<PAGE>
PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) OR Rule 14a-12
CARSON PIRIE SCOTT & CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Rule 0-11 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
of the Exchange Act and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LETTERHEAD OF CARSON PIRIE SCOTT & CO.]
December 12, 1997
Dear Shareholder of Carson Pirie Scott & Co.:
You are invited to attend a Special Meeting of Shareholders of Carson Pirie
Scott & Co. ("CPS") to be held on Friday, January 30, 1998 at 10:00 a.m.,
Milwaukee time, in the Towne Hall at CPS's principal executive offices, 331 W.
Wisconsin Avenue, 4th Floor, Milwaukee, Wisconsin 53203.
At the CPS Special Meeting you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of October 29,
1997, among Proffitt's, Inc. ("Proffitt's"), LaSalle Merger Corporation, a
wholly-owned subsidiary of Proffitt's ("Sub"), and CPS (the "Merger Agreement").
The Merger Agreement provides for, among other things, the merger of Sub
with and into CPS (the "Merger"), with CPS continuing as the surviving
corporation and becoming a wholly-owned subsidiary of Proffitt's, and the
conversion of each outstanding share of Common Stock of CPS into a number (the
"Conversion Number") of shares of Proffitt's Common Stock, ranging from 1.7 to
1.8, depending on the price of the Proffitt's Common Stock. Cash will be paid in
lieu of fractional shares.
The Merger is subject to a number of conditions, including obtaining the
approval of the shareholders of Proffitt's and CPS and obtaining any necessary
regulatory waivers or approvals. A summary of the basic terms and conditions of
the Merger, certain financial and other information relating to Proffitt's and
CPS and a copy of the Merger Agreement are set forth in the accompanying Joint
Proxy Statement/Prospectus. The Board of Directors of CPS has received an
opinion dated October 29, 1997 from SBC Warburg Dillon Read Inc. that, as of
such date, the Conversion Number was fair to the holders of CPS Common Stock
from a financial point of view. Please review and consider the enclosed
materials carefully.
THE BOARD OF DIRECTORS OF CPS BELIEVES THAT THE PROPOSED MERGER IS IN THE
BEST INTERESTS OF CPS AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
Your vote is very important. Regardless of the number of shares you hold or
whether you plan to attend the Special Meeting, we urge you to complete, sign,
date and return the enclosed proxy card immediately. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card. If you have any questions, please call us at (414)
278-5717. We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Stanton J. Bluestone
Stanton J. Bluestone
Chairman of the Board & Chief
Executive Officer
<PAGE>
CARSON PIRIE SCOTT & CO.
331 WEST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53203
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 30, 1998
Dear Shareholder:
A Special Meeting of Shareholders of Carson Pirie Scott & Co. ("CPS") will
be held on Friday, January 30, 1998 at 10:00 a.m., Milwaukee time, in the Towne
Hall at CPS's principal executive offices, 331 W. Wisconsin Avenue, 4th Floor,
Milwaukee, Wisconsin 53203, for the following purposes:
1. to approve the Agreement and Plan of Merger, dated as of October
29, 1997, among Proffitt's, Inc. ("Proffitt's"), LaSalle Merger
Corporation, a wholly-owned subsidiary of Proffitt's ("Sub") and
CPS, providing for, among other things, the merger of Sub with and
into CPS (the "Merger"), with CPS continuing as the surviving
corporation and a wholly-owned subsidiary of Proffitt's; and
2. to act upon any other business that may properly come before the
Special Meeting or adjournments or postponements of the Special
Meeting.
A Joint Proxy Statement/Prospectus containing additional information is
enclosed with this Notice.
Only shareholders of record at the close of business on December 5, 1997
will be entitled to notice of and to vote at the Special Meeting or at any
postponements or adjournments thereof.
In connection with the proposed Merger, appraisal rights will be available
to those shareholders of CPS who comply with the requirements of Section 5/11.70
of the Illinois Business Corporation Act (the "IBCA"), a copy of which is
included as Annex IV to the accompanying Joint Proxy Statement/Prospectus.
Reference is made to the section entitled "THE SPECIAL MEETINGS--Appraisal
Rights" in the accompanying Joint Proxy Statement/Prospectus for a discussion of
the procedures to be followed in asserting appraisal rights under Section
5/11.70 of the IBCA in connection with the proposed Merger.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. YOU MAY
REVOKE A PROXY AT ANY TIME BEFORE IT IS EXERCISED. IF YOU ARE PRESENT AT THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON OR BY YOUR PROXY.
By Order of the Board of Directors
/s/ Charles J. Hansen
Charles J. Hansen
Secretary
Milwaukee, Wisconsin
December 12, 1997
<PAGE>
PROFFITT'S, INC.
AND
CARSON PIRIE SCOTT & CO.
JOINT PROXY STATEMENT
------------------------
PROFFITT'S, INC.
PROSPECTUS
--------------------------
SPECIAL MEETING OF SHAREHOLDERS OF PROFFITT'S, INC.
TO BE HELD ON JANUARY 30, 1998
SPECIAL MEETING OF SHAREHOLDERS OF CARSON PIRIE SCOTT & CO.
TO BE HELD ON JANUARY 30, 1998
This Joint Proxy Statement/Prospectus (this "Joint Proxy
Statement/Prospectus") is being furnished to shareholders of Proffitt's, Inc., a
Tennessee corporation ("Proffitt's"), and to shareholders of Carson Pirie Scott
& Co., an Illinois corporation ("CPS"), in connection with the solicitation of
proxies by the Board of Directors of each corporation for use at the Special
Meeting of Shareholders of Proffitt's (the "Proffitt's Special Meeting") and the
Special Meeting of Shareholders of CPS (the "CPS Special Meeting" and, together
with the Proffitt's Special Meeting, the "Special Meetings"), respectively, in
each case including any adjournments or postponements thereof. The Special
Meetings are both scheduled to be held on January 30, 1998. This Joint Proxy
Statement/Prospectus relates to (i) the proposed merger (the "Merger") of
LaSalle Merger Corporation, an Illinois corporation and a wholly-owned
subsidiary of Proffitt's ("Sub"), with and into CPS pursuant to the Agreement
and Plan of Merger, dated as of October 29, 1997 (the "Merger Agreement"), among
Proffitt's, Sub and CPS, with CPS, as the surviving corporation in the Merger,
to become a wholly-owned subsidiary of Proffitt's; (ii) the issuance (the "Stock
Issuance") of common shares, $0.10 par value, of Proffitt's (the "Proffitt's
Common Stock") in connection with the Merger; and (iii) a proposed amendment
(the "Charter Amendment") to Proffitt's Amended and Restated Charter to be
considered at the Proffitt's Special Meeting. PROFFITT'S SHAREHOLDERS' APPROVALS
OF THE STOCK ISSUANCE AND THE CHARTER AMENDMENT ARE CONDITIONS TO THE
CONSUMMATION OF THE MERGER.
Subject to certain provisions described herein with respect to certain
shares owned by Proffitt's, CPS and Proffitt's wholly-owned subsidiaries and
perfection of dissenters' rights, each outstanding share of common stock, par
value $0.01 per share, of CPS (the "CPS Common Stock"), will be converted by
virtue of the Merger into a number (the "Conversion Number"), of validly issued,
fully paid and nonassessable shares of Proffitt's Common Stock, and a
corresponding percentage of a right to purchase shares of Proffitt's preferred
stock (the "Proffitt's Rights") pursuant to the Proffitt's Rights Agreement (as
defined herein). The Conversion Number will fall in a range from 1.7 to 1.8 to
be determined as provided in the Merger Agreement, depending on the price of the
Proffitt's Common Stock. See "SUMMARY--The Merger Agreement" and "THE MERGER
AGREEMENT--Terms of the Merger." Cash will be paid in lieu of fractional shares
of Proffitt's Common Stock.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Proffitt's regarding up to 30,513,101 shares of Proffitt's Common Stock issuable
to CPS shareholders (other than subsidiaries of CPS) pursuant to the Merger
Agreement, and upon exercise of options to purchase CPS Common Stock to be
converted into options to purchase Proffitt's Common Stock in accordance with
the Merger Agreement.
The Proffitt's Common Stock is listed for trading on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "PFT," and the CPS Common Stock is
listed for trading on the NYSE under the symbol "CRP." On October 28, 1997, the
last trading day prior to the announcement of the execution of the Merger
Agreement, the last sales prices of Proffitt's Common Stock and CPS Common Stock
as reported on the NYSE were $26 3/4 and $37 1/2 per share, respectively. On
December 9, 1997, the last trading day prior to the date of this Joint Proxy
Statement/ Prospectus, the last sales prices of Proffitt's Common Stock and CPS
Common Stock as reported on the NYSE were $28 3/4 and $49 1/2 per share,
respectively. If the Conversion Number were determined as of such date, the
holders of CPS Common Stock would receive pursuant to the Merger, 1.75 shares of
Proffitt's Common Stock with a market value on such date of approximately $50.31
for each share of CPS Common Stock. For a description of Proffitt's Common
Stock, see "DESCRIPTION OF PROFFITT'S CAPITAL STOCK" and "COMPARISON OF RIGHTS
OF HOLDERS OF PROFFITT'S COMMON STOCK AND CPS COMMON STOCK." Proffitt's and CPS
shareholders are urged to obtain current market quotations for the Proffitt's
Common Stock and the CPS Common Stock.
This Joint Proxy Statement/Prospectus, the accompanying forms of proxy and
the other enclosed documents are first being mailed to shareholders of
Proffitt's and CPS on or about December 12, 1997.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------
The date of this Joint Proxy Statement/Prospectus is December 10, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS..................................................... iv
SUMMARY.................................................................................................... 1
The Companies........................................................................................ 1
The Merger Agreement................................................................................. 2
The Special Meetings................................................................................. 3
The Merger........................................................................................... 4
Recent Developments.................................................................................. 8
Selected Financial and Operating Data and Selected Unaudited Pro Forma Financial and Operating
Data................................................................................................ 9
Comparative Per Share Data........................................................................... 16
Comparative Stock Prices and Dividends............................................................... 17
INTRODUCTION............................................................................................... 18
THE SPECIAL MEETINGS....................................................................................... 18
Matters To Be Considered at the Special Meetings..................................................... 18
Votes Required....................................................................................... 19
Voting of Proxies.................................................................................... 20
Revocability of Proxies.............................................................................. 20
Record Dates; Stock Entitled To Vote; Quorum......................................................... 20
Appraisal Rights..................................................................................... 21
Solicitation of Proxies; General..................................................................... 22
Holders of CPS Common Stock Should Not Send Stock Certificates....................................... 23
Accountants.......................................................................................... 23
THE MERGER................................................................................................. 24
General.............................................................................................. 24
Background of the Merger............................................................................. 24
Recommendations of the Boards of Directors; Reasons for the Merger................................... 26
Opinions of Financial Advisors....................................................................... 28
Merger Consideration................................................................................. 36
Effective Time of the Merger......................................................................... 37
Conversion of Shares; Procedures for Exchange of Certificates........................................ 37
Governmental and Regulatory Approvals................................................................ 39
Certain Federal Income Tax Consequences.............................................................. 39
Accounting Treatment................................................................................. 41
Interests of Certain Persons in the Merger........................................................... 41
NYSE Listing......................................................................................... 45
THE MERGER AGREEMENT....................................................................................... 46
Terms of the Merger.................................................................................. 46
Surrender and Payment................................................................................ 47
Fractional Shares.................................................................................... 47
Conditions to the Merger............................................................................. 48
Representations and Warranties....................................................................... 49
Conduct of Business Pending the Merger............................................................... 50
CPS Stock Options and Employee Benefits.............................................................. 52
Composition of Proffitt's Board of Directors Post-Merger............................................. 52
No Solicitation...................................................................................... 52
Indemnification; Directors and Officers Insurance.................................................... 53
Termination.......................................................................................... 53
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fees and Expenses.................................................................................... 55
Amendment............................................................................................ 56
Waiver............................................................................................... 56
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................................................ 57
DESCRIPTION OF PROFFITT'S CAPITAL STOCK.................................................................... 66
General.............................................................................................. 66
Proffitt's Common Stock.............................................................................. 66
Proffitt's Preferred Stock........................................................................... 66
Rights Agreement..................................................................................... 67
Effect of Anti-takeover Provisions................................................................... 67
Registration Rights.................................................................................. 67
Redemption of Debentures............................................................................. 67
Transfer Agent and Registrar......................................................................... 68
COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK
AND CPS COMMON STOCK..................................................................................... 68
Classified Board of Directors........................................................................ 68
Cumulative Voting.................................................................................... 69
Removal of Directors................................................................................. 69
Number of Directors.................................................................................. 69
Special Meetings..................................................................................... 69
Required Vote for Authorization of Certain Actions................................................... 70
Action by Written Consent............................................................................ 70
Voting of Shares Held by Subsidiaries................................................................ 70
Amendment of By-Laws................................................................................. 70
Voluntary Dissolution................................................................................ 71
Indemnification of Officers and Directors............................................................ 71
Corporate Constituencies............................................................................. 71
Fair Price Provisions................................................................................ 72
Control Share Acquisition Act........................................................................ 73
Business Combination Statutes........................................................................ 73
Investor Protection Act.............................................................................. 74
Authorized Corporation Protection Act................................................................ 75
Greenmail Act........................................................................................ 75
Dividends and Other Distributions.................................................................... 75
Dissenters' Rights................................................................................... 75
PROPOSED AMENDMENT TO PROFFITT'S AMENDED AND RESTATED CHARTER.............................................. 76
BUSINESS OF PROFFITT'S..................................................................................... 77
BUSINESS OF CPS............................................................................................ 77
LEGAL OPINIONS............................................................................................. 78
EXPERTS.................................................................................................... 78
AVAILABLE INFORMATION...................................................................................... 78
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 79
OTHER INFORMATION AND SHAREHOLDER PROPOSALS................................................................ 80
</TABLE>
APPENDICES
<TABLE>
<S> <C>
Appendix I Agreement and Plan of Merger dated as of October 29, 1997, among Proffitt's,
Inc., LaSalle Merger Corporation and Carson Pirie Scott & Co.
Appendix II Opinion of Salomon Brothers Inc
Appendix III Opinion of SBC Warburg Dillon Read Inc.
Appendix IV Sections 5/11.65 and 5/11.70 of the Illinois Business Corporation Act of
1983
</TABLE>
iii
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS JOINT PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PROFFITT'S OR CPS. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PROFFITT'S OR CPS SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED AND INCORPORATED BY REFERENCE IN THIS JOINT
PROXY STATEMENT/PROSPECTUS MAY CONSTITUTE FORWARD-LOOKING STATEMENTS FOR
PURPOSES OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL
STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED OR INCORPORATED
BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS THAT ADDRESS ACTIVITIES,
EVENTS OR DEVELOPMENTS THAT PROFFITT'S OR CPS EXPECTS OR ANTICIPATES WILL OR MAY
OCCUR IN THE FUTURE, INCLUDING SUCH THINGS AS FUTURE CAPITAL EXPENDITURES
(INCLUDING THE AMOUNT AND NATURE THEREOF), BUSINESS STRATEGY AND MEASURES TO
IMPLEMENT STRATEGY, COMPETITIVE STRENGTHS, GOALS, EXPANSION AND GROWTH OF
PROFFITT'S AND ITS SUBSIDIARIES' OR CPS AND ITS SUBSIDIARIES' BUSINESS AND
OPERATIONS, REALIZATION OF SYNERGIES AND COST SAVINGS, PLANS, REFERENCES TO
FUTURE SUCCESS AND OTHER SUCH MATTERS, ARE FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE THE ACTUAL RESULTS AND PERFORMANCE OF PROFFITT'S OR CPS TO BE MATERIALLY
DIFFERENT FROM FUTURE RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH
STATEMENTS. CAUTIONARY STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS
INCLUDED UNDER "SUMMARY," "THE MERGER" AND ELSEWHERE HEREIN. AMONG OTHERS,
FACTORS THAT COULD ADVERSELY AFFECT ACTUAL RESULTS AND PERFORMANCE INCLUDE LOCAL
AND REGIONAL ECONOMIC CONDITIONS IN THE AREAS SERVED BY PROFFITT'S AND CPS, THE
LEVEL OF CONSUMER SPENDING FOR APPAREL AND OTHER CONSUMER GOODS, THE EFFECTS OF
WEATHER CONDITIONS ON SEASONAL SALES IN PROFFITT'S OR CPS'S TRADE AREAS,
COMPETITION AMONG DEPARTMENT STORES AND OTHER RETAILERS, CHANGES IN MERCHANDISE
MIXES, SITE SELECTION AND RELATED TRAFFIC AND DEMOGRAPHIC PATTERNS, THE ABILITY
TO DETERMINE AND IMPLEMENT BEST PRACTICES, AND MERCHANDISING, INVENTORY
MANAGEMENT AND TURNOVER LEVELS, REALIZATION OF PLANNED SYNERGIES AND COST
SAVINGS, AND PROFFITT'S SUCCESS IN INTEGRATING OTHER COMPANIES' OPERATIONS
FOLLOWING RECENT AND POTENTIAL FUTURE MERGERS, INCLUDING THE OPERATIONS OF CPS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO PROFFITT'S OR
CPS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE FOREGOING CAUTIONARY
STATEMENT. NEITHER PROFFITT'S NOR CPS ASSUMES ANY OBLIGATION TO UPDATE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL RESULTS, CHANGES IN ASSUMPTIONS OR
CHANGES IN OTHER FACTORS AFFECTING SUCH FORWARD-LOOKING STATEMENTS.
iv
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. REFERENCE IS
MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE APPENDICES HERETO. AS USED HEREIN, UNLESS THE
CONTEXT OTHERWISE REQUIRES, "CPS" MEANS CARSON PIRIE SCOTT & CO. AND ITS
CONSOLIDATED SUBSIDIARIES, "PROFFITT'S" MEANS PROFFITT'S, INC. AND ITS
CONSOLIDATED SUBSIDIARIES AND "SUB" MEANS LASALLE MERGER CORPORATION, A
WHOLLY-OWNED SUBSIDIARY OF PROFFITT'S.
SHAREHOLDERS OF PROFFITT'S AND CPS ARE URGED TO READ CAREFULLY THIS JOINT
PROXY STATEMENT/PROSPECTUS AND THE APPENDICES HERETO AS WELL AS THE ADDITIONAL
DOCUMENTS INCORPORATED BY REFERENCE HEREIN. SEE "AVAILABLE INFORMATION" AND
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." SHAREHOLDERS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH BELOW UNDER THE HEADING "--OTHER SIGNIFICANT
CONSIDERATIONS."
THE COMPANIES
PROFFITT'S AND SUB. Proffitt's is a regional department store chain
operating 177 stores in 24 states, primarily in the Southeast and Midwest.
Proffitt's operates its stores under five chain names: Proffitt's (19 stores),
McRae's (31 stores), Younkers (50 stores), Parisian (40 stores) and Herberger's
(37 stores). Each chain operates primarily as a leading branded traditional
department store in its communities, with Parisian serving as a better branded
specialty department store. Most of the stores are located in premier regional
malls in the respective trade areas served. Proffitt's stores offer a wide
selection of fashion apparel, accessories, cosmetics and decorative home
furnishings, featuring assortments of premier brands and specialty merchandise.
Each of Proffitt's chains operates with its own merchandising, marketing and
store operations team in order to tailor regional assortments to the local
customer. At the same time, Proffitt's coordinates merchandising among the
chains and consolidates certain administrative and support functions, where
appropriate, to realize scale economies, to promote a competitive cost structure
and to increase margins. Proffitt's principal executive offices are located at
750 Lakeshore Parkway, Birmingham, Alabama 35211, telephone number (205)
940-4000. For further information concerning Proffitt's, see "-- Selected
Financial and Operating Data and Selected Unaudited Pro Forma Financial and
Operating Data," "BUSINESS OF PROFFITT'S," "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Sub was organized as an Illinois corporation on October 27, 1997 for the
purpose of consummating the Merger and the other transactions contemplated by
the Merger Agreement. Sub has no assets or business and has not carried on any
activities to date other than those incident to its formation and in connection
with the Merger and the other transactions contemplated by the Merger Agreement.
Sub's principal executive offices are located at 750 Lakeshore Parkway,
Birmingham, Alabama 35211, and its telephone number is (205) 940-4000.
CPS. CPS is a regional department store chain operating 52 family-oriented
department stores and four freestanding furniture stores in four states:
Illinois, Indiana, Minnesota and Wisconsin. The CPS stores operate under the
tradenames of Carson Pirie Scott, Boston Store and Bergner's, with one central
organization for merchandising, marketing and all administrative functions. Each
of these tradenames has strong regional recognition and an operating tradition
exceeding 100 years. The CPS stores offer a complete line of apparel, cosmetics,
accessories/jewelry, shoes, home textiles and housewares, and home furnishings
in select locations. The mix of merchandise emphasizes moderate through better
prices and is targeted at the traditional and current fashion customer. CPS's
principal executive offices are located at 331 W. Wisconsin Avenue, Milwaukee,
Wisconsin 53203, telephone number: (414) 347-4141. For further information
concerning CPS, see "--Selected Financial Operating Data and Selected Unaudited
Pro Forma Financial and Operating Data," "BUSINESS OF CPS," "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
1
<PAGE>
THE MERGER AGREEMENT
The Merger Agreement appears as Appendix I to this Joint Proxy
Statement/Prospectus. Upon the terms and subject to the conditions contained in
the Merger Agreement, Sub will be merged with and into CPS at the time of the
Merger (the "Effective Time") and each share of CPS Common Stock issued and
outstanding immediately prior to the Effective Time (other than certain shares
held by CPS, Proffitt's, or Proffitt's subsidiaries or shares as to which
dissenters' rights have been perfected) will be converted into a number of
shares of Proffitt's Common Stock equal to the Conversion Number. The Conversion
Number will be determined as follows:
<TABLE>
<CAPTION>
PROFFITT'S COMMON STOCK
CLOSING DATE MARKET PRICE CONVERSION NUMBER
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Less than $27.75 1.80
$27.75--$28.56 $50.00 divided by the Closing Date Market
Price
$28.57--$30.85 1.75
$30.86--$31.76 $54.00 divided by the Closing Date Market
Price
$31.77 or greater 1.70
</TABLE>
"Closing Date Market Price" means the average closing price for one share of
Proffitt's Common Stock during the period of the 20 most recent NYSE trading
days ending on the third NYSE trading day prior to the date of the CPS Special
Meeting. The closing price on any day will be the last reported sale price of
one share of Proffitt's Common Stock on the NYSE. See "THE MERGER AGREEMENT."
The Conversion Number was determined through arm's length negotiations
between Proffitt's and CPS.
The following chart sets forth the Conversion Number to be applied (Column
2) in determining the equivalent value to be received per share of CPS Common
Stock, assuming various Closing Date Market Prices for the Proffitt's Common
Stock (Column 1). Calculations are rounded to the nearest hundredth.
<TABLE>
<CAPTION>
EQUIVALENT VALUE
PROFFITT'S COMMON STOCK PER SHARE
CLOSING DATE MARKET PRICE CONVERSION NUMBER OF CPS COMMON STOCK
- ------------------------------ ------------------------------ ---------------------------------
<S> <C> <C>
$24.00 1.80 $43.20
26.00 1.80 46.80
28.00 1.79 50.12
30.00 1.75 52.50
31.00 1.74 53.94
32.00 1.70 54.40
34.00 1.70 57.80
</TABLE>
Since the actual number of shares of Proffitt's Common Stock issuable to CPS
shareholders in the Merger depends on the Closing Date Market Price per share of
Proffitt's Common Stock, there is no guarantee as to the number of shares of
Proffitt's Common Stock that will be received by CPS shareholders.
2
<PAGE>
The Merger Agreement may be terminated by CPS if the closing price on the
NYSE of Proffitt's Common Stock is less than $22.00 per share on each trading
day in any period of 15 consecutive trading days beginning October 5, 1997.
THE SPECIAL MEETINGS
TIME, DATE AND PLACE. The Proffitt's Special Meeting will be held at 10:00
a.m., local time, on January 30, 1998, at Proffitt's executive offices, 750
Lakeshore Parkway, Birmingham, Alabama 35211. The CPS Special Meeting will be
held at 10:00 a.m., Milwaukee time, on January 30, 1998, in the Towne Hall at
CPS's principal executive offices, 331 W. Wisconsin Avenue, 4th Floor,
Milwaukee, Wisconsin 53203.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
PROFFITT'S SPECIAL MEETING. At the Proffitt's Special Meeting, holders of
Proffitt's Common Stock will consider and vote upon proposals to (i) approve the
Merger Agreement; (ii) approve the Stock Issuance; and (iii) approve the Charter
Amendment. APPROVAL OF THE MERGER AGREEMENT, THE STOCK ISSUANCE AND THE CHARTER
AMENDMENT (COLLECTIVELY, THE "PROFFITT'S SHAREHOLDER APPROVALS") ARE ALL
CONDITIONS TO THE CONSUMMATION OF THE MERGER. Holders of shares of Proffitt's
Common Stock entitled to vote also will consider and vote upon any other matter
that may properly come before the Proffitt's Special Meeting or any adjournments
and postponements thereof.
CPS SPECIAL MEETING. At the CPS Special Meeting, holders of shares of CPS
Common Stock will consider and vote upon a proposal to approve the Merger
Agreement. APPROVAL OF THE MERGER AGREEMENT IS A CONDITION TO THE CONSUMMATION
OF THE MERGER. Holders of shares of CPS Common Stock entitled to vote also will
consider and vote upon any other matter that may properly come before the CPS
Special Meeting or at any adjournments or postponements thereof. See "THE
SPECIAL MEETINGS."
VOTES REQUIRED
PROFFITT'S. Each holder of Proffitt's Common Stock is entitled to one vote
per share held of record on the record date. The approval of the Merger
Agreement requires the affirmative vote of a majority of the votes eligible to
be cast on the proposal. The affirmative vote of a majority of the votes cast in
person or by proxy is required to approve each of the Stock Issuance and the
Charter Amendment, provided a quorum is present.
CPS. Each holder of CPS Common Stock is entitled to one vote per share held
of record on the record date. The Merger Agreement must be approved by the
affirmative vote of a majority of the outstanding shares of CPS Common Stock. An
aggregate of 21,555,068 shares of CPS Common Stock held by CPS's subsidiaries
("Subsidiary Shares") will be voted with respect to each matter in the same
proportion as the shares of the CPS Common Stock voted by all other shareholders
with respect to that matter. A majority of the outstanding shares of CPS Common
Stock entitled to vote on a particular matter that are not Subsidiary Shares
must be represented in person or by proxy at the CPS Special Meeting in order
for a quorum to be present for consideration of the matter at the CPS Special
Meeting.
RECORD DATE. The record date for the determination of holders of Proffitt's
Common Stock and CPS Common Stock entitled to notice of and to vote at the
Special Meetings is December 5, 1997. On that date, there were 61,433,314 shares
of Proffitt's Common Stock issued and outstanding, and there were 15,745,761
shares of CPS Common Stock issued and outstanding (not including the Subsidiary
Shares).
SECURITY OWNERSHIP OF MANAGEMENT. As of December 5, 1997, directors and
executive officers of Proffitt's and their affiliates were beneficial owners of
an aggregate of 6,622,863 shares of Proffitt's Common Stock (approximately 10.8%
of the outstanding shares) including 1,050,775 shares subject to
3
<PAGE>
options exercisable within 60 days. As of December 5, 1997, directors and
executive officers of CPS and their affiliates were beneficial owners of an
aggregate of 735,798 shares of CPS Common Stock (approximately 4.7% of the
outstanding shares other than Subsidiary Shares) including 587,722 shares
subject to options exercisable within 60 days.
THE MERGER
REASONS FOR THE MERGER. The Proffitt's Board and the CPS Board believe that
by combining two premier regional department store companies, the Merger will
produce an enterprise which is better positioned for future growth. The
companies' stores have a contiguous geographical relationship, making the
combination a complementary expansion of each company's strong base. The Merger
also will lower Proffitt's financial leverage, providing additional flexibility
for future growth. Proffitt's debt-to-total capitalization ratio as of August 2,
1997 was 49%. On a pro forma basis, as if the Merger had been consummated,
Proffitt's debt-to-total capitalization ratio as of August 2, 1997 would have
been 42%. After giving effect to (i) the October 6, 1997 conversion of its
4 3/4% Convertible Subordinated Debentures Due 2003 (the "Debentures") and (ii)
the planned refinancing of CPS's existing receivables and working capital
facilities, Proffitt's pro forma debt-to-total capitalization ratio would have
been 30% as of August 2, 1997. There can be no assurance that such refinancing
will be completed as planned.
Because the companies' operations are similarly organized, Proffitt's
expects to realize cost reductions and synergies as a result of the Merger of
approximately $10 million, $20 million and $40 million in fiscal 1998, 1999 and
2000, respectively. Cost reductions and synergies related to the Merger are
expected to come in several forms, such as through merchandising improvements,
credit card revenue increases, interest savings and consolidation and
reengineering benefits. Additionally, many best practices of the two companies
will be implemented throughout the combined corporation. Examples include shared
technology and systems and enhanced logistics management at the distribution
facilities. Savings will also be recognized on a combined basis through the
purchasing power of increased scale in such areas as property and casualty
insurance, associate benefits, advertising media and supply purchasing. The
anticipated cost savings and synergies may not be realized due to economic and
competitive uncertainties which are largely beyond Proffitt's control.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS. The Board of Directors of
Proffitt's has determined that the Merger is in furtherance of and consistent
with its long-term business strategies and is in the best interests of the
holders of shares of Proffitt's Common Stock. Accordingly, the Proffitt's Board
has unanimously approved the Merger Agreement and the Merger, including the
Stock Issuance and the Charter Amendment, and recommends that Proffitt's
shareholders vote in favor of the Merger Agreement, the Stock Issuance and the
Charter Amendment at the Proffitt's Special Meeting.
THE BOARD OF DIRECTORS OF PROFFITT'S RECOMMENDS THAT THE HOLDERS OF
PROFFITT'S COMMON STOCK APPROVE THE MERGER AGREEMENT, THE STOCK ISSUANCE AND THE
CHARTER AMENDMENT.
The Board of Directors of CPS believes that the terms of the Merger
Agreement are consistent with and in furtherance of CPS's long-term business
strategy, and in the best interests of CPS and the shareholders of CPS and
unanimously recommends that the shareholders of CPS vote for approval of the
Merger Agreement.
THE BOARD OF DIRECTORS OF CPS RECOMMENDS THAT THE HOLDERS OF CPS COMMON
STOCK APPROVE THE MERGER AGREEMENT.
For additional information with respect to the determinations made by, and
the recommendations of, the Proffitt's and CPS Boards of Directors, see "THE
MERGER--Recommendations of the Boards of Directors; Reasons for the Merger."
4
<PAGE>
OPINIONS OF FINANCIAL ADVISORS. Salomon Brothers Inc ("Salomon Brothers")
has acted as financial advisor to Proffitt's in connection with the Merger and
has delivered a written opinion, dated October 29, 1997, to the Board of
Directors of Proffitt's to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the Conversion Number
was fair, from a financial point of view, to Proffitt's. The full text of the
written opinion of Salomon Brothers dated October 29, 1997, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
appears as Appendix II to this Joint Proxy Statement/Prospectus and should be
read carefully in its entirety. Salomon Brothers' opinion is directed only to
the fairness of the Conversion Number from a financial point of view to
Proffitt's, does not address any other aspect of the Merger or related
transactions and does not constitute a recommendation to any shareholder as to
how such shareholder should vote at the Proffitt's Special Meeting. See "THE
MERGER--Opinions of Financial Advisors--Salomon Brothers Opinion to the
Proffitt's Board of Directors."
SBC Warburg Dillon Read Inc. ("SBCWDR") has delivered its written opinion,
dated October 29, 1997, to the CPS Board of Directors that the Conversion Number
was fair to the holders of CPS Common Stock from a financial point of view. The
full text of the written opinion of SBCWDR, which describes the basis on which
such firm rendered its opinion, appears as Appendix III to this Joint Proxy
Statement/ Prospectus and should be read carefully in its entirety. SBCWDR's
opinion is directed only to the Conversion Number and does not constitute a
recommendation to any shareholder of CPS as to how such shareholder should vote
at the CPS Special Meeting. See "THE MERGER--Opinions of Financial
Advisors--SBCWDR Opinion to the CPS Board of Directors."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. The officers and directors of
CPS may have interests in the Merger that are different from, or in addition to,
the interests of the shareholders of CPS generally. In connection with the
Merger, Stanton J. Bluestone, Chairman of the Board and Chief Executive Officer
of CPS, will enter into a one-year employment agreement with Proffitt's and CPS
pursuant to which he will continue after the Merger to serve as Chairman of the
Board of CPS as a division of Proffitt's. Michael R. MacDonald, President and
Chief Operating Officer of CPS, has entered into a three-year employment
agreement, effective as of the Effective Time, pursuant to which after the
Merger he will serve as President and Chief Executive Officer of CPS as a
division of Proffitt's. These agreements will replace Mr. Bluestone's and Mr.
MacDonald's current agreements with CPS effective with the Merger. In addition,
it is a condition to the consummation of the Merger that Proffitt's offer
employment agreements to four executive officers and two other employees of CPS.
These agreements would replace, effective with the Merger, each such person's
current severance agreement with CPS.
The Merger Agreement provides that at the Effective Time two members of the
current CPS Board of Directors will be appointed to Proffitt's Board of
Directors to serve until Proffitt's next regularly scheduled annual meeting of
shareholders. See "THE MERGER AGREEMENT--Composition of Proffitt's Board of
Directors Post-Merger."
CONDITIONS TO THE MERGER. The obligations of Proffitt's, Sub and CPS to
consummate the Merger are subject to various conditions, including, among other
things:
- obtaining the requisite shareholder approvals;
- clearance under the antitrust laws;
- approval of the Office of the Comptroller of the Currency (the "OCC") for
the change of control of a bank subsidiary of CPS;
- the continued accuracy of each party's representations and warranties;
- the performance by each party of its obligations under the Merger
Agreement;
- receipt of a letter from Proffitt's independent accountants to the effect
that the independent accountants concur with the conclusion of Proffitt's
and CPS's managements that no conditions
5
<PAGE>
exist with respect to either company which would preclude accounting for
the Merger as a "pooling of interests"; and
- receipt of an opinion from counsel to CPS as to the tax-free nature of the
Merger.
Certain of the conditions to the Merger may not be waived by the parties,
including shareholder approvals and clearance under the antitrust laws. Although
the receipt of the pooling letter from Proffitt's independent accountants and
the tax opinion of CPS's counsel may be waived by the parties, Proffitt's and
CPS do not intend to consummate the Merger in the event either the pooling
letter or the tax opinion is not or cannot be delivered.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the Effective Time under certain circumstances, including,
among other things, (i) by mutual written consent of Proffitt's and CPS, (ii) by
either Proffitt's or CPS if the Merger has not been effected prior to the close
of business on April 15, 1998, (iii) by either Proffitt's or CPS if the
requisite shareholder approvals are not obtained, (iv) by either Proffitt's or
CPS in certain circumstances involving a competing transaction, (v) by either
Proffitt's or CPS if the other party's Board of Directors withdraws or modifies
its recommendation of the Merger, recommends a competing transaction or fails to
recommend against a tender or exchange offer by a third party, and (vi) by CPS
if the closing price of the Proffitt's Common Stock is less than $22 per share
for a specified period. See "THE MERGER AGREEMENT-- Termination."
TERMINATION FEES. The Merger Agreement provides that, under certain
circumstances, if the Merger Agreement is terminated following the modification
or withdrawal by the CPS Board of Directors of its recommendation of the Merger,
in certain situations in which the CPS Board of Directors has recommended, or
failed to recommend against, a competing transaction with respect to CPS, or in
certain situations involving a tender or exchange offer for CPS Common Stock or
certain acquisitions of CPS Common Stock, and the CPS shareholders did not
approve the Merger prior to such termination, then CPS will pay $20.0 million to
Proffitt's. The Merger Agreement also provides that, under certain
circumstances, in the event that (i) CPS terminates the Merger Agreement after
April 15, 1998, and a competing transaction commenced prior to the CPS Special
Meeting and was consummated within 12 months after such termination; (ii) the
Merger Agreement is terminated where the shareholders of CPS did not approve the
Merger Agreement, and prior to the CPS Special Meeting a competing transaction
commenced; (iii) the Merger Agreement is terminated after the Board of Directors
of CPS determines that a competing transaction is superior and a competing
transaction is consummated within 12 months after such termination; or (iv)
Proffitt's terminates the Merger Agreement for the reasons described in clause
(v) of the preceding paragraph and a competing transaction is consummated within
12 months after such termination, CPS will pay a fee of $20.0 million to
Proffitt's.
Proffitt's has agreed to pay CPS a $30.0 million termination fee if the
Merger Agreement is terminated under circumstances relating to Proffitt's of the
same type as described above with respect to CPS, except that the termination
fee will be $25.0 million if the circumstances are of the type described in
clause (ii) in the preceding paragraph. In addition, if the closing price per
share of Proffitt's Common Stock is less than $22 per share for a specified
period and (i) the Board of Directors of CPS determines not to terminate the
Merger Agreement or withdraw its recommendation of the approval thereof, (ii)
SBCWDR does not withdraw its opinion, and (iii) the Merger Agreement is not
approved at the CPS Special Meeting and, as a result, the Merger Agreement is
then terminated, Proffitt's will pay $20.0 million into an escrow account to be
released to CPS if a competing transaction involving CPS does not occur within
six months of the CPS Special Meeting, and otherwise returned to Proffitt's.
SHAREHOLDERS' RIGHTS OF APPRAISAL. In accordance with the Tennessee
Business Corporation Act ("TBCA"), shareholders of Proffitt's will not be
entitled to appraisal rights in connection with the Merger. In accordance with
the Illinois Business Corporation Act of 1983, as amended (the "IBCA"), the
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<PAGE>
shareholders of CPS are entitled to certain dissenters' rights of appraisal. See
"THE SPECIAL MEETINGS--Appraisal Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The obligation of CPS to
consummate the Merger is conditioned upon the receipt of an opinion of its
counsel, to the effect, among other things, that the Merger will be treated for
United States federal income tax purposes as a reorganization within the meaning
of section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that no gain or loss will be recognized by Proffitt's, CPS or the CPS
shareholders upon the receipt of Proffitt's Common Stock in exchange for CPS
Common Stock (except with respect to cash received in lieu of fractional shares
of Proffitt's Common Stock). See "THE MERGER--Certain Federal Income Tax
Consequences."
ACCOUNTING TREATMENT OF THE MERGER. The Merger is expected to be accounted
for as a "pooling of interests" in accordance with generally accepted accounting
principles. The obligations of Proffitt's, Sub and CPS to consummate the Merger
are subject to the receipt by Proffitt's of a letter dated as of the Effective
Time from Proffitt's independent accountants to the effect that the independent
accountants concur with the conclusion of Proffitt's and CPS's managements that
no conditions exist with respect to either company which would preclude
accounting for the Merger as a pooling of interests. See "THE MERGER--Accounting
Treatment" and "THE MERGER AGREEMENT--Conditions to the Merger."
OTHER SIGNIFICANT CONSIDERATIONS. In determining whether to approve the
transactions contemplated by the Merger Agreement, Proffitt's and CPS
shareholders should consider that the price of Proffitt's Common Stock may vary
from the price at the Effective Time, as well as from the prices at the date of
this Joint Proxy Statement/Prospectus and at the date of the Special Meetings.
