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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): May 26, 1999
THE NEIMAN MARCUS GROUP, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-9659 95-4119509
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
27 Boylston Street, Chestnut Hill, Massachusetts 02467
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(Address of Principal Executive Offices) (Zip Code)
(617) 232-0760
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On May 14, 1999, the Board of Directors of Harcourt General, Inc.
("Harcourt General") approved a plan to spin-off to the holders of common stock,
par value $1.00 per share, of Harcourt General (the "Harcourt General Common
Stock") and the holders of Class B Stock, par value $1.00 per share, of Harcourt
General (the "Harcourt General Class B Stock") 81% of Harcourt General's
controlling equity position in The Neiman Marcus Group, Inc. ("NMG") in a
tax-free distribution. The spin-off is expected to be completed late in the
third quarter or early in the fourth quarter of the 1999 calendar year, subject
to, among other things, approval of the tax-free status of the spin-off by the
Internal Revenue Service and approval by the stockholders of NMG, as well as
approval by the stockholders of NMG other than Harcourt General of a
recapitalization plan for NMG (the "Recapitalization") that is necessary to
permit the spin-off to be accomplished on a tax-free basis. The transaction is
further subject to the approval by the stockholders of Harcourt General of a new
class of low-voting stock. The transactions have been approved by a committee of
independent directors of NMG and by both the Harcourt General and NMG Boards of
Directors.
Harcourt General is the beneficial owner of approximately 26.4
million shares, or about 53.9%, of the common stock, par value $.01 per share,
of NMG (the "Common Stock"). In order to effect the spin-off on a tax-free basis
to both Harcourt General and its stockholders, Harcourt General, a wholly owned
subsidiary of Harcourt General ("Merger Sub") and NMG have agreed to
recapitalize NMG pursuant to an agreement and plan of merger, dated as of May
14, 1999 among Harcourt General, NMG and Merger Sub (the "Merger Agreement").
Harcourt General will contribute 21,440,960 shares of the Common Stock that it
holds in NMG (the "Contributed Shares") to Merger Sub. Merger Sub will be merged
with and into NMG, with NMG remaining as the surviving corporation. All of the
shares of common stock of Merger Sub (all of which are owned by Harcourt
General) will then be converted into 21,440,960 shares of a newly created Class
B Common Stock, par value $.01 per share, of NMG (the "Class B Common Stock").
Holders of the Class B Common Stock will be entitled to elect 82% of the
directors of NMG or the nearest higher whole number, but their rights will
otherwise be identical to those of the holders of the Class A Common Stock, par
value $.01 per share, of NMG (the "Class A Common Stock"). The Class B Common
Stock will be listed on the New York Stock Exchange. Each share of Common Stock
(other than the Contributed Shares) will be converted into Class A Common Stock,
which will be entitled to elect 18% of the directors of NMG (or the nearest
lower whole number), and will otherwise be substantially identical to the Common
Stock. NMG will initially have eight directors. One director will be designated
a "Class A Director" at the time of the Recapitalization and will remain in the
class of which such director is currently a member that designates the
expiration of such director's term. Each of the remaining seven directors of NMG
will be designated a "Class B Director" and each will remain in the class of
which each such director is currently a member that designates the expiration of
such director's term. Each of the Contributed Shares will automatically be
canceled with no securities or other consideration issued in exchange therefor.
The Recapitalization will be subject to the approval of (1) a majority of the
shares of Common Stock, other than shares held by Harcourt General, present in
person or by proxy and voting on such proposal and (2) two-thirds of the
outstanding shares of Common Stock. Harcourt General has agreed to vote all of
its shares of Common Stock in favor of the Recapitalization.
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Harcourt General and NMG have entered into a distribution agreement,
dated as of May 14, 1999 (the "Distribution Agreement"), pursuant to which
Harcourt General will distribute to the holders of record of Harcourt General
Common Stock and Harcourt General Class B Stock on a pro rata basis the shares
of Class B Common Stock that it receives in the Recapitalization (the
"Distribution"). The Distribution is subject to (1) the receipt by Harcourt
General of a ruling from the Internal Revenue Service to the effect that the
Distribution will qualify as a tax-free distribution for federal income tax
purposes, (2) the effectiveness of the Form 8-A filed with the Securities
Exchange Commission to register the Class B Common Stock under the Securities
Exchange Act of 1934, (3) the approval of the listing of the Class B Common
Stock on the New York Stock Exchange, subject to official notice of issuance,
(4) the approval of an amendment to Harcourt General's charter authorizing a new
class of low-voting common stock by (i) a majority of the outstanding shares of
the Harcourt General Common Stock and the Harcourt General Class B Stock, voting
together as a class, (ii) a majority of the outstanding shares of Harcourt
General Common Stock, voting separately as a class and (iii) a majority of the
outstanding shares of Harcourt General Class B Stock, voting separately as a
class, and (5) such other customary conditions as are set forth in the
Distribution Agreement. Harcourt General has the right to terminate the
Distribution Agreement at any time if it determines that the Distribution is not
in the best interests of Harcourt General and/or its stockholders.
Following the Recapitalization and Distribution, Harcourt General
will continue to own, through a wholly owned subsidiary, approximately 4,988,542
shares of Class A Common Stock (the "Retained Shares"). In connection with
obtaining a ruling from the Internal Revenue Service, Harcourt General will
represent that it will dispose of the Retained Shares within five years
following the date of the Distribution. Prior to the date of the Distribution
NMG and Harcourt General will enter into a registration rights agreement
providing Harcourt General with the right to request the registration of the
Retained Shares under the Securities Act of 1933 and containing customary terms
and conditions. Harcourt General has agreed to vote, or cause to be voted, the
Retained Shares in proportion to the votes cast affirmatively or negatively by
all other holders of Class A Common Stock voting. In addition, Harcourt General
will grant to NMG a right of first offer with respect to the Retained Shares,
effective for the first two years following the Distribution.
In connection with the Recapitalization, NMG expects to amend its
certificate of incorporation to provide that the vote of two-thirds of its
outstanding shares would be required to approve certain business combinations,
stock issuances and sales of all or substantially all of its assets. NMG has
also proposed to modify its certificate of incorporation to include the
provision, currently in NMG's by-laws, setting forth the range of the number of
directors (which will be six to nine) and the fact that the actual number of
directors will be determined by resolution of the NMG Board. The proposed
amendments would also authorize the creation of a new class of low-voting common
stock having one-tenth (1/10) of one vote per share. The Board also has approved
amendments to NMG's by-laws that would provide advance notice requirements for
shareholder proposals to be considered at the annual meeting and would permit
only matters specified in the notice for any special meeting to be considered at
such special meeting. In addition, it is a condition to the Distribution that
the Board of Directors of NMG adopt a stockholders rights plan in order to
improve the ability of its Board to protect and
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advance the interests of NMG and its stockholders in the event of an unsolicited
proposal to acquire a significant interest in NMG.
NMG has agreed that until two years after the date of the
Distribution, it will (a) maintain its status as a company engaged in the active
conduct of a trade or business and (b) not (i) merge or consolidate with or into
any other corporation, (ii) liquidate or partially liquidate, (iii) sell or
transfer all or substantially all of its assets in a single transaction or
series of related transactions, (iv) redeem or otherwise repurchase any NMG
stock or (v) take any other action or actions which in the aggregate would have
the effect of causing or permitting one or more persons to acquire directly or
indirectly stock representing a 50 percent or greater interest in NMG, unless
prior to taking any of the actions referred to in clauses (b)(i) through (v)
above, NMG has obtained (and provided to Harcourt General) a written opinion in
form and substance reasonably acceptable to Harcourt General of a law firm
reasonably acceptable to Harcourt General, or Harcourt General has obtained (at
the reasonable request and at the expense of NMG) a supplemental ruling from the
Internal Revenue Service, that such action or actions will not result in the
Distribution failing to qualify as a tax-free distribution.
If NMG (or any of its subsidiaries) fails to comply with any of its
obligations described in the foregoing paragraph or takes or fails to take any
action on or after the date of the Distribution, and such failure to comply,
action or omission contributes to a determination that the Distribution fails to
qualify as a tax-free distribution, then, subject to certain exceptions, NMG
will indemnify and hold harmless Harcourt General and each member of the
consolidated group of which Harcourt General is a member from and against any
and all federal, state and local taxes, including any interest, penalties or
additions to tax, imposed upon or incurred by Harcourt General, any member of
its group or any stockholder of Harcourt General as a result of the failure of
the Distribution to qualify as a tax-free distribution (including any taxes
payable by reason of any payment made pursuant to such indemnity).
Harcourt General has also agreed that neither it nor any of its
executive officers or directors who is also an executive officer or director of
NMG (a "Shared Representative") will solicit any offers or proposals regarding
(i) any merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving NMG, (ii) any purchase or sale of all or substantially all of the
assets of NMG or (iii) any issuance or other sale or transfer of any equity
interest in NMG held by Harcourt General (collectively, a "Transaction
Proposal"). The obligations in clauses (i) and (ii) above will terminate on the
date that is two years following the date of the Distribution and the
obligations in clause (iii) above will terminate on the date of the
Distribution.
Upon receipt of an unsolicited Transaction Proposal, Harcourt
General or any Shared Representative, as the case may be, will be obligated to,
in Harcourt General's sole discretion, either (i) promptly reject such
Transaction Proposal, subject to the fiduciary obligations of any Shared
Representative to NMG or its stockholders or to such Shared Representative's
obligations as an executive officer of NMG, or (ii) refer such Transaction
Proposal to the independent directors of NMG. In the event that the independent
directors determine that such Transaction Proposal should be discussed further
with the party making such Transaction Proposal, the independent directors will
notify Harcourt General in writing, signed
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by a majority of the directors of NMG that are not Shared Representatives, and
Harcourt General and the Shared Representatives will be permitted to take such
steps as they deem appropriate, in their good faith judgment, in connection with
such Transaction Proposal without being deemed to violate the non-solicitation
covenant. The sole remedy for breach of the non-solicitation covenant will be to
eliminate NMG's indemnity obligation described above, unless the independent
directors are notified of a breach and they agree to proceed to negotiate a
Transaction Proposal notwithstanding such breach.
In anticipation of the Recapitalization and Distribution, Brian J.
Knez has been elected by the NMG Board of Directors to share responsibilities
with Robert A. Smith as co-chief executive officer of NMG. Mr. Smith has served
as chief executive officer of NMG since December 2, 1998 while Mr. Knez is
currently serving as, and will continue to serve as, chief executive officer of
Harcourt, Inc., the publishing subsidiary of Harcourt General. Mr. Smith has
concurrently been elected to share responsibilities with Mr. Knez as co-chief
executive officer of Harcourt, Inc.
The rest of the corporate officers of NMG (some of whom are also
officers of Harcourt General) will retain their positions following the
spin-off. In addition, Harcourt General will continue to provide certain
corporate services to NMG pursuant to an intercompany services agreement.
