case may be. The obligations of Proffitt's and Sub to consummate the Merger are
subject to the fulfillment of various additional conditions, including, among
other things, approval of a supplemental indenture (the "Supplemental
Indenture") by the holders (the "Parisian Noteholders") of the $125 million in
outstanding aggregate principal amount of 9 7/8% Senior Subordinated Notes due
2003 of Parisian (the "Notes"), and that holders of no more than 5% of the
issued and outstanding shares of Parisian Common Stock shall have dissented from
the Merger under applicable law. The obligation of Parisian to consummate the
Merger is subject to the fulfillment of various additional conditions. Certain
of the foregoing conditions may not be waived by the parties, including
shareholder approval, the effectiveness of the Registration Statement or the
availability of an applicable exemption from the registration requirements of
the Securities Act and the absence of any order or legal restraint.
8
<PAGE>
See "THE MERGER--Governmental and Regulatory Approvals," and "THE MERGER
AGREEMENT--Conditions to the Merger."
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time under certain circumstances, including,
among other things, (i) by mutual written consent of Proffitt's and Parisian,
(ii) by either Proffitt's or Parisian if the Merger has not been effected on or
prior to the close of business on November 30, 1996, (iii) by either Proffitt's
or Parisian if the requisite shareholder approval is not obtained, (iv) by
either Proffitt's or Parisian in the event of a breach of any representation or
warranty contained in, or in the event of any failure to comply with any
provision of, the Merger Agreement by the other, (v) by Proffitt's if the
Parisian Board withdraws or modifies its recommendation to approve the Merger
Agreement, or determines that a competing transaction is more favorable to
Parisian and its shareholders than the Merger Agreement, and (vi) by Proffitt's
if the Parisian Noteholders do not approve the Supplemental Indenture. See "THE
MERGER AGREEMENT--Termination." The Merger Agreement provides that if the Merger
Agreement is terminated (i) following the withdrawal or modification by the
Parisian Board of its recommendation of the Merger, prior to the approval of the
Merger Agreement by the Parisian shareholders, (ii) in certain situations
involving certain acquisitions of Parisian Common Stock occurring prior to the
Parisian Special Meeting, (iii) in certain situations in which the Parisian
Board determines that a competing transaction is superior to the Merger, then
Parisian will pay in cash to Proffitt's certain expenses, not in excess of $2.5
million, reasonably incurred in connection with the transactions contemplated by
the Merger Agreement. In addition, if within twelve months following such
termination, Parisian enters into, or announces that it proposes to enter into,
an agreement providing for a business combination or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of Parisian, other than the Merger, and such transaction is
thereafter consummated, Parisian shall pay to Proffitt's an aggregate fee of
$5.5 million, less the actual amount of expenses previously paid.
Dissenters' Rights. Under the Alabama Business Corporation Act ("ABCA"),
holders of Parisian Common Stock are entitled to dissent from the Merger and, if
the Merger is consummated, obtain cash in an amount equal to the fair value of
their Parisian Common Stock which may be more or less than the value of the
Merger Consideration. Specific procedures for the exercise of such rights must
be followed. A copy of the applicable sections of the ABCA is set forth in
Appendix II to this Prospectus. See "INTRODUCTION--Dissenters'
Rights."
Certain Federal Income Tax Consequences. For federal income tax purposes the
Merger will be treated as a taxable sale of the Parisian Common Stock by the
holders thereof. Neither Proffitt's nor Parisian will recognize any gain
or loss as a result of the Merger. See "THE MERGER-- Certain Federal Income
Tax Consequences."
Accounting Treatment of the Merger. The Merger will be accounted for under
the "purchase" method of accounting in accordance with generally accepted
accounting principles. See "THE MERGER-- Accounting Treatment."
Comparison of Rights of Holders of Proffitt's Common Stock and Parisian
Common Stock. See "COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK
AND PARISIAN COMMON STOCK" for a summary of the material differences between the
rights of holders of Proffitt's Common Stock and Parisian Common Stock.
THE GUARANTY AND THE SUPPLEMENTAL INDENTURE
Proffitt's intends to solicit the consents of the Parisian Noteholders to
the Supplemental Indenture. The Supplemental Indenture, if approved by the
Noteholders, will, among other things, amend the existing indenture pursuant to
which the Notes originally were issued (the "Indenture") to make Proffitt's a
party thereto, and to make applicable to Proffitt's certain covenants which are
currently applicable to Parisian, remove certain provisions rendered obsolete by
the Merger, and add to the Indenture the guaranty by Proffitt's, on a senior
subordinated basis, of the payment by Parisian of the principal of, and interest
and premium, if any, on the Notes (the "Guaranty"). The Guaranty will be an
9
<PAGE>
unsecured senior subordinated obligation of Proffitt's, ranking pari passu with,
or senior in right of payment to, all other existing and future indebtedness of
Proffitt's that is expressly subordinated to Proffitt's senior indebtedness. The
Guaranty will be subordinated to senior indebtedness of Proffitt's on the same
basis as the Notes are subordinated to senior indebtedness of Parisian. See "THE
MERGER--The Guaranty and the Supplemental Indenture."
REGULATORY MATTERS
Under the HSR Act and the rules promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. Proffitt's and Parisian each
filed a premerger notification and report form pursuant to the HSR Act with the
Federal Trade Commission and the Antitrust Division of the Department of Justice
on July 19, 1996. The waiting period under the HSR Act expired on , 1996.
Although Proffitt's believes the Merger complies with the antitrust laws, the
Department of Justice or others could take action under the antitrust laws with
respect to the Merger, notwithstanding the expiration of the waiting period,
which action may include seeking to enjoin the consummation of the Merger or to
require divestiture of substantial assets of Proffitt's or Parisian. There can
be no assurance that a challenge to the Merger on antitrust grounds will not be
made or, if such challenge is made, that it would not be successful. See "THE
MERGER--Governmental and Regulatory Approvals."
OTHER SIGNIFICANT CONSIDERATIONS
In determining whether to approve the Merger Agreement, Parisian
shareholders should consider that the market price of Proffitt's Common Stock
may vary from the market price at the Effective Time, as well as from the market
price at the date on which the Parisian Board adopted the Merger Agreement, the
date of this Prospectus and at the date of the Parisian Special Meeting. Such
variations may be the result of changes in the business, operations or prospects
of Proffitt's or Parisian, market assessments of the likelihood that the Merger
will be consummated and the timing thereof, regulatory considerations, general
market and economic considerations and other factors. Because the Effective
Time may occur at a later date than the date of the Parisian Special Meeting,
there can be no assurance that the market price of Proffitt's Common Stock on
the date of the Parisian Special Meeting will be indicative of the market
price of Proffitt's Common Stock at the Effective Time or thereafter.
integrating Parisian into Proffitt's
Anticipated non-recurring charges to be incurred by Proffitt's related to
integrating Parisian into Proffitt's are estimated at $4.0 million ($2.4 million
net of tax), which includes the conversion of computer systems and other
expenses of consolidating administrative functions of Proffitt's and Parisian.
Proffitt's and Parisian are large retail department store chains, with
operations and sales in several different regions of the United States. Although
management of the companies believes that their respective operations are
complementary and that integration of the companies' operations can be
accomplished promptly and without substantial difficulty, there can be no
assurance that future results of Proffitt's will improve or will not be
adversely affected as a result of the Merger.
Shareholders of Parisian also should consider that the Conversion Number is
a fixed ratio in the Merger Agreement. As a result, the Conversion Number will
not be adjusted in the event of an increase or decrease in the market price of
Proffitt's Common Stock. Parisian shareholders are urged to obtain current
market quotations for the Proffitt's Common Stock.
Immediately prior to the Effective Time, there will be approximately
20,689,845 shares of Proffitt's Common Stock outstanding, assuming the absence
of any exercise of options. Immediately following the Effective Time, there will
be approximately 23,636,597 shares of Proffitt's Common Stock outstanding,
assuming the absence of any exercise of stock options. The shares of Proffitt's
Common Stock issued to shareholders of Parisian pursuant to the Merger Agreement
will comprise approximately 12.5% of the total number of shares of Proffitt's
Common Stock outstanding immediately after the Merger (and approximately 12.2%
on a fully diluted basis, assuming exercise of all options exercisable within
60 days of the date of this Prospectus and the conversion of all 4.75%
Convertible Subordinated Debentures due 2003 convertible within 60 days of the
date of this Prospectus).
10
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
AND
PRO FORMA SELECTED FINANCIAL AND OPERATING DATA
Set forth on the following pages are selected historical financial and
operating data of Proffitt's and Parisian, and selected unaudited pro forma
combined financial and operating data of Proffitt's and Parisian. The historical
data with respect to Proffitt's and Parisian are derived from the respective
historical financial statements of Proffitt's and Parisian and should be read in
conjunction with the financial statements and notes of Proffitt's incorporated
herein by reference and the financial statements and notes of Parisian appearing
elsewhere in this Prospectus.
The selected unaudited pro forma combined financial and operating data
should be read in conjunction with the unaudited pro forma financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. See
"Unaudited Pro Forma Condensed Combined Financial Statements."
11
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA FOR PROFFITT'S, INC. (1)
The selected financial and operating data below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of
Proffitt's and with Management's Discussion and Analysis of Financial Condition
and Results of Operations incorporated by reference in this Prospectus. The
selected financial and operating data as of and for the three months ended April
29, 1995 and May 4, 1996 are derived from unaudited financial statements as of
such dates and for such periods, but in the opinion of management, include all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of such data.
<TABLE><CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED (2) (3)
------------------------------------------------------------------- --------------------
FEBRUARY 1, JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, APRIL 29, MAY 4,
1992 1993 1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales (4)......................... $ 435,284 $ 601,677 $ 798,779 $ 1,216,498 $ 1,333,498 $ 287,125 $296,561
Costs and expenses:
Cost of sales........................ 273,040 362,620 520,987 795,353 873,218 187,008 192,892
Selling, general and administrative
expenses.............................. 112,793 158,920 192,028 284,748 324,650 70,891 71,537
Other operating expenses............. 34,934 44,016 66,617 97,821 105,021 24,840 24,398
Expenses related to hostile takeover
defense (5)........................... 3,182 438
Impairment of long-lived assets
(6)................................... 19,121
Merger, restructuring, and
integration costs (7)................. 20,822 2,763
Gain on sale of assets (8)........... (2,260)
----------- ----------- ----------- ----------- ----------- --------- --------
Operating income (loss).......... 14,517 36,121 19,147 38,576 (12,516) 3,948 7,231
Other income (expense):
Finance charge income, net of
allocation to purchasers of
accounts receivable (9)............... 15,194 15,401 19,312 27,934 31,273 7,793 7,160
Interest expense..................... (15,102)(10) (9,445) (9,245) (20,781) (26,098) (6,269) (4,105)
Other income (expense), net.......... 1,817 (380)(11) 2,923 3,865 2,848 656 370
----------- ----------- ----------- ----------- ----------- --------- --------
Income (loss) before provision for
income taxes, extraordinary loss
and cumulative effect of
accounting changes.................... 16,426 41,697 32,137 49,594 (4,493) 6,128 10,656
Provision for income taxes............ 7,045 15,567 12,892 19,850 1,906 2,480 4,402
----------- ----------- ----------- ----------- ----------- --------- --------
Income (loss) before extraordinary
loss and cumulative effect of
accounting changes.................... 9,381 26,130 19,245 29,744 (6,399) 3,648 6,254
Extraordinary loss on extinguishment
of debt (net of tax)................. (1,088) (2,060)
Cumulative effect of accounting
changes (net of tax) (12)............ (1,794) 1,904
----------- ----------- ----------- ----------- ----------- --------- --------
Net income (loss).................... 9,381 24,336 20,061 29,744 (8,459) 3,648 6,254
Preferred stock dividends............. 1,694 1,950 488 488
----------- ----------- ----------- ----------- ----------- --------- --------
Net income (loss) available to common
shares................................ $ 9,381 $ 24,336 $ 20,061 $ 28,050 $ (10,409) $ 3,160 $ 5,766
----------- ----------- ----------- ----------- ----------- --------- --------
----------- ----------- ----------- ----------- ----------- --------- --------
Earnings (loss) per common share
before extraordinary loss and
cumulative effect of accounting
changes............................... $ 1.07 $ 2.06 $ 1.09 $ 1.48 $ (0.43) $ 0.16 $ 0.29
Extraordinary loss.................... (0.06) (0.11)
Cumulative effect of accounting
changes............................... (0.14) 0.11
----------- ----------- ----------- ----------- ----------- --------- --------
Earnings (loss) per common share...... $ 1.07 $ 1.92 $ 1.14 $ 1.48 $ (0.54) $ 0.16 $ 0.29
----------- ----------- ----------- ----------- ----------- --------- --------
----------- ----------- ----------- ----------- ----------- --------- --------
Weighted average common shares
outstanding (in thousands) (13)...... 8,788 12,707 17,667 18,922 19,372 19,182 19,744
OPERATING DATA:
Comparable store net sales increases
(14).................................. 5% 6% 6% 1% 3% 3% 5%
Stores open at end of period
(14)(15).............................. 40 69 78 106 104 106 103
Capital expenditures (16)............. $ 5,843 $ 39,013 $ 78,475 $ 43,289 $ 49,458 $ 9,668 $ 9,348
Balance Sheet Data:
Working capital....................... $ 126,026 $ 180,091 $ 286,351 $ 283,162 $ 212,122 $203,460
Total assets.......................... $ 274,441 $ 455,295 $ 575,449 $ 878,393 $ 835,666 $825,893
Senior long-term debt, less current
portion............................... $ 106,066 $ 193,555 $ 95,777 $ 190,216 $ 134,255 $113,965
Subordinated debt..................... $ 86,250 $ 100,269 $ 100,505 $100,568
Shareholders' equity.................. $ 101,229 $ 143,107 $ 290,309 $ 360,611 $ 356,852 $363,821
</TABLE>
12
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA FOR PROFFITT'S INC. (IN
THOUSANDS)
(1) Effective February 3, 1996, Proffitt's combined its business with Younkers,
Inc., a publicly-owned retail department store chain. The combination was
structured as a tax-free transaction and has been accounted for as a
pooling of interest and accordingly, the financial statements were restated
for all periods to include the results of operations and financial position
of Younkers. Each share of Younkers, Inc. Common Stock was converted into
ninety eight one-hundredths (.98) shares of Proffitt's Common Stock, with
approximately 8,800 shares issued in the transaction.
(2) Proffitt's's fiscal year ends on the Saturday nearest January 31. Fiscal
years presented consisted of 52 weeks except for the fiscal year ended
February 3, 1996 which consisted of 53 weeks (except for the period ended
January 30, 1993 which includes 53 weeks for Younkers).
(3) The business of Proffitt's is seasonal, and results for any period within a
fiscal year are not necessarily indicative of the results that may be
achieved for a full fiscal year.
(4) Net Sales include leased department sales, which represent sales by retail
vendors that lease store space. Leased department sales accounted for
approximately 6 to 7% of net sales for all periods presented.
(5) Expenses incurred were related to the defense of the attempted hostile
takeover of Younkers by Carson Pirie Scott & Co.
(6) Proffitt's adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" in the fourth quarter of the year
ended February 3, 1996. As a result of adopting this new accounting
standard and as a result of closing certain stores and warehouses,
Proffitt's incurred impairment charges related to the write-down in
carrying value of six operating stores due to poor operating results,
abandonment of duplicate warehouse and leasehold improvements related to
the Parks-Belk acquisition and the Younkers merger, and a loss on
abandonment of leasehold improvements related to closed stores.
(7) In connection with the merger of Proffitt's and Younkers, the two companies
incurred certain costs to effect the merger and other costs to restructure
and integrate the combined operating companies. The costs incurred were
comprised of merger transaction costs, severance and related benefits,
abandonment of duplicate administrative office space and property and
duplicate data processing equipment and software (including leases), and
other costs.
During the three-month period ended May 4, 1996, Proffitt's incurred additional
merger, restructuring, and integration costs primarily related to the
termination of the Younkers pension plan, continued conversion of systems
and consolidation of administrative functions.
(8) During the three-month period ended May 4, 1996, Younkers sold two stores
to a third party.
(9) On April 1, 1994, Proffitt's began selling an undivided ownership interest
in its accounts receivable, recognizing no gain or loss on the transaction.
The ownership interest which may be transferred to the purchaser is limited
to $175,000 and is further restricted on a basis of the level of eligible
receivables and a minimum ownership interest to be maintained by
Proffitt's.
Effective with the February 3, 1996 merger, Younkers replaced amounts borrowed
under a securitization program with the sale of (i) a fixed ownership interest
of $75,000 and (ii) a variable ownership interest of up to $50,000 in its
trade receivables.
(10) Includes accruals for interest expense of $1,400 resulting from an Internal
Revenue Service audit of Younkers.
(11) Includes nonrecurring start-up costs of $1,210 connected with the acquired
Prange stores by Younkers.
(12) Effective as of the beginning of the fiscal year ended January 30, 1993,
Younkers recognized a cumulative effect adjustment of $1,794, (net of
income taxes of $1,225) due to the adoption of SFAS 106, under which
employers recognize the cost of retiree health and life insurance benefits
over the employees' period of service.
Effective January 31, 1993, Proffitt's changed its method of accounting for
inventory to include certain purchasing and distribution costs. Previously,
these costs were charged to expense in the period incurred rather than in
the period in which the merchandise was sold. The cumulative effect of this
change was to increase net income $2,273 (net of income taxes of $1,532).
Effective January 31, 1993, Proffitt's also changed its method of accounting for
store preopening costs to expensing such costs when incurred. The cumulative
effect of this change was to decrease net income $369 (net of income taxes
of $236). Previously, these costs were amortized over the twelve months
immediately following the individual store openings. Younkers has
historically expended such costs as incurred.
In 1992, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes, which
requires a change from the deferred method to the asset and liability method
of accounting for income taxes. Proffitt's adopted the new accounting
standard effective January 31, 1993. Adoption of the new standard had no
effect on Proffitt's financial position or
13
<PAGE>
results of operations. There would have been no impact on the year ended January
30, 1993 had the standard been applied retroactively. Younkers adopted SFAS 109
prior to the years presented.
Effective January 30, 1994, Proffitt's changed its method of accounting for
inventory to the last-in, first-out (LIFO) method for a substantial portion of
its inventories. Previously, all inventories were valued using the first-in,
first-out (FIFO) method. Younkers has historically valued its inventories
under the LIFO method. The cumulative effect of this change is not presented
because it is not determinable.
(13) In January 1992, April 1992, March 1993 and April 1993, Proffitt's
and Younkers completed public offerings of 2,645; 6,047; 2,395; and 2,371
shares of Common Stock, the proceeds of which were utilized, in part, to
reduce long-term debt.
In April 1992, Proffitt's completed a public offering of 6,047 shares of Common
Stock, the proceeds of which were used to repay debt and fund capital
expenditures related to the renovation, acquisition and opening of new
stores.
In October 1993, Proffitt's completed a public offering of $86,250 of
Convertible Subordinated Debentures, the proceeds of which were used to reduce
outstanding bank debt, fund capital expenditures related to the renovation
and expansion of stores, and for working capital and general corporate
purposes.
(14) Comparable store data for a fiscal year or a three-month period within a
fiscal year are adjusted so that all annual amounts relate to a 52-week
year. New stores become comparable stores in the first full month following
the anniversary of the opening of those stores. Renovated, expanded, or
relocated stores are classified as comparable stores and not as new stores.
Where operations within a particular shopping mall are divided among two or
more buildings, the combined operation is counted as one store.
(15) Younkers purchased the merchandise inventories, properties and certain
other assets of the Prange department store division of H.C. Prange Company
in September 1992. Additionally, Proffitt's purchased 19 Hess Department
Stores: eight in October 1992, nine in January 1993 (of which one was
subsequently closed) and two in July 1993.
During June 1993, Younkers completed the sale and lease back of the eight owned
store properties acquired from Prange with net proceeds of approximately
$31,000, incurring no gain or loss in the transaction.
On March 31, 1994, Proffitt's acquired all of the common stock of Macco
Investments, Inc. ("Macco"), a privately held corporation and the parent company
of McRae's Inc. ("McRae's"), the owner and operator of 28 department stores
in Alabama, Florida, Louisiana and Mississippi, for a total acquisition
price of approximately $212,000.
In March and April 1995, Proffitt's acquired Parks-Belk Company, the owner and
operator of four department stores of which one was subsequently closed.
(16) Excludes amounts expended in connection with the purchase of the Prange
stores in September 1992, Macco Investments, Inc. in March 1994, and
Parks-Belk Company in March and April 1995.
14
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA FOR PARISIAN
The selected financial and operating data below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto of
Parisian and with Parisian Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in this Prospectus. The
selected financial and operating data as of and for the three months ended April
29, 1995 and May 4, 1996 are derived from unaudited financial statements as of
such dates and for such periods, but, in the opinion of management, include all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of such data.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED (1) (2)
------------------------------------------------------------------- ---------------------
FEBRUARY 1, JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, APRIL 29, MAY 4,
1992 1993 1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales(3).................. $ 368,216 $ 448,969 $ 517,668 $ 606,717 $ 663,828 $ 155,351 $166,047
Costs and expenses:
Cost of sales................ 226,018 275,563 328,506 393,949 419,056 91,874 99,404
Selling, general and
administrative expenses.... 99,221 117,576 137,110 159,987 165,237 40,545 42,472
Other operating expenses..... 26,484 31,602 37,784 47,139 55,948 13,851 14,367
Reengineering costs(4)....... 3,185 304
----------- ----------- ----------- ----------- ----------- --------- --------
Operating income........... 16,493 24,228 14,268 2,457 23,283 9,081 9,804
Other income (expense):
Finance charge income, net of
allocation to purchaser of
accounts receivable........... 12,180 12,621 9,930 8,046 7,125 1,628 2,156
Interest expense............. (30,020) (27,217) (21,617) (18,051) (17,652) (4,439) (4,245)
Other income, net............ 124 465 156 411 2,407 1,110 143
----------- ----------- ----------- ----------- ----------- --------- --------
Income (loss) before
provision for income
taxes......................... (1,223) 10,097 2,737 (7,137) 15,163 7,380 7,858
Provision for income taxes.... 203 4,345 1,705 (1,674) 6,385 2,901 3,307
----------- ----------- ----------- ----------- ----------- --------- --------
Income (loss) before
extraordinary loss......... (1,426) 5,752 1,032 (5,463) 8,778 4,479 4,551
Extraordinary loss on early
retirement of debt (net of
tax).......................... (5,403)
----------- ----------- ----------- ----------- ----------- --------- --------
Net income (loss)............ $ (1,426) $ 5,752 $ (4,371) $ (5,463) $ 8,778 $ 4,479 $ 4,551
----------- ----------- ----------- ----------- ----------- --------- --------
----------- ----------- ----------- ----------- ----------- --------- --------
Earnings (loss) per common
share before extraordinary
loss.......................... $ (0.23) $ 0.93 $ 0.17 $ (0.78) $ 1.19 $ 0.61 $ 0.62
Extraordinary loss............ (0.87)
----------- ----------- ----------- ----------- ----------- --------- --------
Earnings (loss) per common
share......................... $ (0.23) $ 0.93 $ (0.70) $ (0.78) $ 1.19 $ 0.61 $ 0.62
----------- ----------- ----------- ----------- ----------- --------- --------
----------- ----------- ----------- ----------- ----------- --------- --------
Weighted average common shares
outstanding (in
thousands)(5)................. 6,208 6,208 6,208 6,987 7,356 7,356 7,356
Operating Data:
Comparable store net sales
increases(6).................. 6% 10% 0% 0% -1% -4% 3%
Stores open at end of
period........................ 22 25 30 35 37 35 38
Capital expenditures.......... $ 886 $ 4,604 $ 14,974 $ 5,730 $ 10,735 $ 305 $ 1,211
Balance Sheet Data:
Working capital............... $ 79,165 $ 85,298 $ 94,797 $ 101,305 $ 128,599 $134,396
Total assets.................. $ 328,422 $ 365,004 $ 304,784 $ 323,122 $ 344,206 $345,694
Senior long-term debt, less
current portion.............. $ 24,200 $ 23,899 $ 23,567 $ 19,258 $ 22,792 $ 22,539
Subordinated debt............. $ 100,000 $ 100,000 $ 125,000 $ 125,000 $ 125,000 $125,000
Shareholders' equity.......... $ 60,316 $ 66,068 $ 61,697 $ 71,153 $ 79,931 $ 84,482
</TABLE>
15
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA FOR PARISIAN (IN THOUSANDS)
(1) Parisian's fiscal year ends on the Saturday nearest January 31. Fiscal years
presented consisted of 52 weeks except for the fiscal year ended February 3,
1996 which consisted of 53 weeks.
(2) The business of Parisian is seasonal, and results for any period within a
fiscal year are not necessarily indicative of the results that may be
achieved for a full fiscal year.
(3) Net Sales include leased department sales, which represent sales by retail
vendors that lease store space. Leased department sales accounted for
approximately 1 to 2% of net sales for all periods presented.
(4) In the fiscal years ended January 28, 1995 and February 3, 1996, Parisian
incurred certain non-recurring charges in connection with a business process
redesign project. Such reengineering costs included implementation of cost
containment measures, primarily directed at payroll, as well as customer
surveys to refine Parisian's market focus.
(5) In May 1994, Parisian completed a private offering of 1,148 shares of
Parisian Common Stock to certain of its shareholders.
(6) Comparable store growth for 1993 and 1994 does not include sales for
Parisian's Cincinnati stores, since comparable store sales would be
distorted for the periods as a result of the opening of two additional
stores in the market in 1993.
Comparable store sales growth for 1994 does not include sales for Parisian's
Atlanta stores, since comparable store sales would be distorted for the period
as a result of opening one additional store in the market during each of 1993
and 1994.
] Comparable store sales growth for 1995 does not include sales for Parisian's
Keystone Crossing store in Indianapolis, IN, since comparable sales would be
distorted for the period as a result of opening an additional store in the
market during 1995. Additionally, comparable store sales do not include
Parisian's Sarasota, FL, store since comparable store sales would be
distorted for the period due to the closing of the store during January
1996.
16
<PAGE>
SELECTED PRO FORMA FINANCIAL AND OPERATING DATA
The pro forma selected financial and operating data below have been prepared
on a combined basis based upon the historical financial statements of Proffitt's
and Parisian. The pro forma combined information gives effect to the Merger
accounted for as a purchase. See "Unaudited Pro Forma Condensed Combined
Financial Statements."
<TABLE>
<CAPTION>
FISCAL THREE
YEAR ENDED MONTHS ENDED
FEBRUARY 3, MAY 4,
1996 1996
----------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Statement of Income Data:
Net Sales.......................................................... $ 1,997,326 $462,608
Costs and expenses:
Cost of sales.................................................... 1,292,974 292,596
Selling, general and administrative expenses..................... 488,287 113,609
Other operating expenses......................................... 162,973 39,265
Expenses related to hostile takeover defense..................... 3,182
Impairment of long-lived assets.................................. 19,121
Merger, restructuring, and integration costs..................... 20,822 2,763
Gain on sale of assets........................................... (2,260)
----------- ------------
Operating income............................................... 9,967 16,635
----------- ------------
----------- ------------
Other income (expense):
Finance charge income, net of allocation to purchasers of
accounts receivable............................................ 38,398 9,316
Interest expense................................................. (53,050) (10,650)
Other income (expense), net...................................... 5,255 513
----------- ------------
Income (loss) before provision for income taxes and
extraordinary loss........................................... (570) 15,814
Provision for income taxes......................................... 5,691 7,059
----------- ------------
Income (loss) before extraordinary loss.......................... (5,121) 8,755
Preferred stock dividends.......................................... 1,950 488
----------- ------------
Income before extraordinary loss after preferred stock
dividends.......................................................... $ (7,071) $ 8,267
----------- ------------
----------- ------------
Earnings (loss) per common share before extraordinary loss......... $ (0.31) $ 0.36
Weighted average common shares outstanding (in thousands).......... 22,474 22,846
Operating Data:
Comparable store net sales increases............................... 2% 4%
Stores open at end of period....................................... 141 141
Capital expenditures............................................... $ 60,193 $ 10,559
</TABLE>
<TABLE>
<CAPTION>
MAY 4, 1996
-----------
<S> <C>
Balance Sheet Data
Working capital................................................................ $ 334,856
Total assets................................................................... $ 1,339,429
Senior long-term debt, less current portion.................................... $ 261,804
Subordinated debt.............................................................. $ 225,568
Shareholders' equity........................................................... $ 468,845
</TABLE>
17
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are income from continuing operations and book value per
common share data of Proffitt's and Parisian on both an historical and pro forma
combined basis. Neither Proffitt's nor Parisian has paid any dividends on common
stock. Pro forma combined income from continuing operations per share is derived
from the pro forma combined information presented elsewhere herein, which gives
effect to the Merger under the purchase method of accounting as if the Merger
had occurred at January 29, 1995, combining the results of Proffitt's and
Parisian for the periods presented. The equivalent pro forma combined data for
Parisian is based upon the Conversion Number, exclusive of the Cash
Consideration. Book values per share for Parisian and for pro forma combined
presentation are based upon outstanding common shares, adjusted in the case of
the pro forma combined presentation to include the shares of Proffitt's Common
Stock to be issued in the Merger. The information set forth below should be read
in conjunction with the respective audited and unaudited financial statements of
Proffitt's incorporated by reference and of Parisian included elsewhere in this
Prospectus and the "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
EQUIVALENT
PRO FORMA
PROFFITT'S/ COMBINED
PARISIAN PER SHARE OF
PARISIAN PROFFITT'S PRO FORMA PARISIAN
HISTORICAL HISTORICAL COMBINED COMMON STOCK
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Income from continuing operations:
February 3, 1996................................. $(0.43) $ 1.19 $ (0.31) $ (0.12)
May 4, 1996...................................... $ 0.29 $ 0.62 $ 0.36 $ 0.14
Book value (At End of Period):
February 3, 1996................................. $17.15 $10.87 $ 19.62 $ 7.86
May 4, 1996...................................... $17.46 $11.48 $ 19.88 $ 7.96
</TABLE>
18
<PAGE>
STOCK PRICES AND DIVIDENDS
The Proffitt's Common Stock is listed and traded on the Nasdaq National
Market (Symbol: PRFT). The following table sets forth for the periods indicated
the reported high and low bid quotations for Proffitt's Common Stock. The source
of these quotations is the Monthly Statistical Report of the National
Association of Securities Dealers, Inc. These quotations represent inter-dealer
prices for actual transactions, without adjustment for retail markup, markdown
or commission. Proffitt's has not declared or paid any dividends on its common
stock.
<TABLE>
<CAPTION>
SALES PRICE
----------------
<S> <C> <C>
HIGH LOW
------ ------
1994
First Quarter.............................................................. 25 3/4 16 1/2
Second Quarter............................................................. 19 3/4 14 3/4
Third Quarter.............................................................. 21 3/4 14 3/4
Fourth Quarter............................................................. 25 1/4 17 3/4
1995
First Quarter.............................................................. 26 1/2 20 3/4
Second Quarter............................................................. 33 24
Third Quarter.............................................................. 34 1/4 23 1/8
Fourth Quarter............................................................. 29 21 1/2
1996
First Quarter.............................................................. 33 3/4 23 1/2
Second Quarter (prior to Merger announcement July 8, 1996)................. 40 33 1/4
Second Quarter (after Merger announcement on July 8, 1996).................
Third Quarter (through , 1996).......................................
</TABLE>
There is no established trading market for the Parisian Common Stock.
19
<PAGE>
INTRODUCTION
This Prospectus is being furnished to the shareholders of Parisian in
connection with the Parisian Special Meeting to be held at on ,
1996, at , local time, and at any adjournments or postponements thereof.
At the Parisian Special Meeting, shareholders of Parisian will be asked to
approve the Merger Agreement. A conformed copy of the Merger Agreement appears
as Appendix I to this Prospectus.
This Prospectus constitutes a prospectus of Proffitt's with respect to up to
an aggregate of 3,352,635 shares of Proffitt's Common Stock issuable to Parisian
shareholders pursuant to the Merger Agreement and issuable upon exercise of
certain options to purchase shares of Parisian Common Stock which are to be
converted in the Merger into options to purchase shares of Proffitt's Common
Stock.
MATTERS TO BE CONSIDERED AT THE PARISIAN SPECIAL MEETING
At the Parisian Special Meeting, holders of shares of Parisian Common Stock
will consider and vote upon a proposal to approve the Merger Agreement. Holders
of shares of Parisian Common Stock entitled to vote also will consider and vote
upon any other matter that may properly come before the Parisian Special Meeting
or at any adjournments or postponements thereof. On July 8, 1996 the Parisian
Board unanimously adopted the Merger Agreement and recommended a vote FOR the
approval of the Merger Agreement. See "THE MERGER--Recommendation of the
Parisian Board; Reasons for the Merger."
In the Merger each issued and outstanding share of Parisian Common Stock
will be converted into the right to receive $15.00 in cash and .4006 validly
issued, fully paid and nonassessable shares of Proffitt's Common Stock. Cash
will be paid in lieu of fractional shares of Proffitt's Common Stock. See "THE
MERGER--Merger Consideration" and "THE MERGER AGREEMENT--Fractional Shares."
VOTE REQUIRED
Each holder of Parisian Common Stock is entitled to one vote per share held
of record on the record date described below upon each matter properly submitted
at the Parisian Special Meeting. The Merger Agreement must be approved by the
affirmative vote of holders of not less than two-thirds of the outstanding
shares of Parisian Common Stock entitled to vote on approval of the Merger
Agreement. Holders of options to purchase Parisian Common Stock will not be
entitled to receive notice of, or to vote at, the Parisian Special Meeting.
Abstentions will be counted as shares present for purposes of determining a
quorum. See "Record Date; Stock Entitled to Vote; Quorum." Abstentions will have
the effect of votes against the approval of the Merger Agreement.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of Parisian Common Stock at the close of business on
, 1996 (the "Record Date") will be entitled to receive notice of and to
vote at the Parisian Special Meeting. On the Record Date, Parisian had
outstanding 7,355,846.189 shares of Parisian Common Stock, held by 88
shareholders of record. The holders of Parisian Common Stock are entitled to one
vote per share on each matter submitted to a vote at the Parisian Special
Meeting. The holders of a majority of the shares of Parisian Common Stock
entitled to vote must be present in person or by proxy at the Parisian Special
Meeting in order for a quorum to be present. In the event a quorum is not
present in person or by proxy at the Parisian Special Meeting, the Parisian
Special Meeting is expected to be adjourned or postponed.
20
<PAGE>
DISSENTERS' RIGHTS
Any holder of record of Parisian Common Stock who follows the procedures
specified in Section 10-2B-13.01 through 10-2B-13.32 of the ABCA (the "Appraisal
Provisions") is entitled to receive payment of the "fair value" of such shares
in lieu of the Merger Consideration. Reference is made to the Appraisal
Provisions, copies of which are attached to this Prospectus as Appendix II, for
a complete statement of the appraisal rights of dissenting shareholders.
Under the ABCA, a shareholder who is entitled to dissent and obtain payment
for shares of Parisian Common Stock may not challenge the Merger unless it is
unlawful or fraudulent with respect to the shareholder or Parisian. See ABCA
Sec. 10-2B-13.02(b), included herewith in Appendix II.
Unless waived by Proffitt's, it is a condition to the obligation of
Proffitt's to consummate the Merger that holders of no more than 5% of the
outstanding shares of Parisian Common Stock dissent from the Merger in
accordance with the Appraisal Provisions.
The following information is qualified in its entirety by reference to the
Appraisal Provisions:
If a holder of record of Parisian Common Stock elects to exercise such
shareholder's right to an appraisal under the Appraisal Provisions, such
shareholder must satisfy ALL of the following conditions:
(a) such shareholder must deliver a written notice of intent to demand
payment of the fair value of such shareholder's Parisian Common Stock to
Parisian prior to the vote with respect to the Merger Agreement;
(b) such shareholder must not vote in favor of or consent in writing to
the proposal to approve the Merger Agreement. A failure to vote will satisfy
this condition, but voting in favor of or delivering a proxy in favor of the
proposal to approve the Merger Agreement or an unmarked proxy voted by the
proxy in favor of the Merger will constitute a waiver of such shareholder's
rights to appraisal and will nullify any written demand for appraisal; and
(c) on or before a date set by Parisian, which will be not less than 30
nor more than 60 days after delivery of the notice of procedure for
dissenting shareholders from Parisian (which Parisian must send to all
dissenting shareholders who did not vote in favor of the proposal to approve
the Merger Agreement and who properly filed notice of intent to assert
dissenters' rights), such shareholder must demand payment of the fair value
of his or her Parisian Common Stock and submit his or her Parisian Common
Stock to Parisian for notation of the shareholder's dissent.
Under the Appraisal Provisions, record holders of Parisian Common Stock are
entitled to appraisal rights as described above, and the procedures to perfect
such rights must be carried out by and in the name of such holders of record.
Persons who are beneficial but not record owners of Parisian Common Stock and
who wish to exercise appraisal rights with respect to the Merger must (i) submit
to Parisian, at the time of or before the assertion of the rights, a written
consent of the record holders of the shares to such dissent and (ii) do so with
respect to all of the beneficial owner's shares or the shares over which he or
she has voting power.