Such variations may be the result of changes in the business, operations or
prospects of Proffitt's or CPS, market assessments of the likelihood that the
Merger will be consummated and the timing thereof, regulatory considerations,
general market and economic considerations and other factors. Because the
Effective Time may occur at a later date than the date of the Special Meetings,
there can be no assurance that the sales price of Proffitt's Common Stock on the
date of the Special Meetings will be indicative of the sales price of Proffitt's
Common Stock at the Effective Time or thereafter.
Shareholders of Proffitt's and CPS also should consider that the Conversion
Number is a number which will vary with changes in the market price of
Proffitt's Common Stock during a specified period. As a result, the Conversion
Number will not be fixed until the close of the third NYSE trading day before
the CPS Special Meeting. Proffitt's and CPS shareholders are urged to obtain
current market quotations for the Proffitt's Common Stock and the CPS Common
Stock.
Anticipated non-recurring charges related to direct costs of the Merger are
estimated at $6.0 million. This includes estimated investment banking fees of
$4.5 million payable by Proffitt's and CPS and estimated legal, accounting and
other transaction costs of $1.5 million. These non-recurring costs would
represent a reduction in pro forma fully diluted earnings per share of the
Proffitt's Common Stock of $.07 for the year ended February 1, 1997, and $.07
per share for the six months ended August 2, 1997. These charges do not include
any charges or benefits related to the combination of the operations of the
businesses.
Immediately prior to the Effective Time, there will be approximately
61,430,000 shares of Proffitt's Common Stock outstanding, assuming the absence
of any exercise of options. Immediately following the Effective Time, there will
be approximately 88,980,000 shares of Proffitt's Common Stock outstanding (not
including 37,720,000 shares held by subsidiaries of CPS), assuming the absence
of any exercise of stock options. The shares of Proffitt's Common Stock issued
to shareholders of CPS (other than shares issued to subsidiaries of CPS)
pursuant to the Merger Agreement will comprise approximately 31.0% of the total
number of shares of Proffitt's Common Stock outstanding (not including shares
held by subsidiaries of CPS) after the Merger (and approximately 31.3% on a
fully diluted basis, assuming exercise of all options
7
<PAGE>
to purchase Proffitt's Common Stock or CPS Common Stock exercisable within 60
days of the record date for the Special Meetings).
RECENT DEVELOPMENTS
PROFFITT'S THIRD QUARTER RESULTS. On November 20, 1997, Proffitt's reported
operating results for the quarter ended November 1, 1997. Net sales for the
quarter were $592.2 million, compared to net sales of $453.3 million for the
third quarter of the prior year, an increase of 30.6%. On a comparable stores
basis (excluding Parisian), total Proffitt's sales increased 5% in the third
quarter of 1997 compared to the same prior year period. Prior to certain
non-recurring and unusual items, net income for the quarter ended November 1,
1997 was $19.4 million, or $.32 per share, compared to $13.2 million, or $.25
per share, for the same prior year period. After non-recurring and unusual
items, Proffitt's realized net income of $9.9 million, or $.16 per share, for
the quarter ended November 1, 1997, compared to $12.1 million, or $.23 per
share, for the third quarter of the prior year.
For the nine months ended November 1, 1997, net sales were $1,610.9 million,
compared to net sales of $1,161.8 million for the same prior year period, an
increase of 38.7%. On a comparable stores basis (excluding Parisian), total
Proffitt's sales increased 5% in the nine months ended November 1, 1997 compared
to the first nine months of the prior year. Prior to certain non-recurring and
unusual items, net income for the nine months ended November 1, 1997 was $39.4
million, or $.66 per share, compared to $24.5 million, or $.48 per share, for
the first nine months of the prior year. After non-recurring and unusual items,
Proffitt's realized net income of $25.7 , or $.44 per share, for the nine months
ended November 1, 1997, compared to $22.0 million, or $.43 per share, for the
first nine months of fiscal 1996.
The foregoing per share net income data gives effect to Proffitt's
two-for-one stock split paid October 27, 1997 to shareholders of record as of
October 15, 1997.
ESOP TERMINATION. In August 1997, Proffitt's announced the planned
termination of the Herberger's Employee Stock Ownership Plan ("ESOP"). The
planned termination resulted in a third quarter 1997 charge (primarily non-cash)
of approximately $8.6 million due to certain unallocated common shares of
Proffitt's held by the ESOP being allocated to the ESOP participants. In
connection with the planned termination of the ESOP, Proffitt's received
approximately $10 million in cash representing payment of notes receivable from
the ESOP. Subsequent to this one-time charge, Proffitt's will incur no future
ESOP related charges.
CPS THIRD QUARTER RESULTS. On November 13, 1997, CPS reported operating
results for the quarter ended November 1, 1997. Net sales for the quarter were
$281.7 million, compared to net sales of $266.2 million for the third quarter of
the prior year, an increase of 5.8%. On a comparable stores basis, total CPS
sales increased 4.0% in the third quarter of 1997 compared to the same prior
year period. Prior to certain non-recurring items, net income for the quarter
ended November 1, 1997 was $6.5 million, or $.39 per share, compared to $5.2
million, or $.31 per share, for the same prior year period. After non-recurring
items, CPS realized net income of $5.4 million, or $.33 per share, for the
quarter ended November 1, 1997, compared to a net loss of $1.2 million, or $.07
per share, for the third quarter of the prior year.
For the nine months ended November 1, 1997, net sales were $783.6 million,
compared to net sales of $728.0 million for the same prior year period, an
increase of 7.6%. On a comparable stores basis, total CPS sales increased 4.4%
in the nine months ended November 1, 1997 compared to the first nine months of
the prior year. Prior to certain non-recurring and unusual items, net income for
the nine months ended November 1, 1997 was $13.2 million, or $.80 per share,
compared to $10.4 million, or $.61 per share, for the first nine months of the
prior year. After non-recurring and unusual items, CPS realized net income of
$9.7 million, or $.59 per share, for the nine months ended November 1, 1997,
compared to $11.3 million, or $.67 per share, for the first nine months of
fiscal 1996.
8
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
AND
SELECTED UNAUDITED PRO FORMA FINANCIAL AND OPERATING DATA
Set forth on the following pages are selected historical financial and
operating data of Proffitt's and CPS, and selected unaudited pro forma combined
financial and operating data of Proffitt's, Parisian, Inc. ("Parisian") and CPS.
The historical data with respect to Proffitt's and CPS are derived from the
respective historical consolidated financial statements of Proffitt's and CPS
and should be read in conjunction with the consolidated financial statements and
notes of Proffitt's and the consolidated financial statements and notes of CPS,
respectively, incorporated herein by reference.
The selected unaudited pro forma combined financial and operating data
should be read in conjunction with the unaudited pro forma combined financial
statements, including the notes thereto, appearing elsewhere in this Joint Proxy
Statement/Prospectus. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
9
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA FOR PROFFITT'S(1)
The selected financial and operating data below should be read in
conjunction with the consolidated financial statements and notes thereto of
Proffitt's and with Proffitt's Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference in this Joint
Proxy Statement/Prospectus. The selected financial and operating data as of and
for the six months ended August 3, 1996 and August 2, 1997 are derived from
unaudited financial statements as of such dates and for such periods, but in the
opinion of management, include all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of such data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (2) SIX MONTHS ENDED (3)
--------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- --------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales(4)........ $ 858,754 $ 1,063,488 $ 1,513,444 $ 1,661,056 $ 1,889,779 $ 708,538 $ 1,018,657
Cost and expenses:
Cost of sales..... 523,444 690,083 986,028 1,087,619 1,230,454 458,240 648,755
Selling, general,
and
administrative
expenses........ 220,889 255,856 352,448 398,999 440,502 175,733 250,875
Other operating
expenses........ 64,157 88,792 122,583 130,560 142,124 61,350 86,474
Expenses related
to hostile
takeover
defense(5)...... 3,182
Long-lived assets
impairment or
disposition(6).. 19,121 (1,094) (2,260) 30
Merger,
restructuring
and integration
costs(7)........ 20,822 15,929 4,270 3,102
----------- ----------- ----------- ----------- ----------- --------- -----------
Operating
income........ 50,264 28,757 52,385 753 61,864 11,205 29,421
Other income:
Finance charge
income, net of
allocation to
purchasers of
accounts
receivable(8)... 16,151 19,312 27,934 31,273 32,305 14,879 21,647
Interest
expense......... (11,701) (11,286) (23,286) (29,389) (26,756) (9,911) (21,691)
Other income,
net............. 233 4,063 4,826 4,051 1,572 713 389
----------- ----------- ----------- ----------- ----------- --------- -----------
Income before
provision for
income taxes,
extraordinary
loss and
cumulative
effect of
accounting
changes....... 54,947 40,846 61,859 6,688 68,985 16,886 29,766
Provision for income
taxes............. 20,631 16,122 24,411 6,047 31,586 7,045 12,844
----------- ----------- ----------- ----------- ----------- --------- -----------
Income before
extraordinary
loss and
cumulative
effect of
accounting
changes....... 34,316 24,724 37,448 641 37,399 9,841 16,922
Extraordinary loss
on extinguishment
of debt (net of
tax).............. (1,088) (2,060) (1,120)
Cumulative effect of
accounting changes
(net of tax)(9)... (1,794) 1,904
----------- ----------- ----------- ----------- ----------- --------- -----------
Net income
(loss)........ 32,522 25,540 37,448 (1,419) 37,399 9,841 15,802
Preferred stock
dividends(10)..... 1,694 1,950 796 796
Payment for early
conversion of
preferred
stock(10)......... 3,032 3,032
----------- ----------- ----------- ----------- ----------- --------- -----------
Net income
(loss)
available to
common
shareholders... $ 32,522 $ 25,540 $ 35,754 $ (3,369) $ 33,571 $ 6,013 $ 15,802
----------- ----------- ----------- ----------- ----------- --------- -----------
----------- ----------- ----------- ----------- ----------- --------- -----------
EARNINGS PER SHARE
RESTATED FOR THE
OCTOBER 27, 1997
2-FOR-1 SPLIT(11):
Earnings (loss)
per common share
before
extraordinary
loss and
cumulative
effect of
changes in
accounting
methods:
Primary......... $ 0.99 $ 0.56 $ 0.78 $ (.03) $ 0.66 $ 0.13 $ 0.30
Fully diluted... $ 0.99 $ 0.56 $ 0.76 $ (.03) $ 0.71 $ 0.20 $ 0.29
Earnings (loss)
per common
share:
Primary........... $ 0.94 $ 0.58 $ 0.78 $ (.08) $ 0.66 $ 0.13 $ 0.28
Fully diluted... $ 0.94 $ 0.58 $ 0.76 $ (.08) $ 0.71 $ 0.20 $ 0.27
Weighted average
common shares
outstanding (in
thousands)(12):
Primary........... 34,792 44,334 46,092 46,314 51,128 47,740 57,374
Fully diluted... 34,792 44,334 52,602 46,332 56,408 50,194 57,984
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED (2) SIX MONTHS ENDED (3)
--------------------------------------------------------------- ----------------------
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- --------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Comparable store net
sales
increase(13)...... 7% 5% 3% 3% 3% 3% 5%
Stores open at end
of
period(12)(13).... 106 115 146 144 173 134 175
Capital
expenditures(12)... $ 48,078 $ 86,192 $ 53,293 $ 51,469 $ 61,031 $ 24,952 $ 53,896
BALANCE SHEET DATA:
Working capital..... $ 203,977 $ 306,853 $ 301,270 $ 235,194 $ 344,410 $ 226,480 $ 396,148
Total assets........ $ 536,603 $ 653,680 $ 967,667 $ 919,013 $ 1,403,796 $ 922,200 $ 1,512,814
Senior long-term
debt, less current
portion........... $ 216,985 $ 117,588 $ 225,232 $ 168,937 $ 276,810 $ 153,555 $ 338,548
Subordinated debt... $ 86,250 $ 100,269 $ 100,505 $ 225,767 $ 100,633 $ 197,511
Shareholders'
equity............ $ 122,582 $ 275,104 $ 337,007 $ 327,371 $ 539,898 $ 333,636 $ 572,191
</TABLE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA FOR PROFFITT'S
(1) Effective February 1, 1997 and February 3, 1996, G.R. Herberger's, Inc.
("Herberger's") and Younkers, Inc. ("Younkers"), respectively, were acquired
by Proffitt's. These acquisitions were accounted for under the pooling-
of-interests method. Accordingly, Proffitt's financial statements were
restated for all periods to include the results of operations and financial
position of Herberger's and Younkers. Effective October 11, 1996, Proffitt's
acquired Parisian and the transaction was accounted for as a purchase.
Accordingly, the financial results of the operations of Parisian have been
included in Proffitt's results of operations since the acquisition date.
(2) Proffitt's fiscal year ends on the Saturday nearest January 31. Fiscal years
presented consisted of 52 weeks except for the fiscal year ended February 3,
1996, which consisted of 53 weeks (except for the period ended January 30,
1993 which includes 53 weeks for Younkers).
(3) The business of Proffitt's is seasonal, and results for any period within a
fiscal year are not necessarily indicative of the results that may be
achieved in a full fiscal year.
(4) Net sales include leased department sales, which represent sales by retail
vendors that lease store space. Leased department sales accounted for
approximately 3% to 5% of net sales for the periods presented.
(5) Expenses incurred were related to the defense of the attempted hostile
takeover of Younkers by CPS.
(6) Proffitt's adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in the fourth quarter of
fiscal 1995. As a result of adopting this new accounting standard and as a
result of closing certain stores and warehouses, Proffitt's incurred
impairment charges related to the write-down in carrying value of six stores
due to poor operating results, abandonment of a duplicate warehouse and
leasehold improvements related to the Parks-Belk Company ("Parks-Belk") and
Younkers chains, and a loss on abandonment of leasehold improvements related
to closed stores. For the period ended February 1, 1997, Proffitt's incurred
additional charges of $1.4 million for closed or underperforming stores of
the Herberger's chain. These losses in fiscal 1996 were offset by gains from
sales of assets totaling $2.5 million consisting principally of land,
building and fixtures related to two Younkers stores sold to CPS.
(7) In connection with the Younkers, Herberger's, and Parisian acquisitions,
Proffitt's incurred certain costs to effect such acquisitions and other
costs to restructure and integrate the combined operating companies. The
costs incurred included, among other costs, merger transaction costs,
severance and related benefits, abandonment and elimination of duplicate
administrative office space, property, data processing equipment and
software.
(8) Finance charge income includes finance charges and late payment fees earned
on Proffitt's proprietary credit cards, less the portion of such income
allocated to third party purchasers of such credit card receivables.
(9) Effective as of the beginning of the fiscal year ended January 30, 1993,
Younkers recognized a cumulative effect adjustment of $1.8 million (net of
income taxes of $1.2 million) due to the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits other than Pensions,"
under which employers recognize the cost of retiree health and life
insurance benefits over the employees' periods of service.
Effective January 31, 1993, Proffitt's changed its method of accounting for
inventory to include certain purchasing and distributions costs. Previously,
these costs were charged to expense in the period incurred rather than in
the period in which the merchandise was sold. The cumulative effect of this
change was to increase net income $2.3 million (net of income taxes of $1.5
million). Also effective January 31, 1993, Proffitt's changed its method of
accounting for store preopening costs to expensing such costs when incurred.
The cumulative effect of this change
11
<PAGE>
was to decrease net income $0.4 million (net of income taxes of $0.2
million). Previously, these costs were amortized over the twelve months
immediately following the individual store openings.
In 1992, the Financial Accounting Standards Board issued SFAS No. 109
"Accounting for Income Taxes," which requires a change from the deferred
method to the asset and liability method of accounting for income taxes.
Proffitt's adopted the new accounting standard effective January 31, 1993.
Adoption of the new standard had no effect on Proffitt's financial position
or results of operations. There would have been no impact on the year ended
January 30, 1993 had the standard been applied retroactively.
Effective January 30, 1994, Proffitt's changed its method of accounting for
inventory to the last-in, first-out (LIFO) method for a substantial portion
of its inventories. Previously, all inventories were valued using the first-
in, first-out (FIFO) method. The cumulative effect of this change is not
presented because it is not determinable.
(10) On June 12, 1996, the holder of Proffitt's preferred stock converted its
600 shares of Series A Preferred Stock into 1,422 shares of Proffitt's
Common Stock. Proffitt's paid $3.0 million to such holder as an inducement
to the conversion.
(11) On August 21, 1997, Proffitt's declared a 2-for-1 stock split in the form
of a 100% stock dividend payable on October 27, 1997 to recordholders of
Proffitt's Common Stock at the close of business on October 15, 1997.
(12) The increases during the periods presented are primarily due to Proffitt's
acquisitions of: Macco Investments, Inc. ("Macco") (parent company of
McRae's, Inc.) in March 1994; Parks-Belk in March and April 1995; and
Parisian in October 1996.
(13) Comparable store data for the fiscal year or period within a fiscal year
are adjusted so that all amounts relate to a 52-week year. New stores become
comparable stores in the first full month following the anniversary of the
opening of those stores. Renovated, expanded, or relocated stores are
classified as comparable stores and not as new stores. Where operations
within a particular mall are divided among two or more buildings, the
combined operation is counted as one store.
12
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA FOR CPS (1)
The selected financial and operating data below should be read in
conjunction with the consolidated financial statements and notes thereto of CPS
and with CPS's Management's Discussion and Analysis of Financial Condition and
Results of Operations incorporated by reference in this Joint Proxy Statement/
Prospectus. The selected financial and operating data as of and for the
six-months ended August 3, 1996 and August 2, 1997 are derived from unaudited
financial statements as of such dates and for such periods but, in the opinion
of management, include all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of such data.
<TABLE>
<CAPTION>
NINE THREE SIX MONTHS ENDED (3)
FISCAL YEAR MONTHS MONTHS FISCAL YEAR ENDED (2)
ENDED ENDED ENDED --------------------------------------- ---------------------
JANUARY 30, OCTOBER 30, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993(1) 1993(1) 1994(1) 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME
DATA:
Net sales (4)......... $ 1,155,198 $ 760,760 $387,679 $ 1,161,612 $ 1,083,812 $ 1,102,826 $ 461,755 $ 501,899
Cost and expenses:
Cost of sales....... 733,166 488,101 245,446 745,360 700,435 700,080 295,206 322,023
Selling, general,
and administrative
expenses (5)...... 340,723 238,586 90,250 325,847 295,724 307,133 142,710 150,484
Other operating
expenses.......... 33,714 26,989 2,156 7,328 11,180 16,613 8,198 14,061
Long-lived assets
impairment or
disposition (6)... (55,179)
Settlement of
reorganization
payables (7)...... (18,300) (725) (1,280)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Operating
income.......... 47,595 7,084 49,827 101,377 132,377 80,280 15,641 15,331
Other income
(expense):
Interest expense.... (12,053) (9,552) (4,545) (17,624) (17,974) (15,910) (7,135) (8,318)
Reorganization items
(1)............... (52,266) (219,857)
Other income
(expense), net
(8)............... (6,835) 1,540 12,065
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Income (loss)
before provision
for income
taxes,
extraordinary
gain and
cumulative
effect of
accounting
changes......... (16,724) (222,325) 45,282 83,753 107,568 65,910 20,571 7,013
Provision for income
taxes............... 18,110 33,501 43,027 26,100 8,105 2,777
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Income (loss)
before
extraordinary
gain and
cumulative
effect of
accounting
changes......... (16,724) (222,325) 27,172 50,252 64,541 39,810 12,466 4,236
Loss from discontinued
operations (1)...... (6,885)
Extraordinary gain on
extinguishment of
debt (net of tax)
(1)................. 212,139
Cumulative effect of
accounting
changes (9)......... (13,994)
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Net income
(loss).......... $ (23,609) $ (24,180) $ 27,172 $ 50,252 $ 64,541 $ 39,810 $ 12,466 $ 4,236
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Earnings per common
share:..............
Primary............. $1.35 $2.48 $3.75 $2.39 $0.74 $0.26
Fully diluted....... $1.34 $2.48 $3.75 $2.39 $0.74 $0.26
Weighted average
common shares
outstanding (10) (in
thousands):
Primary............. 20,136 20,289 17,218 16,667 16,791 16,479
Fully diluted....... 20,231 20,304 17,218 16,687 16,820 16,513
OPERATING DATA:
Comparable store net
sales
increase (11)....... 1% 1% 6% 4% 3% 2% 2% 5%
Stores open at end of
period.............. 62 63 59 61 54 57 55 56
Capital
expenditures........ $ 18,633 $ 35,559 $ 9,360 $ 54,732 $ 38,614 $ 52,887 $ 27,243 $ 27,556
BALANCE SHEET DATA:
Working capital
(12)................ $ 345,530 $ 251,422 $318,041 $ 351,931 $ 320,007 $ 319,188 $ 269,823 $ 292,466
Total assets.......... $ 965,168 $ 806,267 $712,295 $ 723,338 $ 692,102 $ 724,047 $ 663,984 $ 713,517
Senior long-term debt,
less current
portion............. $ 205,660 $ 256,958 $251,025 $ 237,405 $ 192,705 $ 159,635 $ 146,431 $ 139,825
Shareholders'
equity.............. $ 24,180 $ 205,000 $232,524 $ 286,078 $ 319,816 $ 358,817 $ 320,438 $ 357,874
</TABLE>
13
<PAGE>
NOTES TO SELECTED FINANCIAL AND OPERATING DATA FOR CPS
(1) CPS, its then parent corporation, P.A. Bergner & Co. Holding Company (the
"CPS Predecessor") and most of its subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the United States Bankruptcy Code
with the United States Bankruptcy Court for the Eastern District of
Wisconsin (the "Bankruptcy Court") on August 23, 1991. On October 12, 1993,
CPS, its affiliated debtors, and several of its creditors filed with the
Bankruptcy Court a Fourth Amended Joint Plan of Reorganization that was
consummated on October 29, 1993. Therefore, the periods presented subsequent
to October 30, 1993 represent the results of operations on a post bankruptcy
basis.
(2) CPS's fiscal year ends on the Saturday nearest January 31. Fiscal years
presented include 52 weeks except for the fiscal year ended February 3, 1996
which contains 53 weeks.
(3) The business of CPS is seasonal, and results for any period within a fiscal
year are not necessarily indicative of the results that may be achieved in a
full fiscal year.
(4) Net sales include leased department sales which represent sales by retail
vendors that lease store space. Leased department sales accounted for
approximately 8.0% to 9.0% of net sales for the periods presented.
(5) Included within selling, general, and administrative expenses is service
charge income from receivables of $45.7 million, $45.8 million, $43.8
million, $10.5 million, $31.7 million and $36.3 million for fiscal 1996,
1995 and 1994, the three months ended January 29, 1994, the nine months
ended October 30, 1993 and fiscal 1992, respectively. Service charge income
for the six months ended August 2, 1997 and August 3, 1996 was $25.3 million
and $22.4 million, respectively.
(6) In March 1995, CPS sold certain stores located in Minnesota for net proceeds
of $70.8 million and realized a gain of $55.2 million.
(7) During fiscal 1994, 1995, and 1996, CPS reduced its reorganization payable
reserve to reflect the favorable resolution of claims.
(8) Other expense in fiscal 1995 primarily represents the costs related to CPS's
abandoned attempt to acquire Younkers. Other income in the six months ended
August 3, 1996 primarily relates to a $14.9 million gain associated with the
sale of 1,026,550 shares of Proffitt's Common Stock. Other income for fiscal
1996 includes the aforementioned gain on the Proffitt's Common Stock offset
in part by the writedown of $10.5 million relating to County Seat Holdings,
Inc. 9% Junior Subordinated Exchange Debentures due 2004 held by CPS.
(9) Effective as of the beginning of the fiscal period ended October 30, 1993,
CPS recognized a cumulative effect adjustment of $14.0 million due to the
adoption of SFAS No. 106, under which employers recognize the cost of
retiree health and life insurance benefits over the employees' periods of
service.
(10) Shares outstanding and net loss per share are not presented for periods
prior to October 30, 1993 because the CPS Predecessor's common stock was not
publicly held. Shares outstanding represent weighted average common shares
and common share equivalents used in calculating primary and fully diluted
net income per share.
(11) Comparable store sales growth is normally calculated using sales of stores
and merchandise departments that have been open for the full fiscal period
being calculated and the full prior fiscal period. However, for fiscal 1995,
even though eight of the nine Minnesota stores (the "Minnesota Stores") were
not open for all of fiscal 1995, comparable sales includes the Minnesota
Stores' clearance sales because these clearance sales would normally have
occurred across all stores.
(12) Working capital excludes cash and cash equivalents and the current
maturities of long-term debt.
14
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL AND OPERATING DATA
The selected unaudited pro forma financial and operating data below have
been prepared on a consolidated basis based upon the historical financial
statements of Proffitt's and CPS for all periods and also on the historical
financial statements for Parisian for the year ended February 1, 1997 and for
the six-month period ended August 3, 1996. The pro forma combined information
gives effect to the Merger accounted for as a pooling of interests, based on an
assumed Conversion Number of 1.75 shares of Proffitt's Common Stock for each
share of CPS Common Stock. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
----------- ----------- ----------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................................ $2,675,056 $2,744,868 $3,423,781 $1,478,247 $1,520,556
Costs and expenses:
Cost of sales.................................. 1,766,282 1,822,108 2,245,270 963,505 987,424
Selling, general, and administrative
expenses..................................... 816,586 848,609 1,067,534 502,386 510,295
Expenses related to Younkers takeover.......... 10,017
Long-lived assets impairment or disposition.... (36,058) 1,406 240 30
Merger, restructuring, and integration costs... 20,822 15,929 4,270 3,102
Settlement of reorganization payables.......... (18,300) (725) (1,280)
----------- ----------- ----------- --------- ---------
Operating income........................... 110,488 80,095 94,922 7,846 19,705
Other income (expense):
Finance charge income, net of allocation to
purchasers of accounts receivable............ 71,708 77,073 83,617 41,507 46,994
Interest expense............................... (40,910) (47,363) (60,612) (29,948) (30,009)
Other income (expense), net.................... 4,826 4,051 (9,943) (1,837) 389
----------- ----------- ----------- --------- ---------
Income before provision for income taxes
and extraordinary loss on the early
extinguishment of debt................... 146,112 113,856 107,984 17,568 37,079
Provision for income taxes....................... 58,112 48,914 48,698 8,526 15,741
----------- ----------- ----------- --------- ---------
Income before extraordinary loss on the
extinguishment of debt................... 88,000 64,942 59,286 9,042 21,338
Extraordinary loss on extinguishment of debt, net
of tax......................................... (2,060) (1,120)
----------- ----------- ----------- --------- ---------
Net income................................. 88,000 62,882 59,286 9,042 20,218
Preferred stock dividends........................ 1,694 1,950 796 796
Payment for early conversion of preferred
stock.......................................... 3,032 3,032
----------- ----------- ----------- --------- ---------
Net income available to common
shareholders............................. $ 86,306 $ 60,932 $ 55,458 $ 5,214 $ 20,218
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
Earnings per share:
Earnings per common share before
extraordinary loss
Primary...................................... $ 1.06 $ 0.82 $ 0.66 $ 0.06 $ 0.25
Fully diluted................................ $ 1.03 $ 0.82 $ 0.69 $ 0.11 $ 0.25
Earnings per common share:
Primary...................................... $ 1.06 $ 0.80 $ 0.66 $ 0.06 $ 0.23
Fully diluted................................ $ 1.03 $ 0.80 $ 0.69 $ 0.11 $ 0.23
Weighted average common shares outstanding (in
thousands)
Primary...................................... 81,596 76,446 84,481 83,218 86,212
Fully diluted................................ 88,134 76,464 89,795 85,723 86,882
OPERATING DATA:
Comparable store net sales increases............. 3% 3% 3% 3% 5%
Stores open at end of period..................... 207 198 230 189 231
Capital expenditures............................. $ 108,025 $ 90,083 $ 113,918 $ 52,195 $ 81,452
BALANCE SHEET DATA:
Working capital.................................. $ 707,136
Total assets..................................... $2,188,136
Long-term debt, less current portion............. $ 478,373
Subordinated debt................................ $ 197,511
Shareholders' equity............................. $ 931,965
</TABLE>
15
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are income from continuing operations and before
extraordinary items and book value per common share data of Proffitt's and CPS
on both an historical and a pro forma combined basis. Neither Proffitt's nor CPS
has paid any dividends on its common stock. Proffitt's and CPS presently follow
the policy of retaining earnings to provide funds for the operation and
expansion of the business and have no present intention to declare cash
dividends in the foreseeable future. Pro forma combined income from continuing
operations per share is derived from the pro forma combined information
presented elsewhere herein, which gives effect to the Merger under the
pooling-of-interests method of accounting as if the Merger had occurred at
January 30, 1994, combining the results of Proffitt's and CPS for the periods
presented. The equivalent pro forma combined data for CPS is based upon an
assumed Conversion Number of 1.75 shares of Proffitt's Common Stock for each
share of CPS Common Stock. Book values per share for CPS and for the pro forma
combined presentation are based upon outstanding common shares as of the date
presented, adjusted in the case of the pro forma combined presentation to
include the shares of Proffitt's Common Stock to be issued in the Merger. The
information set forth below should be read in conjunction with the respective
audited and unaudited financial statements of Proffitt's, Parisian and CPS
incorporated by reference in this Joint Proxy Statement/Prospectus and presented
under "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
EQUIVALENT
PRO FORMA
COMBINED
PROFFITT'S/ PER SHARE OF
PROFFITT'S CPS CPS
HISTORICAL CPS PRO FORMA COMMON
(1) HISTORICAL COMBINED (1) STOCK
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING OPERATIONS
AND BEFORE EXTRAORDINARY ITEMS: (2)
January 28, 1995 (3)................................... $ .78 $ 2.48 $ 1.06 $ 1.86
February 3, 1996....................................... $ (.03) $ 3.75 $ .82 $ 1.44
February 1, 1997 (4)................................... $ .66 $ 2.39 $ .66 $ 1.16
August 2, 1997 (six months) (5)........................ $ .30 $ .26 $ .25 $ .44
BOOK VALUE (AT END OF PERIOD):
February 1, 1997....................................... $ 9.64 $ 22.52 $ 10.70 $ 18.73
August 2, 1997......................................... $ 10.01 $ 22.65 $ 10.99 $ 19.23
</TABLE>
- ------------------------
(1) Proffit's Historical reflects certain reclassifications and adjustments. See
Notes 2 and 13 to the Notes to Unaudited Pro Forma Condensed Combined Income
Statements under "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
(2) The historical and pro forma per share amounts have been calculated giving
effect to the Proffitt's two-for-one stock split that was effective October
27, 1997.
(3) On a fully diluted basis, Proffitt's Historical was $.76, the Proffitt's/CPS
Pro Forma Combined is $1.03 and the Equivalent Pro Forma Combined per Share
of CPS Common Stock is $1.80.
(4) On a fully diluted basis, Proffitt's Historical was $.71, the Proffitt's/CPS
Pro Forma Combined is $.69 and the Equivalent Pro Forma Combined per Share
of CPS Common Stock is $1.21.
(5) On a fully diluted basis, Proffitt's Historical was $.29, the Proffitt's/CPS
Pro Forma Combined is $.25 and the Equivalent Pro Forma Combined per Share
of CPS Common Stock is $.44.
16
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
The Proffitt's Common Stock and the CPS Common Stock are listed and traded
on the NYSE (symbols: "PFT" and "CRP," respectively). Proffitt's Common Stock
was traded on the Nasdaq National Market under the symbol "PRFT" prior to July
7, 1997. The following table sets forth for the periods indicated the reported
sales prices for Proffitt's Common Stock and CPS Common Stock. The source of
these quotations is the New York Stock Exchange Composite Tape, and for
Proffitt's Common Stock prior to July 7, 1997, the Monthly Statistical Report of
the National Association of Securities Dealers, Inc. With respect to Proffitt's
Common Stock prior to July 7, 1997, such quotations represent inter-dealer
prices for actual transactions, without adjustment for retail markup, markdown
or commission. Neither Proffitt's nor CPS has declared or paid any dividends on
its common stock. Prices of Proffitt's Common Stock have been adjusted to give
effect to the October 1997 two-for-one stock split.
<TABLE>
<CAPTION>
SALES PRICE
---------------------
<S> <C> <C>
PROFFITT'S COMMON STOCK HIGH LOW
- --------------------------------------------------------------------------------------------- ---------- ---------
1995
First Quarter.............................................................................. 13 1/4 10 3/8
Second Quarter............................................................................. 16 1/2 12
Third Quarter.............................................................................. 17 1/8 11 9/16
Fourth Quarter............................................................................. 14 1/2 10 3/4
1996
First Quarter.............................................................................. 16 7/8 11 3/4
Second Quarter............................................................................. 20 15 3/4
Third Quarter.............................................................................. 21 17 3/4
Fourth Quarter............................................................................. 21 3/8 16 5/16
1997
First Quarter.............................................................................. 20 11/16 15 5/8
Second Quarter............................................................................. 26 27/32 18 7/8
Third Quarter (prior to October 29, 1997).................................................. 30 5/8 24 7/8
Third Quarter (from and after October 29, 1997)............................................ 29 26
Fourth Quarter (through December 9, 1997).................................................. 32 7/16 28 1/4
</TABLE>
<TABLE>
<CAPTION>
SALES PRICE
---------------------
<S> <C> <C>
CPS COMMON STOCK HIGH LOW
- ---------------------------------------------------------------------------------------------- ---------- ---------
1995
First Quarter............................................................................... 18 1/8 15
Second Quarter.............................................................................. 17 1/8 15 1/4
Third Quarter............................................................................... 20 3/4 16 1/2
Fourth Quarter.............................................................................. 20 3/4 15 3/8
1996
First Quarter............................................................................... 26 1/2 16 1/2
Second Quarter.............................................................................. 28 7/8 21 7/8
Third Quarter............................................................................... 27 3/8 22 3/8
Fourth Quarter.............................................................................. 28 5/8 23 1/4
1997
First Quarter............................................................................... 32 7/8 26 1/4
Second Quarter.............................................................................. 33 3/4 29 3/4
Third Quarter (prior to October 29, 1997)................................................... 40 1/8 32 7/8
Third Quarter (from and after October 29, 1997)............................................. 48 1/4 42
Fourth Quarter (through December 9, 1997)................................................... 54 7/16 48 3/8
</TABLE>
17
<PAGE>
INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Proffitt's in connection with the solicitation of proxies by the Proffitt's
Board of Directors for use at the Proffitt's Special Meeting to be held at
Proffitt's executive offices, 750 Lakeshore Parkway, Birmingham, Alabama 35211,
on January 30, 1998, at 10:00 a.m., local time, and at any adjournments or
postponements thereof.
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
CPS in connection with the solicitation of proxies by the CPS Board of Directors
for use at the CPS Special Meeting to be held at the Towne Hall at CPS's
principal executive offices, 331 W. Wisconsin Avenue, 4th Floor, Milwaukee,
Wisconsin 53203, on January 30, 1998, at 10:00 a.m., Milwaukee time, and at any
adjournments or postponements thereof.
This Joint Proxy Statement/Prospectus constitutes a prospectus of Proffitt's
with respect to up to 30,513,101 shares of Proffitt's Common Stock issuable to
CPS shareholders (other than subsidiaries of CPS) pursuant to the Merger
Agreement and upon exercise of options to purchase CPS Common Stock to be
converted into options to purchase shares of Proffitt's Common Stock.
THE SPECIAL MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
PROFFITT'S SPECIAL MEETING. At the Proffitt's Special Meeting, holders of
shares of Proffitt's Common Stock will consider and vote upon proposals to
approve the Merger Agreement, the Stock Issuance and the Charter Amendment.
Holders of shares of Proffitt's Common Stock entitled to vote also will consider
and vote upon any other matter that may properly come before the Proffitt's
Special Meeting or at any adjournments or postponements thereof. RECEIPT OF EACH
OF THE PROFFITT'S SHAREHOLDER APPROVALS IS A CONDITION TO THE CONSUMMATION OF
THE MERGER.
THE BOARD OF DIRECTORS OF PROFFITT'S HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING
THE STOCK ISSUANCE, AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT AND THE STOCK ISSUANCE. SEE "THE MERGER--RECOMMENDATIONS OF THE BOARDS
OF DIRECTORS; REASONS FOR THE MERGER." THE BOARD OF DIRECTORS OF PROFFITT'S HAS
ALSO UNANIMOUSLY APPROVED THE CHARTER AMENDMENT AND RECOMMENDS A VOTE FOR THE
APPROVAL OF THE PROPOSAL RELATING THERETO. SEE "PROPOSED AMENDMENT TO PROFFITT'S
AMENDED AND RESTATED CHARTER."
CPS SPECIAL MEETING. At the CPS Special Meeting, holders of shares of CPS
Common Stock entitled to vote at the CPS Special Meeting will consider and vote
upon a proposal to approve the Merger Agreement. Holders of shares of CPS Common
Stock entitled to vote also will consider and vote upon any other matter that
may properly come before the CPS Special Meeting or at any adjournments or
postponements thereof. APPROVAL OF THE MERGER AGREEMENT BY THE SHAREHOLDERS OF
CPS IS A CONDITION TO THE CONSUMMATION OF THE MERGER.
THE BOARD OF DIRECTORS OF CPS HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT, AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT. SEE "THE MERGER--RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS
FOR THE MERGER."
Subject to certain provisions described herein with respect to certain
shares owned by CPS, Proffitt's, and Proffitt's subsidiaries, in the Merger each
issued and outstanding share of CPS Common Stock will be converted into a number
of validly issued, fully paid and nonassessable shares of Proffitt's Common
Stock, including the corresponding percentage of a Proffitt's Right, equal to
the Conversion Number. Cash will be paid in lieu of fractional shares of
Proffitt's Common Stock. See "THE MERGER--Merger Consideration" and "THE MERGER
AGREEMENT--Fractional Shares."
18
<PAGE>
VOTES REQUIRED
PROFFITT'S. Each holder of Proffitt's Common Stock is entitled to one vote
per share held of record on the Proffitt's Record Date (as defined herein). The
approval of the Merger Agreement requires the affirmative vote of a majority of
the votes eligible to be cast on the proposal. The approval of each of the Stock
Issuance and the Charter Amendment requires the affirmative vote of a majority
of the votes cast, provided a quorum is present.
Abstentions will be counted as shares present for purposes of determining
the presence of a quorum at the Proffitt's Special Meeting. See "--Record Dates;
Stock Entitled to Vote; Quorum." Abstentions with respect to the Merger
Agreement will have the effect of votes against the approval of such matter. In
addition, brokers who hold shares of Proffitt's Common Stock as nominees will
not have discretionary authority to vote shares of Proffitt's Common Stock in
the absence of instructions from the beneficial owners thereof. Votes which are
not cast for this reason ("broker non-votes") will have the effect of a vote
against the Merger Agreement. Abstentions and broker non-votes with respect to
the Stock Issuance and the Charter Amendment will not have the effect of either
a vote for or against the matter.
Shareholders of Proffitt's should be aware that a shareholder who votes to
approve the Merger Agreement, the Stock Issuance or the Charter Amendment may be
deemed to have ratified the terms of the Merger and the Stock Issuance or the
Charter Amendment, including the fairness thereof, and, under certain
circumstances, such shareholder may be precluded from challenging the fairness
of the Merger, the Stock Issuance or the Charter Amendment in a subsequent legal
proceeding. Proffitt's may use a shareholder's affirmative vote in favor of the
Merger Agreement, the Stock Issuance or the Charter Amendment as a defense to
any subsequent challenge to the Merger, the Stock Issuance or the Charter
Amendment. An abstention, in and of itself, will not be considered such a
ratification; however, no assurance can be given as to the effect that such an
abstention would have on the shareholder's rights to challenge the Merger, the
Stock Issuance or the Charter Amendment.