Richard A. Smith and members of his family currently hold
approximately 28% of the equity securities of Harcourt General and will own the
same percentage of the Class B Common Stock. The rights plan described above
would grandfather the shares to be acquired by the Smith family in the
Distribution so long as the Smith family does not collectively acquire shares
that would, relative to their ownership on the date of the Distribution,
represent approximately an additional 6% of the outstanding shares of Class B
Common Stock or approximately an additional 6% of the total number of votes
entitled to be cast generally (other than in an election of directors) by the
holders of all common stock of NMG then outstanding. In connection with the
spin-off, Harcourt General will agree to use commercially reasonable best
efforts to procure the agreement of all of the members of the Smith family not
to dispose of any shares of NMG for 180 days following the spin-off, subject to
limited exceptions.
Copies of the Merger Agreement and the Distribution Agreement are
filed herein as Exhibits 10.1 and 10.2, respectively. Such documents are
incorporated by reference into this Item 5 and the foregoing description of the
above transactions is qualified in its entirety by reference to such Exhibits.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Description
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10.1 Agreement and Plan of Merger, dated as of May 14, 1999, among
Harcourt General, Inc., The Neiman Marcus Group, Inc. and Spring
Merger Corporation.
10.2 Distribution Agreement, dated as of May 14, 1999, between Harcourt
General, Inc. and The Neiman Marcus Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
Dated: May 27, 1999 By: /s/ Eric P. Geller
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Eric P. Geller
Senior Vice President, General Counsel and
Secretary
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EXHIBIT INDEX
Exhibit Description
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10.1 Agreement and Plan of Merger, dated as of May 14, 1999, among
Harcourt General, Inc., The Neiman Marcus Group, Inc. and Spring
Merger Corporation.
10.2 Distribution Agreement, dated as of May 14, 1999, between Harcourt
General, Inc. and The Neiman Marcus Group, Inc.
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER dated as of May 14, 1999 (this
"Agreement"), between THE NEIMAN MARCUS GROUP, INC., a Delaware corporation (the
"Company"), HARCOURT GENERAL, INC., a Delaware corporation ("Harcourt General")
and SPRING MERGER CORPORATION, a Delaware corporation and a wholly-owned
subsidiary of Harcourt General ("Merger Sub").
WHEREAS, Harcourt General will own 21,440,960 shares of common
stock, par value $.01 per share, of the Company ("Common Stock") immediately
prior to the Merger (as defined below), and Harcourt General will own through
HGI Investment Trust, a wholly owned subsidiary of Harcourt General ("HGI"),
4,988,542 shares of Common Stock (the "Retained Shares") immediately prior to
the Merger, totaling 26,429,502 shares of Common Stock;
WHEREAS, Harcourt General owns all of the issued and outstanding
shares of common stock, par value $.01 per share, of Merger Sub ("Merger Sub
Common Stock");
WHEREAS, prior to the effectiveness of the Merger, Harcourt General
plans to contribute to Merger Sub 21,440,960 of its 26,429,502 shares of Common
Stock (the "Contributed Shares");
WHEREAS, Harcourt General and the Company desire that Merger Sub
merge with and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), pursuant to which all the
issued and outstanding shares of Merger Sub Common Stock shall be converted into
shares of a new class of common stock designated as Class B Common Stock, par
value $.01 per share, of the Company ("Class B Common Stock") and all the issued
and outstanding shares of Common Stock (other than the Contributed Shares held
by Merger Sub, which shall be canceled with no securities or other consideration
issued in exchange therefor) shall be converted into Class A Common Stock
("Class A Common Stock") and shall remain issued and outstanding;
WHEREAS, Harcourt General has announced its intention, subject to
the satisfaction of certain conditions, to distribute all the shares of Class B
Common Stock, on a pro rata basis, to the holders of the common stock of
Harcourt General following consummation of the Merger (the "Distribution");
WHEREAS, simultaneously with the execution hereof, the Company and
Harcourt General are entering into a Distribution Agreement dated as of the date
hereof (the "Distribution Agreement"), which provides for the Distribution and
certain other matters;
WHEREAS, the Boards of Directors of the Company and Merger Sub by
resolutions duly adopted have approved the terms of this Agreement and of the
Merger, have declared the advisability of this Agreement and of the Merger and
determined them to be fair to and in the best interests of the Company and
Merger Sub and their respective subsidiaries, and have directed the submission
of this Agreement to their respective stockholders for approval; and
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WHEREAS, the Merger is intended to constitute a reorganization
within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986,
as amended.
NOW, THEREFORE in consideration of the premises and the mutual
agreements and provisions herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined below), Merger
Sub shall be merged with and into the Company in accordance with the DGCL,
whereupon the separate corporate existence of Merger Sub shall cease, and the
Company shall be the surviving corporation (the "Surviving Corporation").
(b) Following satisfaction or waiver of all conditions to the
Merger, the Company and Merger Sub shall file a certificate of merger with the
Secretary of State of the State of Delaware and make all other filings or
recordings required by the DGCL in connection with the Merger. The Merger shall
become effective at such time as the certificate of merger is duly filed with
the Secretary of State of the State of Delaware or at such later time as is
specified in the certificate of merger (the "Effective Time").
(c) At and after the Effective Time, the Merger shall have the
effects set forth in the DGCL. Without limiting the foregoing and subject
thereto, from and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Merger Sub, all
as provided under the DGCL.
SECTION 1.2. Effect on Capital Stock. At the Effective Time:
(a) All of the shares of Merger Sub Common Stock outstanding
immediately prior to the Effective Time shall be converted in the aggregate into
and become 21,440,960 fully paid and non-assessable shares of Class B Common
Stock of the Surviving Corporation, and shall have the rights and privileges as
set forth in the Surviving Corporation Certificate of Incorporation (as defined
in Section 2.1);
(b) Each of the Contributed Shares shall automatically be canceled
and shall cease to exist and no stock of the Surviving Corporation or other
consideration shall be delivered in exchange therefor; and
(c) Each share of Common Stock (other than the Contributed Shares to
be canceled in accordance with Section 1.2(b)), including shares held in the
treasury, if any, and shares held by HGI, shall be converted into "Class A
Common Stock".
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SECTION 1.3. Share Certificates. (a) As soon as practicable after
the Effective Time:
(i) the Surviving Corporation shall deliver, or cause to be
delivered, to Harcourt General a number of certificates issued in the
names of such persons, in each case, as Harcourt General shall direct,
representing in the aggregate 21,440,960 shares of Class B Common Stock
which Harcourt General has the right to receive upon conversion of shares
of Merger Sub Common Stock pursuant to the provisions of Section 1.2 (a)
hereof;
(ii) the Surviving Corporation shall cancel the share certificate or
certificates representing the shares of Common Stock owned directly by
Merger Sub; and
(iii) the share certificates representing shares of Class A Common
Stock that remain issued and outstanding under Section 1.2(c) hereof or
that remain treasury shares under Section 1.2(c) hereof shall not be
exchanged and shall continue to represent an equal number of shares of
Class A Common Stock of the Surviving Corporation without physical
substitution of share certificates of the Surviving Corporation for
existing share certificates of the Company.
(b) Any dividend or other distribution declared or made with respect
to any shares of capital stock of the Company, whether the record date for such
dividend or distribution is before or after the Effective Time, shall be paid to
the holder of record of such shares of capital stock on such record date,
regardless of whether such holder has surrendered its certificates representing
Class A Common Stock or received certificates representing Class B Common Stock
pursuant to Section 1.3(a)(i).
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. Certificate of Incorporation. At the Effective Time,
the Certificate of Incorporation of the Company as in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, except that such Certificate of Incorporation shall be amended as
set forth in Exhibit A-1 hereto. The Certificate of Incorporation of the
Surviving Corporation that becomes effective pursuant to this Section 2.1 is
herein referred to as the "Surviving Corporation Certificate of Incorporation."
SECTION 2.2. By-Laws. (a) At the Effective Time, the By-Laws of the
Company as in effect immediately prior to the Effective Time shall be the
By-Laws of the Surviving Corporation. The By-Laws of the Surviving Corporation
are herein referred to as the "Surviving Corporation By-Laws."
SECTION 2.3. Directors and Officers. (a) The Surviving Corporation's
Board of Directors initially shall consist of eight members as identified on
Exhibit B-1 hereto. From and
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after the Effective Time, until the earlier of their removal or resignation or
until their successors are duly elected or appointed and qualified in accordance
with applicable law, the directors of the Surviving Corporation shall consist of
the directors of the Company in office at the Effective Time. At the Effective
Time, the directors of the Surviving Corporation shall be divided into two
classes pursuant to the Surviving Corporation Certificate of Incorporation. One
director of the Surviving Corporation shall be designated a "Class A Director"
and will remain in the class of which such director is currently a member that
designates the expiration of such director's term. Each of the remaining seven
directors of the Surviving Corporation shall be designated a "Class B Director"
and each will remain in the class of which each such director is currently a
member that designates the expiration of such director's term. The director of
the Company that is expected to be designated as the "Class A Director" shall be
identified by the Board of Directors of the Company from the directors of the
Company that are not affiliated with Harcourt General on or prior to the date on
which the Proxy Statement referred to in Section 3.2 is mailed to the Company's
stockholders.
(b) From and after the Effective Time, until the earlier of their
removal or resignation or until their successors are duly appointed and
qualified in accordance with applicable law and the Surviving Corporation
By-Laws, the officers of the Company shall be the officers of the Surviving
Corporation.
ARTICLE III
COVENANTS
SECTION 3.1. Stockholders Meeting. The Company shall, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold, a meeting of its stockholders (the "Stockholders Meeting") for
the purpose of considering the adoption of this Agreement. The Company hereby
represents and warrants to Merger Sub that a committee of independent directors
of the Company's Board of Directors has approved and declared advisable the
Merger and this Agreement, has determined that the Merger and the transactions
contemplated by the Distribution Agreement are fair to and in the best interests
of the stockholders of the Company, and has recommended that the stockholders of
the Company vote in favor of the adoption of this Agreement. The Company shall,
through a committee of independent directors of its Board of Directors, continue
to recommend to its stockholders approval of the Merger and this Agreement and
shall not withdraw such recommendation.
SECTION 3.2. Filings; Other Actions. (a) Subject to the provisions
of this Agreement and the Distribution Agreement, the Company shall prepare and
file with the Securities and Exchange Commission (the "SEC") as soon as
reasonably possible following the execution hereof a proxy statement for the
solicitation of proxies in favor of the adoption of this Agreement (the "Proxy
Statement"). The Company shall use all reasonable efforts to have the Proxy
Statement cleared by the SEC for mailing in definitive form as promptly as
practicable after such filing. The Company and Harcourt General shall cooperate
with each other in the preparation of the Proxy Statement and any amendment or
supplement thereto, and the Company
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shall notify Harcourt General of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information, and shall provide to
Harcourt General promptly copies of all correspondence between the SEC and the
Company or any of its advisors with respect to the Proxy Statement. The Company
shall give Harcourt General and its counsel appropriate advance opportunity to
review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC, and shall incorporate therein
any comments Harcourt General may deliver to the Company with respect thereto,
before such Proxy Statement, response or reply is filed with or sent to the SEC.
