_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 4, 1998
PROFFITT'S, INC.
(Exact name of registrant as specified in its charter)
Tennessee 1-13113 62-0331040
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
750 Lakeshore Parkway
Birmingham, Alabama 35211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 983-7000
_________________________________________________________________
_________________________________________________________________
Item 5. Other Events.
On July 5, 1998, Proffitt's, Inc. and Saks Holdings, Inc.
jointly announced the signing of an Agreement and Plan of Merger.
Pursuant to General Instruction F to Form 8-K, the following
information is incorporated herein by reference and is attached
hereto: (i) Agreement and Plan of Merger among Proffitt's, Inc.,
Fifth Merger Corporation and Saks Holdings, Inc. dated July 4, 1998
(Exhibit 2); (ii) Registration Rights Agreement dated July 4, 1998
(Exhibit 4.1); (iii) Stockholders' Agreement dated July 4, 1998
(Exhibit 4.2); (iv) press release dated July 5, 1998 (Exhibit
99.1); and (iii) Analysts' Conference Call Script (Exhibit 99.2).
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are filed as a part of this
report:
Exhibit
Number Description
2 Agreement and Plan of Merger dated July 4,
1998, among Proffitt's, Inc., Fifth Merger
Corporation and Saks Holdings, Inc.
4.1 Registration Rights Agreement dated July 4,
1998, among Proffitt's, Inc. and certain
specified stockholders of Saks Holdings,
Inc.
4.2 Stockholders' Agreement dated July 4, 1998,
among Proffitt's, Inc., Saks Fifth Avenue
Holdings II Ltd, Saks Fifth Avenue
Investments II Ltd., SFA Folio Limited, SFA
Label Limited, SFA Collection Limited, SFA
Designer Limited, Flair Limited, Chase
Nominees (Guernsey) Ltd., Saks Investments
Limited, Saks Equity Limited, SFA Capital
Limited, Ballet Limited, Denary Limited,
Gleam Limited, Highlands Limited, Noble
Limited, Outrigger Limited, Quill Limited,
Radial Limited, Shoreline Limited, and
Zinnia Limited.
99.1 Press release dated July 5, 1998 announcing
Merger Agreement among Proffitt's, Inc.,
Fifth Merger Corporation and Saks Holdings,
Inc.
99.2 Analysts' Conference Call Script
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PROFFITT'S, INC.
Date: July 8, 1998
By: /s/ Brian J. Martin
_______________________________
Brian J. Martin, Executive Vice
President of Law
EXECUTION COPY
Exhibit 2
AGREEMENT AND PLAN OF MERGER
among
PROFFITT'S, INC.,
FIFTH MERGER CORPORATION
and
SAKS HOLDINGS, INC.
__________________
Dated as of July 4, 1998
__________________
TABLE OF CONTENTS
Page
ARTICLE ITHE MERGER
Section 1.1 The Merger. . . . . . . . . . . . . . .2
Section 1.2 Effective Time. . . . . . . . . . . . .2
Section 1.3 Effects of the Merger . . . . . . . . .2
Section 1.4 Directors of the Surviving Corporation.2
Section 1.5 Officers of the Surviving Corporation .3
Section 1.6 Charter and By Laws . . . . . . . . . .3
Section 1.7 Conversion of Securities. . . . . . . .3
Section 1.8 Parent to Make Certificates Available .4
Section 1.9 Dividends; Transfer Taxes; Withholding.5
Section 1.10 No Fractional Securities. . . . . . . .6
Section 1.11 Return of Exchange Fund . . . . . . . .6
Section 1.12 Adjustment of Conversion Number . . . .6
Section 1.13 No Further Ownership Rights in
Company Common Stock. . . . . . . . . .7
Section 1.14 Closing of Company Transfer Books . . .7
Section 1.15 Lost Certificates . . . . . . . . . . .7
Section 1.16 Affiliates. . . . . . . . . . . . . . .7
Section 1.17 Further Assurances. . . . . . . . . . .7
Section 1.18 Closing . . . . . . . . . . . . . . . .8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power. . . .8
Section 2.2 Capital Structure . . . . . . . . . . .9
Section 2.3 Authority . . . . . . . . . . . . . . 10
Section 2.4 Consents and Approvals; No Violation. 11
Section 2.5 SEC Documents and Other Reports . . . 12
Section 2.6 Registration Statement and Joint Proxy
Statement. . . . . . . . . . . . . . . . . . . . . . 13
Section 2.7 Absence of Certain Changes or Events. 14
Section 2.8 Permits and Compliance. . . . . . . . 14
Section 2.9 Tax Matters . . . . . . . . . . . . . 15
Section 2.10 Actions and Proceedings . . . . . . . 16
Section 2.11 Certain Agreements. . . . . . . . . . 16
Section 2.12 ERISA . . . . . . . . . . . . . . . . 17
Section 2.13 Compliance with Certain Laws. . . . . 19
Section 2.14 Liabilities . . . . . . . . . . . . . 19
Section 2.15 Labor Matters . . . . . . . . . . . . 19
Section 2.16 Intellectual Property . . . . . . . . 20
Section 2.17 Opinion of Financial Advisor. . . . . 20
Section 2.18 Pooling of Interests/Tax Free Treatment.
. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.19 Required Vote of Parent Shareholders. 20
Section 2.20 Ownership of Shares . . . . . . . . . 21
Section 2.21 Operations of Sub . . . . . . . . . . 21
Section 2.22 Brokers . . . . . . . . . . . . . . . 21
Section 2.23 State Takeover Statutes and Shareholder
Rights Plan . . . . . . . . . . . . . 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power. . . 22
Section 3.2 Capital Structure . . . . . . . . . . 22
Section 3.3 Authority . . . . . . . . . . . . . . 23
Section 3.4 Consents and Approvals; No Violation. 24
Section 3.5 SEC Documents and Other Reports . . . 25
Section 3.6 Registration Statement and Joint Proxy
Statement. . . . . . . . . . . . . . . . . . . . . . 26
Section 3.7 Absence of Certain Changes or Events. 26
Section 3.8 Permits and Compliance. . . . . . . . 27
Section 3.9 Tax Matters . . . . . . . . . . . . . 28
Section 3.10 Actions and Proceedings . . . . . . . 28
Section 3.11 Certain Agreements. . . . . . . . . . 29
Section 3.12 ERISA.. . . . . . . . . . . . . . . . 29
Section 3.13 Compliance with Certain Laws. . . . . 31
Section 3.14 Liabilities . . . . . . . . . . . . . 32
Section 3.15 Labor Matters . . . . . . . . . . . . 32
Section 3.16 Intellectual Property . . . . . . . . 32
Section 3.17 Opinion of Financial Advisor. . . . . 33
Section 3.18 Pooling of Interests/Tax Free Treatment33
Section 3.19 Required Vote of Company Stockholders 33
Section 3.20 Ownership of Shares . . . . . . . . . 33
Section 3.21 Brokers . . . . . . . . . . . . . . . 33
Section 3.22 State Takeover Statutes . . . . . . . 33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger34
Section 4.2 No Solicitation . . . . . . . . . . . 39
Section 4.3 Third Party Standstill Agreements . . 41
Section 4.4 Pooling of Interests; Reorganization. 41
Section 4.5 Tax Representation Letters. . . . . . 42
Section 4.6 Transfer Taxes. . . . . . . . . . . . 42
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings. . . . . . . . . 42
Section 5.2 Preparation of the Registration
Statement
and the Joint Proxy Statement . . . . 43
Section 5.3 Access to Information . . . . . . . . 44
Section 5.4 Compliance with the Securities Act;
Pooling Period. . . . . . . . . . . . 44
Section 5.5 Designation of Directors . . . . . . 45
Section 5.6 NYSE Listing. . . . . . . . . . . . . 45
Section 5.7 Fees and Expenses . . . . . . . . . . 45
Section 5.8 Company Stock Options . . . . . . . . 46
Section 5.9 Convertible Subordinated Notes. . . . 47
Section 5.10 Reasonable Efforts. . . . . . . . . . 48
Section 5.11 Public Announcements. . . . . . . . . 49
Section 5.12 State Takeover Laws . . . . . . . . . 49
Section 5.13 Indemnification; Directors and Officers
Insurance. . . . . . . . . . . . . . . . . . . . . . 49
Section 5.14 Notification of Certain Matters . . . 50
Section 5.15 Employee Matters. . . . . . . . . . . 50
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . 52
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger. . . . . . . . . 53
Section 6.3 Conditions to Obligations of Parent and
Sub to
Effect the Merger . . . . . . . . . . 55
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination . . . . . . . . . . . . . 56
Section 7.2 Effect of Termination . . . . . . . . 58
Section 7.3 Amendment . . . . . . . . . . . . . . 58
Section 7.4 Waiver. . . . . . . . . . . . . . . . 58
Section 7.5 Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . 59
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . 59
Section 8.2 Notices . . . . . . . . . . . . . . . 59
Section 8.3 Interpretation. . . . . . . . . . . . 60
Section 8.4 Counterparts. . . . . . . . . . . . . 60
Section 8.5 Entire Agreement; No Third-Party
Beneficiaries. . . . . . . . . . . . . . . . . . . . 61
Section 8.6 Governing Law . . . . . . . . . . . . 61
Section 8.7 Assignment. . . . . . . . . . . . . . 61
Section 8.8 Severability. . . . . . . . . . . . . 61
Section 8.9 Enforcement of this Agreement . . . . 61
List of Exhibits
Exhibit A1 Form of Affiliate Letter (Proffitt's Inc.)
Exhibit A2 Form of Affiliate Letter (Saks Holdings, Inc.)
Exhibit B Executive Severance Policy Term Sheet
Exhibit C Employment Agreement Term Sheet (PBM)
Exhibit D Employment Agreement Term Sheet (BEK)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 4, 1998 (this
"Agreement"), among PROFFITT'S, INC., a Tennessee corporation
("Parent"), FIFTH MERGER CORPORATION, a Delaware corporation and
a wholly-owned subsidiary of Parent ("Sub"), and SAKS HOLDINGS,
INC., a Delaware corporation (the "Company") (Sub and the Company
being hereinafter collectively referred to as the "Constituent
Corporations").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub
and the Company have approved and declared advisable the merger
of Sub with and into 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 $.01 per
share, of the Company ("Company Common Stock") not owned directly
or indirectly by Parent or directly by the Company will be
converted into shares of Common Stock, par value $.10 per share,
of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and
the Company have determined that the Merger is in the best
interest of their respective shareholders and is in furtherance
of and consistent with their respective long-term business
strategies and Parent has approved this Agreement and the Merger
as the sole shareholder of Sub;
WHEREAS, simultaneously with the execution and delivery of
this Agreement, (i) Parent has entered into an agreement (the
"Company Stockholders Agreement") with certain stockholders of
the Company pursuant to which such stockholders agreed to vote
the shares of Company Common Stock owned by them in favor of the
Merger and (ii) Parent has entered into an agreement (the
"Registration Rights Agreement") with certain stockholders of the
Company pursuant to which Parent grants certain rights to such
stockholders regarding the registration of Parent Common Stock to
be received by them in the Merger (the Company Stockholders
Agreement, the Registration Rights Agreement and this Agreement
are collectively referred to herein as the "Transaction
Agreements");
WHEREAS, for U.S. Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be treated for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to
the conditions hereof, and in accordance with the Delaware
General Corporation Law (the "Del.C."), Sub shall be merged with
and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence
of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in
accordance with the Del.C.
Section 1.2 Effective Time. The Merger shall become
effective when a Certificate of Merger (the "Certificate of
Merger"), duly executed in accordance with the relevant
provisions of the Del.C., is filed with the Secretary of State of
the State of Delaware; provided, however, that, upon mutual
consent of the Constituent Corporations, the Certificate of
Merger may provide for a later date or time of effectiveness of
the Merger. When used in this Agreement, the term "Effective
Time" shall mean the later of the date and time at which the
Certificate of Merger is filed or such later date and time
established by the Certificate of Merger. The filing of the
Certificate of Merger in accordance with the Del.C. shall be made
on the date of the Closing (as hereinafter defined), or as
promptly thereafter as practicable.
Section 1.3 Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the Del.C.
Section 1.4 Directors of the Surviving Corporation. The
directors of Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation as of the Effective
Time and shall hold office until their successors are duly
appointed or elected in accordance with applicable law and the
Certificate of Incorporation and By-laws of the Surviving
Corporation.
Section 1.5 Officers of the Surviving Corporation. The
officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation as of the
Effective Time and shall hold office until their successors are
duly appointed or elected in accordance with applicable law and
the Certificate of Incorporation and By-laws of the Surviving
Corporation.
Section 1.6 Charter and By Laws. At the Effective Time,
the Certificate of Incorporation of the Company shall be amended
so that Article Fourth thereof reads in its entirety as follows:
"The total number of shares of stock which the Corporation shall
have the authority to issue shall be 1,000 shares of common
stock, par value $.01 per share ("Common Stock"), as so amended,
it shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the By-Laws
of Sub, as in effect immediately prior to the Effective Time,
shall be amended to provide that the name of the corporation is
"SAKS Holdings, Inc." and, as so amended, shall be the By-Laws of
the Surviving Corporation, until thereafter changed or amended as
provided therein or by the Certificate of Incorporation of the
Surviving Corporation or by applicable law.
Section 1.7 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 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 and any shares of Company Common Stock
owned by Parent or Sub shall be canceled and no capital stock of
Parent or other consideration shall be delivered in respect
thereof.
(c) Subject to the provisions of Sections 1.10 and 1.12
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 1.7(b)) shall be converted
into 0.82 (the "Conversion Number") of a validly issued, fully
paid and nonassessable share of Parent Common Stock. 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 1.9, certificates
representing the shares of Parent Common Stock into which such
shares are converted and any cash, without interest, in lieu of
fractional shares to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section
1.8. Each certificate shall, from and after the Effective Time
until surrendered in exchange for Parent Common Stock, for all
purposes be deemed to represent the shares of Parent Common Stock
into which such Company Common Stock was converted in the Merger.
Section 1.8 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 reasonably acceptable to
Parent and the Company) to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective
Time, Parent shall deposit with the Exchange Agent, in trust for
the holders of shares of Company Common Stock converted in the
Merger, certificates representing the shares of Parent Common
Stock issuable pursuant to Section 1.7(c) in exchange for
outstanding certificates representing shares of Company Common
Stock and cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.10 (such cash and shares
of Parent Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund"). Except as contemplated by this Section
1.8, and Sections 1.10 and 1.11, the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to
each record holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall be in
customary form, shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent,
and shall contain instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing
shares of Parent Common Stock and cash in lieu of fractional
shares. Upon surrender for cancellation to the Exchange Agent of
a Certificate, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock into which the
shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash
in lieu of any fractional share in accordance with Section 1.10
and any dividends and other distributions payable in accordance
with Section 1.9, and any Certificate so surrendered shall
forthwith be canceled.
Section 1.9 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after
the Effective Time on Parent Common Stock, or are payable to the
holders of record thereof on or after the Effective Time, will be
paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock and no cash payment
in lieu of fractional shares will be paid to any such person
pursuant to Section 1.10 until such person surrenders the related
Certificate or Certificates, as provided in Section 1.8. 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 1.10. 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.
Except as otherwise provided in Section 4.6 of this Agreement,
Parent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock
such amounts as Parent or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment
under the Code or under any provision of state, local or foreign
Tax law. To the extent that amounts are so withheld by Parent or
the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder
of the Company Common Stock in respect of which such deduction
and withholding was made by Parent or the Exchange Agent.
Section 1.10 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 1, 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 otherwise would have been entitled to a fraction of a share
of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined
by multiplying (i) the average per share Closing Price on The New
York Stock Exchange ("NYSE") of Parent Common Stock for the ten
most recent Trading Days ending on the Trading Day immediately
preceding the Closing Date by (ii) the fractional interest to
which such holder would otherwise be entitled. For purposes of
this Agreement, "Closing Price" means the last reported selling
price as reported on the NYSE Transaction Tape for a given date
and "Trading Day" means a day on which securities are traded on
the NYSE. 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 1.9 and this Section 1.10.
Section 1.11 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former
stockholders of the Company for one year after the Effective Time
shall be delivered to Parent, upon demand of Parent, and any such
former stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock. Neither
Parent nor either Constituent Corporation shall be liable to any
former holder of Company Common Stock for any such shares of
Parent Common Stock, cash and dividends and distributions held in
the Exchange Fund which is delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
Section 1.12 Adjustment of Conversion Number. In the
event of any reclassification, recapitalization, stock split,
reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock)
or subdivision 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 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), prior to the Effective Time,
appropriate and proportionate adjustments, shall be made to the
Conversion Number, and all references to the Conversion Number in
this Agreement shall be deemed to be to the Conversion Number as
so adjusted.
Section 1.13 No Further Ownership Rights in Company Common
Stock. All shares of Parent Common Stock issued pursuant to the
terms hereof (including any cash paid pursuant to Section 1.10)
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 1.14 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
outstanding prior to the Effective Time 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 1.
Section 1.15 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 reasonably 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 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 destroyed
Certificate the shares of Parent Common Stock, any cash in lieu
of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 1.10 and any dividends
or other distributions to which the holders thereof are entitled
pursuant to Section 1.9.
Section 1.16 Affiliates. Certificates surrendered for
exchange by any Affiliate (as determined pursuant to Section 5.4)
of the Company for purposes of Rule 145(c) under the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder and for purposes of applicable
interpretations regarding pooling of interests accounting, shall
not be exchanged until Parent has received a written agreement
from such Person as provided in Section 5.4 hereof.
Section 1.17 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
(i) 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 (ii) 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 1.18 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") and all actions
specified in this Agreement to occur at the Closing shall take
place immediately following the time the last of the conditions
set forth in Article VI shall have been fulfilled or, where
appropriate, waived or at such other time as Parent and the
Company shall agree. The date on which the Closing occurs is
referred to herein as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant
to the Company as follows:
Section 2.1 Organization, Standing and Power. Parent is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee, and has the
requisite corporate power and authority to carry on its business
as now being conducted. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power and authority
to carry on its business as now being conducted. Each Subsidiary
(as hereinafter defined) 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 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
(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) each of "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 generally are 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. Parent has heretofore delivered to the Company complete
and correct copies of Parent's certificate of incorporation
("Parent Charter") and by-laws ("Parent By-Laws"), as in effect
on the date hereof.
Section 2.2 Capital Structure. The authorized capital
stock of Parent consists of 300,000,000 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 June 30, 1998, (i) 90,751,553 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) 37,721,369 shares of Parent Common Stock were held
in the treasury of Parent or by the Subsidiaries of Parent, (iii)
7,682,674 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's 1994 Long-Term Incentive Plan, the
1987 Stock Option Plan, the 1997 Stock-Based Incentive Plan, the
Parisian Stock Option Plans and the Carson Pirie Scott & Co.