As of December 5, 1997, directors and executive officers of Proffitt's and
their affiliates were beneficial owners of an aggregate of approximately
6,620,000 shares (approximately 10.8% of the outstanding shares of Proffitt's
Common Stock), including approximately 1,050,000 shares subject to options
exercisable within 60 days.
CPS. Each holder of CPS Common Stock is entitled to one vote per share held
of record on the CPS Record Date (as defined herein). The Merger Agreement must
be approved by the affirmative vote of a majority of the outstanding shares of
CPS Common Stock. The Subsidiary Shares will be voted with respect to each
matter in the same proportion as the shares of the CPS Common Stock voted by
other shareholders with respect to that matter. A majority of the outstanding
shares of CPS Common Stock entitled to vote on a particular matter that are not
Subsidiary Shares must be represented in person or by proxy at the CPS Special
Meeting in order for a quorum to be present for consideration of the matter at
the CPS Special Meeting.
Abstentions will be counted as shares present for purposes of determining a
quorum. See "--Record Dates; Stock Entitled to Vote; Quorum." Abstentions will
have the effect of votes against approval of the Merger Agreement. In addition,
brokers who hold shares of CPS Common Stock as nominees will not have
discretionary authority to vote shares of CPS Common Stock in the absence of
instructions from the beneficial owners thereof. Broker non-votes will have the
effect of votes against approval of the Merger Agreement.
As of December 5, 1997, directors and executive officers of CPS and their
affiliates were beneficial owners of an aggregate of approximately 740,000
shares (approximately 4.7% of the outstanding shares of CPS Common Stock other
than Subsidiary Shares), including approximately 590,000 shares subject to
options exercisable within 60 days.
19
<PAGE>
VOTING OF PROXIES
Shares represented by properly executed proxies received in time for the
Special Meetings and which have not been revoked will be voted at such Special
Meetings in the manner specified by the holders thereof. Proxies which do not
contain an instruction to vote for or against or to abstain from voting on a
particular matter described in the proxy will be voted in favor of such matter.
It is not expected that any matter other than those referred to in this
Joint Proxy Statement/ Prospectus will be brought before either of the Special
Meetings. If, however, other matters are properly presented, the persons named
as proxies will vote in accordance with their judgment with respect to such
matters, unless authority to do so is withheld in the proxy.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed Proffitt's or CPS form of proxy does
not preclude a shareholder from voting in person. A shareholder may revoke a
proxy at any time prior to its exercise by submitting a later dated proxy with
respect to the same shares, by filing with the Secretary of Proffitt's a duly
executed revocation (in the case of a Proffitt's shareholder) or by written
notice to CPS stating that the proxy is revoked (in the case of a CPS
shareholder) or by voting in person at the respective Special Meeting.
Attendance at the respective Special Meeting will not in and of itself
constitute a revocation of a proxy.
RECORD DATES; STOCK ENTITLED TO VOTE; QUORUM
PROFFITT'S. Only holders of record of Proffitt's Common Stock at the close
of business on December 5, 1997 (the "Proffitt's Record Date") will be entitled
to receive notice of and to vote at the Proffitt's Special Meeting. On the
Proffitt's Record Date, Proffitt's had outstanding 61,433,314 shares of
Proffitt's Common Stock. The holders of Proffitt's Common Stock are entitled to
one vote per share on each matter submitted to a vote at the Proffitt's Special
Meeting. The holders of a majority of the shares of Proffitt's Common Stock
entitled to vote must be present in person or by proxy at the Proffitt's Special
Meeting in order for a quorum to be present. Shares of Proffitt's Common Stock
represented by proxies which are marked "abstain" or which are not marked as to
any particular matter or matters will be counted as shares present for purposes
of determining the presence of a quorum at the Proffitt's Special Meeting.
Proxies relating to "street name" shares that are voted by brokers will be
counted as shares present for purposes of determining the presence of a quorum
but will not be treated as shares having voted at the Proffitt's Special Meeting
as to any proposal as to which authority to vote is withheld by the broker.
In the event a quorum is not present in person or by proxy at the Proffitt's
Special Meeting, the Proffitt's Special Meeting is expected to be adjourned or
postponed; provided, however, that proxies directing votes AGAINST the Merger
will not be used to vote FOR adjournment of the Proffitt's Special Meeting by
the persons named therein as proxies.
CPS. Only holders of record of CPS Common Stock at the close of business on
December 5, 1997 (the "CPS Record Date") will be entitled to receive notice of
and to vote at the CPS Special Meeting. On the CPS Record Date, CPS had
outstanding 15,745,761 shares of CPS Common Stock (not including the 21,555,068
Subsidiary Shares). The holders of CPS Common Stock are entitled to one vote per
share on each matter submitted to a vote at the CPS Special Meeting. The
Subsidiary Shares will be voted with respect to each matter submitted to a vote
in the same proportion as the shares of CPS Common Stock voted by all other
shareholders with respect to that matter. The holders of a majority of the
shares of CPS Common Stock entitled to vote on a particular matter that are not
Subsidiary Shares must be present in person or by proxy at the CPS Special
Meeting in order for a quorum to be present. Shares of CPS Common Stock
represented by proxies which are marked "abstain" or which are not marked as to
any particular matter or matters will be counted as shares present for purposes
of determining the presence of a quorum on all matters. Proxies relating to
"street name" shares that are voted by brokers will be counted as shares present
for purposes of determining the presence of a quorum on all matters but will not
be
20
<PAGE>
treated as shares having voted at the CPS Special Meeting as to any proposal as
to which authority to vote is withheld by the broker.
In the event a quorum is not present in person or by proxy at the CPS
Special Meeting, the CPS Special Meeting is expected to be adjourned or
postponed. Proxies directing votes AGAINST adoption of the Merger Agreement will
not be used to vote FOR adjournment of the CPS Special Meeting by the persons
named therein as proxies.
APPRAISAL RIGHTS
At the Proffitt's Special Meeting, holders of shares of Proffitt's Common
Stock will consider and vote upon proposals to approve the Merger Agreement, the
Stock Issuance and the Charter Amendment. Because shares of Proffitt's Common
Stock are listed on the NYSE, holders of Proffitt's Common Stock will not be
entitled to appraisal rights under the TBCA.
The IBCA provides appraisal rights for certain mergers and consolidations.
Sections 5/11.65 and 5/11.70 of the IBCA entitle any CPS shareholder who objects
to the Merger and who follows the prescribed procedures to receive cash equal to
the "fair value" of such shareholder's shares of CPS Common Stock in lieu of
receiving the consideration proposed under the Merger. Set forth below is a
summary of the procedures relating to the exercise of such dissenters' rights.
This summary does not purport to be a complete statement of dissenters' rights
and is qualified in its entirety by reference to Sections 5/11.65 and 5/11.70 of
the IBCA, which are reproduced in full as Appendix IV attached to this Joint
Proxy Statement/Prospectus.
ANY SHAREHOLDER OF CPS CONTEMPLATING THE POSSIBILITY OF DISSENTING FROM THE
MERGER SHOULD CAREFULLY REVIEW THE TEXT OF APPENDIX IV (PARTICULARLY THE
SPECIFIC PROCEDURAL STEPS REQUIRED TO PERFECT DISSENTERS' RIGHTS) AND SHOULD
CONSULT SUCH SHAREHOLDER'S LEGAL COUNSEL. SUCH RIGHTS WILL BE LOST IF THE
PROCEDURAL REQUIREMENTS OF SECTION 5/11.70 OF THE IBCA ARE NOT FULLY AND
PRECISELY SATISFIED.
Under the IBCA, each holder of shares of CPS Common Stock may assert
appraisal rights only by delivering to CPS, before any vote at the CPS Special
Meeting is taken, a written demand for payment for the holder's shares if the
Merger is consummated. If the Merger is consummated and such shareholder did not
vote in favor of the Merger, CPS will, within the later of 10 days after the
Effective Time or 30 days after the shareholder delivered the written demand for
payment, send to such shareholder a statement setting forth (i) CPS's opinion as
to the estimated fair value of such shareholder's shares, (ii) (A) CPS's latest
balance sheet as of the end of a fiscal year ending not earlier than 16 months
before the delivery of the statement, (B) CPS's statement of income for that
year and (C) CPS's latest available interim financial statements, and (iii) a
commitment to pay such estimated fair value for such shares upon the transmittal
to CPS of the relevant Certificate (as defined herein) or Certificates.
A SHAREHOLDER WHO MAKES A WRITTEN DEMAND FOR PAYMENT PURSUANT TO SECTION
5/11.70 OF THE IBCA RETAINS ALL OTHER RIGHTS OF A SHAREHOLDER UNTIL THOSE RIGHTS
ARE CANCELED OR MODIFIED BY THE CONSUMMATION OF THE PROPOSED MERGER.
Pursuant to the IBCA, "fair value" with respect to a dissenting
shareholder's shares of CPS Common Stock, means the value of those shares
immediately before the consummation of the Merger (not including any
appreciation or depreciation in anticipation of the Merger, unless such
exclusion would be inequitable).
If the dissenting shareholder does not agree with CPS's opinion as to the
estimated fair value of such shareholder's shares (or the amount of interest
due), such shareholder shall, within 30 days of the delivery of CPS's statement
of fair value, notify CPS in writing of such dissenting shareholder's estimate
of fair value (and the amount of interest due) and demand payment for the
difference between the shareholder's
21
<PAGE>
estimate of fair value (and interest due) and the amount of CPS's payment. If
the dissenting shareholder and CPS have not agreed in writing as to the value of
the shares (and interest due) within 60 days of the delivery of such
shareholder's notification of estimate of fair value to CPS, CPS must either (i)
pay the difference in value demanded by the shareholder or (ii) file a petition
in a court of appropriate jurisdiction in Illinois requesting the court to
determine the fair value of the shares (and interest due). All dissenting
shareholders whose demands for payment remain unsettled will be made parties to
the proceeding. Failure of CPS to commence such an action will not limit or
affect the right of the dissenting shareholders to otherwise commence an action
as permitted by law. The court is authorized to appoint appraisers to assist it
in the determination of the fair value of the shares.
Each dissenting shareholder will be entitled to judgment against CPS for the
amount, if any, by which the court finds the fair value of such shareholder's
shares exceeds the value paid by CPS, together with interest from the Effective
Time to the date of payment at the average rate currently paid by CPS on its
principal bank loans or, if none, at a rate determined by the court to be fair
and equitable. If (i) the fair value determined by the court materially exceeds
the amount which CPS estimated to be fair value (or if no such estimate was made
by CPS), or (ii) the amount by which a dissenting shareholder estimated fair
value of the shares materially exceeds the fair value of the shares as
determined by the court, then all or part of the costs of the proceeding,
including reasonable compensation and expenses of the appraisers, if any, but
excluding fees and expenses of counsel for any party and experts employed by any
party, may be assessed against CPS (in the case of clause (i)) or against such
shareholder (in the case of clause (ii)). The court may also assess fees for
experts and attorneys for the respective parties, in amounts the court finds
equitable, pursuant to the provisions of Section 5/11.70(i) of the IBCA.
A shareholder who votes to approve the Merger Agreement waives all of his
dissenters' rights with respect to the Merger. If a proxy is returned but not
voted "For," "Against" or "Abstain" with respect to approval of the proposal to
approve the Merger Agreement, the proxy will be voted for such proposal, and
will thus constitute a waiver of dissenters' rights. A vote against the Merger
Agreement will not, by itself, satisfy the requirements with respect to any
written demand for payment referred to above. Such written demand must be in
addition to and separate from any proxy or vote against the Merger Agreement.
Other than as described above, shareholders will not be notified of the date by
which such demand must be made.
The rights of any holder of CPS Common Stock to be paid the fair value of
such shareholder's shares (and interest due, if any) with respect to the Merger
will terminate if for any reason the Merger is not consummated or such
shareholder fails to serve an appropriate timely written demand upon CPS.
EACH OF THE ACTIONS SUMMARIZED ABOVE AND SET FORTH IN THE IBCA MUST BE TAKEN
IN STRICT COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE STATUTE IN ORDER FOR
ANY CPS SHAREHOLDER TO PERFECT DISSENTERS' RIGHTS. ANY WRITTEN OBJECTION, DEMAND
OR NOTICE REQUIRED IN CONNECTION WITH THE EXERCISE OF DISSENTERS' RIGHTS SHOULD
BE SENT TO THE ATTENTION OF THE CORPORATE SECRETARY, CARSON PIRIE SCOTT & CO.,
331 W. WISCONSIN AVENUE, MILWAUKEE, WISCONSIN 53203. IT IS RECOMMENDED THAT ALL
REQUIRED DOCUMENTS TO BE DELIVERED TO CPS BE SENT BY REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED. SEE "COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON
STOCK AND CPS COMMON STOCK--DISSENTERS' RIGHTS."
SOLICITATION OF PROXIES; GENERAL
Subject to the Merger Agreement, each of Proffitt's and CPS will bear the
cost of the solicitation of proxies from its own shareholders, except that
Proffitt's and CPS will share equally the cost of printing and mailing this
Joint Proxy Statement/Prospectus, including related filing fees. In addition to
solicitation by mail, the directors, officers and employees of each corporation
and its subsidiaries may solicit proxies from shareholders of such corporation
by telephone, in person or by other means. These directors, officers and
22
<PAGE>
employees will not be additionally compensated for such solicitation but may be
reimbursed for out-of-pocket expenses in connection therewith. Arrangements also
will be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of shares held of record by such persons, and Proffitt's and CPS will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
Proffitt's has retained Georgeson & Company Inc. ("Georgeson") for
solicitation and advisory services in connection with the solicitation, for
which Georgeson is to receive a fee estimated at $8,000, together with
reimbursement for its reasonable out-of-pocket expenses. Proffitt's has also
agreed to indemnify Georgeson against certain liabilities and expenses,
including liabilities under the federal securities laws. It is anticipated that
Georgeson will employ approximately 15 persons to solicit shareholders for the
Proffitt's Special Meeting.
CPS has also retained Georgeson for solicitation and advisory services in
connection with the solicitation, for which Georgeson is to receive a fee
estimated at $8,000, together with reimbursement for its reasonable
out-of-pocket expenses. CPS has also agreed to indemnify Georgeson against
certain liabilities and expenses, including liabilities under the federal
securities laws. It is anticipated that Georgeson will employ approximately 10
persons to solicit shareholders for the CPS Special Meeting.
HOLDERS OF CPS COMMON STOCK SHOULD NOT SEND STOCK CERTIFICATES
If the requisite shareholder approvals are obtained and the Merger is
consummated, materials for submitting CPS stock certificates in exchange for
Proffitt's stock certificates will be provided to the CPS shareholders. DO NOT
SEND IN YOUR CPS STOCK CERTIFICATES AT THIS TIME.
ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P. and KPMG Peat Marwick LLP are
expected to be present at the Proffitt's Special Meeting and the CPS Special
Meeting, respectively, where they will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
23
<PAGE>
THE MERGER
The description of the Merger and the Merger Agreement contained in this
Joint Proxy Statement/ Prospectus is qualified in its entirety by reference to
the Merger Agreement, a copy of which appears as Appendix I to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
GENERAL
Proffitt's, Sub and CPS have entered into the Merger Agreement, which
provides that, subject to the satisfaction or waiver (where permissible) of the
conditions set forth therein (see "THE MERGER AGREEMENT--Conditions to the
Merger"), Sub will be merged into CPS, and CPS will be the surviving corporation
and a wholly-owned subsidiary of Proffitt's. As promptly as practicable after
the satisfaction or waiver (where permissible) of the conditions under the
Merger Agreement, the Articles of Merger will be filed with the Secretary of
State of the State of Illinois, and the time of the issuance of a Certificate of
Merger by the Secretary of State of the State of Illinois will be the Effective
Time unless otherwise provided in the Certificate of Merger.
BACKGROUND OF THE MERGER
In recent years, Proffitt's has grown primarily through the acquisition of
regional department store chains. The following table sets forth certain
information concerning Proffitt's significant mergers and acquisitions:
<TABLE>
<CAPTION>
COMPANY ACQUIRED/MERGED DATE OF TRANSACTION NUMBER OF STORES
- ------------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
McRae's, Inc............................................................. March 31, 1994 28
Younkers, Inc............................................................ February 3, 1996 51
Parisian, Inc............................................................ October 11, 1996 38
G.R. Herberger's, Inc.................................................... February 1, 1997 39
</TABLE>
Proffitt's believes that its philosophy of retaining the local identity and
merchandising organization of merged and acquired companies makes Proffitt's an
attractive acquirer and merger partner for regional department store companies.
Proffitt's criteria in evaluating strategic opportunities include (i) strong
market presence; (ii) prime real estate locations; (iii) similar merchandising
strategies targeted toward middle to upper income consumers; (iv) geographic
proximity to Proffitt's core markets; (v) compatible corporate culture; and (vi)
favorable demographics in the regions served.
Over the last several years, CPS has pursued a three-pronged growth
strategy. The first component of this growth strategy, CPS's operating strategy,
has been a comprehensive approach designed to improve the sales productivity and
profit performance of CPS's existing stores. The second component, the pursuit
of existing market enhancement opportunities, has focused on adding single store
locations and freestanding furniture store locations within or contiguous to
CPS's existing trade areas to provide greater convenience to customers and to
enhance profitability by leveraging fixed costs. The third component has been
expansion into new trade areas with a view toward generating economies of scale,
and, in connection with this strategy, CPS has sought opportunities to acquire a
small to medium size department store chain in a geographically contiguous
market. Consistent with this strategy, in January 1995, CPS made an unsolicited
offer to acquire Younkers, then an independent department store chain based in
Des Moines, Iowa. Although CPS was ultimately unsuccessful in acquiring
Younkers, which was acquired by Proffitt's in a negotiated merger transaction in
February 1996, CPS has continued to explore opportunities for growth through
acquisitions or other strategic alliances. In connection with Proffitt's
acquisition of Younkers, CPS agreed among other things, to vote all of its
shares of the common stock of Younkers (the "Younkers Common Stock") in favor of
the transaction with Proffitt's. In a separate agreement, Younkers agreed to
sell to CPS two Younkers stores in Rockford, Illinois.
24
<PAGE>
Through his participation in the department store industry, R. Brad Martin,
Chairman of the Board and Chief Executive Officer of Proffitt's, has known Mr.
Bluestone, Chairman of the Board and Chief Executive Officer of CPS, for a
number of years. On August 29, 1997, Mr. Martin visited Mr. Bluestone in
Milwaukee. During that visit, Mr. Martin proposed the idea of a combination of
the two businesses. Several days later, Mr. Bluestone indicated to Mr. Martin
that CPS would only be interested in pursuing further discussions if Mr. Martin
would be willing to begin discussions in a range that would be acceptable to
CPS. Mr. Martin did not indicate that he would be willing to meet under those
conditions and the discussions were terminated. At the next regularly scheduled
meeting of the Board of Directors of CPS held on September 17, 1997, Mr.
Bluestone reported to the Board on his meeting with Mr. Martin and the nature of
the discussions which had been terminated.
On October 7, 1997, Mr. Martin spoke with Mr. Bluestone by telephone and
indicated that he would like to discuss a possible transaction on terms in a
range that might be acceptable to CPS. On October 13, 1997, Mr. Bluestone, Mr.
MacDonald, Mr. Martin and Douglas E. Coltharp, Executive Vice President and
Chief Financial Officer of Proffitt's, met to discuss a possible transaction. On
October 15, 1997, Proffitt's and CPS entered into confidentiality agreements and
thereafter the managements of CPS and Proffitt's met to conduct due diligence of
the business and prospects of the two companies. A draft merger agreement was
provided to CPS by counsel to Proffitt's on October 17, 1997. Further
discussions and negotiations continued over the succeeding days.
As a result of the foregoing discussions, Mr. Bluestone convened a
telephonic meeting of the Executive Committee of the Board of Directors of CPS
on October 21, 1997, the members of which are Mr. Bluestone and Mark Dickstein,
and the Executive Committee authorized management to continue negotiations with
Proffitt's. Negotiations and due diligence between the management and
representatives of CPS and Proffitt's continued over the course of the next week
through the time of the Board meetings on October 29, 1997.
At a special meeting of the CPS Board of Directors held on October 29, 1997,
the CPS Board received presentations concerning, and reviewed the terms of, the
Merger Agreement with members of CPS's management and its legal and financial
advisors. The CPS Board also received presentations from CPS's management, and
representatives of SBCWDR, concerning the business and prospects of CPS, the
potential combination of CPS and Proffitt's and the fairness of the Conversion
Number to the shareholders of CPS. At the meeting, the CPS Board unanimously
determined that the Merger, upon the terms and conditions set forth in the
Merger Agreement, is fair to, and in the best interest of, the shareholders of
CPS. Accordingly, the CPS Board has unanimously approved the Merger Agreement
and unanimously recommends that the holders of CPS Common Stock vote for
approval of the Merger Agreement at the CPS Special Meeting.
At a special meeting held on October 29, 1997, the Board of Directors of
Proffitt's by unanimous vote determined that the Merger is in furtherance of and
consistent with Proffitt's long-term business strategies and is in the best
interests of the holders of shares of Proffitt's Common Stock, approved the
Merger Agreement, the Merger and the other transactions contemplated thereby and
resolved to recommend that the holders of shares of Proffitt's Common Stock vote
in favor of the Merger Agreement, the Stock Issuance and the Charter Amendment.
Following the meetings of the Boards of Directors of Proffitt's and CPS,
Proffitt's and CPS executed the Merger Agreement. In addition, Proffitt's, CPS
and Mr. Bluestone and Proffitt's and Mr. MacDonald entered into arrangements
with respect to the employment of Messrs. Bluestone and MacDonald following the
Merger. Proffitt's and CPS announced the proposed Merger immediately after the
execution of the Merger Agreement.
25
<PAGE>
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER
The Proffitt's Board and the CPS Board believe that by combining two premier
regional department store companies, the Merger will produce an enterprise which
is better positioned for future growth. The companies' stores have a contiguous
geographical relationship, making the combination a complementary expansion of
each company's strong base. The Merger also will lower Proffitt's financial
leverage, providing additional flexibility for future growth. Proffitt's
debt-to-total capitalization ratio as of August 2, 1997 was 49%. On a pro forma
basis, as if the Merger had been consummated, Proffitt's debt-to-total
capitalization ratio as of August 2, 1997 would have been 42%. After giving
effect to (i) the October 6, 1997 conversion of the Debentures and (ii) the
planned refinancing of CPS's existing receivables and working capital
facilities, Proffitt's pro forma debt-to-total capitalization ratio would have
been 30% as of August 2, 1997. There can be no assurance that such refinancing
will be completed as planned.
Because the companies' operations are similarly organized, Proffitt's
expects to realize synergies as a result of the Merger of approximately $10
million, $20 million and $40 million in 1998, 1999 and 2000, respectively, as
described below.
RECOMMENDATIONS OF THE PROFFITT'S BOARD OF DIRECTORS; REASONS FOR THE
MERGER. At the special meeting of the Proffitt's Board of Directors, the Board
heard from Proffitt's management regarding the advisability of the Merger and
the synergies expected to result from the Merger. Proffitt's management analyzed
the financial performance of CPS and provided to the Proffitt's Board its
determination that the achievement of approximately $10 million in the fiscal
year ending January 30, 1999, $20 million in the fiscal year ending January 29,
2000, and $40 million in the fiscal year ending February 3, 2001, in cost
savings and synergies (compared to the cost structure of Proffitt's and CPS on
an independent basis for the fiscal year ending January 31, 1998) would be a
reasonable assumption. Those amounts assume merchandising improvements, credit
card revenue increases, interest savings and consolidation, reengineering and
best practices benefits in the approximate amounts shown on the following table:
ASSUMED COST SAVINGS AND SYNERGIES (AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
-------------------------------------------
JANUARY 30, JANUARY 29, FEBRUARY 3,
1999 2000 2001
------------- ------------- -------------
<S> <C> <C> <C>
Merchandising improvements................................................. $ 3.0 $ 6.0 $ 12.5
Credit card revenue increases.............................................. 2.5 6.0 9.0
Interest savings........................................................... 1.5 4.0 4.0
Consolidation, reengineering, and best-practices benefits.................. 3.0 4.0 14.5
----- ----- -----
$ 10.0 $ 20.0 $ 40.0
</TABLE>
The Proffitt's Board believes that the transaction will be modestly accretive to
the Proffitt's shareholders, even without realization of synergies, in the
fiscal year ending January 30, 1999.
The Proffitt's Board also received a presentation from representatives of
Salomon Brothers concerning the business and prospects of CPS and Proffitt's,
the potential combination of CPS and Proffitt's and the fairness, from a
financial point of view, of the Conversion Number to Proffitt's.
Proffitt's believes that it will realize operating cost savings and
synergies as a result of the Merger through (i) sharing of management personnel,
(ii) shared business strategies, (iii) established vendor relationships, (iv)
development of private label merchandise, (v) enhanced buying power of the
combined companies, (vi) enhancements to Proffitt's capital structure and lower
borrowing costs due to an improved credit profile, (vii) consolidation and
reengineering of certain administrative functions on a corporate or regional
basis, and (viii) adoption of "best practices." "Best practices" involves the
systematic evaluation of key operating and administrative procedures of each of
the combining companies, and implementation of
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the more efficient methods in all operating divisions of the combined company,
to the extent practicable. Examples include shared technology and systems and
enhanced logistics management at the distribution facilities. The anticipated
cost savings and synergies may not be realized due to economic and competitive
uncertainties which are largely beyond Proffitt's control.
In reaching its conclusions with respect to the Merger, the Proffitt's Board
of Directors considered, with the assistance of management and its legal and
financial advisors, the following material factors:
(i) information concerning the financial performance and condition,
business operations, assets, liabilities and prospects of Proffitt's and CPS
and their respective projected future values and prospects as separate
entities and on a combined basis;
(ii) the possible strategic growth opportunities that might be available
to Proffitt's absent the Merger, including possible future acquisitions of
specialty retail department stores;
(iii) the strategic fit between Proffitt's and CPS and the complementary
nature of their respective businesses;
(iv) operating synergies and cost savings the combined company expects
to achieve through best practices and economies of scale;
(v) current industry, economic and market conditions, including the
consolidation in the retail department store industry;
(vi) the structure of the transaction, including the expected accounting
treatment of the Merger as a pooling of interests (thereby avoiding the
reduction in earnings due to the amortization of goodwill which would result
under purchase accounting);
(vii) the terms of the Merger Agreement, including the amount and the
form of consideration, the parties' representations, warranties, covenants
and agreements, and the conditions to their respective obligations set forth
in the Merger Agreement;
(viii) the analyses and recommendation of the transaction by Proffitt's
management; and
(ix) the financial analyses of its financial advisor, Salomon Brothers,
and the opinion of Salomon Brothers as to the fairness to Proffitt's of the
Conversion Number from a financial point of view (see "--Opinions of
Financial Advisors--Salomon Brothers Opinion to the Proffitt's Board of
Directors").
The foregoing discussion of the information and factors considered and given
weight by the Proffitt's Board of Directors is not intended to be exhaustive. In
addition, no assurance can be given that the operating synergies and cost
savings described in (iv) above will be achieved. In view of the variety of
factors considered in connection with its evaluation of the Merger, the
Proffitt's Board of Directors did not find it practicable to and did not
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Proffitt's
Board of Directors may have given different weights to different factors.
THE PROFFITT'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
PROFFITT'S COMMON STOCK VOTE FOR APPROVAL OF THE MERGER AGREEMENT, THE STOCK
ISSUANCE AND THE CHARTER AMENDMENT.
RECOMMENDATION OF THE CPS BOARD OF DIRECTORS; REASONS FOR THE MERGER. At a
special meeting of the CPS Board of Directors held on October 29, 1997, the CPS
Board received presentations concerning, and reviewed the terms of, the Merger
Agreement with members of CPS's management and its legal and financial advisors.
The CPS Board also received presentations from CPS's management, and
representatives of SBCWDR, concerning the business and prospects of CPS, the
potential combination of CPS and Proffitt's and the fairness, from a financial
point of view, of the proposed Conversion Number to the shareholders of CPS. At
the meeting, the CPS Board unanimously determined that the Merger, upon the
terms and conditions set forth in the Merger Agreement, is fair to, and in the
best interests of, the
27
<PAGE>
shareholders of CPS. Accordingly, the CPS Board has unanimously approved the
Merger Agreement and unanimously recommends that the holders of CPS Common Stock
vote for approval of the Merger Agreement at the CPS Special Meeting.
In reaching their conclusions, the members of the CPS Board considered,
among other things, (1) information concerning the financial performance and
condition, business operations, capital levels, asset quality and prospects of
each company, and the projected future financial performance of CPS as a
separate entity and as combined with Proffitt's; (2) current industry, economic
and market conditions and trends; (3) the importance of scale and scope to a
regional department store company's ability to compete effectively; (4) the
tax-free structure of the Merger; (5) the possibility that achieving cost
savings, operating efficiencies and synergies as a result of consummating the
Merger at this time might not be available to the same degree to either company
on its own; (6) the terms of the Merger Agreement including the ability of each
of CPS and Proffitt's to consider alternative business combination proposals and
the termination fees payable by either company in certain circumstances (see
"THE MERGER AGREEMENT--Conditions to the Merger" and "--Termination"); (7) the
current and historical market prices of the common stock of each company and the
premium to the market price of the CPS Common Stock represented by the Merger
consideration; (8) the ability of CPS to terminate the transaction without the
payment of any fee if the closing price of Proffitt's Common Stock is less than
$22.00 on each trading day in any period of fifteen consecutive trading days;
(9) the opinion of SBCWDR as to the fairness, from a financial point of view, of
the Conversion Number (which was determined through arm's-length negotiations
between the parties) to the shareholders of CPS; (10) CPS's and Proffitt's
respective businesses, assets, product mixes, liabilities, managements,
strategic objectives, competitive positions and prospects; (11) the challenges
of combining the businesses of CPS and Proffitt's; (12) the Merger's structure
as a pooling of interests transaction in accordance with generally accepted
accounting principles; and (13) the impact of the Merger on the customers and
employees of CPS. In reaching its decision to approve the Merger Agreement and
to recommend the Merger to the shareholders of CPS for approval, the CPS Board
did not assign any relative or specific weights to the various factors
considered, and individual directors may have given differing weights to
different factors.
THE CPS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
OUTSTANDING SHARES OF CPS COMMON STOCK VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
SALOMON BROTHERS OPINION TO THE PROFFITT'S BOARD OF DIRECTORS
At the meeting of the Board of Directors of Proffitt's held on October 29,
1997, Salomon Brothers delivered its oral opinion, which opinion was
subsequently confirmed in a written opinion dated as of October 29, 1997 (the
"Salomon Brothers Opinion"), to the effect that, as of such date and subject to
the assumptions made, matters considered and limits of the review undertaken, as
set forth in such opinion, the Conversion Number was fair to Proffitt's from a
financial point of view.
PROFFITT'S SHAREHOLDERS ARE URGED TO READ THE SALOMON BROTHERS OPINION IN
ITS ENTIRETY FOR INFORMATION WITH RESPECT TO THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW MADE BY SALOMON
BROTHERS IN RENDERING THE SALOMON BROTHERS OPINION. REFERENCES TO THE SALOMON
BROTHERS OPINION HEREIN AND THE SUMMARY OF THE SALOMON BROTHERS OPINION SET
FORTH BELOW ARE QUALIFIED BY REFERENCE TO THE FULL TEXT OF THE SALOMON BROTHERS
OPINION, WHICH IS ATTACHED HERETO AS APPENDIX II. THE SALOMON BROTHERS OPINION
DOES NOT CONSTITUTE A RECOMMENDATION CONCERNING (A) HOW HOLDERS OF PROFFITT'S
COMMON STOCK SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT, THE MERGER, THE
STOCK ISSUANCE OR THE CHARTER AMENDMENT OR (B) HOW HOLDERS OF CPS COMMON STOCK
SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT AND THE MERGER.
In connection with rendering the Salomon Brothers Opinion, Salomon Brothers
reviewed certain publicly available information concerning Proffitt's and CPS
and certain other financial information
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<PAGE>
concerning Proffitt's and CPS, including financial forecasts that were provided
to Salomon Brothers by Proffitt's and CPS, respectively. Salomon Brothers
discussed the past and current business operations, financial condition and
prospects of Proffitt's and CPS with certain officers and employees of
Proffitt's and representatives of CPS, respectively. Salomon Brothers also
considered such other information, financial studies, analyses, investigations
and financial, economic and market criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon Brothers
assumed and relied upon the accuracy and completeness of the information
reviewed by it for purposes of the Salomon Brothers Opinion and Salomon Brothers
did not assume any responsibility for independent verification of such
information. With respect to the financial forecasts (including the synergy
estimates) prepared by Proffitt's and CPS, Salomon Brothers assumed that such
forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of Proffitt's
and CPS, and Salomon Brothers expressed no opinion with respect to such
forecasts (including the synergy estimates) or the assumptions on which they are
based. Salomon Brothers did not assume any responsibility for any independent
evaluation or appraisal of any of the assets (including properties and
facilities) or liabilities of Proffitt's or CPS. Salomon Brothers assumed that
the Merger would be accounted for as a pooling of interests in accordance with
generally accepted accounting principles as described in Accounting Principles
Board Opinion Number 16.
The Salomon Brothers Opinion is based upon conditions as they existed and
could be evaluated on the date of such opinion. The Salomon Brothers Opinion
does not imply any conclusion as to the likely trading range for Proffitt's
Common Stock following the consummation of the Merger, which may vary depending
upon, among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities. The Salomon Brothers Opinion does not address
Proffitt's underlying business decision to effect the Merger, and is directed
only to the fairness, from a financial point of view, to Proffitt's of the
Conversion Number.
The following is a summary of the report (the "Salomon Report") presented on
October 29, 1997 by Salomon Brothers to the Proffitt's Board of Directors in
connection with the rendering of its opinion:
STOCK PRICE PERFORMANCE. Salomon Brothers reviewed the share price
performance of Proffitt's Common Stock and CPS Common Stock for the period from
October 24, 1995 through October 24, 1997, as compared to the performance of an
index (the "Selected Department Store Index") comprised of Dayton Hudson
Corporation ("Dayton Hudson"), Dillard Department Stores, Inc., Federated
Department Stores, Inc. ("Federated"), JC Penney Company, Inc. ("JC Penney"),
The May Department Stores Company ("May") and Mercantile Stores Company, Inc.
(collectively, the "Selected Department Store Companies"). Salomon Brothers also
reviewed the trading price and volume history of Proffitt's Common Stock and CPS
Common Stock over the same two year period.
COMPARABLE COMPANY ANALYSIS. Salomon Brothers compared the operating
results of Proffitt's and CPS with that of the Selected Department Store
Companies. Salomon Brothers examined: fiscal year end ("FYE") February 1, 1997
revenue per gross selling square foot; FYE February 1, 1997 comparable store
sales growth; second quarter 1997 comparable store sales growth; earnings before
interest, taxes, depreciation and amortization ("EBITDA") as a percentage of
revenues for the latest 12 months ("LTM") (collectively the "LTM EBITDA
margin"); merchandise LTM EBITDA margin (excluding gross finance charge income);
and LTM capital expenditures as a percentage of LTM revenues. This analysis
showed: FYE February 1, 1997 revenue per gross selling square foot ranging from
$159 to $223 for the Selected Department Store Companies (median of $180), as
compared to $178 for Proffitt's and $137 for CPS; FYE February 1, 1997
comparable store sales growth rates ranging from 2.0% to 4.3% for the Selected
Department Store Companies (median of 3.1%), as compared to 3.0% for Proffitt's
and 2.2% for CPS; second quarter 1997 comparable store sales growth rates
ranging from 2.1% to 5.0% for the Selected Department Store Companies (median of
4.6%), as compared to 6.0% for Proffitt's and 5.5% for CPS; LTM EBITDA margins
ranging from 7.9% to 16.1% for the Selected Department Store Companies
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<PAGE>
(median of 10.7%), as compared to 9.7% for Proffitt's and 8.9% for CPS;
merchandise LTM EBITDA margins (excluding gross finance charge income) ranging
from 7.1% to 13.7% for the Selected Department Store Companies (median of 8.1%),
as compared to 7.1% for Proffitt's and 4.8% for CPS; and LTM capital
expenditures as a percentage of LTM revenues ranging from 2.8% to 7.5% for the
Selected Department Store Companies (median of 4.8%), as compared to 4.1% for
Proffitt's and 4.7% for CPS.
Salomon Brothers also compared the financial and market performance of
Proffitt's and CPS with that of the Selected Department Store Companies, in
particular: the projected five year growth in earnings per share ("EPS") based
on I/B/E/S estimates; the ratio ("P/E Ratio") of current stock prices per share
to estimated EPS for the fiscal year ending January 30, 1999 ("FY 1998") and the
fiscal year ending January 29, 2000 ("FY 1999"); the multiple of market
capitalization plus total debt, preferred stock and minority interests less cash
(collectively, "Firm Value") to LTM revenues; and the ratio of Firm Value to
EBITDA. This analysis showed: projected five year EPS growth rates ranging from
8.0% to 15% for the Selected Department Store Companies (a median of 12.0%), as
compared to 20.0% for Proffitt's and 10.0% for CPS; FY 1998 P/E Ratios ranging
from 15.2 to 19.3 for the Selected Department Store Companies (a median of
16.6), as compared to 19.1 for Proffitt's and 14.2 for CPS; FY 1999 P/E Ratios
ranging from 13.6 to 16.9 for the Selected Department Store Companies (a median
of 14.9), as compared to 15.9 for Proffitt's and 13.1 for CPS; Firm Value as a
percentage of LTM revenues ranging from 73% to 141% for the Selected Department
Store Companies (a median of 83%), as compared to 113% for Proffitt's and 64%
for CPS; and ratios of Firm Value to LTM EBITDA ranging from 7.4 to 8.8 for the
Selected Department Store Companies (a median of 8.4), as compared to 11.7 for
Proffitt's and 7.3 for CPS. The analysis above suggested ranges of public
trading prices for CPS equal to: 7.0x to 8.5x multiples of LTM EBITDA or $35.33
to $44.26 per share of CPS Common Stock; 14.0x to 16.0x multiples of FY 1998 EPS
or $36.40 to $41.60 per share of CPS Common Stock; and 13.0x to 15.0x multiples
of FY 1999 EPS or $36.66 to $42.30 per share of CPS Common Stock. Salomon
Brothers noted that these prices did not reflect a change of control premium.
The analysis above also suggested ranges of public trading prices for Proffitt's
equal to: 19.0x to 22.0x FY 1998 EPS or $53.96 to $62.48 per share of Proffitt's
Common Stock before giving effect to Proffitt's two-for-one stock split
("pre-split") and $26.98 to $31.24 after giving effect to such stock split
("post-split") and 16.0x to 19.0x FY 1999 EPS or $54.56 to $64.79 per share of
Proffitt's Common Stock pre-split ($27.28 to $32.40 post-split).