The Company agrees to use its best efforts, after consultation with Harcourt
General and its advisors, to respond promptly to all such comments of, and
requests by, the SEC and to cause the Proxy Statement to be mailed to the
holders of its common stock entitled to vote at the Stockholders Meetings at
such time as shall be requested by Harcourt General.
(b) The Company agrees promptly to furnish to Harcourt General all
copies of written communications (and summaries of the substance of all oral
communications) received by it, or any of its affiliates or representatives
from, or delivered by any of the foregoing to, any federal, state or local or
international court, commission, governmental body, agency, authority, tribunal,
board or other governmental entity (each a "Governmental Entity") in respect of
the transactions contemplated hereby.
SECTION 3.3. Best Efforts. Except in the case of Harcourt General to
the extent that it shall have exercised its right to terminate the Distribution
Agreement in accordance with the terms thereof, upon the terms and subject to
the conditions set forth in this Agreement, each of the parties hereto agrees to
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 party 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 and the Distribution Agreement, including, but
not limited to (i) the obtaining of all necessary actions or non-actions,
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, (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 with respect to the Merger or this Agreement vacated or
reversed, (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by this Agreement and (v)
taking such other actions as are necessary, including agreeing to such other
amendments to or modifications of this Agreement to obtain a favorable tax
ruling from the Internal Revenue Service as to the Federal income tax
consequences of the Merger and Distribution.
SECTION 3.4. Merger Sub Approval. The Board of Directors of Merger
Sub has approved and declared advisable the Merger and this Agreement, has
determined that the
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Merger is fair to and in the best interests of its stockholders and has
recommended that its stockholders adopt this Agreement. As promptly as possible
following the execution of this Agreement, Harcourt General, as sole stockholder
of Merger Sub, shall execute a written consent adopting this Agreement.
SECTION 3.5. Harcourt General Approval. Harcourt General agrees to
vote, or cause to be voted, all of the shares of Common Stock owned by it and
any of its subsidiaries in favor of the adoption of this Agreement.
SECTION 3.6. Stockholders Rights Plan. The Company agrees that prior
to the Distribution, it will adopt a stockholders rights plan substantially in
the form attached hereto as Exhibit D-1.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.1. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company, except that the condition set forth in
Section 4.1(a) may not be waived) of the following conditions:
(a) a proposal to adopt this Agreement has been approved by the
holders of (i) a majority of the shares of Common Stock (other than shares held
directly or indirectly by Harcourt General) present in person or by proxy at
the Stockholders Meeting and voting on such proposal and (ii) two-thirds of the
shares of Common Stock outstanding and entitled to vote thereon;
(b) no court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting the consummation of the Merger or the
Distribution and no proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Merger or the Distribution shall have been instituted by any Governmental
Entity before any court, arbitrator or governmental body, agency or official and
be pending; and
(c) all actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained, except those that would not reasonably be expected to have a material
adverse affect on any party's ability to consummate the transactions
contemplated by this Agreement.
(d) all the conditions to the Distribution set forth in the
Distribution Agreement, other than the consummation of the Merger, shall have
been satisfied.
<PAGE> 7
7
SECTION 4.2. Conditions to the Obligations of Harcourt General and
Merger Sub. The obligations of Harcourt General and Merger Sub to consummate the
Merger are subject to the satisfaction (or waiver by Merger Sub, except that the
condition set forth in Section 4.2(a) may not be waived) of the following
conditions:
(a) a proposal to adopt this Agreement has been approved by the
holders of (i) a majority of the shares of Common Stock (other than shares held
directly or indirectly by Harcourt General) present in person or by proxy at
the Stockholders Meeting and voting on such proposal and (ii) two-thirds of the
shares of Common Stock outstanding and entitled to vote thereon;
(b) Harcourt General shall have received a favorable tax ruling from
the Internal Revenue Service as to the Federal income tax consequences of the
Merger and the Distribution;
(c) no court, arbitrator or Governmental Entity shall have issued
any order, and there shall not be any statute, rule or regulation, restraining
or prohibiting the consummation of the Merger or the Distribution and no
proceeding challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Merger or the
Distribution shall have been instituted by any Governmental Entity before any
court, arbitrator or governmental body, agency or official and be pending;
(d) the Class B Common Stock shall have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance;
(e) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of the
Merger and the Distribution shall have been obtained, except those that would
not reasonably be expected to have a material adverse affect on any party's
ability to consummate the transactions contemplated by this Agreement;
(f) the stockholders of Harcourt General shall have approved the
amendment to Harcourt General's Restated Certificate of Incorporation attached
hereto as Exhibit C-1; and
(g) all the conditions to the Distribution set forth in the
Distribution Agreement, other than the consummation of the Merger, shall have
been satisfied.
ARTICLE V
TERMINATION
SECTION 5.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
(a) by mutual written consent of the Company and Harcourt General;
<PAGE> 8
8
(b) by either the Company or Harcourt General, if there shall be any
law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining the Company or Merger Sub from consummating the Merger is
entered and such judgment, injunction, order or decree shall become final
and nonappealable;
(c) by the Company, Merger Sub or Harcourt General, if there shall
be any law or regulation that makes consummation of the Distribution
illegal or otherwise prohibited or if any judgment, injunction, order or
decree enjoining Harcourt General from consummating the Distribution is
entered;
(d) by Harcourt General or the Company in the event the Distribution
Agreement is terminated;
(e) by Harcourt General or the Company if, after a vote on the
matter by the Company's stockholders at the Stockholders Meeting, the
condition set forth in Sections 4.1(a) and 4.2(a) is not satisfied; or
(f) by Harcourt General if, after a vote on the matter by Harcourt
General's stockholders at a meeting called for such purpose, the condition
set forth in Section 4.2(f) is not satisified.
SECTION 5.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 5.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
<PAGE> 9
9
To Harcourt General or Merger Sub:
c/o Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: (617) 278-5567
Attn: Chief Executive Officer
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Attn: John G. Finley, Esq.
To the Company:
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: (617) 278-5567
Attn: Chief Executive Officer
and:
The Independent Directors of the Company
c/o The Secretary of the Company
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: (617) 278-5567
with a copy to:
Choate Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Telecopy: (617) 248-4000
Attn: Andrew L. Nichols, Esq.
SECTION 6.2. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or
<PAGE> 10
10
obligations under this Agreement without the consent of the other party hereto,
except that Merger Sub may at any time prior to the mailing of the Proxy
Statement assign all of its rights and obligations under this Agreement to any
other wholly-owned subsidiary of Harcourt General, and in the case of such
assignment, the parties hereto agree to amend this Agreement to so provide.
SECTION 6.3. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
SECTION 6.4. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by the other party hereto.
<PAGE> 11
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE NEIMAN MARCUS GROUP, INC.
By /s/ Eric P. Geller
---------------------------------------------
Name: Eric P. Geller
Title: Senior Vice President, General Counsel
and Secretary
HARCOURT GENERAL, INC.
By /s/ John R. Cook
---------------------------------------------
Name: John R. Cook
Title: Senior Vice President and Chief
Financial Officer
SPRING MERGER CORPORATION
By /s/ John R. Cook
---------------------------------------------
Name: John R. Cook
Title: President
<PAGE> 1
EXECUTION COPY
DISTRIBUTION AGREEMENT
between
HARCOURT GENERAL, INC.
and
THE NEIMAN MARCUS GROUP, INC.
Dated as of May 14, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS ........................................................2
SECTION 1.1 General ......................................................2
SECTION 1.2 References; Interpretation ...................................6
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS ............7
SECTION 2.1 The Distribution and Other Transactions ......................7
SECTION 2.2 Declaration Date; Further Assurances ........................11
SECTION 2.3 Representations and Warranties ..............................12
SECTION 2.4 Certain Post-Distribution Transactions ......................14
SECTION 2.5 Certain Limitations on Actions by Harcourt General ..........15
SECTION 2.6 Right of First Offer ........................................16
SECTION 2.7 Smith Family ................................................17
ARTICLE III. INDEMNIFICATION .................................................17
SECTION 3.1 Indemnification by Neiman Marcus .............................17
SECTION 3.2 Indemnification by Harcourt General ..........................18
SECTION 3.3 Procedures for Indemnification ...............................18
SECTION 3.4 Indemnification Payments .....................................20
ARTICLE IV. COVENANTS ........................................................20
SECTION 4.1 Access to Information .......................................20
SECTION 4.2 Confidentiality .............................................20
SECTION 4.3 Retention of Records ........................................21
SECTION 4.4 Litigation Cooperation ......................................21
SECTION 4.5 Other Matters ...............................................21
SECTION 4.6 No Solicitation .............................................21
SECTION 4.7 Registration Rights Agreement ...............................22
SECTION 4.8 Disclosure of Indemnification Obligations ...................22
ARTICLE V. MISCELLANEOUS .....................................................22
SECTION 5.1 Complete Agreement; Construction ............................22
SECTION 5.2 Counterparts ................................................22
SECTION 5.3 Survival of Agreements ......................................23
SECTION 5.4 Expenses ....................................................23
SECTION 5.5 Notices .....................................................23
SECTION 5.6 Waivers .....................................................24
SECTION 5.7 Amendments ..................................................24
SECTION 5.8 Assignment ..................................................24
i
<PAGE> 3
Page
----
SECTION 5.9 Successors and Assigns ......................................24
SECTION 5.10 Termination ................................................24
SECTION 5.11 Subsidiaries ...............................................25
SECTION 5.12 Third Party Beneficiaries ..................................25
SECTION 5.13 Title and Headings .........................................25
SECTION 5.14 Exhibits and Schedules .....................................25
SECTION 5.15 GOVERNING LAW ..............................................25
SECTION 5.16 Consent to Jurisdiction ....................................25
SECTION 5.17 Severability ...............................................26
-ii-
<PAGE> 4
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of May 14, 1999 (this "Agreement"),
between HARCOURT GENERAL, INC., a Delaware corporation ("Harcourt General"), and
THE NEIMAN MARCUS GROUP, INC., a Delaware corporation ("Neiman Marcus").