After the Effective Time, Parisian must offer to pay to each dissenting
shareholder who has complied with the conditions set forth above an amount which
Parisian estimates to be the fair value of the Parisian Common Stock held by
each dissenting shareholder, plus accrued interest. Along with the offer of
payment, Parisian will also send: (i) a year end balance sheet and statements of
income and changes in shareholders' equity for any fiscal year of Parisian
ending 16 months or less before the date of such offer, together with the latest
available interim financial statements; (ii) an estimate by Parisian of the fair
value of Parisian Common Stock and the amount of interest due; (iii) an
explanation of how the interest was calculated; and (iv) a statement of the
dissenting shareholder's right to object to Parisian's estimate and to demand an
additional payment, as described below. If a dissenting shareholder believes
that the fair value of Parisian Common Stock is greater than the amount offered
by
21
<PAGE>
Parisian, then, within 30 days after such offer, the dissenting shareholder may
give written notice to Parisian of such shareholder's own estimate of the fair
value of Parisian Common Stock, and demand payment of the difference (the
"Supplemental Demand"). Within 60 days after receiving the Supplemental Demand,
Parisian shall either: (i) pay the dissenting shareholder the amount demanded
(or such other amount agreed to by such shareholder), or (ii) file a petition
requesting that the circuit court of Jefferson County, Alabama (the "Court")
determine the fair value of the Parisian Common Stock.
The Court may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. Fair value means the
value of Parisian Common Stock immediately before the effectuation of the
Merger, excluding appreciation or depreciation in anticipation of the Merger,
unless such exclusion would be inequitable. Dissenters will be entitled to
judgment for the amount, if any, by which the fair value of their shares, plus
interest, is found to exceed the amount previously remitted by Parisian. Fair
value may be found by the Court to be more, less or the same as the amount
offered by Parisian or the amount the shareholder would have received had he or
she not dissented from the Merger. See "COMPARISON OF RIGHTS OF HOLDERS OF
PROFFITT'S COMMON STOCK AND PARISIAN COMMON STOCK--Appraisal Rights."
HOLDERS OF PARISIAN COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES
If the requisite shareholder approval is obtained and the Merger is
consummated, materials for submitting Parisian stock certificates in exchange
for Proffitt's stock certificates will be provided to the shareholders of
Parisian at an appropriate time. DO NOT SEND IN YOUR PARISIAN STOCK CERTIFICATES
AT THIS TIME.
THE MERGER
The description of the Merger and the Merger Agreement contained in this
Prospectus is qualified in its entirety by reference to the Merger Agreement, a
copy of which is included as Appendix I to this Prospectus and is incorporated
herein by reference.
GENERAL
Proffitt's, Sub and Parisian have entered into the Merger Agreement, which
provides that, subject to the satisfaction or waiver of the conditions set forth
therein (see "THE MERGER AGREEMENT-- Conditions to the Merger"), Sub will be
merged with and into Parisian, and Parisian will be the surviving corporation
and a wholly-owned subsidiary of Proffitt's. The Articles of Merger will be
filed with the Secretary of State of the State of Alabama on the date of the
closing of the transactions contemplated by the Merger Agreement (anticipated to
be on or before October 15, 1996), or as promptly thereafter as practicable, and
the time of such filing will be the Effective Time.
BACKGROUND OF THE MERGER
In late 1995, the Parisian Board, with the assistance of its financial
advisor, Lehman Brothers, began to consider various methods by which Parisian
could continue to compete effectively in existing retail markets and participate
in new and growing markets, while at the same time enhancing the value of
Parisian for its shareholders. The Parisian Board considered, among other
alternatives, a public offering of Parisian Common Stock; however, it was
determined that, in light of the market conditions existing at that time and
based upon analyses of publicly available historical and estimated future
financial results for other retail companies, as well as a comparison of such
companies with Parisian in terms of sales, growth, profitability and leverage, a
public offering would not be the best course of Parisian to pursue at the time.
Recognizing the trend toward consolidation in the retail department store
industry and the potential strengths and synergies of such consolidation, the
Parisian Board began to consider the possibility of a combination of Parisian's
business with several other retail department
22
<PAGE>
store companies. In this regard, the Parisian Board discussed with Lehman
Brothers the strategic benefits to Parisian and its shareholders of such a
business combination.
In the spring of 1996, Parisian began to solicit indications of interest, on
a confidential basis, from several nationally recognized department store
chains, including Proffitt's. In connection therewith, Donald E. Hess, the Chief
Executive Officer of Parisian, called R. Brad Martin, the Chief Executive
Officer of Proffitt's and expressed an interest in exploring a possible business
combination. Mr. Hess and Mr. Martin have known each other for years through
their associations in the industry and had, prior to May 1996, occasionally
discussed the consolidation in the industry in general and the possibility of a
business combination between Proffitt's and Parisian in particular. By the first
week of May 1996, Proffitt's and several other companies which Parisian had
contacted had executed confidentiality agreements with Parisian, and Parisian
then distributed to such companies, including Proffitt's, certain materials
concerning its business, properties, financial condition and results of
operation. Proffitt's expressed interest in pursuing a business combination
with Parisian, and one of the other companies to which confidential information
was sent expressed an interest in the acquisition of certain of Parisian's store
locations. Parisian did not receive any other indications of interest from any
other parties which it had solicited or any other unsolicited parties. In
conjunction with the execution of a confidentiality agreement by Parisian with
Proffitt's on June 6, 1996, senior management of each of Parisian and
Proffitt's, together with their respective financial and legal advisors, began
the due diligence process.
During the next several weeks, various structures for a possible
business combination were discussed in a series of discussions one of more of
which included Mr. Hess, Mr. Martin, senior management of each of the parties
and their respective financial and legal advisors. In connection with their due
diligence review, the parties also discussed certain non-public information
concerning their respective businesses, prospects and strategic objectives, as
well as new business opportunities, operating efficiencies and potential
synergies. Senior management of each company, with the assistance of their
respective financial and legal advisors, separately conducted internal analyses
of the results of their due diligence reviews and discussed the strategic,
financial and operational benefits of a possible business combination.
Consideration was also given to the federal income tax consequences of
alternative structures for a possible combination. At various times during the
period, management of Parisian reported the status of such analyses and
discussions to the members of Parisian Board.
During the period from June 20, 1996 until shortly before the Merger
Agreement was signed on July 8, 1996, the parties and their counsel negotiated
and drafted the proposed Merger Agreement. Negotiation and discussion of the
various aspects of the proposed Merger Agreement by representatives of
Proffitt's and Parisian, together with their respective financial and legal
advisors, continued almost daily throughout the period. Such negotiations and
discussions focused on various aspects of the proposed Merger Agreement and the
transactions contemplated thereby, including (i) certain proposed
representations, warranties and covenants, (ii) what actions of Proffitt's and
Parisian would be prohibited pending the closing of the Merger without the
consent of the other party, (iii) the provisions for termination of the Merger
Agreement, the circumstances under which a termination fee would be paid and the
amount of such fee, (iv) the anticipated terms of the Supplemental Indenture,
(v) the anticipated federal income tax consequences of, and various alternative
structures for, the proposed Merger and (vi) the rights of Parisian shareholders
to have the shares of Proffitt's Common Stock to be received in the Merger
registered for resale under the Securities Act.
By early July, 1996, the outstanding issues regarding the Merger Agreement
and Registration Rights Agreement had been resolved. On July 8, 1996, the
Parisian Board met and received presentations from senior management and
Parisian's financial and legal advisors and discussed the results of the
negotiations with Proffitt's, the operation, financial condition, results and
prospects of the business of both Parisian and Proffitt's and considered at
length the terms and conditions of the proposed Merger Agreement and
Registration Rights Agreement. After consideration of such presentations as well
as a number of other factors, the Parisian Board unanimously adopted the Merger
Agreement, approved the Registration Rights Agreement and approved the
transactions contemplated by such agreements.
23
<PAGE>
RECOMMENDATIONS OF THE PARISIAN BOARD; REASONS FOR THE MERGER
As described above, on July 8, 1996, the Parisian Board, at a special
meeting, received presentations regarding, and reviewed the terms and conditions
of, the Merger Agreement and the Registration Rights Agreement, with members of
senior management of Parisian and with Parisian's financial and legal advisors.
In making its determination set forth below at such meeting, the Parisian Board
reviewed and discussed with Lehman Brothers its financial analyses and opinions
and reviewed and discussed certain factors with management regarding the results
of management's due diligence investigations. By a unanimous vote of the
Parisian Board at such special meeting, the Parisian Board determined that the
Merger is fair and in the best interest of Parisian and its shareholders,
adopted the Merger Agreement, approved the Registration Rights Agreement, and
resolved to recommend that the shareholders of Parisian vote for approval of the
Merger Agreement.
In reaching its conclusion to adopt the Merger Agreement, approve the
Registration Rights Agreement and approve the transactions contemplated by such
agreements, the Parisian Board considered, among other things, the following
material factors:
(i) the Merger Agreement and the Merger Consideration to be received by
the shareholders of Parisian;
(ii) the fact that the terms of the Merger Agreement permit the
shareholders of Parisian to continue to have an indirect ownership interest
in Parisian through their ownership of Proffitt's Common Stock;
(iii) the fact that the terms of the Merger Agreement permit Parisian to
terminate the Merger Agreement if Parisian receives a third party offer with
respect to a merger, consolidation or similar transaction and such
transaction is, in the good faith opinion of the Parisian Board, more
favorable to Parisian than the proposed Merger;
(iv) the fact that there is currently no public trading market for the
Parisian Common Stock;
(v) the business, prospects, properties and historical and current
financial condition and results of operations of Parisian;
(vi) the business, prospects, properties and historical and current
financial condition and results of operations of Proffitt's;
(vii) the proposed revisions to the Indenture and the proposed guaranty
by Proffitt's of Parisian's obligations under the Notes;
(viii) the fact that it is a condition to the obligation of Proffitt's
to effect the Merger that the Parisian Noteholders approve such proposed
revisions to the Indenture in accordance with the terms and conditions
thereof;
(ix) the opinion of Lehman Brothers that, from a financial point of
view, the Merger Consideration is fair to Parisian and its shareholders;
and
(x) the fact that the proposed acquisition of Parisian by Proffitt's is
being structured as a merger so that shareholders of Parisian will have the
right to dissent from the Merger under the applicable provisions of the
ABCA.
In view of the wide variety of factors considered by the Parisian Board, the
Parisian Board did not find it practicable to quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determination. Consequently, the Parisian Board did not quantify the assumptions
and results of its analysis in reaching its determination that the Merger is
fair to, and in the best interests of, Parisian and its shareholders.
THE PARISIAN BOARD HAS UNANIMOUSLY RECOMMENDED THAT THE HOLDERS OF
OUTSTANDING SHARES OF PARISIAN COMMON STOCK VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
24
<PAGE>
Opinion of Lehman Brothers. The Parisian Board engaged Lehman Brothers to
render financial advisory services to the Parisian Board concerning Proffitt's
proposed acquisition of Parisian. As part of its role as financial advisor to
the Parisian Board, Lehman Brothers was engaged to render a fairness opinion
(the "Opinion") with respect to the fairness, from a financial point of view, to
Parisian's shareholders of the consideration to be received by such shareholders
in the Merger.
At the July 8, 1996 Parisian Board meeting, in connection with the Parisian
Board's evaluation of the proposed Merger, Lehman Brothers made a presentation
to the Parisian Board. Following the presentation, Lehman Brothers delivered the
Opinion to the Parisian Board.
The full text of Lehman Brothers' written opinion dated July 8, 1996 is
attached as Appendix IV to this Prospectus and is incorporated herein by
reference. Shareholders may read the Opinion for a discussion of assumptions
made and matters considered by Lehman Brothers in rendering its Opinion. The
summary of the Opinion set forth in this Prospectus is qualified in its entirety
by reference to the full text of such Opinion.
No limitations were imposed by Parisian on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
the Opinion. Lehman Brothers was not requested to and did not make any
recommendation to the Parisian Board as to the form or amount of the
consideration to be received by Parisian's shareholders in the Merger, which was
determined through arm's length negotiations between Proffitt's and Parisian. In
arriving at the Opinion, Lehman Brothers did not ascribe a specific range of
value to Parisian, but made its determination as to the fairness, from a
financial point of view, of the consideration to be received by Parisian's
shareholders on the basis of various financial and comparative analyses. The
Opinion is for the use and benefit of the Parisian Board and was rendered to the
Parisian Board in connection with its consideration of the Merger. The Opinion
does not constitute a recommendation to any shareholder of Parisian as to how
such shareholder should vote with respect to the Merger. Lehman Brothers was not
requested to opine as to, and the Opinion does not in any manner address,
Parisian's underlying business decision to proceed with or effect the Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
proposed Merger Agreement and the specific terms of the Proposed Merger, (2)
publicly available information concerning Parisian and Proffitt's that Lehman
Brothers believed to be relevant to its inquiry, (3) financial and operating
information with respect to the business, operations and prospects of Parisian
(including projections for the years 1996 through 1998) furnished to Lehman
Brothers by Parisian, (4) a comparison of the historical financial results and
present financial condition of Parisian with those of other companies that
Lehman Brothers deemed relevant, (5) financial and operating information with
respect to the business, operations and prospects of Proffitt's (including
projections for the years 1996 through 2000) furnished to Lehman Brothers by
Proffitt's, (6) a trading history of Proffitt's common stock from January 1,
1991 to the present and a comparison of Proffitt's common stock price and
valuation multiples with those of other companies that Lehman Brothers deemed
relevant, (7) a comparison of the historical financial results and present
financial condition of Proffitt's with those of other companies that Lehman
Brothers deemed relevant, (8) the results of Lehman Brothers' efforts to
solicit indications of interest and proposals from third parties with respect
to a purchase of Parisian, and (9) a comparison of the financial terms of the
Merger with the financial terms of certain other transactions that Lehman
Brothers deemed relevant. In addition, Lehman Brothers had discussions with
the management of Parisian and Proffitt's concerning their respective
businesses, operations, assets, financial conditions and prospects and the
cost savings and operating synergies expected to result from a combination of
the businesses of Parisian and Proffitt's, and undertook such other studies,
analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information and relied upon the assurances of management of Parisian
that they were not aware of any facts that would make such information
inaccurate or
25
<PAGE>
misleading. With respect to the financial projections of Parisian, upon advice
of Parisian, Lehman Brothers assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of Parisian as to the future financial performance
of Parisian and that Parisian will perform substantially in accordance with such
projections. With respect to the financial projections of Proffitt's, upon
advice of Proffitt's, Lehman Brothers assumed that such projections have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Proffitt's as to the future financial
performance of Proffitt's and that Proffitt's will perform substantially in
accordance with such projections. In arriving at its Opinion, Lehman Brothers
conducted only a limited physical inspection of the properties and facilities of
Parisian and Proffitt's and did not make or obtain any evaluations or appraisals
of the assets or liabilities of Parisian and Proffitt's. Lehman Brothers'
Opinion necessarily was based upon market, economic and other conditions as they
existed on, and could be evaluated as of, the date of the Parisian Board
meeting.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with the mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Parisian Board selected Lehman
Brothers because of the equity ownership of Parisian and because of its
expertise, reputation and familiarity with Parisian in particular and the
merchandising industry in general.
As compensation for its services in connection with the Merger, Parisian
will pay Lehman Brothers a fee of approximately $3.5 million upon the
consummation of the Merger. In addition, Parisian has agreed to reimburse Lehman
Brothers for certain out-of-pocket expenses incurred in connection with its
engagement and to indemnify Lehman Brothers for certain liabilities that may
arise out of its engagement by Parisian and the rendering of its Opinion.
Affiliates of Lehman Brothers currently own 48.4% of the common stock of
Parisian and Mr. Kenneth Tuchman, a managing director of Lehman Brothers, is a
director of Parisian. Lehman Brothers also has performed various investment
banking services for Parisian in the past and has received customary fees for
such services. In the ordinary course of its business, Lehman Brothers actively
trades in the debt securities of Parisian and may actively trade in the
securities of Proffitt's for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
PROFFITT'S REASONS FOR THE MERGER
The Proffitt's Board believes that the Merger will further the long-term
business strategy of Proffitt's and that the terms of the Merger Agreement
provide the appropriate financial protection for Proffitt's shareholders. The
Board believes, therefore, that the Merger is in the best interests of
Proffitt's and its shareholders. Parisian has demonstrated regional market
leadership in specialty retailing and the locations of its stores fill in some
parts of the south central and midwestern United States not currently served by
Proffitt's. Moreover, with only moderate synergies, the transaction should
provide accretion to the Proffitt's shareholders. The Board, therefore,
unanimously approved the Merger Agreement.
In arriving at its determination, the Proffitt's Board considered a number
of material factors:
(i) The Merger Consideration, a combination of Proffitt's common stock
and cash, allows Proffitt's to use its stock as a currency for the
transaction without unduly diluting the interests of the current Proffitt's
shareholders;
(ii) The Proffitt's Board's view that larger retailers are increasingly
necessary to compete in the retail industry and that the combined company
will have greater economies of scale to provide it with the resources
required to compete both in buying and marketing;
26
<PAGE>
(iii) The Proffitt's Board's belief that the specialty retailing of
Parisian will allow Proffitt's to have store differentiation, allowing it to
compete more effectively with certain larger retailers, while at the same
time allowing for retailing opportunities in products which Parisian
currently does not market;
(iv) The merchandising opportunities provided by the combination with
Parisian will provide Proffitt's a better ability to use more private
labeled products;
(v) The merchandising similarities between Proffitt's and Parisian which
should provide for an easy transition;
(vi) The operating cost savings and synergies that the combined company
expects to achieve through the elimination of corporate overhead, adoption
of "best practices", and economies of scale;
(vii) The Proffitt's Board's belief that Proffitt's and Parisian have
compatible organizational structures and management philosophies; and
(viii) The Proffitt's Board's belief that with only moderate synergies
the transaction should be accretive to Proffitt's shareholders.
The Proffitt's Board neither quantified nor attempted to assign relative
weights to the specific factors it considered in reaching its determination to
approve the Merger Agreement and the Merger.
MERGER CONSIDERATION
Upon consummation of the Merger each issued and outstanding share of
Parisian Common Stock will be converted into the right to receive the Cash
Consideration and .4006 validly issued, fully paid and nonassessable shares of
Proffitt's Common Stock.
Fractional shares of Proffitt's Common Stock will not be issued in the
Merger. Holders of Parisian Common Stock otherwise entitled to a fractional
share of Proffitt's Common Stock will be paid cash in lieu of such fractional
shares determined and paid as described in "THE MERGER AGREEMENT-- Fractional
Shares" below.
The Merger Consideration was determined through arms-length negotiations
between Proffitt's and Parisian. Based on the number of shares of Parisian
Common Stock and the number of options to purchase Parisian Common Stock
expected to be outstanding at the Effective Time, a maximum of 3,352,635 shares
of Proffitt's Common Stock may be issued in respect of shares of Parisian Common
Stock in the Merger and upon exercise of such options, and the total Cash
Consideration will be approximately $110,338,000.
SOURCE OF FUNDS FOR THE CASH CONSIDERATION
Funds for the Cash Consideration are to be provided by Proffitt's from
borrowings under an unsecured senior revolving credit facility. The facility is
anticipated to have interest rate options based upon LIBOR and prime rate, a
three-year initial term with two annual extensions at the lender's discretion,
and will be guaranteed by certain subsidiaries of Proffitt's.
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of the Articles of Merger
with the Secretary of State of the State of Alabama. The filing of the Articles
of Merger will occur on the date of the closing of the transactions contemplated
by the Merger Agreement (anticipated to be on or before October 15, 1996), or as
promptly thereafter as practicable. See "THE MERGER AGREEMENT--Conditions to the
Merger."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of Parisian Common Stock into Proffitt's Common Stock will
occur at the Effective Time. Each certificate for Parisian Common Stock shall,
from and after the Effective Time until surrendered in exchange for Merger
Consideration, for all purposes be deemed to represent the right to receive
$15.00 in cash multiplied by the number of shares represented by the certificate
and the number of shares of Proffitt's Common Stock calculated by multiplying
the number of shares represented by the certificate by the Conversion Number. As
soon as practicable after the Effective Time, Proffitt's will deposit with Union
Planters National Bank, as exchange agent (the "Exchange Agent"), in trust for
the holders of certificates which immediately prior to the Effective Time
represented shares of Parisian Common Stock (the "Certificates"), certificates
representing the shares of Proffitt's Common Stock issuable in exchange for
outstanding shares of Parisian Common Stock and cash as required to pay the
total Cash Consideration and to make payments in lieu of any fractional shares
of Proffitt's Common Stock (such cash and shares of Proffitt's Common Stock,
together with any dividends or distributions with respect thereto payable as
described below, being hereinafter referred to as the "Exchange Fund").
As soon as practicable after the Effective Time, Proffitt's will cause the
Exchange Agent to deliver to each holder of record of a Certificate whose shares
are converted into a right to receive Cash Consideration and shares of
Proffitt's Common Stock a letter of transmittal (which will be in customary
form, specifying that delivery will be effected, and risk of loss and title to
the Certificates will pass, only upon actual delivery of the Certificates to the
Exchange Agent and will contain instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration and cash in lieu of
fractional shares). Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, the
holder of such Certificate will be entitled to receive in exchange therefor the
Cash Consideration and a certificate representing that number of whole shares of
Proffitt's Common Stock into which the shares represented by the surrendered
Certificate have been converted at the Effective Time pursuant to the Merger,
and cash in lieu of fractional shares and certain dividends and other
distributions as described below, and the Certificate so surrendered will be
canceled.
Parisian shareholders should not forward the Certificates to the Exchange
Agent until they have received the letter of transmittal.
No dividends or other distributions that are declared on or after the
Effective Time on Proffitt's 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
Proffitt's Common Stock until such person surrenders the related Certificate or
Certificates, as provided above, and no cash payment in lieu of fractional
shares will be paid to any such person until such person shall so surrender the
related Certificate or Certificates. Subject to the effect of applicable law,
there will be paid to each record holder of a new certificate representing such
Proffitt's 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 Proffitt's 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
Proffitt's 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
Proffitt's Common Stock to which such holder is entitled. In no event shall the
person entitled to receive such dividends or other
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distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing shares of Proffitt's
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 will be a
condition of such exchange that the Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Proffitt's Common Stock in a name other than that of the registered holder of
the Certificate surrendered, or will establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
Proffitt's or the Exchange Agent will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to the Merger Agreement to any
holder of shares of Parisian Common Stock such amounts as Proffitt's 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 Proffitt's or the
Exchange Agent, such withheld amounts shall be treated for all purposes of the
Merger Agreement as having been paid to the holder of the shares of Parisian
Common Stock in respect of which such deduction and withholding was made by
Proffitt's or the Exchange Agent.
RESALES OF PROFFITT'S COMMON STOCK
Resales of Proffitt's Common Stock issued in connection with the Merger to
Parisian shareholders who are not deemed to be "affiliates" (as that term is
used in Rule 145 promulgated under the Securities Act) of Parisian may be made
by such persons without any restrictions under the Securities Act.
The shares of Proffitt's Common Stock issued to Parisian shareholders who
are deemed to be affiliates of Parisian cannot be resold except in accordance
with Rule 145, pursuant to an effective registration statement under the
Securities Act or in accordance with an applicable exemption from registration.
After affiliates of Parisian have owned their Proffitt's Common Stock for at
least two years and in the event they are not affiliates of Proffitt's, they may
thereafter sell such shares without restriction. A shareholder of Parisian who
becomes an affiliate of Proffitt's will be required to make any public resales
of Proffitt's Common Stock in accordance with Rule 144 under the Securities Act
or pursuant to an effective registration statement under the Securities Act.
Pursuant to the Merger Agreement, certificates representing the Proffitt's
Common Stock issued in connection with the Merger to any Parisian shareholders
who are affiliates of Parisian will bear a restrictive legend prohibiting resale
of such Proffitt's Common Stock except (a) in accordance with Rule 145; (b)
pursuant to an effective registration statement; or (c) pursuant to an exemption
from registration.
GOVERNMENTAL AND REGULATORY APPROVALS
The Merger is subject to the expiration or termination of the applicable
waiting period under the HSR Act. Certain aspects of the Merger will require
notification to, and filings with, certain securities and other authorities in
certain states, including jurisdictions where Proffitt's and Parisian currently
operate.
HSR Act. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the applicable waiting period has expired or been terminated. On
July 19, 1996, Proffitt's and Parisian filed notification and report forms under
the HSR Act with the FTC and the Antitrust Division. On , 1996, the
waiting period under the HSR expired.
At any time before or after consummation of the Merger, notwithstanding that
the waiting period under the HSR Act has been terminated, the Antitrust Division
or the FTC could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of
Proffitt's or Parisian. At any time before or after the Effective Time, and
notwithstanding that the waiting period
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under the HSR Act has expired or been terminated, any state could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest. Such action could include seeking to enjoin the consummation of the
Merger or seeking divestiture of substantial assets of Proffitt's and Parisian.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
Based on information available to it, Proffitt's believes that the Merger
can be effected in compliance with federal and state antitrust laws. However,
there can be no assurance that a challenge to the consummation of the Merger on
antitrust grounds will not be made or that, if such a challenge were made,
Proffitt's and Parisian would prevail or would not be required to accept certain
adverse conditions in order to consummate the Merger. The obligations of
Proffitt's and Parisian to consummate the Merger are subject to the condition
that there shall be no preliminary or permanent injunction or other order by any
court or governmental or regulatory authority making the Merger or any of the
transactions contemplated by the Merger Agreement illegal.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
This summary discusses only certain tax consequences to United States
persons (i.e., citizens or residents of the United States and domestic
corporations) who hold shares of Parisian Common Stock as capital assets. It
does not discuss the tax consequences that might be relevant to shareholders who
acquired their shares through the exercise of options or otherwise as
compensation. In addition, it does not discuss the tax consequences that might
be relevant to shareholders entitled to special treatment under the federal
income tax law, such as life insurance companies, tax exempt organizations, S
corporations and taxpayers subject to alternative minimum tax.
For federal income tax purposes, the Merger will be treated as a taxable
exchange resulting in gain or loss for each Parisian shareholder equal to the
difference, if any, between the sum of (i) the amount of cash and (ii) the fair
market value, as of the Effective Time, of the Proffitt's Common Stock received
pursuant to the Merger, and such shareholder's tax basis in the shares of
Parisian Common Stock surrendered in exchange therefor. In general, such gain or
loss will be capital gain or loss if such shares of Parisian Common Stock are
capital assets in the hands of such shareholder at the time of the exchange and
will be long-term capital gain or loss if, at the time of the exchange, such
shareholder's holding period for the shares of Parisian Common Stock is more
than one year.
Neither Proffitt's nor Parisian will recognize any gain or loss as a result
of the Merger.
EACH SHAREHOLDER OF PARISIAN IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
in accordance with generally accepted accounting principles.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Parisian Board, shareholders of
Parisian should be aware that certain members of Parisian management and of the
Parisian Board have interests in the Merger that are in addition to the
interests of shareholders generally and which may create potential conflicts of
interest. The Parisian Board was aware of such interests and considered them,
among other matters, in adopting the Merger Agreement and approving the
transactions contemplated thereby.
In accordance with the Merger Agreement, Donald E. Hess, President and Chief
Executive Officer of Parisian, will become a director of the surviving
corporation at the Effective Time. It is also contemplated that Mr. Hess will be
elected to the Board of Directors of Proffitt's. In addition, Mr. Hess has
entered into an employment agreement with Proffitt's, effective at the Effective
Time, pursuant to which Mr. Hess is to be employed as the President and Chief
Executive Office of Parisian for a term of
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four years, commencing at the Effective Time. Mr. Hess is to receive a base
salary at a rate of no less than $427,000 per year and is to be eligible for an
annual cash bonus of up to 50% of such base salary, based upon his performance
in accordance with specific annual objectives. The employment agreement provides
for termination for cause and also provides that in the event Mr. Hess's
employment is terminated as a result of a change in control of Proffitt's, as
defined in the employment agreement, Mr. Hess is to receive his base salary in
effect at the time of termination for a period of two years or through the end
of the term of the employment agreement, whichever is longer. The employment
agreement also contains certain limitations on Mr. Hess's ability to engage in
activities in competition with Proffitt's during the period of his employment
and for two years following termination.
Pursuant to the Merger Agreement each unexpired and unexercised option to
purchase shares of Parisian Common Stock under the stock option plans of
Parisian is to be assumed by Proffitt's and automatically converted into an
option to purchase a number of shares of Proffitt's Common Stock equal to the
number of shares of Parisian Common Stock that could be purchased upon exercise
of such option multiplied by .8, at a price per share equal to the per share
exercise price of such option divided by .8. As of the date of the Merger
Agreement, options to purchase 271,611 shares of Parisian Common Stock were held
by certain executive officers of Parisian. In addition, it is anticipated that
options to purchase 53,345 additional shares of Parisian Common Stock will be
granted to executive officers immediately prior to the Effective Time.
Prior to the execution of the Merger Agreement, Parisian entered into
employment agreements with 13 executive officers and other employees which
provide, among other things, for the employment of such individuals for certain
terms. The employment agreements contain customary arrangements regarding
termination and benefits in the event of death or disability. In addition, if
the employee's employment by Parisian is terminated for other than good cause
during a certain period of time following a change of control of Parisian, then
Parisian is to pay such employee an amount equal to the sum of (i) a certain
multiple of the annual salary in effect immediately prior to the change of
control, (ii) the amount of such employee's annual salary prorated through the
date of termination and (iii) any amount to which the employee may be entitled
pursuant to Parisian's then current vacation policy. Parisian also is, for a
certain period of time following termination, to provide the employee with
health, life and disability insurance coverage which is substantially similar to
that provided to the employee immediately prior to the date of termination.
The Merger Agreement provides that Proffitt's will cause Parisian, as the
surviving corporation in the Merger, to provide to the current employees of
Parisian employee benefits (including, without limitation, health, life and
disability insurance, retirement benefits and other employee benefits) which are
no less favorable to such employees than those provided by either (i) Parisian
currently or (ii) Proffitt's for employees in similar positions, as such
employee benefits may be provided generally from time to time, the choice of
which set of benefits to be in Proffitt's sole discretion.
The Merger Agreement provides that from and after the Effective Time,
Proffitt's agrees to, and to cause the surviving corporation to, indemnify and
hold harmless all past and present officers and directors of Parisian and of its
subsidiaries to the full extent such persons may be indemnified as of the date
of the Merger Agreement by Parisian pursuant to Parisian's Articles of
Incorporation and Bylaws in existence on the date of the Merger Agreement for
acts or omissions occurring at or prior to the Effective Time. In addition,
Proffitt's will cause the surviving corporation to provide, for an aggregate
period of not less than two years from the Effective Time, Parisian's current
directors and officers with an insurance and indemnification policy that
provides coverage for events occurring prior to the Effective Time that is no
less favorable than Parisian's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, the surviving corporation will not be required to pay an annual premium
for such insurance in excess of 125% of the last annual premium paid prior to
the date of the Merger Agreement.
In addition to the foregoing interests of Parisian management in the Merger,
it should be noted that Tom R. Amerman, Executive Vice President of Special
Projects of Proffitt's, was employed by Parisian until August 1994. Mr. Amerman
is the holder of options to purchase 63,889 shares of
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Parisian Common Stock at an exercise price of $20.40 per share which, pursuant
to the Merger Agreement, will be converted into options to purchase 51,111
shares of Proffitt's Common Stock at an exercise price of $25.50 per share.
REGISTRATION RIGHTS AGREEMENT
Proffitt's and Parisian have entered into a registration rights agreement
(the "Registration Rights Agreement") pursuant to which the shareholders of
Parisian have been granted certain rights to have the shares of Proffitt's
Common Stock acquired by them registered for resale under the Securities Act.
See "DESCRIPTION OF PROFFITT'S CAPITAL STOCK--Registration Rights."
NASDAQ NATIONAL MARKET LISTING
It is a condition to the parties' obligations under the Merger Agreement
that the shares of Proffitt's Common Stock issuable pursuant to the Merger
Agreement shall have been approved for listing on the Nasdaq National Market,
subject to official notice of issuance.
THE GUARANTY AND THE SUPPLEMENTAL INDENTURE
Proffitt's intends to solicit the consents of the Parisian Noteholders to
the Supplemental Indenture. The Supplemental Indenture, if approved by the
Noteholders, will, among other things, amend the Indenture to make Proffitt's a
party thereto, and to make applicable to Proffitt's certain covenants which are
currently applicable to Parisian, remove certain provisions rendered obsolete by
the Merger, and add to the indenture the Guaranty. The Guaranty will be an
unsecured senior subordinated obligation of Proffitt's, ranking pari passu with,
or senior in right of payment to all other existing and future indebtedness of
Proffitt's that is expressly subordinated to Proffitt's senior indebtedness. The
Guaranty will be subordinated to senior indebtedness of Proffitt's on the same
basis as the Notes are subordinated to senior indebtedness of Parisian.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement,
which appears as Appendix I to this Prospectus and is incorporated herein by
reference. The following summary includes the material terms of such agreement
but is not necessarily complete and is qualified in its entirety by reference to
the Merger Agreement.
TERMS OF THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, including the approval of the Merger Agreement by
the holders of Parisian Common Stock and approval of the Supplemental Indenture
by the Noteholders, Sub will be merged with and into Parisian at the Effective
Time, and Parisian will continue as the surviving corporation.
The filing of duly executed Articles of Merger will be made with the
Secretary of State of the State of Alabama and the Merger will become effective
at the Effective Time, which is anticipated to be on or before October 15, 1996.
However, if any of the conditions described herein has not been waived by such
date, then the closing date may be postponed.
Pursuant to the Merger Agreement, as of the Effective Time, all shares of
Parisian Common Stock that are held in the treasury of Parisian or by any
wholly-owned subsidiary of Parisian, will be canceled and no capital stock of
Proffitt's or other consideration will be delivered in exchange therefor.
Each issued and outstanding share of common stock of Sub, par value $.01 per
share, will be converted into one validly issued, fully paid and nonassessable
share of common stock of the surviving corporation.
Subject to the terms and conditions of the Merger Agreement, each share of
Parisian Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled)
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will be converted into the right to receive $15.00 in cash and .4006 validly
issued, fully paid and nonassessable shares of Proffitt's Common Stock. All such
shares of Parisian Common Stock, when so converted, will no longer be
outstanding and will automatically be canceled and retired, and each holder of a
Certificate representing any such shares will cease to have any rights with
respect thereto, except the right to receive certain dividends and other
distributions, the Cash Consideration, certificates representing the shares of
Proffitt's Common Stock into which such shares are converted and any cash,
without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such Certificate.
In the event of any reclassification, stock split or stock dividend with
respect to Proffitt's Common Stock, any change or conversion of Proffitt's
Common Stock into other securities or any other dividend or distribution with
respect to Proffitt's Common Stock other than normal quarterly cash dividends as
the same may be adjusted from time to time pursuant to the terms of the Merger
Agreement (or if a record date with respect to any of the foregoing should
occur) prior to the Effective Time or any issuance of securities (other than
rights pursuant to Proffitt's Rights Plan (as defined below)) appropriate and
proportionate adjustments, if any, will be made to the Conversion Number, and
all references to the Conversion Number in the Merger Agreement will be deemed
to be to the Conversion Number as so adjusted.
SURRENDER AND PAYMENT
Proffitt's has authorized Union Planters National Bank to act as Exchange
Agent. As soon as practicable after the Effective Time, Proffitt's will deposit
with the Exchange Agent, in trust for the holders of shares of Parisian Common
Stock converted in the Merger, certificates representing the shares of
Proffitt's Common Stock issuable pursuant to the Merger Agreement in exchange
for outstanding shares of Parisian Common Stock and cash, as required to pay the
total Cash Consideration and to make payments in lieu of any fractional shares
(such cash and shares of Proffitt's Common Stock, together with any dividends or
distributions with respect thereto, being the "Exchange Fund"). The Exchange
Agent will deliver the Cash Consideration and the Proffitt's Common Stock
issuable pursuant to the Merger Agreement out of the Exchange Fund.
As soon as practicable after the Effective Time, Proffitt's will cause the
Exchange Agent to deliver to each record holder of a Certificate or Certificates
which immediately prior to the Effective Time represented outstanding shares of
Parisian Common Stock converted in the Merger a letter of transmittal (which
will be in customary form, will specify that delivery will be effected, and risk
of loss and title to the Certificates will pass only upon actual delivery of the
Certificates to the Exchange Agent, and will contain instructions for use in
effecting the surrender of the Certificates in exchange for the Cash
Consideration, certificates representing shares of Proffitt's Common Stock and
cash in lieu of fractional shares). Upon surrender for cancellation to the
Exchange Agent of a Certificate, together with such duly executed letter of
transmittal, the holder of such Certificate will be entitled to receive in
exchange therefor the Cash Consideration, a certificate representing that number
of whole shares of Proffitt's Common Stock into which the shares represented by
the surrendered Certificate will have been converted at the Effective Time, cash
in lieu of any fractional shares, and certain dividends and other distributions
in accordance with the Merger Agreement, and any Certificate so surrendered will
forthwith be canceled.
The Cash Consideration and shares of Proffitt's Common Stock issued upon the
surrender for exchange of Certificates in accordance with the terms of the
Merger Agreement(including any cash paid pursuant to the Merger Agreement) will
be deemed to have been issued in full satisfaction of all rights pertaining to
the shares of Parisian Common Stock represented by such Certificates.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Proffitt's Common
Stock will be issued upon the surrender for exchange of Certificates, no
Proffitt's dividend or other distribution or stock split will relate to any
fractional share, and no fractional share will entitle the owner thereof to vote
or to any other rights of a security holder of Proffitt's. In lieu of any such
fractional share, each holder of Parisian Common Stock who would otherwise have
been entitled to a fraction of a share of Proffitt's Common Stock upon surrender
of Certificates for exchange will receive cash (without interest) in an amount
equal to the product of such fractional part of a share of Proffitt's Common
Stock multiplied by $37.50.