PRECEDENT TRANSACTION REVIEW. Salomon Brothers also reviewed publicly
available information regarding eleven recent department store industry
acquisitions: Proffitt's acquisition of Herberger's (1996); Proffitt's
acquisition of Parisian (1996); JC Penney's terminated agreement to acquire
Dayton Hudson (1996); May's acquisition of Strawbridge and Clothier
("Strawbridge") (1996); Proffitt's acquisition of Younkers (1995); Federated's
acquisition of Broadway Stores ("Broadway") (1995); the combined JC Penney and
May acquisition of Woodward & Lothrop (1995); CPS's offer to acquire Younkers
(1995); Federated's acquisition of R.H. Macy & Co. Inc. (1994); Federated's
acquisition of Joseph Horne Co. (1994); and Proffitt's acquisition of McRae's,
Inc. (1994). Salomon Brothers focused on the 1996 transactions which suggested a
reference range of 8.0x-9.0x LTM EBITDA, which results in implied equity values
per share of CPS Common Stock of $41.28 to $47.24.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow ("DCF")
methodology, Salomon Brothers calculated the present value of the projected
future unlevered free cash flows for each of CPS and Proffitt's (without giving
effect to the Merger or any expected operating or other efficiencies). The DCF
analysis of CPS was based on two plans, one prepared by CPS management and one
prepared by Proffitt's management (the Proffitt's prepared plan included two
additional years of forecasts and excluded six new stores in the CPS prepared
plan). The Proffitt's DCF analysis was based on the plan prepared by Proffitt's
management. For each entity and under each case, Salomon Brothers aggregated (x)
the present value of the free cash flows over the applicable forecast period
with (y) the present value of the range of terminal values described below. The
range of terminal values were generally calculated by applying multiples
(ranging from 7.0x-9.0x for CPS and 8.0x-10.0x for Proffitt's) to each entity's
EBITDA for the last year of
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the forecast period. This range of terminal values represented, for each of CPS
and Proffitt's, their respective value beyond the applicable forecast period. As
part of the DCF analysis, Salomon Brothers used discount rates ranging from
11.0% to 12.0% for each of CPS and Proffitt's. The CPS DCF analysis resulted in
values ranging from $40.00 to $48.00 per share of CPS Common Stock based on the
CPS prepared plan and $37.00 to $45.00 based on the Proffitt's prepared plan.
The DCF analysis of Proffitt's resulted in values ranging from $54.00 to $65.00
per share of Proffitt's Common Stock pre-split ($27.00 to $32.50 post-split).
SYNERGY VALUATION. Salomon Brothers reviewed synergy estimates provided by
Proffitt's management and valued these estimates using a range of discount rates
(11.0% to 12.0%) and a range of terminal multiples of EBITDA (7.0x-9.0x). Based
on this analysis Salomon Brothers arrived at synergy values equal to $14.00 to
$16.00 per share of CPS Common Stock.
IMPLIED EXCHANGE RATIO. Based on the analysis above, Salomon Brothers
arrived at reference ranges for CPS and Proffitt's. Salomon Brothers arrived at
a CPS reference range of $40.00 to $45.00 per share of CPS Common Stock on a
stand-alone basis. Salomon Brothers then added 50% of Proffitt's share of the
synergy value (67% to 69% based on the pro forma ownership of Proffitt's after
the transaction), which equaled $4.50 to $5.50 per share of CPS Common Stock, to
arrive at a reference range of $44.50 to $50.50 per share of CPS Common Stock.
Salomon Brothers arrived at a pre-split Proffitt's reference range of $54.00 to
$65.00 per share of Proffitt's Common Stock ($27.00 to $32.50 post-split) on a
stand-alone basis. Based on these reference ranges Salomon Brothers arrived at a
range of implied pre-split exchange ratios equal to 0.68 to 0.94 (1.36 to 1.88
post-split). Salomon Brothers noted that the high, low and average pre-split
exchange ratio over the last two years was 0.92, 0.60 and 0.72, respectively
(1.84, 1.20 and 1.44 post-split).
In addition, Salomon Brothers reviewed a contribution analysis and the pro
forma consequences of the Merger.
CONTRIBUTION ANALYSIS. Salomon Brothers reviewed the relative revenue,
EBITDA and net income contribution, taking into account certain leverage
adjustments, from each of CPS and Proffitt's. The analysis was based on
historical and projected results between and including the LTM period ending
August 2, 1997 and the FYE January 31, 2002 period (the CPS and Proffitt's
results were based on Proffitt's projections for each business). The CPS
contribution was between 31% and 38% in each case (adjusted for leverage and
synergies) which was consistent with the CPS shareholders' pro forma ownership
of Proffitt's (31%-33%).
PRO FORMA MERGER CONSEQUENCES. Salomon Brothers analyzed certain pro forma
effects on Proffitt's resulting from the Merger for the fiscal years ending
January 31, 1999 through 2002. This analysis, based upon the Proffitt's prepared
plans and the synergy estimates provided by Proffitt's management, showed
accretion to the shareholders of Proffitt's in EPS (including the synergies) for
each of the fiscal years ending January 31, 1999 through 2002. Salomon Brothers
noted that Proffitt's EBITDA to interest expense, debt to EBITDA and debt to
total capitalization credit ratios improved as a result of the transaction (due
to the large equity issuance and lower leverage levels at CPS).
The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon Brothers believes that its analysis and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in the Salomon Brothers Opinion and the
Salomon Report. The ranges of valuations resulting from any particular analysis
described above should not be taken to be the view of Salomon Brothers of the
actual value of Proffitt's or CPS.
In performing its analyses, Salomon Brothers made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions and other matters, many of
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which are beyond the control of Proffitt's or CPS. The analyses which Salomon
Brothers performed are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than those
suggested by such analyses. Such analyses were prepared solely as part of
Salomon Brothers' analysis of the fairness, from a financial point of view, of
the Conversion Number to Proffitt's. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at the present time or any time in
the future.
In the ordinary course of its business, Salomon Brothers actively trades the
equity securities of Proffitt's and CPS for its own account and the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. Pursuant to an engagement letter, Proffitt's agreed to pay
Salomon Brothers for its services in connection with the Merger an advisory fee
equal to $3,000,000 due upon consummation of the Merger. Proffitt's also agreed,
under certain circumstances, to reimburse Salomon Brothers for certain
out-of-pocket expenses incurred by Salomon Brothers in connection with the
Merger, and agreed to indemnify Salomon Brothers and certain related persons
against certain liabilities, including liabilities under the federal securities
laws, relating to or arising out of its engagement.
Salomon Brothers is an internationally recognized investment banking firm
that provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon Brothers regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and other
purposes. Proffitt's retained Salomon Brothers because of its reputation,
expertise in the valuation of companies and substantial experience in
transactions such as the Merger.
SBCWDR OPINION TO THE CPS BOARD OF DIRECTORS
On October 29, 1997, SBCWDR delivered its oral opinion to the CPS Board,
which opinion was subsequently confirmed in a written opinion dated October 29,
1997 that, as of the date of such opinion, the Conversion Number was fair to the
holders of CPS Common Stock from a financial point of view.
The full text of the written opinion of SBCWDR, dated October 29, 1997,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as Appendix III to
this Joint Proxy Statement/Prospectus and is incorporated herein by reference.
CPS shareholders should read such opinion in its entirety. SBCWDR's opinion is
directed only to the Conversion Number and does not constitute a recommendation
to any shareholder of CPS as to how such shareholder should vote at the CPS
Special Meeting. The summary of the opinion of SBCWDR set forth in this Joint
Proxy Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
In arriving at its opinion, SBCWDR has, among other things: (i) reviewed
certain publicly available business and financial information relating to CPS
and Proffitt's, (ii) reviewed certain management estimates for fiscal 1997 and
financial projections provided by the managements of CPS and Proffitt's, (iii)
reviewed certain publicly available financial forecasts of analysts relating to
CPS and Proffitt's, (iv) reviewed certain financial information and other data
provided to SBCWDR by CPS that is not publicly available relating to the
business and prospects of the Company, (v) reviewed certain financial
information and other data provided to SBCWDR by Proffitt's that is not publicly
available relating to the business and prospects of Proffitt's, (vi) conducted
discussions with members of the senior management of CPS and Proffitt's with
respect to the operations, financial condition, history and prospects of each
company, (vii) reviewed publicly available financial and stock market data with
respect to certain other retail companies SBCWDR believed to be generally
comparable to CPS and Proffitt's, (viii) reviewed the historical market prices
of the CPS Common Stock and the Proffitt's Common Stock, (ix) compared the
financial terms of the Merger with the financial terms of certain other
transactions which SBCWDR believed to be generally comparable to the Merger, (x)
reviewed the Merger Agreement, and (xi)
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conducted such other financial studies, analyses, and investigations, and
considered such other information as it deemed appropriate.
In conducting its review and arriving at its opinion, SBCWDR relied, without
independent investigation, upon the accuracy and completeness of all financial
and other information provided to it or publicly available, and has not assumed
any responsibility in any respect for the accuracy, completeness or
reasonableness of, or any obligation to verify, the same or to conduct any
appraisal of assets. Without limiting the generality of the foregoing, SBCWDR
relied with the consent of the CPS Board upon the CPS management as to the
reasonableness and achievability of the financial and operating forecasts and
assumed that such forecasts and projections reflected the best currently
available estimates and judgments of management and that such forecasts and
projections will be realized in the amounts and in the time periods currently
estimated by management. SBCWDR's opinion necessarily is based upon economic,
market and other conditions as they existed and could be evaluated on the date
thereof and the information made available to SBCWDR through the date thereof.
SBCWDR has assumed that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles.
The following paragraphs summarize the material analyses performed by SBCWDR
in arriving at its opinion.
ACQUISITION SUMMARY. SBCWDR noted that with a Conversion Number of 1.80
shares of Proffitt's Common Stock per share of CPS Common Stock (or $48.15 per
share of CPS Common Stock) as of October 28, 1997 the Merger would provide for a
total implied equity value of $801.4 million. With the assumption of $124.7
million in net debt, the Merger would provide for an implied value for the
assets of $926.1 million, and with the assumption of the capitalized value of
outstanding operating lease obligations of $115.8 million, the Merger would
provide for an implied value for the assets including capitalized operating
leases of $1,041.9 million. SBCWDR summarized certain acquisition multiples by
observing that the implied equity value as a multiple of CPS's net income was
20.7 for the fiscal year ended February 1, 1997 (referred to as fiscal year
1996), 19.8 for the 12 months ended August 2, 1997, 19.7 for the estimated
fiscal year ending January 31, 1998 (referred to as fiscal year 1997), and 19.2
for the estimated fiscal year ending January 30, 1999 (referred to as fiscal
year 1998) based upon management estimates. The implied equity value as a
multiple of CPS's book value was 2.2 for the fiscal year 1996, 2.2 for the 12
months ended August 2, 1997, 2.0 for the estimated fiscal year 1997 and 1.9 for
the estimated fiscal year 1998 based upon management estimates. SBCWDR also
noted that the implied value for the assets as a multiple of CPS's net sales was
0.84 for the fiscal year 1996, 0.81 for the 12 months ended August 2, 1997, 0.79
for the estimated fiscal year 1997 and 0.75 for the estimated fiscal year 1998
based upon management estimates. The implied value for assets as a multiple of
CPS's EBITDA was 9.7 for the fiscal year 1996, 9.1 for the 12 months ended
August 2, 1997, 8.8 for the estimated fiscal year 1997 and 8.0 for the estimated
fiscal year 1998 based upon management estimates. The implied value for the
assets as a multiple of earnings before interest and taxes ("EBIT") was 11.6 for
the fiscal year 1996, 11.0 for the 12 months ended August 2, 1997, 10.9 for the
estimated fiscal year 1997 and 10.1 for the estimated fiscal year 1998 based
upon management estimates. SBCWDR also observed that the implied value for the
assets including capitalized operating leases as a multiple of CPS's net sales
was 0.94 for the fiscal year 1996, 0.91 for the 12 months ended August 2, 1997,
0.89 for the estimated fiscal year 1997 and 0.85 for the estimated fiscal year
1998. The offer for assets including capitalized operating leases as a multiple
of earnings before income taxes, depreciation, amortization and rent ("EBITDAR")
was 9.5 for the fiscal year 1996, 9.0 for the 12 months ended August 2, 1997,
8.7 for the estimated fiscal year 1997 and 8.0 for the estimated fiscal year
1998 based upon management estimates.
PRO FORMA ANALYSIS. SBCWDR prepared pro forma analyses of the financial
impact on Proffitt's of the Merger. A contribution analysis based on
management's estimated fiscal 1997 financial performance showed that on a pro
forma basis for the Merger CPS would contribute 32.9% to the combined company's
net sales, 29.5% to the combined company's EBITDA, 31.9% to the combined
company's net income, and would receive 32.9% of the share ownership based upon
shares outstanding. Using earnings estimates for
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CPS and Proffitt's prepared by their respective managements and synergies
estimates prepared by Proffitt's management, the analysis showed that the
proposed transaction would be neither accretive nor dilutive to Proffitt's
stockholders in fiscal year 1998 and accretive in the fiscal year ending January
29, 2000 (referred to as fiscal year 1999).
HISTORICAL CPS STOCK TRADING ANALYSIS. SBCWDR examined the history of the
trading prices for the shares of CPS Common Stock in relation to the Selected
Companies (as defined herein) and the S&P 400 index for the past four years.
SBCWDR noted that the CPS Common Stock reached a low price of $11.00 per share
on November 5, 1993 and a high price of $39.94 on September 19, 1997 based on
weekly closing stock prices.
COMPARABLE COMPANY FINANCIAL ANALYSIS. SBCWDR reviewed and compared certain
financial information relating to CPS to corresponding financial information and
ratios for certain retail companies consisting of The Bon-Ton Stores, Inc.,
Dayton-Hudson Corporation, Dillard Department Stores, Inc., Federated, Jacobson
Stores Inc., Kohl's Corporation, May, Mercantile Stores Company, Inc., The
Neiman Marcus Group, Inc., Nordstrom, Inc., Proffitt's and Saks Holdings, Inc.
(the "Selected Companies"). The Selected Companies were chosen because they are
publicly traded companies with operations that for purposes of analysis SBCWDR
considered generally comparable to CPS. No company in the Selected Companies is
identical to CPS. Accordingly, any analysis of the results of the foregoing is
not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors affecting the companies being compared. SBCWDR calculated and compared
various financial multiples and ratios for CPS and each of the Selected
Companies based on the most recent publicly available information. Among other
things, the analysis showed that CPS's three-year compounded annual growth rates
in net sales, EBITDAR, EBIT and net income, its EBITDAR margin for the 12 months
ended August 2, 1997 and its three-year average EBITDAR margin, and analysts'
estimates of its projected five-year earnings growth were below the average of
the Selected Companies.
COMPARABLE COMPANY TRADING ANALYSIS. SBCWDR analyzed and compared certain
equity market multiples relating to CPS to corresponding equity market multiples
for the Selected Companies. SBCWDR calculated various financial multiples for
CPS and each of the Selected Companies based on the most recent publicly
available information. This analysis showed that based on closing stock prices
as of October 28, 1997, the CPS Common Stock traded below the average of the
Selected Companies. On an equity value basis, CPS traded at 15.3x latest 12
months (LTM) earnings per share versus an average of 22.5x; at 14.4x estimated
fiscal year 1997 earnings per share versus an average of 20.2x; at 13.3x
estimated fiscal year 1998 earnings per share versus an average of 16.4x; and at
1.7x latest book value versus an average of 2.9x, in each case based upon
management estimates. On the basis of enterprise value including capitalized
operating leases (market capitalization plus total debt less cash and
equivalents plus capitalized operating lease obligations), CPS traded at 0.73x
LTM net sales versus an average of 1.06x and at 7.2x LTM EBITDAR versus an
average of 10.1x. On an enterprise value excluding capitalized operating leases
basis, CPS traded at 0.63x LTM net sales versus an average of 0.94x; at 7.1x LTM
EBITDA versus an average of 10.9x and at 8.5x LTM EBIT versus an average of
13.8x.
Based upon the Proffitt's closing stock price of $26.75 as of October 28,
1997 and a Conversion Number of 1.8, the implied equity value of $48.15 per
share yielded multiples that were at or somewhat below the average of the
Selected Companies. On an implied equity value basis, CPS was valued at 19.7x
LTM earnings per share, at 18.5x estimated fiscal year 1997 earnings per share,
at 17.1x estimated fiscal year 1998 earnings per share (based upon management
estimates) and at 2.1x latest book value. On an implied value for assets basis
including capitalized operating leases (implied equity value plus total debt
less cash and equivalents plus capitalized operating lease obligations), CPS was
valued at 0.88x LTM net sales and at 8.6x LTM EBITDAR. On an implied value for
assets basis excluding capitalized operating leases, CPS was valued at 0.77x LTM
net sales, at 8.7x LTM EBITDA and at 10.5x LTM EBIT.
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COMPARABLE COMPANY ACQUISITIONS ANALYSIS. SBCWDR analyzed seven other
acquisition transactions in the retail sector over the past four years including
Federated's acquisition of R.H. Macy & Co., Proffitt's acquisition of McRae's,
Federated's acquisition of Broadway, Proffitt's merger with Younkers, May's
acquisition of Strawbridge, Proffitt's acquisition of Parisian, and Proffitt's
merger with Herberger's (the "Selected Transactions"). Such analysis, based on
publicly available information for the 12 months preceding the announcement of
the transaction, indicated that for the Selected Transactions the median of the
implied value for assets including capitalized operating leases was 0.85x LTM
net sales and 8.2x LTM EBITDAR versus multiples for CPS in the Merger of 0.91x
and 9.0x respectively. The implied value for assets excluding capitalized
operating leases was 0.58x LTM net sales, 1.2x net assets, 8.9x LTM EBITDA and
10.3x LTM EBIT versus multiples for CPS in the Merger of 0.81x, 1.9x, 9.1x and
11.0x respectively. The implied equity value was 18.4x LTM net income and 1.7x
latest book value versus multiples for CPS in the Merger of 19.8x and 2.2x
respectively.
DISCOUNTED CASH FLOW ANALYSIS. SBCWDR performed discounted cash flow
analyses to determine the present value per share of CPS Common Stock utilizing
management projections through 2000 and extrapolations by SBCWDR for 2000
through 2002. For purposes of the analysis, SBCWDR utilized discount rates
ranging from 10.5% to 11.5% and terminal value EBITDA multiples ranging from
7.0x to 10.0x. The analysis indicated a range of values for the CPS Common Stock
from $28.12 to $47.57.
LEVERAGED BUYOUT ANALYSIS. SBCWDR analyzed the possible equity return in a
hypothetical leveraged buyout of CPS at $50 per share utilizing the CPS
management projections noted above. Under the criteria normally used to finance
a leveraged buyout, the five-year equity returns at 7.0x to 9.0x 2002 EBITDA
would, in the judgment of SBCWDR, be insufficient to attract such leveraged
buyout investors.
HISTORICAL STOCK TRADING ANALYSIS OF PROFFITT'S. SBCWDR examined the
history of the trading prices for the shares of Proffitt's Common Stock in
relation to the Selected Companies and the S&P 400 index for the past four
years. SBCWDR noted that the Proffitt's Common Stock reached a low price of
$16.13 on May 20, 1994 and a high price of $60.88 on September 26, 1997 based on
weekly closing stock prices (on a pre-split basis).
COMPARABLE COMPANY FINANCIAL ANALYSIS OF PROFFITT'S. SBCWDR reviewed and
compared certain financial information relating to Proffitt's to corresponding
financial information and ratios for the Selected Companies. For purposes of
these analyses, SBCWDR excluded Proffitt's from the Selected Companies and
included CPS. SBCWDR calculated and compared various financial multiples and
ratios for Proffitt's and each of the Selected Companies based on the most
recent publicly available information. Among other things, the analysis showed
that Proffitt's three-year compounded annual growth rates in net sales, EBITDAR,
EBIT and net income, its EBITDAR margin for the 12 months ended August 2, 1997
and its three-year average EBITDAR margin, and analysts' estimates of its
projected five-year earnings growth were above the average of the Selected
Companies.
COMPARABLE COMPANY TRADING ANALYSIS OF PROFFITT'S. SBCWDR analyzed and
compared certain equity market multiples relating to Proffitt's to corresponding
equity market multiples for the Selected Companies. SBCWDR calculated various
financial multiples for Proffitt's and each of the Selected Companies based on
the most recent publicly available information. This analysis showed that based
on closing stock prices as of October 28, 1997, the Proffitt's Common Stock
generally traded above the average of the Selected Companies. On an equity value
basis, Proffitt's traded at 24.7x LTM EPS versus an average of 21.6x; at 18.8x
estimated fiscal year 1997 EPS versus an average of 19.8x; at 15.7x estimated
fiscal year 1998 EPS versus an average of 16.2x; and at 2.5x latest book value
versus an average of 2.8x, in each case based upon management estimates. On the
basis of enterprise value including capitalized operating leases, Proffitt's
traded at 1.17x LTM net sales versus an average of 1.02x and at 10.6x LTM
EBITDAR versus an average of 9.8x. On the basis of enterprise value excluding
capitalized operating leases, Proffitt's traded at 0.94x LTM net sales versus an
average of 0.92x; at 11.5x LTM EBITDA versus an average of 10.6x; and at 15.1x
LTM EBIT versus an average of 13.2x.
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SBCWDR believes that its analyses must be considered as a whole and that
selecting portions of its analyses and other factors considered by it, without
considering all factors and analyses, could create a misleading view of the
processes underlying its opinion. SBCWDR did not quantify the effect of each
factor upon its opinion. SBCWDR made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond CPS's, Proffitt's and SBCWDR's control. Any
estimates contained in SBCWDR's analyses are not necessarily indicative of
actual values, which may be significantly more or less favorable than as set
forth therein. Estimates of the financial value of companies do not purport to
be appraisals or necessarily reflect the prices at which companies actually may
be sold. Because such estimates inherently are subject to uncertainty, neither
CPS, Profitt's, SBCWDR nor any other person assumes responsibility for their
accuracy. In rendering its opinion, SBCWDR expressed no view as to the range of
values at which the Proffitt's Common Stock may trade following the consummation
of the Merger, nor did SBCWDR make any recommendations to the CPS shareholders
with respect to how such holders should vote on the Merger, or the advisability
of disposing of or retaining such Proffitt's Common Stock following the Merger.
SBCWDR is an internationally recognized investment banking firm which, as a
part of its investment banking business, regularly is engaged in the evaluation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes. In the ordinary course of its business, SBCWDR has traded
CPS Common Stock for its own account and for the accounts of customers and has
traded Proffitt's Common Stock for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Pursuant to an engagement letter, dated October 17, 1997, between CPS and
SBCWDR, upon delivery of the fairness opinion CPS agreed to pay SBCWDR a fee of
$900,000 for services rendered in connection with the preparation of its
fairness opinion. CPS has also agreed to reimburse SBCWDR for the expenses
reasonably incurred by it in connection with its engagement (including
reasonable counsel fees) and to indemnify SBCWDR and its officers, directors,
employees, agents and controlling persons against certain expenses, losses,
claims, damages or liabilities in connection with its services, including those
arising under the federal securities laws.
MERGER CONSIDERATION
Subject to certain provisions described herein with respect to certain
shares of CPS Common Stock owned by Proffitt's, Proffitt's subsidiaries or CPS,
upon consummation of the Merger each issued and outstanding share of CPS Common
Stock will be converted into a number of validly issued, fully paid and
nonassessable shares of Proffitt's Common Stock including the corresponding
percentage of a Proffitt's Right, equal to the Conversion Number. See "THE
MERGER AGREEMENT--Terms of the Merger."
Fractional shares of Proffitt's Common Stock will not be issued in the
Merger. Holders of CPS Common Stock otherwise entitled to a fractional share of
Proffitt's Common Stock will be paid cash in lieu of such fractional shares
determined and paid as described in "THE MERGER AGREEMENT-- Fractional Shares"
below.
The Conversion Number was determined through arm's-length negotiations
between Proffitt's and CPS. Based on the number of shares of CPS Common Stock
and the number of CPS stock options outstanding on the CPS Record Date, a
maximum of 30,513,101 shares of Proffitt's Common Stock may be issued in respect
of shares of CPS Common Stock (not including an additional 38,799,122 shares
which may be issued to subsidiaries of CPS) in the Merger or upon exercise of
options to purchase shares of CPS Common Stock to be converted into options to
purchase shares of Proffitt's Common Stock in connection with the Merger.
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Any shares of CPS Common Stock owned by CPS or by Proffitt's, Sub or any
other subsidiary of Proffitt's will automatically be canceled at the Effective
Time and will cease to exist and no capital stock of Proffitt's or other
consideration will be delivered in exchange therefor.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the issuance of a Certificate of
Merger by the Secretary of State of the State of Illinois or such later date,
but in no event later than 30 days subsequent to the date of issuance of the
Certificate of Merger, as may be provided for in the Merger Agreement. The
filing of Articles of Merger will occur as promptly as practicable following the
satisfaction or waiver (where permissible) of the conditions set forth in the
Merger Agreement. See "--General" and "THE MERGER AGREEMENT--Terms of the
Merger" and "--Conditions to the Merger."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of CPS Common Stock into Proffitt's Common Stock will occur
at the Effective Time. Each certificate for CPS Common Stock shall, from and
after the Effective Time until surrendered in exchange for Proffitt's Common
Stock, for all purposes be deemed to represent the number of shares of
Proffitt's Common Stock calculated by multiplying the number of shares
represented by the certificate by the Conversion Number. As soon as practicable
after the Effective Time, Proffitt's will deposit with Union Planters National
Bank ("Union Planters"), as exchange agent (the "Exchange Agent"), in trust for
the holders of certificates which immediately prior to the Effective Time
represented shares of CPS Common Stock (the "Certificates") certificates
representing the shares of Proffitt's Common Stock issuable in exchange for
outstanding shares of CPS Common Stock and cash as required to make payments in
lieu of any fractional shares of Proffitt's Common Stock (such cash and shares
of Proffitt's Common Stock, together with any dividends or distributions with
respect thereto payable as described below, being hereinafter referred to as the
"Exchange Fund").
Shares of CPS Common Stock held by a holder who perfects and does not
withdraw or lose its right to an appraisal will not be converted into Proffitt's
Common Stock. Rather, such holders will be entitled only to those rights granted
under the IBCA and will not be entitled to vote or exercise any other rights as
a shareholder of CPS except as provided in the IBCA. If any holder who has
perfected appraisal rights withdraws or loses such holder's right to appraisal,
its shares of CPS Common Stock will be converted into and exchanged for
Proffitt's Common Stock pursuant to the terms of the Merger Agreement. See "THE
SPECIAL MEETINGS--Appraisal Rights."
As soon as practicable after the Effective Time, Proffitt's will cause the
Exchange Agent to mail to each holder of record of a Certificate whose shares
are converted into shares of Proffitt's Common Stock a letter of transmittal
(which will be in customary form, specifying that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon actual delivery
of the Certificates to the Exchange Agent and will contain instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of Proffitt's Common Stock and cash in lieu of fractional
shares). Upon surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, the holder of such
Certificate will be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Proffitt's Common Stock into which
the shares represented by the surrendered Certificate have been converted at the
Effective Time pursuant to the Merger, and cash in lieu of fractional shares and
certain dividends and other distributions as described below, and the
Certificate so surrendered will be canceled.
CPS SHAREHOLDERS SHOULD NOT FORWARD THE CERTIFICATES TO THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL.
No dividends or other distributions that are declared on or after the
Effective Time on Proffitt's Common Stock, or are payable to the holders of
record thereof on or after the Effective Time, will be paid
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to any person entitled by reason of the Merger to receive a certificate
representing Proffitt's Common Stock until such person surrenders the related
Certificate or Certificates, as provided above, and no cash payment in lieu of
fractional shares will be paid to any such person until such person shall so
surrender the related Certificate or Certificates. Subject to the effect of
applicable law, there will be paid to each record holder of a new certificate
representing such Proffitt's Common Stock: (i) at the time of such surrender or
as promptly as practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to the shares of Proffitt's Common
Stock represented by such new certificate and having a record date on or after
the Effective Time and a payment date prior to such surrender; (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
Proffitt's Common Stock and having a record date on or after the Effective Time
but prior to such surrender and a payment date on or subsequent to such
surrender; and (iii) at the time of such surrender or as promptly as practicable
thereafter, the amount of any cash payable with respect to a fractional share of
Proffitt's Common Stock to which such holder is entitled. In no event shall the
person entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions. If any cash or
certificate representing shares of Proffitt's Common Stock is to be paid to or
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of such exchange that
the Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of Proffitt's Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or will establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
LOST CERTIFICATES. If any Certificate has been lost, stolen or destroyed,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Proffitt's Common Stock, any cash in lieu of
fractional shares of Proffitt's Common Stock to which such holder is entitled
and any dividends or other distributions to which such holder is entitled if the
person claiming ownership of such lost, stolen or destroyed Certificate (i)
presents an affidavit of that fact and (ii) if required by the surviving
corporation, the person posts a bond, in an amount reasonably determined by the
surviving corporation, as indemnity against any claim, if any, made against the
surviving corporation with respect to such Certificate.
Proffitt's or the Exchange Agent will be entitled to deduct and withhold
from the consideration otherwise payable pursuant to the Merger Agreement to any
holder of shares of CPS Common Stock such amounts as Proffitt's or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Code or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Proffitt's or the Exchange
Agent, such withheld amounts shall be treated for all purposes of the Merger
Agreement as having been paid to the holder of the shares of CPS Common Stock in
respect of which such deduction and withholding was made by Proffitt's or the
Exchange Agent.
Certificates representing shares of CPS Common Stock surrendered for
exchange by an "affiliate" of CPS for purposes of Rule 145(c) under the
Securities Act, and the rules and regulations promulgated thereunder and for
purposes of applicable interpretations regarding pooling of interests
accounting, will not be exchanged until Proffitt's receives an affiliate letter
from such affiliate. Shares of Proffitt's Common Stock issued to or held by
"affiliates" will not be transferable until the financial results covering at
least 30 days of combined operations of Proffitt's and CPS have been published
in the manner provided by policies of the Securities and Exchange Commission
("Commission") regardless of whether the affiliate has provided an affiliate
letter to Proffitt's, except to the extent permitted by generally accepted
accounting principles. Shares of Proffitt's Common Stock shall not be
transferable, regardless of whether the affiliate has provided an affiliate
letter to Proffitt's, if such transfer, either alone or in the aggregate with
other transfers by the affiliate, would preclude Proffitt's ability to account
for the Merger as a pooling of interests.
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GOVERNMENTAL AND REGULATORY APPROVALS
The Merger is subject to the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). Certain aspects of the Merger will require
notification to, and filings with, certain securities and other authorities in
certain states, including jurisdictions where Proffitt's and CPS currently
operate.
HSR ACT. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the applicable waiting period has expired or been terminated. On
November 17, 1997, Proffitt's and CPS filed notification and report forms under
the HSR Act with the FTC and the Antitrust Division. The waiting period under
the HSR Act will expire on December 17, 1997 unless additional information is
requested by the FTC or the Antitrust Division. At any time before or after
consummation of the Merger, notwithstanding that the waiting period under the
HSR Act has been terminated, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Proffitt's or CPS. At any time before or
after the Effective Time, and notwithstanding that the waiting period under the
HSR Act has been terminated, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Proffitt's and CPS. Private parties may
also seek to take legal action under the antitrust laws under certain
circumstances.
Based on information available to them, Proffitt's and CPS believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, Proffitt's and CPS would prevail or would not be required to accept
certain adverse conditions in order to consummate the Merger. The obligations of
Proffitt's and CPS to consummate the Merger are subject to the condition that
there shall be no preliminary or permanent injunction or other order by any
court or governmental or regulatory authority making the Merger or any of the
transactions contemplated by the Merger Agreement illegal. Each party has agreed
to use its reasonable best efforts to defend any such challenge or order and to
seek to have any such order vacated or reversed.
ACQUISITION OF BANK. CPS indirectly owns National Bank of the Great Lakes,
a national bank (the "Bank") whose activities are limited by the federal Bank
Holding Company Act of 1956, as amended, to engaging in credit card operations
and taking time and savings deposits from one office in minimum denominations of
$100,000. The Bank owns all Carson Pirie Scott, Bergner's and Boston Store
credit card accounts and extends all credit with respect to those accounts.
Proffitt's has applied to the OCC under the federal Change in Bank Control Act
of 1978 for permission to acquire control of the Bank as a result of the Merger.
Favorable action by the OCC on this application is a condition to the
consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger to holders of CPS Common Stock who or which hold
their shares as capital assets. This discussion deals only with holders who or
which are (i) citizens or residents of the United States; (ii) domestic
corporations; or (iii) otherwise subject to United States federal income tax on
a net income basis in respect of shares of CPS Common Stock ("U.S. Holders").
This discussion may not be applicable to certain classes of taxpayers,
including, without limitation, insurance companies, tax exempt organizations,
financial institutions, dealers in securities, foreign persons, persons who
exercise appraisal rights, persons who acquired CPS Common Stock pursuant to an
exercise of employee stock options or rights or otherwise as compensation and
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persons who hold shares of CPS Common Stock as part of a straddle or conversion
transaction. The discussion also does not address state, local or foreign tax
consequences of the Merger. Consequently, each holder should consult such
holder's own tax advisor as to the specific tax consequences of the Merger to
such holder.
The obligation of CPS to consummate the Merger is conditioned on the receipt
by CPS of an opinion of its counsel, Wachtell, Lipton, Rosen & Katz, in form and
substance satisfactory to CPS, dated the Effective Time, to the effect that the
federal income tax consequences of the Merger will be as described herein. See
"THE MERGER AGREEMENT--Conditions to the Merger." Such tax opinion will be based
upon certain customary representations and assumptions which are consistent with
the state of facts existing as of the Effective Time to be referred to in the
opinion letter. Subject to the receipt of such customary representations,
Wachtell, Lipton, Rosen & Katz anticipate that they will render such tax
opinion. Neither CPS nor Proffitt's has requested or will request a ruling from
the Internal Revenue Service as to the tax consequences of the Merger.
The following discussion of the material federal income tax consequences of
the Merger is based on current laws, regulations, rulings, practice and judicial
decisions in effect on the date of this Joint Proxy Statement/Prospectus and the
above-referenced opinion of Wachtell, Lipton, Rosen & Katz. Legislative,
judicial or administrative changes or interpretations may, however, be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes may or may not be retroactive and could affect the tax
consequences to U.S. Holders described herein.
Based on the foregoing, the following will be the material federal income
tax consequences of the Merger to U.S. Holders of CPS Common Stock:
(i) no gain or loss will be recognized by U.S. Holders, except as
described below with respect to U.S. Holders of CPS Common Stock who receive
cash in lieu of fractional shares of Proffitt's Common Stock;
(ii) the aggregate adjusted tax basis of shares of Proffitt's Common
Stock (including fractional shares of Proffitt's Common Stock deemed
received and redeemed as described below) received by a U.S. Holder will be
the same as the aggregate adjusted tax basis of the shares of CPS Common
Stock exchanged therefor;
(iii) the holding period of the shares of Proffitt's Common Stock
(including the holding period of fractional shares of Proffitt's Common
Stock) received by a U.S. Holder will include the holding period of the CPS
Common Stock exchanged therefor; and
(iv) a U.S. Holder of CPS Common Stock who receives cash in the Merger
in lieu of fractional shares of Proffitt's Common Stock will be treated as
having received such fractional shares and then as having received such cash
in redemption of such fractional shares. Under Section 302 of the Code,
provided that such deemed distribution is "substantially disproportionate"
with respect to such U.S. Holder or is "not essentially equivalent to a
dividend" after giving effect to the constructive ownership rules of the
Code, the U.S. Holder will generally recognize capital gain or loss equal to
the difference between the amount of cash received and the U.S. Holder's
adjusted tax basis in the fractional share interest in Proffitt's Common
Stock. Holders of CPS Common Stock are urged to consult their own tax
advisers concerning changes to the taxation of capital gains contained in
the Taxpayer Relief Act of 1997.
EACH SHAREHOLDER OF CPS IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
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ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of Proffitt's and CPS will be carried forward to the
combined corporation at their recorded amounts, income of the combined
corporation will include income of Proffitt's and CPS for the entire fiscal year
in which the combination occurs, and the reported income of the separate
corporations for prior periods will be combined and restated as income of the
combined corporation.
The obligations of Proffitt's, Sub and CPS to consummate the Merger are
subject to the receipt by Proffitt's of a letter dated as of the Effective Time
from Coopers & Lybrand L.L.P., Proffitt's independent accountants, in form and
substance reasonably satisfactory to Proffitt's and CPS, to the effect that the
independent accountants concur with the conclusion of Proffitt's and CPS's
managements that no conditions exist with respect to either company which would
preclude accounting for the Merger as a pooling of interests.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the CPS Board, CPS shareholders should
be aware that, as described below, certain members of CPS's management and the
CPS Board may have interests in the Merger that are different from, or in
addition to, the interests of CPS shareholders generally and which may create
potential conflicts of interest. The CPS Board was aware of the interests of its
directors and officers when it approved the Merger and the Merger Agreement.
Such interests relate to or arise from, among other things, the terms of the
Merger Agreement providing for (1) the inclusion of two of the current CPS
directors on the Board of Directors of Proffitt's, (2) continuing employment
agreements with CPS and Proffitt's following the Merger for certain of the
executive officers of CPS, and (3) the indemnification of existing directors and
officers of CPS. See "THE MERGER AGREEMENT--Composition of Proffitt's Board of
Directors Post-Merger."
AGREEMENT WITH THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
CPS. As of October 29, 1997, Mr. Bluestone, CPS and Proffitt's entered into an
agreement providing, subject to the consummation of the Merger, for Mr.
Bluestone, CPS and Proffitt's to enter into an employment agreement (the
"Bluestone Employment Agreement") at the closing under the Merger Agreement, to
replace Mr. Bluestone's existing employment agreement with CPS. The Bluestone
Employment Agreement provides for Mr. Bluestone to serve as Chairman of CPS, as
a division of Proffitt's, until January 29, 1999, unless the Bluestone
Employment Agreement is earlier terminated according to its terms or unless
extended by the written agreement of the parties. The Bluestone Employment
Agreement further provides that Proffitt's will cause Mr. Bluestone to be
elected to the Board of Directors of Proffitt's as a member of the class of
directors whose terms expire in 1998, to serve until the next regularly
scheduled annual meeting of Proffitt's, and to cause its Board to renominate Mr.
Bluestone for election to the class of directors whose terms expire in 2001, and
to endorse Mr. Bluestone for election to such class. In the event that Mr.
Bluestone terminates his employment prior to January 29, 1999, he will be
required to submit his resignation as a director of Proffitt's. As long as Mr.
Bluestone serves as a director of Proffitt's, he will also be permitted to serve
as a member of the board of directors of CPS.
The Bluestone Employment Agreement provides for Mr. Bluestone to receive
compensation in the form of (a) an annual base salary equal to the sum of (1)
$800,000 per annum plus (2) the greater of (A) $240,000 or (B) the bonus paid by
CPS to Mr. Bluestone for the fiscal year ending January 31, 1998, (b) the
opportunity to earn an annual bonus pursuant to a mutually agreed-upon formula,
such bonus not to exceed 60% of the total annual base salary described in (a),
and (c) the right to participate, at the highest participation levels available
to Proffitt's executives, in all life insurance, medical insurance and other
employee benefit plans, and to participate in all incentive, savings and
retirement plans, policies and programs of CPS. The bonus to be paid will be
based upon the results of CPS for such fiscal year as
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compared with projected results or such other criteria as Mr. Bluestone and CPS
may agree, such formula to be substantially similar to the formula most recently
used by CPS to determine Mr. Bluestone's annual bonus. The benefits to be
provided shall not be materially less than the benefits provided to Mr.
Bluestone under his current agreement with CPS. The Bluestone Employment
Agreement also provides for purchase by CPS of certain additional life insurance
coverage.
Pursuant to the Bluestone Employment Agreement and in connection with his
employment with the combined companies, Proffitt's has agreed to grant Mr.