WHEREAS, Harcourt General will own, immediately prior to the
Recapitalization (as defined below), 21,440,960 shares of Common Stock, par
value $.01 per share, of Neiman Marcus ("Common Stock") and HGI Investment
Trust, a wholly-owned subsidiary of Harcourt General ("HGI"), will own 4,988,542
shares of Common Stock (the "Retained Shares");
WHEREAS, simultaneously with the execution hereof, Neiman Marcus and
Spring Merger Corporation, a Delaware corporation and a wholly-owned subsidiary
of Harcourt General ("Merger Sub"), are entering into an Agreement and Plan of
Merger dated as of the date hereof ("Recapitalization Agreement"), pursuant to
which, among other things, Merger Sub will merge with and into Neiman Marcus
with the following consequent capital stock changes: (i) 21,440,960 shares of
the Common Stock held by Harcourt General will be contributed to Merger Sub and,
as of the Declaration Date (as defined herein), will automatically be canceled
and retired with no securities or other consideration issued in exchange
therefor, (ii) all of the common stock of Merger Sub, owned by Harcourt General,
will be converted into 21,440,960 shares of a new Class B Common Stock, par
value $.01 per share, of Neiman Marcus ("Class B Common Stock" and, together
with the Class A Common Stock, the "Neiman Marcus Common Stock"), which class of
stock will be entitled to elect at least 82% of the members of the board of
directors of Neiman Marcus and in all other respects will be substantially
identical to the Class A Common Stock and (iii) all other shares of Common Stock
will be converted into Class A Common Stock, par value $.01 per share, of Neiman
Marcus ("Class A Common Stock"), including 4,988,542 shares of Common Stock held
by HGI, which class of stock shall be entitled to elect up to 18% of the members
of the board of directors of Neiman Marcus (the "Recapitalization");
WHEREAS, the Board of Directors of Harcourt General has determined
that it is appropriate, desirable and in the best interests of Harcourt General
and its stockholders to distribute on the Distribution Date all the shares of
Class B Common Stock that Harcourt General will receive in the Recapitalization,
on the terms and subject to the conditions set forth in this Agreement, to the
holders of record of the Common Stock, par value $1.00 per share, of Harcourt
General and the Class B Stock, par value $1.00 per share, of Harcourt General
(collectively, "Harcourt General Common Stock"), as of the Distribution Record
Date (as defined herein), on a pro rata basis (the "Distribution");
WHEREAS, Harcourt General will submit a request for a ruling (as it
may be amended from time to time, the "Ruling Request") from the Internal
Revenue Service to the effect that the Distribution will be a tax-free
distribution within the meaning of Section 355 of the Code (as defined herein);
<PAGE> 5
2
WHEREAS, each of Harcourt General and Neiman Marcus has determined
that it is necessary and desirable to set forth the principal corporate
transactions required to effect the Distribution and the Recapitalization and to
set forth other agreements that will govern certain other matters following the
Distribution.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency, body or commission or any
arbitration tribunal.
(b) "Affiliate" shall mean, when used with respect to a specified
person, another person that controls, is controlled by, or is under common
control with the person specified. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting securities or other interests, by contract or
otherwise.
(c) "Assets" shall mean assets, properties and rights (including
goodwill), wherever located (including in the possession of vendors or
other third parties or elsewhere), whether real, personal or mixed,
tangible, intangible or contingent, in each case whether or not recorded
or reflected or required to be recorded or reflected on the books and
records or financial statements of any Person.
(d) "Business Entity" shall mean any corporation, partnership,
limited liability company or other entity which may legally hold title to
Assets.
(e) "Class A Common Stock" shall have the meaning set forth in the
recitals hereto.
(f) "Class B Common Stock" shall have the meaning set forth in the
recitals hereto.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any
successor legislation.
<PAGE> 6
3
(h) "Commission" shall mean the U.S. Securities and Exchange
Commission.
(i) "Declaration Date" shall mean the date on which (i) the Harcourt
General Board of Directors shall declare the dividend constituting the
Distribution and (ii) the certificate of merger effecting the
Recapitalization shall be filed with the Secretary of State of the State
of Delaware.
(j) "DGCL" shall mean the General Corporation Law of the State of
Delaware.
(k) "Distribution" shall have the meaning set forth in the recitals
hereto.
(l) "Distribution Agent" shall mean the distribution agent selected
by Harcourt General to effect the Distribution.
(m) "Distribution Date" shall mean the date determined by the Board
of Directors of Harcourt General following the consummation of the
Recapitalization for the mailing of certificates of Class B Common Stock
to stockholders of Harcourt General in the Distribution.
(n) "Distribution Record Date" shall mean the date determined by the
Board of Directors of Harcourt General as the record date for the
determination of the holders of record of Harcourt General Common Stock
entitled to receive shares of Class B Common Stock in the Distribution.
(o) "Effective Time" shall mean immediately prior to the midnight,
New York time, that ends the 24-hour period comprising the Distribution
Date.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
(q) "Form 8-A" shall mean a Neiman Marcus registration statement on
Form 8-A pursuant to which the Class B Common Stock shall be registered
under the Exchange Act, including all amendments thereto.
(r) "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or
governmental authority.
(s) "Harcourt General Business" shall mean each and every business
conducted at any time by Harcourt General or any Subsidiary of Harcourt
General (other than Neiman Marcus and its subsidiaries) prior to the
Effective Time, except the Neiman Marcus Business.
<PAGE> 7
4
(t) "Harcourt General Common Stock" shall have the meaning set forth
in the recitals hereto.
(u) "Harcourt General Group" shall mean Harcourt General and each
Person (other than any member of the Neiman Marcus Group) that is a
Subsidiary of Harcourt General immediately prior to the Effective Time.
(v) "Harcourt General Indemnitees" shall mean Harcourt General, each
member of the Harcourt General Group, each of their respective present and
former directors, officers, employees and agents and each of the heirs,
executors, successors and assigns of any of the foregoing except Neiman
Marcus Indemnitees; provided that any Person who is a present or former
director, officer, employee or agent (or is an heir, executor, successor
or assign of such Person) of Harcourt General or any member of the
Harcourt General Group (excluding the Neiman Marcus Group) shall be
covered by this definition in such capacity.
(w) "Harcourt General Liabilities" shall mean collectively, all
Liabilities of Harcourt General or any Subsidiary of Harcourt General
(other than Neiman Marcus and its Subsidiaries) immediately prior to the
Effective Time, except the Neiman Marcus Liabilities.
(x) "Indemnifiable Losses" shall mean any and all losses,
Liabilities, claims, damages, demands, costs or expenses (including
reasonable attorneys' fees and any and all out-of-pocket expenses)
reasonably incurred in investigating, preparing for or defending against
any Actions or potential Actions or in settling any Action or potential
Action or in satisfying any judgment, fine or penalty rendered in or
resulting from any Action.
(y) "Indemnifying Party" shall have the meaning set forth in Section
3.3.
(z) "Indemnitee" shall have the meaning set forth in Section 3.3.
(aa) "Intercompany Services Agreement" shall mean the agreement,
dated as of July 24, 1987, between Harcourt General (formerly General
Cinema Corporation) and The Neiman Marcus Group, Inc.
(bb) "IRS Ruling" shall have the meaning set forth in Section
2.1(b)(i).
(cc) "Liabilities" shall mean any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions,
variances, guarantees, make whole agreements and similar
<PAGE> 8
5
obligations, and other liabilities, including all contractual obligations,
whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
and including those arising under any law, rule, regulation, Action,
threatened or contemplated Action (including the costs and expenses of
demands, assessments, judgments, settlements and compromises relating
thereto and attorneys' fees and any and all costs and expenses, whatsoever
reasonably incurred in investigating, preparing or defending against any
such Actions or threatened or contemplated Actions), order or consent
decree of any governmental or other regulatory or administrative agency,
body or commission or any award of any arbitrator or mediator of any kind,
and those arising under any contract, commitment or undertaking, including
those arising under this Agreement or the Recapitalization Agreement, in
each case, whether or not recorded or reflected or required to be recorded
or reflected on the books and records or financial statements of any
person.
(dd) "Material Adverse Effect" shall mean, with respect to any
Person, any change, effect, event, occurrence or development that is,
individually or in the aggregate, materially adverse to the business,
operations, assets, liabilities, condition (financial or otherwise),
results of operations or prospects of such Person.
(ee) "Neiman Marcus" shall have the meaning set forth in the heading
of this Agreement.
(ff) "Neiman Marcus Business" shall mean each and every business
conducted at any time prior to, on or after the Effective Time by Neiman
Marcus or any Subsidiary of Neiman Marcus or other Business Entity
controlled by Neiman Marcus, whether or not such Subsidiary is a
Subsidiary of Neiman Marcus or such Business Entity is controlled by
Neiman Marcus on the date hereof.
(gg) "Neiman Marcus Group" shall mean Neiman Marcus and each Person
that is a Subsidiary of Neiman Marcus immediately prior to the Effective
Time.
(hh) "Neiman Marcus Indemnitees" shall mean Neiman Marcus, each
member of the Neiman Marcus Group, each of their respective present and
former directors, officers, employees and agents and each of the heirs,
executors, successors and assigns of any of the foregoing.
(ii) "Neiman Marcus Liabilities" shall mean, collectively, any and
all Liabilities whatsoever that arise out of, result from, are related to,
or are enforceable against, Neiman Marcus or any Subsidiary of Neiman
Marcus or any Business Entity controlled by Neiman Marcus, whether or not
such Subsidiary was a Subsidiary of Neiman Marcus or such Business Entity
was controlled by Neiman Marcus prior to, on or after the date hereof, or
the ownership or operation of the Neiman Marcus Business,
<PAGE> 9
6
whether such Liabilities arise before, on or after the Effective Time and
whether known or unknown, fixed or contingent, including:
(i) any and all Liabilities arising from or based upon
"controlling person" liability relating to the Proxy Statement (or any
amendment thereto) or any other report or document filed by Neiman Marcus
with the Commission at any time before, on or after the Effective Time;
and
(ii) any and all Liabilities that are expressly contemplated
by this Agreement or the Recapitalization Agreement (or the Schedules
hereto or thereto) as Liabilities to be assumed by Neiman Marcus or any
member of the Neiman Marcus Group or to remain with Neiman Marcus or any
member of the Neiman Marcus Group, and all Liabilities of Neiman Marcus
under this Agreement and the Recapitalization Agreement.
(jj) "NYSE" shall mean the New York Stock Exchange, Inc.
(kk) "Person" shall mean any natural person, Business Entity,
corporation, business trust, joint venture, association, company,
partnership, other entity or government, or any agency or political
subdivision thereof.
(ll) "Proxy Statement" shall have the meaning set forth in the
Recapitalization Agreement.
(mm) "Recapitalization" shall have the meaning set forth in the
recitals hereto.
(nn) "Recapitalization Agreement" shall have the meaning set forth
in the recitals hereto.
(oo) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(pp) "Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or
persons performing similar functions) (irrespective of whether at the time
any other class or classes of ownership interests of such corporation,
partnership or other entity shall or might have such voting power upon the
occurrence of any contingency) or (ii) is a general partner or an entity
performing similar functions (e.g., a trustee).
(qq) "Third Party Claim" shall have the meaning set forth in Section
3.3.
<PAGE> 10
7
SECTION 1.2 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
such Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS; CERTAIN COVENANTS
SECTION 2.1 The Distribution and Other Transactions.