Stock Options Plan (the "Parent Stock Plans"); (iii) 582,339
shares of Parent Common Stock were reserved for future issuance
pursuant to Parent's 1994 Employee Stock Purchase Plan; and (iv)
no shares of Parent Preferred Stock were issued or outstanding.
All of the shares of Parent Common Stock issuable in exchange for
Company Common Stock at the Effective Time in accordance with
this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and nonassessable, free of preemptive rights
and be entitled to the benefits of the Parent Rights Plan (as
hereinafter defined) under the terms thereof. As of the date of
this Agreement, except for (a) this Agreement, (b) stock options
covering not in excess of 6,999,674 shares of Parent Common Stock
(collectively, the "Parent Stock Options"), (c) the 1994 Employee
Stock Purchase Plan, (d) contingent stock grants of 683,000
shares of Parent Common Stock to key executives, and (e)
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 (as amended, the "Parent
Rights Agreement", and together with the Parent Rights, 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 securities convertible into
or exchangeable for such capital stock, or obligating Parent or
any of its Subsidiaries to grant, extend or enter into any such
option, warrant call, right or agreement. Except as disclosed in
Parent SEC Documents (as hereinafter defined) filed prior to the
date hereof, since June 30, 1998, Parent has not issued any
shares of its capital stock, or securities convertible into or
exchangeable for such capital stock, other than shares issued in
the ordinary course pursuant to the Parent Stock Plans and the
Parent Rights. Except as disclosed in Parent SEC Documents filed
prior to the date hereof, there are no outstanding contractual
obligations of Parent or any of Parent's Subsidiaries (i)
restricting the transfer of, (ii) affecting the voting rights of,
(iii) requiring the repurchase, redemption or disposition of,
(iv) requiring the registration for sale of, or (v) granting any
preemptive or antidilutive right with respect to, any shares of
Parent Common Stock or any capital stock of any Subsidiary of
Parent. Each outstanding share of capital stock of each
Subsidiary of Parent that is a corporation is duly authorized,
validly issued, fully paid, nonassessable and free of preemptive
rights and, except as disclosed in Parent SEC Documents filed
prior to the date hereof, 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. On or prior to the date of this
Agreement, the respective Boards of Directors of Parent and Sub
have declared the Merger advisable and in the best interest of
the shareholders of Parent and Sub, respectively, and approved
this Agreement in accordance with applicable law, and the Board
of Directors of Parent has (a) resolved to recommend the approval
by Parent's shareholders of the matters covered by the Parent
Shareholders' Approvals (as hereinafter defined) and (b) directed
that this Agreement and the other matters subject to Parent
Shareholders' Approvals be submitted to Parent's shareholders for
approval. Each of Parent and Sub has all requisite corporate
power and authority to enter into the Transaction Agreements to
which it is a party and, subject to approval by the shareholders
of Parent of (i) this Agreement (the "Merger Agreement
Approval"), (ii) and the issuance of Parent Common Stock in
connection with the Merger (the "Share Issuance") and (iii)
amendments to the Charter of Parent to (x) increase the
authorized shares of Parent Common Stock (the "Share Increase
Amendment"), (y) change the name of Parent to Saks Incorporated
(the "Name Change Amendment"), and (z) increase the number of
members of Parent's Board of Directors (the "Board Amendment"
and, collectively with the Share Increase Amendment and the Name
Change Amendment, the "Charter Amendments" and, collectively with
the Share Increase Amendment, Name Change Amendment, Merger
Agreement Approval and the Share Issuance, the "Parent
Shareholders' Approvals"), to consummate the transactions
contemplated hereby and thereby. The execution and delivery by
each of Parent and Sub of the Transaction Agreements to which it
is a party and the consummation by Parent and Sub of the
transactions contemplated hereby and thereby, including the Share
Issuance, have been duly authorized by all necessary corporate
action on the part of Parent and Sub, subject to (y) the Parent
Shareholders' Approvals and (z) the filing of the Certificate of
Merger pursuant to the Del.C. Each of Parent and Sub have duly
executed and delivered the Transaction Agreements to which it is
a party and (assuming the valid authorization, execution and
delivery thereof by the other parties thereto) each such
Transaction Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in
accordance with their terms. The Share Issuance and the filing
of a registration statement on Form S-4 with the Securities and
Exchange Commission ("SEC") by Parent under the Securities Act
for the purpose of registering the shares of Parent Common Stock
to be issued in the Merger (together with any amendments or
supplements thereto, whether prior to or after the effective date
thereof, the "Registration Statement") and the taking of all
actions in connection therewith 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, the execution and delivery of the Transaction Agreements do
not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof
will not conflict with, result in any violation of, or breach 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
Parent Charter or Parent By-Laws, (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, lease, indenture, or other contract, agreement,
instrument, permit, concession, franchise or license applicable
to Parent or any of its Subsidiaries or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
Parent or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii),
(iii) or (iv), any such conflicts, violations, breaches,
defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent, or prevent or
materially delay the consummation of any of the transactions
contemplated hereby or thereby. No filing, notification or
registration with, or authorization, consent or approval of, any
domestic (federal and state), or foreign court, commission,
governmental body, regulatory or administrative 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 the Transaction Agreements by
Parent or Sub or is necessary for the consummation of the Merger
and the other transactions contemplated by the Transaction
Agreements, except for (i) in connection, or in compliance, with
the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and
the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the filing of the
appropriate documents with the relevant authorities of other
states in which Parent 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
the Transaction Agreements, (iv) such filings, authorizations,
orders and approvals as may be required by state takeover laws
(the "State Takeover Approvals"), (v) such consents, approvals,
orders, authorizations, registrations, declarations and filings
as may be required under the laws of any foreign country in which
the Company or any of its Subsidiaries conducts any business or
owns any property or assets, (vi) such filings as may be required
under the laws of the State of Tennessee and other states to
effectuate the Charter Amendments and filings with other
Governmental Entities in connection with the Name Change
Amendment, (vii) such filings and consents as may be required
under federal and state securities laws in connection with the
Registration Rights Agreement, (viii) applicable requirements, if
any, of Blue Sky Laws and the NYSE, and (ix) such other consents,
orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent, or prevent or materially delay the consummation of any
of the transactions contemplated hereby or by any other
Transaction Agreement.
Section 2.5 SEC Documents and Other Reports. Parent has
filed all required documents with the SEC since January 1, 1995
(the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and, at the respective times they were filed, none
of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The consolidated financial statements (including, in
each case, any notes thereto) of Parent included in the Parent
SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP")
(except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the
notes thereto) and fairly present in accordance with GAAP 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 and to any other
adjustments described therein). Except as disclosed in Parent
SEC Documents filed prior to the date hereof or as required by
GAAP, Parent has not, since January 31, 1998, made any change in
the accounting practices or policies applied in the preparation
of financial statements. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in accordance
with GAAP and other applicable legal and accounting requirements.
Section 2.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by Parent or
Sub for inclusion or incorporation by reference in the
Registration Statement or the joint proxy statement/prospectus
included therein (together with any amendments or supplements
thereto, the "Joint Proxy Statement") relating to the Shareholder
Meetings (as hereinafter defined) will (i) in the case of the
Registration Statement, at the time it becomes effective, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein not misleading or (ii) in the case
of the Joint Proxy Statement, at the time of the mailing of the
Joint Proxy Statement, the time of each of the Shareholder
Meetings and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any
event with respect to Parent, its officers and directors or any
of its Subsidiaries shall occur which is required to be described
in the Joint Proxy Statement or the Registration Statement, such
event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the shareholders of Parent and the
Company. The Registration Statement will comply (with respect to
Parent) as to form in all material respects with the provisions
of the Securities Act, and the Joint Proxy Statement will comply
(with respect to Parent) as to form in all material respects with
the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except
as disclosed in Parent SEC Documents filed prior to the date
hereof, since January 31, 1998, (A) none of Parent or any of its
Subsidiaries has incurred any material liability or obligation
(indirect, direct or contingent), or entered into any material
oral or written agreement or other transaction, that is not in
the ordinary course of business or that would result in a
Material Adverse Effect on Parent, except for any such changes or
effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof; (B) none of
Parent or any of its Subsidiaries has 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 would have a Material Adverse Effect on Parent;
(C) there has been no action taken by Parent or any of its
Subsidiaries that, if taken during the period from the date of
this Agreement through the Effective Time, would constitute a
breach of Section 4.1(a); and (D) there has been no event,
circumstance or development that would have a Material Adverse
Effect on Parent, excluding any changes and effects resulting
from changes in economic, market, 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 ("Permits") necessary for it to own, lease
and operate its properties or to carry on its business as it is
now being conducted (the "Parent Permits"), except where the
failure to have any of the Parent Permits would not, individually
or in the aggregate, have a Material Adverse Effect on Parent,
and, as of the date of this Agreement, no suspension or
cancellation of any of the Parent Permits is pending or, to the
Knowledge of Parent (as hereinafter defined), 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. None of Parent or any of its
Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having
jurisdiction over Parent or any of its Subsidiaries, except, in
the case of clauses (A) and (B), for any violations that,
individually or in the aggregate, would not have a Material
Adverse Effect on Parent. Except as disclosed in Parent SEC
Documents filed prior to the date hereof, as of the date hereof,
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
Parent SEC Documents filed prior to the date hereof, no event of
default or event that, but for the giving of notice or the lapse
of time or both, would constitute an event of default exists or,
upon the consummation by Parent of the transactions contemplated
by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed
money or any lease, contractual license or other contract,
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. As used in this Agreement,
"Knowledge of Parent" means the actual knowledge of any of the
Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, General Counsel or Principal Accounting Officer of
Parent.
Section 2.9 Tax Matters. Each of Parent and its
Subsidiaries has timely filed, or has caused to be timely filed
on its behalf, all Tax Returns required to have been filed (or
extensions have been duly obtained) and has timely paid all Taxes
required to have been paid by it, except where failure to file
such Tax Returns or pay such Taxes would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
(a) The most recent financial statements contained in
Parent SEC Documents reflect an adequate reserve for all Taxes
payable by Parent and its Subsidiaries for all Taxable periods
and portions thereof through the date of such financial
statements. No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Parent or any of its
Subsidiaries, and no requests for waivers of the time to assess
any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the
aggregate, have not had and could not reasonably be expected to
have a Material Adverse Effect on the Parent.
(b) There are no material liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of Parent or
any of its Subsidiaries. Neither Parent nor any of its
Subsidiaries are bound by any agreement except in the ordinary
course with respect to Taxes.
(c) Parent has no reason to believe that any conditions
exist that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(d) For purposes of this Agreement: (i) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or
foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative
or added minimum, ad valorem, transfer or excise tax, or any
other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority and
(ii) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any
information return, claim for refund, amended return or
declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth
in Parent SEC Documents filed prior to the date hereof or on
Schedule 2.10 of the disclosure letter delivered by Parent to the
Company concurrently with the execution of this Agreement, (the
"Parent Disclosure Letter") (a) there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental
Entity against or involving Parent or any of its Subsidiaries,
against or involving any of the present directors or officers of
Parent or any of its Subsidiaries, as such, or involving any of
its or their properties, assets or business that, individually or
in the aggregate, would have a Material Adverse Effect on Parent
and (b) 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 against or involving any of the present directors or
officers of Parent or any of its Subsidiaries, as such, or
involving any of its or their properties, assets or business
that, individually or in the aggregate, would have a Material
Adverse Effect on Parent. As of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations
pending, or, to the Knowledge of Parent, threatened against or
affecting Parent or any of its Subsidiaries or any of its or
their present directors or officers, as such, or any of its or
their properties, assets or business relating to the transactions
contemplated by the Transaction Agreements.
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. No holder of any
option to purchase shares of Parent Common Stock, or shares of
Parent Common Stock granted in connection with the performance of
services for Parent or its Subsidiaries, is or will be entitled
to receive cash from the Parent 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 Parent nor
any Subsidiary is a party to any termination benefits agreement
or severance agreement or employment agreement which would be
triggered by the consummation of the transactions contemplated by
this Agreement.
Section 2.12 ERISA.
(a) With respect to each material Parent Plan (as
hereinafter defined), Parent has made (or as soon as practicable
will make) available to the Company a true and correct copy of
(i) the three most recent annual reports (Form 5500) filed with
the Internal Revenue Service (the "IRS"), (ii) such Parent Plan,
(iii) each trust agreement, insurance contract or administration
agreement relating to such Parent Plan, (iv) the most recent
summary plan description of each Parent Plan for which a summary
plan description is required, (v) the most recent actuarial
report or valuation relating to a Parent Plan subject to Title IV
of ERISA and (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Parent Plan intended to be
qualified under section 401(a) of the Code. Except as would not
have a Material Adverse Effect on Parent, each Parent Plan (as
defined herein) complies in all material respects with all
applicable statutes and governmental rules and regulations,
including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), and (i) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to
any Parent Plan, (ii) neither Parent nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Parent
Multiemployer Plan (as hereinafter defined) or instituted, or is
currently considering taking, any action to do so, (iii) no
action has been taken, or is currently being considered, to
terminate any Parent Plan subject to Title IV of ERISA, and (iv)
Parent and its ERISA Affiliates have complied in all material
respects with the continued medical coverage requirements of
COBRA; other than, in each case, such events or actions that,
individually or in the aggregate, would not have a Material
Adverse Effect on Parent. Except as would not have a Material
Adverse Effect on Parent, 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.
(b) With respect to any Parent Plan which is subject to
Title IV of ERISA, the present value of accrued benefit
obligations, as determined in accordance with FAS 87 in
accordance with the actuarial assumptions used to prepare the
most recent reports of such Parent Plan, did not exceed the fair
market value of the Plan assets as of the most recent valuation
date for which an actuarial report has been prepared and Parent
has no Knowledge of any Material Adverse Change to such status.
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. With respect to any current
or former employee or contractor of Parent or its Subsidiaries,
consummation of the transactions contemplated by this Agreement
shall not result in the payment or provision of additional
compensation or benefits or accelerate the vesting, payment or
funding of any compensation or benefits. No amounts payable or
provided by Parent or its Subsidiaries related to the
transactions contemplated by this Agreement will constitute
"excess parachute payments" within the meaning of Section 280G of
the Code. All Parent Plans that are intended to be qualified
under Section 401(a) of the Code have been determined by the
Internal Revenue Service (the "IRS") to be so qualified or a
timely application for such determination is pending, and to the
Knowledge of Parent, there is no reason why any such Parent Plan
is not so qualified in operation. Neither Parent nor any of its
ERISA Affiliates has been notified by any Parent Multiemployer
Plan that such Parent Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Parent Multiemployer
Plan intends to terminate or has been terminated under Section
4041A of ERISA. Neither Parent nor any of its ERISA Affiliates
has any liability or obligation under any welfare plan to provide
benefits after termination of employment to any employee or
dependent other than as required by ERISA or as disclosed in the
Parent SEC Documents filed prior to the date hereof. There are
no pending or, to the knowledge of Parent, threatened, claims,
suits, audits or investigations related to any Parent Plan other
than claims for benefits in the ordinary course and other than
claims, suits, audits or investigations that would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent. As used herein, (i) "Parent Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Parent
Multiemployer Plan)) or a "welfare plan" (as defined in Section
3(l) of ERISA) established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA
Affiliates has contributed or otherwise may have any liability
and all other retirement, deferred compensation, severance,
termination, change in control, stock option, restricted stock or
phantom stock plans, policies or programs of Parent or its
Subsidiaries, (ii) "Parent Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been
obligated to contribute or otherwise may have any liability, and
(iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under
common control or would be considered a single employer with such
person pursuant to Section 414(b), (c), (m) or (o) of the Code
and the regulations promulgated under those sections or pursuant
to Section 4001(b) of ERISA and the regulations promulgated
thereunder, including without limitation, each of Parent's
Subsidiaries. Parent has made (or as soon as practicable will
make) available to Company the most recent summary plan
description of each Parent Plan for which a summary plan
description is required and each Parent Plan.
Section 2.13 Compliance with Certain Laws. The
properties, assets and operations of Parent and its Subsidiaries
are in compliance in all material respects with all applicable
federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to
public and worker health and safety (collectively, "Worker Safety
Laws"), 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") and all consumer credit laws, including,
without limitation, bankruptcy laws relating to post-petition
collection procedures (collectively, "Consumer Credit Laws"),
except for any violations that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent. With respect
to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or
operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices,
incidents, actions or plans of Parent or any of its Subsidiaries
that may interfere with or prevent compliance or continued
compliance in all material respects with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or
prevention as would not, individually or in the aggregate with
any such other interference or prevention, have a Material
Adverse Effect on Parent. The term "hazardous materials" shall
mean those substances that are regulated by or form the basis for
liability under any applicable Environmental Laws. Parent will
make available to the Company such certificates and environmental
studies with respect to such properties as Parent has available
on the date hereof.
Section 2.14 Liabilities. Except as fully reflected or
reserved against in the consolidated balance sheet of Parent and
its Subsidiaries as of January 31, 1998 (included in the Parent
SEC Documents) or as reflected in the Parent SEC Documents filed
prior to the date hereof, Parent and its Subsidiaries have no
liabilities (including, without limitation, tax liabilities)
absolute or contingent, that would be required to be reflected on
a balance sheet or in notes thereto prepared in accordance with
GAAP, other than liabilities incurred in the ordinary course of
business or that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent.
Section 2.15 Labor Matters. Except as set forth in Parent
SEC Documents filed prior to the date hereof, or on Schedule 2.15
of the Parent Disclosure Letter, neither Parent nor any of its
Subsidiaries is a party to any collective bargaining agreement or
labor contract. Neither Parent nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons
employed by or otherwise performing services for Parent or any of
its Subsidiaries (the "Parent Business Personnel"), and there is
no unfair labor practice complaint or grievance against Parent or
any of its Subsidiaries by the National Labor Relations Board or
any comparable state agency pending or threatened in writing with
respect to the Parent Business Personnel, except where such
unfair labor practice, complaint or grievance would not have a
Material Adverse Effect on Parent. There is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of
Parent, threatened against or affecting Parent or any of its
Subsidiaries which may interfere with the respective business
activities of Parent or any of its Subsidiaries, except where
such dispute, strike or work stoppage would not have a Material
Adverse Effect on Parent. Parent and its Subsidiaries are in
material compliance with all labor, employment and wage
payment-related laws, regulations and rules.
Section 2.16 Intellectual Property. Parent and its
Subsidiaries own or possess adequate licenses or other legal
rights to use, free to Parent's Knowledge of infringement by
others, all patents, trademarks, trade names, trade dress,
service marks, trade secrets, copyrights, software, mailing lists
and other proprietary intellectual property rights including all
applications with respect thereto (collectively, "Intellectual
Property Rights") as are necessary in connection with the
business of Parent and its Subsidiaries as currently conducted,
taken as a whole, except where the failure to have such
Intellectual Property Rights or such infringement by others would
not have a Material Adverse Effect on Parent. To Parent's
Knowledge, neither Parent nor any of its Subsidiaries has
infringed any Intellectual Property Rights of any third party
other than any infringements that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent.