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CONDITIONS TO THE MERGER
The respective obligations of Proffitt's, Parisian and Sub to effect the
Merger will be subject to the fulfillment of certain conditions at or prior to
the Effective Time, including: (a) approval of the Merger Agreement by the
requisite vote of shareholders of Parisian; (b) the authorization for listing on
the Nasdaq National Market, subject to official notice of issuance, of the
shares of Proffitt's Common Stock issuable in the Merger and upon exercise of
options to purchase Parisian Common Stock (to be converted into options to
purchase Proffitt's Common Stock); (c)expiration or termination of the waiting
period (and any extension thereof) applicable to the consummation of the Merger
under the HSR Act; (d) 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 by the Merger Agreement illegal or would have a material adverse
effect on Proffitt's (assuming the Merger had taken place), will have been
obtained, will have been made or will have occurred; (e) either the registration
statement of which this Prospectus is a part shall become effective in
accordance with the provisions of the Securities Act or there shall be an
effective exemption from the registration requirements of the Securities Act
with respect to the issuance of Proffitt's Common Stock in the Merger. If the
Registration Statement shall have become effective, no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the
Commission and no proceedings for that purpose shall have been initiated or, to
the knowledge of Proffitt's or Parisian, threatened by the Commission; (f) no
court or other governmental entity having jurisdiction over Parisian or
Proffitt's, 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 which is then in effect and has the effect of
making the Merger or any of the transactions contemplated by the Merger
Agreement illegal; and (g) there shall not be instituted or pending any suit,
action or proceeding as a result of the Merger Agreement or any of the
transactions herein which in the opinion of the counsel for Proffitt's or
Parisian would have a material adverse effect on Proffitt's or Parisian, as the
case may be. See "THE MERGER--Governmental and Regulatory Approvals."
The obligation of Parisian to effect the Merger is also subject to the
satisfaction of certain additional conditions at or prior to the Effective Time,
including:(a) each of the representations and warranties of Proffitt's and Sub
in the Merger Agreement shall be true and correct in all material respects on
and as of the Effective Time as if made on and as of the Effective Time (except
to the extent they relate to a particular date), and each of Proffitt's and Sub
shall have performed in all material respects each of its agreements contained
in the Merger Agreement required to be performed on or prior to the Effective
Time, except as contemplated or permitted by the Merger Agreement; and Parisian
shall have received from Proffitt's and Sub a certificate to that effect; and
(b) Parisian shall have received an opinion of Sommer & Barnard, Attorneys at
Law, PC, counsel to Proffitt's, in reasonable form and of the character typical
for transactions of the character of those contemplated by the Merger Agreement.
The obligations of Proffitt's and Sub to effect the Merger are subject to
the satisfaction of certain additional conditions at or prior to the Effective
Time, including: (a) each of the representations and warranties of Parisian in
the Merger Agreement shall be true and correct in all material respects on and
as of the Effective Time as if made on and as of the Effective Time (except to
the extent they relate to a particular date), and Parisian shall have performed
in all material respects each of its agreements contained in the Merger
Agreement required to be performed on or prior to the Effective Time, except as
contemplated or permitted by the Merger Agreement; and Proffitt's shall have
received from Parisian a certificate to that effect; (b) the Parisian
Noteholders shall have approved the Supplemental Indenture in accordance with
the terms of the Indenture and it shall have been executed; (c) holders of no
more than 5% of the issued and outstanding shares of Parisian Common Stock shall
have dissented under applicable law; (d) all consents necessary under Parisian's
and its subsidiaries' financing agreements have been obtained so that
obligations of Parisian and its subsidiaries will not be affected by the Merger;
and (e) Proffitt's shall have received an opinion of Berkowitz, Lefkovits, Isom
& Kushner,
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A Professional Corporation, counsel to Parisian, in reasonable form and of the
character typical for transactions of the character of those contemplated by the
Merger Agreement.
Certain of the foregoing conditions may not be waived by the parties,
including shareholder approvals, the effectiveness of the Registration Statement
or availability of an applicable exemption from registration, and the absence of
any order or legal restraint.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
Proffitt's and Sub, including, among other things; (a) that the documents filed
by Proffitt's with the Commission since January 29, 1994 did not contain any
material misstatements or omissions at the time they were filed; (b) that the
information supplied by Proffitt's and Sub to be included herein and in the
Registration Statement in connection with the Merger will be free from material
misstatements and omissions; (c) that there has been no material adverse change
with respect to Proffitt's since February 3, 1996 except as disclosed in its
documents filed with the Commission prior to the date of the Merger
Agreement;(d) as to governmental licenses and permits, and compliance with laws;
(e) as to compliance with relevant tax laws; (f) with respect to actions and
proceedings pending against or involving Proffitt's; (g) as to employee benefit
plans and labor matters; (h) as to compliance with worker safety laws and
environmental laws; (i) as to intellectual property; (j) as to certain
liabilities; and (k) as to brokers. In addition, the Merger Agreement contains
representations and warranties by each of Proffitt's and Sub as to, among other
things, its organization, capital structure, authority to enter into the Merger
Agreement and the binding effect of the Merger Agreement.
The Merger Agreement also contains similar customary representations and
warranties of Parisian, as well as additional representations and warranties,
including, among other things, the required vote or consent of the shareholders
of Parisian and the Noteholders.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, each of Proffitt's and Parisian has agreed
that, during the period from the date of the Merger Agreement through the
Effective Time (except as otherwise expressly permitted by the terms of the
Merger Agreement), it will, and it will cause its respective subsidiaries to, in
all material respects, carry on their respective businesses in the ordinary
course as conducted as of the date of the Merger Agreement and, to the extent
consistent therewith, use reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses will be unimpaired at the Effective Time.
Actions by Proffitt's. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by the Merger Agreement, Proffitt's
will not, and will not permit any of its subsidiaries to, without the prior
written consent of Parisian: (a) (1) declare, set aside or pay any dividends on,
or make any other 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), (2) 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 (3) purchase, redeem or
otherwise acquire any shares of capital stock of Proffitt's or any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; (b) 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 (1) the
issuance of stock options and shares of Proffitt's Common Stock to employees of
Proffitt's in the ordinary course of business consistent with past practice; (2)
the issuance of Proffitt's securities pursuant to the Rights Agreement dated
35
<PAGE>
March 28, 1995 between Proffitt's and Union Planters National Bank (the
"Proffitt's Rights Agreement"); and (3) the issuance by any wholly-owned
subsidiary of Proffitt's of its capital stock to Proffitt's or another
wholly-owned subsidiary of Proffitt's; (c) amend its Charter or By-laws; (d)
alter (through merger, liquidation, reorganization, restructuring or in any
other fashion) the corporate structure of Proffitt's or any of its subsidiaries;
(e) acquire or agree to acquire any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, unless (1) the entering into a
definitive agreement relating to or the consummation of such acquisition 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 (2) in the case of any
individual acquisition, merger, consolidation or purchase, the asset purchase
price or equity purchase price for which Proffitt's is responsible of which does
not exceed $125 million and which does not materially change the ratio of debt
to total capitalization of Proffitt's; (f) 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 (1) in
the ordinary course of business consistent with past practice, (2) indebtedness,
loans, advances, capital contributions and investments between Proffitt's and
any of its wholly-owned subsidiaries or between any of such wholly-owned
subsidiaries, (3) in connection with the Merger, and (4) as necessary in
connection with certain permitted acquisitions for which the asset purchase
price or equity purchase price for which Proffitt's is responsible does not
exceed $125 million in the aggregate; (g) 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; (h) 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); (i) take any action or knowingly omit
to take any action which would cause any of its representations or warranties
contained in the Merger Agreement to be untrue or result in a breach of any
covenant made by it under the Merger Agreement; or (j) 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.
Actions by Parisian. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by the Merger Agreement, Parisian
will not, and will not permit any of its subsidiaries to, without the prior
written consent of Proffitt's (which in the case of item (k) below as it relates
to Parisian's 1993, 1994 and 1995 federal income tax returns shall not be
unreasonably withheld): (a) (1) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, or
otherwise make any payments to its shareholders in their capacity as such, (2)
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
(3) purchase, redeem or otherwise acquire any shares of capital stock of
Parisian or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities; (b) 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; (c) amend its Articles of
Incorporation or By-laws; (d) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, except for (1)
transactions in the ordinary course of business consistent with past practice
and not material to Parisian taken as a whole, and (2) as may be required by any
governmental entity; (e) 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 (1) in the ordinary course
of business consistent with past practices, and (2) indebtedness, loans,
advances, capital contributions and investments between Parisian and any of its
wholly owned subsidiaries or between any of such wholly owned subsidiaries; (f)
alter the corporate structure or ownership of Parisian or any subsidiary; (g)
enter into or adopt, or amend any existing
36
<PAGE>
severance plan, agreement or arrangement or enter into or amend any Parisian
benefit plan or employment or consulting agreement other than as required by
law; (i) increase the compensation payable or to become payable to its officers
or employees, except for increases in the ordinary course of business consistent
with past practice in salaries or wages of employees of Parisian or any of its
subsidiaries who are not officers of Parisian or any of its subsidiaries, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director or officer of Parisian or any of its
subsidiaries, or establish, adopt, enter into, or, except as maybe required to
comply with applicable law, amend or take action to enhance or accelerate any
rights or benefits under, any plan or arrangement for the benefit of any
director, officer or employee; (j) 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; (k) 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); (l) except for state and federal tax
returns due for Parisian's fiscal year ended February 3, 1996, make any tax
election or settle or compromise any material federal, state, local or foreign
income tax liability; (m) 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; or (n) take any action or knowingly omit
to take any action which would cause any of its representations or warranties
contained in the Merger Agreement to be untrue or result in a breach of any
covenant made by it in the Merger Agreement.
PARISIAN STOCK OPTIONS
At the Effective Time, each Parisian stock option will be assumed by
Proffitt's. All references to Parisian in the Parisian stock option plans, the
applicable stock option or other awards agreements issued thereunder and in any
other Parisian stock option agreements will be deemed to refer to Proffitt's.
Each Parisian stock option will be converted into a stock option to purchase a
number of shares of Proffitt's Common Stock equal to the number of shares of
Parisian Common Stock that could have been purchased under such Parisian stock
option multiplied by .8, at an exercise price per share of Proffitt's Common
Stock equal to the per share option exercise price specified in the Parisian
stock option divided by .8.
NO SOLICITATION
Pursuant to the Merger Agreement, from and after the date of the Merger
Agreement, Parisian will not, and 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 (as defined below) or offer from any person,
or engage in or continue discussions or negotiations relating thereto; provided,
however, that Parisian 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 if the Parisian
Board concludes in good faith on the basis of the advice of its outside counsel
that the failure to take such action would violate the fiduciary obligations of
such Board under applicable law. Parisian will promptly (but in no case later
than 24 hours) notify Proffitt's of any Takeover Proposal, including the
material terms and conditions thereof. As used in the Merger Agreement,
"Takeover Proposal" means any proposal or offer, or any expression of interest
by any third party relating to Parisian's willingness or ability to receive or
discuss a proposal or offer, other than a proposal or offer by Proffitt's or any
of its subsidiaries or as permitted under the Merger Agreement, for a tender or
exchange offer, a merger, consolidation or other business combination involving
Parisian or any of its subsidiaries or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Parisian or any of its subsidiaries.
During the period from the date of the Merger Agreement through the
Effective Time, Parisian will not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which Parisian or
any of its subsidiaries is a party (other than any involving Proffitt's), unless
the
37
<PAGE>
Parisian Board concludes in good faith on the basis of the advice of its outside
counsel that the failure to do so would violate the fiduciary obligations of the
Board.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
The Merger Agreement provides that from and after the Effective Time,
Proffitt's agrees to, and to cause the surviving corporation to, indemnify and
hold harmless all past and present officers and directors of Parisian and of its
subsidiaries to the full extent such persons may be indemnified as of the date
of the Merger Agreement by Parisian pursuant to Parisian's Articles of
Incorporation and By-laws in existence on the date of the Merger Agreement for
acts or omissions occurring at or prior to the Effective Time. In addition,
Proffitt's will cause the surviving corporation to provide, for an aggregate
period of not less than two years from the Effective Time, Parisian's current
directors and officers with an insurance and indemnification policy that
provides coverage for events occurring prior to the Effective Time that is no
less favorable than Parisian's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, the surviving corporation will not be required to pay an annual premium
for such insurance in excess of 125% of the last annual premium paid prior to
the date of the Merger Agreement.
TERMINATION
The Merger 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 shareholders of Parisian or Proffitt's: (a) by
mutual written consent of Parisian and Proffitt's; (b) by either Proffitt's or
Parisian if the other party shall have failed to comply in any material respect
with any of its covenants or agreements contained in the Merger 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 the Merger Agreement pursuant to this clause; (c) by
either Proffitt's or Parisian if there has been (1) a breach by the other
party(in the case of Proffitt's, 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 (2) a breach by the other party (in the case of
Proffitt's, including any material breach by Sub) of any representation or
warranty that is qualified as to materiality, which breach in either (c)(1)
or(c)(2) has not been cured within five business days following receipt by the
breaching party of written notice of the breach; provided, however, that if any
such breach is curable by the breaching party through the exercise of the
breaching party's best efforts and for so long as the breaching party shall be
so using its best efforts to cure such breach, the non-breaching party may not
terminate the Merger Agreement pursuant to this clause; (d) by Proffitt's or
Parisian if the Merger has not been effected on or prior to the close of
business on November 30, 1996 (the "Termination Date"); provided, however, that
the right to terminate the Merger Agreement pursuant to this clause will not be
available to any party whose failure to fulfill any of its obligations contained
in the Merger 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 Proffitt's
or Parisian if the shareholders of Parisian do not approve the Merger Agreement
at the Parisian Special Meeting; (f) by Proffitt's or Parisian if the Parisian
Board reasonably determines that a Takeover Proposal constitutes a Superior
Proposal(as defined below); provided, however, that Parisian may not terminate
the Merger Agreement pursuant to this clause unless and until three business
days have elapsed following delivery to Proffitt's of a written notice of such
determination by the Parisian Board, which notice shall inform Proffitt's of the
material terms and conditions of the Takeover Proposal but need not identify the
identity of such third party; (h) by Proffitt's if the Parisian Board has not
recommended, or has resolved not to recommend, or has modified or withdrawn its
recommendation of adoption of the Merger Agreement or declaration that the
Merger is advisable and fair to and in the best interest of Parisian, its
shareholders and its Noteholders, or has resolved to do so, (j) by Proffitt's if
the Parisian Noteholders do not approve the Supplemental Indenture.
38
<PAGE>
"Superior Proposal" means a bona fide proposal or offer made by a third
party to acquire Parisian 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 Parisian on terms which a majority of the members of the
Parisian Board determines in its good faith reasonable judgment(based on the
advice of independent financial advisors) to be more favorable to Parisian and
to its shareholders than the transactions contemplated by the Merger Agreement,
provided that in making such determination the Board considers the likelihood
that such third party is able to consummate such proposed transaction.
FEES AND EXPENSES
Regardless of whether the Merger is consummated, except as described below
upon certain events of termination of the Merger Agreement, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such costs and
expenses.
Notwithstanding the foregoing, if the Merger Agreement is terminated (i)
following the withdrawal or modification by the Parisian Board of its
recommendation of the Merger, prior to the approval of the Merger by the
Parisian shareholders, (ii) in certain situations involving certain acquisitions
of Parisian Common Stock occurring prior to the Parisian Special Meeting, (iii)
in certain situations in which the Parisian Board determines that a competing
transaction is superior to the Merger, then Parisian will pay in cash to
Proffitt's certain expenses, not in excess of $2.5 million, reasonably incurred
in connection with the Merger. In addition, if within twelve months following
such termination, Parisian enters into, or announces that it proposes to enter
into an agreement providing for a business combination or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of Parisian, other than the Merger, and such transaction is
thereafter consummated, Parisian shall pay to Proffitt's an aggregate fee of
$5.5 million, less the actual amount of expenses previously paid.
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by or pursuant
to action taken by their respective Boards of Directors, at any time before or
after approval of the Merger Agreement and the transactions contemplated thereby
by the shareholders of Parisian, but, after any such approval, no amendment
shall be made which by law requires further approval by such shareholders
without such further approval.
WAIVER
The Merger Agreement provides that, at any time prior to the Effective time,
the parties thereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained therein which may legally be waived.
39
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
are based on the consolidated financial statements of Proffitt's, incorporated
by reference herein, and Parisian, included elsewhere in this Prospectus,
adjusted to give effect to the Merger.
The Unaudited Pro Forma Condensed Combined Balance Sheet is derived from the
consolidated balance sheets of Proffitt's, incorporated by reference herein, and
Parisian, included elsewhere in this Prospectus, as of May 4, 1996 and assumes
the Merger was consummated on May 4, 1996. The unaudited Pro Forma Condensed
Combined Income Statements are derived from the consolidated income statements
for the fiscal year ended February 3, 1996 and for the three-month period ended
May 4, 1996 of Proffitt's, incorporated by reference herein, and Parisian,
included elsewhere in this Prospectus, and assume that the Merger was
consummated as of January 29, 1995. These pro forma financial statements are
presented for illustrative purposes only, and therefore are not necessarily
indicative of the operating results and financial position that might have been
achieved had the Merger occurred as of an earlier date, nor are they necessarily
indicative of operating results and financial position which may occur in the
future.
The unaudited pro forma information with respect to the Merger is based on
the historical financial statements of the business acquired. The Merger is and
will be accounted for under the purchase method of accounting. The purchase
price for the Merger, including the related fees and expenses, has been
allocated to the tangible and identifiable intangible assets and liabilities of
the acquired business based on Proffitt's preliminary estimates of their fair
value with the remainder allocated to goodwill. The allocation of purchase price
for the Merger is subject to revision when additional information concerning
asset and liability valuation becomes available. Pro forma adjustments included
in the unaudited pro forma information are those that are directly attributable
to the Merger.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
notes thereto in the Annual Report on Form 10-K for the year ended February 3,
1996 and Quarterly Report on Form 10-Q for the period ended May 4, 1996 for
Proffitt's, incorporated by reference herein, and the financial statements of
Parisian, included elsewhere in this Prospectus. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and the Consolidated Financial
Statements of Parisian included herein.
40
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE YEAR ENDED FEBRUARY 3, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER
ADJUSTMENTS PRO FORMA
PROFFITT'S PARISIAN (7) TOTAL
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
Net sales.................................. $1,333,498 $663,828 $1,997,326
Costs and expenses:
Cost of sales............................ 873,218 419,056 700(1) 1,292,974
Selling, general and administrative
expenses................................... 324,650 165,237 (1,600)(1) 488,287
Other operating expenses................. 105,021 56,252 (2,200)(2) 162,973
3,900(6)
Expenses related to hostile takeover
defense.................................... 3,182 3,182
Impairment of long-lived assets.......... 19,121 19,121
Merger, restructuring and integration
costs...................................... 20,822 20,822
---------- -------- --------------- ----------
Operating income (loss)................ (12,516) 23,283 (800) 9,967
Other income (expenses):
Finance charge income, net of allocation
to purchasers of accounts receivable... 31,273 7,125 38,398
Interest expense......................... (26,098) (17,652) (9,300)(3) (53,050)
Other income, net........................ 2,848 2,407 5,255
---------- -------- --------------- ----------
Income (loss) before provision for income
taxes and extraordinary loss............... (4,493) 15,163 (10,100) 570
Provision for income taxes................. 1,906 6,385 (2,600)(4) 5,691
---------- -------- --------------- ----------
Net (loss) income before extraordinary
loss....................................... (6,399) 8,778 (7,500) (5,121)
Preferred stock dividends.................. 1,950 1,950
---------- -------- --------------- ----------
Net income (loss) available to common
shareholders before extraordinary loss..... $ (8,349) $ 8,778 $ (7,500) $ (7,071)
---------- -------- --------------- ----------
---------- -------- --------------- ----------
Loss per common share before extraordinary
loss....................................... $ (0.43) $ (0.31)
---------- ----------
---------- ----------
Weighted average common shares............. 19,372 3,102(5) 22,474
---------- --------------- ----------
---------- --------------- ----------
</TABLE>
41
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MAY 4, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER PRO FORMA
PROFFITT'S PARISIAN ADJUSTMENTS TOTAL
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................................... $ 296,561 $166,047 $ 462,608
Costs and expenses:
Cost of sales............................... 192,892 99,404 300(1) 292,596
Selling, general and administrative expenses 71,537 42,472 (400)(1) 113,609
Other operating expenses 24,398 14,367 (500)(2) 39,265
1,000(6)
Merger, restructuring and integration
costs......................................... 2,763 2,763
Gain on sale of assets...................... (2,260) (2,260)
----------- -------- ----------- ---------
Operating income.......................... 7,231 9,804 (400) 16,635
Other income:
Finance charge income, net of allocation to
purchasers of accounts receivable............. 7,160 2,156 9,316
Interest expense............................ (4,105) (4,245) (2,300)(3) (10,650)
Other income, net............................. 370 143 513
----------- -------- ----------- ---------
----------- -------- ----------- ---------
Income before provision for income
taxes......................................... 10,656 7,858 (2,700) 15,814
Provision for income taxes.................... 4,402 3,307 (650)(4) 7,054
Net income................................ 6,254 4,551 (2,050) 8,755
Preferred stock dividends..................... 488 488
----------- -------- ----------- ---------
Net income available to common
shareholders.................................. $ 5,766 $ 4,551 $(2,050) $ 8,267
----------- -------- ----------- ---------
----------- -------- ----------- ---------
Earnings per common share................... $ 0.29 $ 0.36
----------- ---------
----------- ---------
Weighted average common shares.............. 19,744 3,102(5) 22,846
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
42
<PAGE>
PROFFITT'S, INC.
NOTES TO PRO FORMA CONDENSED COMBINED INCOME STATEMENT
(IN THOUSANDS)
(1) To conform Parisian's direct cost method of accounting for inventory to the
full costs method used by Proffitt's and to conform Parisian's presentation
of certain expenses with that of Proffitt's.
(2) To conform Parisian's accounting method for store preopening costs of
deferral and amortization over twelve months to Proffitt's accounting method
of expending such costs as incurred and to reflect the amortization of the
liability established for unfavorable lease obligations.
(3) To reflect interest expense on acquisition debt of approximately $125,300,
at 7.0% and 7.4% for the period ended February 3, 1996 and May 4, 1996
respectively, assuming that the debt was outstanding throughout the period.
(4) To reflect the income tax impact of the pro forma merger adjustments using
an effective rate of 40%.
(5) To reflect the Proffitt's Common Shares and Equivalents issued to the
Parisian's shareholders.
(6) To reflect the increase in depreciation and amortization resulting from the
preliminary purchase price allocation.
(7) Pro Forma adjustments do not include any changes or benefits related to the
integration of the operations of the business.
43
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEETS (UNAUDITED)
MAY 4, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ACQUISITION PRO FORMA
PROFFITT'S PARISIAN ADJUSTMENTS TOTAL
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................. $ 2,014 $ 1,821 $ 3,835
Restricted cash and short term
investments................................... 2,030 2,030
Net trade accounts receivable, less
receivables sold to third parties............. 32,038 36,193 68,231
Merchandise inventories................... 317,004 150,988 8,000(1) 475,992
Other current assets...................... 16,513 3,379 19,892
Deferred income taxes..................... 3,750 3,669 1,000(1) 8,419
---------- -------- ----------- ----------
Total current assets.................. 371,319 198,080 9,000 578,399
Property and equipment, net................... 380,836 71,331 11,000(1) 463,167
Goodwill and other assets to be identified.... 52,450 59,801 159,842(1) 272,093
Other assets.................................. 21,288 16,482 (12,000)(1) 25,770
---------- -------- ----------- ----------
$ 825,893 $345,694 $ 167,842 $1,339,429
---------- -------- ----------- ----------
---------- -------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................... $ 86,234 $ 36,789 $ 123,023
Accrued expenses.......................... 64,725 24,036 12,000(1) 100,761
Current portion of long-term debt and
capital lease obligations..................... 16,900 2,859 19,759
---------- -------- ----------- ----------
Total current liabilities............. 167,859 63,684 12,000 243,543
Real estate and mortgage notes................ 86,211 22,539 108,750
Notes payable................................. 27,754 125,300(2) 153,054
Capital lease obligations..................... 10,715 11,473 22,188
Deferred income taxes......................... 53,957 8,227 (9,000)(1) 53,184
Other long-term liabilities................... 15,008 30,289 19,000(1) 64,297
Subordinated debt............................. 100,568 125,000 225,568
Shareholders' equity.......................... 363,821 84,482 105,024(1) 468,845
(84,482)(1)
---------- -------- ----------- ----------
$ 825,893 $345,694 $ 167,842 $1,339,429
---------- -------- ----------- ----------
---------- -------- ----------- ----------
</TABLE>
NOTE: The adjustment of Leasehold Improvements, Fixtures and Equipment to
fair value is to be determined.
44
<PAGE>
PROFFITT'S, INC.
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
(1) The Merger will be accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16, "Business Combinations." The purchase price
is to be allocated first to tangible assets and liabilities of Parisian
based on preliminary estimates of their fair market values, with the
remainder allocated to goodwill and other assets to be identified. The
purchase price and the preliminary purchase price allocation are as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash consideration paid......................................... $110,300
Common Stock and Common Stock Equivalents....................... 105,024
Transaction Expenses............................................ 15,000
--------
Purchase Price.............................................. $230,324
Historical book value of net assets acquired.................... (84,482)
--------
Excess of purchase price over historical book
value of assets acquired...................................... $145,842
--------
--------
Allocation of excess purchase price:
Increase inventories to fair value.......................... 8,000
Increase property and equipment to fair value............... 11,000
Increase in goodwill and other assets to be identified...... 159,842
Write-off duplicate assets to be abandoned and existing
deferred store preopening costs, and decrease other
assets to fair value...................................... (12,000)
Accrue Merger costs......................................... (12,000)
Adjust lease commitments to fair value...................... (19,000)
Changes in deferred income taxes for tax effect of the
aforementioned adjustments:
Increase in deferred tax assets--current.................. 1,000
Increase in deferred tax liabilities--noncurrent.......... 9,000
--------
$145,842
--------
--------
</TABLE>
(2) To reflect acquisition debt.
45
<PAGE>
DESCRIPTION OF PROFFITT'S CAPITAL STOCK
GENERAL
As of the date hereof, Proffitt's authorized capital stock consists of
100,000,000 shares of Common Stock, par value $0.10 per share, and 10,000,000
shares of preferred stock, par value $1.00 per share (the "Proffitt's Preferred
Stock"). As of July 12, 1996, 20,689,845 shares of Proffitt's Common Stock and
no shares of Proffitt's Preferred Stock were issued and outstanding. The
following summary description of the capital stock of Proffitt's does not
purport to be complete and is qualified in its entirety by reference to
Proffitt's Charter and to the Tennessee Business Corporation Act. See "AVAILABLE
INFORMATION."
PROFFITT'S COMMON STOCK
Holders of Proffitt's Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders of Proffitt's and do not
have cumulative voting rights. Accordingly, holders of a majority of the shares
of Proffitt's Common Stock entitled to vote in any election of directors of
Proffitt's may elect all of the directors standing for election. Holders of
Proffitt's Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors of Proffitt's out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
Proffitt's Preferred Stock. See "SUMMARY--Comparative Stock Prices and
Dividends." Upon the liquidation, dissolution or winding up of Proffitt's, the
holders of Proffitt's Common Stock are entitled to receive ratably the net
assets of Proffitt's available after payment of all debts and other liabilities
and subject to the prior rights of outstanding Proffitt's Preferred Stock.
Holders of Proffitt's Common Stock have no preemptive, subscription, redemption
or conversion rights. All outstanding shares of Proffitt's Common Stock are duly
authorized, validly issued fully paid and nonassessable. The rights, preferences
and privileges of holders of Proffitt's Common Stock are subject to, and may be
adversely affected by, the rights of the holders of any series of Proffitt's
Preferred Stock, whether currently outstanding or designated and issued in the
future.
PROFFITT'S PREFERRED STOCK
The Board of Directors of Proffitt's has the authority to issue the
Proffitt's Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences and rights of the shares of each class or
series, including dividend rates, conversion rights, voting rights, terms of
each such class or series, without any further vote or action by the
stockholders of Proffitt's. The ability of the Board of Directors of Proffitt's
to issue Proffitt's Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of
Proffitt's.
A total of 500,000 shares of the Proffitt's Preferred Stock have been
designated as Series C Junior Preferred Stock ("Series C Preferred Stock") to be
issued under certain circumstances involving a potential change in control of
Proffitt's. See "Rights Plan." Each share of the Series C Preferred Stock, if
issued, would bear a dividend rate of 100 times the aggregate amount per share
of any dividend declared on Proffitt's Common Stock. Each share of Series C
Preferred Stock would entitle the holder to 100 votes on all matters submitted
to a vote of the stockholders of Proffitt's. Such shares provide for a
liquidation preference of the greater of $100 per share or an aggregate amount
per share equal to 100 times the aggregate amount to be distributed per share to
holders of Proffitt's Common Stock. No shares of Series C Preferred Stock have
been issued, and management is aware of no facts suggesting that issuance of
such shares may be imminent.
RIGHTS PLAN
On March 28, 1995, the Board of Directors of Proffitt's declared a dividend
distribution of one right (a "Right") for each share of Proffitt's Common Stock.
Each Right entitles the holder to purchase
46
<PAGE>
from Proffitt's one one-hundredth (1/100) of a share of Series C Preferred Stock
at a price of $85 per one one-hundredth (1/100) of a share. See "Preferred
Stock." Such Rights will attach to shares of Proffitt's Common Stock issued to
Parisian shareholders in connection with the Merger. Initially, the Rights will
not be exercisable, but will become exercisable upon the acquisition by any
person of, or the announcement of the intention of any person to commence a
tender or exchange offer upon the successful consummation of which such person
would be the beneficial owner of, 20% or more of the shares of Proffitt's Common
Stock then outstanding, without the prior approval of the Proffitt's Board of
Directors. The Rights are generally designed to deter coercive takeover tactics
and to encourage all persons interested in potentially acquiring control of
Proffitt's to treat each shareholder on a fair and equal basis.
REGISTRATION RIGHTS
Under the Registration Rights Agreement the shareholders of Parisian who
receive Proffitt's Common Stock in the Merger will have the right at any time
after the Effective Time, subject to certain conditions, to require Proffitt's
to use its reasonable best efforts to register for sale under the Securities Act
the shares of Proffitt's Common Stock issued to such shareholders in the Merger
(a "Demand Registration"). In the event any such Demand Registration involves an
underwritten offering, such shareholders will have the right to designate an
underwriter reasonably satisfactory to Proffitt's as a co-lead underwriter of
such underwritten offering. The shareholders of Parisian are also granted the
right, subject to certain conditions, to require Proffitt's to include their
Proffitt's Common Stock in a registration statement relating to any securities
proposed to be registered by Proffitt's, whether on its own behalf or on behalf
of another holder of Proffitt's Common Stock (a "Piggyback Registration").
Generally, former Parisian shareholders requesting a registration will be
required to pay, pro rata, the expenses of a Demand Registration and the
incremental expenses of including their shares of Proffitt's Common Stock in a
Piggyback Registration. However, if any of the shares of Proffitt's Common Stock
issued in the Merger are "restricted securities" under Rule 144, Proffitt's will
pay the expenses related to the registration of such shares, except for
underwriting discounts, commissions or fees.
Proffitt's has agreed in the Registration Rights Agreement to indemnify the
holders of Proffitt's Common Stock who sell such stock through a registration
statement against certain liabilities under the Securities Act.
Reference is made to the Registration Rights Agreement, a copy of which is
attached hereto as Appendix III. This summary of the Registration Rights
Agreement is not necessarily complete and is qualified in its entirety by
reference to the Registration Rights Agreement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Proffitt's Common Stock is Union
Planters National Bank.
COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK
AND PARISIAN COMMON STOCK
The following summary compares certain rights of Proffitt's stockholders
under the Tennessee Business Corporation Act and Proffitt's Charter and Amended
and Restated Bylaws with the rights of Parisian's shareholders under the Alabama
Business Corporation Act and the Parisian Articles of Incorporation and Bylaws.
Proffitt's is a Tennessee corporation subject to the provisions of the
Tennessee Business Corporation Act (The "TBCA"). Parisian is an Alabama
corporation subject to the provisions of the Alabama Business Corporation Act
(the "ABCA"). Shareholders of Parisian, whose rights are governed by Parisian's
Articles of Incorporation and Bylaws and by the ABCA, will, upon consummation of
the
47
<PAGE>
Merger, become stockholders of Proffitt's whose rights will then be governed by
the Charter and Bylaws of Proffitt's and by the TBCA. The following is a summary
of the material differences in the rights of stockholders of Proffitt's and
Parisian and is qualified in its entirety by reference to the governing law and
the Articles of Incorporation or Charter and Bylaws of each of Proffitt's and
Parisian. Certain topics discussed below are also subject to federal law and the
regulations promulgated thereunder.
REMOVAL OF DIRECTORS
Parisian's Articles of Incorporation provide that any director may be
removed with or without cause at a special meeting called for the purpose, but
only upon the affirmative vote of not less than 80% of the then outstanding
common shares, and the affirmative vote of not less than 67% of the then
outstanding common shares which are not held by an "Interested Shareholder" or
any affiliate thereof. "Interested Shareholder" generally means any person
(other than a Family Shareholder or an Investor Partnership (as each terms are
defined in the shareholders agreement described below) with respect to shares
currently owned) who is the beneficial owner of 10% or more of the outstanding
common shares of Parisian. The approval required referred to above is referred
to hereinafter as a "Supermajority Vote."
Proffitt's Charter and Bylaws provide that any or all directors may be
removed only for cause (as defined in the TBCA) by a vote of a majority of the
stockholders entitled to vote on such proposal at a special meeting called for
the purpose.
NUMBER OF DIRECTORS
Parisian's Articles provide for the number of directors to be fixed in the
Bylaws. The Bylaws provide that the exact number of directors may be fixed by
the Parisian Board from time to time at a number no greater than nine (9) and no
less than three (3). The ABCA provides that if the board of directors has the
power to fix or change the number of directors, the board of directors may
increase or decrease by 30% or less the number of directors last approved by the
shareholders. Further, the ABCA requires that only shareholders may change the
range for the number of directors or change from a variable number to a fixed
number or vice versa. Vacancies created by an increase in the number of
directors may be filled only by the shareholders.
The number of members of the Proffitt's Board of Directors may be increased
or decreased by the Proffitt's Board of Directors through an amendment to the
Bylaws; provided, however, that the adoption of such an amendment by the
Proffitt's Board of Directors requires the vote of a majority of the entire
Board. The Proffitt's Board of Directors may be comprised of up to 15 members.
PARISIAN SPECIAL MEETINGS
The ABCA provides that on the call of the Board of Directors or the persons
authorized to do so in the Articles of Incorporation or Bylaws, or upon the
written demand of the holders of at least 10% of all of the votes entitled to be
cast on an issue, a corporation shall hold a special meeting of shareholders.
Parisian's Bylaws provide that the Chairman of the Board, the Board of
Directors, the President or shareholders holding not less than 10% of the
outstanding common shares may call a special meeting. Any notice of a special
meeting must include a statement of the purpose or purposes of the meeting.
Proffitt's Bylaws authorize the Chairman of the Board, the President and the
Board of Directors to call a special meeting of stockholders. The Charter and
Bylaws also provide that a special meeting of stockholders shall be called at
the written request of at least 25% of the outstanding shares of Proffitt's
entitled to vote at the special meeting.
48
<PAGE>
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Pursuant to the ABCA, the recommendation of the Parisian Board and the
approval of holders of at least two-thirds (unless a greater or lesser vote is
specified in the Articles of Incorporation) of the shares of Parisian Common
Stock entitled to vote thereon is required to effect (i) a merger or share
exchange in certain cases, and (ii) to sell, lease or exchange all or
substantially all of Parisian's assets. With respect to a merger, no vote of the
Parisian shareholders would be required if Parisian were the surviving
corporation and (i) the related agreement of merger did not amend Parisian's
Articles of Incorporation, (ii) each share of Parisian Common Stock outstanding
immediately before the merger were an identical outstanding or treasury share of
Parisian Common Stock after the merger and (iii) the number of shares of
Parisian Common Stock to be issued in the merger (or to be issuable upon
conversion of any convertible instruments to be issued in the merger) did not
exceed 20% of the shares of Parisian Common Stock outstanding immediately before
the merger. The Articles of Incorporation of Parisian require a Supermajority
Vote to approve certain business combinations with an Interested Shareholder
unless such business combination is approved by the disinterested members of the
Parisian Board before such person becomes an Interested Shareholder or certain
conditions relating to the price offered and other matters are satisfied.
Various provisions of the Articles of Incorporation of Parisian which
require a supermajority vote to approve shareholder action may be amended only
on approval by a Supermajority Vote.
The TBCA provides that the approval of the Proffitt's Board of Directors and
of a majority of the outstanding shares of Proffitt's Common Stock entitled to
vote thereon would also generally be required to approve a merger or to sell,
lease, exchange or otherwise dispose of substantially all of Proffitt's assets.
In accordance with the TBCA, submission by the Proffitt's Board of Directors of
any such action may be conditioned on any basis, including without limitation,
conditions regarding a super-majority voting requirement or that no more than a
certain number of shares indicate that they will seek dissenters' rights, if
such rights are otherwise available.