(a) The Distribution. Subject to the conditions set forth in Section
2.1(b) of this Agreement, on the Declaration Date the Board of Directors of
Harcourt General shall declare the Distribution upon the terms set forth in this
Agreement. To effect the Distribution, Harcourt General shall cause the
Distribution Agent to distribute, on the Distribution Date, on a pro rata basis
and taking into account Section 2.1(c), to the holders of record of Harcourt
General Common Stock on the Distribution Record Date, all shares of Class B
Common Stock held by Harcourt General on the Distribution Date. During the
period commencing on the date the certificates representing shares of Class B
Common Stock are delivered to the Distribution Agent and ending upon the date(s)
on which certificates evidencing such shares are mailed to holders of record of
Harcourt General Common Stock on the Distribution Record Date or on which
fractional shares of Class B Common Stock are sold on behalf of such holders,
the Distribution Agent shall hold the certificates representing shares of Class
B Common Stock on behalf of such holders. Harcourt General shall deliver to the
Distribution Agent the share certificates representing the shares of Class B
Common Stock held by Harcourt General which are to be distributed to the holders
of Harcourt General Common Stock in the Distribution. Neiman Marcus agrees, if
required by Harcourt General, to provide all certificates evidencing shares of
Class B Common Stock that Harcourt General shall require in order to effect the
Distribution.
(b) Conditions to the Distribution. The Harcourt General Board of
Directors shall declare a dividend constituting the Distribution on the
Declaration Date following the satisfaction or waiver by Harcourt General, as
determined by Harcourt General in its sole discretion, of the conditions set
forth below:
(i) A private letter ruling from the Internal Revenue Service
shall have been obtained, and shall continue in effect, providing that,
among other things, the Recapitalization and the Distribution will qualify
as tax-free transactions for federal
<PAGE> 11
8
income tax purposes under Sections 354 and 355 of the Code (the "IRS
Ruling"); such ruling shall be in form and substance satisfactory to
Harcourt General in its sole discretion; and Harcourt General and Neiman
Marcus shall have complied with all conditions set forth in such ruling
that are required to be complied with prior to the Distribution;
(ii) Any material governmental approvals and consents
necessary to consummate the Distribution and the other transactions
contemplated hereby and by the Recapitalization Agreement shall have been
obtained and shall be in full force and effect;
(iii) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution and the other transactions
contemplated hereby and by the Recapitalization Agreement shall be in
effect and no other event outside the control of Harcourt General shall
have occurred or failed to occur that prevents the consummation of the
Distribution;
(iv) The transactions contemplated hereby shall be in
compliance with applicable federal and state securities and other
applicable laws;
(v) Each of Neiman Marcus and Harcourt General shall have
received such consents, and shall have received executed copies of such
agreements or amendments of agreements, as Harcourt General shall deem
appropriate in connection with the completion of the Distribution or the
transactions contemplated by this Agreement and the Recapitalization
Agreement;
(vi) The Recapitalization shall have been consummated;
(vii) The Form 8-A shall have been filed with the Commission
and there shall be no impediment to the certification by the NYSE to the
Commission of the listing of the Class B Common Stock;
(viii) The Class B Common Stock shall have been approved for
listing on the NYSE, subject to official notice of issuance;
(ix) The stockholders of Harcourt General shall have approved
an amendment to the Harcourt General Certificate of Incorporation creating
a class of low- vote common stock;
(x) The Board of Directors of Harcourt General shall have
received an opinion of Lazard Freres as to the fairness of the
Distribution to the Harcourt General stockholders from a financial point
of view;
<PAGE> 12
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(xi) The Board of Directors of Harcourt General shall have
received a customary opinion as to the legality of the dividend
constituting the Distribution under Delaware law;
(xii) The Board of Directors of Harcourt General shall have
received a customary opinion as to the Distribution not constituting a
sale, lease, exchange or other disposition of all or substantially all of
its assets;
(xiii)Each of the representations and warranties of Neiman
Marcus set forth in this Agreement shall have been true and correct when
made and shall be true and correct as of the Declaration Date; and Neiman
Marcus shall have performed or complied with all agreements and covenants
required to be performed by it under this Agreement and the
Recapitalization Agreement at or prior to the Declaration Date; and
Harcourt General shall have received a certificate of the chief financial
officer of Neiman Marcus as to the foregoing;
(xiv) All actions and other documents and instruments deemed
necessary or advisable in connection with the transactions contemplated
hereby shall have been taken or executed, as the case may be, in form and
substance satisfactory to Harcourt General; and
(xv) No event or development shall have occurred which the
Board of Directors of Harcourt General determines, in its sole discretion,
makes the Distribution not in the best interests of Harcourt General
and/or its stockholders.
The foregoing conditions are for the sole benefit of Harcourt General and shall
not give rise to or create any duty on the part of Harcourt General to waive or
not waive any such condition.
(c) Sale of Fractional Shares. In response to the request of Neiman
Marcus that no fractional shares of Class B Common Stock be distributed in the
Distribution, Harcourt General shall appoint the Distribution Agent as agent for
each holder of record of Harcourt General Common Stock who would receive in the
Distribution any fractional share of Class B Common Stock. The Distribution
Agent shall aggregate all such fractional shares and sell them in an orderly
manner after the Distribution Date in the open market and, after completion of
such sales, distribute a pro rata portion of the net proceeds from such sales,
based upon the gross selling price of all such fractional shares, to each
shareholder of Harcourt General who would otherwise have received a fractional
share. Harcourt General shall reimburse the Distribution Agent for its
reasonable costs, expenses and fees (including selling expenses) in connection
with the sale of fractional shares of Class B Common Stock and the distribution
of the proceeds thereof in accordance with this Section 2.1(c).
(d) Other Actions. (i) Harcourt General and Neiman Marcus shall
prepare and mail, at such time as determined by Harcourt General, to the holders
of Harcourt General
<PAGE> 13
10
Common Stock, such information concerning Neiman Marcus, its business,
operations and management, the Distribution and the tax consequences thereof and
such other matters as Harcourt General shall reasonably determine or as may be
required by law. Neiman Marcus agrees to cooperate with Harcourt General in the
preparation of, and provide any information reasonably requested by Harcourt
General for inclusion in, such mailing. Harcourt General and Neiman Marcus will
prepare, and Neiman Marcus will, to the extent required under applicable law,
file with the Commission any such documentation, including any no action letters
or other requests for interpretive or regulatory assistance, if any, which
Harcourt General determines are necessary or desirable to effectuate the
Distribution and the other transactions contemplated hereby and by the
Recapitalization Agreement and Harcourt General and Neiman Marcus shall each use
its reasonable best efforts to obtain all necessary approvals from the
Commission with respect thereto as soon as practicable.
(ii) Harcourt General and Neiman Marcus shall take all such
action as may be necessary or appropriate under the securities or blue sky
laws of the United States (and any comparable laws under any foreign
jurisdiction) in connection with the Distribution and the other
transactions contemplated hereby and by the Recapitalization Agreement.
(iii) Neiman Marcus shall prepare and file, and shall use its
reasonable best efforts to have approved, subject to official notice of
issuance, an application for the listing on the NYSE of the Class B Common
Stock to be distributed in the Distribution.
(iv) Subject to Section 2.1(d)(vii), Neiman Marcus shall
prepare and file the Form 8-A (which may include or incorporate by
reference information contained in the Proxy Statement) with the
Commission as promptly as practicable following the execution hereof, and
shall use its best efforts to cause the Form 8-A to become effective under
the Exchange Act immediately following the consummation of the
Recapitalization on the Declaration Date or as soon thereafter as
practicable.
(v) On or prior to the Distribution Date, each of Harcourt
General and Neiman Marcus shall consummate those other transactions in
connection with the Distribution (including the Recapitalization) that are
contemplated by the Ruling Request and any related submissions by Harcourt
General to the Internal Revenue Service.
(vi) In addition to those matters specifically set forth
above, Harcourt General and Neiman Marcus also shall take all reasonable
steps necessary and appropriate to cause the conditions set forth in
Section 2.1(b) to be satisfied and to effect the Distribution on the
Distribution Date.
(vii) Neiman Marcus agrees that it shall not file with the
Commission any report or other document that contains any disclosure
relating to the Distribution, this Agreement, the Recapitalization
Agreement or any of the transactions contemplated
<PAGE> 14
11
hereby or thereby without the prior written consent of Harcourt General
with respect to such disclosure, which consent shall not be unreasonably
withheld.
(viii) Prior to the Distribution Date, Neiman Marcus shall not
amend, and the Neiman Marcus Board of Directors shall not approve any
amendment to, Neiman Marcus's restated Certificate of Incorporation, other
than the amendments to the Certificate of Incorporation that will take
effect upon the filing of the certificate of merger with the Secretary of
State of the State of Delaware in connection with the Recapitalization in
accordance with the terms of the Recapitalization Agreement.
(ix) Harcourt General agrees to vote, or cause to be voted,
all shares of Neiman Marcus Common Stock owned by it in favor of the
adoption of the Recapitalization Agreement.
(x) Harcourt General and Neiman Marcus shall enter into an
Amended and Restated Intercompany Services Agreement, pursuant to which
Harcourt General will continue to provide corporate services to Neiman
Marcus.
(xi) Except as set forth above in clause (x), all agreements
and arrangements existing on the date hereof between Harcourt General or
any of its Subsidiaries on the one hand and Neiman Marcus and any of its
Subsidiaries on the other hand, whether written or oral, shall continue in
full force and effect in accordance with their terms and consistent with
past practice from the date hereof, through the Distribution Date and
thereafter.
SECTION 2.2 Declaration Date; Further Assurances. (a) The parties
agree that the Declaration Date shall occur as soon as reasonably practicable
following the satisfaction or waiver of the conditions to the declaration of the
Distribution set forth in Section 2.1(b). To the extent any action of the Board
of Directors of Neiman Marcus or Harcourt General is necessary to consummate the
Distribution, the parties shall cause their respective Boards of Directors to
meet telephonically or at the same location on the Declaration Date and each
shall take such corporate action at such meeting as shall be required to effect
the transactions contemplated hereby and by the Recapitalization Agreement.
Immediately following such meetings, Neiman Marcus shall take all actions
required to consummate the Recapitalization in accordance with the terms of the
Recapitalization Agreement, including the filing of the certificate of merger
relating to the Recapitalization with the Secretary of State of the Delaware.
(b) Subject to Harcourt General's right to terminate this Agreement
in accordance with Section 5.10, in case at any time after the date hereof any
further action is reasonably necessary or desirable to carry out the
Recapitalization or Distribution or any other purpose of this Agreement or the
Recapitalization Agreement, the proper officers of each party to this Agreement
shall take all such necessary action, and shall execute and deliver all
necessary instruments related thereto. Without limiting the foregoing, and
subject as aforesaid, Harcourt
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General and Neiman Marcus shall use their respective reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
promptly to obtain all consents and approvals, to enter into all amendatory
agreements (including, without limitation, agreeing to such other amendments or
modifications of this Agreement in order to obtain the IRS Ruling), to make all
filings and applications that may be required for the consummation of the
transactions contemplated by this Agreement and the Recapitalization Agreement,
including all applicable governmental and regulatory filings, and to permit each
other to review and comment on all correspondence and filings related to the
foregoing.