Section 2.17 Opinion of Financial Advisor. Parent has
received the written opinion of Salomon Smith Barney, dated the
date hereof, to the effect that, as of such date, the Conversion
Number is fair to Parent from a financial point of view, a copy
of which opinion will be made available to the Company promptly
after the date of this Agreement.
Section 2.18 Pooling of Interests/Tax Free Treatment.
Parent has made available to Price Waterhouse Coopers LLP ("PWC")
substantially all documents and other written materials and other
information relating to Parent that, based upon the advice of
PWC, Parent management believes would be material to their
conclusion that no conditions exist with respect to either
company which would preclude accounting for the Merger as a
pooling of interests. Neither Parent nor any of its
Subsidiaries, nor to Parent's Knowledge, any of Parent's
Affiliates, has taken any action or failed to take any action
which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a)
of the Code.
Section 2.19 Required Vote of Parent Shareholders. Under
applicable Tennessee law and the Parent Charter and Parent
Bylaws, (i) the affirmative vote of a majority of the votes
eligible to be cast is required for Merger Agreement Approval,
(ii) the affirmative vote of a majority of a quorum is required
to approve the Share Issuance, the Share Increase Amendment and
the Name Change Amendment and (iii) the affirmative vote of
eighty percent of the outstanding shares of Parent Common Stock
are required to approve the Board Amendment. No other vote of
the shareholders of Parent is required by law, the Parent Charter
or Parent By-Laws of Parent or otherwise in order for Parent to
consummate the Merger and the transactions contemplated hereby.
Section 2.20 Ownership of Shares. Neither Parent nor any
of its Subsidiaries owns any Shares of Company Common Stock.
Section 2.21 Operations of Sub. Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations
only as contemplated hereby.
Section 2.22 Brokers. No broker, investment banker or
other person, other than Salomon Smith Barney, the fees and
expenses of which will be paid by Parent (and as reflected in
agreements between Salomon Smith Barney, and Parent, a copy of
which has been furnished to the Company), is entitled to any
broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
Section 2.23 State Takeover Statutes and Shareholder
Rights Plan.
(a) Assuming the accuracy of the Company's representations
and warranties contained in Section 3.20 (Ownership of Shares),
as of the date hereof, no state takeover statutes or other state
statutes, including any business combination act, or any
supermajority Parent Charter provisions are applicable to the
Merger, this Agreement and the transactions contemplated hereby,
other than the Board Amendment.
(b) As of the date hereof and as of the Effective Time, (i)
Parent will have no additional obligations under the Parent
Rights or the Parent Rights Agreement and (ii) the holders of the
Parent Rights will have no additional rights under the Parent
Rights or the Parent Rights Agreement, in each case, as a result
of any of the transactions contemplated by this Agreement.
Execution and delivery of this Agreement does not, and compliance
with the provisions hereof will not, cause the holders of the
Parent Rights to have any rights under the Parent Rights or the
Parent Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to carry on its business
as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the
requisite corporate 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. The
Company has heretofore delivered to Parent complete and correct
copies of the Company's Certificate of Incorporation ("Company
Charter") and by-laws ("Company By-Laws"), as in effect on the
date hereof.
Section 3.2 Capital Structure. The authorized capital
stock of the Company consists of 150,000,000 shares of Company
Common Stock, par value $.0l per share. At the close of business
on July 2, 1998, (i) 64,020,413 shares of Company Common Stock
were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights, (ii)
24,000 shares of Company Common Stock were held in the treasury
of the Company or by the Subsidiaries of the Company, (iii) not
more than 6,235,000 shares of Company Common Stock were reserved
for future issuance pursuant to the Saks Holdings, Inc. 1996
Management Stock Incentive Plan, (the "Company Stock Plan" (iv)
6,641,000 shares of Company Common Stock were reserved for
issuance pursuant to the Company's 5 1/2% Convertible Subordinated
Notes due September 15, 2006 (the "Notes") and (v) 64,000 shares
of Company Common Stock were reserved for issuance pursuant to
the 1997 Non-Employee Directors Plan. As of the date of this
Agreement, except for stock options covering not in excess of
5,375,000 shares of Company Common Stock issued under the Company
Stock Plans (collectively, the "Company Stock Options") and
except for the outstanding Notes, 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 securities convertible into or exchangeable for
such capital stock, 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 disclosed in the
Company SEC Documents (as hereinafter defined) filed prior to the
date hereof, since July 2, 1998, the Company has not issued any
shares of its capital stock, or securities convertible into or
exchangeable for such capital stock, other than shares issued in
the ordinary course pursuant to the Company Stock Plans. Except
as disclosed in the Company SEC Documents filed prior to the date
hereof, there are no outstanding contractual obligations of the
Company or any of the Company's Subsidiaries (i) restricting the
transfer of, (ii) affecting the voting rights of, (iii) requiring
the repurchase, redemption or disposition of, (iv) requiring the
registration for sale of, or (v) granting any preemptive or
antidilutive right with respect to, any shares of Company Common
Stock or any capital stock of any Subsidiary of the Company.
Each outstanding share of capital stock of each Subsidiary of the
Company that is a corporation is duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights, and
except as disclosed in the Company SEC Documents filed prior to
the date hereof, 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)
declared the Merger advisable and in the best interest of the
Company and its stockholders and approved this Agreement in
accordance with applicable law, (b) resolved to recommend the
approval of this Agreement by the Company's stockholders and (c)
directed that this Agreement be submitted to the Company's
stockholders for approval. The Company has all requisite
corporate power and authority to enter into the Transaction
Agreements to which it is a party and, subject to approval by the
stockholders of the Company of the Merger (which approval, for
all purposes in this Agreement, shall be deemed to include any
necessary approval of amendments to the Company's Stock plans)
(collectively, the "Company Shareholder Approvals"), to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of the Transaction Agreements to which it
is a party by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject to (x) Company Shareholder Approvals and (y) the
filing of the Certificate of Merger pursuant to the Del.C. The
Transaction Agreements to which it is a party have been duly
executed and delivered by the Company and (assuming the valid
authorization, execution and delivery thereof by the other
parties thereto) each such Transaction Agreement constitutes the
valid and binding obligation of the Company enforceable against
the Company in accordance with their terms. The filing of the
Joint Proxy Statement with the SEC and the taking of all actions
in connection therewith have been duly authorized by the
Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation.
Assuming 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 and except as set forth in Schedule 3.4 of the disclosure
letter delivered by the Company to Parent concurrently with the
execution of this Agreement (the "Company Disclosure Letter"),
the execution and delivery of the Transaction Agreements do not,
and the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof
will not, conflict with, result in any violation of, or breach 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 Company Charter or Company By-Laws, (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, lease, indenture or other contract, agreement,
instrument, permit, concession, franchise or license applicable
to the Company or any of its Subsidiaries, or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of
clauses (ii), (iii) or (iv), any such conflicts, violations,
breaches, 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 or
materially delay the consummation of any of the transactions
contemplated hereby or thereby. No filing, notification or
registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company
or any of its Subsidiaries in connection with the execution and
delivery of the Transaction Agreements by the Company or is
necessary for the consummation of the Merger and the other
transactions contemplated by the Transaction Agreements, except
for (i) in connection, or in compliance, with the provisions of
the HSR Act, the Securities Act and the Exchange Act, (ii) the
filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and the filing of appropriate documents
with the relevant authorities of other states in which the
Company or any of its Subsidiaries is qualified to do business,
(iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to
any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by this Agreement,
(iv) such filings, authorizations, orders and approvals as may be
required to obtain the State Takeover Approvals, (v) such
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries
conducts any business or owns any property or assets, (vi)
applicable requirements, if any, of Blue Sky Laws and the NYSE,
and (vii) 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 or
materially delay the consummation of any of the transactions
contemplated hereby or thereby or by any other Transaction
Agreement. The execution and delivery of the Transaction
Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, result in
any violation of, or breach 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 leases, subleases, reciprocal operating
agreements or reciprocal easement agreements relating to the
Company stores listed on Schedule 3.4 of the Company Disclosure
Letter.
Section 3.5 SEC Documents and Other Reports. The Company
has filed all required documents with the SEC since January 1,
1995 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times
they were filed, none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements (including, in each case, any notes thereto) of the
Company included in the Company SEC Documents complied as to form
in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP (except, in the
case of the unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes
thereto) and fairly present in accordance with GAAP the
consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and
the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
Except as disclosed in the Company SEC Documents or as required
by GAAP, the Company has not, since January 31, 1998, made any
change in the accounting practices or policies applied in the
preparation of financial statements. The books and records of
the Company and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and other applicable legal and
accounting requirements.
Section 3.6 Registration Statement and Joint Proxy
Statement. None of the information to be supplied by the Company
for inclusion or incorporation by reference in the Registration
Statement or the Joint Proxy Statement will (i) in the case of
the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or (ii) in
the case of the Joint Proxy Statement, at the time of the mailing
of the Joint Proxy Statement, the time of each of the Shareholder
Meetings and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or
any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the shareholders of Parent
and the Company. The Joint Proxy Statement will comply (with
respect to the Company) as to form in all material respects with
the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except
as disclosed in the Company SEC Documents filed with the SEC
prior to the date of this Agreement or in Schedule 3.7 of the
disclosure letter delivered by the Company to Parent concurrently
with the execution of this Agreement (the "Company Disclosure
Letter"), since January 31, 1998, (A) none of the Company or any
of its Subsidiaries has incurred any material liability or
obligation (indirect, direct or contingent), or entered into any
material oral or written agreement or other transaction, that is
not in the ordinary course of business or that would result in a
Material Adverse Effect on the Company, except for any such
changes or effects resulting from this Agreement, the
transactions contemplated hereby or the announcement thereof; (B)
the Company or any of its Subsidiaries has 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 would have a Material Adverse Effect on the
Company; (C) there has been no action taken by the Company or any
of Subsidiaries, that, if taken during the period from the date
of this Agreement through the Effective Time, would constitute a
breach of Section 4.1(b); and (D) there has been no event,
circumstance or development that would have a Material Adverse
Effect on the Company, excluding any changes and effects
resulting from changes in economic, market, regulatory or
political conditions or changes in conditions generally
applicable to the industries in which the Company and
Subsidiaries of the Company are involved and except for any such
changes or effects resulting from this Agreement, the
transactions contemplated hereby or the announcement thereof.
Section 3.8 Permits and Compliance. Each of the Company
and its Subsidiaries is in possession of all Permits necessary
for it to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Company
Permits"), except where the failure to have any of the Company
Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of
this Agreement, no suspension or cancellation of any of the
Company Permits is pending or, to the Knowledge of the Company
(as hereinafter defined), threatened, except where the suspension
or cancellation of any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect
on the Company. None of the Company or any of its Subsidiaries
is in violation of (A) its certificate, by-laws or other
organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having
jurisdiction over the Company or any of its Subsidiaries, except,
in the case of clauses (A) (as to the Company's Subsidiaries
only), (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 or in Schedule 3.8(a) of the
Company Disclosure Letter, 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 filed prior to the date of this Agreement
or in Schedule 3.8(b) of the Company Disclosure Letter, 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 contractual license or other
contract, 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. As used
in this Agreement "Knowledge of the Company" means the actual
knowledge of any of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer or the General
Counsel of the Company.
Section 3.9 Tax Matters. Each of the Company and its
Subsidiaries has timely filed, or has caused to be timely filed
on its behalf, all Tax Returns required to have been filed (or
extensions have been duly obtained) and has timely paid all Taxes
required to have been paid by it, except where failure to file
such Tax Returns or pay such Taxes would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(a) The most recent financial statements contained in the
Company SEC Documents reflect an adequate reserve for all Taxes
payable by the Company and its Subsidiaries for all Taxable
periods and portions thereof through the date of such financial
statements. No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company or any of its
Subsidiaries, and no requests for waivers of the time to assess
any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the
aggregate, have not had and could not reasonably be expected to
have a Material Adverse Effect on the Company.
(b) There are no material liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of the
Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries are bound by any agreement, except for
agreements entered into in the ordinary course with respect to
Taxes.
(c) The Company has no reason to believe that any
conditions exist that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
Section 3.10 Actions and Proceedings. Except as set forth
in the Company SEC Documents filed prior to the date hereof or in
Schedule 3.10 of the Company Disclosure Letter, there are no
outstanding orders, judgments, injunctions, awards or decrees of
any Governmental Entity against or involving the Company or any
of its Subsidiaries, against or involving any of the present
directors or officers of the Company or any of its Subsidiaries,
as such, or involving any of its or their properties, assets or
business that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. Except as set forth in
the Company SEC Documents filed prior to the date hereof or on
Schedule 3.10 of the Company Disclosure Letter, 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 against or
involving any of the present directors or officers, of the
Company or any of its Subsidiaries as such or involving any of
its or their properties, assets or business that, individually or
in the aggregate, would have a Material Adverse Effect on the
Company. As of the date hereof, there are no actions, suits,
labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending, or, to the
Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of its or their present
directors or officers, as such, or any of its or their
properties, assets or business relating to the transactions
contemplated by the Transaction Agreements.
Section 3.11 Certain Agreements. Except as set forth in
Schedule 3.11 of the Company Disclosure Letter, as of the date of
this Agreement, neither the Company nor any of its Subsidiaries
is a party to any oral or written agreement or plan, including
any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, 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 (other than in
lieu of fractional shares). Neither the Company nor any
Subsidiary is a party to any termination benefits agreement or
severance agreement or employment agreement which would be
triggered by the consummation of the transactions contemplated by
this Agreement, except as set forth in Schedule 3.11 of the
Company Disclosure Letter.
Section 3.12 ERISA.
(a) With respect to each material Company Plan (as
hereinafter defined), the Company has made (or as soon as
practicable will make) available to Parent a true and correct
copy of (i) the three most recent annual reports (Form 5500)
filed with the IRS, (ii) such Company Plan, (iii) each trust
agreement, insurance contract or administration agreement
relating to such Company Plan, (iv) the most recent summary plan
description of each Company Plan for which a summary plan
description is required, (v) the most recent actuarial report or
valuation relating to a Company Plan subject to Title IV of ERISA
and (vi) the most recent determination letter, if any, issued by
the IRS with respect to any Company Plan intended to be qualified
under Section 401(a) of the Code. Except as would not have a
Material Adverse Effect on the Company, (i) each Company Plan
complies in all material respects with all applicable statutes
and governmental rules and regulations, including but not limited
to ERISA, the Code and COBRA, (ii) no "reportable event" (within
the meaning of Section 4043 of ERISA) has occurred with respect
to any Company Plan, (iii) neither the Company nor any of its
ERISA Affiliates has withdrawn from any Company Multiemployer
Plan (as hereinafter defined), or instituted, or is currently
considering taking, any action to do so, and (iv) no action has
been taken, or is currently being considered, to terminate any
Company Plan subject to Title IV of ERISA, and (v) the Company
and its ERISA Affiliates have complied in all material respects
with the continued medical coverage requirements of COBRA, other
than, in each case, such events or actions that, individually or
in the aggregate, would not have a Material Adverse Effect on the
Company. Except as would not have a Material Adverse Effect on
the Company, no Company Plan, nor any trust created thereunder,
has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived. Except as
disclosed on Schedule 3.12(a) of the Company Disclosure Letter,
with respect to any Company Plan which is subject to Title IV of
ERISA, the present value of accrued benefit obligations, as
determined in accordance with FAS 87 in accordance with the
actuarial assumptions used to prepare the most recent reports of
such Company Plan, did not exceed the fair market value of the
Plan assets as of the most recent valuation date for which an
actuarial report has been prepared, and the Company has no
Knowledge of any Material Adverse Change to such status.
(b) With respect to the Company Plans, no event has
occurred in connection with which the Company or any ERISA
Affiliate would be subject to any liability under the terms of
such Company Plans, ERISA, the Code or any other applicable law
which would have a Material Adverse Effect on the Company.
Except as disclosed in the Company SEC Documents or set forth in
Schedule 3.12(b) of the Company Disclosure Letter, with respect
to any current or former employee or contractor of the Company or
its subsidiaries, consummation of the transactions contemplated
by this Agreement shall not result in the payment or provision of
additional compensation or benefits or accelerate the vesting,
payment or funding of any compensation or benefits. Except as
disclosed in the Company SEC Documents or set forth in Schedule
3.12(b) of the Company Disclosure Letter, no amounts payable or
provided by the Company or its subsidiaries related to the
transactions contemplated by this Agreement will constitute
"excess parachute payments" within the meaning of Section 280G of
the Code. Company Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the IRS to be
so qualified, or a timely application for such determination is
now pending, and to the Knowledge of the Company, there is no
reason why any Company Plan is not so qualified in operation.
Neither the Company nor any of its ERISA Affiliates has been
notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency
under and within the meaning of Section 4241 or 4245 of ERISA or
that such Company Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA. Except as
disclosed in the Company SEC Documents filed prior to the date
hereof or set forth in Schedule 3.12(b) of the Company Disclosure
Letter, neither the Company nor any of its ERISA Affiliates has
any liability or obligation under any welfare plan to provide
benefits after termination of employment to any employee or
dependent other than as required by ERISA or as disclosed in the
Company Annual Report. There are no pending, or to the knowledge
of the Company, threatened, claims, suits, audits or
investigations related to any Company Plan other than claims for
benefits in the ordinary course and other than claims, suits,
audits or investigations that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. As
used herein, (i) "Company Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Company
Multiemployer Plan)) or a "welfare plan" (as defined in Section
3(l) of ERISA) established or maintained by the Company or any of
its ERISA Affiliates or as to which the Company or any of its
ERISA Affiliates has contributed or otherwise may have any
liability and all other retirement, deferred compensation,
severance, termination, change in control, stock option,
restricted stock or phantom stock plans, policies or programs of
the Company or its Subsidiaries, (ii) "Company Multiemployer
Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise
may have any liability and (iii) with respect to any person,
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be
considered a single employer with such person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b)
of ERISA and the regulations promulgated thereunder, including,
without limitation, each of the Company's Subsidiaries.
Section 3.13 Compliance with Certain Laws. Except as
disclosed in Schedule 3.13 of the Company Disclosure Letter, the
properties, assets and operations of the Company and its
Subsidiaries are in compliance in all material respects with all
applicable Worker Safety Laws, Environmental Laws and Consumer
Credit Laws, except for any violations that individually or in
the aggregate would not have a Material Adverse Effect on the
Company. Except as disclosed in Schedule 3.13 of the Company
Disclosure Letter, with respect to such properties, assets and
operations, including any previously owned, leased or operated
properties, assets or operations, there are no past, present or
reasonably anticipated future events, conditions, circumstances,
activities, practices, incidents, actions or plans of the Company
or any of its Subsidiaries that may interfere with or prevent
compliance or continued compliance in all material respects with
applicable Worker Safety Laws and Environmental Laws, other than
interference or prevention that would not individually or in the
aggregate with any other such interference or prevention have a
Material Adverse Effect on the Company. The Company will make
available to Parent such certificates and environmental studies
with respect to such properties as the Company has available on
the date hereof.