Bluestone, as of the date of such agreement, an option to purchase 60,000 shares
of Proffitt's Common Stock under Proffitt's 1997 Stock-Based Incentive Plan, at
an exercise price equal to the closing price of Proffitt's Common Stock on the
date of grant. Such option shall be initially exercisable as to 20% of the
shares covered thereby, with an additional 20% becoming exercisable on each of
the first, second and third anniversaries thereof, and as to any remaining
shares, on the fourth anniversary thereof. Such option shall become 100%
exercisable in the event that Mr. Bluestone terminates employment with CPS, and,
along with any options to purchase CPS Common Stock converted into options to
purchase Proffitt's Common Stock in connection with the Merger, shall remain
exercisable until one year following the later of (a) the termination of Mr.
Bluestone's employment under the Bluestone Employment Agreement or (b) such time
as Mr. Bluestone ceases to be a director of Proffitt's.
CPS may terminate the employment of Mr. Bluestone at any time for cause or
in the event of total disability (as provided in the Bluestone Employment
Agreement). Mr. Bluestone may voluntarily terminate his employment under the
Bluestone Employment Agreement at any time for any reason.
Pursuant to the Bluestone Employment Agreement, if the employment of Mr.
Bluestone is terminated for any reason, CPS is required to pay in a lump sum
within 15 days of the date of termination, three times Mr. Bluestone's annual
base salary plus three times his midpoint bonus (30% of his total annual base
salary) and a prorated midpoint bonus for the year of termination, provided that
such prorated amount will not be paid if Mr. Bluestone is employed through
January 29, 1999 and receives the annual bonus provided under the Bluestone
Employment Agreement. At the same time, CPS would be required to pay Mr.
Bluestone cash equal to the sum of his unvested amounts in CPS's 401(k) plan and
the actuarial equivalent of any unvested accrued benefit under the CPS pension
plan. CPS also would be required to continue Mr. Bluestone's employee health and
welfare benefits for 36 months or such longer term as provided under the
respective benefit plan and to credit Mr. Bluestone with additional hours under
CPS's pension plan equal to the least of (a) the greater of (1) 501 hours and
(2) the maximum number of hours of benefit service attributable to severance pay
on the date of termination, (b) the maximum number of hours permitted by law,
and (c) 3,000 hours. The Bluestone Employment Agreement also provides for the
acceleration of vesting of certain benefits and awards, and the payment of
previously deferred compensation.
Pursuant to the Bluestone Employment Agreement, CPS is required to pay Mr.
Bluestone a gross-up payment (as described in the Bluestone Employment
Agreement) to reimburse him for the full amount of any excise tax that may be
applicable to any payment or distribution under the Bluestone Employment
Agreement. Mr. Bluestone has also agreed to certain restrictions on the
solicitation of employees of CPS, on the treatment of confidential information
and on entering into competing employment following termination of his
employment under the Bluestone Employment Agreement.
As described above, the Bluestone Employment Agreement will, at the
Effective Time, replace and supersede Mr. Bluestone's current employment
agreement with CPS. Mr. Bluestone's current employment agreement contains, among
other things, a "change of control" provision which would have entitled him to
receive three years of salary, plus bonus and other benefits upon his
resignation for good reason (which would have applied as a result of the Merger)
or termination of his employment by CPS (other than for cause) within two years
following the Merger.
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AGREEMENT WITH THE PRESIDENT AND CHIEF OPERATING OFFICER OF CPS. Mr.
MacDonald and Proffitt's have entered into an employment agreement, subject to
the consummation of the Merger (the "MacDonald Employment Agreement") to replace
Mr. MacDonald's existing employment agreement with CPS. The MacDonald Employment
Agreement provides that Mr. MacDonald will serve as President and Chief
Executive Officer of CPS, as a division of Proffitt's, for a period of three
years from the date of the Merger. The term of the MacDonald Employment
Agreement may be extended for up to several weeks beyond three years until the
end of Proffitt's fiscal year ending in 2001. The agreement provides for Mr.
MacDonald to receive compensation in the form of (a) an annual base salary in an
amount not less than $550,000 for the first year, not less than $600,000 for the
second year and not less than $650,000 for the third year of the employment
period, (b) the opportunity to earn an annual bonus pursuant to a mutually
agreed-upon formula, such bonus not to exceed 50% of the annual base salary in
any such fiscal year and (c) the right to participate in all employee, pension,
welfare, fringe and other benefit plans, practices, policies and programs
provided by Proffitt's to the senior management of Proffitt's, to receive credit
for service and other requirements under the corresponding CPS plan for the
period prior to the Merger, and to continue participation in certain CPS
executive benefit plans or materially equivalent benefit plans. The bonus to be
paid shall be based upon the results of CPS for the applicable fiscal year as
compared with projected results or such other criteria as Mr. MacDonald and
Proffitt's may agree.
As of the date of the Merger and in connection with his employment with the
combined companies, Proffitt's has agreed to grant Mr. MacDonald an option to
purchase 35,000 shares of Proffitt's Common Stock under Proffitt's 1994
Long-Term Incentive Plan (the "1994 LTIP"), at an exercise price equal to the
closing price of Proffitt's Common Stock on the date of grant or the first
business day thereafter. Such option shall have a ten-year term and shall be
initially exercisable as to 20% of the shares covered thereby, with an
additional 20% becoming exercisable on each of the first and second
anniversaries thereof, and as to an additional 40%, on the third anniversary
thereof. During the term of the MacDonald Employment Agreement, Mr. MacDonald
shall be eligible for future employee stock option grants on the same basis as
other senior management of Proffitt's. In the event of a change of control of
Proffitt's (as defined in the 1994 LTIP) any stock option granted to Mr.
MacDonald will immediately vest. As of the date of the Merger and in connection
with his employment with the combined companies, Mr. MacDonald will receive a
grant of 100,000 shares of restricted Proffitt's Common Stock pursuant to
Proffitt's 1997 Stock-Based Incentive Plan. Such restricted stock will vest as
to 20% of the shares immediately, and as to an additional 20% on each of the
first, second and third anniversaries of the grant date and an additional 20% on
the conclusion of the employment period. The MacDonald Employment Agreement
provides that a pro rata portion of the next 20% of the restricted stock
scheduled to vest will vest immediately if Proffitt's terminates Mr. MacDonald's
employment other than for cause (as defined in the MacDonald Employment
Agreement), or Mr. MacDonald terminates his employment for good reason (as
defined in the MacDonald Employment Agreement) or as a result of death. All such
restricted stock shall become immediately vested upon a change of control of
Proffitt's.
If Proffitt's terminates the employment of Mr. MacDonald for cause or if Mr.
MacDonald terminates his employment voluntarily (other than for good reason),
the Company is required to pay Mr. MacDonald his annual salary to the date of
termination of employment together with certain accrued or deferred and unpaid
compensation and benefits. If the employment of Mr. MacDonald is terminated for
total disability or by reason of death, he or his estate will receive (a) the
amount of his annual base salary and average bonus (as defined in the MacDonald
Employment Agreement) prorated to the date of termination and (b) certain
accrued or deferred and unpaid compensation and benefits.
If the employment of Mr. MacDonald is terminated by Proffitt's without cause
or by Mr. MacDonald for good reason, then Proffitt's is required to pay in a
lump sum within 15 days of the date of termination, three times Mr. MacDonald's
annual base salary, plus three times half of the amount of the annual base
salary (plus a portion of an additional one half of the amount of the annual
base salary prorated to the termination date) and certain accrued or deferred
and unpaid compensation and benefits. In such
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circumstances, Proffitt's also would be required to continue Mr. MacDonald's
employee health and welfare benefits for 36 months or such longer term as
provided under the relevant health or welfare plan and to credit Mr. MacDonald
with the maximum age and service credit a participant may accrue under the CPS
Supplemental Executive Retirement Plan. Under such circumstances, the option to
purchase Proffitt's Common Stock granted pursuant to the MacDonald Employment
Agreement would immediately become exercisable in its entirety for one year
following the date of termination.
If following the conclusion of the original term of the MacDonald Employment
Agreement, Proffitt's terminates Mr. MacDonald's employment without cause or Mr.
MacDonald terminates employment under circumstances that would have constituted
good reason under the MacDonald Employment Agreement, Mr. MacDonald will receive
twice his annual base salary and the continuation of health and welfare benefits
for twenty-four months, and the option to purchase Proffitt's Common Stock
granted pursuant to the MacDonald Employment Agreement will immediately become
exercisable in its entirety for one year following the date of termination.
Proffitt's is required to pay Mr. MacDonald a gross-up payment (as defined
in the MacDonald Employment Agreement) to reimburse him for the full amount of
any excise tax that may be applicable to any payment or distribution under the
MacDonald Employment Agreement. Mr. MacDonald has also agreed to certain
restrictions on the solicitation of employees of Proffitt's and on the treatment
of confidential information following termination of his employment under the
MacDonald Employment Agreement.
As discussed above, the MacDonald Employment Agreement will, at the
Effective Time, replace and supersede Mr. MacDonald's current employment
agreement with CPS. Mr. MacDonald's current employment agreement contains change
of control provisions which would have entitled him to receive two and one-half
years of salary, plus bonus and other benefits upon his resignation for good
reason (which would have applied as a result of the Merger) or termination of
his employment by CPS (other than for cause) within two years following the
Merger.
ARRANGEMENTS WITH CERTAIN OTHER EXECUTIVE OFFICERS AND EMPLOYEES. The
Merger Agreement contemplates that prior to the closing of the Merger,
Proffitt's will offer new employment agreements to four executive officers and
two other employees (each such officer or employee, an "Employee") of CPS who
may continue employment with CPS following the Merger (the "Employment
Agreements"). Such Employment Agreements will become effective and replace and
supersede these Employees' current severance agreements with CPS effective upon
consummation of the Merger. The Employment Agreements shall provide for: (a)
two-year employment terms, (b) base salary and bonus potential no less than
current arrangements with CPS, (c) the application of each Employee's current
change-in-control severance formula if Proffitt's terminates employment during
the two-year period following the effective date of the Employment Agreement
without cause, or if employee terminates for good reason, because of material
reductions in salary or responsibility from those set forth in the Employment
Agreement, (d) the waiver and release by each Employee of his or her right to
terminate for good reason under his or her current agreement with CPS in
conjunction with the Merger, and (e) the grant to each Employee of a number of
shares of Proffitt's Common Stock (to be determined on an individual basis) that
will vest in three equal segments at the first, second and third anniversaries
of the date of the new Employment Agreement, provided that such Employee remains
employed by CPS or Proffitt's on the vesting dates and provided further that
such Proffitt's Common Stock would vest on a change in control of Proffitt's.
As described above, the Employment Agreements will, at the Effective Time,
replace and supersede the Employee's current CPS severance agreements. Such
current CPS severance agreements contain change of control or similar severance
provisions which would have entitled the Employees to receive a cash payment in
an amount equal to a multiple of salary upon termination of their employment
under certain circumstances within two years following the Merger if they had
not entered into the Employment Agreements.
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CERTAIN OTHER BENEFITS. As of December 5, 1997, directors and executive
officers of CPS owned options to purchase an aggregate of 766,322 shares of CPS
Common Stock. As of December 5, 1997, an aggregate of 178,600 such options were
unvested. As of the Effective Time (or upon shareholder approval of the Merger
with respect to options granted to directors) all such unvested options will
become fully vested as a result of the Merger. In addition, 11,000 shares
previously awarded under the 1996 Directors Stock Compensation Plan and deferred
will as of the Effective Time, become immediately deliverable. Under CPS's
Supplement Executive Retirement Plan, upon the closing of the Merger the accrued
benefits of all participants will vest, and upon termination of employment
within two years after the closing date of the Merger, the entire present value
of a participant's accrued benefit will be paid out.
The CPS 1996 Long Term Incentive Plan (the "1996 LTIP") provides for cash
awards based upon CPS performance over three-year performance periods. Upon
shareholder approval of the Merger, each participant in the 1996 LTIP will be
entitled to pro rata payouts based upon performance through that date with
maximum performance assumed for the fiscal year in which such shareholder
approval occurs.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that for three
years from and after the Effective Time, Proffitt's agrees to, and to cause CPS
as the surviving corporation to, indemnify and hold harmless all past and
present directors, officers and employees of CPS and of its subsidiaries to the
full extent such persons may be indemnified as of the date of the Merger
Agreement by CPS pursuant to the CPS Restated Articles of Incorporation ("CPS's
Restated Articles") and By-Laws and indemnification agreements in existence on
the date of the Merger Agreement with any directors, officers and employees of
CPS and its subsidiaries for acts or omissions occurring at or prior to the
Effective Time. Additionally, Proffitt's agrees to, and to cause the CPS as the
surviving corporation to, indemnify and hold harmless such persons to the
fullest extent permitted by law for acts or omissions occurring in connection
with the approval of the Merger Agreement and the consummation of the
transactions contemplated thereby. Proffitt's also agrees to cause CPS as the
surviving corporation to provide, for an aggregate period of not less than two
years from the Effective Time, CPS's current directors and officers with an
insurance and indemnification policy that provides coverage for events occurring
at or prior to the Effective Time that is no less favorable than CPS's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage. Notwithstanding the foregoing, the surviving
corporation will not be required to pay an annual premium for such insurance in
excess of 200% of the last annual premium paid prior to the date of the Merger
Agreement.
NYSE LISTING
It is a condition to the parties' obligations under the Merger Agreement
that the shares of Proffitt's Common Stock issuable pursuant to the Merger
Agreement shall have been approved for listing on the NYSE, subject to official
notice of issuance.
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THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT,
WHICH APPEARS AS APPENDIX I TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY INCLUDES THE MATERIAL
TERMS OF SUCH AGREEMENT BUT IS NOT NECESSARILY COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT.
TERMS OF THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, including the approval of the Merger Agreement,
the Stock Issuance and the Charter Amendment by the holders of Proffitt's Common
Stock and approval of the Merger Agreement by the holders of CPS Common Stock,
Sub will be merged with and into CPS at the Effective Time, and CPS will
continue as the surviving corporation.
After the conditions precedent to the Merger have been fulfilled or waived
(where permissible), Proffitt's, Sub and CPS will promptly file duly executed
Articles of Merger with the Secretary of State of the State of Illinois and the
Merger will become effective at the Effective Time, which will occur upon the
issuance of a Certificate of Merger by the Secretary of State of the State of
Illinois or such later time established by the Certificate of Merger (provided
that such later date is not more than 30 days after the Articles of Merger are
filed).
Pursuant to the Merger Agreement, as of the Effective Time, all shares of
CPS Common Stock that are held in the treasury of CPS, and any shares of CPS
Common Stock owned by Proffitt's or by any wholly-owned subsidiary of Proffitt's
will be canceled and no capital stock of Proffitt's or other consideration will
be delivered in exchange therefor.
Each issued and outstanding share of common stock of Sub, par value $.01 per
share, will be converted into one validly issued, fully paid and nonassessable
share of common stock of the surviving corporation.
Subject to the terms and conditions of the Merger Agreement, each share of
CPS Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled) will be converted into a number of validly
issued, fully paid and nonassessable shares of Proffitt's Common Stock,
including the corresponding percentage of a Proffitt's Right, equal to the
Conversion Number. All such shares of CPS Common Stock, when so converted, will
no longer be outstanding and will automatically be canceled and retired, and
each holder of a Certificate representing any such shares will cease to have any
rights with respect thereto, except the right to receive certain dividends and
other distributions, certificates representing the shares of Proffitt's Common
Stock into which such shares are converted and any cash, without interest, in
lieu of fractional shares to be issued or paid in consideration therefor upon
the surrender of such Certificate.
Shares of CPS Common Stock held by a holder who perfects and does not
withdraw or lose its right to an appraisal will not be converted into Proffitt's
Common Stock. Rather, such holders will be entitled only to those rights granted
under the IBCA and will not be entitled to vote or exercise any other rights as
a shareholder of CPS except as provided in the IBCA. If any holder who has
perfected appraisal rights withdraws or loses such holder's right to appraisal,
such holder's shares of CPS Common Stock will be converted into and exchanged
for Proffitt's Common Stock.
In the event of any reclassification, stock split or stock dividend with
respect to Proffitt's Common Stock, any change or conversion of Proffitt's
Common Stock into other securities or any other dividend or distribution with
respect to Proffitt's Common Stock as the same may be adjusted from time to time
pursuant to the terms of the Merger Agreement (or if a record date with respect
to any of the foregoing should occur) prior to the Effective Time appropriate
and proportionate adjustments, if any, will be made to the Conversion Number,
and all references to the Conversion Number in the Merger Agreement will be
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deemed to be to the Conversion Number as so adjusted; provided that under no
circumstances will CPS shareholders be required to accept anything other than
Proffitt's Common Stock.
THE CONVERSION NUMBER. Subject to the adjustments described above and the
other conditions of the Merger Agreement, the Conversion Number is determined as
follows:
(i) in the event that the Closing Date Market Price is less than $27.75,
the Conversion Number shall be 1.80;
(ii) in the event that the Closing Date Market Price is equal to or
greater than $27.75 and less than $28.57, the Conversion Number shall be
equal to $50.00 divided by the Closing Date Market Price;
(iii) in the event that the Closing Date Market Price is equal to or
greater than $28.57 and less than $30.86, the Conversion Number shall be
1.75;
(iv) in the event that the Closing Date Market Price is equal to or
greater than $30.86 and less than $31.77, the Conversion Number shall be
equal to $54.00 divided by the Closing Date Market Price; and
(v) in the event that the Closing Date Market Price is equal to or
greater than $31.77, the Conversion Number shall be 1.70.
"Closing Date Market Price" shall mean the average closing price for one
share of Proffitt's Common Stock during the period of the 20 most recent NYSE
trading days ending on the third NYSE trading day prior to the date of the CPS
Special Meeting. The closing price on any day shall be the last reported sale
price of one share of Proffitt's Common Stock on the NYSE.
SURRENDER AND PAYMENT
Proffitt's has authorized Union Planters to act as Exchange Agent. As soon
as practicable after the Effective Time, Proffitt's will deposit with the
Exchange Agent, in trust for the holders of shares of CPS Common Stock converted
in the Merger, the Exchange Fund. The Exchange Agent will deliver the Proffitt's
Common Stock issuable pursuant to the Merger Agreement out of the Exchange Fund.
See "THE MERGER--Conversion of Shares; Procedures for Exchange of Certificates."
All shares of Proffitt's Common Stock issued upon the surrender for exchange
of Certificates in accordance with the terms of the Merger Agreement (including
any cash paid pursuant to the Merger Agreement) will be deemed to have been
issued in full satisfaction of all rights pertaining to the shares of CPS Common
Stock represented by such Certificates.
FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Proffitt's Common
Stock will be issued upon the surrender for exchange of Certificates, and no
Proffitt's dividend or other distribution or stock split will relate to any
fractional share, and no fractional share will entitle the owner thereof to vote
or to any other rights of a security holder of Proffitt's. In lieu of any such
fractional share, each holder of CPS Common Stock who would otherwise have been
entitled to a fraction of a share of Proffitt's Common Stock upon surrender of
Certificates for exchange will receive cash (without interest) in an amount
equal to the product of such fractional part of a share of Proffitt's Common
Stock multiplied by the per share closing price on the NYSE of Proffitt's Common
Stock on the date of the Effective Time (or, if the shares of Proffitt's Common
Stock do not trade on the NYSE on such date, the first date of trading of the
Proffitt's Common Stock on the NYSE after the Effective Time).
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CONDITIONS TO THE MERGER
The respective obligations of Proffitt's, CPS and Sub to effect the Merger
will be subject to the fulfillment of certain conditions at or prior to the
Effective Time, including, among other things: (a) adoption of the Merger
Agreement by the requisite vote of shareholders of CPS, and the obtaining of the
Proffitt's Shareholder Approvals by the requisite vote of the shareholders of
Proffitt's; (b) the authorization for listing on the NYSE subject to official
notice of issuance, of the shares of Proffitt's Common Stock issuable in the
Merger and upon exercise of CPS stock options; (c) expiration or termination of
the waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act; (d) approval of the change of control of the Bank
by the OCC; (e) all authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by, any governmental entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the transactions contemplated by
the Merger Agreement illegal or would have a material adverse effect on
Proffitt's (assuming the Merger had taken place), will have been obtained, will
have been made or will have occurred; (f) the receipt of all other third party
authorizations, consents or approvals which the failure to obtain would have a
material adverse effect on Proffitt's or CPS; (g) receipt, by Proffitt's, of a
letter dated as of the Effective Time of Coopers & Lybrand L.L.P., to the effect
that the independent accountants concur with the conclusion of Proffitt's and
CPS's managements that no conditions exist with respect to either company which
would preclude accounting for the merger as a pooling of interests; (h)
Proffitt's receipt of a "cold comfort" letter of Coopers & Lybrand L.L.P., dated
as of the effective date of the Registration Statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") filed by Proffitt's
with the Commission registering the shares of Proffitt's Common Stock to be
issued in connection with the Merger Agreement, and as of the Effective Time, in
form and substance reasonably satisfactory to Proffitt's and CPS and reasonably
customary in scope and substance for letters of such type; (i) no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceedings for that purpose shall have been
initiated or, to the knowledge of Proffitt's or CPS, threatened by the
Commission; (j) no court or other governmental entity having jurisdiction over
CPS or Proffitt's, or any of their respective subsidiaries, shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order which is then in effect and has the
effect of making the Merger or any of the transactions contemplated by the
Merger Agreement illegal; (k) there shall not be instituted or pending any
action or proceeding by a government entity or any other person as a result of
the Merger Agreement or the transactions contemplated thereby which in the
opinion of Proffitt's counsel, would have a material adverse effect on
Proffitt's (assuming the Merger had taken place) and (l) holders of no more than
5% of the CPS Common Stock having dissented and preserved their rights to seek
appraisal. See "THE MERGER--Governmental and Regulatory Approvals."
The obligations of CPS to effect the Merger are also subject to the
satisfaction of the following additional conditions at or prior to the Effective
Time, including: (a) each of the representations and warranties of Proffitt's
and Sub in the Merger Agreement that is qualified by materiality shall be true
and correct on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent they relate to a particular date), and each
of the representations and warranties of Proffitt's and Sub that is not so
qualified shall be true and correct in all material respects on and as of the
Effective Time as if made on and as of the Effective Time (except to the extent
they relate to a particular date) and each of Proffitt's and Sub shall have
performed in all material respects each of its agreements contained in the
Merger Agreement required to be performed on or prior to the Effective Time,
except as contemplated or permitted by the Merger Agreement; and CPS shall have
received from Proffitt's and Sub a certificate to that effect; (b) Proffitt's
shall have proffered executed employment agreements to Mr. Bluestone, Mr.
MacDonald, and certain other employees of CPS, which proffers shall not have
been withdrawn; (c) CPS shall have received an opinion of Proffitt's counsel, to
the effect that the Proffitt's Common Stock issued in the Merger is duly
authorized, validly issued and nonassessable; and (d) CPS shall have received
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an opinion of Wachtell, Lipton, Rosen & Katz relating to certain tax matters.
See "THE MERGER-- Certain Federal Income Tax Consequences."
The obligations of Proffitt's and Sub to effect the Merger are subject to
the satisfaction of the following additional conditions at or prior to the
Effective Time: each of the representations and warranties of CPS in the Merger
Agreement that is qualified by materiality shall be true and correct on and as
of the Effective Time as if made on and as of the Effective Time (except to the
extent they relate to a particular date), and each of the representations and
warranties of CPS that is not so qualified shall be true and correct in all
material respects on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent they relate to a particular date) and CPS
shall have performed in all material respects each of its agreements contained
in the Merger Agreement required to be performed on or prior to the Effective
Time, except as contemplated or permitted by the Merger Agreement; and
Proffitt's shall have received from CPS a certificate to that effect.
Certain of the conditions to the Merger may not be waived by the parties,
including shareholder approvals, clearance under the antitrust laws, the
effectiveness of the Registration Statement and the absence of any order or
legal restraint. Although the receipt of the pooling letter of Coopers & Lybrand
L.L.P. and the tax opinion of CPS's counsel may be waived by the parties,
Proffitt's and CPS do not intend to consummate the Merger in the event either
the pooling letter or the tax opinion is not or cannot be delivered.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
Proffitt's and Sub, including, among other things: (a) the absence of conflicts,
violations and defaults under their respective charters and bylaws, certain
other agreements and documents and judgments and orders; (b) that the documents
filed by Proffitt's with the Commission since January 1, 1995 did not contain
any material misstatements or omissions at the time they were filed; (c) that
the information supplied by Proffitt's and Sub to be included herein and in the
Registration Statement in connection with the Merger will be free from material
misstatements and omissions; (d) that there has been no material adverse change
with respect to Proffitt's since February 1, 1997 except as disclosed in its
documents filed with the Commission prior to the date of the Merger Agreement;
(e) as to governmental licenses and permits, and compliance with laws; (f) as to
compliance with relevant tax laws; (g) with respect to actions and proceedings
pending against or involving Proffitt's; (h) as to employee benefit plans and
labor matters; (i) as to compliance with worker safety laws and environmental
laws and consumer credit laws; (j) as to intellectual property; (k) as to labor
matters; (l) the required vote of Proffitt's shareholders; (m) as to the
operations of Sub; (n) as to the applicability to Proffitt's and Sub of state
takeover statutes and as to the applicability of the Proffitt's Rights
Agreement, dated March 28, 1995, between Proffitt's and Union Planters (the
"Proffitt's Rights Agreement"); (o) as to actions taken or not taken that would
jeopardize the contemplated tax and accounting treatment of the Merger; (p) as
to certain liabilities; (q) as to the receipt of a fairness opinion from Salomon
Brothers and (r) as to brokers. In addition, the Merger Agreement contains
representations and warranties by each of Proffitt's and Sub as to, among other
things, its organization, capital structure, authority to enter into the Merger
Agreement and the binding effect of the Merger Agreement.
The Merger Agreement also contains similar customary representations and
warranties of CPS, as well as additional representations and warranties,
including, among other things: (a) as to the receipt of a fairness opinion from
SBCWDR; (b) that the Board of Directors has taken all action necessary to exempt
CPS, its subsidiaries and affiliates, the Merger, the Merger Agreement and the
transactions contemplated thereby from certain state takeover statutes; (c) as
to the due organization, good standing and membership of the Bank in the FDIC
Bank Insurance Fund and the Federal Reserve System; and (d) that CPS has taken
all necessary action so that CPS will have no additional obligations and
Proffitt's will have no obligations under the rights to purchase CPS Common
Stock (the "Rights") issued pursuant to the Rights Agreement between CPS and
Harris Trust and Savings Bank dated November 2, 1993 ("CPS's Rights
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Plan") or under CPS's Rights Plan and the holders of Rights will have no
additional rights under the Rights or CPS's Rights Plan, as a result of the
Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, each of Proffitt's and CPS has agreed
that, during the period from the date of the Merger Agreement through the
Effective Time (except as otherwise expressly permitted by the terms of the
Merger Agreement), it will, and it will cause its respective subsidiaries to, in
all material respects, carry on their respective businesses in the ordinary
course as conducted as of the date of the Merger Agreement and, to the extent
consistent therewith, use reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and ongoing businesses will be unimpaired at the Effective Time.
ACTIONS BY PROFFITT'S. Without limiting the generality of the foregoing,
and except as otherwise expressly contemplated by the Merger Agreement,
Proffitt's will not, and will not permit any of its subsidiaries to, without the
prior written consent of CPS: (a) (1) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock, or
otherwise make any payments to its shareholders in their capacity as such (other
than dividends and other distributions by subsidiaries), (2) other than in the
case of any subsidiary, split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (3) subject to the
limitations of the Merger Agreement, purchase, redeem or otherwise acquire any
shares of capital stock of Proffitt's or any shares of capital stock of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities or (4) institute any share
repurchase program; (b) issue, deliver, sell, pledge, dispose of, grant,
transfer or otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or exchangeable
into, or any rights, warrants or options to acquire any such shares, voting
securities, equity equivalent or convertible securities, other than (1) subject
to the other terms of the Merger Agreement, the issuance of stock options and
shares of Proffitt's Common Stock to employees of Proffitt's in the ordinary
course of business consistent with past practice, (2) the issuance of Proffitt's
securities pursuant to the Proffitt's Rights Agreement and (3) the issuance by
any wholly-owned subsidiary of Proffitt's of its capital stock to Proffitt's or
another wholly-owned subsidiary of Proffitt's; (c) amend its Amended and
Restated Charter or By-laws, other than to increase its authorized capital stock
or amend its By-Laws as provided in the Merger Agreement; (d) acquire or agree
to acquire any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, unless (1) the entering into a definitive agreement relating
to or the consummation of such acquisition would not (A) impose any material
delay in the obtaining of, or significantly increase the risk of not obtaining,
any authorizations, consents, orders, declarations or approvals of any
governmental entity necessary to consummate the Merger or the expiration or
termination of any applicable waiting period, (B) significantly increase the
risk of any governmental entity entering an order prohibiting the consummation
of the Merger or (C) significantly increase the risk of not being able to remove
any such order on appeal or otherwise, and (2) in the case of any individual
acquisition, merger, consolidation or purchase, the equity value of which does
not exceed $175 million; (e) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than (1)
transactions in the ordinary course of business consistent with past practice
and not material to Proffitt's and its subsidiaries taken as a whole, (2) as may
be required by any governmental entity or (3) subject to the terms of the Merger
Agreement, dispositions involving an aggregate consideration not in excess of
$100 million; (f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or other
investments in, any other person, other than (1) in the ordinary course of
business consistent with past practice and (2) indebtedness, loans, advances,
capital contributions and investments between Proffitt's and any of its
wholly-owned subsidiaries or between any of such wholly-owned subsidiaries; (g)
knowingly violate or knowingly fail to perform any material
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obligation or duty imposed upon it or any subsidiary by any applicable material
federal, state or local law, rule, regulation, guideline or ordinance; (h) take
any action, other than reasonable and usual actions in the ordinary course of
business consistent with past practice, with respect to accounting policies or
procedures (other than actions required to be taken by generally accepted
accounting principles); or (i) authorize, recommend or announce an intention to
do any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
ACTIONS BY CPS. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by the Merger Agreement, CPS will
not, and will not permit any of its subsidiaries to, without the prior written
consent of Proffitt's: (a)(1) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, or
otherwise make any payments to its shareholders in their capacity as such, (2)
other than in the case of any subsidiary, split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (3)
purchase, redeem or otherwise acquire any shares of capital stock of CPS or any
other securities thereof or the capital stock of any of its subsidiaries or any
rights, warrants or options to acquire any such shares or other securities or
(4) reinstate CPS's share repurchase program or institute any similar share
repurchase program; (b) issue, deliver, sell, pledge, dispose of, grant,
transfer or otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than (1) the issuance of
shares of CPS Common Stock upon the exercise of CPS stock options outstanding on
the date of the Merger Agreement in accordance with their then current terms,
(2) the issuance of CPS securities pursuant to CPS's 1996 Directors' Stock
Compensation Plan or the CPS Rights Plan and (3) the issuance by any
wholly-owned subsidiary of CPS of its capital stock to CPS or another
wholly-owned subsidiary of CPS; (c) amend CPS's Restated Articles or By-Laws;
(d) acquire or agree to acquire any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets other than acquisitions of assets in the
ordinary course of CPS's business consistent with past practice; (e) sell, lease
or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of
its assets, except for (1) transactions in the ordinary course of business
consistent with past practice and not material to CPS and its subsidiaries taken
as a whole and (2) as may be required by any governmental entity; (f) incur any
indebtedness for borrowed money, guarantee any such indebtedness or make any
loans, advances or capital contributions to, or other investments in, any other
person, other than (1) in the ordinary course of business consistent with past
practices and (2) indebtedness, loans, advances, capital contributions and
investments between CPS and any of its wholly owned subsidiaries or between any
of such wholly owned subsidiaries; (g) alter the corporate structure or
ownership of CPS or any subsidiary; (h) enter into or adopt, or amend any
existing, severance plan, agreement or arrangement or enter into or amend any
CPS benefit plan or employment or consulting agreement other than as required by
law, or as expressly contemplated by the Merger Agreement; (i) increase the
compensation payable or to become payable to its officers or employees, except
for increases in the ordinary course of business consistent with past practice
in salaries or wages of employees of CPS or any of its subsidiaries who are not
officers of CPS or any of its subsidiaries, or grant any additional rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director or officer of CPS or any of its subsidiaries, or
establish, adopt, enter into, or, with certain exceptions, amend or take action
to enhance or accelerate any rights or benefits under, any plan or arrangement
for the benefit of any director, officer or employee; (j) knowingly violate or
knowingly fail to perform any material obligation or duty imposed upon it or any
subsidiary by any applicable material federal, state or local law, rule,
regulation, guideline or ordinance; (k) take any action, other than reasonable
and usual actions in the ordinary course of business consistent with past
practice, with respect to accounting policies or procedures (other than actions
required to be taken by generally accepted accounting principles); (l) make any
tax election or settle or compromise any material federal, state, local or
foreign income tax liability; or (m) authorize, recommend, propose or announce
an intention to do any
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of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
CPS STOCK OPTIONS AND EMPLOYEE BENEFITS
At the Effective Time, each outstanding option to purchase CPS Common Stock
will, pursuant to its terms, be converted into an option to purchase Proffitt's
Common Stock. All references to CPS in the CPS stock option plans, the
applicable stock option or other awards agreements issued thereunder and in any
other CPS stock options will be deemed to refer to Proffitt's. Each CPS stock
option will be converted into a stock option to purchase a number of shares of
Proffitt's Common Stock equal to the number of shares of CPS Common Stock that
could have been purchased under such CPS stock option multiplied by the
Conversion Number, at an exercise price per share of Proffitt's Common Stock
equal to the per share option exercise price specified in the CPS stock option
divided by the Conversion Number. Pursuant to their original terms, all CPS
stock options will become fully vested as of the Effective Time. The Proffitt's
stock options will otherwise be subject to the same terms and conditions as the
CPS stock options.
From and after the Effective Time, Proffitt's will honor, and will cause CPS
and its subsidiaries to honor, all existing employment and severance agreements
and severance and bonus plans which apply to current and former employees or
directors of CPS or its subsidiaries. Employees of CPS and its subsidiaries will
be credited with service accrued prior to the Effective Time for purposes of all
employee benefit plans, programs or arrangements maintained by Proffitt's, CPS
or CPS's subsidiaries. For one year following the Effective Time, any changes to
the CPS or any subsidiary's benefit plans and arrangements shall be subject to
the determination of Mr. Bluestone. Also for one year following the Effective
Time, Proffitt's will cause CPS or its subsidiaries to pay bonuses pursuant to
the CPS current bonus plans consistent with past practices as determined by Mr.
Bluestone.
COMPOSITION OF PROFFITT'S BOARD OF DIRECTORS POST-MERGER
The Merger Agreement provides that at the Effective Time Proffitt's will
cause two members of CPS's current Board of Directors (Mr. Bluestone and John W.
Burden III) to be appointed to Proffitt's Board of Directors to serve until the
next regularly scheduled meeting of Proffitt's shareholders. Mr. Bluestone will
be appointed for the 1998 class of directors and renominated by Proffitt's for
election to the 2001 class of directors. Mr. Burden will be appointed to the
1999 class of directors and will be renominated by Proffitt's at its 1999 annual
meeting for the 2002 class of directors. In addition, in connection with the
1998 annual meeting of Proffitt's shareholders, Messrs. Bluestone, Burden and R.
Brad Martin will jointly make a recommendation for an additional board member of
Proffitt's, who may or may not be a current member of CPS's Board, to Proffitt's
Strategic Planning and Corporate Governance Committee. The committee will,
consistent with its fiduciary obligations, consider such recommendation to
nominate an additional director for election at the 1998 annual meeting of
shareholders. In addition, Proffitt's has agreed to amend Article III, Section
13 of its By-Laws so that the mandatory resignation requirement contained
therein will not apply to CPS's nominees.
NO SOLICITATION
Pursuant to the Merger Agreement, from and after the date of the Merger
Agreement, neither Proffitt's nor CPS will, and each will use its best efforts
to cause any of its officers, directors, employees, attorneys, financial
advisors, agents or other representatives or those of any of its subsidiaries
not to, directly or indirectly, (a) solicit, initiate or encourage (including by
way of furnishing non-public information) any proposal or offer from any person
that constitutes, or may reasonably be expected to lead to, a Takeover Proposal
(as defined below) or (b) engage in or continue discussions or negotiations
relating to a Takeover Proposal. Notwithstanding the foregoing, prior to the
receipt of approval by their respective shareholders, either Proffitt's or CPS
may engage in discussions or negotiations with, or furnish information
concerning itself and its subsidiaries, business, properties or assets to, any
third party which makes a
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Takeover Proposal if the Board of Directors of either Proffitt's or CPS
concludes in good faith on the basis of the advice of its outside counsel that
the failure to take such action would violate the fiduciary obligations of such
Board under applicable law. Each of Proffitt's and CPS will promptly (but in no
case later than 24 hours) notify the other of any Takeover Proposal, including
the material terms and conditions thereof.
As used in the Merger Agreement, "Takeover Proposal" means any proposal or
offer, or any expression of interest by any third party relating to Proffitt's
or CPS's willingness or ability to receive or discuss a proposal or offer, other
than a proposal or offer by Proffitt's or any of its subsidiaries or as
permitted under the Merger Agreement, for a tender or exchange offer, a merger,
consolidation or other business combination involving either Proffitt's or CPS
or any of their respective subsidiaries or any proposal to acquire in any manner
30% or more of the outstanding voting capital stock of, or 30% or more of the
assets of, either Proffitt's or CPS and any of their respective subsidiaries,
taken as a whole.