SECTION 2.3 Representations and Warranties. (a) Neiman Marcus hereby
represents and warrants to Harcourt General as follows:
(i) Organization; Good Standing. Neiman Marcus is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate power required to
consummate the transactions contemplated hereby and by the
Recapitalization Agreement.
(ii) Authorization. The execution, delivery and performance by
Neiman Marcus of this Agreement and the Recapitalization Agreement and the
consummation by Neiman Marcus of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of Neiman Marcus, other than the approval of the Recapitalization by
the stockholders of Neiman Marcus. Each of this Agreement and the
Recapitalization Agreement constitutes, and each other agreement or
instrument executed and delivered or to be executed and delivered by
Neiman Marcus pursuant to this Agreement or the Recapitalization Agreement
will, upon such execution and delivery, constitute a legal, valid and
binding obligation of Neiman Marcus, enforceable against Neiman Marcus in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(iii) Consents and Filings. Except (w) for the filing of a
certificate of merger in connection with the Recapitalization and any
other filings required to be made with the Secretary of State of the State
of Delaware, (x) for the IRS Ruling, (y) for the filing of the Proxy
Statement and the Form 8-A and any other reports or documents required to
be filed under the Exchange Act and (z) for any filings required to be
made with the NYSE, no consent of, or filing with, any Governmental Entity
which has not been obtained or made is required for or in connection with
the execution and delivery of
<PAGE> 16
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this Agreement or the Recapitalization Agreement by Neiman Marcus, and the
consummation by Neiman Marcus of the transactions contemplated hereby or
thereby.
(iv) Noncontravention. Except in the case of any consents that
will be obtained prior to the Distribution Date, the execution, delivery
and performance of this Agreement and the Recapitalization Agreement by
Neiman Marcus does not, and the consummation by Neiman Marcus of the
transactions contemplated hereby and thereby will not, (i) violate any
applicable federal, state or local statute, law, rule or regulation, (ii)
violate any provision of the Certificate of Incorporation or By-Laws of
Neiman Marcus or (iii) violate any provision of, or result in the
termination or acceleration of, or entitle any party to accelerate any
obligation or indebtedness under, any mortgage, lease, franchise, license,
permit, agreement, instrument, order, arbitration award, judgment or
decree to which Neiman Marcus or any of its Subsidiaries is a party or by
which any of them are bound, except for, in the case of clause (iii)
above, such violations that would not result in a Material Adverse Effect
with respect to Neiman Marcus or prevent Harcourt General from complying
with the terms and provisions of this Agreement or the Recapitalization
Agreement in any material respect.
(v) Litigation. There are no actions or suits against Neiman
Marcus pending, or to the knowledge of Neiman Marcus, threatened which
seek to, and Neiman Marcus is not subject to any judgments, decrees or
orders which, enjoin or rescind the transactions contemplated by this
Agreement or the Recapitalization Agreement or otherwise prevent Neiman
Marcus from complying with the terms and provisions of this Agreement or
the Recapitalization Agreement in any material respect.
(vi) Change of Control Adjustments. Except as would not result
in a Material Adverse Effect with respect to Neiman Marcus and except in
the case of any consents that will be obtained prior to the Distribution
Date, neither the Recapitalization nor the Distribution nor any of the
other transactions contemplated hereby or by the Recapitalization
Agreement will (x) constitute a "change of control" or otherwise result in
the increase or acceleration of any benefits, including to employees of
Neiman Marcus, under any agreement to which Neiman Marcus or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is
bound, or (y) result in any adjustment of the number of shares subject to,
or the terms of, including exercise price, any outstanding employee stock
options of Neiman Marcus.
(b) Harcourt General hereby represents and warrants to Neiman Marcus
as follows:
(i) Organization; Good Standing. Harcourt General is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate power required to
consummate the transactions contemplated hereby.
<PAGE> 17
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(ii) Authorization. The execution, delivery and performance by
Harcourt General of this Agreement and the consummation by Harcourt
General of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Harcourt General, other
than the formal declaration of the Distribution. This Agreement
constitutes, and each other agreement or instrument executed and delivered
or to be executed and delivered by Harcourt General pursuant to this
Agreement will, upon such execution and delivery, constitute, a legal,
valid and binding obligation of Harcourt General, enforceable against
Harcourt General in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing.
(iii) Consents and Filings. Except (w) for the filing of a
certificate of merger in connection with the Recapitalization, a
certificate of amendment to the Harcourt General Certificate of
Incorporation and any other filings required to be made with the Secretary
of State of the State of Delaware, (x) for the IRS Ruling, (y) for the
filing of the Proxy Statement, the Form 8-A and a proxy statement in
respect of the proposed amendment to Harcourt General's Certificate of
Incorporation referred to in Section 2.1(b)(ix) and any other reports or
documents required to be filed under the Exchange Act and (z) for any
filings required to be made with the NYSE, no material consent of, or
filing with, any Governmental Entity which has not been obtained or made
is required for or in connection with the execution and delivery of this
Agreement by Harcourt General, and the consummation by Harcourt General of
the transactions contemplated hereby.
(iv) Noncontravention. Except in the case of any consents that
will be obtained prior to the Distribution Date, the execution, delivery
and performance of this Agreement and the Recapitalization Agreement by
Harcourt General does not, and the consummation by Harcourt General of the
transactions contemplated hereby and thereby will not, (i) violate any
applicable federal, state or local statute, law, rule or regulation, or
(ii) violate any provision of the Certificate of Incorporation or By-Laws
of Harcourt General or (iii) violate any provision of, or result in the
termination or acceleration of, or entitle any party to accelerate any
obligation or indebtedness under, any mortgage, lease, franchise, license,
permit, agreement, instrument, order, arbitration award, judgment or
decree to which Harcourt General or any of its Subsidiaries is a party or
by which any of them are bound, except for, in the case of clause (iii)
above, such violations that would not prevent Harcourt General from
complying with the terms and provisions of this Agreement or the
Recapitalization Agreement in any material respect.
SECTION 2.4 Certain Post-Distribution Transactions. (a)(i) Neiman
Marcus shall comply and shall cause its Subsidiaries to comply with and
otherwise not take action inconsistent with each representation and statement
made to the Internal Revenue Service in
<PAGE> 18
15
connection with the request by Harcourt General for a ruling letter in respect
of the Distribution as to certain tax aspects of the Distribution and (ii) until
two years after the Distribution Date, Neiman Marcus will maintain its status as
a company engaged in the active conduct of a trade or business, as defined in
Section 355(b) of the Code.
(b) Neiman Marcus agrees that until two years after the Distribution
Date, it will not (i) merge or consolidate with or into any other corporation,
(ii) liquidate or partially liquidate, (iii) sell or transfer all or
substantially all of its assets (within the meaning of Rev. Proc. 77-37, 1977 -
2 C.B. 568) in a single transaction or series of related transactions, (iv)
redeem or otherwise repurchase any Neiman Marcus stock (other than as described
in Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696), or (v) take any
other action or actions which in the aggregate (and taking into account the
Recapitalization) would have the effect of causing or permitting one or more
persons to acquire directly or indirectly stock representing a 50 percent or
greater interest (within the meaning of Section 355(e) of the Code) in Neiman
Marcus, unless prior to taking any such action set forth in the foregoing
clauses (i) through (v), Neiman Marcus has obtained (and provided to Harcourt
General) a written opinion in form and substance reasonably acceptable to
Harcourt General of a law firm reasonably acceptable to Harcourt General, or
Harcourt General has obtained (at the reasonable request and at the expense of
Neiman Marcus) a supplemental ruling from the Internal Revenue Service, that
such action or actions will not result in (i) the Distribution failing to
qualify under Section 355(a) of the Code or (ii) the Neiman Marcus shares
failing to qualify as qualified property for purposes of Section 355(c)(2) of
the Code by reason of Section 355(e) of the Code. Harcourt General agrees to
cooperate with Neiman Marcus in obtaining such opinion or, as the case may be,
to use its commercially reasonable best efforts in obtaining any supplemental
ruling reasonably requested by Neiman Marcus, including, where appropriate, by
providing written representations as to factual events that transpired prior to
the Distribution Date.
(c) Notwithstanding anything to the contrary herein, if Neiman
Marcus (or any of its Subsidiaries) fails to comply with any of its obligations
under Sections 2.4(a) and 2.4(b) above or takes or fails to take any action
(including any action referred to in Section 2.4(a) or clauses (i) through (v)
of Section 2.4(b) without regard to when such action occurs) on or after the
Distribution Date, and such failure to comply, action or omission contributes to
a determination that (i) the Distribution fails to qualify under Section 355(a)
of the Code or (ii) the Neiman Marcus shares fail to qualify as qualified
property for purposes of Section 355(c)(2) of the Code by reason of Section
355(e) of the Code, then Neiman Marcus shall indemnify and hold harmless
Harcourt General and each member of the consolidated group of which Harcourt
General is a member from and against any and all federal, state and local taxes,
including any interest, penalties or additions to tax, imposed upon or incurred
by Harcourt General, any member of its group or any stockholder of Harcourt
General as a result of the failure of the Distribution to qualify under Section
355(a) of the Code or the application of Section 355(e) (including any taxes
payable by reason of any payment made pursuant to this Section 2.4(c)). The
obligation of Neiman Marcus to indemnify Harcourt General pursuant to the
preceding sentence shall not be affected by the delivery of any legal opinion or
supplemental ruling under
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Section 2.4(b), unless the circumstances described in clause (i) or (ii) of this
Section 2.4(c) shall occur solely by reason of (x) the failure of a
representation made by Harcourt General pursuant to the last sentence of Section
2.4(b) to be true and correct in all material respects, (y) a material omission
in any such representation or (z) a breach by Harcourt General or any of the
Shared Representatives (as defined in Section 4.6) of any of the covenants
contained in Section 4.6; provided, however, that in the event that Harcourt
General or any of the Shared Representatives shall have breached any of such
covenants, which breach shall have been disclosed to a director of Neiman Marcus
that is not affiliated with Harcourt General (an "Independent Director"), and
notwithstanding such breach, a majority of the Independent Directors shall
determine (as evidenced in writing) to proceed with a Transaction Proposal (as
defined in Section 4.6), the indemnity provided by this Section 2.4(c) shall not
be affected.
SECTION 2.5 Certain Limitations on Actions by Harcourt General.
Subject to the representations and undertakings required by Harcourt General to
be made in order to obtain the IRS Ruling, following the Distribution, in
matters requiring a vote of the holders of Class A Common Stock, for such time
as Harcourt General holds the Retained Shares, Harcourt General will vote the
Retained Shares in proportion to the votes cast affirmatively or negatively by
all other holders of Class A Common Stock voting.