Section 3.14 Liabilities. Except as fully reflected or
reserved against in the consolidated balance sheet of the Company
and its Subsidiaries as of January 31, 1998 (included in the
Company SEC Documents) or as reflected in the Company SEC
Documents filed prior to the date hereof, or set forth in
Schedule 3.14 of the Company Disclosure Letter, the Company and
its Subsidiaries have no liabilities (including, without
limitation, tax liabilities) absolute or contingent, that would
be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, other than liabilities
incurred in the ordinary course of business or that, individually
or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.15 Labor Matters. Except as set forth in
Schedule 3.15 of the Company Disclosure Letter or in the Company
SEC Documents filed prior to the date hereof, neither the Company
nor any of its Subsidiaries is a party to any collective
bargaining agreement or labor contract. Neither the Company nor
any of its Subsidiaries has engaged in any unfair labor practice
with respect to any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries
(the "Company Business Personnel"), and there is no unfair labor
practice complaint or grievance against the Company or any of its
Subsidiaries by the National Labor Relations Board or any
comparable state agency pending or threatened in writing with
respect to the Company Business Personnel, except where such
unfair labor practice, complaint or grievance would not have a
Material Adverse Effect on the Company. There is no labor
strike, dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries which may interfere with the
respective business activities of the Company or any of its
Subsidiaries, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect on the Company. The
Company and its subsidiaries are in material compliance with all
labor, employment and wage payment-related laws, regulations and
rules.
Section 3.16 Intellectual Property. The Company and its
Subsidiaries own or possess adequate licenses or other legal
rights to use, free to the Company's Knowledge of infringement by
others, all Intellectual Property Rights as are necessary in
connection with the business of the Company and its Subsidiaries
as currently conducted, taken as a whole, except where the
failure to have such Intellectual Property Rights or such
infringement by others would not have a Material Adverse Effect
on the Company. To the Company's Knowledge, neither the Company
nor any of its Subsidiaries has infringed any Intellectual
Property Rights of any third party other than any infringements
that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.17 Opinion of Financial Advisor. The Company
has received the written opinions of Goldman, Sachs & Co. and
Merrill Lynch & Co. dated the date hereof, to the effect that, as
of the date hereof, the Conversion Number is fair to the
Company's stockholders from a financial point of view, a copy of
which opinion will be made available to Parent promptly after the
date of this Agreement.
Section 3.18 Pooling of Interests/Tax Free Treatment. The
Company has made available to PWC substantially all documents and
other written materials and other information relating to the
Company that, based upon the advice of PWC, the Company believes
would be material to their conclusion that no conditions exist
with respect to either Company which would preclude accounting
for the Merger as a pooling of interests. Neither the Company
nor to the Company's Knowledge, any of Company's Affiliates, has
taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.19 Required Vote of Company Stockholders. Under
applicable Delaware law and the Company Charter and Company
Bylaws, the affirmative vote of the holders of not less than a
majority of the outstanding shares of Company Common Stock is
required to approve the Merger. No other vote of the
stockholders of the Company is required by law, the Company
Charter or Company By-Laws or otherwise for the Company to
consummate the Merger and the transactions contemplated hereby.
Section 3.20 Ownership of Shares. Neither Company nor any
of its Subsidiaries owns any Shares of Parent Common Stock.
Section 3.21 Brokers. No broker, investment banker or
other person, other than Goldman, Sachs & Co. and Merrill Lynch &
Co., the fees and expenses of which will be paid by the Company
(and are reflected in agreements between Goldman, Sachs & Co. and
Merrill Lynch & Co. and the Company, respectively, copies of
which have been furnished to Parent), is entitled to any
broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.22 State Takeover Statutes. Assuming the
accuracy of Parent's representations and warranties contained in
Section 2.20 (Ownership of Shares), the Board of Directors of the
Company has taken all action so that, prior to the execution
hereof, the Board of Directors has approved the Merger and the
Company Stockholders Agreement prior to the execution hereof
pursuant to Section 203 of the Del.C. As of the date hereof,
except as set forth in Section 2.23(a), no other state takeover
statutes, including without limitation, any business combination
act or supermajority Company Charter provisions are applicable to
the Merger, this Agreement and the transactions contemplated
hereby.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Except as expressly permitted by
clauses (i) through (ix) of this Section 4.1(a), during the
period from the date of this Agreement through the Effective
Time, Parent shall, and shall cause each of its Subsidiaries to,
in all material respects carry on its business in the ordinary
course as currently conducted and, to the extent consistent
therewith, use reasonable best efforts to preserve intact its
current business organizations, keep available the services of
its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall
be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement
to the Effective Time, Parent, shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of
the Company:
(i) (w) declare, set aside or pay any dividends on,
or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any
payments to its 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, (y) purchase,
redeem or otherwise acquire any shares of capital stock of Parent
or any other securities thereof or the capital stock of any
Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities (other than the redemption of the Parisian 9 7/8%
Senior Subordinated Notes), or (z) institute any share
repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant,
transfer or otherwise encumber any shares of its capital stock,
any other voting securities or equity equivalent or any
securities convertible or exchangeable into, or exercisable for,
or any rights, warrants or options to acquire any such shares,
voting securities, equity equivalent or convertible securities,
other than (A) subject to Section 4.4, the issuance of stock
options and shares of Parent Common Stock to employees of Parent
or any of its Subsidiaries in the ordinary course of business
consistent with past practice, (B) the issuance of Parent
securities pursuant to the Parent Rights Plan, and (C) the
issuance by any wholly-owned Subsidiary of Parent of its capital
stock to Parent or another wholly-owned Subsidiary of Parent;
(iii) amend its charter or by-laws;
(iv) except as set forth on Schedule 4.1 of the Parent
Disclosure Letter and except for inventory, merchandise, finished
goods and accounts receivable acquired in the ordinary course of
business, acquire or agree to acquire by merging or consolidating
with, or by purchasing a portion of the assets of or equity in,
or by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any
assets, other than acquisitions of assets in the ordinary course
of business consistent with past practice, 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)
increase the risk of any Governmental Entity entering an order
prohibiting the consummation of the Merger or (C) increase the
risk of not being able to remove any such order on appeal or
otherwise, and (ii) in the case of any individual acquisition,
merger, consolidation or purchase, the value of which does not
exceed $750 million;
(v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other
than (A) sales of inventory, merchandise and finished goods in
the ordinary course of business, (B) transactions that are in the
ordinary course of business consistent with past practice and not
material to Parent and its Subsidiaries taken as a whole, (C) as
may be required by any Governmental Entity and (D) subject to
Sections 4.4, dispositions involving an aggregate consideration
not in excess of $500 million;
(vi) incur any indebtedness for borrowed money,
guarantee any such indebtedness or make any loans, advances or
capital contributions to, or other investments in, any other
person, other than (A) indebtedness in the ordinary course of
business consistent with past practice, (B) indebtedness, loans,
advances, capital contributions and investments between Parent
and any of its wholly-owned Subsidiaries or between any of such
wholly-owned Subsidiaries, (C) the issuance of up to $300 million
in senior notes and (D) such indebtedness as may be necessary to
fund actions allowed under Section 4.1(a)(iv) hereof;
(vii) knowingly violate or knowingly fail to
perform any material obligation or duty imposed upon it or any
Subsidiary by any applicable 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 GAAP); or
(ix) authorize, recommend or announce an intention to
do any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(b) Actions by the Company. Except as expressly permitted
by clauses (i) through (xvi) of this Section 4.1(b), during the
period from the date of this Agreement through the Effective
Time, the Company, subject to Section 4.2 hereof, shall, and
shall cause each of its Subsidiaries to, in all material
respects, carry on its business in the ordinary course as
currently conducted and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business
organizations, keep available the services of its current
officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it
to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement
to the Effective Time, the Company, subject to Section 4.2
hereof, shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent:
(i) (w) declare, set aside or pay any dividends on,
or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any
payments to its stockholders in their capacity as such (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, (y) except as set
forth in Schedule 4.1(b)(i) of the Company Disclosure Letter,
purchase, redeem or otherwise acquire any shares of capital stock
of the Company or any other securities thereof or the capital
stock of any Subsidiaries, or any securities thereof, or any
rights, warrants or options to acquire any such shares or other
securities or (z) institute any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant,
transfer or otherwise encumber any shares of its capital stock,
any other voting securities or equity equivalent or any
securities convertible or exchangeable into, or exercisable for,
or any rights, warrants or options to acquire any such shares,
voting securities, equity equivalent or convertible securities,
other than the issuance of shares of Company Common Stock upon
the exercise of Company Stock Options outstanding on the date of
this Agreement in accordance with their current terms;
(iii) amend its charter, or by-laws;
(iv) except as set forth in Schedule 4.1(b)(iv) of the
Company Disclosure Letter and except for inventory, merchandise,
finished goods and accounts receivable acquired in the ordinary
course of business, acquire or agree to acquire by merging or
consolidating with, or by purchasing a portion of the assets of
or equity in, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets other than acquisitions of assets in the
ordinary course of business consistent with past practice, the
value of which do not exceed $50 million in the aggregate;
(v) except as set forth in Schedule 4.1(b)(v) of the
Company Disclosure Letter, sell, lease or otherwise dispose of,
or agree to sell, lease or otherwise dispose of, any of its
assets other than (A) sales of inventory, merchandise and
finished goods in the ordinary course of business, (B)
transactions that are in the ordinary course of business
consistent with past practice, not material to the Company and
its Subsidiaries taken as a whole, and in an aggregate amount
greater than $50 million and (C) as may be required by any
Governmental Entity;
(vi) except as set forth in Schedule 4.1(b)(vi) of the
Company Disclosure Letter, incur any indebtedness for borrowed
money, guarantee any such indebtedness or make any loans,
advances or capital contributions to, or other investments in,
any other person, other than (A) indebtedness incurred in the
ordinary course of business consistent with past practice and (B)
indebtedness, loans, advances, capital contributions and
investments between the Company and any of its wholly-owned
Subsidiaries or between any of such wholly-owned Subsidiaries;
(vii) alter (through merger, liquidation,
reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or any
Subsidiary;
(viii) enter into or adopt, or amend any existing,
severance plan, agreement or arrangement or enter into or amend
any Company Plan or employment or consulting agreement, other
than (A) as required by law, or (B) as expressly contemplated by
this Agreement;
(ix) increase the compensation payable or to become
payable to its officers, employees, or directors except for
increases in the ordinary course of business consistent with past
practice in salaries or wages of employees of the Company or any
of its Subsidiaries who are not officers of the Company or any of
its Subsidiaries, or grant any additional rights to 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
set forth on Schedule 4.1(b)(ix) of the Company Disclosure
Letter or as may be required to comply with applicable law, amend
or take action in any such case in a manner so as to enhance or
accelerate any rights or benefits under, any labor, collective
bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any
material obligation or duty imposed upon it or any Subsidiary by
any applicable federal, state or local law, rule, regulation,
guideline or ordinance;
(xi) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with past
practice, with respect to accounting policies or procedures
(other than actions required to be taken by GAAP);
(xii) make any tax election or settle or compromise
any material federal, state, local or foreign income tax
liability or refund involving taxes in excess of $1,000,000;
(xiii) except as set forth in Schedule 4.1(b)(xiii)
of the Company Disclosure Letter, enter into any contract (other
than for inventory, merchandise or finished goods) that cannot be
canceled on 30 days' notice pursuant to which it is obligated in
an amount in excess of $1,000,000;
(xiv) other than as required by law, make any
material changes to terms and conditions of its credit cards
issued, or change in any material respect the underwriting
standards therefor;
(xv) make any capital expenditure in the aggregate
in excess of $2,000,000, other than expenditures (and
contracts for such expenditures) set forth in the Company's
current capital budget included as Schedule 4.1(b)(xv) of the
Company Disclosure Letter; or
(xvi) 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.
(c) Other Actions. The Company and Parent shall not,
and shall not permit any of their respective Subsidiaries to,
take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that is
qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that is not so qualified
becoming untrue in any material respect or (iii) except as
otherwise permitted by Section 4.2 with regard to the
Company, any condition to the Merger set forth in Article VI
not being satisfied.
Section 4.2 No Solicitation. The Company shall
not, nor shall it permit any Subsidiary of the Company to,
nor shall it authorize any officer, director or employee of,
or any investment banker, attorney or other advisor or
representative of, the Company or any Subsidiary of the
Company to, (i) directly or indirectly solicit, initiate or
encourage the submission of, any Company Takeover Proposal
(as hereinafter defined), (ii) enter into or, other than in
connection with a termination of this Agreement pursuant to
Section 7.1(g), approve any agreement with respect to any
Company Takeover Proposal or (iii) directly or indirectly
participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to or take
any other action to facilitate any inquiries or the making of
any proposal that constitutes, or may reasonably be expected
to lead to, any Company Takeover Proposal; provided, however,
that prior to the approval of this Agreement by the
stockholders of the Company, the Company (A) following
receipt of a Company Takeover Proposal from a third party,
may participate in any discussions or negotiations
(including, as a part thereof, making any counterproposal)
with such third party or its agents or representatives, or
furnish information with respect to the Company to such third
party or its agents or representatives pursuant to a
customary confidentiality agreement, or take any such other
action otherwise prohibited by clause (i) or (ii) above with
respect to such third party or its agents or representatives
with respect to any Company Takeover Proposal if the
Company's Board of Directors determines in good faith, after
receipt of advice from counsel, that the failure to
participate in such discussions or negotiations or to furnish
such information, or take such other action, may constitute a
breach of its fiduciary duties under, or otherwise violate,
applicable law, provided that the Company shall not be
permitted to take any such actions with respect to any
proponent of a Company Takeover Proposal after the thirtieth
day following the date on which the Company's Board of
Directors first makes such determination with respect to such
proponent (it being understood that the Company will notify
Parent promptly as to any such date), and (B) shall be
permitted to (x) take and disclose to the Company's
stockholders a position or make a recommendation with respect
to any Company Takeover Proposal or amend or withdraw such
position or amend or withdraw its position with respect to
the Merger, including pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, or (y) make appropriate
disclosure to the Company's stockholders, in each case, if
the Company's Board of Directors determines in good faith,
after receipt of advice from counsel, that the failure to
take such action may constitute a breach of its fiduciary
duties under, or otherwise violate, applicable law. For
purposes of this Agreement, "Company Takeover Proposal" means
any proposal for a merger or other business combination
involving the Company and its Subsidiaries or the acquisition
or purchase of more than 25% of any class of equity
securities of the Company or any of its Significant
Subsidiaries (as hereinafter defined), or any tender offer
(including self-tenders) or exchange offer that, if
consummated, would result in any person beneficially owning
more than 25% of any class of equity securities of the
Company or any of its Significant Subsidiaries, or a majority
of the assets of the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by
this Agreement. For purposes of this Agreement, "Parent
Takeover Proposal" means any proposal for a merger or other
business combination involving Parent and its Subsidiaries or
the acquisition or purchase of more than 25% of any class of
equity securities of Parent or any of its Significant
Subsidiaries, or any tender offer (including self-tenders) or
exchange offer that, if consummated, would result in any
person beneficially owning more than 25% of any class of
equity securities of Parent or any of its Significant
Subsidiaries, or a majority of the assets of Parent or any of
its Significant Subsidiaries, other than the transactions
contemplated by this Agreement. For purposes of this
Agreement, "Significant Subsidiary" shall have the meaning
ascribed to it in Rule 1-02 of Regulation S-X promulgated
under the Exchange Act.
(a) Neither the Board of Directors of the Company nor
any committee thereof shall withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by the Board of Directors of the
Company or any such committee of this Agreement or the
Merger, or approve or recommend, or propose to approve or
recommend, any Company Takeover Proposal, unless (i) the
Board of Directors of the Company determines in good faith,
after receipt of advice from counsel, that the failure to do
so may constitute a breach of its fiduciary duties under, or
otherwise violate, applicable law, and (ii) any of the
following is true: (A) a Company Takeover Proposal has been
made and not withdrawn, (B) the Company then has the right to
terminate this Agreement pursuant to Section 7.1(j) or (C)
the Company then has the right to terminate this Agreement
pursuant to Section 7.1(b) or (c).
(b) The Company promptly shall advise Parent orally and
in writing of its receipt of any Company Takeover Proposal,
the identity of the person making any such Company Takeover
Proposal, the material terms of any such Company Takeover
Proposal and any changes to such material terms. The Company
shall provide to Parent, as soon as practicable after receipt
or delivery thereof, copies of any written Company Takeover
Proposal and documents reflecting any changes to such
material terms.
Section 4.3 Third Party Standstill Agreements.
During the period from the date of this Agreement through the
Effective Time, neither the Parent nor the Company, without
the prior written consent of the other party, shall
terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which Parent or
the Company or any of their respective Subsidiaries is a
party and which relates to a Parent or Company Takeover
Proposal (other than any involving the other party hereto),
unless the Board of Directors of Parent or the Company, as
the case may be, determines in good faith after receipt of
advice from counsel, that the failure to terminate, amend,
modify or waive any such confidentiality or standstill
agreement may constitute a breach of its fiduciary duties
under, or otherwise violate, applicable law. Subject to such
fiduciary duties, during such period, each of Parent and the
Company agrees to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements,
including, but not limited to, seeking to obtain injunctions
to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of
the United States or any state thereof having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization.
During the period from the date of this Agreement through the
Effective Time, unless the other party shall otherwise agree
in writing, none of Parent, the Company or any of their
respective Subsidiaries or Affiliates shall (a) knowingly
take or fail to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of
interests for accounting purposes or (b) knowingly take or
fail to take any action which action or failure would
jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the
Code. Between the date of this Agreement and the Effective
Time, Parent and the Company each shall take all reasonable
actions (including taking all reasonable actions with respect
to seeking consents from third parties) necessary to cause
the characterization of the Merger as a pooling of interests
for accounting purposes if such a characterization were
jeopardized by action taken by Parent or the Company,
respectively, prior to the Effective Time; provided, however
that nothing contained herein shall require either party to
take any actions without receipt of appropriate or desirable
consents from third parties.
Section 4.5 Tax Representation Letters. For purposes
of the tax opinions described in Section 6.2(b) of this
Agreement, Parent and the Company shall provide
representation letters reasonably customary in scope and
substance, dated as of the date that is two business days
prior to the date the Joint Proxy Statement is mailed to
shareholders of the Company and reissued as of the date of
Closing.