With respect to a merger, no vote of the stockholders of Proffitt's would be
required if Proffitt's were the surviving corporation and (i) Proffitt's Charter
would remain unchanged after the merger, subject to certain exceptions, (ii)
each stockholder of Proffitt's immediately before the merger would hold an
identical number of shares, with identical rights and preferences, after the
merger, (iii) the number of voting shares outstanding immediately after the
merger plus the number of voting shares issuable as a result of the merger
(either by conversion of securities issued pursuant to the merger or the
exercise of rights and warrants issued pursuant to the merger, will not exceed
by more than 20% the number of voting shares for the surviving corporation
outstanding immediately before the merger; and (iv) the number of participating
shares outstanding immediately after the merger, plus the number of
participating shares issuable as a result of the merger (either by conversion of
securities issued pursuant to the merger or the exercise of rights and warrants
issued pursuant to the merger), will not exceed by more than 30% the total
number of participating shares outstanding immediately before the merger.
With respect to a sale, lease, exchange or other disposition of
substantially all the assets of Proffitt's, no vote of the stockholders of
Proffitt's would be required if such transfer were conducted in the regular
course of business or if such transfer were made to a wholly-owned subsidiary of
Proffitt's.
ACTION BY WRITTEN CONSENT
Both the ABCA and the TBCA provide that action may be taken without a
stockholder meeting and vote if all stockholders entitled to vote on the action
consent to taking such action without a meeting. Action by written consent of
the Proffitt's stockholders is impracticable given the number of holders of the
Proffitt's Common Stock.
49
<PAGE>
INSPECTION RIGHTS
Both the TBCA and the ABCA contain provisions granting stockholders the
right to inspect certain records of each corporation. Under the ABCA, any person
who has been a holder of record of shares for 180 days immediately preceding his
or her demand or who is the holder of record of at least 5% of the outstanding
shares is entitled, either in person or by attorney or other agent, upon written
demand stating the purpose thereof, to inspect Parisian's records during
Parisian's usual business hours. This right is limited, however, to inspection
for "a proper purpose."
Under the TBCA, Proffitt's stockholders are also entitled to inspect and
copy, during regular business hours at Proffitt's principal office, the minutes
of stockholder meetings, Charter, Bylaws, annual reports, and certain other
records of Proffitt's, provided the stockholder give Proffitt's written notice
of his demand at least 5 business days before the date on which he wishes to
inspect and copy the records. In addition, a stockholder who makes a demand in
good faith, for a proper purpose and described with reasonable particularity his
purpose and the records he desires to inspect, and if the records are directly
connected with his purpose, may also, upon 65 days' written notice, inspect and
copy: (i) accounting records of Proffitt's, (ii) the records of stockholders and
excerpts from minutes of any meeting of Proffitt's Board of Directors, (iii)
records of any action of a committee of Proffitt's Board of Directors while
acting in place of the Board of Directors on behalf of the corporation, (iv)
minutes of any meeting of the stockholders, and (v) records of action taken by
the stockholders or Board of Directors without a meeting.
AMENDMENT OF BYLAWS
Parisian's Bylaws may be modified, altered or repealed and new Bylaws may be
adopted by the vote of a majority of the Parisian Board. No Bylaws may be
adopted, amended or repealed by the shareholders of Parisian unless approved by
a Supermajority Vote. The Bylaw providing for filling of vacancies on the
Parisian Board by shareholder vote, and any Bylaw which was adopted by the
shareholders and specifically provides that it cannot be altered, amended or
repealed by the Parisian Board, may be amended only by the shareholders.
Proffitt's Bylaws may be modified, altered or repealed and new Bylaws may be
adopted by the vote of a majority of all stockholders or by the majority vote of
the Board of Directors.
VOLUNTARY DISSOLUTION
The ABCA provides that Parisian may be dissolved by the approval of the
Parisian Board and a majority of the outstanding shares of Parisian stock
entitled to vote thereon. The ABCA also allows all the shareholders of Parisian
acting unanimously in writing to effect a dissolution of Parisian without the
approval of the Parisian Board.
The TBCA provides that Proffitt's may be dissolved if the Proffitt's Board
of Directors proposes dissolution and a majority of the outstanding shares of
Proffitt's stock entitled to vote thereon approves. In accordance with the TBCA,
the Proffitt's Board of Directors may condition its submission of a proposal for
dissolution on any basis including a greater stockholder vote requirement.
INDEMNIFICATION
Both the ABCA and the TBCA provide in certain situations for mandatory and
permissive indemnification of directors and officers in substantially the same
manner. Both the ABCA and the TBCA provide that statutory indemnification is not
to be deemed exclusive of any other rights to which a director or officer
seeking indemnification may be entitled; provided, however, that the TBCA also
states that no indemnification may be made if a final adjudication adverse to
the director or officer establishes his liability (1) for any breach of loyalty
to the corporation or its stockholders; (2) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law; or
(3) for unlawful distributions. Under the TBCA an action for breach of fiduciary
duty must generally be
50
<PAGE>
brought within one year of the event giving rise to the action. Under Alabama
law, an action must generally be brought within two years.
The ABCA permits a corporation to include in its articles of incorporation a
provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director for (A) the amount of financial benefit the director
received to which he was not entitled; (B) an intentional infliction of harm on
the corporation or the shareholders; (C) a violation for an unlawful
distribution; (D) an intentional violation of criminal law; or (E) a breach of a
director's duty of loyalty. Parisian's Articles of Incorporation contain such a
provision.
No similar provision exists in the TBCA or in Proffitt's Charter or Bylaws.
BUSINESS COMBINATION STATUTE
Tennessee's Business Combination Act (the "Business Combination Act")
provides that a party owning 10% or more of stock in a "resident domestic
corporation" (such party is called an "interested stockholder") cannot engage in
a business combination with the resident domestic corporation unless the
combination (i) takes place at least five years after the interested stockholder
first acquired 10% or more of the resident domestic corporation, and (ii) either
(A) is approved by at least 2/3 of the non-interested voting shares of the
resident domestic corporation or (B) satisfies certain fairness conditions
specified in the Business Combination Act.
These provisions apply unless one of two events occurs. A business
combination with an entity can proceed without delay when approved by the target
corporation's board of directors before that entity becomes an interested
stockholder, or the resident corporation may enact a charter amendment by bylaw
to move itself entirely from the Business Combination Act. This charter
amendment or bylaw must be approved by a majority of the stockholders who have
held shares for more than one year prior to the vote. It may not take effect for
at least two years after the vote. Proffitt's has not adopted a provision in its
Charter or Bylaws removing Proffitt's from coverage under the Business
Combination Act.
The Business Combination Act further provides an exemption from liability
for officers and directors of resident domestic corporations who do not approve
proposed business combinations or charter amendments and bylaws removing their
corporations from the Business Combination Act's coverage as long as the
officers and directors act in "good faith belief" that the proposed business
combination would adversely affect their corporation's employees, customers,
suppliers, or the communities in which their corporation operates and such
factors are permitted to be considered by the board of directors under the
charter.
The United States Court of Appeals for the Sixth Circuit has held that the
Tennessee Business Combination Act is unconstitutional as it applies to target
corporations organized under the laws of states other than Tennessee (such as
Parisian).
The ABCA contains no similar provision.
CONTROL SHARE ACQUISITION ACT
The Tennessee Control Share Acquisition Act ("TCSAA") strips a purchaser's
shares of voting rights any time an acquisition of shares in a covered Tennessee
corporation brings the purchaser's voting power to one-fifth, one-third or a
majority of all voting power. The purchaser's voting rights can be established
only by a majority vote of the other stockholders. The purchaser may demand a
special meeting of stockholders to conduct such a vote. The purchaser can demand
such a meeting before acquiring a control share only if it holds at least 10% of
outstanding shares and announces a good faith intention to make the control
share acquisition. A target corporation may or may not redeem the purchaser's
shares if the shares are not granted voting rights. The TCSAA applies only to
corporations
51
<PAGE>
that have adopted a provision in its charter or bylaws expressly declaring that
the TCSAA will apply. Proffitt's has not adopted any provision in its Charter or
Bylaws electing protection under the TCSAA.
The United States Court of Appeals for the Sixth Circuit, however, has held
that the TCSAA is unconstitutional as it applies to target corporations
organized under the laws of states other than Tennessee (such as Parisian).
The ABCA contains no similar provisions with respect to control share
acquisitions.
INVESTOR PROTECTION ACT
Tennessee's Investor Protection Act ("TIPA") applies to tender offers
directed at corporations (called "offeree companies") that have "substantial
assets" in Tennessee and that are either incorporated in or have a principal
office in Tennessee. The TIPA requires an offeror making tender offer for an
offeree company to file with the Commissioner of Commerce and Insurance (the
"Commissioner") a registration statement. When the offeror intends to gain
control of the offeree company, the registration statement must indicate any
plans the offeror has for the offeree. The Commissioner may require additional
information material to the takeover offer and may call for hearings. The TIPA
does not apply to an offer that the offeree company's board of directors
recommends to stockholders.
In addition to requiring the offeror to file a registration statement with
the Commissioner, the TIPA requires the offeror and the offeree company to
deliver to the Commissioner all solicitation materials used in connection with
the tender offer. The TIPA prohibits "fraudulent, deceptive, or manipulative
acts or practices" by either side, and given the Commissioner's standing to
apply for equitable relief to the Chancery Court of Davidson County, Tennessee,
or to any other chancery court having jurisdiction whenever it appears to the
Commissioner that the offeror, the offeree company, or any of its respective
affiliates has engaged in or is about to engage in a violation of the TIPA. Upon
proper showing, the Chancery Court may grant injunctive relief. The TIPA further
provides civil and criminal penalties for violations.
The United States Court of Appeals for the Sixth Circuit has held that the
TIPA violates the commerce clause of the United States Constitution to the
extent that it applies to target corporations organized under the laws of states
other than Tennessee (such as Parisian).
The ABCA contains no similar provisions with respect to investor protection.
AUTHORIZED CORPORATION PROTECTION ACT
The Tennessee Authorized Corporation Protection Act ("TACPA") is the vehicle
through which the Tennessee statutes attempt to permit the Business Combination
Act and the TCSAA to govern foreign corporations, The TACPA provides that an
authorized corporation can adopt a bylaw or a charter provision electing to be
subject to the operative provisions of the Business Combination Act and the
TCSAA, which then become applicable "to the same extent as such provisions apply
to a resident domestic corporation." Authorized corporations are those that are
required to obtain a Certificate of Authority from the Tennessee Secretary of
State and that satisfy any 2 of certain tests including having its principal
place of business located in Tennessee; having a significant subsidiary located
in Tennessee; having a majority of such corporation's fixed assets located in
Tennessee; having more than 10% of the beneficial owners of the voting stock or
more than 10% of such corporation's shares of voting stock beneficially owned by
residents of Tennessee; employing more than 250 individuals in Tennessee, or
having an annual payroll paid to residents of Tennessee that is in excess of
$5,000,000; producing goods and/or services in Tennessee that result in annual
gross receipts in excess of $10,000,000; or having physical assets and/or
deposits located within Tennessee that exceed $10,000,000 in value.
The United States Court of Appeals for the Sixth Circuit, however, has held
that TACPA is unconstitutional as it applies to target corporations organized
under the laws of states other than Tennessee (such as Parisian).
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<PAGE>
The ABCA contains no similar provisions with respect to authorized
corporation protection.
GREENMAIL ACT
The Tennessee Greenmail Act ("TGA") applies to any corporation chartered
under the laws of Tennessee which has a class of voting stock registered or
traded on a national securities exchange or registered with the Commission
pursuant to Section 12(g) of the Exchange Act. The TGA provides that it is
unlawful for any corporation or subsidiary to purchase, either directly or
indirectly, any of its shares at a price above the market value, as defined in
the TGA, from any person who holds more than 3% of the class of the securities
purchased if such person has held such shares for less than 2 years, unless
either the purchase is first approved by the affirmative vote of a majority of
the outstanding shares of each class of voting stock issued or the corporation
makes an offer of at least equal value per share to all holders of shares of
such class.
The ABCA contains no similar provision with respect to greenmail.
DISSENTERS' RIGHTS
The ABCA provides for dissenters' appraisal rights for certain mergers and
consolidations. See "INTRODUCTION --Dissenters' Rights."
The TBCA generally provides dissenters' rights for mergers and share
exchanges that would require stockholder approval, sales of substantially all
the assets (other than sales that are in the usual and regular course of
business and certain liquidations and court-ordered sales), and certain
amendments to the charter that materially and adversely affect rights in respect
of a dissenter's shares. Dissenters' rights are not available as to any shares
which are listed on an exchange registered under Section 6 of the Exchange Act
or are "national market system" securities as defined in rules promulgated
pursuant to the Exchange Act. Proffitt's Common Stock is listed on the Nasdaq
National Market and as a result dissenters' rights are not available to
Proffitt's stockholders.
PREEMPTIVE RIGHTS
The ABCA provides, with minor exceptions, that existing shareholders have
preemptive rights to the unissued shares of the corporation, except to the
extent that the Articles of Incorporation otherwise provide. Parisian's Articles
of Incorporation provide that shareholders do not have such preemptive rights.
The TBCA provides the existing shareholders do not have preemptive rights to
the unissued shares of the corporation unless the Charter so provides.
Proffitt's Charter does not provide for preemptive rights.
PARISIAN SHAREHOLDERS AGREEMENTS
The shareholders of Parisian are parties to a certain shareholders
agreement, dated July 12, 1990, as amended (the "Shareholders Agreement"),
governing, among other things, the election of directors of Parisian, standstill
agreements relating to the acquisition of additional common shares, certain
registration rights granted to the shareholders and a right of first offer
granted to the shareholders. The Shareholders Agreement will terminate at the
Effective Time of the Merger.
Certain shareholders of Parisian are parties to restrictive stock transfer
agreements restricting transfer of their shares except in accordance with such
agreements. Such restrictive stock transfer agreements will also terminate at
the Effective Time.
As shareholders of Proffitt's the former Parisian shareholders will not be
subject to any agreements restricting voting rights. Parisian shareholders will
have certain registration rights with respect to the shares of Proffitt's Common
Stock acquired by them in the Merger, in accordance with the Registration Rights
Agreement. See "DESCRIPTION OF PROFFITT'S CAPITAL STOCK--Registration Rights."
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SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
PROFFITT'S
Principal Owners of Proffitt's Common Stock. The following table sets forth,
based on the number of shares outstanding as of July 12, 1996 (except as noted
below), the percentage of ownership of the Proffitt's Common Stock by the
persons believed by Proffitt's to own beneficially more than 5% of the
Proffitt's Common Stock based upon recent Schedule 13G filings and information
provided by the beneficial owners.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER PERCENT
- -------------------------------------------------------------------- --------- -------
<S> <C> <C>
Apollo Specialty Retail Partners, L.P............................... 1,421,801 6.87%
Two Manhattanville Road
Purchase, New York
Fidelity Management and Research Corp............................... 1,340,739(2) 6.31%
82 Devonshire Street
Boston, Massachusetts
R. Brad Martin...................................................... 1,270,735(3) 6.10%
115 North Calderwood
Alcoa, Tennessee
</TABLE>
- ------------
(1) Based solely on information provided by the beneficial owner.
(2) Includes 552,173 shares issuable upon conversion of Proffitt's, Inc. 4.75%
Convertible Debentures ($23.578 million face value).
(3) Includes: (i) 150,000 shares that Mr. Martin has a right to acquire within
sixty days after July 12, 1996 through the exercise of stock options, (ii)
2,000 shares held by Mr. Martin as custodian for his minor children, (iii)
1,900 shares owned by RBM Venture Company, a company of which Mr. Martin is
the sole shareholder, (iv) 75,000 shares held by R. Brad Martin 1994-1,
1995-1 and 1996-1 Qualified Annuity Trusts, (v) 2,586 shares owned by the R.
Brad and Jean L. Martin Family Foundation, and (vi) 13,000 shares of
restricted stock which will vest on February 12, 1987.
54
<PAGE>
Proffitt's Common Stock Ownership by Directors and Executive Officers. The
following table sets forth, as of July 12, 1996, the beneficial ownership of
Proffitt's Common Stock by all directors, each of the executive officers named
in the Summary Compensation Table contained in the Proffitt's Proxy Statement
dated May 1, 1996 and all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF OUTSTANDING
NAME OF BENEFICIAL OWNERSHIP (1) COMMON STOCK
- ------------------------------------------------------ --------------------------- ----------------
<S> <C> <C>
R. Brad Martin........................................ 1,270,735(2) 6.10%
James A. Coggin....................................... 46,500 *
James E. Glasscock.................................... 29,500 *
Gary L. Howard........................................ 32,000 *
Frederick J. Mershad.................................. 29,000 *
Bernard E. Bernstein.................................. 16,201(3) *
Edmond D. Cicala...................................... 17,889 *
Ronald de Waal........................................ 1,000,513 4.84%
Gerard K. Donnelly.................................... 4,649 *
Donald F. Dunn........................................ 8,550 *
W. Thomas Gould....................................... 412,434(4) 1.96%
Michael S. Gross...................................... 1,800(5) *
G. David Hurd......................................... 6,443 *
Richard D. McRae...................................... 57,407 *
C. Warren Neel........................................ 7,250 *
Harwell W. Proffitt................................... 7,500 *
Marguerite W. Sallee.................................. 1,100 *
Gerald Tsai, Jr....................................... 5,000 *
All directors and executive officers as a group
(29 persons)........................................ 3,285,436 15.26%
</TABLE>
- ------------
* Owns less than 1% of the total outstanding Common Stock of Proffitt's.
(1) Includes shares that the following persons have a right to acquire within
sixty days after July 12, 1996 through the exercise of stock options: Martin
(150,000), Coggin (42,000), Glasscock (27,000), Howard (30,000), Mershad
(27,000), Bernstein (3,000), Cicala (2,000), de Waal (2,000), Donnelly
(1,670), Dunn (1,670), Gould (313,323), Gross (800), Hurd (1,670), McRae
(1,000), Neel (3,000), Proffitt (3,000) and Tsai (2,000).
(2) Includes: (i) 2,000 shares held by Mr. Martin as custodian for his minor
children, (ii) 1,900 shares owned by RBM Venture Company, a company of which
Mr. Martin is sole shareholder, (iii) 75,000 shares held by R. Brad Martin
1994-1, 1995-1, and 1996-1 Qualified Annuity Trusts, (iv) 2,586 shares owned
by the R. Brad and Jean L. Martin Family Foundation, and (v) 13,000 shares
of restricted stock which will vest on February 12, 1997.
(3) Includes 3,000 shares owned by the Bernard E. Bernstein Defined Benefit
Pension Plan.
(4) Includes 3,577 shares owned by Mr. Gould's wife as to which he disclaims
beneficial ownership. Also includes 17,512 shares held in a profit sharing
and savings plan for the account of Mr. Gould. Excludes 84,735 shares
reserved by Proffitt's for issuance to Mr. Gould with respect to a deferred
compensation arrangement.
(5) Does not include shares held by Apollo Specialty Retail Partners, L.P.
("Apollo Specialty"). Mr. Gross is one of the founding principals of Apollo
Advisors, L.P., the managing general partner of Apollo Investment Fund,
L.P., the general partner of Apollo Specialty. Mr. Gross disclaims
beneficial ownership of all securities held by Apollo Specialty.
PARISIAN
Security Ownership of Certain Beneficial Owners of Parisian Common Stock and
Parisian Management. The following table sets forth certain information, as of
July 12, 1996 with respect to the beneficial ownership of Parisian Common Stock
by (i) each person known by Parisian to be the beneficial owner of more than 5%
the outstanding Parisian Common Stock, (ii) each director of
55
<PAGE>
Parisian, (iii) each of the Chief Executive Officer and the next four most
highly compensated executive officers of Parisian and (iv) all directors and
executive officers of Parisian as a group. Except as otherwise indicated, each
person named below has sole voting and dispositive power with respect to the
Parisian Common Stock beneficially owned by such person.
<TABLE>
<CAPTION>
PERCENTAGE
NAME SHARES(1) OWNED(1)
- -------------------------------------------------------- --------- ----------
<S> <C> <C>
Harold Abroms........................................... 427,677(2)(12) 5.8%
Jim W. Adams............................................ 6,555(3)(12) *
Warren Bailey........................................... 14,320(4)(12) *
Howard R. Finkelstein................................... 10,072(5)(12) *
Emil C. Hess............................................ 20,449(6)(12) *
Donald E. Hess.......................................... 1,541,677(7)(12) 21.0%
Kenneth I. Tuchman...................................... 0 *
LB I Group, Inc......................................... 3,557,359(8) 46.1%
Jo Ann H. Morrison...................................... 904,752(9)(12) 12.3%
Gary A. Smith........................................... 9,691(11)(12) *
David P. Spalding....................................... 0 *
All Directors and Executive Officers as a Group
(including the persons named above)................... 2,038,448(11)(12) 27.7%
</TABLE>
- ------------
* Beneficially owns less than 1% of the shares outstanding.
(1) For purposes of this table, the percentage of class beneficially owned has
been computed on the basis of 7,355,846 shares of Parisian Common Stock
outstanding on , 1996. Beneficial ownership is based upon information
available to Parisian or furnished by the respective shareholders,
directors and executive officers. Shares shown as beneficially owned by
certain shareholders in the foregoing table have been rounded to exclude
fractional shares.
(2) Includes 14,677 shares owned directly by Mr. Abroms, 73,500 shares held by
him as trustee of certain charitable remainder trusts, 139,500 shares held
by him as trustee for his children, and 200,000 shares owned by a family
partnership of which Mr. Abroms is a general partner and as to which he
shares beneficial ownership with the other general partner. Does not
include 29,900 shares owned by Mr. Abroms' wife and 20,000 shares owned by
his son as trustee for Mr. Abrom's wife, with respect to which shares Mr.
Abroms disclaims beneficial ownership. Mr. Abroms's address is 3132
Guilford Road, Birmingham, Alabama 35223.
(3) Includes 2,093 shares owned directly by Mr. Adams and 4,462 shares held
under the Parisian, Inc. Retirement and Savings Plan (the "Parisian
Retirement Plan") for Mr. Adams' benefit. Does not include 34,075 shares
which Mr. Adams or his assignees have the right to acquire pursuant to the
exercise of options.
(4) Includes 7,955 shares owned directly by Mr. Bailey and 6,365 shares held
under the Parisian Retirement Plan for Mr. Bailey's benefit. Does not
include 68,148 shares which Mr. Bailey or his assignees have the right to
acquire pursuant to the exercise of options.
(5) Includes 8,374 shares owned directly by Mr. Finkelstein and 1,698 shares
held under the Parisian Retirement Plan for Mr. Finkelstein's benefit. Does
not include 55,370 shares which Mr. Finkelstein or his assignees have the
right to acquire pursuant to the exercise of options.
(6) Does not include 41,889 shares owned by Mr. Hess' wife, with respect to
which shares Mr. Hess disclaims beneficial ownership.
(7) Includes 656,315 shares owned directly by Mr. Hess, 699,687 shares held by
him as trustee or co-trustee for his children, and 185,675 shares held by
him as trustee for the children of his sister, Jo Ann H. Morrison. Does not
include 5,717 shares owned directly by his wife, 18,300 shares held by his
wife as co-trustee for one of their children, and 219,825 shares held by
another individual as trustee for Mr. Hess' children, with respect to which
shares Mr. Hess disclaims beneficial ownership. Mr. Hess' address is 750
Lakeshore Parkway, Birmingham, Alabama 35211.
(8) Includes 1,286,264 shares owned by Lehman Brothers Merchant Banking
Portfolio Partnership L.P., 1,048,954 shares owned by Lehman Brothers
Offshore Investment Partnership--Japan L.P.
(Footnotes continued on following page)
56
<PAGE>
(Footnotes continued from preceding page)
347,659 shares owned by Lehman Brothers Offshore Investment Partnership
L.P., and 874,482 shares owned by Lehman Brothers Capital Partners II L.P.
(collectively referred to herein as the "Investment Partnerships").
Pursuant to the Shareholders Agreement referred to elsewhere herein, LB I
Group Inc. ("LBG") has been designated as the "Investor Group
Representative" (as defined therein) and, in such capacity, may exercise
certain rights on behalf of the Investment Partnerships. Each such
Investment Partnership has irrevocably appointed the Investor Group
Representative as its proxy with respect to the election and removal of
those directors of Parisian to be designated by the Investor Group, as
defined in the Shareholders Agreement. Accordingly, the Investor Group
Representative may be deemed to share the power to vote or direct the vote
of the 3,557,359 shares held in the aggregate by the Investment
Partnerships. LBG and Lehman Brothers Holdings Inc. ("Lehman Holdings") are
the general partners of Lehman Brothers Merchant Banking Portfolio
Partnership L.P. and Lehman Brothers Capital Partners II L.P.,
respectively, and Lehman Brothers Offshore Partners Ltd. is the general
partner of each of Lehman Brothers Offshore Investment Partnership-Japan
L.P. and Lehman Brothers Offshore Investment Partnership L.P. Each such
general partner may be deemed to own beneficially the shares directly owned
by the entity of which it is the general partner. Lehman Brothers Offshore
Partners Ltd. is a wholly owned subsidiary of LBG, which is a wholly owned
subsidiary of Lehman Holdings. LBG and Lehman Holdings may be deemed to own
beneficially all of the shares directly held by the Investment
Partnerships. Each of the Investment Partnerships may be deemed to share
with LBG the power to vote and the power to dispose of the shares owned by
such Investment Partnership. The address of LBG is American Express Tower,
World Financial Center, New York, New York 10285.
(9) Includes 619,889 shares owned directly by Jo Ann H. Morrison and 284,863
shares held by her as trustee for her children. Ms. Morrison's address is
750 Lakeshore Parkway, Birmingham, Alabama 35211.
(10) Includes 5,233 shares owned directly by Mr. Smith and 4,458 shares held
under the Parisian Retirement Plan of the benefit of Mr. Smith. Does not
include 17,037 shares which Mr. Smith has the right to acquire pursuant to
the exercise of options.
(11) Includes 3,998 shares owned directly by two officers of the Company who are
not listed above, 1,604 shares held under the Parisian Retirement Plan for
the benefit of two officers of the Company who are not listed above, and
2,405 shares held under an individual retirement account for the benefit of
one officer of the Company who is not listed above. Does not include 96,981
shares which six officers who are not listed above or the assignees of such
officers have the right to acquire pursuant to the exercise of options.
(12) Pursuant to the Shareholders Agreement, each of the Family Shareholders, as
defined therein (which for purposes of the Shareholders Agreement includes
each of the Management Shareholders, as defined therein) has (i)
irrevocably relinquished such Family Shareholder's right to act
independently and (ii) irrevocably constituted and appointed Donald E. Hess
as the "Family Shareholder Representative" (as defined therein) with
respect to the nomination, election and removal of directors of the
Company. As such Family Shareholder Representative, Mr. Hess is to
designate the persons to be nominated to the Parisian Board the Family
Shareholders and has the power to vote the shares of Parisian Common Stock
held by the Family Shareholders for the election or removal of directors.
Accordingly, Mr. Hess may be deemed to share the power to vote or direct
the vote of 3,764,909 common shares beneficially owned in the aggregate by
the Family Shareholders (including the Management Shareholders),
constituting 51.2% of the Parisian Common Stock outstanding. As a result of
the Merger, the Shareholders Agreement is to be terminated.
BUSINESS OF PROFFITT'S
Founded in 1919, Proffitt's is a leading regional specialty department store
company offering a wide selection of fashion apparel, accessories, cosmetics,
and decorative home furnishings, featuring assortments of premier brands and
unique specialty merchandise. Proffitt's objective is to be the dominant
specialty department store chain in its region through a strategy which combines
fashion leadership with opening or acquiring new stores and expanding and
renovating existing stores.
57
<PAGE>
Proffitt's has experienced significant growth since 1992. During 1992 and
1993, Proffitt's acquired certain real and personal property and assumed certain
operating leases of eighteen store locations from Hess Department Stores, Inc.
and Crown American Corporation. The acquired locations were in Tennessee,
Virginia, Georgia and Kentucky. These stores were renovated and placed in
service as Proffitt's Division stores in 1992 and 1993.
In March 1994, Proffitt's acquired all of the outstanding common stock of
Macco Investments, Inc., a holding company for McRae's, Inc., a privately-owned
retail department store chain with 28 department stores headquartered in
Jackson, Mississippi.
In March 1995, Proffitt's purchased a majority interest in Parks-Belk
Company, the owner/operator of four Parks-Belk stores located in northeast
Tennessee. Proffitt's purchased the remaining interest in Parks-Belk in April
1995 and subsequently converted three stores to Proffitt's Division stores and
closed one.
On February 3, 1996, Proffitt's acquired by merger all of the outstanding
common stock of Younkers, Inc., a publicly held department store chain with 49
department stores headquartered in Des Moines, Iowa.
Proffitt's stores are primarily anchor stores in leading regional malls.
Proffitt's currently operates under three divisions, the Proffitt's Division
with 25 stores, the McRae's Division with 29 department stores and one specialty
store and the Younkers Division with 48 department stores. The stores operated
under the Proffitt's Division are located in Tennessee (12 stores), Virginia (8
stores), Georgia (2 stores), Kentucky (2 stores) and North Carolina (1 store).
The McRae's department stores are located in Alabama (14 stores), Mississippi
(12 stores), Florida (2 stores) and Louisiana (1 store). The stores operated
under the Younkers Division are located in Iowa (18 stores), Wisconsin (17
stores), Michigan (5 stores), Nebraska (5 stores) and Illinois, Minnesota and
South Dakota (each 1 store).
Proffitt's operates separate merchandising, sales promotion and store
operating divisions for the Proffitt's, McRae's and Younkers Divisions, but
operates centralized administrative and support functions, such as accounting,
information systems and credit.
Proffitt's regularly considers acquisition opportunities as well as other
forms of business combinations. Proffitt's continues to evaluate and pursue
transaction opportunities as they arise. In evaluating opportunities for future
expansion, Proffitt's targets markets in which it believes it can achieve and
sustain a strong competitive position. No assurance can be given with respect to
the timing, likelihood or the financial or business effect of any possible
transaction.
Proffitt's principal executive offices are located at 115 North Calderwood,
Alcoa, Tennessee 37701, and its telephone number is (423) 983-7000.
For further information concerning Proffitt's, see "--Selected Financial and
Operating Data," "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
BUSINESS OF PARISIAN
Parisian operates 38 specialty department stores, including one store
location which opened in March 1996, selling moderate to better-priced fashion
merchandise for the entire family. Parisian's stores are generally anchor stores
in enclosed regional and premium community malls. As a specialty department
store, a Parisian store carries apparel, cosmetics, shoes, accessories and gifts
customarily found in typical department stores, but does not carry home
furnishings, housewares, furniture, large or small appliances or electronics.
Parisian concentrates on providing value through superior customer service,
competitive pricing and strong relationships with its customers and suppliers.
Parisian seeks to create a special shopping experience in its stores through
carefully selected fashion merchandise assortments, attractive store design,
exciting visual presentations and promotional events and personal amenities that
enhance customer convenience and comfort.
58
<PAGE>
Parisian was founded in 1887 and operated a single store in downtown
Birmingham for 76 years. Since 1985, Parisian has expanded its operations from
12 stores in Alabama to 38 stores in eight states.
Parisian stores offer a wide selection of first-quality fashion apparel for
all members of the family. Parisian offers an exciting selection of merchandise
that reflects current fashion trends and responds to customer needs through a
carefully edited mix comprised of national brands, narrowly distributed brands
typically found in specialty boutiques and private label apparel. Parisian
believes that this three-part merchandising strategy enables Parisian to deliver
fashion and value and distinguishes Parisian stores from those of its
competitors.
National brands include Calvin Klein, Jones New York, Tommy Hilfiger, Ralph
Lauren/Polo, Hart Schaffner and Marx, Easy Spirit, Levi, Dockers, Estee Lauder
and Clinique. Parisian's buyers are authorized to edit their selection of
branded apparel to focus on merchandise which they expect to be the most
appealing to customers. Parisian also encourages its buyers to seek out
lesser-known vendors who provide merchandise typically found in specialty
boutiques. These narrowly distributed brands provide Parisian with merchandise
variety and excitement and, for a limited period, exclusivity. In addition,
Parisian purchases first-quality private label merchandise which is
predominately imported through the Associated Merchandising Corporation ("AMC"),
a buying cooperative of which Parisian is a member. Parisian's relationship with
AMC offers Parisian access to group purchasing opportunities in worldwide
markets as well as helpful statistical and fashion trend information. During the
fiscal year ended Febrary 3, 1996, Parisian purchased approximately 6.8% of its
merchandise through AMC. Parisian's merchandise mix, as a percent of sales, was
as follows in 1995: women's apparel, 43.6%; men's apparel, 26.0%; children's
apparel, 8.0%; shoes, 12.1%; and cosmetics, 10.3%.
The principal executive offices of Parisian are located at 750 Lakeshore
Parkway, Birmingham Alabama 35211, and its telephone number is (205) 940-4000.
59
<PAGE>
PARISIAN MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of Parisian for each of the three fiscal years in the
period ended February 3, 1996 and for the three month periods ended April 29,
1995 and May 4, 1996. The financial information, discussion and analysis which
follow are based upon and should be read in conjunction with the Consolidated
Financial Statements and the notes thereto. Parisian's fiscal year ends on the
Saturday closest to January 31 of the following year. Accordingly, unless
otherwise indicated, reference to a year in this section means the fiscal year
commencing in the calendar year to which reference is made. For example,
references to "1995" mean the fiscal year which commenced on January 29, 1995
and ended on February 3, 1996.
The following table sets forth certain sales and other information regarding
Parisian's stores for the last five fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales ($
thousands):
Total................ $368,216 $448,969 $517,668 $606,717 $663,828
Average per store.... 17,166 19,247 19,365 19,151 18,234
Average net sales
($/sq.ft.):
Net selling
area(1)................ 277 301 285 264 242
Gross area(2)........ 207 223 209 191 173
Sales increase in
comparable stores (3).. 5.5% 9.9% (0.2 4) 0.4%(4)(5) (0.8)%(6)(7)
Comparable store sales
per avg. sq. ft. of
selling area(3)........ 280 306 304 293 262
New store per avg. sq.
ft of selling
area(3)................ 170 265 241 221 189
Stores open at end of
period................. 22 25 30 35 37(7)
Total area (sq. ft. in
thousands):
Net selling area
(weighted)............. 1,330 1,492 1,818 2,298 2,746
Gross area
(weighted)............. 1,775 2,012 2,479 3,179 3,831
</TABLE>
- ------------
(1) Total for the period divided by weighted average square feet of selling area
(as defined by the National Retail Federation) in use for the period.
(2) Total sales for the period divided by weighted average square feet of gross
area in use for the period.
(3) Comparable store sales per year are sales for stores open throughout the
prior year. New stores sales per year are sales for stores opened during the
current and prior year. Sales for existing stores in markets where a new
store was opened in the current or prior year may be excluded from
comparable store and included in new store sales in circumstances under
which inclusion of the existing store's sales in the comparable store sales
category would distort the category.
(4) Excluding Cincinnati stores. Comparable sales would be distorted in 1993 and
1994 due to the opening of two additional stores in Cincinnati in 1993 and
the resulting effect of the newer stores on sales in the same market.
Including the first Cincinnati store would result in a comparable store
sales decrease of 0.9% in 1993 and 0.6% in 1994.
(Footnotes continued on following page)
60
<PAGE>
(Footnotes continued from preceding page)
(5) Excluding Atlanta stores. Comparable store sales would be distorted in 1994
due to the opening of one additional store in Atlanta in each of 1993 and
1994 and the resulting effect of the newer stores on sales in the same
market. Including the first two Atlanta stores would result in a comparable
store sales increase of 1.1% in 1994.
(6) Excluding Keystone Crossing, Indianapolis, Indiana. Comparable store sales
would be distorted in 1995 due to the opening of one additional store in
Indianapolis in 1995 and the resulting effect of the newer store on sales in
the same market. Including Keystone Crossing would result in a comparable
store sales decrease of 0.9% in 1995.
(7) Excluding Sarasota Square, Sarasota, FL. Comparable store sales would be
distorted in 1995 due to the closing of the Sarasota location during January
1996. Including Sarasota Square would result in a comparable store sales
decrease of 1.0% in 1995.
RESULTS OF OPERATIONS
The following table sets forth Parisian's results of operations as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED
----------------------------------------- -------------------
JANUARY 29, JANUARY 26, FEBRUARY 3, APRIL 29, MAY 4,
1994 1995 1996 1995 1996
----------- ----------- ----------- --------- ------
<S> <C> <C> <C> <C> <C>
Net sales................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 63.4 64.9 63.1 59.1 59.9
----- ----- ----- --------- ------
Gross margin.............................. 36.6 35.1 36.9 40.9 40.1
Selling, general and administrative....... 26.5 26.4 24.9 26.1 25.6
Other operating expenses:
Property and equipment rentals.......... 2.8 3.6 4.5 4.5 4.7
Depreciation and amortization........... 2.5 2.1 1.9 2.1 1.8
Taxes other than income................. 2.0 2.1 2.0 2.3 2.1
Reengineering costs..................... -- 0.5 0.1 -- --
----- ----- ----- --------- ------
Operating income...................... 2.8 0.4 3.5 5.9 5.9
Other income, net......................... 1.9 1.4 1.4 1.8 1.4
Interest expense.......................... 4.2 3.0 2.6 2.9 2.6
Income tax expense (benefit).............. 0.3 (0.3) 1.0 1.9 2.0
----- ----- ----- --------- ------
Income (less) before extraordinary item... 0.2% (0.9)% 1.3% 2.9% 2.7%
----- ----- ----- --------- ------
----- ----- ----- --------- ------
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MAY 4, 1996 (1996) AND APRIL 29, 1995
(1995)
Net Sales. Net sales for the three month period ended May 4, 1996 increased
6.9% over the prior year period. The increase is primarily attributable to the
addition of one new store during May 1995, two new stores during September 1995,
one new store during March 1996, and an increase in comparable store sales.