During the period from the date of the Merger Agreement through the
Effective Time, neither Proffitt's nor CPS will terminate, amend, modify or
waive any provision of any confidentiality or standstill agreement to which CPS
or Proffitt's or any of their respective subsidiaries is a party (other than any
such agreements involving the other party), unless the Board of Directors of
such party concludes in good faith on the basis of the advice of its outside
counsel that the failure to do so would violate the fiduciary obligations of
such Board.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
The Merger Agreement provides that for three years from and after the
Effective Time, Proffitt's agrees to, and to cause the surviving corporation to,
indemnify and hold harmless all past and present directors, officers and
employees of CPS and of its subsidiaries to the full extent such persons may be
indemnified as of the date of the Merger Agreement by CPS pursuant to CPS's
Restated Articles and By-Laws and indemnification agreements in existence on the
date of the Merger Agreement with any directors, officers and employees of CPS
and its subsidiaries for acts or omissions occurring at or prior to the
Effective Time; provided, however, that Proffitt's agrees to, and to cause the
surviving corporation to, indemnify and hold harmless such persons to the
fullest extent permitted by law for acts or omissions occurring in connection
with the approval of the Merger Agreement and the consummation of the
transactions contemplated thereby. In addition, Proffitt's will cause the
surviving corporation to provide, for an aggregate period of not less than two
years from the Effective Time, CPS's current directors and officers with an
insurance and indemnification policy that provides coverage for events occurring
at or prior to the Effective Time that is no less favorable than CPS's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, the surviving corporation will not
be required to pay an annual premium for such insurance in excess of 200% of the
last annual premium paid prior to the date of the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after any approval of the matters presented in
connection with the Merger by the shareholders of CPS or Proffitt's: (a) by
mutual written consent of CPS and Proffitt's; (b) by either Proffitt's or CPS
(provided such party is not then in material breach) if the other party shall
have failed to comply in any material respect with any of its covenants or
agreements contained in the Merger Agreement required to be complied with prior
to the date of such termination, which failure to comply has not been cured
within ten business days following receipt by such other party of written notice
of such failure to comply; (c) by either Proffitt's or CPS (provided such party
is not then in material breach) if there has been (1) a breach by the other
party (in the case of Proffitt's, including any material breach by Sub) of any
representation or warranty that is not qualified as to materiality which has the
effect of making such representation or warranty not true and correct in all
material respects, or (2) a breach by the other party (in the case of
Proffitt's, including any
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material breach by Sub) of any representation or warranty that is qualified as
to materiality, which breach in either (c)(1) or (c)(2) has not been cured
within ten business days following receipt by the breaching party of written
notice of the breach; provided, however, that with respect to clauses (b) and
(c) described above, if any such breach is curable by the breaching party
through the exercise of the breaching party's best efforts and for so long as
the breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate the Merger Agreement pursuant to either of
those clauses; (d) by Proffitt's or CPS if the Merger has not been effected on
or prior to the close of business on April 15, 1998 (the "Termination Date");
provided, however, that the right to terminate the Merger Agreement pursuant to
this clause will not be available to any party whose failure to fulfill any of
its obligations contained in the Merger Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to the
aforesaid date; (e) by Proffitt's or CPS if the shareholders of CPS do not
approve the Merger Agreement at the CPS Special Meeting; (f) by Proffitt's or
CPS if the Proffitt's Shareholder Approvals are not obtained at the Proffitt's
Special Meeting; (g) by Proffitt's or CPS prior to the approval of the Merger
Agreement by CPS's shareholders if the Board of Directors of CPS reasonably
determines that a Takeover Proposal with respect to CPS constitutes a Superior
Proposal (as defined below); provided, however, that CPS may not terminate the
Merger Agreement pursuant to this clause unless and until three business days
have elapsed following delivery to Proffitt's of a written notice of such
determination by the Board of Directors of CPS, which notice shall inform
Proffitt's of the material terms and conditions of the Takeover Proposal; (h) by
Proffitt's or CPS prior to the receipt of the Proffitt's Shareholder Approvals
if the Board of Directors of Proffitt's reasonably determines that a Takeover
Proposal with respect to Proffitt's constitutes a Superior Proposal; provided,
however that Proffitt's may not terminate the Merger Agreement pursuant to this
clause unless and until three business days have elapsed following delivery to
CPS of a written notice of such determination by the Board of Directors of
Proffitt's which notice shall inform CPS of the material terms and conditions of
the Takeover Proposal; (i) by Proffitt's prior to the approval of the Merger
Agreement by CPS's shareholders if (1) the Board of Directors of CPS has not
recommended, or has resolved not to recommend, or has modified or withdrawn its
recommendation of approval of the Merger Agreement or declaration that the
Merger is advisable and fair to and in the best interest of CPS and its
shareholders, or has resolved to do so, (2) the Board of Directors of CPS has
recommended to the shareholders of CPS any Takeover Proposal or has resolved to
do so, or (3) a tender offer or exchange offer for 30% or more of the
outstanding shares of capital stock of CPS is announced or commenced, and, after
fifteen business days, the Board of Directors of CPS fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders (including
by taking no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders); (j) by CPS prior to the receipt of the
Proffitt's Shareholder Approvals if (1) the Board of Directors of Proffitt's has
not recommended, or has modified or withdrawn its recommendation of the
Proffitt's Shareholder Approvals or declaration that the Merger is advisable and
fair to and in the best interests of Proffitt's and its shareholders, or has
resolved to do so, (2) the Board of Directors of Proffitt's shall have
recommended to the shareholders of Proffitt's any Takeover Proposal or has
resolved to do so, or (3) a tender offer or exchange offer for 30% or more of
the outstanding capital stock of Proffitt's is announced or commenced, and,
after fifteen business days, the Board of Directors of Proffitt's fails to
recommend against acceptance of such offer by its shareholders (including by
taking no position with respect to the acceptance of such offer by its
shareholders); (k) by CPS if the closing price on the NYSE of Proffitt's Common
Stock is less than $22.00 per share on each trading day in any period of fifteen
consecutive trading days beginning November 5, 1997 (a "Floor Price Event").
As used in the Merger Agreement, "Superior Proposal" means a bona fide
proposal or offer made by a third party to acquire Proffitt's or CPS pursuant to
a Takeover Proposal which a majority of the members of the Board of Directors of
Proffitt's or CPS (as the case may be) determines in its good faith reasonable
judgment (based on the advice of independent financial advisors) to be more
favorable to Proffitt's or CPS and to its shareholders than the transactions
contemplated by the Merger Agreement, provided that in
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making such determination the relevant Board considers the likelihood that such
third party is able to consummate such proposed transaction.
FEES AND EXPENSES
Regardless of whether the Merger is consummated, except as described below
upon certain events of termination of the Merger Agreement, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such costs and
expenses; provided that all printing expenses and filing fees shall be divided
equally between Proffitt's and CPS.
Notwithstanding the foregoing, CPS will pay to Proffitt's a fee of $20.0
million in cash (i) if any event referred to in clause (i) under "--Termination"
above (events relating to the failure of CPS's Board to recommend the
transaction) occurs at a time when a Floor Price Event has not occurred, the
Merger Agreement is terminated thereafter by CPS or Proffitt's (whether or not
pursuant to such clause) and prior to such termination the shareholders of CPS
did not approve the Merger Agreement (so long as Proffitt's is not in material
breach of any representation or covenant in the Merger Agreement) or (ii) if at
a time when a Floor Price Event has not occurred (A) the Merger Agreement is
terminated by CPS pursuant to clause (d) under "--Termination" above (failure to
consummate the Merger prior to April 15, 1998), where prior to the CPS Special
Meeting a Takeover Proposal with respect to CPS was made and within 12 months
after such a termination a CPS Acquisition Transaction (as defined below)
occurs; (B) (1) the Merger Agreement is terminated by CPS or Proffitt's at a
time when Proffitt's is entitled to terminate the Merger Agreement pursuant to
clause (e) under "--Termination" above (failure to obtain CPS shareholder
approval), and (2) prior to the CPS Special Meeting but after the date of the
Merger Agreement a Takeover Proposal with respect to CPS was made; (C) the
Merger Agreement is terminated by CPS or Proffitt's pursuant to clause (g) under
"--Termination" above (a Superior Proposal for CPS) and within 12 months after
such termination a CPS Acquisition Transaction occurs; or (D) the Merger
Agreement is terminated by Proffitt's pursuant to clause (i) under
"--Termination" above (events relating to the failure of CPS's Board to
recommend the transaction), following the occurrence of a CPS Acquisition
Transaction.
Notwithstanding the foregoing Proffitt's will pay to CPS a fee of $30.0
million in cash (i) if any event referred to in clause (j) under "--Termination"
above occurs (events relating to the failure of Proffitt's Board to recommend
the transaction), the Merger Agreement is terminated thereafter by CPS or
Proffitt's (whether or not pursuant to such clause) and prior to such
termination the shareholders of Proffitt's did not approve the Merger Agreement
(so long as CPS is not in material breach of any representation, warranty or
covenant in the Merger Agreement) or (ii) if (a) the Merger Agreement is
terminated by Proffitt's pursuant to clause (d) under "--Termination" above
(failure to consummate the Merger prior to April 15, 1998), a Takeover Proposal
with respect to Proffitt's is made before the Proffitt's Special Meeting and
within 12 months thereafter a Proffitt's Acquisition Transaction (as defined
herein) occurs; (b) the Merger Agreement is terminated by CPS or Proffitt's
pursuant to clause (h) under "--Termination" above (a Superior Proposal for
Proffitt's) and within 12 months after such termination a Proffitt's Acquisition
Transaction occurs; or (c) the Merger Agreement is terminated by CPS pursuant to
clause (j) under "-- Termination" above (events relating to the failure of
Proffitt's Board to recommend the transaction) following the occurrence of a
Proffitt's Acquisition Transaction.
Notwithstanding the foregoing, Proffitt's will pay to CPS a fee of $25.0
million in cash if the Merger Agreement is terminated at a time when CPS is
entitled to terminate the Merger Agreement pursuant to clause (f) under
"--Termination" above (failure to obtain Proffitt's Shareholder Approvals), and
prior to the Proffitt's Special Meeting a Takeover Proposal with respect to
Proffitt's is made.
If a Floor Price Event occurs and (w) the Board of Directors of CPS
determines not to terminate the Merger Agreement as a result of such event, (x)
the Board of Directors of CPS determine not to withdraw its recommendation, (y)
SBCWDR does not withdraw its opinion and (z) the shareholders of CPS do not
55
<PAGE>
approve the Merger Agreement, and the Merger Agreement is then terminated
pursuant to clause (e) under "--Termination" above (failure to obtain CPS
shareholder approval), Proffitt's will pay to CPS a fee of $20.0 million, such
payment to be made into an escrow account and released to CPS only if no CPS
Acquisition Transaction occurs within six months of the CPS Special Meeting, and
otherwise returned to Proffitt's.
For purposes of the Merger Agreement, a "CPS Acquisition Transaction" means
any of the following events: (A) any person, other than Proffitt's or its
affiliates, acquires or becomes the beneficial owner of 30% or more of the
outstanding shares of CPS Common Stock; (B) any new group is formed which, at
the time of formation, beneficially owns 30% or more of the outstanding shares
of CPS Common Stock, other than a group which includes or may be reasonably
deemed to include Proffitt's or its affiliates; (C) CPS enters into an
agreement, including, without limitation, an agreement in principle, providing
for a merger or other business combination involving CPS or the acquisition of a
30% or more interest in, or at least 30% of the assets, business or operations
of, CPS (other than the transactions contemplated by the Merger Agreement); or
(D) any person, other than Proffitt's or its affiliates, is granted an option or
right to acquire or otherwise become the beneficial owner of shares of CPS
Common Stock which, together with all shares of CPS Common Stock beneficially
owned by such person, results or would result in such person being the
beneficial owner of 30% or more of the outstanding shares of CPS Common Stock.
The terms "group" and "beneficial owner," as used herein, have their respective
definitions under Section 13(d) of the Exchange Act.
For purposes of the Merger Agreement, a "Proffitt's Acquisition Transaction"
means any of the following events: (A) any person acquires or becomes the
beneficial owner of 30% or more of the outstanding shares of Proffitt's Common
Stock; (B) any new group is formed which, at the time of formation, beneficially
owns 30% or more of the outstanding shares of Proffitt's Common Stock (other
than a group which includes or may be reasonably deemed to include Proffitt's or
any of its affiliates); (C) Proffitt's enters into an agreement, including,
without limitation, an agreement in principle, providing for a merger or other
business combination involving Proffitt's (other than the Merger Agreement) or
the acquisition of a 30% or more interest in, or at least 30% of the assets,
business or operations of, Proffitt's; or (D) any person, other than CPS or its
affiliates, is granted an option or right to acquire or otherwise become the
beneficial owner of shares of Proffitt's Common Stock which, together with all
shares of Proffitt's Common Stock beneficially owned by such person, results or
would result in such person being the beneficial owner of 30% or more of the
outstanding shares of Proffitt's Common Stock.
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by or pursuant
to action taken by their respective Boards of Directors, at any time before or
after approval of the Merger Agreement and the transactions contemplated thereby
by the shareholders of Proffitt's and CPS, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval.
WAIVER
The Merger Agreement provides that, at any time prior to the Effective Time,
the parties thereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained therein which may legally be waived.
56
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to (i) the Merger under the pooling-of-interests method of
accounting and (ii) the merger of Proffitt's and Parisian accounted for as a
purchase. These pro forma financial statements have been prepared by the
managements of Proffitt's and CPS based upon their respective financial
statements, as well as available information and certain assumptions which the
managements believe are reasonable. Pro forma combined per share amounts are
based on an assumed Conversion Number of 1.75 shares of Proffitt's Common Stock
for each share of CPS Common Stock. The unaudited pro forma condensed combined
income statements, which include results of operations as if the Merger had been
consummated, do not reflect Merger expenses anticipated to be incurred or the
effects of potential increased revenues or operating synergies and cost savings
anticipated to result from the Merger. These pro forma financial statements are
presented for illustrative purposes only, and therefore are not necessarily
indicative of the operating results and financial position that might have been
achieved had the Merger occurred as of an earlier date, nor are they necessarily
indicative of operating results and financial position which may occur in the
future.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
notes thereto in the companies' separate Annual Reports on Form 10-K for the
year ended February 1, 1997 and Quarterly Reports on Form 10-Q for the periods
ended May 3, 1997, and August 2, 1997 incorporated by reference herein, and the
consolidated financial statements and notes thereto of Parisian incorporated by
reference herein. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
57
<PAGE>
COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE YEAR ENDED JANUARY 28, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER PRO FORMA
PROFFITT'S(1) CPS(2) ADJUSTMENTS(3) TOTAL
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
Net Sales.............................................. $ 1,513,444 $ 1,161,612 $ 2,675,056
Costs and expenses:
Cost of sales........................................ 986,028 745,360 $ 34,894(4) 1,766,282
Selling, general, administrative and other operating
expenses........................................... 475,031 333,175 43,774(5) 816,586
(35,394)(4)
Settlement of reorganization payables................ (18,300) (18,300)
------------ ------------ ------- ------------
Operating income................................... 52,385 101,377 (43,274) 110,488
Other income (expense):
Finance charge income, net of allocation to
purchasers of accounts receivables................. 27,934 43,774(5) 71,708
Interest expense..................................... (23,286) (17,624) (40,910)
Other income, net.................................... 4,826 4,826
------------ ------------ ------- ------------
Income before provision for income taxes........... 61,859 83,753 500 146,112
Provision for income taxes............................. 24,411 33,501 200(6) 58,112
------------ ------------ ------- ------------
Net income......................................... 37,448 50,252 300 88,000
Preferred stock dividends.............................. 1,694 1,694
------------ ------------ ------- ------------
Net income available to common shareholders........ $ 35,754 $ 50,252 $ 300 $ 86,306
------------ ------------ ------- ------------
------------ ------------ ------- ------------
Earnings per common share(7):
Primary.............................................. $ 0.78 $ 1.06
Fully diluted........................................ $ 0.76 $ 1.03
Weighted average common shares(7):
Primary.............................................. 46,092 35,504(8) 81,596
Fully diluted........................................ 52,602 35,532(8) 88,134
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Income Statements
58
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE YEAR ENDED FEBRUARY 3, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PROFFITT'S MERGER PRO FORMA
(1) CPS (2) ADJUSTMENTS (3) TOTAL
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
Net Sales................................................. $ 1,661,056 $ 1,083,812 $ 2,744,868
Costs and expenses:
Cost of sales........................................... 1,087,619 700,435 $ 34,054(4) 1,822,108
Selling, general, administrative and other operating
expenses.............................................. 529,559 306,904 45,800(5) 848,609
(33,654)(4)
Expenses related to Younkers takeover................... 3,182 6,835 10,017
Long-lived assets impairment or disposition............. 19,121 (55,179) (36,058)
Merger, restructuring and integration costs............. 20,822 20,822
Settlement of reorganization payables................... (725) (725)
------------ ------------ --------------- ------------
Operating income...................................... 753 125,542 (46,200) 80,095
Other income (expense):
Finance charge income, net of allocation to purchasers
of accounts receivables............................... 31,273 45,800(5) 77,073
Interest expense........................................ (29,389) (17,974) (47,363)
Other income, net....................................... 4,051 4,051
------------ ------------ --------------- ------------
Income before provision for income taxes and
extraordinary loss on the early extinguishment of
debt................................................ 6,688 107,568 (400) 113,856
Provision for income taxes................................ 6,047 43,027 (160)(6) 48,914
------------ ------------ --------------- ------------
Income before extraordinary loss on the early
extinguishment of debt.................................. 641 64,541 (240) 64,942
Extraordinary loss on the early extinguishment of debt.... (2,060) (2,060)
------------ ------------ --------------- ------------
Net income (loss)..................................... (1,419) 64,541 (240) 62,882
Preferred stock dividends................................. 1,950 1,950
------------ ------------ --------------- ------------
Net income (loss) available to common shareholders.... $ (3,369) $ 64,541 $ (240) $ 60,932
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
Earnings (loss) per common share before extraordinary
loss:
Primary............................................... $ (0.03) $ 0.82
Fully diluted......................................... $ (0.03) $ 0.82
Earnings (loss) per common share (7):
Primary............................................... $ (0.08) $ 0.80
Fully diluted......................................... $ (0.08) $ 0.80
Weighted average common shares (7):
Primary............................................... 46,314 30,132(8) 76,446
Fully diluted......................................... 46,332 30,132(8) 76,464
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Income Statements
59
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE YEAR ENDED FEBRUARY 1, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PROFFITT'S/ PRO FORMA
MERGER CPS PRO ACQUISITION PRO FORMA
PROFFITT'S(1) CPS(2) ADJUSTMENTS(3) FORMA PARISIAN(1) ADJUSTMENTS(9) TOTAL
------------- ---------- --------------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $ 1,889,779 $1,102,826 $ 2,992,605 $ 431,176 $3,423,781
Costs and expenses:
Cost of sales......... 1,230,454 700,080 $ 33,388(4) 1,963,922 279,699 $ 1,649(10) 2,245,270
Selling, general,
administrative and
other operating
expenses............ 582,626 323,746 45,734(5) 918,418 150,718 (1,649)(10) 1,067,534
(33,688)(4) (1,284)(11)
1,331(12)
Long-lived assets
impairment or
disposition......... (1,094) 2,500(13) 1,406 1,406
Merger, restructuring
and integration
costs............... 15,929 15,929 15,929
Settlement of
reorganization
payables............ (1,280) (1,280) (1,280)
------------- ---------- --------------- ----------- ------------ ------- ----------
Operating income.... 61,864 80,280 (47,934) 94,210 759 (47) 94,922
Other income (expense):
Finance charge income,
net of allocation to
purchasers of
accounts
receivable.......... 32,305 45,734(15) 78,039 5,578 83,617
Interest expense...... (26,756) (15,910) (42,666) (11,932) (6,014)(15) (60,612)
Other income
(expense), net...... 1,572 1,540 (14,892)(14) (11,780) 1,837 (9,943)
------------- ---------- --------------- ----------- ------------ ------- ----------
Income (loss) before
provision for
income taxes...... 68,985 65,910 (17,092) 117,803 (3,758) (6,061) 107,984
Provision for income
taxes................. 31,586 26,100 (6,800)(6) 50,886 (799) (1,389)(6) 48,698
------------- ---------- --------------- ----------- ------------ ------- ----------
Net income (loss)... 37,399 39,810 (10,292) 66,917 (2,959) (4,672) 59,286
Preferred stock
dividends............. 796 796 796
Payment for early
conversion of
preferred stock....... 3,032 3,032 3,032
------------- ---------- --------------- ----------- ------------ ------- ----------
Net income (loss)
available to
common
shareholders...... $ 33,571 $ 39,810 $(10,292) $ 63,089 $ (2,959) $(4,672) $ 55,458
------------- ---------- --------------- ----------- ------------ ------- ----------
------------- ---------- --------------- ----------- ------------ ------- ----------
Earnings per common
share(7):
Primary............... $0.66 $0.79 $0.66
Fully diluted......... $0.71 $0.81 $0.69
Weighted average common
shares(7):
Primary............... 51,128 29,167(8) 80,295 4,186(16) 84,481
Fully diluted......... 56,408 29,201(8) 85,609 4,186(16) 89,795
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Income Statements
60
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED AUGUST 3, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MERGER PROFFITT'S/ ACQUISITION
ADJUSTMENTS CPS PRO PARISIAN ADJUSTMENTS PRO FORMA
PROFFITT'S(1) CPS (2) (3) FORMA (1) (9) TOTAL
------------- -------- -------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $708,538 $461,755 $ 1,170,293 $307,954 $1,478,247
Costs and expenses:
Cost of sales................ 458,240 295,206 $ 16,239(4) 769,685 192,560 $ 1,260(10) 963,505
Selling, general,
administrative and other
operating expenses......... 237,083 150,908 22,432(5) 394,584 108,976 (1,260)(10) 502,386
(15,839)(4) (884)(11)
970(12)
Merger restructuring and
integration costs.......... 4,270 4,270 4,270
Long-lived assets impairment
or disposition............. (2,260) 2,500(13) 240 240
------------- -------- -------------- ----------- ----------- ----------- ----------
Operating income......... 11,205 15,641 (25,332) 1,514 6,418 (86) 7,846
Other income (expense):
Finance charge income, net of
allocation to purchasers of
accounts receivable........ 14,879 22,432(5) 37,311 4,196 41,507
Interest expense............. (9,911) (7,135) (17,046) (8,506) (4,396)(15) (29,948)
Other income (expense), net.. 713 12,065 (14,892)(14) (2,114) 277 (1,837)
------------- -------- -------------- ----------- ----------- ----------- ----------
Income before provision
for income taxes....... 16,886 20,571 (17,792) 19,665 2,385 (4,482) 17,568
Provision for income taxes..... 7,045 8,105 (7,000)(6) 8,150 1,415 (1,039)(6) 8,526
------------- -------- -------------- ----------- ----------- ----------- ----------
Net income............... 9,841 12,466 (10,792) 11,515 970 (3,443) 9,042
Preferred stock dividends...... 796 796 796
Payment for early conversion of
preferred stock.............. 3,032 3,032 3,032
------------- -------- -------------- ----------- ----------- ----------- ----------
Net income available to
common shareholders.... $ 6,013 $ 12,466 $(10,792) $ 7,687 $ 970 $(3,443) $ 5,214
------------- -------- ----------- ----------- ----------
------------- -------- -------------- ----------- ----------- ----------- ----------
-------------- -----------
Earnings per common share (7):
Primary...................... $ 0.13 $ 0.10 $ 0.06
Fully diluted................ $ 0.20 $ 0.14 $ 0.11
Weighted average common
shares(7):
Primary...................... 47,740 29,384(8) 77,124 6,094(16) 83,218
Fully diluted................ 50,194 29,435(8) 79,629 6,094(16) 85,723
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Income Statements
61
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED AUGUST 2, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
PROFFITT'S MERGER PRO FORMA
(1) CPS (2) ADJUSTMENTS (3) TOTAL
------------ ---------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................................. $ 1,018,657 $ 501,899 $ 1,520,556
Costs and expenses:
Cost of sales............................................ 648,755 322,023 $ 16,646(4) 987,424
Selling, general, and administrative expenses............ 337,349 164,545 25,347(5) 510,295
(16,946)(4)
Merger, restructuring and integration costs.............. 3,102 3,102
Long-lived assets impairment or disposition.............. 30 30
------------ ---------- --------------- ------------
Operating income....................................... 29,421 15,331 (25,047) 19,705
Other income (expense):
Finance charge income, net of allocation to purchasers of
accounts receivables................................... 21,647 25,347(5) 46,994
Interest expense......................................... (21,691) (8,318) (30,009)
Other income, net........................................ 389 389
------------ ---------- --------------- ------------
Income before provision for income taxes and
extraordinary loss................................... 29,766 7,013 300 37,079
Provision for income taxes................................. 12,844 2,777 120(6) 15,741
------------ ---------- --------------- ------------
Net income before extraordinary loss................... 16,922 4,236 180 21,338
Extraordinary loss on early extinguishment of debt, net of
tax...................................................... 1,120 1,120
------------ ---------- --------------- ------------
Net income............................................. $ 15,802 $ 4,236 $ 180 $ 20,218
------------ ---------- --------------- ------------
------------ ---------- --------------- ------------
Earnings per common share before extraordinary loss
Primary.................................................. $ 0.30 $ .25
Fully diluted............................................ $ 0.29 $ .25
Earnings per common share (7)
Primary.................................................. $ 0.28 $ 0.23
Fully diluted............................................ $ 0.27 $ 0.23
Weighted average common shares (7).........................
Primary.................................................. 57,374 28,838(8) 86,212
Fully diluted............................................ 57,984 28,898(8) 86,882
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Income Statements
62
<PAGE>
PROFFITT'S, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENTS
(1) The historical income statements of Proffitt's do not reflect the operating
results of Parisian prior to Proffitt's acquisition of Parisian on October
11, 1996. Therefore, Parisian's historical income statements for the year
ended February 1, 1997 and for the six month period ended August 3, 1996,
have been included in the pro forma condensed combined income statements for
those periods. The pro forma adjustments for the Parisian acquisition
reflect the impact of "push down accounting" on the historical results of
Parisian.
The historical income statements of Proffitt's do not reflect the operating
results of Macco prior to Proffitt's acquisition of Macco on March 31, 1994.
(2) Certain reclassifications have been made to CPS's income statements to
conform to Proffitt's presentation.
(3) Pro forma merger adjustments do not reflect certain anticipated
non-recurring charges of approximately $6.0 million related to direct costs
of the Merger, nor do they include any charges or benefits related to the
combination of the operations of the businesses of Proffitt's and CPS.
(4) To conform CPS's direct cost of accounting for inventory to the full cost
method used by Proffitt's and to conform CPS's presentation of certain
expenses with that of Proffitt's.
(5) To conform CPS's presentation of finance charge income with that of
Proffitt's.
(6) To reflect the income tax impact on the pro forma merger and acquisition
adjustments using an effective rate of 40%.
(7) Earnings per share and weighted average common shares have been restated for
the October 1997 2-for-1 stock split.
(8) To reflect the weighted average common shares of Proffitt's that would have
been held by CPS's shareholders, based on an assumed conversion number of
1.75 shares of Proffitt's Common Stock for each share of CPS Common Stock.
(9) Pro forma adjustments do not include any charges or benefits related to the
integration of the operations of the businesses of Proffitt's and Parisian.
(10) To conform Parisian's direct cost method of accounting for inventory to the
full cost method used by Proffitt's and to conform Parisian's presentation
of certain expenses with that of Proffitt's.
(11) To conform Parisian's accounting method for store preopening costs of
deferral and amortization over 12 months to Proffitt's accounting method of
expending such costs as incurred.
(12) To reflect the increase in depreciation and amortization resulting from the
purchase price allocation for the Parisian acquisition. Goodwill will be
amortized over 40 years. Buildings will be depreciated over approximately 42
years. Land improvements will be depreciated over 20 years. Depreciation for
building and leasehold improvements and furniture, fixtures and equipment
are based on estimated remaining useful lives not to exceed 20 years for
building and leasehold improvements or 15 years for furniture, fixtures and
equipment with consideration for anticipated future remodels.
(13) To reclassify the gain realized by Proffitt's on the sale of two stores to
CPS.
(14) To reclassify the gain realized by CPS on the sale of Proffitt's common
stock in March 1996 of $14.9 million to paid-in capital.
(15) To reflect interest expense on Parisian acquisition debt of approximately
$119 million at 7.4% per annum for the periods ended February 1, 1997 and
August 3, 1996, assuming that the debt was outstanding throughout the
periods.
(16) To reflect the Proffitt's Common Stock and common stock equivalents issued
to Parisian shareholders.
63
<PAGE>
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
AUGUST 2, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER PRO FORMA
PROFFITT'S CPS ADJUSTMENTS TOTAL
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................... $ 15,813 $ 17,887 $ 33,700
Net trade accounts receivable, less receivables sold to third parties... 79,978 237,398 317,376
Merchandise inventories................................................. 528,323 198,502 $ 5,700(1) 732,525
Deferred income taxes................................................... 15,709 6,920 (2,300)(1) 20,329
Other current assets.................................................... 43,942 12,710 56,652
---------- -------- ----------- ----------
Total current assets.................................................. 683,765 473,417 3,400 1,160,582
Property and equipment, net............................................... 526,227 190,220 (2,500)(2) 713,947
Net deferred income taxes................................................. 39,095 (39,095)(3)
Goodwill and trade names, net............................................. 273,844 273,844
Other assets.............................................................. 28,978 10,785 39,763
---------- -------- ----------- ----------
$1,512,814 $713,517 $(38,195) $2,188,136
---------- -------- ----------- ----------
---------- -------- ----------- ----------
LIABILITY AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................................. $ 179,866 $ 66,903 $ 246,769
Accrued expenses and other current liabilities.......................... 100,395 96,161 196,556
Current portion of long-term debt....................................... 7,356 2,765 10,121
---------- -------- ----------- ----------
Total current liabilities............................................. 287,617 165,829 453,446
Senior debt............................................................... 338,548 139,825 478,373
Deferred income taxes..................................................... 66,666 $(39,095)(3) 26,571
(1,000)(2)
Other long-term liabilities............................................... 50,281 49,989 100,270
Subordinated debt......................................................... 197,511 197,511
Shareholders' equity...................................................... 572,191 357,874 3,400(1) 931,965
(1,500)(2)
---------- -------- ----------- ----------
$1,512,814 $713,517 $(38,195) $2,188,136
---------- -------- ----------- ----------
---------- -------- ----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
64
<PAGE>
PROFFITT'S, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) To conform the CPS's inventory valuation to the Proffitt's method of valuing
inventory which includes certain purchasing and distribution costs, and to
adjust current deferred income taxes accordingly.
(2) To reduce property and equipment to historical cost by eliminating the gain
recognized on the sales of certain stores to CPS by Proffitt's in fiscal
1996. Deferred taxes and shareholders equity are also adjusted for the
impact of eliminating the gain.
(3) To reclassify deferred income taxes.
65
<PAGE>
DESCRIPTION OF PROFFITT'S CAPITAL STOCK
GENERAL
As of the date hereof, Proffitt's authorized capital stock consists of
100,000,000 shares of Common Stock, par value $0.10 per share, and 10,000,000
shares of preferred stock, par value $1.00 per share (the "Proffitt's Preferred
Stock"). In the event the Charter Amendment proposed hereunder is approved,
Proffitt's authorized capital stock will comprise 300,000,000 shares of
Proffitt's Common Stock and 10,000,000 shares of Proffitt's Preferred Stock. As
of December 5, 1997, 61,433,314 shares of Proffitt's Common Stock and no shares
of Proffitt's Preferred Stock were issued and outstanding. The following summary
description of the capital stock of Proffitt's does not purport to be complete
and is qualified in its entirety by reference to Proffitt's Amended and Restated
Charter and to the TBCA. See "AVAILABLE INFORMATION."
PROFFITT'S COMMON STOCK
Holders of Proffitt's Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of shareholders of Proffitt's and do not
have cumulative voting rights. Accordingly, holders of a majority of the shares
of Proffitt's Common Stock entitled to vote in any election of directors of
Proffitt's may elect all of the directors standing for election. Holders of
Proffitt's Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors of Proffitt's out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
Proffitt's Preferred Stock. See "SUMMARY--Comparative Stock Prices and
Dividends." Upon the liquidation, dissolution or winding up of Proffitt's, the
holders of Proffitt's Common Stock are entitled to receive ratably the net
assets of Proffitt's available after payment of all debts and other liabilities
and subject to the prior rights of outstanding Proffitt's Preferred Stock.
Holders of Proffitt's Common Stock have no preemptive, subscription, redemption
or conversion rights. All outstanding shares of Proffitt's Common Stock are duly
authorized, validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of Proffitt's Common Stock are subject to,
and may be adversely affected by, the rights of the holders of any series of
Proffitt's Preferred Stock, whether currently outstanding or designated and
issued in the future.
PROFFITT'S PREFERRED STOCK
The Board of Directors of Proffitt's has the authority to issue the
Proffitt's Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences and rights of the shares of each class or
series, including dividend rates, conversion rights, voting rights, terms of
redemption and liquidation preferences and the number of shares constituting
each such class or series, without any further vote or action by the
shareholders of Proffitt's. The ability of the Board of Directors of Proffitt's
to issue Proffitt's Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of
Proffitt's.
As of December 5, 1997, 1,000,000 shares of the Proffitt's Preferred Stock
were designated as Series C Junior Preferred Stock ("Series C Preferred Stock")
to be issued under certain circumstances involving a potential change in control
of Proffitt's. See "--Rights Agreement." Each share of the Series C Preferred
Stock, if issued, would bear a dividend rate of 200 times the aggregate amount
per share of any dividend declared on Proffitt's Common Stock. Each share of
Series C Preferred Stock would entitle the holder to 200 votes on all matters
submitted to a vote of the shareholders of Proffitt's. Such shares provide for a
liquidation preference of the greater of $100 per share or an aggregate amount
per share equal to 200 times the aggregate amount to be distributed per share to
holders of Proffitt's Common Stock. No shares of Series C Preferred Stock have
been issued, and management is aware of no facts suggesting that issuance of
such shares may be imminent. If the Charter Amendment is approved, Proffitt's
will increase
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the number of authorized shares of Series C Preferred Stock to 1,500,000. An
increase in the number of authorized shares of Series C Preferred Stock does not
require approval of Proffitt's shareholders under the TBCA.
RIGHTS AGREEMENT
On March 28, 1995, the Board of Directors of Proffitt's declared a dividend
distribution of one right (a "Right") for each share of Proffitt's Common Stock.
As adjusted for a two-for-one stock split payable to shareholders of record as
of October 15, 1997, each Proffitt's Right entitles the holder to purchase from
Proffitt's one two-hundredth (1/200) of a share of Series C Preferred Stock at a
price of $85 per one one-hundredth (1/100) of a share. See "--Preferred Stock."
Such Proffitt's Rights will attach to shares of Proffitt's Common Stock issued
to CPS shareholders in connection with the Merger. Initially, the Proffitt's
Rights will not be exercisable, but will become exercisable upon the acquisition
by any person of, or the announcement of the intention of any person to commence
a tender or exchange offer upon the successful consummation of which such person
would be the beneficial owner of, 20% or more of the shares of Proffitt's Common
Stock then outstanding, without the prior approval of the Proffitt's Board of
Directors. The Proffitt's Rights are generally designed to deter coercive
takeover tactics and to encourage all persons interested in potentially
acquiring control of Proffitt's to treat each shareholder on a fair and equal
basis.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Proffitt's Rights Agreement and certain provisions of Proffitt's Amended
and Restated Charter may tend to discourage certain kinds of unsolicited
takeover bids for Proffitt's, including some tender offers which shareholders
may feel would be in their best interests, and may tend to perpetuate present
management. See "COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK AND
CPS COMMON STOCK--Classified Board of Directors, --Cumulative Voting, and
- --Removal of Directors." Certain of the provisions of the TBCA may be deemed to
have an "anti-takeover" effect. These provisions affect shareholder rights and
should be given careful attention. They may have the effect of delaying a tender
offer or takeover attempt that a shareholder might consider in his or her best
interest, including those attempts that might result in a premium over the
current market price for the shares held by shareholders. See "COMPARISON OF
RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK AND CPS COMMON STOCK--Fair Price
Provisions, --Control Share Acquisition Act, --Business Combination Statute,
- --Investor Protection Act, --Authorized Corporation Protection Act, and
- --Greenmail Act."
REGISTRATION RIGHTS
Certain former shareholders of Parisian have the right, subject to certain
conditions, to require Proffitt's to use its best efforts to register for sale
under the Securities Act the shares of Proffitt's Common Stock issued to such
shareholders in the acquisition of Parisian (a "Demand Registration"). Such
shareholders also have the right, subject to certain conditions, to require
Proffitt's to include their Proffitt's Common Stock in a registration statement
relating to any securities proposed to be registered by Proffitt's, whether on
its own behalf or on behalf of another holder of Proffitt's Common Stock (a
"Piggyback Registration"). Generally, the former Parisian shareholders
requesting a registration will be required to pay, pro rata, the expenses of a
Demand Registration and the incremental expenses of including their shares in a
Piggyback Registration.
REDEMPTION OF DEBENTURES
On September 5, 1997, Proffitt's called for redemption on October 6, 1997
(the "Redemption Date"), all of its Debentures. As of September 4, 1997, the
aggregate principal amount of Debentures outstanding was $86,250,000. The
holders of Debentures had the option to convert the Debentures into Proffitt's
Common Stock at a conversion price of $42.70 per share, sell the Debentures in
the open market or allow
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the Debentures to be redeemed on October 6, 1997. Pursuant to the terms of the
Indenture between Proffitt's and Union Planters National Bank, as Trustee, dated
as of October 26, 1993, holders of the Debentures were entitled to receive upon
redemption 103.1667% of the principal amount thereof, plus interest accruing
after May 1, 1997 to the Redemption Date. Concurrently with the call for
redemption, Proffitt's made a public offering of Proffitt's Common Stock in a
number sufficient to raise the funds to pay the aggregate redemption price of
the Debentures redeemed. All of the Debentures have been redeemed or converted
and a total of 4,039,950 shares (adjusted for the October 1997 two-for-one stock
split) of Proffitt's Common Stock were issued on conversion of Debentures or
pursuant to the public offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Proffitt's Common Stock is Union
Planters National Bank.
COMPARISON OF RIGHTS OF HOLDERS OF PROFFITT'S COMMON STOCK
AND CPS COMMON STOCK
The following summary compares certain rights of Proffitt's shareholders
under the TBCA and Proffitt's Amended and Restated Charter and By-laws with the
rights of CPS shareholders under the IBCA and CPS's Restated Articles and
By-Laws.
Proffitt's is a Tennessee corporation subject to the provisions of the TBCA.
CPS is a Illinois corporation subject to the provisions of the IBCA.
Shareholders of CPS, whose rights are governed by CPS's Restated Articles and
By-Laws and by the IBCA, will, upon consummation of the Merger, become
shareholders of Proffitt's whose rights will then be governed by Proffitt's
Amended and Restated Charter and By-Laws of Proffitt's and by the TBCA. The
following is a summary of the material differences in the rights of shareholders
of Proffitt's and CPS and is qualified in its entirety by reference to the
governing law and the Articles or Charter and By-laws of each of Proffitt's and
CPS. Certain topics discussed below are also subject to federal law and the
regulations promulgated thereunder.
CLASSIFIED BOARD OF DIRECTORS
Proffitt's Amended and Restated Charter provides for a three-class Board of
Directors. Directors shall serve three-year terms expiring upon the election and
qualification of their successors. The classes of directors shall serve rolling
terms; the term of one class expires at each annual shareholders' meeting. Each
director shall serve until his or her successor is elected and qualified, or
until his or her earlier resignation, removal from office, death or incapacity.
Vacancies on the Board may be filled by a vote of the majority of the
directors then in office, although the number may be less than a quorum, or by a
sole remaining director. The term of a director elected to fill a vacancy
expires at the next annual shareholders' meeting. If the number of directors is
changed, the Board shall determine to which class of directors the increase or
decrease shall be apportioned. No decrease in the number of directors shall have
the effect of shortening the term of any incumbent director.
The affirmative vote of the holders of at least 80% of the voting power of
the shares of the then outstanding voting stock, voting together as a single
class, shall be required to amend or repeal, or adopt any provisions
inconsistent with this provision of the Amended and Restated Charter.
Proffitt's classified Board of Directors extends the time required for
holders of a majority of shares to make any change in the composition of a
majority of the Proffitt's Board. It would take at least two annual meetings of
Proffitt's shareholders to effect a change in the majority control of the Board.
The classified Board may tend to discourage certain unsolicited takeover offers.
CPS's Restated Articles do not provide for a classified board of directors.
Directors of CPS each serve for a term of one year.
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CUMULATIVE VOTING
Pursuant to IBCA Section 5/7.40, CPS has adopted cumulative voting of shares
for directors in CPS's Restated Articles. CPS's Restated Articles also provide
that a plurality of the votes cast at a meeting at which a quorum is present
shall elect a director. Cumulative voting allows each shareholder to vote the
number of shares owned by the shareholder, multiplied by the number of directors
to be elected. The shareholder may distribute those votes in any proportion
among the candidates, including casting all of such votes for a single nominee
for director, as the shareholder sees fit. Under cumulative voting, it is
possible for representation on the CPS Board of Directors to be obtained by an
individual or group of individuals who own less than a majority of the CPS
Common Stock.
Shareholders of Proffitt's do not have cumulative voting rights.