SECTION 2.6 Right of First Offer. (a) Commencing immediately after
the consummation of the Distribution, and prior to the second anniversary of the
Distribution Date, Harcourt General shall not, and shall not permit any
Subsidiary to, sell, exchange or transfer ("Transfer"), other than to a direct
or indirect wholly owned Subsidiary of Harcourt General, Neiman Marcus or
pursuant to a bona fide merger, tender offer, exchange offer, consolidation or
other similar transaction in which the opportunity to Transfer shares is made
available on the same basis to all holders of Class A Common Stock, a number of
shares of Class A Common Stock in any 60-day period representing 5% or more of
the outstanding shares of Class A Common Stock and Class B Common Stock, taken
together, unless Harcourt General shall have given to Neiman Marcus at least ten
days' prior written notice (the "Right of First Offer") that it or its
Subsidiary is considering effecting such a Transfer (a "Transferor's Notice").
Such notice shall state (i) the number of shares of Class A Common Stock that
Harcourt General or its Subsidiary may Transfer (the "Offered Securities") and
(ii) the price, if applicable, at which Harcourt General or its Subsidiary would
be willing to Transfer the Offered Securities, other than in a "block trade" or
other public offering (a "Public Sale"), including to a third party (the
"Private Price"), and/or if Harcourt General or its Subsidiary anticipates the
possibility of a Transfer of such shares in a Public Sale, a statement to such
effect. Upon receipt of the Transferor's Notice, Neiman Marcus, acting through
its Board of Directors, shall have ten days (the "Offer Period") to elect to
purchase the Offered Securities at a price in cash equal to (x) the Private
Price or (y) if no Private Price has been stated by Harcourt General, the
closing price on the New York Stock Exchange Composite Transactions Tape (the
"NYSE Tape") on the trading day immediately preceding the date of the
Transferor's Notice. The foregoing Right of First Offer shall not apply to any
Transfer for shares of stock or other property, so long as the
<PAGE> 20
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transferee in any such Transfer shall agree in writing to be bound by the
provisions of this Section 2.6.
(b) If Neiman Marcus does not exercise its Right of First Offer,
then Harcourt General or its Subsidiary shall have the right, for a period
ending upon the later of (i) 120 days from the expiration of the Offer Period,
(ii) 45 days after such time as a registration statement filed with respect to
such Offered Securities shall be declared effective by the Commission or (iii)
15 days after the expiration of such time as the parties to any transaction
reasonably require to comply with applicable United States federal and state
laws and regulations, to Transfer or, in the case of Harcourt General, cause its
Subsidiary to Transfer all or any portion of the Offered Securities at a price
no less than (i) if the Transferor's Notice sets forth a Private Price, the
Private Price or (ii) if the Transferor's Notice does not set forth a Private
Price, (A) in a Public Sale, 90% of the low sales price on the NYSE Tape on the
trading day on which such Transfer is made (as opposed to the settlement date of
such Transfer) or (B) in a Transfer other than a Public Sale, the low sales
price on the NYSE Tape on the trading day on which an agreement to Transfer is
made. If Harcourt General or its Subsidiary does not Transfer or, in the case of
Harcourt General, cause its Subsidiary to Transfer all or any portion of the
Offered Securities within the time period provided for in this Section 2.6(b),
the Right of First Offer in this Section 2.6 shall again become applicable with
respect to any Transfer of shares of Class A Common Stock by Harcourt General or
its Subsidiary.
(c) If Neiman Marcus exercises its Right of First Offer, the closing
of the purchase of the Offered Securities with respect to which such right has
been exercised shall take place on the 15th day after the later of (i) the date
Neiman Marcus gives notice of such exercise and (ii) the expiration of such time
as the parties may reasonably require in order to comply with applicable United
States federal and state laws and regulations, which in no event shall be more
than 45 days after the date specified in clause (c)(i).
(d) Upon exercise by Neiman Marcus of its Right of First Offer under
this Section 2.6, Neiman Marcus and Harcourt General or, if applicable, its
Subsidary, shall be legally obligated to consummate the purchase contemplated
thereby and shall use their respective reasonable best efforts to make all
necessary filings and to secure any approvals required and to comply as soon as
practicable with all applicable United States federal and state laws and
regulations in connection therewith; provided, however, that Harcourt General or
its Subsidiary may determine, at any time prior to the consummation of a
Transfer to Neiman Marcus, not to Transfer or, in the case of Harcourt General,
cause its Subsidiary to Transfer the Offered Securities, in which case all of
the provisions of this Section 2.6 shall again become applicable with respect to
any Transfer of shares of Class A Common Stock by Harcourt General or its
Subsidiary.
SECTION 2.7 Smith Family. Harcourt General shall use its
commercially reasonable best efforts to procure the agreement of each member of
the Smith family currently reporting its ownership of Harcourt General Common
Stock on Schedule 13D under the
<PAGE> 21
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Exchange Act (the "Smith Stockholders") that, for a period of 180 days from the
Distribution Date, such Smith Stockholder shall not Transfer any shares of Class
B Common Stock held by such Smith Stockholder other than to any other Smith
Stockholder or any other Person to whom such Smith Stockholder would be
permitted to transfer shares of Class B Stock of Harcourt General in accordance
with the Harcourt General Certificate of Incorporation (including for bona fide
estate planning or charitable purposes); provided, however, that such Smith
Stockholder shall be permitted to Transfer shares of Class B Common Stock
pursuant to a bona fide tender offer, exchange offer, merger, consolidation or
similar transaction in which the opportunity to Transfer shares is made
available on the same basis to all holders of Class B Common Stock.
ARTICLE III. INDEMNIFICATION
SECTION 3.1 Indemnification by Neiman Marcus. Except as otherwise
specifically set forth in any provision of this Agreement, Neiman Marcus shall
indemnify, defend and hold harmless the Harcourt General Indemnitees from and
against any and all Indemnifiable Losses of the Harcourt General Indemnitees
arising out of, by reason of or otherwise in connection with the Neiman Marcus
Liabilities or alleged Neiman Marcus Liabilities, including any breach by Neiman
Marcus of any representation, warranty, covenant or other provision of this
Agreement or the Recapitalization Agreement.
SECTION 3.2 Indemnification by Harcourt General. Except as otherwise
specifically set forth in any provision of this Agreement, Harcourt General
shall indemnify, defend and hold harmless the Neiman Marcus Indemnitees from and
against any and all Indemnifiable Losses of the Neiman Marcus Indemnitees
arising out of, by reason of or otherwise in connection with the Harcourt
General Liabilities or alleged Harcourt General Liabilities, including any
breach by Harcourt General of any representation, warranty, covenant or other
provision of this Agreement or the Recapitalization Agreement.
SECTION 3.3 Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against a
Neiman Marcus Indemnitee or a Harcourt General Indemnitee (each, an
"Indemnitee") by any person who is not a party to this Agreement (a "Third Party
Claim") as to which such Indemnitee is entitled to indemnification pursuant to
this Agreement, such Indemnitee shall notify the party which is or may be
required pursuant to the terms hereof to make such indemnification (the
"Indemnifying Party") in writing, and in reasonable detail, of the Third Party
Claim promptly (and in any event within 15 business days) after receipt by such
Indemnitee of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Party shall
not be liable for any expenses incurred during the period in which the
Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver
to the Indemnifying Party, promptly (and in any event within five business days)
after the Indemnitee's receipt thereof, copies of all notices and
<PAGE> 22
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documents (including court papers) received by the Indemnitee relating to the
Third Party Claim. Any Indemnitee shall cooperate with the Indemnifying Party in
the defense or prosecution of any Third Party Claim, including by providing or
causing to be provided records and witnesses as soon as reasonably practicable
after receiving any request therefor from or on behalf of the Indemnifying
Party.
If a Third Party Claim is made against an Indemnitee with respect to
which a claim for indemnification is made pursuant to Section 3.1 or Section 3.2
hereof, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges in writing its obligation to
indemnify the Indemnitee therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party; provided that such counsel is not reasonably
objected to by the Indemnitee. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party shall, within 30 days
(or sooner if the nature of the Third Party Claim so requires), notify the
Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter
not be liable to the Indemnitee for legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
that such Indemnitee shall have the right to employ counsel to represent such
Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest
between such Indemnitee and such Indemnifying Party exists in respect of such
claim which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, subject to the proviso of the preceding sentence,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the period
prior to the time the Indemnitee shall have given notice of the Third Party
Claim as provided above). If the Indemnifying Party so elects to assume the
defense of any Third Party Claim, all of the Indemnitees shall cooperate with
the Indemnifying Party in the defense or prosecution thereof, including by
providing or causing to be provided, records and witnesses as soon as reasonably
practicable after receiving any request therefor from or on behalf of the
Indemnifying Party.
If the Indemnifying Party acknowledges in writing responsibility for
a Third Party Claim, then in no event will the Indemnitee admit any liability
with respect to, or settle, compromise or discharge, any Third Party Claim
without the Indemnifying Party's prior written consent (which shall not be
unreasonably withheld); provided, however, that the Indemnitee shall have the
right to settle, compromise or discharge such Third Party Claim without the
consent of the Indemnifying Party if (i) the Indemnitee releases the
Indemnifying Party from its indemnification obligation hereunder with respect to
such Third Party Claim, (ii) such settlement, compromise or discharge is solely
for money damages and would not otherwise adversely affect the Indemnifying
Party and (iii) such settlement, compromise or discharge does not subject the
Indemnifying Party to any equitable remedy. If the Indemnifying Party
acknowledges in writing responsibility for a Third Party Claim, the Indemnifying
Party shall be permitted to enter into,
<PAGE> 23
20
and the Indemnitee shall agree to, any settlement, compromise or discharge of a
Third Party Claim that the Indemnifying Party may recommend and that by its
terms obligates the Indemnifying Party to pay the full amount of the liability
in connection with such Third Party Claim and releases the Indemnitee completely
in connection with such Third Party Claim and that would not otherwise adversely
affect the Indemnitee or subject the Indemnitee to any equitable remedy;
provided, however, that the Indemnitee may refuse to agree to any such proposed
settlement, compromise or discharge if the Indemnitee agrees that the
Indemnifying Party's indemnification obligation with respect to such Third Party
Claim shall not exceed the amount that would be required to be paid by or on
behalf of the Indemnifying Party in connection with such proposed settlement,
compromise or discharge; and provided further that the Indemnifying Party shall
not agree to any other settlement, compromise or discharge of a Third Party
Claim not described above without the prior written consent of the Indemnitee,
such consent not to be unreasonably withheld. If an Indemnifying Party elects
not to assume the defense of a Third Party Claim, or fails to notify an
Indemnitee of its election to do so as provided herein, such Indemnitee may
compromise, settle or defend such Third Party Claim.