Comparable store sales for the three month period increased 2.5% from the
comparable period in 1995. New store sales and increased comparable store sales
were slightly offset by the closing of one store during January 1996.
Gross Margin. Gross margin decreased from 40.9% in the prior year period to
40.1% for the first quarter of 1996, primarily as a result of increased
markdowns during the current year period. Such increase is primarily increased
attributable to additional planned promotional events related to in-season
merchandise.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (SG&A) decreased from 26.1% of sales in the first
quarter of 1995 to 25.6% of sales in the first quarter of 1996. Such decrease as
a percent of sales is primarily attributable to a reduction in payroll expenses
61
<PAGE>
from the prior year, caused by the continuation of certain cost reduction and
containment measures first undertaken by Parisian in 1994. The reduction is
offset to some extent by an increase in advertising related costs, which
increased at a rate greater than the rate of increase in sales due to increased
promotional activity in a greater number of markets. SG&A includes all payroll,
occupancy and supply expenses as well as costs associated with advertising and
with Parisian's headquarters and distribution facilities, but excludes
depreciation and rental expenses.
Other Operating Expenses. Other operating expenses decreased from 8.9% of
sales in the first quarter of 1995 to 8.6% of sales in the first quarter of
1996. The decrease in other operating expenses is a result of the expenses in
this category, including amortization of new store preopening costs and taxes,
increasing at a rate less than the rate of increase in sales. However, this
decrease is partially offset by an increase in rent expense over the prior year
period, due to the rent expense for the stores opened during 1995 being at a
level slightly higher, as a percent of sales, than the rent expense for
Parisian's existing stores.
Other Income, Net. Other income, which generally consists primarily of
finance charge income generated by Parisian's proprietary credit card sales,
decreased from 1.8% of sales in 1995 to 1.4% of sales in 1996. Included in other
income for the 1995 period is a write-off of $0.3 million associated with the
disposal of certain assets in connection with the renovation of the Riverchase
Galleria store in Birmingham, Alabama as well as a gain of $1.2 million
associated with the sale of Parisian's airplane. Before consideration of the
effect of the write-off related to the Riverchase Galleria store and the sale of
Parisian's airplane, other income increased from 1.2% of sales in 1995 to 1.4%
of sales in 1996.
Net finance charge income increased as a percent of sales from 1.1% in 1995
to 1.3% in 1996, in part due to a decrease in commercial paper rates which
increases the residual yield received by Parisian on accounts receivable sold
pursuant to Parisian's Receivables Facility (the "Receivables Facility").
Finance charge income before consideration of the effect of the sale of an
interest in accounts receivable pursuant to the Receivables Facility decreased
as a percent of sales from 2.4% in the first quarter of 1995 to 2.3% in the
first quarter of 1996. The decrease in finance charge income as a percent of
sales is attributable to the balance of accounts receivable growing at a slower
rate than Parisian's sales.
Interest Expense. Interest expense for the first quarter of 1996 was $4.2
million, compared to $4.4 million in the first quarter of 1995.
Income Taxes. The differences between the effective tax rate and statutory
rate were primarily due to amortization of goodwill and state income taxes.
Amortization of goodwill was $.47 million during the first quarter of 1996 and
1995.
COMPARISON OF THE FISCAL YEARS ENDED FEBRUARY 3, 1996 (1995) AND JANUARY 28,
1995 (1994)
Net Sales. Parisian's net sales in 1995 increased 9.4% over 1994 from $607
million to $664 million. The increase was attributable to the addition of five
new stores during Fall 1994, one new store during May 1995, and two new stores
during September 1995. Comparable store sales in 1995 decreased 0.8% from the
prior year. Parisian attributes such decline primarily to continuing softness in
the apparel market, fewer sales of clearance inventory during the season, and
Parisian's decision to discontinue the sale of certain lines of women's apparel
which had not been profitable in recent seasons. In any given year, because of
the large number of separate items of merchandise sold and because pricing is
periodically adjusted, Parisian is not able to quantify accurately the
percentage of the net sales increase resulting from increases in unit volume as
compared to increases in prices.
Gross Margin. Gross margin increased from 35.1% in 1994 to 36.9% in 1995. In
1994, Parisian implemented several strategies to improve its gross margin,
including restructuring of the buying organization, implementation of a
planner/distributor organization, installation of more advanced merchandise
inventory systems, and changing the mix of merchandise offered by Parisian to
include more moderately priced merchandise, more merchandise on which higher
than average markups could be earned, and to exclude certain lines of women's
apparel which historically had produced gross
62
<PAGE>
margins lower than Parisian average. The increase in gross margin was primarily
the result of these changes. In addition, better inventory control resulted in
fewer sales of clearance merchandise at significant discounts, which also
contributed to improved gross margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (SG&A) decreased from 26.4% of sales in 1994 to 24.9% of
sales in 1995. Such decrease as a percent of sales is primarily attributable to
a reduction in payroll and certain other expense categories from the prior year,
caused by the continuation of certain cost reduction and containment measures
first undertaken by Parisian in 1994. The reduction is offset to some extent by
an increase in advertising related costs, which increased at a rate greater than
the rate of increase in sales due to increased promotional activity in a greater
number of markets. SG&A includes all payroll, occupancy and supply expenses as
well as costs associated with advertising and with Parisian's headquarters and
distribution facilities, but excludes depreciation and rental expenses.
Other Operating Expenses. Other operating expenses increased from 8.3% of
sales in 1994 to 8.5% of sales in 1995. Included in other operating expenses are
non-recurring charges of approximately $3.2 million in 1994 and $0.3 million in
1995 related to a business process redesign project. Such reengineering costs
include implementation of cost containment measures, primarily directed at
payroll, as well as customer surveys to refine Parisian's market focus. Before
consideration of the effect of the non-recurring charges, operating expenses
increased from 7.8% in 1994 to 8.4% in 1995. The increase in other operating
expenses was a result of the store rent expense for the stores opened during
Fall 1994 and 1995 being a level slightly higher, as a percent of sales, than
the rent expense for Parisian's pre-existing stores.
Other Income, Net. Other income, which generally consists primarily of
finance charge income generated by Parisian's proprietary credit card sales, was
1.4% of sales for both 1994 and 1995. Included in other income for 1995 is a
write-off of $0.9 million associated with the disposal of certain assets in
connection with the renovation of the Riverchase Galleria store in Birmingham,
Alabama. Also included in other income for 1995 are gains of $1.2 million and
$1.7 million from the sale of Parisian's airplane and the Sarasota, Florida
store location, respectively. Before consideration of the effect of the
write-off related to the Riverchase Galleria store and the sale of Parisian's
airplane and the Sarasota, Florida store location, other income decreased from
1.2% of sales in 1994 to 1.1% of sales in 1995.
Net finance charge income decreased as a percent of sales from 1.3% in 1994
to 1.1% in 1995, in part due to an increase in commercial paper rates which
reduces the residual yield received by Parisian on accounts receivable sold
pursuant to the Receivables Facility. Finance charge income before consideration
of the effect of the sale of an interest in accounts receivable pursuant to the
Receivables Facility decreased as a percent of sales from 2.3% in 1994 to 2.2%
in 1995. The decrease in finance charge income as a percent of sales is
attributable to the balance of accounts receivable growing at a slower rate than
Parisian's sales and to an increase in the selection of the interest-free credit
option by holders of Parisian's proprietary credit card.
Interest Expense. Interest expense for 1995 was $17.7 million, compared to
$18.1 million in 1994.
Income Taxes. The differences between the effective tax rate and the
statutory rate were primarily due to amortization of goodwill and state income
taxes. Amortization of goodwill was $1.9 million in 1994 and 1995.
COMPARISON OF FISCAL YEARS ENDED JANUARY 28, 1995 (1994) AND JANUARY 29, 1994
(1993)
Net Sales. Parisian's net sales in 1994 increased 17.2% over 1993 from $518
million to $607 million. The increase was attributable to the addition of five
new stores opened during each of these two years. Comparable store sales in 1994
increased 0.4% from the prior year.
Gross Margin. As in the retail apparel industry in general, Parisian
experienced a decline in gross margin for 1994. Gross margin decreased from
36.6% in 1993 to 35.1% in 1994. The decrease was
63
<PAGE>
attributable to heavier than normal markdowns in the second quarter and
particularly in the fourth quarter of 1994. Markdowns were heavier than normal
for several reasons, including adverse weather conditions from time to time,
fashion trends and competitive pressures in Parisian's stores. During 1994
Parisian effected certain changes in its merchandising division, including
restructuring of the buying organization, the implementation of a
planner/distributor organization, and the installation of more advanced
merchandise inventory systems in an effort to address the decline in gross
margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (SG&A) decreased from 26.5% of net sales in 1993 to
26.4% in 1994 as a result of cost containment measures taken by Parisian. SG&A
includes all payroll, occupancy and supply expenses as well as costs associated
with advertising and with Parisian's headquarters and distribution facilities,
but excludes depreciation and rental expenses.
Other Operating Expenses. Other operating expenses increased as a percent of
sales from 7.3% in 1993 to 8.3% in 1994. The increase was primarily due to a
non-recurring charge of approximately $3.2 million related to a business process
redesign project. Such reengineering costs include implementation of cost
containment measures, primarily directed at payroll, as well as customer surveys
to redefine Parisian's market. The increase was also the result of store rent
expenses for the stores opened during Fall 1993 and 1994 being at a level
slightly higher, as a percent of sales, than the rent expense for Parisian's
existing stores. The increase was partially offset by a reduction in the
amortization of new store preopening costs from 1.0% of sales in 1993 to 0.7% of
sales in 1994.
Other Income, Net. Other income, which consists primarily of finance charge
income generated by Parisian's proprietary credit card sales, decreased as a
percent of sales from 1.9% in 1993 to 1.4% in 1994. The decrease in net finance
charge income as a percent of sales was partially attributable to an increase in
commercial paper rates which reduces the residual yield received by Parisian on
accounts receivable sold pursuant to the Receivables Facility. Finance charge
income before the consideration of the effect of the Receivables Facility
decreased as a percent of sales from 2.6% in 1993 to 2.3% in 1994. The decrease
in finance charge income as a percent of sales was attributable to the balance
of accounts receivable growing at a slower rate than Parisian's sales and to an
increase in the selection of the interest-free credit option by holders of
Parisian's proprietary credit card.
Interest Expense. Interest expense for 1994 was $18.1 million, compared to
$21.6 million in 1993. The decrease was attributable primarily to interest
savings due to the Redemption described below. Interest expense during 1993
includes approximately $1.3 million of interest expense on Parisian's 16 3/4%
Debentures, from July 15, 1993, the date of notice of Redemption of such
Debentures, to August 14, 1993, the Redemption date, in addition to interest
expense on the Notes, at the rate of 9 7/8% per annum, from July 15, 1993 (see
Notes 2 and 4 of the Notes to Parisian's Consolidated Financial Statements).
Interest expense during 1994 includes approximately $12.3 million of interest
expense on the Notes at the rate of 9 7/8% per annum.
Income Taxes. The differences between the effective tax rate and statutory
rate were primarily due to amortization of goodwill and state income taxes.
Amortization of goodwill was $1.9 million in 1993 and 1994.
SEASONALITY AND INFLATION
Parisian considers its business to be seasonal in that working capital and
cash flow requirements fluctuate during the fiscal year and generally reach
their highest levels during the third and fourth quarters, while inventory
levels are lowest at various times during the first and second quarters and
typically increase throughout the second half of the fiscal year. Parisian's
results of operations are typically weakest during the second quarter.
64
<PAGE>
Parisian's net sales and net income or loss from continuing operations for
each quarter during 1995 were as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------
Q1 Q2 Q3 Q4
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales........................................ $155,351 $133,201 $167,196 $208,080
Net income (loss)................................ 4,479 (2,574) 879 5,994
</TABLE>
Parisian cannot determine the precise effects of inflation on its business.
Because of inflation, Parisian has experienced in recent years increased
expenses for cost of goods, salaries, employee benefits and administrative and
general expenses. Such increases have been somewhat offset by improved
merchandise purchasing and expense control efficiencies. Some portion of the
increase in comparable store sales may be due to the effects of inflation;
however, any such increase is difficult to quantify because of changes in
merchandise styles and selections during the periods.
LIQUIDITY AND CAPITAL RESOURCES
Parisian's primary ongoing cash requirements have been for working capital,
capital expenditures in connection with Parisian's store expansion strategy and
preopening expenses related to new stores. For the 1996 fiscal year, Parisian's
primary ongoing cash requirements will be for working capital and capital
expenditures related to store maintenance, store renovation and technology.
Parisian's primary sources of liquidity for these activities are cash flow from
operations, proceeds from the sale of an undivided interest in accounts
receivable pursuant to the Receivables Facility described above, borrowings
under its credit facility (the "Bank Credit Agreement"), and short-term trade
credit in the form of customary payment terms for inventory purchases or
third-party factor financing. In addition to such ongoing sources, during
previous fiscal years Parisian received additional liquidity from the offer and
sale of the Notes and from the equity contributions of its shareholders, as
described below. During the 1995 fiscal year liquidity was supplemented by store
opening reimbursements provided by mall developers.
During the three months ended May 4, 1996 net cash provided by operations
was $1.9 million, compared to net cash provided by operations of $4.0 million
during the same prior year period. The decrease in net cash provided is
primarily attributable to a smaller decrease in income taxes payable compared to
the prior year resulting from a change in Parisian's tax position. During the
first quarter of 1995 Parisian received an income tax refund as a result of the
net loss generated during the 1994 fiscal year. In the first quarter of 1996,
Parisian paid income taxes based on the net income generated during the 1995
fiscal year. The decrease in cash provided from a change in income taxes payable
was offset to some extent by reduced growth in inventory levels during the first
quarter of 1996 as compared to the prior year.
During the year ended February 3, 1996, net cash used in operations was $3.3
million, compared to net cash used in operations of $10.7 million during the
prior year. The decrease in net cash used was primarily attributable to an
increase in net income, with the resultant increase in federal and state taxes
payable. The decrease was partially offset by an increase in accounts receivable
and merchandise inventory.
Investing activities of Parisian used net cash of $1.0 million during the
quarter ended May 4, 1996 compared to net cash provided of $1.3 million
during the quarter ended April 29, 1995. The amount used during 1996 is
attributable to capital expenditures, whereas the amount provided during the
fiscal year ended February 3, 1996 is attributable to proceeds received from the
sale of Parisian's airplane. Investing activities of Parisian provided net cash
of $10.0 million during the fiscal year ended February 3, 1996 compared to using
$3.8 million during the fiscal year ended January 28, 1995. The amount provided
during 1995 is attributable to the receipt of store opening reimbursements from
mall developers and to proceeds received from the sale of both Parisian's
airplane and the Sarasota, Florida store location.
65
<PAGE>
Parisian opened a store in Greenville, South Carolina in May 1995, opened
one store in each of Indianapolis, Indiana and Orlando, Florida in September
1995, and opened one store in Columbia, South Carolina in March 1996, all of
which are operated under operating lease agreements. Also, during November,
1995, Parisian completed the renovation and expansion of its Riverchase Galleria
store in Birmingham, Alabama.
In November 1995, Parisian sold its store location in Sarasota, Florida.
Although the Sarasota location was profitable, it was a single-store market in a
geographically remote location. When evaluating various opportunities respecting
such location, Parisian determined that its resources could be better allocated
by a sale thereof pursuant to which Parisian acquired the right to assume the
lease for a store location in Columbia, South Carolina and also received certain
additional consideration. The Columbia, South Carolina store opened in March
1996 after the completion of renovation work and is Parisian's second store in
the market. The Sarasota, Florida store remained open through early January
1996.
Parisian is not planning to open any other new stores in 1996, but is
expanding and renovating its store location in Mobile, Alabama, and is
considering expanding and renovating certain other existing locations over the
next several years. Parisian believes that it will open one to three stores per
year for the several years after 1996 and has executed a lease with respect to
one location for an anticipated opening in 1997. Parisian has determined that,
in the near future, it will focus its primary efforts on strengthening existing
markets and is considering approximately 15 additional locations. The opening of
new stores will be dependent on a number of factors, including the availability
of desirable locations and general economic conditions. Parisian believes that
its two distribution centers, together with other support systems, will be
adequate to sustain such anticipated expansion for the next several years
without significant additions.
Future capital expenditure needs will depend primarily on the extent to
which Parisian plans to renovate and expand its existing store locations, open
new store locations and invest further in technology. Costs related to the
expansion and renovation of the store location in Mobile, Alabama, as described
above, are being funded by the mall owner. In connection with Parisian's plans
regarding store expansion and renovation, new store openings and new technology,
Parisian expects to fund such capital expenditures with working capital
generated from operations, proceeds from the sale of an undivided interest in
accounts receivable under the Receivables Facility and borrowings under the Bank
Credit Agreement. Parisian does not believe that any of the restrictions under
its debt instruments or the Receivables Facility will adversely affect its
future growth strategy.
Parisian's total indebtedness at May 4, 1996 was $161.9 million, comprised
of $2.9 million of current maturities of long-term debt and short-term
borrowings, and $159.0 million of long-term debt.
On May 27, 1994, Parisian issued approximately 1.15 million additional
shares of its common stock to certain of its shareholders, including the
Investment Partnerships and certain members of the Hess and Abroms families, for
the aggregate purchase price of $15.0 million.
Parisian's sources of liquidity continue to include borrowing availability
pursuant to the Bank Credit Agreement, which expires on August 31, 1997 and
provides for a total commitment amount of $50.0 million. The Bank Credit
Agreement contains no separate "incurrence" or similar tests to determine the
amount available for borrowings thereunder by Parisian. After giving effect to
$13.2 million in standby letters of credit, approximately $36.8 million in the
aggregate was available to Parisian for revolving loans at May 4, 1996. During
the fourth quarter of 1994, Parisian failed to meet one of the financial ratio
requirements under the Bank Credit Agreement, and a waiver of such failure was
obtained from the lenders. In view of Parisian's financial performance during
1994 and its failure to meet such financial ratio requirement, the Bank Credit
Agreement was amended at Parisian's request in April 1995 to revise the
financial covenants contained therein. Parisian believes that it will remain in
compliance with the revised covenants under the Bank Credit Agreement; however,
there can be no assurance that in the event Parisian fails to comply with one or
more of the revised covenants, the
66
<PAGE>
lenders would waive compliance or otherwise agree to amend the Bank Credit
Agreement in order to prevent a default thereunder.
Parisian, through Parisian Services, maintains the Receivables Facility
pursuant to which Parisian Services has the right to sell an undivided interest
in its accounts receivable on a daily basis, thereby providing Parisian with an
additional source of liquidity. Effective July 31, 1995, the termination date of
the Receivables Facility was extended from March 1996 to July 31, 1998. The
amount of funds available from time to time under the Receivables Facility, up
to a maximum of $160.0 million, is based upon a variable percentage of eligible
accounts receivable. As of May 4, 1996, after giving effect to the proceeds of
$101.5 million from the sale of an undivided interest in accounts receivable,
the amount of funds available under the Receivables Facility was $11.2 million.
Parisian expects that cash from operations and liquidity provided by the
Receivables Facility, the Bank Credit Agreement and short-term trade credit will
be sufficient to satisfy Parisian's needs for working capital, planned capital
expenditures and operations for the short term. For the longer term, the Bank
Credit Agreement is in place until August 1997, and Parisian believes that the
term of the Bank Credit Agreement can be extended or that other financing will
be available at that time such that when combined with the other sources of cash
referred to above, Parisian's liquidity needs will be satisfied. However, there
can be no assurance that future developments or general economic trends will not
adversely affect Parisian's ability to extend the term of, or otherwise to
refinance, the Bank Credit Agreement or to satisfy Parisian's liquidity needs
during such period.
RECENTLY ISSUED ACCOUNTING STANDARDS
During the year ended February 3, 1996, Parisian adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. The adoption of
this accounting standard had no impact on Parisian's financial statements.
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, was issued during 1995. Parisian anticipates that the adoption of
this accounting standard will not be material to its financial condition.
LEGAL OPINIONS
The validity of the Proffitt's Common Stock being offered hereby is being
passed upon for Proffitt's by Sommer & Barnard, Attorneys at Law, PC, special
counsel to Proffitt's.
EXPERTS
The consolidated financial statements appearing in Proffitt's Form 10-K as
of February 3, 1996 and January 28, 1995 and for each of the three years in the
period ended February 3, 1996, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon and included
therein and incorporated by reference herein. Such report, as it relates to the
amounts included for Younkers, Inc., for the years ended January 28, 1995 and
January 29, 1994, is based solely on the reports of Deloitte & Touche, LLP, and
Ernst & Young, LLP, respectively, included in such Form 10-K and incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference herein in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.
The consolidated financial statements of Parisian as of February 3, 1996 and
January 28, 1995, and for each of the three years in the period ended February
3, 1996, appearing in this Prospectus and the Registration Statement have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement. Such consolidated financial statements are included herein and in the
Registration Statement in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
67
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF PARISIAN
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets as of January 28, 1995, February 3, 1996 and May 4, 1996
(unaudited)........................................................................... F-3
Consolidated Statements of Operations for the years ended January 29, 1994, January
28, 1995 and February 3, 1996 and for the periods from January 29, 1995 through
April 29, 1995 (unaudited) and February 4, 1996 through May 4, 1996 (unaudited)... F-4
Consolidated Statements of Changes in Shareholders Equity for the years ended
January 29, 1994, January 28, 1995 and February 3, 1996........................... F-5
Consolidated Statements of Cash Flows for the years ended January 29, 1994, January
28, 1995 and February 3, 1996 and for the periods from January 29, 1995 through
April 29, 1995 (unaudited) and February 4, 1996 through May 4, 1994 (unaudited)... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Parisian, Inc.
We have audited the accompanying consolidated balance sheets of Parisian,
Inc. and subsidiaries as of January 28, 1995 and February 3, 1996, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the years ended January 29, 1994, January 28, 1995, and
February 3, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Parisian, Inc.
and subsidiaries as of January 28, 1995 and February 3, 1996, and the
consolidated results of their operations and their cash flows for the years
ended January 29, 1994, January 28, 1995 and February 3, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 22, 1996
F-2
<PAGE>
PARISIAN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 28, 1995, FEBRUARY 3, 1996, AND MAY 4, 1996
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, MAY 4,
1995 1996 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents....................... $ 394,377 $ 1,858,541 $ 1,821,301
Restricted cash and short-term investments...... 2,190,000 2,020,000 2,030,000
Accounts receivable, net........................ 34,953,764 39,205,613 36,192,716
Merchandise inventory........................... 119,924,513 143,045,118 150,988,075
Prepaid expenses................................ 4,103,356 5,375,343 3,379,182
Deferred income taxes........................... 3,412,662 3,668,660 3,668,660
Federal and state income tax receivable......... 3,876,996
------------ ------------ ------------
Total current assets...................... 168,855,668 195,173,275 198,079,934
------------ ------------ ------------
------------ ------------ ------------
Property and equipment, less accumulated
depreciation and amortization................... 74,479,814 71,469,103 71,331,388
Goodwill, net................................... 62,137,207 60,268,477 59,801,295
Deferred financing costs, net................... 4,239,446 3,686,542 3,497,648
Other........................................... 13,409,614 13,608,883 12,983,642
------------ ------------ ------------
Total assets.............................. $323,121,749 $344,206,280 $345,693,907
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
Short-term debt, including current portion of
long-term debt................................ $ 8,549,410 $ 2,863,604 $ 2,858,604
Accounts payable................................ 40,949,864 42,305,004 36,788,884
Accrued store rent.............................. 1,026,703 1,842,683 (457,612)
Federal and state income tax payable............ 1,184,949 2,777,595
Sales tax payable............................... 6,188,263 6,476,474 6,185,180
Other........................................... 10,836,673 11,901,969 15,531,306
------------ ------------ ------------
Total current liabilities................. 67,550,913 66,574,683 63,683,957
Long-term debt, less current portion above...... 158,792,902 159,869,298 159,012,006
Deferred income taxes........................... 8,170,795 8,167,214 8,227,214
Store opening reimbursements.................... 14,011,239 26,026,488 25,207,798
Other........................................... 3,443,067 3,637,760 5,080,825
------------ ------------ ------------
Total liabilities......................... 251,968,916 264,275,443 261,211,800
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Convertible preferred stock, par value $.01 per
share, 12,000,000 shares, none issued
Common stock, par value $.01 per share,
authorized 65,000,000 shares, issued and
outstanding 7,355,846 shares at January 28,
1995 and February 3, 1996..................... 73,558 73,558 73,558
Paid-in capital................................. 87,959,792 87,959,792 87,959,792
Accumulated deficit............................. (16,880,517) (8,102,513) (3,551,243)
------------ ------------ ------------
Total shareholders' equity................ 71,152,833 79,930,837 84,482,107
------------ ------------ ------------
Total liabilities and shareholders'
equity.......................................... $323,121,749 $344,206,280 $345,693,907
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
AND THE PERIODS FROM JANUARY 29, 1995 THROUGH APRIL 29, 1995
AND FEBRUARY 4, 1996 THROUGH MAY 4, 1996
<TABLE>
<CAPTION>
FOR THE PERIOD FROM:
-----------------------------
FOR THE YEAR ENDED: JANUARY 29, FEBRUARY 4,
------------------------------------------ 1995 1996
JANUARY 29, JANUARY 28, FEBRUARY 3, THROUGH THROUGH
1994 1995 1996 APRIL 29, 1995 MAY 4, 1996
------------ ------------ ------------ -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales, including leased
departments.................... $517,667,748 $606,716,896 $663,827,999 $ 155,350,983 $166,047,316
Costs and expenses:
Cost of sales................. 328,505,911 393,948,510 419,055,866 91,874,276 99,403,916
Selling, general, and
administrative expenses........ 137,110,373 159,987,520 165,236,749 40,544,901 42,472,054
Other operating expenses:
Property and equipment
rentals........................ 14,436,483 21,583,330 29,787,936 7,061,165 7,858,391
Depreciation and
amortization................... 12,850,190 12,855,933 12,618,367 3,212,040 2,952,584
Taxes other than income
taxes.......................... 10,497,041 12,699,576 13,542,117 3,577,625 3,556,242
Reengineering costs......... 3,184,725 304,369
------------ ------------ ------------ -------------- ------------
Operating income.......... 14,267,750 2,457,302 23,282,595 9,080,976 9,804,129
Other income (expense):
Finance charge income......... 9,930,691 8,046,347 7,125,115 1,627,616 2,156,027
Interest expense.............. (21,617,385) (18,051,210) (17,651,879) (4,438,687) (4,244,777)
Other, net.................... 155,901 411,194 2,407,349 1,110,111 142,769
------------ ------------ ------------ -------------- ------------
Income (loss) before
provision (benefit) for
income taxes and
extraordinary item............. 2,736,957 (7,136,367) 15,163,180 7,380,016 7,858,148
Provision (benefit) for income
taxes.......................... 1,704,530 (1,673,554) 6,385,176 2,901,380 3,306,879
------------ ------------ ------------ -------------- ------------
Income (loss) before
extraordinary item............. 1,032,427 (5,462,813) 8,778,004 4,478,636 4,551,269
Extraordinary loss from early
retirement of debt (net of
income tax benefit of
$3,092,179).................... (5,402,819)
------------ ------------ ------------ -------------- ------------
Net income (loss)........... $ (4,370,392) $ (5,462,813) $ 8,778,004 $ 4,478,636 $ 4,551,269
------------ ------------ ------------ -------------- ------------
------------ ------------ ------------ -------------- ------------
Income (loss) per common and
common equivalent share before
extraordinary item............. $ .17 $ (.78) $ 1.19 $ 0.61 $ 0.62
Extraordinary loss per common
and common equivalent share... (.87)
------------ ------------ ------------ -------------- ------------
Net income (loss) per common
and common equivalent share... $ (.70) $ (.78) $ 1.19 $ 0.61 $ 0.62
------------ ------------ ------------ -------------- ------------
------------ ------------ ------------ -------------- ------------
Weighted average common and
common equivalent shares....... 6,208,180 6,986,952 7,355,846 7,355,846 7,355,846
------------ ------------ ------------ -------------- ------------
------------ ------------ ------------ -------------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED SHAREHOLDERS'
STOCK STOCK CAPITAL DEFICIT EQUITY
--------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 30, 1993........ $ 0 $62,082 $73,052,973 $(7,047,312) $ 66,067,743
Net loss......................... (4,370,392) (4,370,392)
--------- ------- ----------- ----------- -------------
Balance, January 29, 1994........ 0 62,082 73,052,973 (11,417,704) 61,697,351
Issuance of common stock, net of
$81,705 in issuance costs,
1,147,666 shares................. 11,476 14,906,819 14,918,295
Net loss......................... (5,462,813) (5,462,813)
--------- ------- ----------- ----------- -------------
Balance, January 28, 1995........ 0 73,558 87,959,792 (16,880,517) 71,152,833
Net income....................... 8,778,004 8,778,004
--------- ------- ----------- ----------- -------------
Balance, February 3, 1996........ $ 0 $73,558 $87,959,792 $(8,102,513) $ 79,930,837
--------- ------- ----------- ----------- -------------
--------- ------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
AND THE PERIODS FROM JANUARY 29, 1995 THROUGH APRIL 29, 1995 AND FEBRUARY 4,
1996 THROUGH MAY 4, 1996
<TABLE>
<CAPTION>
FOR THE PERIOD FROM:
----------------------------
FOR THE YEAR ENDED: JANUARY 29, FEBRUARY 4,
------------------------------------------- 1995 1996
JANUARY 29, JANUARY 28, FEBRUARY 3, THROUGH THROUGH
1994 1995 1996 APRIL 29, 1995 MAY 4, 1996
------------- ------------ ------------ -------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (4,370,392) $ (5,462,813) $ 8,778,004 $ 4,478,636 $4,551,269
------------- ------------ ------------ -------------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 12,850,190 12,855,933 12,618,367 3,212,040 2,952,584
Amortization of deferred financing costs........ 1,022,338 1,099,532 1,191,496 257,334 188,894
Proceeds from the initial sale of accounts
receivable......................................... 90,500,000
Provision for losses on accounts receivable..... 2,869,546 2,827,348 3,986,023 847,167 1,078,437
Loss (gain) on disposal of property and
equipment.......................................... 370,174 443,649 (1,814,341) (928,753) (2,461 )
Deferred compensation........................... 231,544 114,887 198,091 49,523 50,576
Write-off of unamortized financing costs (net of
tax)............................................... 2,063,819
Loss from redemption of debt (net of tax)....... 3,339,000
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable.......................... (6,301,365) (1,937,633) (8,237,872) 2,887,131 1,934,460
Merchandise inventory........................ (14,002,448) (18,061,935) (23,120,605) (9,655,164) (7,942,957 )
Prepaid expenses............................. 1,151,554 (247,182) (1,271,987) 1,552,274 1,996,161
Other........................................ (10,433,472) (7,316,879) (5,294,953) (502,359) (578,564 )
Increase (decrease) in:
Accounts payable............................. (3,765,665) 5,037,697 1,551,362 (8,647,673) (5,416,682 )
Accrued store rent........................... (234,160) 59,726 815,980 192,210 (2,300,295 )
Federal and state income taxes............... (2,850,263) (1,442,785) 5,061,945 3,105,968 1,592,646
Sales tax payable............................ 589,857 152,475 288,211 195,098 (291,294 )
Deferred income taxes........................ 439,040 (1,734,382) (259,579) 2,968,063 60,000
Other liabilities............................ 799,686 2,875,671 2,199,993 3,970,548 3,997,868
------------- ------------ ------------ -------------- -----------
Total adjustments.......................... 78,639,375 (5,273,878) (12,087,869) (496,593) (2,680,627 )
------------- ------------ ------------ -------------- -----------
Net cash provided by (used in) operating
activities......................................... 74,268,983 (10,736,691) (3,309,865) 3,982,043 1,870,642
------------- ------------ ------------ -------------- -----------
Cash flows from investing activities:
(Increase) decrease in restricted cash and
short-term investments............................. 1,711,731 (270,000) 170,000 70,000 (10,000 )
Proceeds from sale of property and equipment...... 29,325 1,085 9,937,589 1,585,980 2,461
Increase in cash value of life insurance.......... (338,775) (364,613) (337,110) (90,000) (90,000 )
Capital expenditures.............................. (14,974,339) (5,729,644) (10,735,276) (305,245) (1,211,195 )
Store opening reimbursements...................... 2,000,000 2,600,000 10,986,827 263,144
------------- ------------ ------------ -------------- -----------
Net cash provided by (used in) investing
activities......................................... (11,572,058) (3,763,172) 10,022,030 1,260,735 (1,045,590 )
------------- ------------ ------------ -------------- -----------
Cash flows from financing activities:
Borrowings under revolving credit agreements...... 28,200,000 38,500,000 36,905,343 12,000,000
Payments under revolving credit agreements........ (105,200,000) (36,500,000) (38,905,343) (14,000,000)
Principal payments of long-term debt.............. (2,242,248) (2,395,323) (6,549,410) (785,295) (862,292 )
Proceeds from the issuance of subordinated
notes.............................................. 125,000,000
Redemption of subordinated debentures............. (100,000,000)
Payment of financing costs........................ (5,575,969) (204,361) (638,591) (175,365)
Premium paid on redemption of debentures (net of
tax)............................................... (3,339,000)
Proceeds from issuance of common stock............ 14,918,295
Proceeds from bond refunding...................... 3,940,000
------------- ------------ ------------ -------------- -----------
Net cash provided by (used in) financing
activities......................................... (63,157,217) 14,318,611 (5,248,001) (2,960,660) (862,292 )
------------- ------------ ------------ -------------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ (460,292) (181,252) 1,464,164 2,282,118 (37,240 )
Cash and cash equivalents, beginning of period..... 1,035,921 575,629 394,377 394,377 1,858,541
------------- ------------ ------------ -------------- -----------
Cash and cash equivalents, end of period........... $ 575,629 $ 394,377 $ 1,858,541 $ 2,676,495 $1,821,301
------------- ------------ ------------ -------------- -----------
------------- ------------ ------------ -------------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................ $ 23,065,471 $ 17,089,008 $ 17,001,105 $ 1,303,544 $ 980,828
------------- ------------ ------------ -------------- -----------
------------- ------------ ------------ -------------- -----------
Income taxes.................................... $ 2,203,733 $ 2,003,555 $ 4,991,703 $ 192,410 $2,202,175
------------- ------------ ------------ -------------- -----------
------------- ------------ ------------ -------------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Company.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Parisian Services, Inc. (Parisian Services),
Parisian Management Company, Inc., Parisian of Tennessee, Inc., and Hess
Specialty Department Store, L.L.C. Parisian Services was formed for the purpose
of financing customer accounts receivable of the Company and financing future
credit purchases by the Company's customers. All material intercompany accounts
and transactions have been eliminated.
The Company currently operates thirty-six specialty department stores
located in Alabama, Florida, Georgia, Tennessee, South Carolina, Ohio, Indiana,
and Michigan and one clearance center in Alabama. The Company sells moderate to
better-priced fashion merchandise including apparel, cosmetics, shoes,
accessories, and gifts for the family. The Company performs ongoing credit
evaluations of its customers and maintains reserves for potential credit losses.
The value of merchandise inventory is determined by the retail inventory
method, using last-in, first-out (LIFO) cost, which is lower than market for
approximately 18% and 17% of the inventory and the lower of average cost or
market for the balance of the inventory for 1995 and 1996, respectively. If
average cost had been used for all inventory, the January 28, 1995 and February
3, 1996 merchandise inventory would have been higher by approximately $2,439,000
and $2,709,000, respectively.
Certain expenditures incurred prior to the opening of new stores are
deferred and charged to income on the straight-line basis over a twelve-month
period following the date the related store is opened.
Property and equipment is recorded at cost and depreciation and amortization
are computed using the straight-line method. All property and equipment, except
improvements to leased premises and land, is depreciated over its estimated
useful life. Improvements to leased premises are amortized over the
noncancelable terms of the leases. Costs for repairs and maintenance are
expensed as incurred.
Expenditures for certain computer software and related customization are
recorded at cost and amortized using the straight-line method over the expected
life of the licensing agreement. Additionally, certain related leased computer
hardware and supporting software are being amortized using the straight-line
method from the beginning amortization dates of the licensing agreement to the
end of the hardware lease term. Such expenditures, included in other assets,
totaled $8,304,722 and $9,885,824 as of January 28, 1995 and February 3, 1996,
respectively. As of January 28, 1995 and February 3, 1996, accumulated
amortization of expenditures related to software systems implemented was
$1,035,794 and $2,542,732, respectively.
Store opening reimbursements represent amounts received from developers in
reimbursement of certain expenses incurred during the opening of a new store.
Store opening reimbursements are amortized over the noncancelable term of the
lease.
Goodwill, the excess of purchase price over the fair value of the net assets
acquired arising from a 1988 leveraged buy-out transaction, is being amortized
on a straight-line basis over 40 years. As of January 28, 1995 and February 3,
1996, the accumulated amortization of goodwill is $12,611,997 and $14,480,727,
respectively.