Shareholders owning in the aggregate a majority of the outstanding shares of
Proffitt's Common Stock have the power to elect all of Proffitt's directors. The
lack of cumulative voting could discourage the accumulation of blocks of
Proffitt's Common Stock and therefore could tend to make temporary increases in
the market price of Proffitt's Common Stock, which could result therefrom, less
likely to occur and, additionally, could have the effect of discouraging
unsolicited takeover proposals for Proffitt's.
REMOVAL OF DIRECTORS
The IBCA provides that one or more directors may be removed, with or without
cause, at a meeting of shareholders, by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote unless a corporations's
articles of incorporation or by-laws provide otherwise. Since CPS's Restated
Articles and By-Laws do not provide otherwise with respect to removal, members
of the Board of Directors of CPS may be removed with or without cause.
Additionally, in the case of a corporation having cumulative voting (like CPS),
under the IBCA, if less than the entire board is to be removed, no director may
be removed, with or without cause, if the votes cast against his or her removal
would be sufficient to elect him or her cumulatively at an election of the
entire board of directors. Any vacancies on the board of directors may be filled
at an annual or special meeting of the shareholders. As permitted by the IBCA,
CPS's By-Laws provide that the board of directors may fill vacancies arising
between meetings of shareholders due to an increase in the number of directors
or otherwise.
Proffitt's Charter and By-laws provide that any or all directors may be
removed only for cause (as defined in the TBCA) by a vote of a majority of the
shareholders entitled to vote on such proposal. Proffitt's shareholders, unlike
CPS shareholders, are unable to remove a director without cause and hence would
have more difficulty in forcing changes in the composition of the majority of
the Board of Directors of Proffitt's. Such a provision would encourage any
person who may be attempting to take over Proffitt's, including those holding a
majority of shares, to deal with the then current Board of Directors of
Proffitt's. Such a provision could have the effect of discouraging unsolicited
takeover proposals for Proffitt's.
NUMBER OF DIRECTORS
The number of members of the CPS Board of Directors may be increased or
decreased from time to time by a resolution of the CPS Board of Directors, but
may not be less than two nor exceed seven.
The number of members of the Proffitt's Board of Directors may be increased
or decreased by the Proffitt's Board of Directors through an amendment to the
By-Laws; provided, however, that the adoption of such an amendment by the
Proffitt's Board of Directors requires the vote of a majority of the entire
Board. The Proffitt's Board of Directors may be comprised of up to fifteen
members.
SPECIAL MEETINGS
CPS's By-Laws authorize the directors, the Chairman of the Board and Chief
Executive Officer, the Secretary, or any officer instructed by the directors, a
majority of the CPS Board of Directors, or the
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holders of one-fifth of the shares outstanding, to call a special meeting of
shareholders. Such a call shall state the purpose or purposes of the proposed
special meeting and no other business may be considered at such meeting. See
"OTHER INFORMATION AND SHAREHOLDER PROPOSALS."
Proffitt's By-Laws authorize the Chairman of the Board, the President and
the Board of Directors to call a special meeting of shareholders. The Charter
and By-Laws also provide that a special meeting of shareholders shall be called
at the written request of at least 25% of the outstanding shares of Proffitt's
entitled to vote at the special meeting.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
The IBCA provides that the recommendation of the CPS Board of Directors and,
unless a corporation's article of incorporation provide otherwise, the approval
of two-thirds of the shares of CPS Common Stock entitled to vote thereon is
required to effect (i) a merger or consolidation in certain cases, (ii) an
amendment to the Restated Articles of CPS in most instances, and (iii) a sale,
lease or exchange of all or substantially all of CPS's assets other than in the
usual course of business. The Restated Articles require the approval of a
majority of the outstanding shares entitled to vote on any proposal described in
(i), (ii) or (iii).
The TBCA provides that the approval of the Proffitt's Board of Directors and
of a majority of the outstanding shares of Proffitt's Common Stock entitled to
vote thereon would also generally be required to approve a merger or to sell,
lease, exchange or otherwise dispose of substantially all of Proffitt's assets.
In accordance with the TBCA, submission by the Proffitt's Board of Directors of
any such action may be conditioned on any basis, including without limitation,
conditions regarding a super-majority voting requirement or that holders of no
more than a certain number of shares indicate that they will seek dissenters'
rights, if such rights are otherwise available.
ACTION BY WRITTEN CONSENT
Unless otherwise prohibited by the articles of incorporation, the IBCA
provides for action without shareholder meetings and without a vote, if a
written consent or consents setting forth the action to be taken is signed (i)
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted (subject to the
satisfaction of certain pre- and post-consent notice requirements to the
shareholders who would be entitled to vote on the subject matter of the consent)
or (ii) by all the shareholders entitled to vote with respect to the subject
matter thereof.
The TBCA provides that action may be taken without a shareholder meeting and
vote if all shareholders entitled to vote on the action consent to taking such
action without a meeting. Action by written consent of the Proffitt's
shareholders is impracticable given the number of holders of Proffitt's Common
Stock.
VOTING OF SHARES HELD BY SUBSIDIARIES
The IBCA does not restrict the ability of a subsidiary owning shares of its
parent to vote those shares. CPS's subsidiaries have agreed to limit their
ability to vote their Subsidiary Shares. See "THE SPECIAL MEETINGS--Vote
Required--CPS." Pursuant to the TBCA, generally, shares of Proffitt's owned by
its subsidiaries cannot be voted.
AMENDMENT OF BY-LAWS
The IBCA provides that a corporation's board of directors or its
shareholders may amend or repeal by-laws, subject to the corporation's articles
of incorporation reserving such powers exclusively to the
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shareholders. CPS's Restated Articles do not reserve any such power exclusively
to the shareholders. CPS's By-Laws do provide for by-law amendments by the Board
of Directors acting alone.
Proffitt's By-Laws may be modified, altered or repealed and new By-Laws may
be adopted by the vote of a majority of all shareholders or by the majority vote
of the Board of Directors.
VOLUNTARY DISSOLUTION
The IBCA provides that CPS may be dissolved by the approval of the CPS Board
of Directors in limited circumstances, or (unless a corporation's articles of
incorporation provide otherwise) by a vote of the holders of two-thirds of the
shares entitled to vote on dissolution. CPS's Restated Articles provide that a
majority of the outstanding shares of CPS Common Stock entitled to vote on a
dissolution may also dissolve CPS without Board of Director approval or action.
The IBCA also allows all the shareholders of CPS, acting by unanimous written
consent to effect a dissolution of CPS without the approval of the CPS Board of
Directors.
The TBCA provides that Proffitt's may be dissolved if the Proffitt's Board
of Directors proposes dissolution and a majority of the outstanding shares of
Proffitt's stock entitled to vote thereon approves. In accordance with the TBCA
the Proffitt's Board of Directors may condition its submission of a proposal for
dissolution on any basis, including a greater shareholder vote requirement.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The IBCA permits a corporation to indemnify directors, officers, employees
or agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which the officer or director had no
reasonable cause to believe was unlawful. The IBCA provides that a corporation
may advance expenses of defense and must reimburse a successful defendant for
his expenses and permits a corporation to purchase and maintain liability
insurance for its directors and officers. The IBCA also requires that a
corporation may pay expenses incurred in defending a civil or criminal action,
suit or proceeding in advance of the final disposition of such action, suit or
proceeding only upon receipt of an undertaking by or on behalf of the potential
indemnitee to repay such amount if it is determined the officer, director,
employee or agent is not entitled to indemnification under the IBCA. CPS
includes in CPS's Restated Articles and By-Laws, an indemnification provision
similar to the IBCA.
The TBCA provides in certain situations for mandatory and permissive
indemnification of directors and officers in substantially the same manner. The
TBCA provides that statutory indemnification is not to be deemed exclusive of
any other rights to which a director or officer seeking indemnification may be
entitled; provided, however, that no indemnification may be made if a final
adjudication adverse to the director or officer establishes his liability (1)
for any breach of loyalty to the corporation or its shareholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; or (3) for unlawful distributions.
CORPORATE CONSTITUENCIES
The IBCA provides that directors and officers, in discharging their duties
to consider the best long-term and short-term interests of the corporation, may
consider the effects of any action (including, without limitation, actions which
may involve or relate to a change or potential change in control of the
corporation) upon the corporation's employees, suppliers and customers and upon
the communities in which offices or other establishments of the corporation are
located. The TBCA has a similar provision.
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FAIR PRICE PROVISIONS
Section 5/7.85 of the IBCA includes a "Fair Price" statute (the "Illinois
Fair Price Statute") which applies to certain public companies, including CPS,
as well as corporations which specifically adopt the provision in their articles
of incorporation. If applicable, the statute requires the approval of both (i)
80% or more of the combined voting power of the outstanding shares of the
corporation's stock voting together as one class and (ii) a majority of the
combined voting power of the outstanding shares of the corporation's stock held
by disinterested shareholders for any business combinations. For purposes of the
Illinois Fair Price Statute, (i) "business combination" has the same meaning as
used for purposes of the Illinois Business Combination Act (as defined herein),
see "--Business Combination Statutes," and (ii) "interested shareholders" are
defined as, among other things, certain beneficial owners of 15% or more of the
outstanding voting shares of the corporation. If either (i) two-thirds of the
disinterested directors of the corporation approve the business combination or
(ii) the price and procedure requirements of the Illinois Fair Price Statute are
met, the additional shareholder approvals described above are not required and
the regular voting requirements of the IBCA and CPS's Restated Articles apply
instead. The price and procedure requirements provide, among other things, that
the consideration to be received by all holders of common shares shall be at
least equal to the higher of the following: (i) the highest per share price paid
by the interested shareholder or any affiliate or associate of the interested
shareholder (a) within the two-year period prior to the first public
announcement of the proposal of the business combination or (b) in the
transaction in which it became an interested shareholder, whichever is higher;
or (ii) the fair market value per share on the first trading date after the date
of the first public announcement of the interested shareholder becoming an
interested shareholder or after the date of the first public announcement of the
proposed business combination.
The Illinois Fair Price Statute does not apply to the Merger and the related
transactions contemplated by the Merger Agreement since all of CPS's
disinterested directors approved the Merger Agreement and the Merger.
Proffitt's Amended and Restated Charter contains a provision (the "Fair
Price Provision") requiring the approval of at least 80% of the combined voting
power of the outstanding shares of Proffitt's capital stock entitled to vote
generally in the election of directors: (a) to make changes to the Fair Price
Provision; (b) to effectuate certain transactions with any Interested
Shareholder (as defined herein), including certain mergers and consolidations,
sales, leases, exchanges, mortgages, pledges, transfers or other dispositions of
assets having an aggregate fair market value of at least $1 million; (c) to
issue or transfer securities of the corporation having an aggregate fair market
value of at least $1 million to any Interested Shareholder; (d) to adopt certain
plans or proposals for the liquidation or dissolution of the corporation, or (e)
to reclassify securities or undertake certain other transactions which have the
effect of increasing the proportionate share of Proffitt's capital stock of any
class owned by Interested Shareholders or their affiliates or associates.
Interested Shareholders are defined as, among other things, the beneficial
owners of 10% or more of the combined voting power of the outstanding shares of
the corporation. If a majority of the disinterested directors of Proffitt's
approve an action listed in (b) through (e) above or if certain price and
procedure requirements and certain other requirements are met, the 80% vote
described above is not required and the regular voting requirements of the TBCA
and the provisions of Proffitt's Amended and Restated Charter apply instead. The
price and procedure requirements provide that the consideration to be received
by all holders of Proffitt's Common Stock shall be at least equal to the higher
of the following: (i) the highest per share price paid by the Interested
Shareholder or any affiliate or associate of the Interested Shareholder (a)
within the two-year period prior to the first public announcement of the
proposal of the business combination ("Public Announcement") or (b) in the
transaction in which it became an Interested Shareholder, whichever is higher;
(ii) the fair market value per share on the date of the Public Announcement or
on the date the Interested Shareholder became an Interested Shareholder,
whichever is higher; or (iii) the fair market value determined under (ii)
multiplied by a ratio of (a) the highest per share price paid by the Interested
Shareholder within the two-year period immediately prior to
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the Public Announcement over (b) the fair market value per share on the first
day in such two-year period upon which the Interested Shareholder acquired any
common shares. In addition, all outstanding shares of any class other than
Proffitt's Common Stock must meet a test based on certain similar criteria.
CONTROL SHARE ACQUISITION ACT
The Tennessee Control Share Acquisition Act ("TCSAA") strips a purchaser's
shares of voting rights any time an acquisition of shares in a covered Tennessee
corporation brings the purchaser's voting power to one-fifth, one-third or a
majority of all voting power. The purchaser's voting rights can be established
only by a majority vote of the other shareholders. The purchaser may demand a
special meeting of shareholders to conduct such a vote. The purchaser can demand
such a meeting before acquiring a control share only if it holds at least 10% of
outstanding shares and announces a good faith intention to make the control
share acquisition. A target corporation may or may not redeem the purchaser's
shares if the shares are not granted voting rights. The TCSAA applies only to
corporations that have adopted a provision in its Charter or By-laws expressly
declaring that the TCSAA will apply. Proffitt's has not adopted any provision in
its Charter or By-laws electing protection under the TCSAA.
The United States Court of Appeals for the Sixth Circuit, however, has held
that the TCSAA is unconstitutional as it applies to target corporations
organized under the laws of states other than Tennessee (such as CPS).
BUSINESS COMBINATION STATUTES
CPS is subject to Section 5/11.75 of the IBCA (the "Illinois Business
Combination Act"), which prohibits certain "business combinations" with
"interested shareholders," subject to certain exceptions, for a period of three
years following the time the acquiring person became an interested shareholder.
For purposes of the Illinois Business Combination Act, "business combinations"
include, among other things, (i) mergers or consolidations with interested
shareholders, (ii) sales or other dispositions of 10% or more of a corporation's
assets to an interested shareholder, (iii) certain transactions resulting in the
issuance of shares of a corporation to an interested shareholder, (iv)
transactions resulting in a disproportionate increase in an interested
shareholder's percentage ownership interest in a corporation's shares, or (v)
the receipt by an interested shareholder (except proportionately, as a
shareholder) of loans, advances, guarantees or other financial benefits provided
by or through a corporation or its defined benefit pension plans. The Illinois
Business Combination Act does not apply to certain excluded business
combinations, including the following: (i) prior to the time of the transaction
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the shareholder becoming an
interested shareholder, or (ii) upon consummation of the transaction which
resulted in the shareholder becoming an interested shareholder, the interested
shareholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (x) persons
who are directors and also officers and (y) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) at or subsequent to the time of the transaction the business
combination is approved by the board of directors and authorized at an annual or
special meeting of shareholders by the affirmative vote of at least 66 2/3% of
the outstanding voting stock which is not owned by the interested shareholder.
An "interested shareholder" is generally any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) who directly or indirectly, alone or in concert with others,
beneficially owns or controls 15% or more of the voting stock of the
corporation.
Although the Merger and the related transactions contemplated by the Merger
Agreement may be deemed to be a business combination within the scope of the
Illinois Business Combination Act, CPS
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believes the provisions thereof will not apply to the Merger and the related
transactions contemplated by the Merger Agreement since the transactions were
approved by the Board of Directors of CPS.
Tennessee's Business Combination Act (the "Tennessee Business Combination
Act") provides that a party owning 10% or more of stock in a "resident domestic
corporation" (such party is called an "interested shareholder") cannot engage in
a business combination with the resident domestic corporation unless the
combination (i) takes place at least five years after the interested shareholder
first acquired 10% or more of the resident domestic corporation, and (ii) either
(A) is approved by at least 1/3 of the noninterested voting shares of the
resident domestic corporation or (B) satisfies certain fairness conditions
specified in the Tennessee Business Combination Act.
These provisions apply unless one of two events occurs. A business
combination with an entity can proceed without delay when approved by the target
corporation's board of directors before that entity becomes an interested
shareholder (as the Proffitt's Board of Directors has done with respect to the
Merger) or the resident corporation may enact a charter amendment or by-law to
remove itself entirely from the Tennessee Business Combination Act. This charter
amendment or by-law must be approved by a majority of the shareholders who have
held shares for more than one year prior to the vote. It may not take effect for
at least two years after the vote. Proffitt's has not adopted a provision in its
Charter or By-laws removing Proffitt's from coverage under the Tennessee
Business Combination Act.
The Tennessee Business Combination Act further provides an exemption from
liability for officers and directors of resident domestic corporations who do
not approve proposed business combinations or charter amendments and by-laws
removing their corporations from the Tennessee Business Combination Act's
coverage as long as the officers and directors act in "good faith belief" that
the proposed business combination would adversely affect their corporation's
employees, customers, suppliers, or the communities in which their corporation
operates and such factors are permitted to be considered by the board of
directors under the charter.
The United States Court of Appeals for the Sixth Circuit has held that the
Tennessee Business Combination Act is unconstitutional as it applies to target
corporations organized under the laws of states other than Tennessee (such as
CPS).
INVESTOR PROTECTION ACT
Tennessee's Investor Protection Act ("TIPA") applies to tender offers
directed at corporations (called "offeree companies") that have "substantial
assets" in Tennessee and that are either incorporated in or have a principal
office in Tennessee. The TIPA requires an offeror making a tender offer for an
offeree company to file with the Commissioner of Commerce and Insurance (the
"Commissioner") a registration statement. When the offeror intends to gain
control of the offeree company, the registration statement must indicate any
plans the offeror has for the offeree. The Commissioner may require additional
information material to the takeover offer and may call for hearings. The TIPA
does not apply to an offer that the offeree company's board of directors
recommends to shareholders.
In addition to requiring the offeror to file a registration statement with
the Commissioner, the TIPA requires the offeror and the offeree company to
deliver to the Commissioner all solicitation materials used in connection with
the tender offer. The TIPA prohibits "fraudulent, deceptive, or manipulative
acts or practices" by either side, and gives the Commissioner standing to apply
for equitable relief to the Chancery Court of Davidson County, Tennessee, or to
any other chancery court having jurisdiction whenever it appears to the
Commissioner that the offeror, the offeree company, or any of its respective
affiliates has engaged in or is about to engage in a violation of the TIPA. Upon
proper showing, the Chancery Court may grant injunctive relief. The TIPA further
provides civil and criminal penalties for violations.
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The United States Court of Appeals for the Sixth Circuit has held that the
TIPA violates the commerce clause of the United States Constitution to the
extent that it applies to target corporations organized under the laws of states
other than Tennessee (such as CPS).
AUTHORIZED CORPORATION PROTECTION ACT
The Tennessee Authorized Corporation Protection Act (the "TACPA") is the
vehicle through which the Tennessee statutes attempt to permit the Business
Combination Act and the TCSAA to govern foreign corporations. The TACPA provides
that an authorized corporation can adopt a by-law or a charter provision
electing to be subject to the operative provisions of the Business Combination
Act and the TCSAA, which then become applicable "to the same extent as such
provisions apply to a resident domestic corporation." Authorized corporations
are those that are required to obtain a Certificate of Authority from the
Tennessee Secretary of State and that satisfy any two of certain tests including
having its principal place of business located in Tennessee; having a
significant subsidiary located in Tennessee; having a majority of such
corporation's fixed assets located in Tennessee; having more than 10% of the
beneficial owners of the voting stock or more than 10% of such corporation's
shares of voting stock beneficially owned by residents of Tennessee; employing
more than 250 individuals in Tennessee or having an annual payroll paid to
residents of Tennessee that is in excess of $5,000,000; producing goods and/or
services in Tennessee that result in annual gross receipts in excess of
$10,000,000; or having physical assets and/or deposits located within Tennessee
that exceed $10,000,000 in value.
The United States Court of Appeals for the Sixth Circuit, however, has held
the TACPA unconstitutional as it applies to target corporations organized under
the laws of states other than Tennessee (such as CPS).
The IBCA contains no similar provisions with respect to authorized
corporation protection.
GREENMAIL ACT
The Tennessee Greenmail Act ("TGA") applies to any corporation chartered
under the laws of Tennessee which has a class of voting stock registered or
traded on a national securities exchange or registered with the Commission
pursuant to Section 12(g) of the Exchange Act. The TGA provides that it is
unlawful for any corporation or subsidiary to purchase, either directly or
indirectly, any of its shares at a price above the market value, as defined in
the TGA, from any person who holds more than 3% of the class of the securities
purchased if such person has held such shares for less than two years, unless
either the purchase is first approved by the affirmative vote of a majority of
the outstanding shares of each class of voting stock issued or the corporation
makes an offer of at least equal value per share to all holders of shares of
such class.
The IBCA contains no similar provision with respect to greenmail.
DIVIDENDS AND OTHER DISTRIBUTIONS
The IBCA and the TBCA provide similar rules with respect to distributions to
shareholders. Proffitt's and CPS each generally may make dividends or other
distributions to its shareholders unless after the distribution either (i) the
company would be insolvent or would not be able to pay its debts as they become
due in the usual course of business or (ii) the company's assets would be less
than the sum of its liabilities plus the amount that would be needed to satisfy
the preferential dissolution rights of its preferred stock. See "DESCRIPTION OF
PROFFITT'S CAPITAL STOCK--Proffitt's Preferred Stock."
DISSENTERS' RIGHTS
The TBCA generally provides dissenters' rights for mergers and share
exchanges that would require shareholder approval, sales of substantially all
the assets (other than sales that are in the usual and regular
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course of business and certain liquidations and court-ordered sales), and
certain amendments to the charter that materially and adversely affect rights in
respect of a dissenter's shares. Dissenters' rights are not available as to any
shares which are listed on an exchange registered under Section 6 of the
Exchange Act or are "national market system" securities as defined in rules
promulgated pursuant to the Exchange Act. Proffitt's Common Stock is listed on
the NYSE and dissenters' rights are not available to Proffitt's shareholders
with respect to the Merger.
Any CPS shareholder who objects to the Merger and who follows the procedures
prescribed by Sections 5/11.65 and 5/11.70 of the IBCA is entitled, in lieu of
receiving shares of Proffitt's Stock as a result of the Merger, to receive cash
equal to the "fair value" of such shareholder's shares, plus interest if
applicable. See "THE SPECIAL MEETING--Appraisal Rights" for a further discussion
of dissenters' rights and Appendix IV attached to this Joint Proxy
Statement/Prospectus for a copy of the text of Sections 5/11.65 and 5/11.70 of
the IBCA.
PROPOSED AMENDMENT TO PROFFITT'S
AMENDED AND RESTATED CHARTER
At the Proffitt's Special Meeting, shareholders of Proffitt's will be asked
to approve and adopt an amendment to Proffitt's Amended and Restated Charter to
increase the number of shares of Proffitt's Common Stock and the number of
shares of Proffitt's Preferred Stock issuable thereunder.
THE BOARD OF DIRECTORS OF PROFFITT'S UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF AND ADOPTION OF THE CHARTER AMENDMENT. APPROVAL AND ADOPTION OF THE
CHARTER AMENDMENT BY PROFFITT'S SHAREHOLDERS ARE CONDITIONS TO CONSUMMATION OF
THE MERGER AND STOCK ISSUANCE PURSUANT TO THE MERGER AGREEMENT.
At a special meeting held on October 29, 1997, the Board of Directors of
Proffitt's approved an amendment to the Amended and Restated Charter increasing
the total number of authorized shares of capital stock from 110,000,000 to
310,000,000, increasing the number of authorized shares of Proffitt's Common
Stock from 100,000,000 to 300,000,000, without changing the number of authorized
shares of Proffitt's Preferred Stock. The increase in the number of authorized
shares will permit the Stock Issuance and allow Proffitt's additional authorized
but unissued shares to accommodate future issuances. No such future issuances
are presently being contemplated except pursuant to employee stock option, stock
purchase and incentive compensation plans.
The Charter Amendment will be effective upon the filing of Articles of
Amendment or a new Amended and Restated Charter with the Secretary of State of
the State of Tennessee. Articles of Amendment or an Amended and Restated Charter
will be filed with the Secretary of State of the State of Tennessee after
shareholder approval of the Charter Amendment and prior to the Effective Time.
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BUSINESS OF PROFFITT'S
Proffitt's is a regional department store chain operating 177 stores in 24
states, primarily in the Southeast and Midwest. The Company operates its stores
under five chain names: Proffitt's (19 stores), McRae's (31 stores), Younkers
(50 stores), Parisian (40 stores), and Herberger's (37 stores). Each chain
operates primarily as a leading branded traditional department store in its
communities, with Parisian serving as a better branded specialty department
store. Most of the stores are located in premier regional malls in the
respective trade areas served. Proffitt's stores offer a wide selection of
fashion apparel, accessories, cosmetics and decorative home furnishings,
featuring assortments of premier brands, private brands and specialty
merchandise. Each of Proffitt's chains operates with its own merchandising,
marketing and store operations team in order to tailor regional assortments to
the local customer. At the same time, Proffitt's coordinates merchandising among
the chains and consolidates certain administrative and support functions, where
appropriate, to realize scale economies, to promote a competitive cost structure
and to increase margins.
In recent years, Proffitt's has grown primarily through the acquisition of
strong, regional department store chains such as McRae's, Younkers, Parisian and
Herberger's. Proffitt's philosophy has been to maintain existing chain names, to
retain merchandising and store personnel and to employ a "best practices"
approach to integrating acquired companies. Best practices is a process whereby
each acquired chain's operating procedures and policies are reviewed to
determine those practices which Proffitt's believes will increase synergies
while minimizing business interruptions. Proffitt's believes the implementation
of best practices throughout Proffitt's chains has resulted in improved
comparable store sales and increased operating margins through better and more
consistent inventory control and pricing, and other operating efficiencies. In
addition, Proffitt's realizes scale economies in purchasing and distribution, in
administrative areas such as accounting, proprietary credit card administration,
and management information systems and in other infrastructure-related areas.
Proffitt's principal executive offices are located at 750 Lakeshore Parkway,
Birmingham, Alabama 35211, and its telephone number is (205) 940-4000.
For further information concerning Proffitt's, see "SUMMARY--Selected
Financial and Operating Data and Selected Unaudited Pro Forma Financial and
Operating Data," "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
BUSINESS OF CPS
CPS is a regional department store chain operating 52 family-oriented
department stores and four freestanding furniture stores in Illinois, Indiana,
Minnesota, and Wisconsin. The CPS stores operate under the trade names of Carson
Pirie Scott, Boston Store and Bergner's with one central organization for
merchandising, marketing and administrative functions. Each of these tradenames
has strong regional recognition and an operating tradition exceeding 100 years.
CPS stores offer a complete line of apparel, cosmetics, accessories/jewelry,
shoes, home textiles and housewares, and home furnishings in select locations.
The mix of merchandise emphasizes moderate through better prices and is targeted
at the traditional and current fashion customer.
CPS has grown in recent years through the addition of new stores and through
comparable store sales growth resulting from the implementation of the CPS
business strategy. Since the 1991 fiscal year, CPS has renovated nearly 70% of
its store square footage. In addition, CPS added three new department store
locations in fiscal 1996 and four freestanding furniture store locations in
fiscal years 1994 through 1996. CPS places a high priority on holding a
leadership position in each of the trade areas in which it operates. CPS
believes that it is the largest or second largest traditional department store
retailer in terms of sales in each of its principal trade areas: the greater
Chicago, Milwaukee and central Illinois regions.
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CPS's principal executive offices are located at 331 West Wisconsin Avenue,
Milwaukee, Wisconsin 53203, and its telephone number is (414) 347-4141.
For further information concerning CPS, see "SUMMARY--Selected Financial and
Operating Data and Selected Unaudited Pro Forma Financial and Operating Data"
and "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE"
LEGAL OPINIONS
The validity of the Proffitt's Common Stock being offered hereby is being
passed upon for Proffitt's by Sommer & Barnard, PC, Indianapolis, Indiana,
counsel to Proffitt's.
Wachtell, Lipton, Rosen & Katz, special counsel to CPS, will deliver an
opinion concerning certain federal income tax consequences of the Merger. See
"THE MERGER--Certain Federal Income Tax Consequences."
EXPERTS
The consolidated financial statements appearing in Proffitt's Annual Report
on Form 10-K as of February 1, 1997 and February 3, 1996 and for each of the
three years in the period ended February 1, 1997, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report thereon
and included therein and incorporated by reference herein. Such report as it
relates to the amounts included for Younkers and subsidiary, for the year ended
January 28, 1995, not separately presented, is based solely on the report of
Deloitte & Touche LLP, independent auditors, incorporated by reference herein.
Such consolidated financial statements are incorporated by reference herein in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
The consolidated financial statements of Parisian as of February 3, 1996 and
January 28, 1995, and for each of the three years in the period ended February
3, 1996, incorporated by referenced herein, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report thereon
and incorporated by reference herein. Such consolidated financial statements are
incorporated by reference herein in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements and schedule of CPS at February 1,
1997, and for each of the three years in the period ended February 1, 1997
incorporated by reference in this Joint Proxy Statement/ Prospectus have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, as
set forth in their report thereon included in CPS's Annual Report on Form 10-K
for the fiscal year ended February 1, 1997, and are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
Proffitt's and CPS are subject to the informational requirements of the
Exchange Act, and in accordance therewith file reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information filed by Proffitt's and CPS with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be available at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at the NYSE, 20 Broad Street, New York, New York 10005. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding Proffitt's and CPS.
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Proffitt's has filed the Registration Statement with the Commission under
the Securities Act with respect to the Proffitt's Common Stock to be issued in
connection with the Merger Agreement. This Joint Proxy Statement/Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Joint Proxy Statement/Prospectus or in any document incorporated in this Joint
Proxy Statement /Prospectus by reference as to the contents of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Proffitt's and CPS
pursuant to the Exchange Act are incorporated by reference in this Joint Proxy
Statement/Prospectus:
PROFFITT'S DOCUMENTS (COMMISSION FILE NO. 1-13113)
(1) Annual Report on Form 10-K for the fiscal year ended February 1, 1997;
(2) Quarterly Report on Form 10-Q for the fiscal quarters ended May 3, 1997
and August 2, 1997;
(3) Current reports on Form 8-K filed February 11, 1997, April 1, 1997, May
2, 1997, May 22, 1997 (as amended by Form 8-K/A filed on May 22, 1997), July 8,
1997, August 22, 1997, September 2, 1997, September 4, 1997, October 30, 1997
and November 5, 1997;
(4) The description of Proffitt's Common Stock contained in Proffitt's
Post-Effective Amendment No. 1 to Registration Statement on Form S-4 dated
January 15, 1997 (Registration No. 333-17059) and incorporated by reference in
Proffitt's Registration Statement on Form 8-A filed June 18, 1997;
(5) Registration Statement on Form 8-A filed June 18, 1997 in respect of the
Proffitt's Rights Agreement;
(6) The Consolidated Financial Statements of Parisian, Inc. included in the
Proffitt's prospectus dated July 9, 1997, included in the Proffitt's
Registration Statement on Form S-1 (Registration No. 333-29771).
CPS DOCUMENTS (COMMISSION FILE NO. 0-22682)
(1) Annual Report on Form 10-K for the fiscal year ended February 1, 1997;
(2) Quarterly Report on Form 10-Q for the fiscal quarters ended May 3, 1997
and August 2, 1997;
(3) Current reports on Form 8-K filed March 11, 1997, May 16, 1997, July 1,
1997, August 21, 1997 and October 29, 1997;
(4) The description of CPS Common Stock set forth in CPS's Registration
Statement on Form 8-A, incorporating by reference the information described
under the heading "Description of Capital Stock" in CPS's Registration Statement
on Form S-1 (File No. 33-67514), including any amendment or report filed for the
purpose of updating such description;
(5) Registration Statement on Form 8-A filed November 8, 1993 in respect of
CPS's Rights Plan.
All documents and reports filed by Proffitt's and CPS pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
and to be a part hereof from the dates of filing of such documents or reports.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified
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or superseded for purposes of this Joint Proxy Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such document so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, WITHIN ONE BUSINESS DAY OF SUCH REQUEST, IN THE CASE OF
DOCUMENTS RELATING TO PROFFITT'S, TO PROFFITT'S, INC., P.O. BOX 9388, ALCOA,
TENNESSEE 37701 (TELEPHONE NUMBER: (423) 983-7000), ATTENTION: INVESTOR
RELATIONS; OR, IN THE CASE OF DOCUMENTS RELATING TO CPS, TO CARSON PIRIE SCOTT &
CO., 331 WEST WISCONSIN AVENUE, MILWAUKEE, WISCONSIN 53203 (TELEPHONE NUMBER:
(414) 278-5717), ATTN: JAMES L. STOFFEL, VICE PRESIDENT AND TREASURER. IN ORDER
TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE APPLICABLE SPECIAL MEETING,
REQUESTS SHOULD BE RECEIVED BY JANUARY 20, 1998.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus relating to Proffitt's or Sub has been supplied by
Proffitt's, and all such information relating to CPS has been supplied by CPS.
OTHER INFORMATION AND SHAREHOLDER PROPOSALS
The Proffitt's management and the CPS management know of no other matters
that may properly be, or which are likely to be, brought before the Proffitt's
Special Meeting or the CPS Special Meeting, respectively. Pursuant to the CPS
By-Laws, the only business that may be conducted at the CPS Special Meeting is
business brought before the meeting pursuant to the Notice of Special Meeting.
However, if any other matters are properly brought before such Special Meetings,
the persons named in the enclosed proxy or their substitutes will vote the
proxies in accordance with the recommendations of management, unless such
authority is withheld.
In order to be considered for inclusion in the Proxy Statement for the 1998
Annual Meeting of shareholders of CPS, any shareholder proposal intended to be
presented at such meeting must have been received by CPS on or before December
31, 1997. The 1998 Annual Meeting will be held only if the Merger is not
consummated.
In order to be considered for inclusion in the Proxy Statement for the next
annual meeting of shareholders of Proffitt's, any shareholder proposal intended
to be presented at the meeting must have been received by Proffitt's on or
before January 5, 1998.
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APPENDIX I
AGREEMENT AND PLAN OF MERGER
AMONG
PROFFITT'S, INC.,
LASALLE MERGER CORPORATION
AND
CARSON PIRIE SCOTT & CO.
DATED AS OF OCTOBER 29, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER.................................................................................. 1
Section 1.1 The Merger...................................................................... 1
Section 1.2 Effective Time.................................................................. 1
Section 1.3 Effects of the Merger........................................................... 1
Section 1.4 Articles and By-Laws............................................................ 2
Section 1.5 Conversion of Securities........................................................ 2
Section 1.6 Parent to Make Certificates Available........................................... 3
Section 1.7 Dividends; Transfer Taxes; Withholding.......................................... 3
Section 1.8 No Fractional Securities........................................................ 4
Section 1.9 Return of Exchange Fund......................................................... 4
Section 1.10 Adjustment of Conversion Number................................................ 4
Section 1.11 No Further Ownership Rights in Company Common Stock............................ 4
Section 1.12 Closing of Company Transfer Books.............................................. 5
Section 1.13 Lost Certificates.............................................................. 5
Section 1.14 Affiliates..................................................................... 5
Section 1.15 Dissenters' Rights............................................................. 5
Section 1.16 Further Assurances............................................................. 5
Section 1.17 Closing........................................................................ 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................ 6
Section 2.1 Organization, Standing and Power................................................ 6
Section 2.2 Capital Structure............................................................... 6
Section 2.3 Authority....................................................................... 7
Section 2.4 Consents and Approvals; No Violation............................................ 7
Section 2.5 SEC Documents and Other Reports................................................. 8
Section 2.6 Registration Statement and Joint Proxy Statement................................ 9
Section 2.7 Absence of Certain Changes or Events............................................ 9
Section 2.8 Permits and Compliance.......................................................... 9
Section 2.9 Tax Matters..................................................................... 10
Section 2.10 Actions and Proceedings........................................................ 10
Section 2.11 Certain Agreements............................................................. 10
Section 2.12 ERISA.......................................................................... 11
Section 2.13 Compliance with Certain Laws................................................... 12
Section 2.14 Liabilities.................................................................... 12
Section 2.15 Labor Matters.................................................................. 12
Section 2.16 Intellectual Property.......................................................... 12
Section 2.17 Opinion of Financial Advisor................................................... 12
Section 2.18 Pooling of Interests; Reorganization........................................... 13
Section 2.19 Required Vote of Parent Shareholders........................................... 13
Section 2.20 Ownership of Shares............................................................ 13
Section 2.21 Operations of Sub.............................................................. 13
Section 2.22 Brokers........................................................................ 13
Section 2.23 State Takeover Statutes and Shareholder Rights Plan............................ 13
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 13
Section 3.1 Organization, Standing and Power................................................ 13
Section 3.2 Capital Structure............................................................... 14
Section 3.3 Authority....................................................................... 14
Section 3.4 Consents and Approvals; No Violation............................................ 15
Section 3.5 SEC Documents and Other Reports................................................. 15
Section 3.6 Registration Statement and Joint Proxy Statement................................ 16
Section 3.7 Absence of Certain Changes or Events............................................ 16
Section 3.8 Permits and Compliance.......................................................... 16
Section 3.9 Tax Matters..................................................................... 17
Section 3.10 Bank Matters................................................................... 17
Section 3.11 Actions and Proceedings........................................................ 17
Section 3.12 Certain Agreements............................................................. 17
Section 3.13 ERISA.......................................................................... 18
Section 3.14 Compliance with Certain Laws................................................... 19
Section 3.15 Liabilities.................................................................... 19
Section 3.16 Labor Matters.................................................................. 19
Section 3.17 Intellectual Property.......................................................... 19
Section 3.18 Opinion of Financial Advisor................................................... 20
Section 3.19 State Takeover Statutes and Shareholder Rights Plan............................ 20
Section 3.20 Required Vote of Company Shareholders.......................................... 20
Section 3.21 Pooling of Interests; Reorganization........................................... 20
Section 3.22 Brokers........................................................................ 20
Section 3.23 Share Repurchases.............................................................. 20
Section 3.24 Ownership of Shares............................................................ 20
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................................................... 21
Section 4.1 Conduct of Business Pending the Merger.......................................... 21
Section 4.2 No Solicitation................................................................. 23
Section 4.3 Third Party Standstill Agreements............................................... 24
Section 4.4 Pooling of Interests; Reorganization............................................ 24
ARTICLE V
ADDITIONAL AGREEMENTS....................................................................... 24
Section 5.1 Shareholder Meetings............................................................ 24
Section 5.2 Preparation of the Registration Statement and the Joint Proxy Statement......... 25
Section 5.3 Access to Information........................................................... 25
Section 5.4 Compliance with the Securities Act; Pooling Period.............................. 26
Section 5.5 NYSE Listing.................................................................... 27
Section 5.6 Fees and Expenses............................................................... 27
Section 5.7 Company Stock Options; Stock Purchase Plan; Employee Benefits................... 29
Section 5.8 Reasonable Best Efforts; Pooling of Interests................................... 30
Section 5.9 Public Announcements............................................................ 31
Section 5.10 State Takeover Laws............................................................ 31
Section 5.11 Indemnification; Directors and Officers Insurance.............................. 31
Section 5.12 Notification of Certain Matters................................................ 32
Section 5.13 Directors...................................................................... 32
Section 5.14 Designation of Directors....................................................... 32
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER.......................................................... 32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger...................... 32
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.................... 33
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger................ 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER........................................................... 35
Section 7.1 Termination..................................................................... 35
Section 7.2 Effect of Termination........................................................... 36
Section 7.3 Amendment....................................................................... 37
Section 7.4 Waiver.......................................................................... 37
ARTICLE VIII
GENERAL PROVISIONS.......................................................................... 37
Section 8.1 Non-Survival of Representations, Warranties and Agreements...................... 37
Section 8.2 Notices......................................................................... 37
Section 8.3 Interpretation.................................................................. 38
Section 8.4 Counterparts.................................................................... 38
Section 8.5 Entire Agreement; No Third-Party Beneficiaries.................................. 38
Section 8.6 Governing Law................................................................... 38
Section 8.7 Assignment...................................................................... 38
Section 8.8 Severability.................................................................... 38
Section 8.9 Enforcement of this Agreement................................................... 38
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 29, 1997 (this
"Agreement"), among PROFFITT'S, INC., a Tennessee corporation ("Parent"),
LASALLE MERGER CORPORATION, an Illinois corporation and a wholly-owned
subsidiary of Parent ("Sub"), and CARSON PIRIE SCOTT & CO., an Illinois
corporation (the "Company") (Sub and the Company being hereinafter collectively
referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of Common Stock, par value $.01 per
share, of the Company ("Company Common Stock") not owned directly or indirectly
by Parent or directly by the Company will be converted into shares of Parent
Common Stock, par value $.10 per share ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective shareholders and Parent has approved this Agreement and the Merger as
the sole shareholder of Sub;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the Illinois Business Corporation Act of 1983, as amended
(the "Ill.C."), Sub shall be merged with and into the Company at the Effective
Time (as hereinafter defined). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the Ill.C. Section 5/11.50.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the Ill.C., is issued by the Secretary of State of
the State of Illinois; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is issued. When used in this Agreement, the term
"Effective Time" shall mean the later of the date and time at which the
Certificate of Merger is issued or such later time established by the
Certificate of Merger. The filing of the Articles of Merger in accordance with
Section 5/11.25 of the Ill.C. shall be made on the date of the Closing (as
defined in Section 1.17), or as promptly thereafter as practicable.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in the Ill.C.