Section 4.6 Transfer Taxes. Parent and the Company
shall cooperate in the preparation, execution and filing of
all returns, applications or other documents regarding any
real Property transfer, stamp, recording, documentary or
other taxes and any other fees and other similar taxes which
become payable in connection with the Merger (collectively,
"Transfer Taxes"). Parent shall pay or cause to be paid,
without deduction or withholding from any amounts payable to
the holders of the Company Common Stock, all Transfer Taxes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings. Provided that the
Board of Directors of the Company has not publicly withdrawn
or modified its approval or recommendation of the Merger
Agreement or the Merger in accordance with Section 4.2(b),
the Company and Parent each shall call a meeting of its
shareholders (respectively, the "Company Stockholder Meeting"
and the "Parent Shareholder Meeting" and, collectively, the
"Shareholder Meetings") to be held, if practicable, on the
same day and as promptly as practicable after the date on
which the Registration Statement becomes effective for the
purpose of considering the approval of this Agreement (in the
case of the Company) and the Parent Shareholders' Approvals
(in the case of Parent). Subject to Section 4.2, the Company
and Parent will, through their respective Boards of
Directors, recommend to their respective shareholders
approval of such matters. Without limiting the generality of
the foregoing, subject to Section 4.2, the Company and Parent
agree that their obligations pursuant to the first sentence
of this Section 5.1 shall not be affected by the
commencement, public proposal, public disclosure or
communication to either party of any Company Takeover
Proposal.
Section 5.2 Preparation of the Registration Statement
and the Joint Proxy Statement. The Company and Parent shall
promptly prepare and file with the SEC the Joint Proxy
Statement and Parent shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement
will be included as a prospectus. Each of Parent and the
Company shall use its reasonable best efforts to have the
Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing.
As promptly as practicable after the Registration Statement
shall have become effective, each of Parent and the Company
shall mail the Joint Proxy Statement to its respective
shareholders. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is
now not so qualified) required to be taken under any
applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger, and the
Company shall furnish all information concerning the Company
and the holders of Company Common Stock as may be reasonably
requested in connection with any such action.
Notwithstanding any other provision of this Agreement to the
contrary (but without limiting the parties respective
termination rights under Section 7.1(h) or (i)), the Company
and Parent may make any disclosure to their respective
shareholders if their respective Boards of Directors
determine in good faith, after receipt of advice from
counsel, that the failure to make such disclosure may
constitute a breach of their fiduciary duties under, or
otherwise violate, applicable law. Subject to the foregoing,
no amendment or supplement to the Joint Proxy Statement or
the Registration Statement will be made by Parent or the
Company without the prior approval of the other party.
Parent and the Company each will advise the other, promptly
after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Parent
Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or of any request by
the SEC for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information.
Section 5.3 Access to Information. Subject to
currently existing contractual and legal restrictions
applicable to Parent or to the Company or any of their
respective Subsidiaries, each of Parent and the Company
shall, and shall cause each of its Subsidiaries to, afford to
the accountants, counsel, financial advisors and other
representatives of the other party hereto reasonable access
to, and permit them to make such inspections as they may
reasonably require of, during normal business hours during
the period from the date of this Agreement through the
Effective Time, all their respective properties, books,
contracts, commitments and records (including, without
limitation, the work papers of independent accountants, if
available and subject to the consent of such independent
accountants) and, during such period, Parent and the Company
shall, and shall cause each of its Subsidiaries to, furnish
promptly to the other (i) a copy of each report, schedule,
registration statement and other document filed by it during
such period pursuant to the requirements of federal or state
securities laws and (ii) all other information concerning its
business, properties and personnel as the other may
reasonably request. No investigation pursuant to this
Section 5.3 shall affect any representation or warranty in
this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
Section 5.4 Compliance with the Securities Act;
Pooling Period.
(a) Prior to mailing the Joint Proxy Statement, the
Company shall deliver to Parent and Parent shall deliver to
the Company a list of names and addresses of those persons
who, in the opinion of the Company or Parent, as the case may
be, may, at the time of the Company Stockholders Meeting or
the Parent Shareholder Meeting, as the case may be, be deemed
to be "affiliates" of the Company within the meaning of Rule
145 under the Securities Act and for the purposes of
applicable interpretations regarding the pooling-of-interests
method of accounting ("Affiliates"). The Company shall
provide to Parent and Parent shall provide to the Company
such information and documents as each shall reasonably
request for purposes of reviewing such lists. There shall be
added to such lists the names and addresses of any other
person which Parent or the Company, as the case may be,
reasonably identifies (by written notice to the other party
within ten business days after receipt of such list) as being
a person who may be deemed to be an Affiliate of the Company
or Parent, as the case may be; provided, however, that no
such person identified by Parent or the Company, as the case
may be, shall be added to the list of Affiliates of the other
party if Parent or the Company, as the case may be, receives
from such other party, on or before the Effective Time, a
reasonably satisfactory opinion of counsel to the effect that
such person is not an Affiliate. Each party shall exercise
all reasonable efforts to deliver or cause to be delivered to
the other party, not later than 30 days prior to the
Effective Time, from each of such Affiliates of such party
identified in the foregoing list, an affiliate letter in the
form attached hereto as Exhibit A-1 or A-2 respectively.
(b) If the Merger would otherwise qualify for pooling-
of-interests accounting treatment, shares of Parent Common
Stock issued to such Affiliates of the Company in exchange
for shares of Company Common Stock shall not be transferable
until such time as financial results covering at least 30
days of combined operations of Parent and the Company have
been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies (the
"Pooling Financial Results"), regardless whether each such
Affiliate has provided the written agreement referred to in
this Section 5.4. Parent agrees to publish the Pooling
Financial Results within 45 days after the end of the first
full fiscal month following the Closing. Except as set forth
in the Registration Rights Agreement, Parent shall not be
required to maintain the effectiveness of the S-4
Registration Statement or any other registration statement
under the Securities Act for the purposes of resale of Parent
Common Stock received in the Merger by such Affiliates and
the certificates representing Parent Common Stock received by
such Affiliates shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of
this Section 5.4.
Section 5.5 Designation of Directors. At the
Effective Time, Parent shall take all actions necessary to
cause three designees of the Company (two of whom shall be
members of senior management of the Company) to be appointed
to its Board of Directors (and, if Parent has any discretion
in the matter, in such classes, as shall be mutually agreed
by Parent and the Company prior to the Closing Date), to
serve until their terms expire or until their successors have
been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Parent Charter or Parent Bylaws.
Section 5.6 NYSE Listing. Parent shall use its
reasonable best efforts to have authorized for listing on the
NYSE, subject to official notice of issuance, the shares of
Parent Common Stock to be issued in connection with the
Merger.
Section 5.7 Fees and Expenses.
(a) Except as provided in this Section 5.7, whether or
not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby including, without
limitation, the fees and disbursements of counsel, financial
advisors and accountants, shall be paid by the party
incurring such costs and expenses, provided that all printing
expenses for the Joint Proxy Statement shall be divided
equally between Parent and the Company.
(b) The Company shall pay to Parent a fee of $80
million if: (i) the Company terminates this Agreement
pursuant to Section 7.1(g); (ii) Parent terminates this
Agreement pursuant to Section 7.1(h); or (iii) any person
makes a Company Takeover Proposal that was not withdrawn by
the date of the Company Stockholders Meeting and, thereafter,
this Agreement is terminated pursuant to Section 7.1(e) and,
within six months of the date of the Company Stockholders
Meeting, the Company enters into a definitive agreement with
respect to, or consummates, a Company Takeover Proposal.
(c) Parent shall pay to the Company a fee of $80
million if (i) the Company terminates this Agreement pursuant
to Section 7.1(i); or (ii) any person makes a Parent Takeover
Proposal that was not withdrawn by the date of the Parent
Shareholders Meeting and, thereafter, this Agreement is
terminated pursuant to Section 7.1(f) and within six months
of the date of the Parent Shareholders Meeting, Parent enters
into a definitive agreement with respect to, or consummates,
a Parent Takeover Proposal.
(d) Any fee payable under Section 5.7(b) or (c) shall
be paid by wire transfer of same-day funds on the date of
termination of this Agreement or, in the case of clause (iii)
of Section 5.7(b) or clause (ii) of Section 5.7(c), on the
date of execution and delivery by the Company or Parent, as
the case may be, of the definitive agreement referred to
therein or, if later, the date of termination of this
Agreement.
Section 5.8 Company Stock Options and Other Equity
Based Awards.
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of the Company or the
holder thereof, each unexpired and unexercised option to
purchase shares of Company Common Stock (a "Company Stock
Option"), under the Company Stock Plans, or otherwise granted
by the Company outside of any Company Stock Plan, will be
assumed by Parent as hereinafter provided. At the Effective
Time, by virtue of the Merger and without any further action
on the part of the Company or the holder thereof, each
Company Stock Option will be automatically converted into an
option (the "Parent Stock Option") to purchase a number of
shares of Parent Common Stock equal to the number of shares
of Company Common Stock that could have been purchased under
such Company Stock Option multiplied by the Conversion
Number, at a price per share of Parent Common Stock equal to
the per share option exercise price specified in the Company
Stock Option, divided by the Conversion Number. Such Parent
Stock Option shall otherwise be subject to the same terms and
conditions as such Company Stock Option. At the Effective
Time, (i) all references in the Company Stock Plans, the
applicable stock option or other awards agreements issued
thereunder and in any other Company Stock Options to the
Company shall be deemed to refer to Parent; and (ii) Parent
shall assume the Company Stock Plans and all of the Company's
obligations with respect to the Company Stock Options.
(b) At the Effective Time, by virtue of the Merger and
without any further action on the part of the Company or the
holder thereof, each restricted stock award of the Company
("Company Equity Based Award") shall be assumed by the Parent
and shall be automatically converted into an identical award
with respect to Parent Common Stock ("Parent Equity Based
Award"), adjusted based on the Conversion Number, and
otherwise subject to the same terms and conditions as the
related Company Equity Based Award.
(c) In respect of each Company Stock Option as
converted into a Parent Stock Option pursuant to Section
5.8(a) and assumed by Parent, and the shares of Parent
Common Stock underlying such option, Parent shall file as
soon as practicable after the Effective Time with the
Securities and Exchange Commission, and keep current the
effectiveness of, a registration statement on Form S-8 (which
may be accomplished by amendment of the registration
statement on Form S-4) or other appropriate form for as long
as such options or equity based awards remain outstanding
(and maintain the current status of the prospectus with
respect thereto). Parent agrees to reserve a number of
shares of Parent Common Stock equal to the number of shares
of Parent Common Stock issuable upon the exercise of such
Company Stock Options.
(d) The Company agrees that it will not grant any stock
options, restricted stock, stock appreciation rights or
limited stock appreciation rights and will not permit cash
payments to holders of Company Stock Options in lieu of the
substitution therefor of Parent Stock Options, as described
in this Section 5.8.
Section 5.9 Convertible Subordinated Notes.
At the Effective Time, by virtue of the Merger and
without any further action on the part of the Company or the
Holder thereof, the Saks Holdings, Inc. 5 1/2% Convertible
Subordinated Notes due September 15, 2006 (the "Convertible
Notes") outstanding at the Effective Time shall become
obligations of the Surviving Corporation and shall remain
outstanding thereafter; and from and after the Effective
Time, the holders of the Convertible Notes shall have the
right to convert such Convertible Notes into such number of
shares of Parent Common Stock and such amount of cash in lieu
of fractional shares received in the Merger by a holder of
the number of shares of Company Common Stock into which such
Convertible Notes were convertible immediately prior to the
Effective Time.
Section 5.10 Reasonable Efforts.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, including, with regard to the
Company, Section 4.2, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) the obtaining
of all necessary actions or nonactions, waivers, consents and
approvals from all Governmental Entities and the making of
all necessary registrations and filings (including filings
with Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the
HSR Act and State Takeover Approvals), (ii) the obtaining of
all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (iv) the
execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by this
Agreement. Parent and the Company shall cooperate with each
other in connection with the making of such filings,
including providing copies of all such documents to the
non-filing party and its advisors prior to filing and, if
requested, accepting all reasonable suggestions in connection
therewith.
(b) The parties hereto will consult and cooperate with
one another, and consider in good faith the views of one
another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or in behalf of any party
hereto in connection with proceedings under or relating to
the HSR Act or any other federal, state or foreign antitrust
or fair trade law. Each party shall promptly notify the
other party of any communication to that party from any
Governmental Entity in connection with any required filing
with, or approval or review by, such Governmental Entity in
connection with the Merger and permit the other party to
review in advance any such proposed communication to any
Governmental Entity. Neither party shall agree to
participate in any meeting with any Governmental Entity in
respect of any such filings, investigation or other inquiry
unless it consults with the other party in advance and, to
the extent permitted by such Governmental Entity, gives the
other party the opportunity to attend and participate
thereat.
(c) Each party shall use all reasonable efforts to not
take any action, or enter into any transaction, which would
cause any of its representations or warranties contained in
this Agreement to be untrue in any material respect or result
in a material breach of any covenant made by it in this
Agreement.
Section 5.11 Public Announcements. The initial press
release shall be a joint press release and thereafter the
Company and Parent each shall consult with the other prior to
issuing any press releases or otherwise making public
announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to
making any filings with any third party and/or any
Governmental Entity (including any national securities
exchange or interdealer quotation service) with respect
thereto, except as may be required by law or by obligations
pursuant to any listing agreement with or rules of the NYSE.
Section 5.12 State Takeover Laws. If any "fair
price" "business combin-ation" 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 5.13 Indemnification; Directors and Officers
Insurance. For not less than six (6) years from and after
the Effective Time, Parent agrees to, and to cause the
Surviving Corporation to, indemnify and hold harmless all
past and present directors, officers and employees 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 Charter and Company By-Laws
and indemnification agreements, if any, in existence on
the date hereof with any directors, officers and employees of
the Company and its Subsidiaries for acts or omissions
occurring at or prior to the Effective Time; provided,
however, that Parent agrees to, and to cause the Surviving
Corporation to, indemnify and hold harmless such persons to
the fullest extent permitted by law for acts or omissions
occurring in connection with the approval of this Agreement
and the consummation of the transactions contemplated hereby.
Parent shall cause the Surviving Corporation to provide, for
an aggregate period of not less than six (6) years from the
Effective Time, the Company's current directors and officers
an insurance and indemnification policy that provides
coverage for events occurring prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the
Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available
coverage; provided, however, that the Surviving Corporation
shall not be required to pay an annual premium for the D&O
Insurance in excess of 200 percent of the last annual premium
paid prior to the date hereof, which premium the Company
represents and warrants to be approximately $450,000.
Section 5.14 Notification of Certain Matters. Parent
shall use its reasonable best efforts to give prompt notice
to the Company, and the Company shall use its reasonable best
efforts to give prompt notice to Parent, of: (i) the
occurrence, or non-occurrence, of any event the occurrence,
or nonoccurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty
contained in this Agreement to 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,
(iii) any material litigation or material governmental
complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or (iv) 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 5.14 shall not limit or otherwise
affect the remedies available hereunder to the party
receiving such notice.
Section 5.15 Employee Matters.
(a) For a period commencing on the date of the
Closing and ending on the date which is the second
anniversary of the date of the signing of this Agreement (the
"Benefit Continuation Period"), the Parent agrees to cause
the Surviving Corporation and its Subsidiaries to provide to
all active employees of the Company who continue to be
employed by the Company as of the Effective Time ("Continuing
Employees") coverage under those benefit plans, arrangements
and policies (including, but not limited to, those relating
to severance pay, except with respect to those Continuing
Employees who are eligible to receive severance in accordance
with Exhibit B attached hereto) that are maintained for the
benefit of such employees by the Company immediately prior to
the date of the Closing (collectively, the "Benefit
Arrangements"); provided, however, that the foregoing shall
not apply to any equity-based compensation program or annual
bonus program. Parent further agrees that (1) no changes to
any of the Benefit Arrangements shall be made during the
Benefit Continuation Period without the prior approval of the
chief executive officer of Saks Fifth Avenue; (2) following
the date of the Closing until December 31, 1998, Continuing
Employees shall be eligible to be granted options to acquire
shares of Parent Common Stock on a basis no less favorable
than similarly situated employees of Parent (or, in the event
a similarly situated employee of Parent is not currently
eligible to be granted options to acquire Parent Common
Stock, on a basis relative to other Continuing Employees
which is substantially consistent with the Company's past
practice); and (3) following the date of the Closing, Parent
shall provide annual bonus programs to Continuing Employees
which are substantially similar to the annual bonus programs
currently being provided for such employees by the Company.
Following December 31, 1998, the Continuing Employees shall
participate in annual bonus programs on the same basis as
similarly situated employees of Parent.
(b) Except to the extent necessary to avoid the
duplication of benefits, Parent will, or will cause the
Surviving Corporation and its Subsidiaries to, give
Continuing Employees full credit for purposes of eligibility,
vesting and determination of the level of benefits under any
employee benefit plans or arrangements maintained by Parent,
the Surviving Corporation or any Subsidiary of Parent or the
Surviving Corporation in which such Continuing Employee is
eligible to participate for such Continuing Employees'
service with the Company or any Subsidiary of the Company to
the same extent recognized by the Company immediately prior
to the Effective Time. Parent will, or will cause the
Surviving Corporation and its Subsidiaries to, (i) waive all
limitations as to preexisting conditions exclusions and
waiting periods with respect to participation and coverage
requirements applicable to the Continuing Employees under any
welfare plan that such employees may be eligible to
participate in after the Effective Time, other than
limitations or waiting periods that are already in effect
with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare plan
maintained for the Continuing Employees immediately prior to
the Effective Time, and (ii) provide each Continuing Employee
with credit for any co-payments and deductibles paid prior to
the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective
Time.
(c) As soon as practicable following and effective as
of the date of the Closing in consideration of future
services to be performed by such employees, Parent shall
cause to be granted to those Continuing Employees selected by
prior mutual agreement of Parent and the current Chief
Executive Officer of the Company, an aggregate of 89,500
restricted shares of Parent Common Stock. Such shares shall
vest at the rate of one third on the second anniversary and
the remaining two thirds on the third anniversary of the
Closing Date. The grant of such restricted shares shall
contain other customary terms and conditions.
(d) Parent and the Company agree to work together as
expeditiously as possible after the date hereof to adopt a
Severance Policy for the benefit of certain Company employees
and to enter into Employment Agreements with certain
executive officers of the Company, substantially in
accordance with the term sheets annexed hereto as Exhibits C
and D, respectively.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of each party
to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have
been duly approved by the requisite vote of stockholders of
the Company in accordance with applicable law and the Company
Charter and Company By-Laws, and the Merger Agreement
Approval and the approval of the Share Issuance shall have
been obtained by the requisite vote of the shareholders of
Parent in accordance with applicable rules of the NYSE,
applicable law, and the Parent Charter and Parent By-Laws.
(b) Listing on the NYSE. The Parent Common Stock
issuable in the Merger shall have been authorized for listing
on the NYSE, subject to official notice of issuance.
(c) HSR. The waiting period (and any extension
thereof) applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(d) Accounting. Parent shall have received a letter
from PWC, dated as of the Effective Time, in customary form,
to the effect that no conditions exist which would preclude
accounting for the Merger as a pooling of interests. The
Company shall have received a letter from PWC, dated as of
the Effective Time, in customary form, to the effect that, as
to the Company, no conditions exist which would preclude
accounting for the Merger as a pooling of interests.