Deferred financing costs represent fees and costs directly related to the
issuance of debt. These costs are amortized using the straight-line method over
the terms of the specific borrowings or commitments to which they relate and are
included in interest expense.
F-7
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Company expenses advertising cost when the advertising takes place.
Advertising expense was $10,570,390, $14,814,426, and $19,470,129 in 1994, 1995,
and 1996, respectively.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes.
Reengineering costs include implementation of cost containment measures
primarily directed at payroll as well as customer surveys to refine the
Company's market focus.
Net income (loss) per common and common equivalent share is computed by
dividing net income (loss) by the weighted average number of common and common
equivalent shares outstanding during the periods. The effect of common stock
options on net income (loss) per common and common equivalent share for all
years presented is insignificant or antidilutive.
During the year ended February 3, 1996, the Company adopted SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The adoption of this accounting standard had no impact on the
Company's financial statements. SFAS No. 123, Accounting for Stock-Based
Compensation was issued during 1995. The Company anticipates that the adoption
of this accounting standard will not be material to its financial condition.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Certain reclassifications have been made in the previously reported
financial statements and accompanying notes to make the prior year amounts
comparable to those of the current year. Such reclassifications had no effect on
previously reported net income, total assets, or stockholders' equity.
In management's opinion, all adjustments are included to fairly present
quarterly results and all such adjustments are of a normal and recurring nature.
The results of the interim periods are not necessarily indicative of the results
for a full year's operations.
2. ACCOUNTS RECEIVABLE
Accounts receivable is shown net of allowances for doubtful accounts and
return sales of $2,805,934 and $3,058,088 for January 28, 1995 and February 3,
1996, respectively. The provision for losses from bad debts, less recoveries, is
included in selling, general, and administrative expenses and amounted to
$2,869,546, $2,827,348, and $3,986,023 for the years ended January 29, 1994,
January 28, 1995, and February 3, 1996, respectively.
On March 31, 1993, the Company entered into an agreement through its
subsidiary, Parisian Services, with Sheffield Receivables Corporation
(Sheffield), whereby Sheffield agreed to provide up to $160 million in capital
against eligible accounts receivable generated by holders of the Company's
proprietary credit card accounts (the Receivables) pursuant to a nonrecourse
facility (the Receivables Facility), which expires in July 1998. As of such
date, Parisian Services sold an undivided interest in the
F-8
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACCOUNTS RECEIVABLE--(CONTINUED)
Receivables to Sheffield and utilized the proceeds from such sale to repay in
full Parisian Services' then outstanding indebtedness under the receivables loan
agreement, which was then terminated. At January 28, 1995 and February 3, 1996,
$109.5 and $101.0 million, respectively, of the available receivables had been
sold to Sheffield and accounted for as a reduction of accounts receivable.
Parisian Services retains a residual undivided interest in the Receivables equal
to the undivided interest not purchased by Sheffield. Sheffield's undivided
interest and, accordingly, Parisian Services' undivided interest fluctuate each
business day based upon the amount of capital invested in relation to the pool
of eligible Receivables. The Company services and collects the Receivables. A
cash reserve equal to 2% of aggregate capital is required under the agreement
and is included in the restricted cash and short-term investments balance.
Sheffield finances the purchase of its undivided interest in the Receivables
primarily through the issuance of commercial paper or, alternatively, the
obtaining of revolving loans from the Liquidity Facility (defined below). The
discount and interest costs are funded from the Receivables. The Receivables
Facility receives liquidity support from a consortium of five banks (the
Liquidity Facility) which have agreed to provide standby funding under certain
specified conditions. Repayment of the amounts due under the commercial paper or
revolving loans is without recourse to Parisian Services and is made solely
through collections of Sheffield's undivided interest in Receivables.
3. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
------------ ------------
<S> <C> <C>
Land.......................................... $ 920,903 $ 893,474
Buildings..................................... 57,442,129 51,734,084
Furniture, fixtures, and equipment............ 52,297,250 53,018,433
Leasehold improvements........................ 6,088,111 6,585,766
Transportation equipment...................... 2,524,363 268,285
------------ ------------
119,272,756 112,500,042
Less accumulated depreciation and
amortization.................................. 44,792,942 41,030,939
------------ ------------
$ 74,479,814 $ 71,469,103
------------ ------------
------------ ------------
</TABLE>
In November 1995, the Company sold its store location in Sarasota, Florida,
resulting in a gain of $1,725,783. The Sarasota store remained open throughout
most of January 1996 and closed prior to February 3, 1996. In connection with
this sale, the Company acquired the right to assume the lease for a store
location in Columbia, South Carolina and also received certain additional
consideration. The Company airplane was sold in 1995 resulting in a gain of
$1,180,090. In conjunction with the expansion and remodeling of one store, the
Company disposed of furniture, fixtures, and equipment with a net book value of
$893,269.
F-9
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consist of the following:
<TABLE>
<CAPTION>
JANUARY 28, 1995 FEBRUARY 3, 1996
------------------------ ------------------------
YEAR-END YEAR-END
AMOUNT RATE AMOUNT RATE
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Short-term debt:
Bank revolving credit agreement............ $ 2,000,000 9.75% $ 0
Tax-exempt promissory note--On April 1,
1995, the note became payable on demand
and was paid in May 1995..................... 4,109,749 7.22% 0
Current portion of long-term debt.......... 2,439,661 Various 2,863,604 Various
------------ ------------
Total short-term debt.................. $ 8,549,410 $ 2,863,604
------------ ------------
------------ ------------
Long-term debt:
Senior subordinated notes.................. $125,000,000 9.875% $125,000,000 9.875%
Mortgage loans--five separate loans,
payments due monthly, based on an
original 27-year amortization, principal
payments totaling $18,791,733 due in 1998.... 19,258,204 10.5% 19,037,150 10.5%
Tax-exempt promissory note--payable in
annual installments ranging from $185,000
to $525,000 through April 1, 2007 plus
interest at a variable rate as determined
on a weekly basis........................ 3,755,000 5.25%
Obligations under capitalized leases:
Headquarters and distribution center--
payable in quarterly installments
aggregating $3,615,288 in the year ended
1996, varying in each year to $3,548,327
in the year ended 2000, including
interest at prime rate within the range
of 4.75% to 15.25%....................... 14,487,900 8.5% 12,072,900 8.25%
Other capitalized leases................... 46,798 Various 4,248 12.05%
------------ ------------
$158,792,902 $159,869,298
------------ ------------
------------ ------------
</TABLE>
Under a bank credit agreement, the Company may borrow through August 31,
1997 up to an amount such that the sum of loans outstanding and certain standby
letters of credit issued thereunder (Total Commitment Amount) may not exceed
$50,000,000. At February 3, 1996, $36,778,879 was available under this agreement
as the Company had $13,221,121 in standby letters of credit outstanding under
this agreement. The agreement requires that there be no aggregate principal
amount outstanding on the loans for a period of thirty consecutive days during
each calendar year. The bank credit loans bear interest at the bank's base rate
plus 1.25%, payable monthly, with the rate adjustable to as low as the base rate
plus .75% if certain debt to equity ratios are met. Bank credit loans may
alternatively bear interest, at the request of the Company, at LIBOR plus a
margin of 2.5% per annum. Certain commitment fees are also payable based upon
unused commitment amounts. The Company has pledged all of the capital stock of
its subsidiaries and certain notes receivable of the Company from Parisian
Services as collateral for the bank credit loans.
F-10
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SHORT-TERM AND LONG-TERM DEBT--(CONTINUED)
Under the bank credit agreement, the Company is subject to certain
affirmative and negative covenants. Some of the restrictive covenants are as
follows:
Negative covenants in the bank credit agreement include agreements that
the Company will not permit the current ratio at the end of any fiscal
quarter to be less than a range of 1.75 to 2.25, dependent on the fiscal
quarter, to 1.0; the ratio of long-term debt to equity at the end of any
fiscal quarter to be greater than a range of 2.6-2.15, dependent on the
fiscal quarter, to 1.0; earnings before interest, taxes, depreciation, and
amortization (EBITDA) to total debt service ratio at the end of any fiscal
quarter to be less than a range of 1.10 to 2.00, dependent on the fiscal
quarter, to 1.0; net worth, as defined, at the end of any fiscal quarter to
be less than the sum of (A) $55 million, (B) 80% of net income for each
fiscal year closed subsequent to January 29, 1995 for which net income was
positive, (C) certain capital contributions and (D) certain other
adjustments. Additionally, the Company may not declare, pay, or make any
dividend or distribution of any class of capital stock.
Information concerning the bank revolving credit agreements is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
Bank credit agreement:
Weighted average interest rate based on daily
amounts outstanding............................... 8% 8.63% 10.25%
Average daily borrowings outstanding................ $ 361,000 $ 4,292,000 $ 827,820
Maximum borrowings outstanding at any month end..... $7,500,000 $29,000,000 $9,500,000
</TABLE>
On July 15, 1993, the Company issued $125.0 million of 9.875% Senior
Subordinated Notes due 2003 (the Notes) and notified the holders of its Senior
Subordinated Debentures in the aggregate principal amount of $100.0 million (the
Debentures) of its intention to redeem, as of August 14, 1993, all of its
outstanding Debentures at the stated redemption price of 105.25%. On July 15,
1993, in order to effect such redemption, the Company deposited $107.25 million
representing the $100.0 million principal of Debentures to be redeemed at the
stated redemption price of 105.25% plus accrued and unpaid interest thereon to
August 14, 1993, with AmSouth Bank, as escrow agent. The Company utilized
proceeds from the issuance of the Notes to effect such redemption.
The Company recorded an extraordinary loss of $5.4 million after taxes for
the early retirement of debt. The extraordinary loss consists of the redemption
premium paid to holders of the Debentures and the write-off of the unamortized
portion of deferred financing fees associated with the retired Debentures.
F-11
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. SHORT-TERM AND LONG-TERM DEBT--(CONTINUED)
On or after July 15, 1998, the Notes are redeemable at the option of the
Company, in whole or in part, at the redemption prices below plus accrued
interest at the redemption date.
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH PERCENTAGE OF
PERIOD BEGINNING JULY 15 PRINCIPAL
- -------------------------------------------------------------- -------------
<S> <C>
1998.......................................................... 104.938%
1999.......................................................... 102.469%
2000 and thereafter........................................... 100.00%
</TABLE>
The Notes are uncollateralized obligations and are subordinated in right of
payment to all senior indebtedness, as defined. Senior indebtedness was
approximately $45,390,540 at February 3, 1996.
The Company is subject to certain covenants set forth in the indenture to
the Notes including, among others, the following: limitations on certain
restricted payments; limitations on certain indebtedness; limitations on liens;
limitations on dividends and other payment restrictions affecting subsidiaries;
limitations on transactions with affiliates; limitations on preferred stock of
subsidiaries; and limitations on future senior subordinated indebtedness.
Indebtedness outstanding under the tax-exempt promissory note bears interest
at a floating rate based on prime, but in no event is the rate to be less than
6% or greater than 10%. During the years ended January 29, 1994, January 28,
1995, and February 3, 1996 the interest rate ranged from 6% per annum to 74.6%
of prime. The interest charged changes within limits to protect the lender's
yield when there is a change in the maximum federal corporate income tax rate.
In May 1995, the Company purchased the tax-exempt bond with funds available
under the Receivables Facility. On October 19, 1995, the bond was re-funded,
with credit enhancement provided by a financial institution. The outstanding
indebtedness bears interest at a floating rate.
At February 3, 1996, property and equipment with a net book value of
approximately $45,085,127 was pledged as collateral on the mortgage loans,
obligations under capitalized leases, equipment loan and security agreement, and
mortgage note. Substantially all of the Company's bank accounts are pledged as
collateral on the bank revolving credit agreement, described above.
The noncurrent portion of long-term debt at February 3, 1996 is payable as
follows:
<TABLE>
<S> <C>
Second succeeding year...................................... $ 445,416
Third succeeding year....................................... 19,016,734
Fourth succeeding year...................................... 245,000
Fifth succeeding year....................................... 270,000
Thereafter.................................................. 127,815,000
------------
147,792,150
Capitalized lease obligations:
Payable in monthly, semi-annual and annual installments... 12,077,148
------------
$159,869,298
------------
------------
</TABLE>
The future minimum lease payments required under capitalized lease
obligations are disclosed in Note 6.
Based on the borrowing rates currently available to the Company for
long-term debt with similar terms and average maturities, the fair value of
long-term debt is approximately $137,359,119 at February 3, 1996.
F-12
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The components of the current deferred income tax asset are:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Inventory capitalization.......................... $ 1,406,435 $ 1,829,259
Allowances for doubtful accounts and return
sales............................................. 910,319 1,148,056
Compensation accruals............................. 633,794 622,579
Other............................................. 462,114 68,766
----------- -----------
$ 3,412,662 $ 3,668,660
----------- -----------
----------- -----------
</TABLE>
The components of the noncurrent deferred income tax liability are:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Property and equipment............................ $ 7,094,128 $ 6,095,988
Computer software costs........................... 2,318,070 2,567,467
Store pre-opening costs........................... 734,011 477,852
Compensation accruals............................. (632,739) (727,915)
Alternative minimum tax credit.................... (1,330,723)
Other............................................. (11,952) (246,178)
----------- -----------
$ 8,170,795 $ 8,167,214
----------- -----------
----------- -----------
</TABLE>
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal:
Current............................................. $ 727,846 $ (58,003) $ 5,646,129
Deferred............................................ 1,055,992 (1,929,800) (243,627)
----------- ----------- -----------
1,783,838 (1,987,803) 5,402,502
----------- ----------- -----------
State:
Current............................................. 537,644 118,831 998,626
Deferred............................................ (616,952) 195,418 (15,952)
----------- ----------- -----------
(79,308) 314,249 982,674
----------- ----------- -----------
Provision for income taxes............................ $ 1,704,530 $(1,673,554) $ 6,385,176
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
In addition, an income tax benefit of $3,092,179 was recognized during the
year ended January 29, 1994 related to the extraordinary loss from early
retirement of debt.
F-13
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES--(CONTINUED)
The provision (benefit) for income taxes is different from the amount
computed by applying the federal income tax statutory rate to income (loss)
before provision (benefit) for income taxes. The reasons for this difference, as
a percentage of pretax income (loss), are as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal income tax statutory rate.......................... 34% (34)% 35%
Amortization of goodwill................................... 23 9 5
State income taxes......................................... (3) 3 3
Other...................................................... 8 (1) (1)
-- --
---
Effective income tax rate............................ 62% (23)% 42%
-- --
-- --
---
---
</TABLE>
Details of the deferred tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Inventory capitalization.............................. $ (41,639) $ (256,801) $ (422,824)
Property and equipment................................ (722,505) (210,083) (998,140)
Computer software costs............................... 583,534 249,397
Store pre-opening costs............................... 1,309,414 (154,624) (256,159)
Compensation accruals................................. (291,515) (6,076) (83,961)
Alternative minimum tax credit........................ (1,330,723) 1,330,723
Other, net............................................ 185,285 (359,609) (78,615)
----------- ----------- -----------
Deferred tax provision (benefit)................ $ 439,040 $(1,734,382) $ (259,579)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
6. LEASES
The Company leases its headquarters and distribution center and another
facility under capitalized leases which expire in 2001 and 1996, respectively.
At expiration, the Company has the option to purchase the leased properties for
nominal amounts. In addition, the Company leases computer equipment under
capitalized leases expiring over the next three years.
The following is a summary of the leased property under capitalized leases
by major classes of property:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Classes of Property
Buildings..................................... $17,218,881 $17,219,894
Transportation equipment...................... 145,028
Furniture, fixtures, and equipment............ 10,772,832 10,593,735
----------- -----------
28,136,741 27,813,629
Less accumulated amortization................. 10,871,026 11,119,920
----------- -----------
17,265,715 16,693,709
Land.......................................... 711,507 711,507
----------- -----------
$17,977,222 $17,405,216
----------- -----------
----------- -----------
</TABLE>
F-14
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASES--(CONTINUED)
Future minimum lease payments required under capitalized lease obligations
together with the present value of the net minimum lease payments at February 3,
1996 are as follows:
<TABLE>
<S> <C>
First succeeding year......................................... $ 3,619,446
Second succeeding year........................................ 3,616,481
Third succeeding year......................................... 3,658,634
Fourth succeeding year........................................ 3,707,527
Fifth succeeding year......................................... 3,503,255
Thereafter....................................................
-----------
18,105,343
Less amount representing interest............................. 3,577,443
-----------
Present value of net minimum lease payments................... $14,527,900
-----------
-----------
Current portion of above...................................... $ 2,455,000
-----------
-----------
Noncurrent portion of above................................... $12,072,900
-----------
-----------
</TABLE>
In addition, the Company conducts a substantial portion of its operations
from thirty-one leased stores. The leases are operating leases and expire at
various times during the next 20 years. The Company can, at its option, renew
most of these leases at predetermined fair rental values for periods of five to
fifteen years. The rental payments under the store leases are based on a minimum
rental plus a percentage of the stores' sales in excess of stipulated amounts.
The Company also leases certain computer equipment, vehicles, and loss
prevention equipment under operating leases. The future minimum rental payments
under operating leases having initial or remaining noncancelable lease terms in
excess of one year as of February 3, 1996 are as follows:
<TABLE>
<S> <C>
First succeeding year....................................... $ 26,705,012
Second succeeding year...................................... 26,335,196
Third succeeding year....................................... 24,720,623
Fourth succeeding year...................................... 23,539,730
Fifth succeeding year....................................... 22,210,711
Thereafter.................................................. 251,487,144
------------
Total minimum payments required....................... $374,998,416
------------
------------
</TABLE>
The following schedule shows total rental expense for all operating leases:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals..................................... $12,548,820 $20,319,741 $27,553,590
Contingent rentals.................................. 1,785,982 1,270,191 2,231,259
----------- ----------- -----------
$14,334,802 $21,589,932 $29,784,849
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Company leases one of its stores from a limited partnership which
includes certain officers of the Company. Rental expense related to the lease
amounted to $568,213 for the year ended January 29, 1994, $565,574 for the year
ended January 28, 1995 and $556,453 for the year ended February 3, 1996. The
future minimum lease payments required under the lease as of February 3, 1996
are $8,917,082.
F-15
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LEASES--(CONTINUED)
In addition, the Company has entered into a lease for a future store
opening. The future minimum rental payments under this operating lease having an
initial noncancelable lease term in excess of one year as of February 3, 1996 is
as follows:
<TABLE>
<S> <C>
First succeeding year......................................... $ 0
Second succeeding year........................................ 875,160
Third succeeding year......................................... 875,160
Fourth succeeding year........................................ 875,160
Fifth succeeding year......................................... 875,160
Thereafter.................................................... 15,590,700
-----------
Total minimum payments required......................... $19,091,340
-----------
-----------
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company has a combined profit-sharing and Section 401(k) plan which
provides death, disability, termination, and retirement benefits to its eligible
employees who are at least 21 years of age and have completed one year and 1,000
hours of service with the Company. The profit-sharing portion and the Section
401(k) portion of the plan provides for discretionary contributions by the
Company as determined by resolutions of the Board of Directors.
Beginning in 1993, the Company's contribution to the profit-sharing portion
of the plan was terminated. With the Company's growth, the number of
participants in the plan had grown and the amount allocated to each participant
became diluted. Existing accounts will remain and continue to be invested.
The Company contribution to the Section 401(k) plan totaled $700,000 for the
year ended January 29, 1994. No company contribution was made to the plan for
the year ended January 28, 1995. The Company contribution to the Section 401(k)
plan totaled $600,000 for the year ended February 3, 1996.
8. STOCK OPTION PLANS
The Company's stock option plan for officers, as amended, allows for the
grant of options to purchase 405,882 shares of common stock to certain officers.
During April 1988 and March 1992, 345,000 and 20,000 options to purchase common
shares were granted, respectively. An additional 17,037 options to purchase
common shares were granted during September 1995. The exercise price for all
such options is $20.40 per share. These options were granted at an exercise
price that was equal to or above fair value as determined by a committee
consisting of the Participant Representatives under the plan. As of February 3,
1996, 324,667 of these options were outstanding; 57,370 options have been
forfeited in accordance with the provisions of the Plan. The options generally
began to vest at the rate of 20% per year from February 3, 1990. Participants
may exercise their vested options following the date such options become fully
vested. At February 3, 1996, 314,445 options are vested and became exercisable
during the month of May 1994. In the case of certain specified events, the
options would become immediately fully vested and exercisable subject to certain
regulatory requirements.
The Company's Management Incentive Plan allows for the grant of options to
purchase 101,471 shares of common stock to certain managers of the Company.
During July 1990 and March 1992, 60,250 and 5,750 options to purchase common
shares were granted, respectively, at an exercise price of
F-16
<PAGE>
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK OPTION PLANS--(CONTINUED)
$20.40 per share. These options were granted at an exercise price that was equal
to or above fair value as determined by a committee consisting of the
Participant Representatives under the plan. The options generally began to vest
at the rate of 20% per year from February 2, 1991. Participants may exercise
their vested options following the date such options become fully vested. At
February 3, 1996, 56,850 options are vested and became exercisable during the
month of May 1994. In the case of certain specified events, the options would
become immediately fully vested and exercisable subject to certain regulatory
requirements. Since the year ended February 2, 1991 grant, 9,150 nonvested
options have been forfeited in accordance with the provisions of the Plan;
consequently, as of January 28, 1995 and February 3, 1996, 57,050 and 56,850,
respectively, of these options were outstanding.
F-17
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 8, 1996 (this "Agreement"),
among PROFFITT'S, INC., a Tennessee corporation ("Parent"), CASABLANCA MERGER
CORP., an Alabama corporation and a wholly-owned subsidiary of Parent ("Sub"),
and PARISIAN, INC., an Alabama corporation (the "Company") (Sub and the Company
being hereinafter collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of Common Stock, par value $0.01 per
share, of the Company ("Company Common Stock") will be converted into cash and
shares of Parent Common Stock, par value $.10 per share ("Parent Common Stock")
as hereinafter provided; and
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 shareholders;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE 1.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions hereof
and in accordance with Alabama law, Sub shall be merged with and into the
Company at the Effective Time (as hereinafter defined). Following the Merger,
the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all of the rights and obligations of Sub in accordance
with Alabama law.
SECTION 1.2 Effective Time. The merger shall become effective when the
articles of merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of Alabama law, are filed with the Secretary of State of the
State of Alabama (the "Secretary"). Upon issuance of a certificate of merger by
the Secretary in accordance with the relevant provisions of Alabama law, the
Merger shall be effected (the time of such issuance of a certificate of merger
being referred to as the "Effective Time"). The filing of the Articles of Merger
shall be made on the date of the Closing (as defined in Section 1.18), or as
promptly thereafter as practicable.
SECTION 1.3 Effects of the Merger. The effect of the merger shall be as
provided by Alabama law.
SECTION 1.4 Articles and Bylaws. At the Effective Time, the Articles of
Incorporation of the Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. At the
Effective Time, the Bylaws of the 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 Articles of
Incorporation of the Surviving Corporation or by applicable law.
I-1
<PAGE>
SECTION 1.5 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the holders
of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01,
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 Sections 1.10 and 1.15 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)) shall be converted into the right to receive $15.00 in cash
(the "Cash Consideration") and .4006 (such number being the "Conversion
Number") validly issued, fully paid and nonassessable shares of Parent
Common Stock (collectively, the "Merger Consideration"). 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, the Cash
Consideration and any cash, without interest, in lieu of fractional shares
to be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 1.6.
(d) Each unexpired and unexercised option to purchase shares of Company
Common Stock (a "Company Stock Option") under the Company Stock Option Plans
(including Company Stock Options which as of the Effective Time have not yet
been granted under the Company Stock Option Plans) will be assumed by Parent
as hereinafter provided. Pursuant to Section 4.4 of each Company Stock
Option Plan, each Company Stock Option will be automatically converted into
an option (the "Parent Stock Option") to purchase a number of shares of
Parent Common Stock equal to the number of shares of Company Common Stock
that could have been purchased under such Company Stock Option multiplied by
.8, at a price per share of Parent Common Stock equal to the per share
option exercise price specified in the Company Stock Option divided by .8.
Such Parent Stock Option shall otherwise be subject to the same terms and
conditions as such Company Stock Option. At the Effective Time, (i) the
Company Stock Option Plans shall be amended so that all references in the
Company Stock Option Plans, the applicable stock option or other awards
agreements issued thereunder shall be deemed to refer to Parent; (ii) Parent
shall assume the Company Stock Option Plans and all of the Company's
obligations with respect to the Company Stock Options; and (iii) Parent
shall issue to each holder of an outstanding Company Stock Option a document
evidencing the foregoing assumption by Parent. If required by law in
addition to the existing Parent Registration Statement on Form S-8 relating
to such Parent Stock Options, as soon as practicable following the Effective
Time of the Merger, Parent shall use its best efforts to file a registration
statement on Form S-8 with the Securities and Exchange Commission (the
"SEC") with respect to the Company Stock Options that have been converted
into Parent Stock Options.
SECTION 1.6 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize a commercial bank
reasonably acceptable to the Company (or such other person or persons as
shall be acceptable to Parent and the Company) to act as Exchange Agent
hereunder (the "Exchange Agent"). As soon as practicable after the Effective
Time, Parent shall deposit with the Exchange Agent, in trust for the holders
of shares of Company Common Stock converted in the Merger, the total Cash
Consideration, certificates representing the shares of Parent Common Stock
issued pursuant to Section 1.5(c) in exchange for outstanding certificates
representing shares of Company Common Stock and cash required to make
payments in lieu of any fractional shares pursuant to Section 1.8 (such
total Cash
I-2
<PAGE>
Consideration, cash and shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Cash Consideration and certificates
representing the Parent Common Stock contemplated to be delivered pursuant
to Section 1.5(c) out of the Exchange Fund. Except as contemplated by
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 the
Merger Consideration 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 the Cash Consideration, 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.
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 the
Merger Consideration and no certificates evidencing Parent Common Stock, Cash
Consideration or 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
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
I-3
<PAGE>
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) $37.50 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 shareholders of the Company for one year
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former shareholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Cash Consideration, 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 Cash Consideration,
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. For
purposes of this Agreement, "Parent Rights Plan" means the issuance of
securities pursuant to the stock purchase rights declared as a dividend on March
28, 1995 and the rights agreement dated as of March 28, 1995 between Parent and
Union Planters National Bank.
SECTION 1.11 No Further Ownership Rights in Company Common Stock. All Cash
Consideration and 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 shareholders), 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
I-4
<PAGE>
destroyed Certificate the Cash Consideration, 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 Legend. Certificates representing shares of Parent Common Stock
issued in accordance with the terms of this Agreement in exchange for shares of
Company Common Stock surrendered by any "affiliate" 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 bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A RULE 145
TRANSACTION, AS THAT TERM IS USED IN RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY BE OFFERED FOR SALE,
SOLD, TRANSFERRED ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE ENCUMBERED ONLY
(1) PURSUANT TO RULE 145, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (3) UPON RECEIPT OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER IS OTHERWISE EXEMPT FROM
REGISTRATION UNDER THE ACT.
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 dissenters' rights in accordance with
Alabama law and who has not effectively withdrawn or lost his right to such
dissenters' rights (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 Alabama law and shall not
be entitled to vote or to exercise any other rights of a shareholder of the
Company. Each holder of Dissenting Shares who becomes entitled to payment
therefor pursuant to Alabama law shall receive such payment from the
Surviving Corporation in accordance with Alabama law.
(b) Notwithstanding the provisions of Section 1.15(a) hereof if any
shareholder who demands dissenters' rights with respect to a share of his
Company Common Stock under Alabama law 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 Directors and Officers. The persons who are directors of Sub
immediately prior to the Effective Time, together with Donald E. Hess, shall,
after the Effective Time, comprise the Board of
I-5
<PAGE>
Directors of the Surviving Corporation. At the Effective Time, the officers of
the Surviving Corporation shall consist of the officers of Sub immediately prior
to the Effective Time. Each of such directors and officers of the Surviving
Corporation shall hold office until their respective successors have been duly
elected or appointed and qualified or as otherwise provided in the Articles of
Incorporation of the Surviving Corporation, the Bylaws of the Surviving
Corporation or by law.
SECTION 1.18 Closing. Unless this Merger Agreement shall have been
terminated pursuant to the provisions of Article 7 hereof 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 on or
before October 15, 1996 (the "Closing Date"); provided, however, that if any of
the conditions provided for in Article 6 hereof shall not have been satisfied or
waived in accordance with the terms hereof by the Closing Date, then either
party to this Merger Agreement shall be entitled to postpone the Closing by
notice to the other party until such condition or conditions shall have been met
or waived.
ARTICLE 2.
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 Alabama and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each Subsidiary of Parent is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate power and authority to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Parent. Parent and each of its Subsidiaries are duly qualified to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement (a) "Material Adverse Change" or "Material
Adverse Effect" means, when used with respect to Parent or the Company, as the
case may be, any change or effect that is materially adverse to the assets,
liabilities, results of operation or financial condition of Parent and its
Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a
whole, as the case may be, and (b) "Subsidiary" means any corporation,
partnership, joint venture or other legal entity of which Parent or the Company,
as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, joint venture or other legal entity.
SECTION 2.2 Capital Structure. As of the Effective Time, the authorized
capital stock of Parent will consist of 100,000,000 shares of Parent Common
Stock and 10,000,000 shares of Preferred Stock, par value $ 1.00 per share (the
"Parent Preferred Stock"). At the close of business on July 5, 1996 (i)
20,660,145 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) 3,401,000 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's 1994 Long-Term Incentive Plan and the 1987 Stock
Option Plan; (iii) 330,000 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 4 3/4% Convertible Subordinated Debentures Due
2003. No shares of Preferred Stock are issued and outstanding. All of the shares
of Parent Common Stock issuable in exchange for Company Common Stock at the
Effective
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Time in accordance with this Agreement will be, when so issued, duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights. As
of the date of this Agreement, except for (a) this Agreement, (b) stock options
covering not in excess of 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 38,000 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, to issue the Parent Common Stock in connection with the Merger (the
"Share Issuance"), and 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 Alabama
law. 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
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to judicial discretion. 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 and the guarantees to be issued in connection with 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.
SECTION 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this Section
2.4 have been made, except as set forth on Schedule 2.4 of the disclosure
schedule delivered contemporaneously herewith (the "Disclosure Schedule") 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 Bylaws 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,
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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 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 Articles of Merger with the
Secretary 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 and consents as
may be required under any state or foreign laws pertaining to debt collection,
the issuance of payment instruments or money transmission, (v) applicable
requirements, if any, of state securities or "blue sky" laws (the "Blue Sky
Laws") and NASDAQ, and (vi) 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, since January 29,
1994, filed all documents and reports which it is required to file with the SEC,
including, without limitation, an Annual Report on Form 10-K for each of the
fiscal years ended January 29, 1994, January 28, 1995 and February 3, 1996, and
a Quarterly Report on Form 10-Q for the quarter ended May 4, 1996 (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
(and as amended through the date hereof), 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) 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 which would not in the aggregate be material in
amount or effect). 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 principles, practices,
methods or policies applied in the preparation of financial statements.
SECTION 2.6 Registration Statement and Prospectus. None of the information
to be supplied by Parent or Sub for inclusion or incorporation by reference in
the Registration Statement or the prospectus included therein (together with any
amendments or supplements thereto, the "Prospectus") relating to the Company
Shareholder Meeting and the Company Noteholder Approval (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
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or necessary in order to make the statements therein not misleading or (ii) in
the case of the Prospectus, at the time of the mailing of the Prospectus, the
time of each of the Shareholder Meeting and Noteholder Approval, 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 Prospectus 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 shareholders and noteholders 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 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.l(a)(v), there has been no material change in the
consolidated indebtedness of Parent and its Subsidiaries, and no dividend or
distribution of any kind declared, paid or made by Parent on any class of its
stock, except for regular semi-annual dividends of not more than $ 1.625
per share on Parent Series A Preferred Stock and an inducement payment of
$3,031,674 in connection with the conversion of Parent Series A Preferred Stock
into Parent Common Stock; and (D) there has been no event causing a Material
Adverse Effect on Parent, excluding any changes and effects resulting from
changes in economic, regulatory or political conditions or changes in conditions
generally applicable to the industries in which Parent and Subsidiaries of
Parent are involved and except for any such changes or effects resulting from
this Agreement, the transactions contemplated hereby or the announcement
thereof.
SECTION 2.8 Permits and Compliance. Each of Parent and its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity which, to the Knowledge of Parent (as hereinafter
defined), are 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, 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, Bylaws 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
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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. Set forth on
Schedule 2.8 of the Disclosure Schedule is a description of any material changes
to the amount and terms of the indebtedness of the Company and its Subsidiaries
as described on Parent's Annual Report on Form 10-K. "Knowledge of Parent" means
the actual knowledge of any of the Chief Executive Officer, Chief Operating
Officer, General Counsel and Chief Financial Officer of the Parent.
SECTION 2.9 Tax Matters. (a) 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.
(b) Neither the Parent's shares of capital stock nor the shares of capital
stock of any of its subsidiaries are "United States real property interests"
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended (the "Code").
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, as such, any of its 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, any of its 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, any of its 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
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Plan to the extent that it no longer pays retiree life benefits (iii) no action
has been taken, or is currently being considered, to terminate any Parent Plan
subject to Title IV of ERISA, 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, except for Younkers, Inc.'s termination of the Brandeis
Employees Pension Plan, the present value of the liabilities (as determined on a
terminated plan basis) do not exceed the fair market value of the Plan assets as
of the most recent valuation date. With respect to the Parent Plans, no event
has occurred in connection with which Parent or any ERISA Affiliate would be
subject to any liability under the terms of such Parent Plans, ERISA, the Code
or any other applicable law which would have a Material Adverse Effect on
Parent. All Parent Plans that are intended to be qualified under Section 401(a)
of the Code have been determined by the Internal Revenue Service to be so
qualified, and to the Knowledge of Parent, there is no reason why any Parent
Plan is not so qualified in operation. Neither Parent nor any of its ERISA
Affiliates has been notified by any Parent 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(1) 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 400l(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. 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 Documents, or disclosed in
the footnotes thereto, Parent 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 Parent, and, to the Knowledge of Parent, had no
liabilities (including, without limitation, tax liabilities) that were not
incurred in the ordinary course of business other than liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Parent.
SECTION 2.15 Labor Matters. Neither Parent nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract except as set
forth on Schedule 2.15 of the Disclosure
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Schedule. To the Knowledge of Parent, 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, to the
Knowledge of Parent, 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") that are necessary in connection with the business of the
Parent 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 Parent. To the Knowledge of the Parent, neither the 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 the Company.
SECTION 2.17 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 2.18 Financing. Parent has, or will have prior to the Closing Date,
sufficient funds available to fund the total Cash Consideration contemplated by
this Agreement and to pay all related fees and expenses in connection with the
consummation of the transactions contemplated hereby.
SECTION 2.19 Brokers. Except as set forth on Schedule 2.19 of the Disclosure
Schedule, no broker, investment banker or other person 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 3.
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 Alabama 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.
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SECTION 3.2 Capital Structure. As of the Effective Time, the authorized
capital stock of the Company will consist of 65,000,000 shares of Company Common
Stock, par value $.01 per share, and 12,000,000 shares of Preferred Stock, par
value $.01 per share ("Company Preferred Stock"). As of the date hereof (i)
7,355,846.189 shares of Company Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of preemptive
rights, except as set forth on Schedule 3.2 of the Disclosure Schedule and (ii)
no shares of Preferred Stock are issued or outstanding and no shares are held in
the Company's treasury. Except as set forth on Schedule 3.2 of the Disclosure
Schedule, 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. Except as set forth on Schedule 3.2 of the Disclosure
Schedule, 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 each such share is owned by the Company or another Subsidiary
of the Company, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever.
SECTION 3.3 Authority. The Board of Directors of the Company has on or prior
to the date of this Agreement (a) adopted this Agreement in accordance with
Alabama law, (b) resolved to recommend the approval of this Agreement by the
Company's shareholders and (c) directed that this Agreement be submitted to the
Company's shareholders for approval. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to approval by the
shareholders of the Company of this Agreement, 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 shareholders of the
Company and (y) the filing of appropriate Merger documents as required by
Alabama law. 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 except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to judicial discretion.
SECTION 3.4 Consents and Approvals: No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, except as set forth on Schedule 3.4 of the Disclosure
Schedule, 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 Articles of
Incorporation or Bylaws 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 (iv) any shareholder agreement, or (v)
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) (iv) or
(v), 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
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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, (ii) the filing of the Articles
of Merger with the Secretary 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 and consents as
may be required under any state or foreign laws pertaining to debt collection,
the issuance of payment instruments or money transmission, (v) applicable
requirements, if any, of Blue Sky Laws, and (vi) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent the consummation of any of the
transactions contemplated hereby.
SECTION 3.5 SEC Documents and Other Reports. The Company has, since January
29, 1994, filed all documents and reports which it is required to file with the
SEC including, without limitation, an Annual Report on Form 10-K for the fiscal
years ended January 29, 1994, January 28, 1995 and February 3, 1996, and a
Quarterly Report on Form 10-Q for the quarter ended May 4, 1996 (the "Company
SEC Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and, at the respective times they were
filed (and as amended through the date hereof), none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Company included in the Company SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles (except, in
the case of the unaudited statements, as permitted by Form 10-Q) 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 any adjustments described
therein and to adjustments for inventories, receivables and other normal
year-end audit adjustments consistent with past practices). Except as disclosed
in the Company SEC Documents or as required by generally accepted accounting
principles, the Company has not, since February 3, 1996, made any change in the
accounting principles, practices, methods or policies applied in the preparation
of financial statements.