(b) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(c) The remedies provided in this Article III shall be cumulative
and shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
SECTION 3.4 Indemnification Payments. Indemnification required by
this Article III shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
loss, liability, claim, damage or expense is incurred.
ARTICLE IV. COVENANTS
SECTION 4.1 Access to Information. (a) Other than in circumstances
in which indemnification is sought pursuant to Article III (in which event the
provisions of such Article will govern), from and after the Distribution Date,
each of Neiman Marcus and Harcourt General shall afford to the other and its
authorized accountants, counsel and other designated representatives reasonable
access during normal business hours, subject to appropriate restrictions for
classified, privileged or confidential information, to the personnel,
properties, books and records of such party and its Subsidiaries insofar as such
access is reasonably required by the other party and relates to such other
party's performance of its obligations under this
<PAGE> 24
21
Agreement or the Recapitalization Agreement or such party's financial, tax and
other reporting obligations.
(b) A party providing information or access to information to the
other party under this Article IV shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such information or access to
information.
SECTION 4.2 Confidentiality. Each of Neiman Marcus and its
Subsidiaries and Harcourt General and its Subsidiaries shall keep, and shall
cause its consultants and advisors to keep, confidential all information
concerning the other parties in its possession, its custody or under its control
(except to the extent that (A) such information has been in the public domain
through no fault of such party or (B) such information has been later lawfully
acquired from other sources by such party or (C) this Agreement or the
Recapitalization Agreement or any other agreement entered into pursuant hereto
or thereto permits the use or disclosure of such information) to the extent such
information (i) relates to or was acquired during the period up to the Effective
Time or pursuant to Section 4.1, or (ii) is based upon or is derived from
information described in the preceding clause (i), and each party shall not
(without the prior written consent of the other) otherwise release or disclose
such information to any other person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure.
SECTION 4.3 Retention of Records. Except as otherwise required by
law or agreed to in writing, each party shall preserve and retain all
information relating to the other party's business in accordance with the record
retention policies of such party as may be in effect from time to time.
Notwithstanding the foregoing, any party may destroy or otherwise dispose of any
information at any time; provided that prior to such destruction or disposal (i)
such party shall provide no less than 90 days prior written notice to the other
party, specifying the information proposed to be destroyed or disposed of and
(ii) if the recipient of such notice shall request in writing prior to the
scheduled date for such destruction or disposal that any of the information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the information as was requested at the expense of the
requesting party.
SECTION 4.4 Litigation Cooperation. Each of Harcourt General and
Neiman Marcus shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, employees and agents as witnesses
to the extent that such persons may reasonably be required in connection with
any Action arising out of (i) the business of such other party and its
predecessors, if any, in which the requesting party may from time to time be
involved, provided, that such Action does not involve a claim between either of
Harcourt General or Neiman Marcus against the other or (ii) the matters
contained in Section 2.4 hereof.
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SECTION 4.5 Other Matters. Each of Harcourt General and Neiman
Marcus shall negotiate in good faith to execute prior to the Distribution Date
such further certificates, agreements and other documents (including, without
limitation, with respect to transition services, intellectual property, employee
benefits and insurance matters) which are necessary or appropriate to consummate
or implement the transactions contemplated hereby and by the Recapitalization
Agreement.
SECTION 4.6 No Solicitation. (a) Harcourt General agrees that
neither it nor any executive officer of Harcourt General named on Schedule 4.6
to this Agreement or any director of Harcourt General who is also an executive
officer or director of Neiman Marcus (a "Shared Representative") shall solicit
any offers or proposals regarding (i) any merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Neiman Marcus, (ii) any purchase or
sale of all or substantially all of the assets of Neiman Marcus or (iii) any
issuance or other sale or transfer of any equity interest in Neiman Marcus held
by Harcourt General (collectively, a "Transaction Proposal"). The obligations
set forth in clauses (i) and (ii) of this Section 4.6(a) shall terminate on the
date that is two years following the Distribution Date and the obligations set
forth in clause (iii) of this Section 4.6(a) shall terminate on the Distribution
Date.
(b) Upon receipt of an unsolicited Transaction Proposal, Harcourt
General or any Shared Representative, as the case may be, shall, in Harcourt
General's sole discretion, either (i) promptly reject such Transaction Proposal,
subject to the fiduciary obligations of any Shared Representative to Neiman
Marcus or its stockholders or to such Shared Representative's obligations as an
executive officer of Neiman Marcus, or (ii) refer such Transaction Proposal to
Walter J. Salmon or another Independent Director and to the Person designated
pursuant to Section 5.5 to receive copies of any notices delivered to Neiman
Marcus and the Independent Directors of Neiman Marcus. In the event that the
Independent Directors determine that such Transaction Proposal should be
discussed further with the party making such Transaction Proposal, the
Independent Directors shall notify Harcourt General in writing, signed by a
majority of the Independent Directors of Neiman Marcus. Harcourt General and the
Shared Representatives shall be permitted to take such steps as they deem
appropriate, in their good faith judgment, in connection with such Transaction
Proposal without being deemed to violate this Section 4.6. The sole remedy for
breach by Harcourt General or any of the Shared Representatives of this Section
4.6 shall be the elimination of the indemnity obligation of Neiman Marcus set
forth in Section 2.4(c), as provided in the last sentence of Section 2.4(c),
except as provided in the proviso to such last sentence of Section 2.4(c).
SECTION 4.7 Registration Rights Agreement. On the Distribution Date,
Harcourt General and Neiman Marcus will enter into a registration rights
agreement providing for two demand registration rights and two shelf
registration rights with respect to the shares of Class A Common Stock to be
held by Harcourt General following the Distribution Date, and otherwise
containing customary provisions reasonably acceptable to both Harcourt General
and Neiman Marcus.
<PAGE> 26
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SECTION 4.8 Disclosure of Indemnification Obligations. Neiman Marcus
agrees to disclose from time to time, in its audited consolidated financial
statements included in its Annual Report on Form 10-K, the existence, scope and
material terms of its indemnification obligations pursuant to Section 2.4(c),
for a period commencing on the Distribution Date and ending on the earlier to
occur of (i) the date that is five years from the Distribution Date and (ii)
such time as the Independent Directors of Neiman Marcus determine such
disclosure is no longer necessary.
ARTICLE V. MISCELLANEOUS
SECTION 5.1 Complete Agreement; Construction. This Agreement and the
Recapitalization Agreement, including the Exhibits and Schedules hereto and
thereto, shall constitute the entire agreement between the parties with respect
to the subject matter hereof and thereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
SECTION 5.2 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
SECTION 5.3 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 5.4 Expenses. Except as set forth on Schedule 5.4 or as
otherwise set forth in this Agreement or in the Recapitalization Agreement, all
costs and expenses incurred in connection with the preparation, execution,
delivery and implementation of this Agreement and the Recapitalization
Agreement, and the Distribution and the other transactions contemplated hereby
and thereby shall be charged to and paid by the party incurring such costs and
expenses.
SECTION 5.5 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To Harcourt General:
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: 617-278-5567
<PAGE> 27
24
Attn: Chief Executive Officer
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: 212-455-2502
Attn: John G. Finley, Esq.
To Neiman Marcus:
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: 617-278-5567
Attn: Chief Executive Officer
and
The Independent Directors of Neiman Marcus
c/o The Secretary of Neiman Marcus
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02467
Telecopy: 617-278-5567
with a copy to:
Choate Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Telecopy: 617-248-4000
Attn: Andrew L. Nichols, Esq.
SECTION 5.6 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 5.7 Amendments. Subject to the terms of Section 5.10 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
<PAGE> 28
25
SECTION 5.8 Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any party hereto without the prior
written consent of the other party hereto, and any attempt to assign any rights
or obligations arising under this Agreement without such consent shall be void.
SECTION 5.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns. In addition, the
provisions of this Agreement shall be binding upon any person that acquires,
directly or indirectly, 50% or more of the (i) voting power, in an election of
directors or otherwise, represented by the outstanding common stock, (ii) shares
of outstanding common stock or (iii) assets of Neiman Marcus on or after the
Distribution Date, but Neiman Marcus shall not enter into any agreement with
respect to the foregoing or permit to be consummated any such transaction unless
and until a writing shall be signed by any such person and delivered to Harcourt
General whereby such person agrees to assume the obligations of Neiman Marcus
hereunder.
SECTION 5.10 Termination. This Agreement (including Article III
hereof) may be terminated and the Distribution may be amended, modified or
abandoned at any time prior to the filing of the certificate of merger relating
to the Recapitalization by and in the sole discretion of Harcourt General
without the approval of Neiman Marcus or the stockholders of Neiman Marcus;
provided that if, at the time of such termination Neiman Marcus is not in breach
of any of its obligations hereunder or under the Recapitalization Agreement,
Harcourt General shall pay the reasonable out-of-pocket expenses of Neiman
Marcus incurred in connection with this Agreement, the Recapitalization
Agreement and the transactions contemplated hereby and thereby. This Agreement
may be terminated by Neiman Marcus only upon material breach by Harcourt General
of a representation, warranty or covenant contained in this Agreement, which
breach would result in a Material Adverse Effect with respect to Neiman Marcus
after giving effect to the Distribution. In the event of termination of this
Agreement by either party hereto, except as set forth in the next preceding
sentence, no party shall have any liability of any kind to any other party or
any other person. After the filing of the certificate of merger relating to the
Recapitalization, this Agreement may not be terminated except by an agreement in
writing signed by both parties and a majority of the Independent Directors of
Neiman Marcus.
SECTION 5.11 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any entity that is contemplated to be a Subsidiary of such party on or
after the Distribution Date.
SECTION 5.12 Third Party Beneficiaries. Except as provided in
Article III relating to Indemnitees, this Agreement is solely for the benefit of
the parties hereto and their respective Subsidiaries and Affiliates and should
not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
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SECTION 5.13 Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 5.14 Exhibits and Schedules. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
SECTION 5.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE COMMONWEALTH OF
MASSACHUSETTS.
SECTION 5.16 Consent to Jurisdiction. Each of the parties
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the Commonwealth of Massachusetts, and (b) the United States District Court for
the District of Massachusetts, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the District of
Massachusetts or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the Supreme Court of the Commonwealth
of Massachusetts. Each of the parties further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in Massachusetts with respect to any matters to which
it has submitted to jurisdiction in this Section 5.16. Each of the parties
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 (i) the Supreme Court of the Commonwealth of
Massachusetts, or (ii) the United States District Court for the District of
Massachusetts, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 5.17 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
<PAGE> 30
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
HARCOURT GENERAL, INC.
By: /s/ John R. Cook
--------------------------------------
Name: John R. Cook
Title: Senior Vice President and Chief
Financial Officer
THE NEIMAN MARCUS GROUP, INC.
By: /s/ Eric P. Geller
--------------------------------------
Name: Eric P. Geller
Title: Senior Vice President, General
Counsel and Secretary