(e) Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions
of the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall
have been initiated or, to the Knowledge of Parent or the
knowledge of Company, threatened by the SEC. All necessary
state securities or blue sky authorizations (including State
Takeover Approvals) shall have been received.
(f) No Governmental Action/Order. There shall not be
pending any action, suit or proceeding brought by any
Governmental Entity which challenges or seeks to enjoin the
Merger or the other transactions contemplated hereby. 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.
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger. The obligation of the Company to
effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and
Warranties. Each of Parent and Sub shall have performed in
all material respects each of its covenants and agreements
contained in this Agreement required to be performed on or
prior to the Effective Time, each of the representations and
warranties of Parent and Sub contained in this Agreement that
is qualified by materiality shall be true and correct on and
as of the Effective Time as if made on and as of such date
(other than representations and warranties which address
matters only as of a certain date which shall be true and
correct as of such certain date) and each of the
representations and warranties that is not so qualified shall
be true and correct in all material respects on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as
of a certain date which shall be true and correct in all
material respects as of such certain date), in each case,
except as contemplated or permitted by this Agreement, and
the Company shall have received a certificate signed on
behalf of each of Parent and Sub by its Chief Executive
Officer and its Chief Financial Officer to such effect;
provided, that, for purposes of determining whether the
condition set forth in this Section 6.2(a) has been
satisfied, no representation, warranty, covenant or agreement
of Parent and Sub shall be deemed untrue, incorrect, not
complied with or not performed as a consequence of the
existence or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or when
taken together with all other facts, circumstances or events
inconsistent with the representations, warranties, covenants
or agreements of Parent and Sub has had or would have a
Material Adverse Effect on Parent and its Subsidiaries taken
as a whole (disregarding for this purpose any materiality
qualification contained in such representations, warranties,
covenants and agreements); provided, further, however that
the foregoing proviso shall not apply with respect to (x)
actions done with the actual prior knowledge of the Board of
Directors of Parent or any of the executive officers of
Parent set forth in Section 3.8 or (y) actions set forth in
subsections (i), (ii) or (iii) of Section 4.1(a).
(b) Tax Opinion. The Company shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP in form
and substance reasonably satisfactory to the Company, dated
the Effective Time, substantially to the effect that on the
basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts
existing as of the Effective Time, for U.S. Federal income
tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Sub and Parent will each be a party to that
reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent
or the Company as a result of the Merger;
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the conversion of their
shares of Company Common Stock into shares of Parent Common
Stock pursuant to the Merger, except with respect to cash, if
any, received in lieu of fractional shares of Parent Common
Stock;
(iv) the aggregate tax basis of the shares of
Parent Common Stock received in exchange for shares of
Company Common Stock pursuant to the Merger (including
fractional shares of Parent Common Stock for which cash is
received) will be the same as the aggregate tax basis of such
shares of Company Common Stock;
(v) the holding period for shares of Parent Common
Stock received in exchange for shares of Company Common Stock
pursuant to the Merger will include the holder's holding
period for such shares of Company Common Stock, provided such
shares of Company Common Stock were held as capital assets by
the holder at the Effective Time; and
(vi) a shareholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such shareholder's basis in the fractional share (as
described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, and Skadden, Arps, Slate, Meagher
& Flom LLP may receive and rely upon representations from
Parent, the Company, and others, including the representation
letters referred to in Section 4.5.
(c) The Company shall have received an opinion of
Sommer & Barnard, PC, counsel to Parent, in form and
substance reasonably satisfactory to the Company, dated the
Closing Date, to the effect that the Parent Common Stock to
be issued in the Merger will, when issued, have been duly
authorized, validly issued, fully paid and not subject to
further assessment. In rendering such opinion, Sommer &
Barnard, PC may rely upon the opinion of State of Tennessee
counsel reasonably satisfactory to the Company.
Section 6.3 Conditions to Obligations of Parent and
Sub to Effect the Merger. The obligations of Parent and Sub
to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following additional
condition:
(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed in all material
respects each of its agreements contained in this Agreement
required to be performed on or prior to the Effective Time,
each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality
shall be true and correct on and as of the Effective Time as
if made on and as of such date (other than representations
and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date)
and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects
on and as of the Effective Time as if made on and as of such
date (other than representations and warranties which address
matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in
each case except as contemplated or permitted by this
Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive
Officer and its Chief Financial Officer to such effect;
provided, that, for purposes of determining whether the
condition set forth in this Section 6.3(a) has been
satisfied, no representation, warranty, covenant or agreement
of the Company shall be deemed untrue, incorrect, not
complied with or not performed as a consequence of the
existence or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or when
taken together with all other facts, circumstances or events
inconsistent with the representations, warranties, covenants
or agreements of the Company, has had or would have a
Material Adverse Effect on the Company and its Subsidiaries
taken as a whole (disregarding for this purpose any
materiality qualification contained in such representations
or warranties); provided, further, however that the foregoing
proviso shall not apply with respect to (x) actions done with
the actual prior knowledge of the Board of Directors of the
Company or any of the executive officers of the Company set
forth in Section 2.8 or (y) actions set forth in subsections
(i), (ii), (iii), (viii) and (ix) of Section 4.1(b).
(b) Affiliate Letters. The letters from Affiliates
required by Section 5.4 shall have been delivered.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after any approval of the matters presented in
connection with the Merger by the shareholders of the Company
or Parent:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company (provided such
party is not then in material breach) 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 the effect set forth
in the proviso to Section 6.2(a) or Section 6.3(a), as
applicable, and has not been cured within ten 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 (provided such
party is not then in material breach) if there has been a
breach by the other party (in the case of Parent, including
any breach by Sub) of any representation or warranty of such
other party contained in this Agreement, which breach has the
effect set forth in the proviso to Section 6.2(a) or Section
6.3(a), as applicable, and which breach has not been cured
within ten business days following receipt by the breaching
party of written notice of the breach; provided, however,
that if any such breach is curable by the breaching party
through the exercise of the breaching party's best efforts
and for so long as the breaching party shall be so using its
best efforts to cure such breach, the non-breaching party may
not terminate this Agreement pursuant to this paragraph;
(d) by Parent or the Company
(i) if any governmental entity issues an order,
decree or ruling or takes any other action permanently
enjoining, restraining or otherwise prohibiting the Merger
and such order, decree or ruling shall have become final and
nonappealable; or
(ii) if the Merger has not been effected on or
prior to the close of business on March 31, 1999 (the
"Termination Date"); provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(d)
shall not be available to any party whose failure to fulfill
any of its obligations contained in this Agreement has been
the cause of, or resulted in, the failure of the Merger to
have occurred on or prior to the aforesaid date;
(e) by Parent or the Company if the stockholders of the
Company do not approve this Agreement at the Company
Stockholders Meeting or any adjournment or postponement
thereof,
(f) by Parent or the Company if the Merger Agreement
Approval and approval of the Share Issuance are not obtained
at the Parent Shareholder Meeting or any adjournment or
postponement thereof;
(g) by the Company in connection with the concurrent
execution by the Company of an agreement with respect to a
Superior Takeover Proposal that the Board of Directors of the
Company has determined, in good faith, in the exercise of its
fiduciary duties after receipt of advice from counsel and
after consultation with its financial advisors, is more
favorable to the Company's stockholders than the Merger. As
used herein, a "Superior Takeover Proposal" means a Company
Takeover Proposal for more than 50% of any class of equity
securities of the Company or any of its Significant
Subsidiaries, or any tender offer (including self-tenders) or
exchange offer than, if consummated, would result in any
person beneficially owning more than 50% of any class of
equity securities of the Company or any of its Significant
Subsidiaries, or a majority of the assets of, the Company or
any of its Significant Subsidiaries;
(h) by Parent if (i) the Board of Directors of the
Company shall not have recommended, or shall have resolved
not to recommend, or shall have modified or withdrawn in a
manner adverse to Parent its recommendation of the Merger, or
(ii) the Board of Directors of the Company shall have
recommended to the stockholders of the Company any Company
Takeover Proposal or shall have resolved to do so;
(i) by the Company if (i) the Board of Directors of
Parent shall not have recommended, or shall have resolved not
to recommend or shall have modified or withdrawn its
recommendation in a manner adverse to the Company of the
Parent Shareholders' Approvals, or (ii) the Board of
Directors of Parent shall have recommended to the
shareholders of the Parent any Parent Takeover Proposal or
shall have resolved to do so; and
(j) by the Company prior to the Company Stockholders
Meeting if the Average Parent Stock Price is less than
$30.52. As used in this Agreement, (i) "Average Parent Stock
Price" means the average of the daily per share Closing Price
of Parent Common Stock for the fifteen (15) consecutive
Trading Days ending on the third Trading Day prior to the
Company Stockholders Meeting.
The right of any party hereto to terminate this
Agreement pursuant to this Section 7.1 shall remain operative
and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any person
controlling any such party or any of their respective
officers or directors, whether prior to or after the
execution of this Agreement.
Section 7.2 Effect of Termination. In the event of
termination of this Agreement by either Parent or the
Company, as provided in Section 7.1, this Agreement shall
forthwith terminate and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective
officers or directors (except for the last sentence of
Section 5.3, the entirety of Section 5.7, and Article VIII
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 at any time before or after approval of
the matters presented in connection with the Merger by the
shareholders of Parent and the Company; provided, however,
after any such approval, no amendment shall be made which by
law requires further approval by 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) subject to the
proviso of Section 7.3, 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.
Section 7.5 Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement
pursuant to Section 7.1, an amendment of this Agreement
pursuant to Section 7.3 or an extension or waiver pursuant to
Section 7.4 shall, to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors
or the duly authorized designee of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and
Warranties. The representations and warranties 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.
Section 8.2 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given when delivered personally, one day after being
delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties
at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn.: Mr. R. Brad Martin
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn.: Brian J. Martin, Esquire
with copies to:
James A. Strain, Esquire
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
Richard Hall, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
(b) if to the Company, to:
Saks Holdings, Inc.
12 East 49th Street, 19th Floor
New York, NY 10017
Attn: Joan F. Krey
with copies to:
Eileen Nugent Simon, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10019
Charles K. Marquis, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
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. Except for the Confidentiality Agreement
between the parties dated June 24, 1998, this Agreement is
the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof. Other than Section
5.8, the second sentence of Section 5.4(b) and Section
5.15(d), this Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies
hereunder.
Section 8.6 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of
laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE ACTIONS OF PARENT, THE COMPANY, OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
THEREOF.
Section 8.7 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated
hereby are not affected in any manner materially adverse to
any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest
extent possible.
Section 8.9 Enforcement of this Agreement. The
parties acknowledge and agree that any payment made pursuant
to Section 5.6 does not relieve either party from any
liability it otherwise may have for breach of this Agreement.
(a) The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction,
such remedy being in addition to any other remedy to which
any party is entitled at law or in equity. Each party hereto
hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the Courts of the State of
Delaware for any actions, suits or proceedings arising out of
or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to
commence any action, suit or proceeding relating thereto
except in such courts), and further agrees that service of
any process, summons, notice or document by U.S. registered
mail to the addresses set forth herein shall be effective
service of process for any such action, suit or proceeding
brought against the each party in such court. Each party
hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby, in the United States District Courts
located in the State of Delaware (unless such courts assert
no jurisdiction, in which case each party consents to the
exclusive jurisdiction of the courts of the State of
Delaware). Each party hereby further irrevocably and
unconditionally waives and agrees not to plead or to claim in
any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient
forum.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their respective officers
thereunto duly authorized all as of the date first written
above.
PROFFITT'S INC.
By:
Name:
Title:
FIFTH MERGER CORPORATION
By:
Name:
Title:
SAKS HOLDINGS, INC.
By:
Name: Philip B. Miller
Title: Chairman of the
Board
and Chief Executive
Officer
EXECUTION COPY
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of
July 4, 1998, is between PROFFITT'S, INC., a Tennessee corporation
("Parent"), and certain specified stockholders of SAKS HOLDINGS,
INC., a Delaware 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 stockholders 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;
WHEREAS, the stockholders of the Company party hereto are the
only affiliates of the Company that will be limited under Rule 145
in their ability to dispose of their shares of Parent Common Stock
received in the Merger; 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) "Holder" means any of the former stockholders of the
Company listed on Exhibit A attached hereto or their respective
successors, permitted transferees or assignees.
(c) "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.
(d) "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 (x) 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, (ii) if such
securities shall have been distributed pursuant to Rule 144, Rule
144A or Rule 145(d) and (y) all such securities held by any Holder
(and all other Holders with whom such Holder should aggregate sales
under Rule 144(e)) shall cease to be Registrable Securities if such
securities do not exceed the amount specified in Rule 144(e)(1)(i).
(e) "Registration Expenses" means all reasonable expenses in
connection with any registration of securities pursuant to this
Agreement including, without limitation, the following: (i) SEC
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.
(f) "Restricted Securities" has the same meaning as in Rule
144(a)(3) (as hereinafter defined).
(g) "Rule 144" means Rule 144 promulgated under the
Securities Act, or any successor rule to similar effect.
(h) "Rule 144A" means Rule 144A promulgated under the
Securities Act, or any successor rule to similar effect.
(i) "Rule 145" means Rule 145 promulgated under the
Securities Act, or any successor rule to similar effect.
(j) "SEC" means the United States Securities and Exchange
Commission.
(l) "Securities Act" means the Securities Act of 1933, as
amended, or any successor statute, and the rules and regulations of
the SEC promulgated thereunder.
<PAGE>
2. Demand Registration.
(a) At any time after the publication by the Parent of
financial results covering at least 30 days of post Merger combined
operations, upon written notice from the Representatives (as
hereinafter defined) 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, 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 the 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 earliest
of (A) the abandonment of such offering or (B) 120 days after
receipt by the Holder requesting registration of the 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)
90 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) if such registration request
is for a number of Registrable Securities with a then market
value of less than $150 million or (B) more than 36 months
have elapsed since the Effective Time;
(iv) at least four months have elapsed since the last
request made by the Representatives on behalf of any Holders;
and
(v) no more than three demands under this Section 2
shall be required to be honored.
(b) Notwithstanding any other provision of this Agreement to
the contrary:
(i) a registration requested on behalf of 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 or (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, all of
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 an act
or omission by such Holder) or waived by the underwriters; and
(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
(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 to Parent as a co-manager of such
underwritten offering and Parent shall have the right to designate
the 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 such person is advised in writing (with a
copy to the Parent) by the 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 described in paragraph (c) of this Section), 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 Investcorp Management Services, LTD., as
representative of the Holders (the "Representative") of its
intention to do so at least 20 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 other 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 Representative 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 (with a copy to the Representative) that, in such firm's
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: (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
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.
Parent agrees to pay all Registration Expenses with respect to an
offering pursuant to Section 2 hereof, provided that, Parent shall
have no obligation to pay any underwriting discounts, commissions
or fees or the fees and expenses of Holders' counsel relating to
Registrable Securities, all of which 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 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 Representative 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 Representative or such underwriter may
reasonably request in order to facilitate the public sale of the
Registrable 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 may
be necessary to offer and sell the Registrable Securities in those
jurisdictions, 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 the
Representatives 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
letter addressed to the Representative, 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 Representative 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 each Holder of Registrable Securities
included in such registration (each a "Selling Holder") 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 in respect of 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 Representative, prepare and furnish to the
Representative 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) furnish unlegended certificates representing ownership of
the Registrable Securities being sold in such denominations as
shall be requested by the Representative or the underwriters; and
(h) 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.
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 7 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 agreements with respect to secondary distributions,
including without limitation, indemnities and contribution
substantially to the effect and to the extent provided in Section
7 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 Representative 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 the Representative 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 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 7,
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
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 7 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 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 party; 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 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. No Transfer of Registration Rights.
(a) Holders may not transfer any portion of their rights
under this Agreement except that Holders may transfer such rights
to transferees who agree in writing 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.
10. 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.
(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.
750 Lakeshore Drive
Birmingham, Alabama 35211
Attn: Mr. R. Brad Martin
Facsimile Number: (205) 940-4468
Proffitt's, Inc.
750 Lakeshore Drive
Birmingham, Alabama 35211
Attn: Mr. Brian J. Martin, Esquire
Facsimile Number: (205) 940-4468
with copies to:
James A. Strain, Esquire
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
Facsimile Number: (317) 236-9802
(ii) if to the Representative:
Investcorp Management Services, LTD.
P.O. Box 1111
West Wind Building
Attn: H. Richard Lukens III
Facsimile Number: (809) 949-7920
With copies to:
Charles K. Marquis, Esq.
Gibson, Dunn & Crutcher LLP
New York, NY 10166
Facsimile Number: (212) 351-4035
and
(iii) if to a Holder of Registrable Securities, to the
Representative who shall provide such
communications to the Holders;
or to such other address as may have previously furnished to the
other party 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 DELAWARE.
(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.
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.
PARENT:
PROFFITT'S, INC.,
by
Name:
Title:
SHAREHOLDERS:
SAKS FIFTH AVENUE HOLDINGS II LTD.,
by
Name:
Title:
SAKS FIFTH AVENUE INVESTMENTS II LTD.,
by
Name:
Title:
SFA FOLIO LIMITED,
by
Name:
Title:
SFA LABEL LIMITED,
by
Name:
Title:
SFA COLLECTION LIMITED,
by
Name:
Title:
SFA DESIGNER LIMITED,
by
Name:
Title:
FLAIR LIMITED,
by
Name:
Title:
CHEMICAL NOMINEES (GUERNSEY) LTD.,
by
Name:
Title:
SAKS INVESTMENTS LIMITED,
by
Name:
Title:
SAKS EQUITY LIMITED,
by
Name:
Title:
SFA CAPITAL LIMITED,
by
Name:
Title:
BALLET LIMITED,
by
Name:
Title:
DENARY LIMITED,
by
Name:
Title:
GLEAM LIMITED,
by
Name:
Title:
HIGHLANDS LIMITED,
by
Name:
Title:
NOBLE LIMITED,
by
Name:
Title:
OUTRIGGER LIMITED,
by
Name:
Title:
QUILL LIMITED,
by
Name:
Title:
RADIAL LIMITED,
by
Name:
Title:
SHORELINE LIMITED,
by
Name:
Title:
ZINNIA LIMITED,
by
Name:
Title:
EXHIBIT A
Saks Fifth Avenue Holdings II Ltd
Saks Fifth Avenue Investments II Ltd.
SFA Folio Limited
SFA Label Limited
SFA Collection Limited
SFA Designer Limited
Flair Limited
Chase Nominees (Guernsey) Ltd.
Saks Investments Limited
Saks Equity Limited
SFA Capital Limited
Ballet Limited
Denary Limited
Gleam Limited
Highlands Limited
Noble Limited
Outrigger Limited
Quill Limited
Radial Limited
Shoreline Limited
Zinnia Limited
EXECUTION COPY
Exhibit 4.2
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, dated as of July 4, 1998, is
among PROFFITT'S, INC., a Tennessee corporation ("Parent"), and
the individuals and other parties listed on Schedule A hereto
(each, a "Stockholder" and, collectively, the "Stockholders").