SECTION 3.6 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.6 of the Disclosure Schedule, since February 3, 1996, (A) the Company
and its Subsidiaries have not 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. l(b)(v), there has been no material change in the
consolidated indebtedness of the Company and its Subsidiaries, and no dividend
or distribution of any kind declared, paid or made by the Company on any class
of its stock; and (D) there has been no event causing a Material Adverse Effect
on the Company, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industries in which the Company
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and Subsidiaries of the Company are involved and except for any such changes or
effects resulting from this Agreement, the transactions contemplated hereby or
the announcement thereof.
SECTION 3.7 Registration Statement and Prospectus. None of the information
to be supplied by the Company for inclusion or incorporation by reference in the
Registration Statement or the Prospectus 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 Prospectus, at the time of the mailing of
the Prospectus, the time of each of the Company Shareholder Meeting and the
Company Noteholder Approval, 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 Prospectus 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 shareholders and
noteholders of the Company. The Registration Statement will comply (with respect
to the Company) as to form in all material respects with the provisions of the
Securities Act.
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 which, to the Knowledge of the Company (as
hereinafter defined), are 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 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 Articles of Incorporation,
Bylaws or other organizational document, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or any
of its Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement, as of the date hereof there is no
contract or agreement that is material to the business, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.
Except as set forth in the Company SEC Documents, prior to the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or, upon
the consummation by the Company of the transactions contemplated by this
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any agreement
or instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any such Subsidiary is bound or to which any of
the properties, assets or 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 on Schedule 3.8 to
this Agreement is a description of (i) all store leases and leases for leased
departments 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, and (ii) any material changes to the amount
and terms of the indebtedness of the Company and its Subsidiaries as described
in the Company's Annual Report on Form 10-K. "Knowledge of the Company" means
the actual knowledge of any of the Chief Executive Officer, Chief Operating
Officer, General Counsel and Chief Financial Officer of the Company.
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SECTION 3.9 Tax Matters. Except as set forth on Schedule 3.9, 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 on the Company SEC
Documents, there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against or involving the Company or any of
its Subsidiaries, that, individually or in the aggregate, would have a Material
Adverse Effect on the Company. Except as set forth on Schedule 3.10 of the
Disclosure Schedule, 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 properties,
assets or business or any Company Plan that, individually or in the aggregate,
would have a Material Adverse Effect on the Company. As of the date hereof there
are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of its 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 as
set forth on Schedule 3.11 of the Disclosure Schedule, 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, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. No holder of any option to
purchase shares of Company Common Stock, or shares of Company Common Stock
granted in connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option or shares as a result of
the transactions contemplated by this Agreement. Neither the Company nor any
Subsidiary is a party to any termination benefits agreement or severance
agreement or employment agreement one trigger of which would be the consummation
of the transactions contemplated by this Agreement, except as set forth on
Schedule 3.11 of the Disclosure Schedule.
SECTION 3.12 ERISA. Each Company Plan complies in all material respects with
the Code and all other applicable statutes and governmental rules and
regulations, including but not limited to 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 has
withdrawn from any Company Multi-employer Plan or instituted, or is currently
considering taking, any action to do so, (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. 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. With respect to the Company Plans, no event has occurred in
connection with which 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 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, and to
the Knowledge of Company, there is no reason why any Company Plan is not so
qualified in operation. Neither 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
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ERISA or that such Company Multi-employer Plan intends to terminate or has been
terminated under Section 4041A of ERISA. Neither 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 SEC Documents. 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 Company or any of
its ERISA Affiliates or as to which 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 Company or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability.
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,
except for any violations that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company.
SECTION 3.14 Liabilities. Except as fully reflected or reserved against in
the financial statements included in the Company SEC Documents, 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, to the Knowledge of the Company,
had no liabilities (including, without limitation, tax liabilities) that were
not incurred in the ordinary course of business other than liabilities that,
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. To the
Knowledge of the Company, 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,
to the Knowledge of the Company, 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 that 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. To the Knowledge of the Company, neither the
Company nor any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
SECTION 3.17 Environmental Matters.
(a) Except as disclosed on Schedule 3.17 of the Disclosure Schedule and
except for matters which will not, individually or in the aggregate, have a
Material Adverse Effect, the Company has not received any oral or written
notice of, nor, to the Knowledge of the Company, is there any existing or
pending violation, citation, claim or complaint relating to the business of
the Company or any facility now or previously owned or operated by the
Company arising under any federal laws
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relating to environmental protection, including without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking
Water Act, the Federal Water Pollution Control Act (Clean Water Act), the
Clean Air Act, and antipollution, waste control and disposal and
environmental provisions of similar statutes or ordinances of any state or
local governmental authorities, and all regulations, standards and
guidelines enacted or promulgated pursuant thereto and all permits and
authorizations issued in connection therewith (collectively, "Environmental
Matters").
(b) Except as set forth in Schedule 3.17 of the Disclosure Schedule: to
the Knowledge of the Company (i) no underground tanks are now or have been
located at any facility now or previously owned or operated by the Company,
and (ii) except for matters which will not, individually or in the
aggregate, have a Material Adverse Effect, no toxic or hazardous substances
have been generated, transported, treated, stored, disposed of on or from or
otherwise deposited in or on or allowed to emanate from any such facility
(irrespective of whether such substances remain at the facility or were
transferred to or otherwise disposed of off site), including, without
limitation, the surface waters and subsurface waters thereof, which may
support a claim or cause of action under any federal, state or local
environmental statutes, ordinances, regulations or guidelines.
SECTION 3.18 Required Vote or Consent of Company Shareholders and
Noteholders. The affirmative vote of the holders of not less than two-thirds of
the outstanding shares of Company Common Stock is required to approve the
transactions contemplated by this Agreement. No other vote of the shareholders
of the Company is required by law, the Articles of Incorporation or By-laws of
the Company or otherwise in order for the Company to consummate the Merger and
the transactions contemplated hereby. The affirmative vote of the holders of not
less than a majority in aggregate principal amount of the Company's 9 7/8 Senior
Subordinated Notes (the "Senior Notes") is required to approve a Supplemental
Indenture to the Indenture dated as of July 15, 1993, between Parisian, Inc. and
AmSouth Bank N.A., Trustee (the "Indenture") to allow the transactions
contemplated by this Agreement to be consummated without triggering the right of
the Noteholders to require the repurchase of the Senior Notes.
SECTION 3.19 Brokers. Except as set forth on Schedule 3.19 of the Disclosure
Schedule, no broker, investment banker or other person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
ARTICLE 4.
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 (x) 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 good faith 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 or necessary to effect this Agreement,
Parent shall not, and shall not permit any of its Subsidiaries to, without
the prior written consent of the Company:
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(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 shareholders 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, and (C) the issuance by any wholly-owned Subsidiary of Parent
of its capital stock to Parent or another wholly-owned Subsidiary of Parent;
(iii) amend its Charter or Bylaws;
(iv) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Parent
or any Subsidiary;
(v) 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, (B) indebtedness, loans,
advances, capital contributions and investments between Company and any of
its wholly-owned Subsidiaries or between any of such wholly-owned
Subsidiaries (C) in connection with the consummation of the transactions
contemplated hereby, and (D) as necessary in connection with any acquisition
permitted in Section 4.1(a)(vi) hereof ;
(vi) 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 asset
purchase price or equity purchase price for which Parent is responsible does
not exceed $125 million in the aggregate and which does not materially
change the ratio of debt to total capitalization of Parent;
(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);
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(ix) take any action or knowingly omit to take any action which would
cause any of its representations or warrants contained in this Agreement to
be untrue or result in a breach of any covenant made by it in this
Agreement; or
(x) 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.l(b), during the period from the date of
this Agreement through the Effective Time, the Company 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 good faith 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 or necessary to
effect this Agreement, the Company shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of Parent:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such, (x) other than in the case of any Subsidiary, split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (y) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities;
(iii) amend its Articles of Incorporation or Bylaws;
(iv) 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;
(v) 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 Company and
any of its wholly-owned Subsidiaries or between any of such wholly-owned
Subsidiaries;
(vi) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company
or any Subsidiary;
(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) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, except one that can be terminated on
30-days' notice without cost, the payment of any penalty, or termination
fee, other than as required by law;
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(ix) increase the compensation payable or to become payable to its
officers or employees, except for increases in the ordinary course of
business consistent with past practice in salaries or wages of employees of
the Company or any of its Subsidiaries who are not officers of the Company
or any of its Subsidiaries, or, except pursuant to existing plans or
policies, grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director or officer of the
Company or any of its Subsidiaries, or establish, adopt, enter into, or,
except as may be required to comply with applicable law, amend or take
action to enhance or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(x) 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);
(xi) take any action or knowingly omit to take any action which would
cause any of its representations or warrants contained in this Agreement to
be untrue or result in a breach of any covenant made by it in this
Agreement;
(xii) except for state and federal tax returns due for the Company's
fiscal year-ended February 3, 1996, make any tax election or settle or
compromise any material federal, state, local or foreign income tax
liability; provided, however, that Parent shall not unreasonably withhold
its consent to the Company's settlement or compromise of any issues raised
in connection with the pending IRS audit of the Company's federal income tax
returns for its fiscal years ending in 1993, 1994 and 1995; or
(xiii) 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.
SECTION 4.2 No Solicitation. From and after the date hereof, neither the
Company, nor any members of the Company's Board of Directors will, and each will
use its best efforts to cause any of its officers, employees, affiliates,
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 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 the
Company concludes in good faith on the basis of a written opinion of its outside
counsel, Berkowitz, Lefkovits, Isom & Kushner, a Professional Corporation, that
the failure to take such action would violate the fiduciary obligations of such
Board under applicable law. The Company will promptly (but in no case later than
24 hours) notify the Parent 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 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 the Company or any of its Subsidiaries or any proposal to
acquire in any manner a substantial equity interest in, or a substantial portion
of the assets of, the Company or any of its 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, entered into in connection with any potential business
combination, sale of all or substantially all of the assets, merger or
transaction of comparable
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character involving the Company or any of its Subsidiaries, 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 Tax Certification. Within thirty days prior to the Effective
Time, the Company shall provide to Parent a certificate signed by an Officer of
the Company to the effect that the Company is not, nor has it been within five
years of the date thereof, a "United States real property holding corporation"
as defined in Section 897 of the Code.
ARTICLE 5.
ADDITIONAL AGREEMENTS
SECTION 5.1 Shareholder and Noteholder Approvals. The Company shall call a
meeting of its shareholders (the "Company Shareholder Meeting") to be held as
promptly as practicable for the purpose of considering the approval of this
Agreement. The Company shall participate in the process seeking approval (the
"Company Noteholder Approval") by the Noteholders of modifications to the
Indenture as provided in Section 5.11 (the modified Indenture being hereinafter
referred to as the "Supplemental Indenture"). The Company will, through its
Board of Directors, recommend to its shareholders approval of such Agreement and
shall not withdraw such recommendation; provided, however, that the 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 written
opinion of Berkowitz, Lefkovits, Isom & Kushner, a Professional Corporation,
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 interests of the Company and its shareholders
unless the Board concludes in good faith on the basis of the written opinion of
Berkowitz, Lefkovits, Isom & Kushner, a Professional Corporation, 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
Prospectus. The Company and Parent shall promptly prepare and file with the SEC
the Prospectus and Parent shall prepare and file with the SEC the Registration
Statement, in which the Prospectus will be included as a prospectus. Each of
Parent and the Company shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. As promptly as practicable after the
Registration Statement shall have become effective, each of Parent and the
Company shall mail the Prospectus to the Company's shareholders and Noteholders.
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 federal or 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 Prospectus 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
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amendment of the Prospectus 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. All such information obtained by the parties pursuant to this
Section 5.1 shall be subject to the terms of the Confidentiality Agreements
dated May 2, 1996 and June 6, 1996 (the "Confidentiality Agreements").
SECTION 5.4 Fees and Expenses.
(a) Except as otherwise provided herein, whether or not the transactions
contemplated herein shall be consummated, each party shall pay its own
expenses in connection with this Agreement and the transactions contemplated
herein.
(b) If:
(i) any event referred to in Section 7.1(h) occurs, this Agreement is
terminated thereafter by the Company or Parent (whether or not pursuant to
such clause) and prior to such termination the stockholders of the Company
did not approve this Agreement;
(ii) (y) this Agreement is terminated by the Company or Parent at a time
when Parent is entitled to terminate this Agreement pursuant to Section
7.1(e), and (z) prior to the Company Shareholder Meeting but after the date
of this Agreement a Company Third Party Acquisition Event has occurred;
(iii) this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(g); or
(iv) this Agreement is terminated by Parent pursuant to Section 7.1(h)
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 in cash to Parent all of its expenses reasonably
incurred in connection with the transactions contemplated pursuant to this
Agreement, but excluding "in-house" expenses such as compensation paid to
Parent's Officers and employees in connection herewith (the "Parent Expenses"),
which Parent Expenses shall not exceed $2.5 million, such payment to be made
promptly, but in no event later than the later of the second business day
following, (i) such termination or (ii) the receipt by the Company of reasonable
substantiation of such Parent Expenses. In the event that a Company Clause D
event (as hereinafter defined) occurs within twelve (12) months following such
termination, and is thereafter consummated, then the Company shall pay Parent an
aggregate fee of $5.5 million in cash less the actual amount of Parent Expenses
previously paid. Such payment shall be made within two (2) business days
following consummation of the Clause D Event.
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
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
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interest in, or a substantial portion of the assets, business or operations of,
the Company (other than the transactions contemplated by this Agreement) (a
"Company Clause D Event"); (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 5.4, the terms "group" and
"beneficial owner" shall be defined by reference to Section 13(d) of the
Exchange Act even though Section 13(d) of the Exchange Act may not apply to the
Company.
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 shareholders than the financial
and other terms of the Merger.
(c) Parent and the Company acknowledge that the agreements contained in
Section 5.4(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 the Company
fails promptly to pay the amount due pursuant to Section 5.4(b), and, to
obtain such payment, Parent or Sub commences a suit which results in a
judgment for the fee set forth in Section 5.4(b), the Company shall pay to
Parent or Sub 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 5.5 Reasonable Good Faith Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable good faith 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, if any), (ii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iii) the obtaining of any requisite
shareholder and Noteholder votes or consents, shareholder investor consents,
or other necessary corporate approvals, 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) Public Announcements. The initial press release relating to this
Agreement shall be a joint press release and thereafter the Company and
Parent each shall consult with the other prior to issuing any press releases
or otherwise making public announcements with respect to the Merger and the
other transactions contemplated by this Agreement and prior to making any
filings with any third party and/or any Governmental Entity (including any
national securities interdealer quotation service) with respect thereto,
except as may be required by law or by obligations pursuant to any listing
agreement with or rules of NASDAQ.
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SECTION 5.6 Securities Filings. From the date hereof to the Effective Time
and thereafter, each of Parent and Company shall timely file all reports
required to be filed by it under the Exchange Act, including, without
limitation, the timely filing of Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
SECTION 5.7 Indemnification. From and after the Effective Time, Parent
agrees to, and to cause the Surviving Corporation to, indemnify and hold
harmless all past and present officers and directors of the Company and of its
Subsidiaries to the same extent such persons are indemnified as of the date of
this Agreement by the Company pursuant to the Company's Articles of
Incorporation and By-Laws in existence on the date hereof for acts or omissions
occurring at or prior to the Effective Time. Parent shall cause the Surviving
Corporation to provide, for an aggregate period of not more 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 125 percent of the last annual premium paid prior to the date
hereof.
SECTION 5.8 Employee Benefits. Parent agrees to cause the Surviving
Corporation to provide to the current employees of the Company employee benefits
(including, without limitation, health, life and disability insurance,
retirement benefits and other employee benefits) which are no less favorable to
such employees than those provided by either (i) the Company currently or (ii)
the Parent for employees in similar positions, as such employee benefits may be
provided generally from time to time, the choice of which set of benefits to be
in Parent's sole discretion.
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 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 5.10 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.11 Cooperative Efforts. Parent and the Company shall work together
to obtain the requisite Noteholder vote or consent. Parent shall not solicit,
directly or indirectly, Noteholder vote or consent without first notifying the
Company and obtaining the Company's agreement with the form of solicitation,
which agreement shall not be unreasonably withheld.
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ARTICLE 6.
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) Shareholder Approval. This Agreement shall have been duly approved
by the requisite vote of shareholders of the Company in accordance with
Alabama law and the Articles of Incorporation and Bylaws of the Company.
(b) 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 (including State Takeover Approvals,
if any), 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.
(c) 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.
(d) 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 either party's counsel, would have a Material
Adverse Effect on the Parent or the Company, as the case may be.
(e) Registration Statement or Exemption. Either the Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act or there shall be an effective exemption from the
registration requirements of the Securities Act. If the Registration
Statement shall have become effective, 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 shall have been received.
SECTION 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligations 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 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, its Chief Operating Officer and its
Chief Financial Officer to such effect.
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(b) Legal Opinion. The Company shall have received an opinion of Sommer &
Barnard, counsel to Parent, dated the Closing Date, in reasonable form and of
the character typical for transactions of the character of those contemplated
hereby.
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
and, each of the representations and warranties of the Company contained in this
Agreement 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, its Chief Operating Officer and its Chief Financial Officer to such
effect.
(b) Legal Opinion. The Parent shall have received an opinion of Berkowitz,
Lefkovits, Isom & Kushner, A Professional Corporation, dated the Closing Date,
in reasonable form and of the character typical for transactions of the
character of those contemplated hereby.
(c) Noteholder Approval. The Noteholders shall have approved the
Supplemental Indenture in accordance with the terms of the Indenture and it
shall have been executed.
(d) Dissenting Shareholders. Holders of no more than 5% of the issued and
outstanding shares of the Company shall have dissented under applicable law.
(e) Financing Agreement and Other Consents. All consents necessary under the
Company's and its Subsidiaries' financing agreements shall have been obtained so
that obligations of the Company and its Subsidiaries will not be affected by the
transactions contemplated by this Agreement. All third-party consents and
consents necessary under any shareholder agreements applicable to the Company
and its Subsidiaries shall have been obtained.
ARTICLE 7.
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 shareholders 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
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breach by Sub) of any representation or warranty that is qualified as to
materiality, in each case which breach has not been cured within five business
days following receipt by the breaching party of written notice of the breach;
provided, however, that if any such breach is curable by the breaching party
through the exercise of the breaching party's best efforts and for so long as
the breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this paragraph;
(d) by the Parent or the Company if any order, decree or other order has
been entered by a court or other Governmental Entity which has the effect of
making the Merger or any of the transactions contemplated hereby illegal;
(e) by Parent or the Company if the Merger has not been effected on or prior
to the close of business on November 30, 1996 (the "Termination Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section 7.l(e) 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;
(f) by Parent or the Company if the shareholders of the Company do not
approve this Agreement;
(g) by Parent or the Company if the Board of Directors of the Company
reasonably determines that a Takeover Proposal constitutes a "Superior Proposal"
(as hereinafter defined); provided, however, that the Company may not terminate
this Agreement pursuant to this Section 7.1(g) unless and until three business
days have elapsed following delivery to Parent of a written notice of such
determination by the Board of Directors of the Company (which written notice
shall inform Parent of the material terms and conditions of the Takeover
Proposal but need not include the identity of such third party);
(h) by Parent if 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 interests of the Company, its shareholders
and its Noteholders, or shall have resolved to do so; or
(i) by Parent if the Noteholders of the Company do not approve the
Supplemental Indenture.
"Superior Proposal" shall mean a bona fide proposal or offer made by a third
party to acquire the Company pursuant to a stock purchase, 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 a
nationally recognized investment banking firm) to be more favorable to the
Company and to its shareholders and/or Noteholders 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 Section 5.4, Article 8 and the obligations of the parties under the
Confidentiality Agreements 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 shareholders and Noteholders of the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
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such shareholders 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 8.
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, Sections 1.5
(d), 5.2, 5.3, 5.4, 5.5, 5.6, 5.7 and 5.8, and this Article 8 shall survive the
Effective Time, and those set forth in Section 5.4, this Article 8 and the
Confidentiality Agreements 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, three days after
mailing by United States certified mail, return receipt requested, 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):
<TABLE>
<CAPTION>
<C> <S>
(a) if to Parent or Sub:
Proffitt's, Inc.
5810 Shelby Oaks Drive
Memphis, Tennessee 38134
Attn: Mr. R. Brad Martin
Facsimile Number: (901) 386-4594
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Attn: Brian J. Martin, Esquire
Facsimile Number: (601) 968-5216
with copies to:
James A. Strain, Esquire
Sommer & Barnard
PROFESSIONAL CORPORATION
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236-9802
(b) if to the Company:
Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn: Donald E. Hess
Facsimile Number: (205) 940-4984
with copies to:
Berkowitz, Lefkovits, Isom & Kushner,
A PROFESSIONAL CORPORATION
1600 SouthTrust Tower
Birmingham, Alabama 35203
Attn: Harold B. Kushner, Esquire
Facsimile Number: (205) 322-8007
</TABLE>
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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 Exhibits and Schedules attached hereto or referred to herein, and
the Confidentiality Agreements constitute the entire agreement of the parties
and supersede 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 Tennessee, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws 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 irrevocably waives right to trial by jury.
SECTION 8.10 Litigation Costs. In the event it becomes necessary for any
party hereto to initiate litigation for the purpose of enforcing any of its
rights hereunder or for the purpose of seeking damages for any violation hereof
then, in addition to any and all other judicial remedies that may be granted,
the prevailing party shall be entitled to recover attorneys' fees and all other
costs sustained by it in connection with such litigation.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
<TABLE>
<S> <C>
ATTEST: PROFFITT'S, INC.
By: By:
----------------------------- -------------------------
Its: Its:
----------------------------- -------------------------
ATTEST: CASABLANCA MERGER CORP.
By: By:
----------------------------- -------------------------
Its: Its:
----------------------------- -------------------------
ATTEST: PARISIAN, INC.
By: By:
----------------------------- -------------------------
Its: Its:
----------------------------- -------------------------
</TABLE>
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APPENDIX II
ALABAMA CODE
TITLE 10. CORPORATIONS, PARTNERSHIPS AND ASSOCIATIONS
CHAPTER 2B. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
DIVISION A.
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SECTION 10-2B-13.01. Definitions.
(1) "Corporate action" means the filing of articles of merger or share
exchange by the probate judge or Secretary of State, or other action giving
legal effect to a transaction that is the subject of dissenters' rights.
(2) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 10-2B-13.02 and who exercises that right when and
in the manner required by Sections 10-2B-13.20 through 10-2B-13.28.
(4) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans, or, if none, at a rate that is fair and
equitable under all circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
SECTION 10-2B-13.02. Right to dissent.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his or her shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by Section
10-2B-11.03 or the articles of incorporation and the shareholder is entitled
to vote on the merger or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 10-2B-11.04;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to
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court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(4) To the extent that the articles of incorporation of the corporation
so provide, an amendment of the articles of incorporation that materially
and adversely affects rights in respect to a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Section 10-2B-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for shares under
this chapter may not challenge the corporate action creating his or her
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
SECTION 10-2B-13.03. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than all
of the shares registered in his or her name only if he or she dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf he
or she asserts dissenters' rights. The rights of a partial dissenter under this
subsection are determined as if the shares to which he or she dissents and his
or her other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which he or she is
the beneficial shareholder or over which he or she has power to direct the
vote.
DIVISION B
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SECTION 10-2B-13.20. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
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(b) If corporate action creating dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the corporation shall (1)
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken; and (2) send them the dissenters' notice described in
Section 10-2B-13.22.
SECTION 10-2B-13.21. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is submitted to a vote at a shareholder's meeting, a shareholder who
wishes to assert dissenters' rights (1) must deliver to the corporation before
the vote is taken written notice of his or her intent to demand payment or his
or her shares if the proposed action is effectuated; and (2) must not vote his
or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for his or her shares under this article.
SECTION 10-2B-13.22. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under Section
10-2B-13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of the shares will
be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand,which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
SECTION 10-2B-13.23. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in Section 10-2B-13.22
must demand payment in accordance with the terms of the dissenters' notice.
(b) The shareholder who demands payment retains all other rights of a
shareholder until those rights are canceled or modified by the taking of the
proposed corporate action.
(c) A shareholder who does not demand payment by the date set in the
dissenters' notice is not entitled to payment for his or her shares under this
article.
(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered under the proposed
corporate action unless the corporation shall consent thereto.
SECTION 10-2B-13.24. Share restrictions.
(a) Within 20 days after making a formal payment demand, each shareholder
demanding payment shall submit the certificate or certificates representing his
or her shares to the corporation for (1) notation thereon by the corporation
that such demand has been made and (2) return to the shareholder by the
corporation.
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<PAGE>
(b) The failure to submit his or her shares for notation shall, at the
option of the corporation, terminate the shareholders' rights under this article
unless a court of competent jurisdiction, for good and sufficient cause, shall
otherwise direct.
(c) If shares represented by a certificate on which notation has been made
shall be transferred, each new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of such
shares.
(d) A transferee of such shares shall acquire by such transfer no rights in
the corporation other than those which the original dissenting shareholder had
after making demand for payment of the fair value thereof.
SECTION 10-2B-13.25. Offer of payment.
(a) As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenter who complied
with Section 10-2B-13.23 the amount the corporation estimates to be the fair
value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the offer, an income
statement for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Section
10-2B-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of payment
in full satisfaction of his or her demand must surrender to the corporation the
certificate or certificates representing his or her shares in accordance with
terms of the dissenters' notice. Upon receiving the certificate or certificates,
the corporation shall pay each dissenter the fair value of his or her shares,
plus accrued interest, as provided in subsection (a). Upon receiving payment, a
dissenting shareholder ceases to have any interest in the shares.
SECTION 10-2B-13.26. Failure to take corporate action.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment, the corporation shall release the
transfer restrictions imposed on shares.
(b) If, after releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Section 10-2B-13.22
and repeat the payment demand procedure.
SECTION 10-2B-13.28. Procedure if shareholder dissatisfied with offer of
payment.
(a) A dissenter may notify the corporation in writing of his or her own
estimate of the fair value of his or her shares and amount of interest due, and
demand payment of his or her estimate, or reject the corporation's offer under
Section 10-2B-13.25 and demand payment of the fair value of his or her shares
and interest due, if:
(1) The dissenter believes that the amount offered under Section
10-2B-13.25 is less than the fair value of his or her shares or that the
interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section 10-2B-13.25
within 60 days after the date set for demanding payment; or
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<PAGE>
(3) The corporation, having failed to take the proposed action, does not
release the transfer restrictions imposed on shares within 60 days after the
date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this section
unless he or she notifies the corporation of his or her demand in writing under
subsection (a) within 30 days after the corporation offered payment for his or
her shares.
DIVISION C
JUDICIAL APPRAISAL OF SHARES
SECTION 10-2B-13.30. Court action.
(a) If a demand for payment under Section 10-2B-13.28 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares, and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the clerk
of the court an amount sufficient to pay unsettled claims of all dissenters
party to the action in an amount per share equal to its prior estimate of fair
value, plus accrued interest, under Section 10-2B-13.25.
(e) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to judgment
for the amount the court finds to be the fair value of his or her shares, plus
accrued interest. If the court's determination as to the fair value of a
dissenter's shares, plus accrued interest, is higher than the amount estimated
by the corporation and deposited with the clerk of the court pursuant to
subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to subsection(d),
then the clerk shall return the balance of funds deposited, less any costs under
Section 10-2B-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation of the
certificate or certificates representing the appraised shares, a dissenting
shareholder ceases to have any interest in the shares.
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SECTION 10-2B-13.31. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under Section 10-2B-13.30
shall determine all costs of the proceeding, including compensation and expenses
of appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Section 10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 10-2B-13.20 through 10-2B-13.28; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefitted.
SECTION 10-2B-13.32. Status of shares after payment.
Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this chapter
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or share
exchange,they may be held and disposed of as the plan of merger or share
exchange may otherwise provide.
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APPENDIX III
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of July 8, 1996,
is between PROFFITT'S, INC., a Tennessee corporation ("Parent") and PARISIAN,
INC., an Alabama corporation (the "Company").
WHEREAS, Parent and the Company have entered into an Agreement and Plan of
Merger (the "Merger Agreement") contemporaneously with the execution of this
Agreement pursuant to which shareholders of the Company will receive Common
Stock of the Parent ("Parent Common Stock");
WHEREAS, following consummation of the transactions contemplated by the
Agreement and Plan of Merger (the "Merger"), Parent will own 100% of the stock
of the Company; and
WHEREAS, the parties hereto desire to enter into this Agreement which sets
forth the terms of certain registration rights applicable to the Registrable
Securities (as defined below) subsequent to the Merger;
NOW, THEREFORE, upon the terms and conditions, and the mutual promises
herein contained, and for good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
same meaning as they have in the Merger Agreement. As used in this Agreement,
the following initially capitalized terms shall have the following meanings:
(a) "Affiliate" means, with respect to any person, any other person who,
directly or indirectly, is in control of, is controlled by or is under
common control with the former person.
(b) "Family Holder" means any Holder (as hereinafter defined) other than
a Lehman Holder (as hereinafter defined).
(c) "Holder" means any of the former shareholders of the Company who or
which is the record holder of Registrable Securities and any successor,
permitted transferee or assignee thereof.
(d) "In Registration" means, with respect to the Parent, that there has
been an organizational meeting with underwriters regarding a proposed public
offering of Parent's securities.
(e) "Lehman Holder" means Lehman Brothers Merchant Banking Portfolio
Partnership, L.P., Lehman Brothers Offshore Investment Partnership--Japan
L.P., Lehman Brothers Offshore Investment Partnership L.P., or Lehman
Brothers Capital Partners II L.P.
(f) "Registrable Securities" means Parent Common Stock received in the
Merger, any stock or other securities into which or for which such Parent
Common Stock may hereafter be changed, converted or exchanged, and any other
securities issued to holders of such Parent Common Stock (or such shares
into which or for which such shares are so changed, converted or exchanged)
upon any reclassification, share combination, share subdivision, share
dividend, merger, consolidation or similar transactions or events, provided
that any such securities shall cease to be Registrable Securities (i) if a
registration statement with respect to the sale of such securities (other
than a registration statement relating to the initial issuance of Parent
Common Stock in the Merger) shall have become effective under the Securities
Act and such securities are sold pursuant to such registration statement, or
(ii) if such securities shall have been distributed pursuant to Rule 144,
Rule 144A or Rule 145(d).
(g) "Registration Expenses" means all reasonable expenses in connection
with any registration of securities pursuant to this Agreement including,
without limitation, the following: (i) SEC
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filing fees; (ii) the fees, disbursements and expenses of Parent's counsel
and accountants in connection with the registration of the Registrable
Securities to be disposed of under the Securities Act; (iii) all expenses in
connection with the preparation, printing and filing of the registration
statement, any preliminary prospectus or final prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to any
Holders, underwriters and dealers and all expenses incidental to delivery of
the Registrable Securities; (iv) the cost of producing blue sky or legal
investment memoranda; (v) all expenses in connection with the qualification
of the Registrable Securities to be disposed of for offering and sale under
state securities laws, including the fees and disbursements of counsel for
the underwriters or Holders in connection with such qualification and in
connection with any blue sky and legal investments surveys; (vi) the filing
fees incident to securing any required review by the National Association of
Securities Dealers, inc. of the terms of the sale of the Registrable
Securities to be disposed of, (vii) transfer agents', depositaries' and
registrars' fees and the fees of any other agent appointed in connection
with such offering; (viii) all security engraving and security printing
expenses, (ix) all fees and expenses payable in connection with the listing
of the Registrable Securities on each securities exchange or inter-dealer
quotation system on which a class of common equity securities of Parent is
then listed and (x) courier, overnight, and delivery expenses; provided
further that Registration Expenses shall not include any underwriting
discounts, commissions or fees attributable to the sale of the Registrable
Securities and shall not include internal expenses such as salaries and
expenses of Parent's officers and employees performing legal or accounting
duties, word processing, overhead, clerical and duplication expenses.
(h) "Restricted Securities" has the same meaning as in Rule 144(a)(3)
(as hereinafter defined).
(i) "Rule 144" means Rule 144 promulgated under the Securities Act, or
any successor rule to similar effect.
(j) "Rule 144A" means Rule 144A promulgated under the Securities Act, or
any successor rule to similar effect.
(k) "Rule 145" means Rule 145 promulgated under the Securities Act, or
any successor rule to similar effect.
(l) "SEC" means the United States Securities and Exchange Commission.
(m) "Securities Act" means the Securities Act of 1933, as amended, or
any successor statute, and the rules and regulations of the SEC promulgated
thereunder.
2. Demand Registration.
(a) At any time after the Effective Time (or in the case of a Lehman Holder,
prior to or after the Effective Time), upon written notice from a Holder or
group of Holders in the manner set forth in Section 11(h) hereof requesting that
the Parent effect the registration under the Securities Act of any or all of the
Registrable Securities held by such Holder, which notice shall specify the
intended method or methods of disposition of such Registrable Securities, the
Parent shall use its reasonable best efforts to effect, in the manner set forth
in Section 5, the registration under the Securities Act of all of such
Registrable Securities for disposition in accordance with the intended method or
methods of disposition stated in such request, provided that:
(i) if, within 5 business days of receipt of a registration request
pursuant to this Section 2(a), Parent is advised in writing (with a copy to
the Holder requesting registration) by either co-lead underwriter of the
proposed offering described below that, in such firm's good faith opinion, a
registration at the time and on the terms requested would materially and
adversely affect any immediately planned offering of securities by Parent as
to which Parent was In Registration prior to receipt of notice requesting
registration pursuant to this Section 2(a) (a "Transaction Blackout"),
Parent shall not be required to effect a registration pursuant to this
Section 2(a) until the
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earliest of (A) the abandonment of such offering, (B) the termination of any
"hold back" period obtained by the underwriter(s) of such offering from any
person in connection therewith or (C) 120 days after receipt by the Holder
requesting registration of either co-lead underwriter's written opinion
referred to above in this subsection (i));
(ii) if, while a registration request is pending pursuant to this
Section 2(a), Parent has determined in good faith that the filing of a
registration statement would require the disclosure of material non-public
information that Parent has a bona fide business purpose for preserving as
confidential, Parent shall not be required to effect a registration pursuant
to this Section 2(a) until the earlier of (1) the date upon which such
material information is otherwise disclosed to the public or ceases to be
material or Parent is able to so comply with applicable SEC requirements, as
the case may be, and (2) 45 days after Parent makes such good-faith
determination;
(iii) Parent shall not be obligated to file a registration statement
relating to a registration request pursuant to this Section 2: (A) in the
case of a request by Lehman Holders, if such registration request is for an
amount of Registrable Securities with an aggregate value, based on the
closing price on the trading day preceding such registration request, of
less than $25 million or if the Lehman Holders have previously made a
registration request; or (B) in the case of a request by Family Holders, if
such registration request is for an amount of Registrable Securities with an
aggregate value, based on the closing price on the trading day preceding
such registration request, of less than $25 million or if the Family Holders
have previously made a registration request; provided, however, that in the
event the Family Holders receive Restricted Securities in the Merger, Parent
shall not be obligated to file such a registration statement if such
aggregate value is less than $10 million or if the Family Holders have
previously made two such registration requests; and
(iv) for the first three-months following the Effective Time, the Family
Holders shall not make a registration request under this Section 2 unless
prior to such request, the Lehman Holders shall have made a registration
request under this Section 2.
(b) Notwithstanding any other provision of this Agreement to the contrary:
(i) a registration requested by a Holder pursuant to this Section 2,
shall not be deemed to have been effected (and, therefore, not requested for
purposes of subsection 2(a)), (A) unless the registration statement filed
with respect to such Holder's Registrable Securities has become effective,
(B) if after it has become effective such registration is interfered with by
any stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason other than a misrepresentation
or an omission by such Holder and, as a result thereof, the Registrable
Securities requested to be registered cannot be distributed in accordance
with the plan of distribution set forth in the related registration
statement or (C) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied (other than by reason of some act or omission
by such Holder) or waived by the underwriters;
(ii) a registration requested by a Holder pursuant to this Section 2 and
later withdrawn at the request of such Holder shall be deemed to have been
effected (and, therefore, requested for purposes of Section 2(a)), whether
withdrawn by the Holder prior to or after the effectiveness of such
requested registration, unless such request is withdrawn by a Holder prior
to the filing of a registration statement with the SEC; and
(iii) nothing herein shall modify Holders' obligation to pay the
Registration Expenses incurred in connection with any registration withdrawn
at the Holders' request, if the Holders are otherwise obligated to do so.
(c) In the event that any registration pursuant to this Section 2 shall
involve, in whole or in part, an underwritten offering, a Holder shall have the
right to designate an underwriter reasonably satisfactory
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to Parent as a co-lead underwriter of such underwritten offering and Parent
shall have the right to designate a co-lead underwriter reasonably satisfactory
to the Holder of such underwritten offering.
(d) Parent shall have the right to cause the registration of additional
securities for sale for the account of any person (including Parent) in any
registration of Registrable Securities requested by a Holder pursuant to Section
2(a); provided that Parent shall not have the right to cause the registration of
such additional securities if (i) such registration is pursuant to Rule 415
under the Securities Act, or (ii) such person is advised in writing (with a copy
to the Parent) by either co-lead underwriter that, in such firm's good faith
opinion, registration of such additional securities would materially and
adversely affect the offering and sale of the Registrable Securities then
contemplated by such Holder.