WHEREAS, Parent, FIFTH MERGER CORPORATION, a Delaware
corporation ("Sub"), and SAKS HOLDINGS, INC. (the "Company"),
propose to enter into an Agreement and Plan of Merger dated as of
the date hereof (as the same may be amended or supplemented, the
"Merger Agreement"; capitalized terms used but not defined herein
shall have the meanings set forth in the Merger Agreement)
providing for the merger of Sub with and into the Company; and
WHEREAS, each Stockholder owns the number of shares of
Company Common Stock set forth on Schedule A hereto (such shares
of Company Common Stock, together with any other shares of
capital stock of the Company acquired by such stockholder after
the date hereof and during the term of this Agreement, being
collectively referred to herein as the "Subject Shares" of such
Stockholder); and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Parent has requested that each Stockholder
enter into this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of Each
Stockholder. Each Stockholder hereby, severally and not jointly,
represents and warrants to the Parent as of the date hereof in
respect of itself as follows:
(a) Authority; Execution and Delivery; Enforceability. The
Stockholder has all requisite power and authority to execute this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by the Stockholder of this
Agreement and consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the
part of the Stockholder. The Stockholder has duly executed and
delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms.
The execution and delivery by the Stockholder of this Agreement
do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or
to loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any lien upon any of the
properties or assets of the Stockholder under, any provision of
any contract to which the Stockholder is a party or by which any
properties or assets of the Stockholder are bound or, subject to
the filings and other matters referred to in the next sentence,
any provision of any judgment or applicable law applicable to the
Stockholder or the properties or assets of the Stockholder. No
consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with
respect to the Stockholder in connection with the execution,
delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby, other than (i) compliance
with and filings under the HSR Act, if applicable to the
Stockholder's receipt in the Merger of Parent Common Stock, and
(ii) such reports under Sections 13(d) and 16 of the Exchange Act
as may be required in connection with this Agreement and the
transactions contemplated hereby.
(b) The Subject Shares. The Stockholder is the record and
beneficial owner of, or is the trustee of a trust that is the
record holder of, and whose beneficiaries are the beneficial
owners of, and has good and marketable title to, the Subject
Shares set forth opposite its name on Schedule A attached hereto,
free and clear of any liens. The Stockholder does not own, of
record or beneficially, or have any voting or dispositive control
in respect of, any shares of capital stock of the Company other
than the Subject Shares set forth on Schedule A. The Stockholder
has the sole right to vote the Subject Shares set forth opposite
its name on Schedule A, and none of such Subject Shares is
subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting of such Subject Shares,
except as contemplated by this Agreement.
SECTION 2. Representations and Warranties of the Parent.
The Parent hereby represents and warrants to each Stockholder as
follows: The Parent has all requisite corporate power and
authority to execute this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by
the Parent of this Agreement and consummation of the transactions
contemplated hereby have been duly authorized by all necessary
action on the part of the Parent. The Parent has duly executed
and delivered this Agreement, and this Agreement constitutes the
legal, valid and binding obligation of the Parent, enforceable
against the Parent in accordance with its terms. The execution
and delivery by the Parent of this Agreement do not, and the
consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any lien upon any of the
properties or assets of the Parent under, any provision of any
contract to which the Parent is a party or by which any
properties or assets of the Parent are bound or, subject to the
filings and other matters referred to in the next sentence, any
provision of any judgment or applicable law applicable to the
Parent or the properties or assets of the Parent. No consent of,
or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to
the Parent in connection with the execution, delivery and
performance of this Agreement or the consummation of the
transactions contemplated hereby, other than (i) compliance with
and filings under the HSR Act in connection with the Merger and
(ii) such reports under section(s) 13(d) and 16 of the Exchange
Act as may be required in connection with this Agreement and the
transactions contemplated hereby.
SECTION 3. Covenants of Each Stockholder. Each
Stockholder, severally and not jointly, covenants and agrees as
follows;
(a) At any meeting of the stockholders of the Company
called to seek the Company Shareholder Approvals or in any other
circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger
Agreement, any other Transaction Agreement, the Merger or any
other transaction contemplated thereby is sought, the Stockholder
shall, including by initiating a written consent solicitation if
requested by the Company, vote (or cause to be voted) the Subject
Shares of the Stockholder in favor of the Company Shareholder
Approvals.
(b) Other than this Agreement, the Stockholder shall not
sell, transfer, pledge, assign or otherwise dispose of (including
by gift) (collectively, "Transfer"), or enter into any contract,
option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Subject Shares
to any person other than pursuant to the Merger; provided,
however, that the foregoing requirement shall not be applicable
to any Transfer to any person who agrees to be subject to the
provisions hereof.
(c) The Stockholder shall not, nor shall it authorize or
permit any officer, director or employee of, or any investment
banker, attorney or other adviser or representative of, the
Stockholder to, directly or indirectly solicit, initiate or
encourage the submission of, any Company Takeover Proposal. The
Stockholder promptly shall advise the Parent orally and in
writing of its receipt of any Company Takeover Proposal, the
identity of the person making any such Company Takeover Proposal,
the material terms of any such Company Takeover Proposal and any
changes to such material terms.
(d) The Stockholder shall use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger
and the other Transactions.
(e) The Stockholder hereby consents to and approves the
actions taken by the Company Board in approving the Transaction
Agreements.
SECTION 4. Termination. This Agreement shall terminate
upon the earliest of (i) the Effective Time, (ii) the termination
of the Merger Agreement in accordance with its terms and (iii)
the Termination Date, other than with respect to the liability of
any party for breach hereof prior to such termination.
SECTION 5. Additional Matters.
(a) Each Stockholder shall, from time to time, execute and
deliver, or cause to be executed and delivered, such additional
or further consents, documents and other instruments as the
Parent may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
(b) Each Stockholder signs solely in its capacity as the
record holder and beneficial owner of, or the trustee of a trust
whose beneficiaries are the beneficial owners of, such
Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by any Stockholder in his capacity as an
officer or director of the Company to the extent specifically
permitted by the Merger Agreement.
SECTION 6. General Provisions.
(a) Amendments. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of
delivery) to the Parent in accordance with Section 8.2 of the
Merger Agreement and to the Stockholders at their respective
addresses set forth on Schedule A hereto (or at such other
address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to
this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words without limitations.
(d) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any rule or 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 or legal substance of
the transactions contemplated hereby is 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 hereto shall negotiate in good
faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement. This Agreement shall become effective against
the Parent when one or more counterparts have been signed by the
Parent and delivered to each Stockholder. This Agreement shall
become effective against any Stockholder when one or more
counterparts have been executed by such Stockholder and delivered
to the Parent. Each party need not sign the same counterpart.
(f) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (i) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and (ii) is
not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
(g) Governing Law. This Agreement shall he governed by, and
construed in accordance with, the laws of the State of Delaware
regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.
(h) Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise,
by the Parent without the prior written consent of each
stockholder or by any Stockholder without the prior written
consent of the Parent, and any purported assignment without such
consent shall be void. Subject to the preceding sentences, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
(i) Enforcement. The parties 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 of this Agreement in any Delaware state
court or any Federal court located in the State of Delaware, this
being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any
Delaware state court or any Federal court located in the State of
Delaware in the event any dispute arises out of this Agreement or
any Transaction, (ii) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that it will not bring
any action relating to this Agreement or any Transaction in any
court other than an Delaware state court or any Federal court
sitting in the State of Delaware and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to
or arising out of this Agreement or any transaction contemplated
hereby.
IN WITNESS WHEREOF, each party has duly executed this
Agreement, all as of the date first written above.
PARENT:
PROFFITT'S, INC.,
by
Name:
Title:
SHAREHOLDERS:
SAKS FIFTH AVENUE HOLDINGS II LTD.,
by
Name:
Title:
SAKS FIFTH AVENUE INVESTMENTS II LTD.,
by
Name:
Title:
SFA FOLIO LIMITED,
by
Name:
Title:
SFA LABEL LIMITED,
by
Name:
Title:
SFA COLLECTION LIMITED,
by
Name:
Title:
SFA DESIGNER LIMITED,
by
Name:
Title:
FLAIR LIMITED,
by
Name:
Title:
CHEMICAL NOMINEES (GUERNSEY) LTD.,
by
Name:
Title:
SAKS INVESTMENTS LIMITED,
by
Name:
Title:
SAKS EQUITY LIMITED,
by
Name:
Title:
SFA CAPITAL LIMITED,
by
Name:
Title:
BALLET LIMITED,
by
Name:
Title:
DENARY LIMITED,
by
Name:
Title:
GLEAM LIMITED,
by
Name:
Title:
HIGHLANDS LIMITED,
by
Name:
Title:
NOBLE LIMITED,
by
Name:
Title:
OUTRIGGER LIMITED,
by
Name:
Title:
QUILL LIMITED,
by
Name:
Title:
RADIAL LIMITED,
by
Name:
Title:
SHORELINE LIMITED,
by
Name:
Title:
ZINNIA LIMITED,
by
Name:
Title:
SCHEDULE A
Name of Stockholder Number of Shares of
Company Common Stock Owned
Saks Fifth Avenue Holdings II
Ltd 1,657,899
Saks Fifth Avenue Investments II
Ltd. 1,657,899
SFA Folio Limited 40,207
SFA Label Limited 40,207
SFA Collection Limited 40,207
SFA Designer Limited 40,207
Flair Limited 3,124,914
Chase Nominees (Guernsey) Ltd. 818,440
Saks Investments Limited 24,000
Saks Equity Limited 24,000
SFA Capital Limited 2,250,000
Ballet Limited 1,400
Denary Limited 1,400
Gleam Limited 1,400
Highlands Limited 1,400
Noble Limited 1,400
Outrigger Limited 1,400
Quill Limited 1,400
Radial Limited 1,400
Shoreline Limited 1,400
Zinnia Limited 1,400
PROFFITT'S, INC. AND SAKS HOLDINGS, INC.
ANNOUNCE MERGER AGREEMENT
Contacts: Proffitt's: Julia Bentley
(423) 981-6243
Saks: Jaqui Lividini (media)
(212) 940-4245
Stacey Bibl (investors)
(212) 940-5262
The management of Proffitt's, Inc. ("Proffitt's") and Saks
Holdings, Inc. ("Saks") have scheduled a conference call for the
investment community at 11:00 a.m. Eastern Time on Monday, July
6, 1998, to discuss the proposed business combination of the two
companies. to participate, please call (212) 346-7485 (10
minutes prior to call).
The management of Proffitt's and Saks will host a luncheon for
the investment community in New York at the St. Regis Hotel on
Tuesday, July 7, 1998, at 12:00 noon to discuss the proposed
merger. For luncheon reservations, please call Katy Ostrander at
(212) 816-8329.
The management of Proffitt's and Saks will host a luncheon for
the investment community in Boston at the Boston Bay Club on
Wednesday, July 8, 1998, at 12:00 noon to discuss the proposed
merger. For luncheon reservations, please call Katy Ostrander at
(212) 816-8329.
Birmingham, Alabama and New York, New York (July 5,
1998) Proffitt's, Inc. (NYSE: PFT) ("Proffitt's" or the
"Company") and Saks Holdings, Inc. (NYSE: SKS) ("Saks"), two of
the nation's premier retailers, jointly announced today that they
have entered into a definitive agreement and plan of merger in
which the two companies will be combined. The Boards of
Directors of both Proffitt's and Saks have unanimously approved
the merger. Saks is the holding company for Saks Fifth Avenue.
Under the terms of the transaction, shareholders of Saks will
receive .82 share of Proffitt's, Inc. Common Stock for each share
of Saks Holdings, Inc. Common Stock. Proffitt's will issue
approximately 52.5 million shares in the transaction,
representing a transaction equity value of approximately $2.1
billion, based upon Proffitt's July 2, 1998 closing stock price
of $40.6875 per share. The merger is expected to be completed
late in the third quarter or early in the fourth quarter of 1998.
The transaction is subject to certain conditions, including
regulatory approval under the Hart-Scott-Rodino Antitrust
Improvements Act, an effective registration statement filed with
the Securities and Exchange Commission, and approval by the
shareholders of both companies. The combination has been
structured as a tax-free transaction and will be accounted for as
a pooling of interests.
Upon completion of the merger, Saks Fifth Avenue will become a
subsidiary of Proffitt's, Inc., and the corporate name of
Proffitt's, Inc. will be changed to Saks Incorporated. R. Brad
Martin, Chairman and Chief Executive Officer of Proffitt's, Inc.,
will be Chairman and Chief Executive Officer of the combined
parent corporation, Saks Incorporated. Saks Incorporated will be
headquartered in Birmingham.
Philip B. Miller will continue in his role as Chairman and Chief
Executive Officer of Saks Fifth Avenue, and Brian E. Kendrick
will remain Vice Chairman and Chief Operating Officer. Upon
consummation of the merger, Messrs. Miller and Kendrick will join
the Board of Directors of Saks Incorporated. Saks Fifth Avenue's
merchandising, store operations, marketing, and various other
support functions will continue to be headquartered in New York.
Investcorp, the global investment group, and its affiliates, who
own approximately 18% of the outstanding shares of Saks Holdings,
Inc., have signed an agreement to vote their shares in favor of
the proposed merger. Investcorp and these affiliates will
receive registration rights for their Proffitt's common stock
received in the transaction.
Proffitt's, Inc. is a leading regional department store company
currently operating 230 department stores and 4 free-standing
furniture stores in 24 states under the store names of
Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson
Pirie Scott, Boston Store, and Bergner's. For the twelve months
ended May 2, 1998, Proffitt's, Inc. achieved record sales of $3.6
billion, net income before non-recurring items of $139.6 million,
and diluted earnings per share before non-recurring items of
$1.54. The Company has grown revenues and earnings per share at
annual compound rates of approximately 78% and 20%, respectively,
over the last five fiscal years.
Saks operates 41 Saks Fifth Avenue Full-Line stores (led by its
flagship store on New York's Fifth Avenue), 8 Saks Fifth Avenue
Resort stores, 7 Saks Fifth Avenue Main Street stores, and 40 Off
5th stores throughout 27 states. Saks also operates Folio, a
direct mail business. For the twelve months ended May 2, 1998,
Saks achieved sales of $2.3 billion, net income of $57 million,
and diluted earnings per share of $.89. Saks has grown revenues
and operating earnings at annual compound rates of approximately
10% and 61%, respectively, over the last five fiscal years.
The combined corporation will operate 330 stores in 38 states
with 1998 revenues in excess of $6 billion.
Mr. Martin, commenting on the merger said, "This transaction
combines two of the most compelling and complementary growth
companies in retailing today. Saks Fifth Avenue is the premier
brand in global luxury goods retailing and certainly one of the
most recognized retailing franchises in the world. Philip
Miller, Brian Kendrick and the dedicated associates at Saks Fifth
Avenue have done a wonderful job of nurturing this distinguished
brand while their partners at Investcorp and Saks' other
shareholders and financial institutions have provided the
financial platform with which to do so."
Mr. Miller noted, "Proffitt's is known for creating shareholder
value through successful business combinations and for its
outstanding financial performance. Proffitt's is indeed a great
partner for Saks Fifth Avenue. Our companies have many
similarities, including common cultures and values. The
successful execution of our operating and growth strategies have
led to solid financial performance for both companies. We are
confident that Proffitt's growth orientation will create further
opportunities for our team."
Mr. Martin noted, "Saks Fifth Avenue has successfully capitalized
on the growing demand for luxury merchandise. We expect that
this market will continue to achieve above-average growth due to
favorable income and age demographics, along with an overall
increased consumer preference for prestige and quality
merchandise.
"Proffitt's financial capacity, operating strength, and long-term
commitment to this unique business make Proffitt's a wonderful
home for Saks Fifth Avenue. Proffitt's will provide Saks Fifth
Avenue the infrastructure support and funding to successfully
capitalize on its many growth opportunities. We see prospects to
expand the Saks Fifth Avenue brand on a global basis, in both its
core business and into new retail formats."
Mr. Martin continued, "Our two companies are well positioned to
create substantial value from this combination. Proffitt's has
successfully demonstrated its ability to deliver substantial cost
savings and other synergies as a part of its acquisition
processes, and we intend to achieve substantial savings in this
combination as well.
"We expect to realize cost and growth synergies of approximately
$10 to $12 million in 1998, $60 to $70 million in 1999, and $75
to $85 million in 2000 related to this transaction. As soon as
practical, designated teams from both Proffitt's and Saks will
begin identifying best practices and synergies that will allow us
to most effectively and efficiently operate our business and
position the Company for further growth."
Cost reductions related to the merger are expected to come in a
variety of forms, such as through the consolidation of certain
back office functions and the elimination of certain duplicate
corporate expenses. Additionally, many best practices of the two
companies will be implemented throughout the combined
corporation. Examples include shared technology and systems and
enhanced logistics management at the distribution facilities.
Savings will also be recognized on a combined basis through the
purchasing power of increased scale in such areas as property and
casualty insurance, advertising media, and supply purchasing.
Martin noted, "Through this merger, we believe there are also
meaningful opportunities to improve the merchandising operations
of the combined business through expanded fashion direction for
the entire corporation, leveraging private brand development and
sourcing capabilities, and strengthened vendor relationships.
Saks Fifth Avenue will add a unique fashion perspective in
emerging styles and trends that can be translated into further
differentiation in our assortments throughout the corporation.
"The combination also provides the opportunity for cross-marketing
to the 5.2 million proprietary credit card customers of
our existing operations with the 3.3 million proprietary credit
card customers of Saks. The database management, telemarketing,
and distribution infrastructure of Saks' direct mail business,
Folio, will be leverage across Proffitt's existing customer base.
In addition, this infrastructure can provide us with growth
opportunities in the electronic commerce arena."
Mr. Martin further commented, "Based upon achieving the synergies
outlined above, we expect this transaction to be accretive to
diluted earnings per share of the Company by $.01 to $.02 in the
fourth quarter of 1998 and $.03 to $.05 in 1999. Taking into
account this expect accretion, we believe diluted earnings per
share for the combined corporation should approximate $.96 in the
fourth quarter of 1998, $1.66 for the fully year of 1998, and
$2.20 in 1999."
Upon closing the transaction, the Company will r certain
non-recurring charges related to the merger of the two businesses.
The details of these charges will be disclosed shortly after
closing. The majority of these charges are expected to be
incurred in the quarter that the transaction is consummated.
Additional charges will be incurred throughout the balance of
1998 and in 1999 as certain of the operations of the two
businesses are integrated.
Mr. Martin concluded, "We are most pleased to announce the
Company's planned name change to Saks Incorporated, which as a $6
billion enterprise, will operate stores under the following
nameplates: Saks Fifth Avenue (Full-Line, Resort, and Main
Street stores), Off 5th, Proffitt's, McRae's, Younkers, Parisian,
Herberger's, Carson Pirie Scott, Boston Store, and Bergner's.
The Company will also operate Folio, its direct mail business.
Through combining the Saks Fifth Avenue brand with a
geographically diversified department store business, we believe
that Saks Incorporated will be well positioned to create a most
promising future."
This announcement is neither an offer of securities nor a
solicitation of proxies. An offering will only be made by means
of a prospectus which is part of an effective registration
statement, and proxies will only be solicited pursuant to a
definitive proxy statement.
Certain of the information presented in the press release is
"forward-looking" information within the definition of the
Federal securities laws. The forward-looking information
presented in the press release is premised on many factors, some
of which are outlined below. Actual consolidated results might
differ materially from projected forward-looking information if
there are any material changes in management's assumptions.
The forward-looking information and statements are based on a
series of preliminary projections and estimates, are contingent
upon the timely completion of the merger transaction with Saks,
and involve certain risks and uncertainties. Potential risks and
uncertainties include such factors as the level of consumer
spending for apparel and other merchandise carried by the
Company; the competitive pricing environment within the
department and specialty store industries; the effectiveness of
planned advertising, marketing, and promotional campaigns;
appropriate inventory management; realization of planned
synergies; effective cost containment; and solution of Year 2000
and other systems issues by the Company and its suppliers. For
additional information regarding these and other risk factors,
please refer to the Company's public filings with the Securities
and Exchange Commission, which may be accessed via EDGAR through
the internet at www.sec.gov.
####
SPECIAL CONFERENCE CALL Exhibit 2
PROFFITT'S/SAKS ANNOUNCEMENT
July 6, 1998
Brad Martin
This is Brad Martin, the Chairman and Chief Executive officer of
Proffitt's, Inc. I'm joined on the call today by Philip Miller,
the Chairman and CEO of Saks Holdings, and Julia Bentley, Senior
VP of Investor Relations for Proffitt's. (Introduce any others on
the call).
I would like to thank each of you for taking the time to join us
for the call today. The purpose of our call is to outline the
business combination between Proffitt's, Inc. and Saks and to
answer questions you may have.
Proffitt's will combine its business with Saks Holdings, Inc. in a
stock-for-stock, tax-free transaction that will be accounted for as
a pooling of interests. Each share of Saks' Common Stock will be
exchanged for .82 shares of Proffitt's Common Stock. Proffitt's
will issue approximately 52.5 million shares in the transaction,
representing a transaction equity value of approximately $2.1
billion, based on Proffitt's July 2 closing stock price of $40.69
per share.
The Boards of both companies unanimously approved the transaction.
The merger is expected to be completed late in the third quarter or
early in the fourth quarter of this year. The merger is subject to
customary conditions, including an effective registration statement
filed with the SEC, clearance under the Hart-Scott-Rodino Antitrust
Act, and approval by the shareholders of both companies.
Upon completion of the transaction Saks Fifth Avenue will become,
a subsidiary of Proffitt's, Inc., and the corporate name of
Proffitt's will be changed to Saks Incorporated. I will be the
Chairman and CEO of the combined corporation, Saks Incorporated,
which will be headquartered in Birmingham. Saks Fifth Avenue's
merchandising, store operations, marketing, and various support
functions will continue to be headquartered in New York. Philip
Miller will continue in his role as Chairman and CEO of Saks Fifth
Avenue, and Brian Kendrick will remain Vice Chairman and COO of
Saks Fifth Avenue.
Please allow me to give you a brief overview of Proffitt's, and
I'll ask Phil to do the same for Saks.
Proffitt's, Inc. is a leading regional department store company
offering upper moderate to better brand name and private label
fashion apparel, accessories, cosmetics, and decorative home
furnishings. The Company currently operates 234 stores in 24
states under the store names of Proffitt's, McRae's, Younkers,
Parisian, Herberger's, Carson Pirie Scott, Bergner's, and Boston
Store. Our stores are primary anchor stores in leading regional
malls, and are located throughout the Southeast, Midwest, and Great
Plains regions of the U.S.
Over the last five years, Proffitt's has grown from 25 stores and
annual revenues of $200 million to 230 stores with annual revenues
in excess of $3.5 billion. This dynamic growth was primarily
achieved through a series of successful acquisitions including
McRae's in 1994, Younkers and Parisian in 1996, Herberger's in
1997, and Carson Pirie Scott in 1998. Over the last five years, we
have achieved an average annual growth in EPS and share price in
excess of 20%.
I'd like to ask Phil to give a little background on Saks.
Philip Miller
Saks Holdings, Inc. is the holding company for Saks Fifth Avenue.
Saks Fifth Avenue operates 41 Full-Line stores (led by our flagship
store in New York). 8 Resort stores, and 7 Main Street stores. We
also operate 40 Off 5th stores and Folio, a direct mail business.
Our stores are located throughout 27 states. Saks Fifth Avenue is
recognized worldwide as a premier fashion retailer, offering the
finest quality and latest styles in bridge and designer apparel,
shoes, accessories, jewelry, cosmetics, and gift merchandise.
During the last five years, Saks has nearly doubled its size from
52 stores and $1.3 billion in revenues to 96 stores with over $2.3
billion of annual sales today. This growth was principally
achieved through the expansion of our Full-Line stores and the
addition of the Resort, Main Street, and Off 5th store concepts as
well as the introduction of Folio.
We have achieved growth through focusing on our core strategies of
customer service, merchandising, and real estate initiatives. We
have established unique relationships with our top customers and
are experts in translating the knowledge gained from these
relationships into incremental revenue. We have a disciplined
merchandising approach and are leveraging our position of high-end
fashion leadership to cultivate new vendor resources while
continuing to grow our established businesses. We operate premier
retail locations comprised of multiple store formats and are
increasing our square footage through expansion, renovations, and
new store openings.
As a result of those strategies, we have achieved financial
momentum over the past five years. We have increased sales at a
compound annual rate of 10% and operating income by 61%.
Brad Martin
Thanks Phil.
This transaction is consistent with Proffitt's strategy of making
accretive acquisitions that create shareholder value. Saks Fifth
Avenue offers a top-tier position in one of the most attractive and
fastest growing segments in retailing, an undisputed reputation for
fashion direction and customer service, an outstanding management
team, and numerous brand extension opportunities.
For those of you asking, "Isn't acquiring Saks a change in
Proffitt's strategy?", let me go ahead and answer that question.
The answer is "No." Actually, our planned merger with Saks meets
each of the criteria we have defined in our merger strategy:
* Strong franchise identity and customer loyalty
* Quality real estate
* Attractive geographic markets
* Solid financial performance
* Opportunity to realize meaningful synergies
* Fair value
* Accretive with the achievement of targeted synergies
This is a "once in a lifetime" opportunity to acquire the premier
global retail brand in an accretive transaction. Our previous
growth has been fueled by accretive acquisitions with the principal
synergies coming from cost rationalization and business process
improvement. We are now leveraging the scale of the department
store franchises effectively and are owed substantial improvement
in these operations over the next four years. Our cash flow
generated through execution to the embedded opportunities in core
business, combined with Proffitt's corporate infrastructure,
provide a very complementary home for the Saks Fifth Avenue brand.
Brand authority is becoming increasingly important in retail. Upon
consummation of the merger, we will generate approximately 40% of
our revenues from the premier global upscale retail brand.
We are acquiring Saks at a fair value. At an enterprise value
(including $890 million in debt and subtracting $200 million in the
present value of Saks' NOLs) of 10.95x Saks' stand-alone estimated
1998 EBITDA (before synergies) and 9.45x Saks' stand-alone
estimated 1999 EBITDA (before synergies), these multiples are well
in line with other retail transactions and public values in the
market today. The multiple is particularly fair given the recent
capital investments which have been made by Saks and the future
cash flow benefits which we expect from these investments. Over,
the last three years, Saks has spent $190 million opening,
remodeling and renovating its Full-Line sores. Additionally, a
fair value for Saks must reflect its extraordinary growth
prospects, premier global brand name, superb real estate assets,
and value of its NOLs. Upon realization of the first year
synergies, we will have acquired the premier global brand name in
specialty department store retailing at a multiple less than the
public valuations of the mature department store group as a whole.
I consider this a very fair value, and those of you who have
followed this Company for the past 9 years know that we have
delivered substantial shareholder returns through this strategy.
Philip Miller
Proffitt's has an impressive track record of creating shareholder
value through successful business combinations. Because of a
shared vision of growth, Brad and his team understand our
commitment to realizing the full potential of the Saks Fifth Avenue
brand. This makes Proffitt's an excellent partner to provide Saks
the financial capacity to propel our sustainable growth.
Proffitt's well developed operating infrastructure will be
leveraged to support Saks Fifth Avenue to permit our management to
focus on the buying, selling, and marketing of merchandise.
Proffitt's has become very proficient at enhancing business
processes, creating efficiencies, and removing substantial costs.
The same opportunities exist in this combination.
We are pleased that Saks Fifth Avenues' compelling position in the
luxury goods sector presents new avenues of growth for the combined
corporation, Saks Incorporated. We look forward to capitalizing on
these opportunities by pursuing our proven strategies, looking to
extend the brand, and succeeding through, superb execution.
Brad Martin
In our past transaction we have successfully integrated the
acquired companies as a result of a systematic process which
includes:
* Retailing and incensing the key management personnel of the
acquired entity
* Maintaining the store identity and store level associates to
assure the transaction is transparent to the customer
* Maintaining the merchandising organization to tailor
assortments to customer preferences
* Engaging in benefiting and best practices processes to improve
performance across all operations
* Centralizing certain support functions to reduce the expense
structure and improve efficiency and productivity
The strategy for Saks will be the same.
This transaction combines two of the most compelling growth
companies in retailing today. Proffitt's and Saks have similar
growth rates, and the methods of growth are certainly
complementary. Proffitt's projected earnings growth of 20%+ per
annum comes from moderate comparable store sales growth, modest
square footage additions, and the reaction of the embedded income
and leverage opportunities in its recently acquired department
store companies. Saks' projected earnings growth of 20%+ per annum
comes from meaningful sales growth from the existing store base as
well as from new and remodeled units.
Proffitt's is an ideal long-term strategic partner for Saks Fifth
Avenue. Proffitt's operating strength and support Restructure will
allow Saks Fifth Avenue's outstanding management team to focus on
its core competencies of merchandising, marketing, and customer
relationships. Proffitt's financial capacity will provide ample
funding of an abundance of growth opportunities for the business.
We see prospects to expand the Saks Fifth Avenue brand on a global
basis, in both its core business (Full-Line, Resort, and Main
Street) and into new retail formats, which offer opportunities to
extend the brand. International expansion is an additional
opportunity.
Saks has successfully capitalized on the growing demand for upscale
merchandise. We expect that this market will continue to achieve
above-average growth due to favorable income and age demographics,
along with an overall increased consumer preference for prestige
and quality merchandise.
We believe there are opportunities to rationalize some elements of
the existing real estate portfolio. This gives us the opportunity
to explore conversion of certain under performing units to another
of our franchises that is better suited for that particular
geographic, demographic, and competitive environment.
Proffitt's successfully demonstrated its ability to deliver
substantial cost savings and other synergies as a part of its
acquisition processes, and we intend to achieve substantial savings
in this combination as well.
We expect to realize cost and growth synergies of approximately $10
to $12 million in 1998. $60 to $70 million in 1999, and $75 to $95
million in 2000 related to this transaction. These synergy targets
translate into diluted EPS accretion of $.01 to $.02 in the fourth
quarter of 1998 and $.03 to $.05 in 1999.
The vast majority of these identified synergies do not relate to
the significant brand extension opportunities that exist with Saks,
but are of the type we have successfully realized in previous
business combinations. This list includes efficiencies to be
realized in the areas of information technology, distribution and
logistics, credit curd processing, supply and services purchasing,
media buying, and interest expense. Consistent with prior
transactions the consolidation of certain back office functions and
the elimination of certain duplicate corporate expenses will take
place. The targeted synergies represent approximately 2.5% of
Saks' stand-alone projected revenue which is consistent with our
previous transactions.
Through this merger, we believe there are also meaningful
opportunities to improve the merchandising operations of the
combined business through expanded fashion direction for the entire
corporation. Saks Fifth Avenue will add a unique fashion
perspective in emerging styles and trends in our assortments
throughout the corporation. Our objective is to be the style
leader in the markets we serve. As we seek to further
differentiate ourselves from our department store competitors, the
Saks Fifth Avenue affiliation will be a distinct advantage.
We believe that the fashion expertise at Saks Fifth Avenue can be
coordinated with the private-brand development resources at
Proffitt's to enhance the product offerings and gross margin of our
private brands throughout the corporation. Saks Fifth Avenue's
fashion leadership and European sourcing relationships will be
complementary to Proffitt's existing product development
infrastructure and domestic and Asian sourcing relationships,
translating into more distinctiveness in private brand merchandise.
Saks Fifth Avenue's well-developed expertise in customer service,
customer database marketing, and customer loyalty program can be
leveraged across the entire organization thereby improving the
profitability generated from a customer data base.
Saks has, made a substantial investment in the infrastructure
required to support a direct mail organization. Leveraging Folio,
both the existing format and new formats, across the combined
Company's 8.5 million charge account customers will enhance
revenues and further boost the margins of this business. By
refining the Folio strategy and operation and utilizing the
recognition of the Saks Fifth Avenue brand, we see future
opportunity in internet retail as well.
Let me comment briefly on the Company's balance sheet. The
leverage of Proffitt's, Inc. as measured on a total debt to total
capitalization basis is currently approximately 24%. The leverage
of Proffitt's, Inc. is expected to increase to approximately 38% of
total capital upon the consummation of the transaction. This
leverage is appropriate for the combined Company. Post closing,
our proposed financing strategy includes terminating Saks'
revolving credit facility and amending and increasing our facility
from $600 million to between $800 million and $1 billion. Also,
Saks' accounts receivable securitization will be assumed and over
time integrated with Proffitt's facility. Proffitt's remains
committed to maintaining an appropriate capital structure to pursue
additional growth opportunities as they arise.
Julia Bentley
After the call today, I will be available, by phone to clarify any
items discussed on today's call or covered in the press release.
Since we are entering a registration and proxy solicitation period,
there will be some topics, such as detailed forward-looking
financial information, that management from either company will be
prohibited from discussing. I will note that on May 19 and 20, we
released via press release and conference call, certain 1998 income
statement guidance for Proffitt's, Inc. (on a stand-alone basis)
that remains unchanged.
Certain of the information presented in last night's press release
and presented on the call today is "forward-looking" information
within the definition of the Federal securities laws. This
forward-looking information is premised on many factors, some of
which I will outline. Actual consolidated results might differ
materially from protected forward-looking information if there are
any material changes in management's assumptions.
The forward-looking information and statements are based on a
series of preliminary projections and estimates, are contingent
upon the timely completion of the merger transaction with Saks, and
involve certain risks and uncertainties. Potential risks and
uncertainties include such factors as the level of consumer
spending for apparel and other merchandise carried by the Company;
the competitive pricing environment within the department and
specialty store industries; the activeness of planned advertising,
marketing, and promotional campaigns; appropriate inventory
management; realization of planned synergies; effective cost
containment; and solution of Year 2000 and other system issues by
the Company and its suppliers. For additional information
regarding these and other risk factors, please refer to the
Company's public filings with the Securities and Exchange
Commission, which may be accessed via EDGAR through the Internet at
www.sec.gov.
Our estimated revenues for the combined Company for 1998 range from
$6.0 billion to $6.2 billion. As we stated previously, the addition
of Saks and the realization of $10 to $12 million in synergies are
expected to add $.01 to $.02 to our previous fourth quarter 1998
diluted EPS guidance (before nonrecurring charges) of $.95. For the
full year of 1998, the transaction is expected to be dilutive (due
to the timing of the transaction) by approximately $.12.
Therefore, we expect 1998 diluted earnings per share to
approximately $1.66 (before non-recurring items). This compares to
$1.78 stand-alone guidance given previously. For 1999, our
estimated revenues for the combined Company range from $6.6 to $6.8
billion, and a reasonable diluted earnings per share target would
be $2.20 (considering the accretion and synergies Brad discussed
earlier).
Upon closing the transaction, the Company will incur certain
non-recurring charges related to the merger of the two businesses. The
details of these charges will be disclosed shortly after closing.
The majority of the one-time charges should be incurred in the
quarter that the transaction is consummated. Additional charges
will be incurred throughout the balance of 1998 and in 1999 as we
continue to integrate the two companies.
We will be pleased to provide you with any historical information
about either company that has been previously filed with the SEC.
We also have a transaction summary and summary company information
that we would be glad to fax or mail you upon request. Please call
423/981-6243 to receive this information.
We have scheduled two luncheon meetings for the investment
community over the next couple of days in order to discuss the
proposed merger. We will host a luncheon in New York at the Pierre
Hotel on Tuesday, July 7 at 12:00 noon. On Wednesday, July 8, at
12:15 p.m., we will host a luncheon in Boston at the Boston Bay
Club. Both Brad Martin and Philip Miller will speak at the
luncheons and will be available for questions. To make
reservations for either luncheon, please call Katy Ostrander at
212/816-8329.
Let me talk a minute about the timing of the transaction. We
expect to file Hart-Scott-Rodino within the next two weeks. We
also expect our registration statement to be filed with the SEC
within the next two weeks. This should be effective around
mid-September. Let me note that the registration statement will
contain historical pro forma financial information which will be
available to the public once effective. We expect to begin the
proxy solicitation process in mid-to-late September and hold the
special shareholders' meetings to vote on the transaction in
October. We anticipate the transaction will close late in the
third quarter or early in the fourth. We will be able to resume
our regular communications with Wall Street at that time.
Both Proffitt's and Saks will release monthly sales as usual on the
first Thursday following the monthly end. Our next sales release
day is this Thursday, July 9.
Again, please call me at 423/981-6243 today or anytime in the next
few days if I can be of assistance.
Brad Martin
Thank you, Julia. We would now by happy to answer questions about
the pending transaction.
(After questions)
The combined enterprise, Saks Incorporated, as a $6 billion
company, will operate stores under the following nameplates: Saks
Fifth Avenue (Full-Line, Resort, and Main Street stores), Off 5th,
Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie
Scott, Boston Store, and Herberger's. The Company will also
operate Folio, its direct mail business. Through combining the
Saks Fifth Avenue brand with a geographically diversified
department store business, Saks Incorporated will be well
positioned to capitalize on a most promising future. The name
recognition and enhanced market capitalization associated with the
new corporate name will expand the investor base both domestically
and abroad. The prestige of the Saks Fifth Avenue brand will also
assist in the Company's recruiting efforts in attracting premier
retail talent and in strengthening and broadening new supplier
relationships.
With the retail authority of the Saks Fifth Avenue brand and the
stability and strength of our department store businesses and
infrastructure, we believe the extraordinary growth prospects of
this company should be highly valued by global investors.
Thank you again for your time and interest.