3. Piggyback Registration. If Parent at any time proposes to register any of
its Common Stock or any other of its common equity securities, including any
security convertible into or exchangeable for any of its common equity
securities (collectively, "Other Securities") under the Securities Act (other
than a registration on Form S-4 or S-8 or any successor form thereto), whether
or not for sale for its own account, in a manner which would permit registration
of Registrable Securities for sale for cash to the public under the Securities
Act, it will each such time give prompt written notice to Mr. Donald E. Hess, or
his successor, or Mr. Kenneth I. Tuchman, or his successor, of its intention to
do so at least 10 business days prior to the anticipated filing date of the
registration statement relating to such registration. Such notice shall offer
Holders the opportunity to include in such registration statement any or all of
the Registrable Securities owned by each such Holder. Upon the receipt of
Parent's notice (which request shall specify the number of Registrable
Securities intended to be disposed of and the intended method of disposition
thereof), Parent shall effect, in the manner set forth in Section 5, in
connection with the registration of the Other Securities, the registration under
the Securities Act of all Registrable Securities which Parent has been so
requested to register, to the extent required to permit the disposition (in
accordance with such intended methods thereof) of the Registrable Securities so
requested to be registered, provided that:
(a) if at any time after giving written notice of its intention to register
any securities and prior to the effective date of such registration, Parent
shall determine for any reason not to register or to delay registration of such
securities, Parent may, at its election, give written notice of such
determination to the Holder and, thereupon, (A) in the case of a determination
not to register, Parent shall be relieved of its obligation to register any
Registrable Securities in connection with such registration and (B) in the case
of a determination to delay such registration, Parent shall be permitted to
delay registration of any Registrable Securities requested to be included in
such registration for the same period as the delay in registering such Other
Securities;
(b) (i) if the registration referred to in the first sentence of this
Section 3 is to be an underwritten primary registration on behalf of Parent, and
the managing underwriter advises Parent in writing that, in such firm's opinion,
such offering would be materially and adversely affected by the inclusion
therein of the Registrable Securities requested to be included therein, Parent
shall include in such registration: (1) first, all securities Parent proposes to
sell for its own account ("Parent Securities"), and (2) second, up to the full
number of (A) Registrable Securities held by Holders requested to be included in
such registration and (B) other securities, if any, requested to be included
therein by the holders thereof (the "Other Holders"), in excess of the number or
dollar amount of securities Parent proposes to sell which, in the good-faith
opinion of the managing underwriter, can be so sold without so materially and
adversely affecting such offering (and, if less than the full number of such
Registrable Securities and securities held by Other Holders, allocated pro rata
among the Holders of such Registrable Securities and the Other Holders on the
basis of the number of securities requested to be registered in such
registration by each such Holder and each such Other Holder); and (ii) if the
registration referred to in the first sentence of this Section 3 is to be an
underwritten secondary registration on behalf of Other Holders and the managing
underwriter of such secondary registration on behalf of Other Holders and the
managing underwriter of such secondary offering advises Parent in writing that
in its good-faith opinion such offering would be materially and adversely
affected by the inclusion therein of the Registrable Securities requested to be
included therein, Parent shall include in such registration the
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<PAGE>
amount of securities (including Registrable Securities) that the managing
underwriter advises can be so sold without materially affecting such offering,
allocated pro rata among the Other Holders and the Holders on the basis of the
number of securities (including Registrable Securities) requested to be included
therein by each Other Holder and each Holder.
(c) Parent shall not be required to effect any registration of Registrable
Securities under this Section 3 incidental to the registration of any of its
securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
executive or employee benefit or compensation plans; and
(d) no registration of Registrable Securities effected under this Section 3,
standing alone, shall relieve Parent of its obligation to effect a registration
of Registrable Securities pursuant to Section 2 hereof.
4. Expenses, Underwriting Discounts, Commissions and Fees. (a) Unless
Holders receive Restricted Securities in the Merger, each Holder, by accepting
Registrable Securities, agrees to pay all Registration Expenses with respect to
an offering pursuant to Section 2 hereof, pro rata based on each Holder's number
of Registrable Securities included in such offering, except to the extent the
Parent causes shares to be registered for itself or another party pursuant to
Section 2(d), in which event Parent or such other party shall pay the
incremental expenses of including such shares in the offering. By accepting
Registrable Securities, each Holder agrees to pay all incremental expenses of
including such Holder's Registrable Securities in an offering pursuant to
Section 3 hereof. All Registration Expenses to be paid by the Holder shall be
paid within 30 days of the delivery of a statement, such statements to be
delivered not more frequently than once every 30 days.
(b) If Holders receive Restricted Securities in the Merger, Parent agrees to
pay all Registration Expenses with respect to the exercise of one registration
request pursuant to Section 2 by the Lehman Holders and any registration
requests pursuant to Section 2 by the Family Holders. If Holders receive
Restricted Securities in the Merger, Parent agrees to pay the incremental
expenses of including Holders' Registrable Securities in an offering pursuant to
Section 3 hereof.
(c) Parent shall have no obligation to pay any underwriting discounts,
commissions or fees relating to Registrable Securities. All such underwriting
discounts, commissions and fees shall be borne by the Holders.
5. Registration and Qualifications. If and whenever Parent is required to
use its reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2 or 3 hereof,
Parent, subject to Section 4 hereof, shall:
(a) prepare and file a registration statement under the Securities Act
relating to the Registrable Securities to be offered as soon as practicable, but
in no event later than 30 days (45 days if the applicable registration form is
other than Form S-3) after the date notice is given, and use its reasonable best
efforts to cause the same to become effective within 60 days after the date
notice is given (90 days if the applicable registration form is other than Form
S-3);
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for 90 days (or, in the
case of an underwritten offering, such shorter time period as the underwriters
may require);
(c) furnish to the Holders and to any underwriter of such Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents, as the Holders or such underwriter may reasonably request in order to
facilitate the public sale of the Registrable
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<PAGE>
Securities, and a copy of any and all transmittal letters or other
correspondence to, or received from the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any domestic
or foreign securities exchange) relating to such offering;
(d) use its reasonable best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Holders or any underwriter of such
Registrable Securities shall request, and use its reasonable best efforts to
obtain all appropriate registration, permits and consents required in connection
therewith, and do any and all other acts and things which may be necessary or
advisable to enable the Holders or any such underwriter to consummate the
disposition in such jurisdictions of its Registrable Securities covered by such
registration statement; provided that Parent shall not for any such purpose be
required to register or qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(e) (i) use its reasonable best efforts to furnish an opinion of counsel for
Parent addressed to the underwriters and each Holder of Registrable Securities
included in such registration (each a "Selling Holder") and dated the date of
the closing under the underwriting agreement (if any) (or if such offering is
not underwritten, dated the effective date of the registration statement), and
(ii) use its reasonable best efforts to furnish a "cold comfort" letter
addressed to each Selling Holder, if permissible under applicable accounting
practices, and signed by the independent public accountants who have audited
Parent's financial statements included in such registration statement, in each
such case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements;
(f) immediately notify the Selling Holders in writing (i) at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 hereof is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of any material fact or omits to
state any 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, and (ii) of any request by the SEC or any other regulatory body
or other body having jurisdiction over any amendment of or supplement to any
registration statement or other document relating to such offering, and in
either such case (i) or (ii) at the request of the Selling Holders, subject to
Section 4 hereof, prepare and furnish to the Selling Holders a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading;
(g) use its reasonable best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and inter-dealer
quotation system on which a class of common equity securities of Parent is then
listed, with expenses in connection therewith (not including any future periodic
assessments or fees for such additional listing) to be paid in accordance with
Section 4 hereof;
(h) furnish unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters with expenses therewith to be paid in
accordance with Section 4 hereof; and
(i) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the SEC relating to the registration and distribution
of the Registrable Securities, and take all other reasonable steps necessary and
appropriate to effect all registrations in the manner contemplated by this
Agreement.
III-6
<PAGE>
6. Underwriting; Due Diligence.
(a) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this
Agreement, Parent shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by Parent and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distribution,
including, without limitation, indemnities and contribution substantially to the
effect and to the extent provided in Section 8 hereof and the provision of
opinions of counsel and accountants' letters to the effect and to the extent
provided in Section 5(e) hereof. The Selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, Parent to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by the Selling Holders on whose behalf the
Registrable Securities are to be distributed as are customarily contained in
underwriting agreements with respect to secondary distributions.
(b) In the event that any registration pursuant to Section 3 shall involve,
in whole or in part, an underwritten offering, Parent may require the
Registrable Securities requested to be registered pursuant to Section 3 to be
included in such underwriting on the same terms and conditions as shall be
applicable to the other securities being sold through underwriters under such
registration. If requested by the underwriters for such underwritten offering,
the Selling Holders on whose behalf the Registrable Securities are to be
distributed shall enter into an underwriting agreement with such underwriters,
such agreement to contain such representations and warranties by the Selling
Holders and such other terms and provisions as are customarily contained in
underwriting agreement with respect to secondary distributions, including
without limitation, indemnities and contribution substantially to the effect and
to the extent provided in Section 8 hereof. Such underwriting agreement shall
also contain such representations and warranties by Parent and such other person
or entity for whose account securities are being sold in such offering as are
customarily contained in underwriting agreements with respect to secondary
distributions.
(c) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act, Parent
shall give the Holders of such Registrable Securities and the underwriters, if
any, and their respective counsel and accountants, such reasonable and customary
access to its books and records and such opportunities to discuss the business
of Parent with its officers and the independent public accountants who have
certified Parent's financial statements as shall be necessary, in the opinion of
such Holder and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
7. Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities made pursuant to
this Agreement, Parent agrees to indemnify and hold harmless each Holder, its
officers and directors, each underwriter of Registrable Securities so offered
and each person, if any, who controls any of the foregoing persons within the
meaning of Section 15 of the Securities Act, from and against any and all
claims, liabilities, losses, damages, expenses and judgments, joint or several,
to which they or any of them may become subject, under the Securities Act or
otherwise, including any amount paid in settlement of any litigation commenced
or threatened, and shall promptly reimburse them, as and when incurred, for any
reasonable legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as such losses,
claims, damages, liabilities or actions shall arise out of, or shall be based
upon, any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein, or any amendment thereto or supplement thereto, or
in any document incorporated by reference therein, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading); provided, however,
that Parent shall not be liable to a particular Holder in any such case to the
extent that any such loss, claim, damage, liability or action
III-7
<PAGE>
arises out of, or is based upon, any untrue statement or alleged untrue
statement, or any omission, if such statement or omission shall have been made
in reliance upon and in conformity with information relating to such Holder
furnished to Parent in writing by or on behalf of such Holder specifically for
use in the preparation of the registration statement (or in any preliminary or
final prospectus included therein) or any amendment thereof or supplement
thereto. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Holder and shall survive the transfer of
such securities. The foregoing indemnity agreement is in addition to any
liability which Parent may otherwise have to each Holder, its officers and
directors, underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, further, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent or given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.
(b) In the case of each offering made pursuant to this Agreement, each
Holder of Registrable Securities, included in such offering, by exercising its
registration rights hereunder, agrees to indemnify and hold harmless Parent, its
officers and directors and each person, if any, who controls any of the
foregoing (within the meaning of Section 15 of the Securities Act), from and
against any and all claims, liability, losses, damages, expenses and judgments,
joint or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement of any
litigation commenced, or threatened, and shall promptly reimburse them, as and
when incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of, or shall be
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that such untrue statement of a material fact is
contained in, or such material fact is omitted from, information relating to
such Holder furnished in writing to Parent by or on behalf of such Holder
specifically for use in the preparation of such registration statement (or in
any preliminary or final prospectus included therein). The foregoing indemnity
is in addition to any liability which such Holder may otherwise have to Parent,
or any of its directors, officers or controlling persons; provided, however,
that, as to any underwriter or any person controlling any underwriter, this
indemnity does not apply to any loss, liability, claim, damage or expense
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus if a copy of a
prospectus was not sent or given by or on behalf of an underwriter to such
person asserting such loss, claim, damage, liability or action at or prior to
the written confirmation of the sale of the Registrable Securities as required
by the Securities Act and such untrue statement or omission had been corrected
in such prospectus. In no event, however, shall a Holder be required to pay
pursuant to this Section 7(b) an amount in the aggregate in excess of the net
proceeds received by such Holder in connection with the sale of Registrable
Securities in the offering which is the subject of such loss, claim, damage or
liability.
(c) Procedure for Indemnification. Each party indemnified under paragraph
(a) or (b) of this Section 7 shall, promptly after receipt of notice of any
claim or the commencement of any action against such indemnified party in
respect of which indemnity may be sought, notify the indemnifying party in
writing of the claim or the commencement thereof; provided that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party on account of the indemnity agreement contained
in paragraph (a) or (b) of this Section 8, except to the extent the indemnifying
party was actually prejudiced by such failure, and in no event shall relieve the
indemnifying party from any other liability which it may have to such
indemnified party. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly
III-8
<PAGE>
with any other similarly notified indemnifying party to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided that each
indemnified party, its officers and directors, if any, and each person, if any,
who controls such indemnified-led party within the meaning of the Securities
Act, shall have the right to employ separate counsel reasonably approved by the
indemnifying party to represent them if the named parties to any action
(including any impleaded parties) include both such indemnified party and an
indemnifying party or an affiliate of an indemnifying party, and such
indemnified party shall have been advised by counsel either (i) that there may
be one or more legal defenses available to such indemnified party that are
different from or additional to those available to such indemnifying party or
such affiliate or (ii) a conflict may exist between such indemnified party and
such indemnifying party or such affiliate, and in that event the fees and
expenses of one such separate counsel for all such indemnified parties shall be
paid by the indemnifying party. An indemnified party will not enter into any
settlement agreement which is not approved by the indemnifying party, which
approval shall not to be unreasonably withheld. The indemnifying party may not
agree to any settlement of any such claim or action which provides for any
remedy or relief other than monetary damages for which the indemnifying party
shall be responsible hereunder, without the prior written consent of the
indemnified party, which shall not be unreasonably withheld, and any such
settlement agreement shall contain a complete and unconditional release from
liability of each indemnified party. Notwithstanding the foregoing, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by this Section 7, the indemnifying party agrees that it shall be liable for any
settlement effected without its written consent if (i) such settlement is
entered into more than 30 business days after receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of settlement. In any action hereunder as to which the indemnifying party
has assumed the defense thereof with counsel reasonably satisfactory to the
indemnified party, the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the indemnifying party shall not be obligated hereunder to
reimburse the indemnified part; for the costs thereof. In all instances, the
indemnified party shall cooperate fully with the indemnifying party or its
counsel in the defense of each claim or action.
If the indemnification provided for in this Section 7 shall for any reason
be unavailable to an indemnified party in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to herein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party on the one hand or the indemnified party on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by
reference to any indemnified party's stock ownership in Parent. In no event,
however, shall a Holder be required to contribute in excess of the amount of the
net proceeds received by such Holder in connection with the sale of Registrable
Securities in the offering which is the subject of such loss, claim, damage or
liability. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this paragraph shall be deemed to include, for purposes of this
paragraph, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person
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guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Rules 144 and 145. Parent shall take such measures and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rules 144 and 145 (or any successor
provisions).
9. Holdback.
(a) Each Holder agrees by acquisition of Registrable Securities, if so
required by either co-lead underwriter, not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any securities of Parent, during the 14
days prior to and the 90 days after any underwritten registration pursuant to
Section 2 or 3 hereof has become effective (or such shorter period as may be
required by the underwriter), except as part of such underwritten registration.
Notwithstanding the foregoing sentence, each Holder subject to the foregoing
sentence shall be entitled to sell during the foregoing period securities in a
private sale. Parent may legend and may impose stop transfer instructions on any
certificate evidencing Registrable Securities relating to the restrictions
provided for in this Section 9.
(b) Parent agrees, if so required by either co-lead underwriter, not to
sell, make any short sale of, loan, grant any option for the purchase of (other
than pursuant to employee benefit plans) effect any public sale or distribution
of or otherwise dispose of its equity securities or securities convertible into
or exchangeable or exercisable for any such securities during the 14 days prior
to and the 90 days after any underwritten registration pursuant to Section 2 or
3 hereof has become effective, except as part of such underwritten registration
and except pursuant to registrations on Form S-4, S-8 or any successor or
similar forms thereto.
10. No Transfer of Registration Rights.
(a) Holders may not transfer any portion of their rights under this
Agreement except as follows: (i) Lehman Holders may transfer such rights to
other Affiliates of Lehman Brothers Holdings Inc. or entities for which Lehman
Brothers Holdings Inc. provides investment advice; and (ii) Family Holders may
transfer such rights to transferees who agree to the terms and conditions of
this Agreement.
(b) No transfer of registration rights pursuant to this Section shall be
effective unless Parent has received written notice of an intention to transfer
of at least 10 days prior to Holder's successor entering into a binding
agreement to transfer Registrable Securities. Such notice need not contain
proposed terms or name a proposed transferee. On or before the time of the
transfer, Parent shall receive a written notice stating the name and address of
any transferee and identifying the amount of Registrable Securities with respect
to which the rights under this Agreement are being transferred and the nature of
the rights to transferred.
(c) After any such transfer, Holder shall retain its rights under this
Agreement with respect to all other Registrable Securities owned by Holder.
(d) Upon the request of Holder's successor, Parent shall execute a
Registration Rights Agreement with such transferee or a proposed transferee
substantially similar to this Agreement, and any demand registrations granted to
such transferee shall limit the demand registrations to which Holder is entitled
under Section 2(a) hereof.
11. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees that irreparable damage
would occur in the event that any of the provisions of this Agreement was not
performed in accordance with its specific terms or was otherwise breached.
Therefore, each party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court having jurisdiction, such remedy
being in addition to any other remedy to which such party may be entitled at law
or in equity. Each party hereby irrevocably waives trial by jury.
III-10
<PAGE>
(b) Severability. If any term or provision of this Agreement held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms and provisions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and each of the
parties shall use its reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term or provision.
(c) Further Assurances. Subject to the specific terms of this Agreement,
each of the parties hereto shall make, execute, acknowledge and deliver such
other instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby.
(d) Waivers, etc. No failure or delay on the part of either party (or the
intended third-party beneficiaries referred to herein) in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure therefrom shall in any event be effective unless the same shall be in
writing and signed by an authorized officer of each of the parties, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
(e) Entire Agreement. This Agreement contains the final and complete
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties, whether
written or oral, with respect to the subject matter hereof. The paragraph
headings contained in this Agreement are for reference purposes only, and shall
not affect in any manner the meaning or interpretation of this Agreement.
(f) Counterparts. For the convenience of the parties, this Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original but all of which together shall be one and the same instrument.
(g) Amendment. This Agreement may be amended only by a written instrument
duly executed by an authorized officer of each of the parties.
(h) Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed, registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent:
(i) if to Parent:
Proffitt's, Inc.
5810 Shelby Oaks Drive
Memphis, Tennessee 38134
Attn: Mr. R. Brad Martin
Facsimile Number: (901) 386-4594
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Attn: Brian J. Martin, Esquire
Facsimile Number: (601) 968-5216
III-11
<PAGE>
with copies to:
James A. Strain, Esquire
Sommer & Barnard
PROFESSIONAL CORPORATION
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236-9802
(ii) if to the Company:
Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn: Donald E. Hess
Facsimile Number: (205) 940-4984
with copies to:
Berkowitz, Lefkovits, Isom & Kushner,
A PROFESSIONAL CORPORATION
1600 SouthTrust Tower
Birmingham, Alabama 35203
Attn: Harold B. Kushner, Esquire
Facsimile Number: (205) 322-8007
and
Lehman Brothers Holdings Inc.
3 World Financial Center
200 Vesey Street
New York, New York 10285
Attn: Kenneth I. Tuchman
Facsimile Number: (212) 528-6503
and
(iii) if to a Holder of Registrable Securities, to the name and address as the
same appear in the security transfer books of Parent;
or to such other address as the party (or Holder of Registrable
Securities) to whom notice is to be given may have previously furnished to the
other party (or, in the case of a Holder of Registrable Securities, to Parent)
in writing in the manner set forth above.
(i) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
(j) Assignment; Beneficiaries. Except as provided herein, the parties may
not assign their rights under this Agreement. Parent may not delegate its
obligations under this Agreement. Notwithstanding the foregoing, it is expressly
understood, intended and agreed by the parties hereto that this Agreement is
intended to benefit the Holders and that each of the Holders, together with such
Holder's permitted successors, assigns and transferees, shall be a beneficiary
of the respective rights, obligations, duties, privileges and responsibilities
under this Agreement and shall be entitled to enforce the provisions hereof as
though such Holder were a party hereto.
[next page is signature page]
III-12
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
duly executed by their authorized representative as of the date first above
written.
PROFFITT'S, INC.
By:
----------------------------------
Name:
Title:
PARISIAN, INC.
By:
----------------------------------
Name:
Title:
III-13
<PAGE>
APPENDIX IV
July 8, 1996
Board of Directors
Parisian, Inc.
750 Lakeshore Parkway
Birmingham, AL 35211
Members of the Board:
We understand that Parisian, Inc. ("Parisian" or the "Company") has
entered into an Agreement and Plan of Merger dated July 8, 1996 (the
"Agreement") with Proffitt's, Inc. ("Proffitt's") and a wholly-owned subsidiary
of Proffitt's pursuant to which Parisian will merge with such subsidiary and
each outstanding share of Parisian common stock will be exchanged for $15.00 in
cash and 0.4006 shares of Proffitt's common stock (the "Proposed Transaction").
The terms and conditions of the Proposed Transaction are set forth in more
detail in the Agreement.
We have been requested by the Board of Directors of the Company to
render our opinion with respect to the fairness, from a financial point of view,
to the Company's stockholders of the consideration to be offered to such
stockholders in the Proposed Transaction. We have not been requested to opine as
to, and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement
and the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company and Proffitt's that we believe to be relevant
to our inquiry, (3) financial and operating information with respect to the
business, operations and prospects of the Company (including projections for the
years 1996 through 1998) furnished to us by the Company, (4) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies that we deemed relevant, (5) financial and operating
information with respect to the business, operations and prospects of Proffitt's
(including projections for the years 1996 through 2000) furnished to us by
Proffitt's, (6) a trading history of Proffitt's common stock from January 1,
1991 to the present and a comparison of Proffitt's common stock price and
valuation multiples with those of other companies that we deemed relevant, (7) a
comparison of the historical financial results and present financial condition
of Proffitt's with those of other companies that we deemed relevant, (8) the
results of our efforts to solicit indications of interest
IV-1
<PAGE>
and proposals from third parties with respect to a purchase of the Company, and
(9) a comparison of the financial terms of the Proposed Transaction with the
financial terms of certain other transactions that we deemed relevant. In
addition, we have had discussions with the management of the Company and
Proffitt's concerning their respective businesses, operations, assets, financial
conditions and prospects and the cost savings and operating synergies expected
to results from a combination of the businesses of the Company and Proffitt's,
and undertook such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company, upon
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company and that the Company will perform substantially in
accordance with such projections. With respect to the financial projections of
Proffitt's, upon advice of Proffitt's we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Proffitt's as to the future
financial performance of Proffitt's and that Proffitt's will perform
substantially in accordance with such projections. In arriving at our opinion,
we have conducted only a limited physical inspection of the properties and
facilities of the Company and Proffitt's and have not made or obtained any
evaluations or appraisals of the assets or liabilities of the Company or
Proffitt's. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In addition, affiliates of Lehman Brothers currently own 48.4% of the
common stock of Parisian and Mr. Kenneth Tuchman, a managing director of Lehman
Brothers, is a director of the Company. In the ordinary course of our business,
we actively trade in the debt securities of the Company and may actively trade
in the securities of Proffitt's for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is solely for the use and benefit of the Board of
Directors of the Company and shall not be disclosed publicly or made available
to, or relied upon by, any third party without our prior approval.
IV-2
<PAGE>
Very truly yours,
LEHMAN BROTHERS
By:__________________________________
Managing Director
IV-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The ByLaws of Proffitt's provide that Proffitt's shall indemnify to the full
extent authorized or permitted by the Tennessee Business Corporation Act any
person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person, or such person's testate
or intestate, is or was an officer or director of Proffitt's or serves or served
as an officer or director of any other enterprise at the request of Proffitt's.
Section 48-18-503 of the Tennessee Business Corporation Act provides for
"mandatory indemnification," unless limited by the charter, by a corporation
against reasonable expenses incurred by a director who is wholly successful, on
the merits or otherwise, in the defense of any proceeding to which the director
was a party by reason of the director being or having been a director of the
corporation. Section 48-18-504 of the Tennessee Business Corporation Act states
that a corporation may, in advance of the final disposition of a proceeding,
reimburse reasonable expenses incurred by a director who is a party to a
proceeding if the director furnishes the corporation with a written affirmation
of the director's good faith belief that the director has met the standard of
conduct required by Section 48-18-502 of the Tennessee Business Corporation Act,
that the director will repay the advance if it is ultimately determined that
such director did not meet the standard of conduct required by Section 48-18-502
of the Tennessee Business Corporation Act, and that those making the decision to
reimburse the director determine that the facts then known would not preclude
indemnification under the Tennessee Business Corporation Act. Section 48-18-507
of the Tennessee Business Corporation Act provides for mandatory
indemnification, unless limited by the charter, of officers pursuant to the
provisions of Section 48-18-503 of the Tennessee Business Corporation Act
applicable to mandatory indemnification of directors.
Proffitt's ByLaws further provide that Proffitt's may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of Proffitt's, or is or was serving at the request of
Proffitt's as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person or on such person's behalf in any such
capacity, or arising out of such person's status as such, whether or not
Proffitt's would have the power to indemnify such person against such liability
under the ByLaws, provided that such insurance is available on acceptable terms
as determined by a majority of Proffitt's Board of Directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement
or incorporated by reference herein:
<TABLE>
<C> <S> <C>
(2) Agreement and Plan of Merger, dated as of July 8, 1996, among Proffitt's,
Inc., Casablanca Merger Corp. and Parisian, Inc. (Appendix I to Prospectus)
(3) (a) Charter, as amended, of Proffitt's, Inc. (Incorporated by reference from
Exhibits to the Form S-1 Registration Statement No. 33-13548 dated June 3,
1987)
(3) (b) Articles of Amendment to the Charter of Proffitt's, Inc. designating the
rights, preferences and limitations of its Series A Cumulative Convertible
Exchangeable Preferred Stock (Incorporated by reference from Exhibits to the
Form 8-K dated April 14, 1994)
(3) (c) Articles of Amendment to the Charter of Proffitt's, Inc. designating the
rights, preferences and limitations of its Series B Cumulative Junior
Perpetual Preferred Stock (Incorporated by reference from Exhibits to the
Form 8-K dated April 14, 1994)
(3) (d) Articles of Amendment to the Charter of Proffitt's Inc. designating the
rights, preferences and limitations of its Series C Junior Preferred Stock
(Incorporated by reference from Exhibits to the Form 8-K dated April 3, 1995)
</TABLE>
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.--(CONTINUED)
<TABLE>
<C> <S> <C>
(3) (e) Articles of Amendment to the Charter of Proffitt's Inc. designating the
maximum number of shares of all stock which the corporation shall have the
authority to issue (Incorporated by reference from Exhibits to the Quarterly
Report on Form 10-Q for the quarterly period ended July 29, 1995)
(3) (f) Articles of Amendment to the Charter of Proffitt's Inc. designating special
meeting of shareholders (Incorporated by reference from Exhibits to the
Quarterly Report on Form 10-Q for the quarterly period ended July 29, 1995)
(3) (g) Articles of Amendment to the Charter of Proffitt's, Inc. increasing the
number of authorized shares of Series C Junior Preferred stock (Incorporated
by reference from Exhibits to Form 10-K dated May 1, 1996)
(3) (h) Amended and Restated Bylaws of Proffitt's, Inc. (Incorporated by reference
from Exhibits to the Quarterly Report on Form 10-Q for the quarterly period
ended July 29, 1995)
(4) (a) Form of 7.5% Junior Subordinated Debentures due 2004 (Incorporated by
reference from Exhibits to the Form 8-K dated April 14, 1994)
(4) (b) Form of 4.75% Convertible Subordinated Debentures due 2003 (Incorporated by
reference from Exhibits to the Form S-3 Registration Statement No. 33-70000
dated October 19, 1993)
(4) (c) Form of Rights Certificate (Incorporated by reference from Exhibits to the
Form 8-K dated April 3, 1995)
(4) (d) Registration Rights Agreement (Appendix III to Prospectus)
(5) Opinion of Sommer & Barnard, Attorneys at Law, PC regarding legality
(23) (a) Consent of Coopers & Lybrand L.L.P. (re: Proffitt's)
(23) (b) Consent of Deloitte & Touche LLP
(23) (c) Consent of Ernst & Young LLP
(23) (d) Consent of Coopers & Lybrand L.L.P. (re: Parisian)
(23) (e) Consent of Sommer & Barnard (in opinion regarding legality)
(99) Consent of Lehman Brothers
</TABLE>
<TABLE>
<S> <C>
(b) No financial statement schedules are required to be filed herewith pursuant to Item
21(b) or (c) of this Form.
</TABLE>
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes as follows: That prior to
any public reoffering of the securities registered hereunder through the use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The undersigned Registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated document by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.--(CONTINUED)
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(6) The undersigned Registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to rule 424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; that, for
the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof; and to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(8) The undersigned Registrant hereby undertakes that: (i) for the purposes
of determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statment as of the time it was
declared effective; and (ii) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on July 26, 1996.
PROFFITT'S, INC.
By: /s/ BRIAN W. BENDER
..................................
Brian W. Bender
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 26, 1996 by the following persons
in the capacities indicated.
<TABLE>
<C> <S>
/s/ R. BRAD MARTIN Chairman of the Board and Chief Executive
............................................. Officer
R. Brad Martin
/s/ W. THOMAS GOULD Vice Chairman of the Board
.............................................
W. Thomas Gould
/s/ JAMES A. COGGIN President
.............................................
James A. Coggin
/s/ BERNARD E. BERNSTEIN Director
.............................................
Bernard E. Bernstein
/s/ EDMOND D. CICALA Director
.............................................
Edmond D. Cicala
/s/ RONALD DE WAAL Director
.............................................
Ronald de Waal
/s/ GERARD K. DONNELLY Director
.............................................
Gerard K. Donnelly
/s/ DONALD F. DUNN Director
.............................................
Donald F. Dunn
/s/ G. DAVID HURD Director
.............................................
G. David Hurd
/s/ MICHAEL A. GROSS Director
.............................................
Michael A. Gross
/s/ RICHARD D. MCRAE Director
.............................................
Richard D. McRae
/s/ C. WARREN NEEL Director
.............................................
C. Warren Neel
/s/ HARWELL W. PROFFITT Director
.............................................
Harwell W. Proffitt
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
/s/ GERALD TSAI, JR. Director
.............................................
Gerald Tsai, Jr.
/s/ MARGUERITE W. SALLEE Director
.............................................
Marguerite W. Sallee
/s/ JULIA A. BENTLEY Senior Vice President and Secretary
.............................................
Julia A. Bentley
/s/ BRIAN W. BENDER Executive Vice President, Chief Financial
............................................. Officer and Treasurer
Brian W. Bender
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
(2) Agreement and Plan of Merger, dated as of July 8, 1996, among Proffitt's,
Inc., Casablanca Merger Corp. and Parisian, Inc. (Appendix I to Prospectus)
(3) (a) Charter, as amended, of Proffitt's, Inc. (Incorporated by reference from
Exhibits to the Form S-1 Registration Statement No. 33-13548 dated June 3,
1987)
(3) (b) Articles of Amendment to the Charter of Proffitt's, Inc. designating the
rights, preferences and limitations of its Series A Cumulative Convertible
Exchangeable Preferred Stock (Incorporated by reference from Exhibits to the
Form 8-K dated April 14, 1994)
(3) (c) Articles of Amendment to the Charter of Proffitt's, Inc. designating the
rights, preferences and limitations of its Series B Cumulative Junior
Perpetual Preferred Stock (Incorporated by reference from Exhibits to the
Form 8-K dated April 14, 1994)
(3) (d) Articles of Amendment to the Charter of Proffitt's Inc. designating the
rights, preferences and limitations of its Series C Junior Preferred Stock
(Incorporated by reference from Exhibits to the Form 8-K dated April 3, 1995)
(3) (e) Articles of Amendment to the Charter of Proffitt's Inc. designating the
maximum number of shares of all stock which the corporation shall have the
authority to issue (Incorporated by reference from Exhibits to the Quarterly
Report on Form 10-Q for the quarterly period ended July 29, 1995)
(3) (f) Articles of Amendment to the Charter of Proffitt's Inc. designating special
meeting of shareholders (Incorporated by reference from Exhibits to the
Quarterly Report on Form 10-Q for the quarterly period ended July 29, 1995)
(3) (g) Articles of Amendment to the Charter of Proffitt's, Inc. increasing the
number of authorized shares of Series C Junior Preferred stock (Incorporated
by reference from Exhibits to Form 10-K dated May 1, 1996)
(3) (h) Amended and Restated Bylaws of Proffitt's, Inc. (Incorporated by reference
from Exhibits to the Quarterly Report on Form 10-Q for the quarterly period
ended July 29, 1995)
(4) (a) Form of 7.5% Junior Subordinated Debentures due 2004 (Incorporated by
reference from Exhibits to the Form 8-K dated April 14, 1994)
(4) (b) Form of 4.75% Convertible Subordinated Debentures due 2003 (Incorporated by
reference from Exhibits to the Form S-3 Registration Statement No. 33-70000
dated October 19, 1993)
(4) (c) Form of Rights Certificate (Incorporated by reference from Exhibits to the
Form 8-K dated April 3, 1995)
(4) (d) Registration Rights Agreement (Appendix III to Prospectus)
(5) Opinion of Sommer & Barnard, Attorneys at Law, PC regarding legality
(23) (a) Consent of Coopers & Lybrand L.L.P. (re: Proffitt's)
(23) (b) Consent of Deloitte & Touche LLP
(23) (c) Consent of Ernst & Young LLP
(23) (d) Consent of Coopers & Lybrand L.L.P. (re: Parisian)
(23) (e) Consent of Sommer & Barnard (in opinion regarding legality)
(99) Consent of Lehman Brothers
</TABLE>
Exhibit 5
[SOMMER & BARNARD LETTERHEAD]
July 26, 1996
Proffitt's, Inc.
115 North Calderwood
Alcoa, Tennessee 37701-9388
Ladies and Gentlemen:
You have requested our opinion in connection with the Form S-4 Registration
Statement which is being filed with the Securities and Exchange Commission by
Proffitt's, Inc. ("Proffitt's"), with respect to the shares of the Common Stock,
$0.10 par value, of Proffitt's (the "Shares") to be issued to stockholders of
Parisian, Inc., an Alabama corporation ("Parisian"), in the event the Agreement
and Plan of Merger among Parisian, Casablanca Merger Corp. and Proffitt's is
approved and the transactions contemplated therein are consummated, all as
further described in the Registration Statement.
We have examined such records and documents, and have made such
investigations of law and fact as we have deemed necessary in the circumstances.
Based on that examination and investigation, it is our opinion that, when
exchanged in the manner described in the Registration Statement (including all
exhibits thereto) and in compliance with the Securities Act of 1933, as amended,
and applicable state Blue Sky laws, the Shares will have been duly authorized,
validly issued, fully paid and not subject to further assessment.
We consent to the use of our name under the caption "LEGAL MATTERS" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as Exhibit 5 to the Registration Statement.
---------
Sincerely,
SOMMER & BARNARD, PC
By:
-----------------------------
James K. Sommer
Exhibit 23(a)
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Proffitt's, Inc. on Form S-4 of our report dated March 15, 1996, on our audits
of the consolidated financial statements and financial statement schedules of
Proffitt's, Inc. as of February 3, 1996 and January 28, 1995, and for each of
three years in the period ended February 3, 1996 which report is incorporated by
reference herein. We also consent to the reference to our firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
July 25, 1996
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Proffitt's, Inc. on Form S-4 of our report dated March 3, 1995 of Younkers,
Inc., appearing in and incorporated by reference in the Annual Report on Form
10-K of Proffitt's Inc. for the year ended February 3, 1996 and to the reference
to us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
July 25, 1996
Exhibit 23(c)
[ERNST & YOUNG LETTERHEAD]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement of Proffitt's, Inc. (Form S-4) pertaining to the proposed
merger with Parisian, Inc. and to the incorporation by reference therein of our
report dated March 3, 1994 (with respect to the consolidated statements of
earnings, shareholders' equity, and cash flows of Younkers, Inc. for the year
ended January 29, 1994, not separately presented), appearing in the Annual
Report (Form 10-K) of Proffitt's, Inc. for the year ended February 3, 1996,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
Des Moines, Iowa
July 24, 1996
Exhibit 23(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 22, 1996, on our audits of the consolidated financial
statements of Parisian, Inc. as of January 28, 1995 and February 3, 1996, and
for the years ended January 29, 1994, January 28, 1995, and February 3, 1996. We
also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
July 25, 1996
EXHIBIT 99
CONSENT OF LEHMAN BROTHERS
We hereby consent to the inclusion in the Prospectus forming part of this
Registration Statement of our opinion dated on July 8, 1996 to the Board of
Directors of Parisian, attached as an Appendix to such Prospectus, and the
references to such opinion contained therein. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and we do not hereby
admit that we are experts with respect to any part of this Registration
Statement within the meaning of the term "expert" as used in the Securities
Act.
LEHMAN BROTHERS
By: /s/ James H. Sabatier
----------------------