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Section 1.4 Articles and By-Laws. At the Effective Time, the Articles of
Incorporation of the Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. At the
Effective Time, the Board of the Surviving Corporation shall take such steps as
shall be necessary so that the By-Laws of the Sub, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by the Articles of
Incorporation of the Surviving Corporation or by applicable law.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the holders
of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company and any shares of Company Common Stock owned by Parent or by any
wholly-owned Subsidiary of Parent shall be canceled and no capital stock of
Parent or other consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each
share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled in accordance with
Section 1.5(b) or as to which dissenters' rights have been perfected) shall
be converted into a number (the "Conversion Number") of validly issued,
fully paid and nonassessable shares of Parent Common Stock, including the
corresponding percentage of a right to purchase shares of Parent preferred
stock pursuant to the Parent Rights Plan (as hereinafter defined). All such
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder
of a certificate formerly representing any such shares shall cease to have
any rights with respect thereto, except the right to receive any dividends
and other distributions in accordance with Section 1.7, certificates
representing the shares of Parent Common Stock into which such shares are
converted and any cash, without interest, in lieu of fractional shares to be
issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 1.6. Each certificate shall, from and
after the Effective Time until surrendered in exchange for Parent Common
Stock, for all purposes be deemed to represent the shares of Parent Common
Stock into which such Company Common Stock was converted in the Merger.
For purposes of this Agreement, the "Conversion Number" shall be determined
as follows: (i) in the event that the Closing Date Market Price is less than
$27.75, the Conversion Number shall be 1.80; (ii) in the event that the Closing
Date Market Price is equal to or greater than $27.75 and less than $28.57, the
Conversion Number shall be equal to $50.00 divided by the Closing Date Market
Price of one share of Parent Common Stock; (iii) in the event that the Closing
Date Market Price is equal to or greater than $28.57 and less than $30.86, the
Conversion Number shall be 1.75; (iv) in the event that the Closing Date Market
Price is equal to or greater than $30.86 and less than $31.77, the Conversion
Number shall be equal to $54.00 divided by the Closing Date Market Price of one
share of Parent Common Stock; and (v) in the event that the Closing Date Market
Price is equal to or greater than $31.77, the Conversion Number shall be equal
to 1.70. For purposes of this Agreement, "Closing Date Market Price" shall mean
the average closing price for one share of Parent Common Stock during the period
of the twenty (20) most recent NYSE (as defined herein) trading days ending on
the third NYSE trading day prior to the date of the Company Shareholder Meeting
(as hereinafter defined). The closing price on any day shall be the last
reported sale price of one share of Parent Common Stock on the NYSE. All
calculations under this Section 1.5(c) shall be rounded to the nearest
hundredth.
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Section 1.6 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize a commercial bank
reasonably acceptable to the Company (or such other person or persons as shall
be acceptable to Parent and the Company) to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective Time, Parent shall
deposit with the Exchange Agent, in trust for the holders of shares of Company
Common Stock converted in the Merger, certificates representing the shares of
Parent Common Stock issued pursuant to Section 1.5(c) in exchange for
outstanding certificates representing shares of Company Common Stock and cash,
as required to make payments in lieu of any fractional shares pursuant to
Section 1.8 (such cash and shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the certificates representing the Parent Common Stock
contemplated to be delivered pursuant to Section 1.5(c) out of the Exchange
Fund. Except as contemplated by this Section 1.6, and Sections 1.8 and 1.9, the
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock converted in the Merger
(the "Certificates") a letter of transmittal (which shall be in customary form,
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the
Exchange Agent, and shall contain instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock and cash in lieu of fractional shares). Upon surrender
for cancellation to the Exchange Agent of a Certificate, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock into which the shares represented by the
surrendered Certificate shall have been converted at the Effective Time pursuant
to this Article I, cash in lieu of any fractional share in accordance with
Section 1.8 and certain dividends and other distributions in accordance with
Section 1.7, and any Certificate so surrendered shall forthwith be canceled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock and no cash payment in lieu of
fractional shares will be paid to any such person pursuant to Section 1.8 until
such person surrenders the related Certificate or Certificates, as provided in
Section 1.6. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate representing shares
of Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
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other taxes required by reason of the issuance of certificates for such shares
of Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Company Common Stock in respect of which such deduction and withholding was made
by Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the per
share closing price on the New York Stock Exchange ("NYSE") of Parent Common
Stock on the date of the Effective Time (or, if the shares of Parent Common
Stock do not trade on the NYSE on such date, the first date of trading of shares
of Parent Common Stock on NYSE after the Effective Time) by (ii) the fractional
interest to which such holder would otherwise be entitled. As promptly as
practicable after the determination of the amount of cash, if any, to be paid to
holders of fractional share interests, the Exchange Agent shall so notify the
Parent, and the Parent shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
share interests subject to and in accordance with the terms of Section 1.7 and
this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of the Company for one year
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former shareholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock for any such shares of Parent Common Stock, cash
and dividends and distributions held in the Exchange Fund which is delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.10 Adjustment of Conversion Number. In the event of any
reclassification, recapitalization, stock split, stock dividend or subdivision
with respect to Parent Common Stock, any change or conversion of Parent Common
Stock into other securities, any other dividend or distribution with respect to
the Parent Common Stock as the same may be adjusted from time to time pursuant
to the terms of this Agreement (or if a record date with respect to any of the
foregoing should occur), prior to the Effective Time, appropriate and
proportionate adjustments, if any, shall be made to the Conversion Number, and
all references to the Conversion Number in this Agreement shall be deemed to be
to the Conversion Number as so adjusted; provided, however, that in no event
shall any such adjustment result in the consideration to be paid pursuant to
Section 1.5(c) being any securities other than Parent Common Stock.
Section 1.11 No Further Ownership Rights in Company Common Stock. All shares
of Parent Common Stock issued pursuant to the terms hereof (including any cash
paid pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
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Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock outstanding prior to the Effective Time shall thereafter be
made on the records of the Company. If, after the Effective Time, Certificates
are presented to the Surviving Corporation, the Exchange Agent or the Parent,
such Certificates shall be canceled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
the practices the Parent applies to its own shareholders), as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock to which the holders thereof are entitled pursuant
to Section 1.8 and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 1.7.
Section 1.14 Affiliates. Certificates surrendered for exchange by any
Affiliate (as determined pursuant to Section 5.4) of the Company for purposes of
Rule 145(c) under the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations promulgated thereunder and for purposes of
applicable interpretations regarding pooling of interests accounting, shall not
be exchanged until Parent has received a written agreement from such Person as
provided in Section 5.4 hereof.
Section 1.15 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the contrary, each
outstanding share of Company Common Stock held by a holder who has demanded and
perfected his or her appraisal rights in accordance with Section 5/11.65 of the
Ill.C. and who has not effectively withdrawn or lost his right to such appraisal
(a "Dissenting Share"), shall not be converted into, become exchangeable for or
represent a right to receive Parent Common Stock pursuant to Section 1.5 hereof
but the holder thereof shall only be entitled to such rights as are granted by
the Ill.C. and shall not be entitled to vote or to exercise any other rights of
a shareholder of the Company except as provided in the Ill.C. Each holder of
Dissenting Shares who becomes entitled to payment therefor pursuant to the
Ill.C. shall receive such payment from the Surviving Corporation in accordance
with the Ill.C.
(b) Notwithstanding the provisions of Section 1.15(a) hereof if any
shareholder who demands appraisal with respect to a share of his Company Common
Stock under the Ill.C. shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to appraisal, such share shall cease to be a
Dissenting Share and shall automatically be converted into, become exchangeable
for and represent only the right to receive the shares of Parent Common Stock in
accordance with Section 1.5(c) hereof, without interest thereon, any cash in
lieu of fractional shares pursuant to Section 1.8 hereof and any dividends or
other distributions pursuant to Section 1.7 hereof, upon surrender of a
Certificate.
Section 1.16 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (ii) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
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Section 1.17 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place immediately following the time the last of the
conditions set forth in Article VI shall have been fulfilled or waived or at
such other time as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee, and has the requisite corporate power and authority to carry on its
business as now being conducted. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
the requisite corporate power and authority to carry on its business as now
being conducted. Each Subsidiary of Parent is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate or other power and authority to carry on its
business as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power or authority would not,
individually or in the aggregate, have a Material Adverse Effect (as hereinafter
defined) on Parent. Parent and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. For purposes of this Agreement (a) each of "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to Parent or the
Company, as the case may be, any change or effect that is materially adverse to
the assets, liabilities, results of operation or financial condition of Parent
and its Subsidiaries, taken as a whole, or the Company and its Subsidiaries,
taken as a whole, as the case may be, and (b) "Subsidiary" means any
corporation, partnership, joint venture or other legal entity of which Parent or
the Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity. Parent has
heretofore delivered to the Company complete and correct copies of Parent's
certificate of incorporation ("Charter") and by-laws ("Parent By-Laws"), as in
effect on the date hereof.
Section 2.2 Capital Structure. As of the Effective Time, the authorized
capital stock of Parent will consist of 500,000,000 shares of Parent Common
Stock and 50,000,000 shares of Preferred Stock, par value $1.00 per share (the
"Parent Preferred Stock"). At the close of business on October 24, 1997, (i)
61,762,302 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of preemptive
rights; (ii) 4,811,248 shares of Parent Common Stock were reserved for future
issuance pursuant to Parent's 1994 Long-Term Incentive Plan, the 1987 Stock
Option Plan, the 1997 Stock-Based Incentive Plan and the Parisian Stock Option
Plans (the "Parent Stock Plans"); (iii) 645,036 shares of Parent Common Stock
were reserved for future issuance pursuant to Parent's 1994 Employee Stock
Purchase Plan; and (iv) no shares of Parent Preferred Stock were issued or
outstanding. All of the shares of Parent Common Stock issuable in exchange for
Company Common Stock at the Effective Time in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable, free of preemptive rights and be entitled to the benefits of the
Parent Rights Plan under the terms thereof. As of the date of this Agreement,
except for (a) this Agreement, (b) stock options covering not in excess of
4,196,248 shares of Parent Common Stock (collectively, the "Parent Stock
Options"), (c) the 1994 Employee Stock Purchase Plan, (d) contingent stock
grants of 615,000 shares of Parent Common Stock to key executives, and (e)
securities issuable pursuant to the stock purchase rights declared as a dividend
on March 28, 1995 (the "Parent Rights") and the rights agreement dated as of
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March 28, 1995 between Parent and Union Planters National Bank (the "Parent
Rights Agreement") ( the Parent Rights and the Parent Rights Agreement are
collectively the "Parent Rights Plan"), there are no options, warrants, calls,
rights or agreements to which Parent or any of its Subsidiaries is a party or by
which any of them is bound obligating Parent or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Parent or any of its Subsidiaries, or securities
convertible into or exchangeable for such capital stock, or obligating Parent or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement. Except as disclosed in Parent SEC Documents filed
prior to the date hereof (as hereinafter defined), since October 24, 1997,
Parent has not issued any shares of its capital stock, or securities convertible
into or exchangeable for such capital stock, other than shares issued in the
ordinary course pursuant to the Parent Stock Plans and the accompanying rights
issued pursuant to the Parent Rights Agreement. Except as disclosed in Parent
SEC Documents filed prior to the date hereof, there are no outstanding
contractual obligations of Parent or any of Parent's Subsidiaries (i)
restricting the transfer of, (ii) affecting the voting rights of, (iii)
requiring the repurchase, redemption or disposition of, (iv) requiring the
registration for sale of, or (v) granting any preemptive or antidilutive right
with respect to, any shares of Parent Common Stock or any capital stock of any
Subsidiary of Parent. Each outstanding share of capital stock of each Subsidiary
of Parent is duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights and, except as disclosed in the Parent SEC Documents filed
prior to the date hereof, each such share is owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever.
Section 2.3 Authority. The respective Boards of Directors of Parent and Sub
have on or prior to the date of this Agreement (a) declared the Merger advisable
and approved this Agreement in accordance with the applicable law, (b) resolved
to recommend the approval by Parent's shareholders of the matters covered by the
Parent Shareholder Approvals (as hereinafter defined) and (c) directed that this
Agreement and the other matters subject to Parent Shareholder Approvals be
submitted to Parent's shareholders for approval. Each of Parent and Sub has all
requisite corporate power and authority to enter into this Agreement and,
subject to approval by the shareholders of Parent of this Agreement, an
amendment to the Charter of Parent to increase the authorized shares of Parent
Common Stock (the "Charter Amendment") and the issuance of Parent Common Stock
in connection with the Merger (the "Share Issuance") (collectively, the "Parent
Shareholders' Approvals"), to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby,
including the Charter Amendment and the Share Issuance, have been duly
authorized by all necessary corporate action on the part of Parent and Sub,
subject to (x) the Parent Shareholders' Approvals, (y) the filing of appropriate
Merger documents as required by the Ill.C. and (z) the filing of the Charter
Amendment in accordance with Tennessee law. This Agreement has been duly
executed and delivered by Parent and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by the Company) this Agreement
constitutes the valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with its terms. The Share Issuance and the
filing of a registration statement on Form S-4 with the Securities and Exchange
Commission ("SEC") by Parent under the Securities Act for the purpose of
registering the shares of Parent Common Stock to be issued in the Merger
(together with any amendments or supplements thereto, whether prior to or after
the effective date thereof, the "Registration Statement") have been duly
authorized by Parent's Board of Directors. The Parent Common Stock, when issued,
will be registered under the Securities Act and Exchange Act (as hereinafter
defined) and registered or exempt from registration under any applicable state
securities or "blue sky" laws ("Blue Sky Laws").
Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in the second
sentence of this Section 2.4 have been obtained and all filings and obligations
described in this Section 2.4 have been made, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with
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the provisions hereof will not conflict with, result in any violation of, or
breach or default (with or without notice or lapse of time, or both) under, or
give to others a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its Subsidiaries under, any provision of (i) the
Charter or By-Laws of Parent, (ii) any provision of the comparable charter or
organization documents of any of Parent's Subsidiaries, (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or any
of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its Subsidiaries or
any of their respective properties or assets, other than, in the case of clauses
(ii), (iii) or (iv), any such conflicts, violations, breaches, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, or prevent or
materially delay the consummation of any of the transactions contemplated
hereby. No filing, notification or registration with, or authorization, consent
or approval of, any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory or administrative agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by Parent or Sub or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement, except
for (i) in connection, or in compliance, with the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act and the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) the issuance of the Certificate of Merger by the Secretary of State
of the State of Illinois, the filing of the Charter Amendment in Tennessee and
the filing of the appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement, (iv) such filings, authorizations,
orders and approvals as may be required by state takeover laws (the "State
Takeover Approvals"), (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries conducts any
business or owns any property or assets, (vi) such filings and consents as may
be required under any state or foreign laws pertaining to debt collection, the
issuance of payment instruments or money transmission, (vii) applicable
requirements, if any, of Blue Sky Laws and the NYSE, (viii) the approval of the
Office of the Comptroller of the Currency ("OCC") for the change of control of
the National Bank of Great Lakes, a wholly-owned Subsidiary of the Company (the
"Bank") and (ix) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on Parent, or
prevent or materially delay the consummation of any of the transactions
contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent and its affiliates have
filed all required documents with the SEC since January 1, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of Parent included in the Parent
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of Parent and
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its consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to any
other adjustments described therein and normal year-end audit adjustments).
Except as disclosed in the Parent SEC Documents or as required by GAAP, Parent
has not, since February 1, 1997, made any change in the accounting practices or
policies applied in the preparation of financial statements. The books and
records of Parent and its Subsidiaries have been, and are being, maintained in
accordance with GAAP and other applicable legal and accounting requirements.
Section 2.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the joint proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Joint Proxy Statement") relating to the Shareholder Meetings (as defined in
Section 5.1) will (i) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing of the Joint Proxy Statement, the
time of each of the Shareholder Meetings and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to Parent, its officers
and directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
shareholders of Parent and the Company. The Registration Statement will comply
(with respect to Parent) as to form in all material respects with the provisions
of the Securities Act, and the Joint Proxy Statement will comply (with respect
to Parent) as to form in all material respects with the provisions of the
Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as disclosed in
Parent SEC Documents filed with the SEC prior to the date of this Agreement,
since February 1, 1997, (A) Parent and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that would result in a Material Adverse
Effect on Parent, except for any such changes or effects resulting from this
Agreement, the transactions contemplated hereby or the announcement thereof; (B)
Parent and its Subsidiaries have not sustained any loss or interference with
their business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a Material Adverse
Effect on Parent; (C) there has been no action taken by Parent and its
Subsidiaries that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 4.1(a); and (D)
there has been no event, circumstance or development that would cause or have a
Material Adverse Effect on Parent, excluding any changes and effects resulting
from changes in economic, regulatory or political conditions or changes in
conditions generally applicable to the industries in which Parent and
Subsidiaries of Parent are involved and except for any such changes or effects
resulting from this Agreement, the transactions contemplated hereby or the
announcement thereof.
Section 2.8 Permits and Compliance. Each of Parent and its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity ("Permits") necessary for Parent or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Parent Permits"), except where the
failure to have any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, and, as of the date of this
Agreement, no suspension or cancellation of any of the Parent Permits is pending
or, to the Knowledge of Parent (as hereinafter defined herein), threatened,
except where the suspension or cancellation of any of the Parent Permits would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Neither
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Parent nor any of its Subsidiaries is in violation of (A) its charter, by-laws
or other organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over Parent or any of
its Subsidiaries, except, in the case of clauses (A) (as to Parent's
Subsidiaries only), (B) and (C), for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. Except as
disclosed in the Parent SEC Documents filed prior to the date of this Agreement,
as of the date hereof, there is no contract or agreement that is material to the
business, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole. Except as set forth in the Parent SEC Documents
filed prior to the date of this Agreement, no event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute an
event of default exists or, upon the consummation by Parent of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which Parent or any of
its Subsidiaries is a party or by which Parent or any such Subsidiary is bound
or to which any of the properties, assets or operations of Parent or any such
Subsidiary is subject, other than any defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. "Knowledge of
Parent" means the actual knowledge, after due inquiry, of the Chief Executive
Officer and Chief Financial Officer of the Parent.
Section 2.9 Tax Matters. Each of Parent and its Subsidiaries has filed all
Tax Returns required to have been filed (or extensions have been duly obtained)
and has paid all Taxes required to have been paid by it, except where failure to
file such Tax Returns or pay such Taxes would not, in the aggregate, have a
Material Adverse Effect on Parent. For purposes of this Agreement: (i) "Tax"
(and, with correlative meaning, "Taxes") means any federal, state, local or
foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or added minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority and (ii) "Tax Return"
means any return, report or similar statement required to be filed with respect
to any Tax (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return or declaration of
estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth in Parent SEC
Documents filed prior to the date of this Agreement, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving Parent or any of its Subsidiaries, or against or involving
any of the present directors or officers of Parent or any of its Subsidiaries,
as such, any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent. As of the
date of this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries or any of its or their present directors or officers, as such, any
of its or their properties, assets or business that, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on Parent. As
of the date hereof, there are no actions, suits, labor disputes or other
litigation, legal or administrative proceedings or governmental investigations
pending or, to the Knowledge of Parent, threatened against or affecting Parent
or any of its Subsidiaries or any of its or their present directors or officers,
as such, or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement.
Section 2.11 Certain Agreements. As of the date of this Agreement, neither
Parent nor any of its Subsidiaries is a party to any oral or written agreement
or plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. No holder of any option to
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purchase shares of Parent Common Stock, or shares of Parent Common Stock granted
in connection with the performance of services for Parent or its Subsidiaries,
is or will be entitled to receive cash from the Parent or any Subsidiary in lieu
of or in exchange for such option or shares as a result of the transactions
contemplated by this Agreement. Neither Parent nor any Subsidiary is a party to
any termination benefits agreement or severance agreement or employment
agreement one trigger of which would be the consummation of the transactions
contemplated by this Agreement.
Section 2.12 ERISA.
(a) Each Parent Plan (as defined herein) complies in all material respects
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the Code and all other applicable statutes and governmental rules and
regulations, including but not limited to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and (i) no "reportable event"
(within the meaning of Section 4043 of ERISA) has occurred with respect to any
Parent Plan, (ii) neither Parent nor any of its ERISA Affiliates (as hereinafter
defined) has withdrawn from any Parent Multiemployer Plan (as hereinafter
defined) or instituted, or is currently considering taking, any action to do so,
(iii) no action has been taken, or is currently being considered, to terminate
any Parent Plan subject to Title IV of ERISA, and (iv) Parent and its ERISA
Affiliates have complied in all material respects with the continued medical
coverage requirements of COBRA; other than, in each case, such events or actions
that, individually or in the aggregate, would not have a Material Adverse Effect
on Parent. No Parent Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived.
(b) With respect to any Parent Plan which is subject to Title IV of ERISA,
the present value of the liabilities (as determined on a terminated plan basis)
did not exceed the fair market value of the Plan assets as of the most recent
valuation date for which an actuarial report has been prepared and Parent has no
Knowledge of any Material Adverse Change to such status. With respect to the
Parent Plans, no event has occurred in connection with which Parent or any ERISA
Affiliate would be subject to any liability under the terms of such Parent
Plans, ERISA, the Code or any other applicable law which would have a Material
Adverse Effect on Parent. All Parent Plans that are intended to be qualified
under Section 401(a) of the Code have been determined by the Internal Revenue
Service to be so qualified or a timely application for such qualification is
pending, and to the Knowledge of Parent, there is no reason why any Parent Plan
is not so qualified in operation. Neither Parent nor any of its ERISA Affiliates
has been notified by any Parent Multiemployer Plan that such Parent
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such Parent Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
Neither Parent nor any of its ERISA Affiliates has any liability or obligation
under any welfare plan to provide benefits after termination of employment to
any employee or dependent other than as required by ERISA or as disclosed in the
Parent SEC Documents filed prior to the date hereof, except for certain health
benefits for former employees of Younkers, Inc. and Brandeis, Inc. As used
herein, (i) "Parent Plan" means a "pension plan" (as defined in Section 3(2) of
ERISA (other than a Parent Multiemployer Plan)) or a "welfare plan" (as defined
in Section 3(l) of ERISA) established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "Parent Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability, and (iii) with respect to any
person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder, including without
limitation, each of Parent's Subsidiaries. Parent has made (or as soon as
practicable will make) available to Company the most recent summary plan
description of each Parent Plan for which a summary plan description is required
and each Parent Plan.
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Section 2.13 Compliance with Certain Laws. The properties, assets and
operations of Parent and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws, rules and
regulations, orders, decrees, judgments, permits and licenses relating to public
and worker health and safety (collectively, "Worker Safety Laws"), the
protection and clean-up of the environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous materials
(collectively, "Environmental Laws") and all consumer credit laws, including,
without limitation, bankruptcy laws relating to post-petition collection
procedures (collectively, "Consumer Credit Laws"), except for any violations
that, individually or in the aggregate, would not have a Material Adverse Effect
on Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent or
any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, have a Material Adverse Effect on Parent. The term "hazardous
materials" shall mean those substances that are regulated by or form the basis
for liability under any applicable Environmental Laws.
Section 2.14 Liabilities. Except as fully reflected or reserved against in
the consolidated balance sheet of Parent and its Subsidiaries as of February 1,
1997, included in the Parent SEC Documents, or disclosed in the footnotes
thereto, Parent and its Subsidiaries had no liabilities (including, without
limitation, tax liabilities) at the date of such balance sheet, absolute or
contingent, that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with GAAP other than liabilities incurred
in the ordinary course of business or that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent.
Section 2.15 Labor Matters. Except as set forth on Schedule 2.15, neither
Parent nor any of its Subsidiaries is a party to any collective bargaining
agreement or labor contract. Neither Parent nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons employed by or
otherwise performing services for Parent or any of its Subsidiaries (the "Parent
Business Personnel"), and there is no unfair labor practice complaint or
grievance against Parent or any of its Subsidiaries by the National Labor
Relations Board or any comparable state agency pending or threatened in writing
with respect to the Parent Business Personnel, except where such unfair labor
practice, complaint or grievance would not have a Material Adverse Effect on
Parent. There is no labor strike, dispute, slowdown or stoppage pending or, to
the Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries which may interfere with the respective business activities of
Parent or any of its Subsidiaries, except where such dispute, strike or work
stoppage would not have a Material Adverse Effect on Parent.
Section 2.16 Intellectual Property. Parent and its Subsidiaries own or
possess adequate licenses or other legal rights to use, free to Parent's
Knowledge of infringement by others, all patents, trademarks, trade names, trade
dress, service marks, trade secrets, copyrights, software, mailing lists and
other proprietary intellectual property rights including all applications with
respect thereto (collectively, "Intellectual Property Rights") as are necessary
in connection with the business of Parent and its Subsidiaries as currently
conducted, taken as a whole, except where the failure to have such Intellectual
Property Rights or such infringement by others would not have a Material Adverse
Effect on Parent. To Parent's Knowledge, neither Parent nor any of its
Subsidiaries has infringed any Intellectual Property Rights of any third party
other than any infringements that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent.
Section 2.17 Opinion of Financial Advisor. Parent has received the written
opinion of Salomon Brothers Inc, dated the date hereof, to the effect that, as
of such date, the Conversion Number (as defined in such opinion) is fair to
Parent from a financial point of view, a copy of which opinion will be delivered
to the Company promptly after the date of this Agreement.
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Section 2.18 Pooling of Interests; Reorganization. Neither Parent nor any of
its Subsidiaries, nor to Parent's Knowledge, any of Parent's Affiliates, has or
will have prior to Closing (i) taken any action or failed to take any action
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (ii) taken any action or failed
to take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.
Parent has no Knowledge of any agreement, plan or other circumstance that would
prevent the Merger from qualifying as a pooling of interests for accounting
purposes, or as a reorganization within the meaning of Section 368(a) of the
Code.
Section 2.19 Required Vote of Parent Shareholders. The affirmative vote of a
majority of the votes eligible to be cast on the approval of this Agreement is
required to approve this Agreement. The affirmative vote of a majority of the
quorum is required to approve the Share Issuance and the Charter Amendment. No
other vote of the shareholders of Parent is required by law, the Charter or
By-Laws of Parent or otherwise in order for Parent to consummate the Merger and
the transactions contemplated hereby.
Section 2.20 Ownership of Shares. Neither Parent nor any of its Subsidiaries
(i) "Beneficially Owns" or is the "Beneficial Owner" of (as such terms are
defined in the Company's Rights Agreement), or (ii) "owns," any Shares of
Company Common Stock.
Section 2.21 Operations of Sub. Sub is a direct, wholly-owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.22 Brokers. No broker, investment banker or other person, other
than Salomon Brothers Inc, the fees and expenses of which will be paid by Parent
(and as reflected in agreements between Salomon Brothers Inc, and Parent, a copy
of which has been furnished to the Company), is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
Section 2.23 State Takeover Statutes and Shareholder Rights Plan. (a)
Assuming the accuracy of the Company's representations and warranties contained
in Section 3.24 (Ownership of Shares), as of the date hereof, no state takeover
statutes or supermajority Charter provisions are applicable to the Merger, this
Agreement and the transactions contemplated hereby.
(b) As of the Effective Time, (i) Parent will have no additional obligations
under the Parent Rights or the Parent Rights Agreement and (ii) the holders of
the Parent Rights will have no additional rights under the Parent Rights or the
Parent Rights Agreement, in each case as a result of the transactions
contemplated by this Agreement. Execution and delivery of this Agreement does
not, and compliance with the provisions hereof will not, cause the holders of
the Parent Rights to have any rights under the Parent Rights or the Parent
Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power and authority to carry on its business as now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power or authority would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
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The Company and each of its Subsidiaries are duly qualified to do business, and
are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company has heretofore delivered to Parent complete and correct
copies of the Company's Articles of Incorporation ("Articles") and by-laws
("Company By-Laws"), as in effect on the date hereof.
Section 3.2 Capital Structure. As of the Effective Time, the authorized
capital stock of the Company will consist of 100,000,000 shares of Company
Common Stock, par value $.01 per share. At the close of business on October 27,
1997, (i) 15,732,191 shares of Company Common Stock were issued and outstanding,
all of which were validly issued, fully paid and nonassessable and free of
preemptive rights, (ii) 21,555,068 shares of Company Common Stock were held in
the treasury of the Company or by the Subsidiaries of the Company, and (iii) not
more than 2,564,130 shares of Company Common Stock were reserved for future
issuance pursuant to the Company's 1993 Stock Incentive Plan, 1993 Directors'
Stock Option Plan and 1996 Directors' Stock Compensation Plan, or pursuant to
any plans assumed by the Company in connection with any acquisition, business
combination or similar transaction (collectively, the "Company Stock Plans"). As
of the date of this Agreement, except for stock options covering not in excess
of 1,219,532 shares of Company Common Stock issued under the Company Stock Plans
(collectively, the "Company Stock Options") and securities issuable under the
1996 Directors' Stock Compensation Plan, the Company 1994 Employee Stock
Purchase Plan and the Company Rights Plan (as hereinafter defined), there are no
options, warrants, calls, rights or agreements to which the Company or any of
its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company or
any of its Subsidiaries or securities convertible into or exchangeable for such
capital stock, or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement. Except
as disclosed in the Company SEC Documents filed prior to the date hereof (as
hereinafter defined), since October 27, 1997, the Company has not issued any
shares of its capital stock, or securities convertible into or exchangeable for
such capital stock, other than shares issued in the ordinary course pursuant to
the Company Stock Plans and the accompanying rights issued pursuant to the
Company Rights Agreement. Except as disclosed in the Company SEC Documents filed
prior to the date hereof, there are no outstanding contractual obligations of
the Company or any of the Company's Subsidiaries (i) restricting the transfer
of, (ii) affecting the voting rights of, (iii) requiring the repurchase,
redemption or disposition of, (iv) requiring the registration for sale of, or
(v) granting any preemptive or antidilutive right with respect to, any shares of
Company Common Stock or any capital stock of any Subsidiary of the Company. Each
outstanding share of capital stock of each Subsidiary of the Company that is a
corporation is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights, and except as disclosed in the Company SEC Documents
filed prior to the date hereof, each such share is owned by the Company or
another Subsidiary of the Company, free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever.
Section 3.3 Authority. The Board of Directors of the Company has on or prior
to the date of this Agreement (a) declared the Merger advisable and fair to and
in the best interest of the Company and its shareholders, (b) approved this
Agreement in accordance with the Ill.C., (c) resolved to recommend the approval
of this Agreement by the Company's shareholders and (d) directed that this
Agreement be submitted to the Company's shareholders for approval. The Company
has all requisite corporate power and authority to enter into this Agreement
and, subject to approval by the shareholders of the Company of this Agreement
(which, for all purposes in this Agreement, shall be deemed to include any
necessary approval of amendments to the Company's stock plans) (collectively,
the "Company Shareholder Approvals"), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to (x) Company
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Shareholder Approvals and (y) the filing of appropriate Merger documents as
required by the Ill.C. This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub) constitutes the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms. The
filing of the Joint Proxy Statement with the SEC has been duly authorized by the
Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming all consents,
approvals, authorizations and other actions described in this Section 3.4 have
been obtained and all filings and obligations described in this Section 3.4 have
been made and except as set forth in Schedule 3.4 hereto, the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, result in any violation of, or breach or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Articles of Incorporation or
By-Laws of the Company, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv), any such conflicts, violations, breaches,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, or prevent or materially delay the consummation of any of the
transactions contemplated hereby. No filing, notification or registration with,
or authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, except for (i) in connection, or in compliance, with the provisions
of the HSR Act, the Securities Act and the Exchange Act, (ii) the issuance of
the Certificate of Merger by the Secretary of State of the State of Illinois and
the filing of appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement,(iv) such filings, authorizations,
orders and approvals as may be required to obtain the State Takeover Approvals,
(v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which the Company or any of its Subsidiaries conducts any business or
owns any property or assets, (vi) such filings and consents as may be required
under any state or foreign laws pertaining to debt collection, the issuance of
payment instruments or money transmission, (vii) applicable requirements, if
any, of Blue Sky Laws and the NYSE, (viii) the approval of the OCC for the
change of control of the Bank and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or prevent the consummation of any of the
transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has filed all
required documents with the SEC since January 1, 1995 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in
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all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC Documents
or as required by GAAP, the Company has not, since February 1, 1997, made any
change in the accounting practices or policies applied in the preparation of
financial statements. The books and records of the Company and its Subsidiaries
have been, and are being, maintained in accordance with GAAP and other
applicable legal and accounting requirements.
Section 3.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy Statement will (i) in
the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Joint Proxy Statement, at the
time of the mailing of the Joint Proxy Statement, the time of each of the
Shareholder Meetings and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
shareholders of Parent and the Company. The Registration Statement will comply
(with respect to the Company) as to form in all material respects with the
provisions of the Securities Act, and the Joint Proxy Statement will comply
(with respect to the Company) as to form in all material respects with the
provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed with the SEC prior to the date of this Agreement,
since February 1, 1997 or in Schedule 3.7 hereto, (A) the Company and its
Subsidiaries have not incurred any material liability or obligation (indirect,
direct or contingent), or entered into any material oral or written agreement or
other transaction, that is not in the ordinary course of business or that would
result in a Material Adverse Effect on the Company, except for any such changes
or effects resulting from this Agreement, the transactions contemplated hereby
or the announcement thereof; (B) the Company and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on the Company; (C) there has
been no action taken by the Company and its Subsidiaries, that, if taken during
the period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 4.1(b); and (D) there has been no event,
circumstance or development that would cause or have a Material Adverse Effect
on the Company, excluding any changes and effects resulting from changes in
economic, regulatory or political conditions or changes in conditions generally
applicable to the industries in which the Company and Subsidiaries of the
Company are involved and except for any such changes or effects resulting from
this Agreement, the transactions contemplated hereby or the announcement
thereof.
Section 3.8 Permits and Compliance. Each of the Company and its Subsidiaries
is in possession of all Permits necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and, as of the date of
this Agreement, no suspension or cancellation of any of the
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Company Permits is pending or, to the Knowledge of the Company (as hereinafter
defined), threatened, except where the suspension or cancellation of any of the
Company Permits would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
is in violation of (A) its articles, by-laws or other organizational documents,
(B) any applicable law, ordinance, administrative or governmental rule or
regulation or (C) any order, decree or judgment of any Governmental Entity
having jurisdiction over the Company or any of its Subsidiaries, except, in the
case of clauses (A) (as to the Company's Subsidiaries only), (B) and (C), for
any violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement or in Schedule 3.8(a) hereto, as of
the date hereof there is no contract or agreement that is material to the
business, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. Except as set forth in the Company SEC Documents
filed prior to the date of this Agreement or in Schedule 3.8(b) hereto, no event
of default or event that, but for the giving of notice or the lapse of time or
both, would constitute an event of default exists or, upon the consummation by
the Company of the transactions contemplated by this Agreement, will exist under
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any contractual license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which any of the properties, assets or operations
of the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. "Knowledge of the Company" means the actual knowledge, after due
inquiry, of the Chief Executive Officer and the Chief Financial Officer.
Section 3.9 Tax Matters. Each of the Company and its Subsidiaries has filed
all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to file such Tax Returns or pay such Taxes would not, in the aggregate,
have a Material Adverse Effect on the Company.
Section 3.10 Bank Matters. The Bank is a national bank, duly organized,
validly existing and in good standing. It has all the requisite power and all
Permits necessary to conduct its business. The Bank's deposits are insured by
the FDIC and it is a member in good standing of (i) the FDIC's Bank Insurance
Fund ("BIF"), and (ii) the Federal Reserve System. There are no material
memoranda of understanding, cease and desist or removal orders, or capital or
other directives, resolutions or other action by any regulatory authority
against the Bank or any of its directors, officers or employees.
Section 3.11 Actions and Proceedings. Except as set forth in the Company SEC
Documents filed prior to this Agreement or on Schedule 3.11 hereto, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
or against or involving any of the present directors or officers of the Company
or any of its Subsidiaries, as such, any of its or their properties, assets or
business that, individually or in the aggregate, would have a Material Adverse
Effect on the Company. Except as set forth in the Company SEC Documents or on
Schedule 3.11 hereto, as of the date of this Agreement, there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened against
or involving the Company or any of its Subsidiaries or any of its or their
present directors or officers, as such, any of its or their properties, assets
or business that, individually or in the aggregate, would have a Material
Adverse Effect on the Company. As of the date hereof, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
its or their present directors or officers, as such, or any of its or their
properties, assets or business relating to the transactions contemplated by this
Agreement.
Section 3.12 Certain Agreements. Except as set forth in Schedule 3.12, as of
the date of this Agreement, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or
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plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. No holder of any option to
purchase shares of Company Common Stock, or shares of Company Common Stock
granted in connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option or shares as a result of
the transactions contemplated by this Agreement (other than in lieu of
fractional shares). Neither the Company nor any Subsidiary is a party to any
termination benefits agreement or severance agreement or employment agreement
one trigger of which would be the consummation of the transactions contemplated
by this Agreement, except as set forth in Schedule 3.12.
Section 3.13 ERISA.
(a) With respect to each material Company Plan (as hereinafter defined), the
Company has made (or as soon as practicable will make) available to Parent a
true and correct copy of (i) the three most recent annual reports (Form 5500)
filed with the Internal Revenue Service (the "IRS"), (ii) such Company Plan,
(iii) each trust agreement, insurance contract or administration agreement
relating to such Company Plan, (iv) the most recent summary plan description of
each Company Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Company Plan subject to Title
IV of ERISA and (vi) the most recent determination letter, if any, issued by the
IRS with respect to any Company Plan intended to be qualified under section
401(a) of the Code. Except as would not have a Material Adverse Effect on the
Company, (i) each Company Plan complies in all material respects with ERISA, the
Code and all other applicable statutes and governmental rules and regulations,
including but not limited to COBRA, (ii) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan,
(iii) neither the Company nor any of its ERISA Affiliates has withdrawn from any
Company Multiemployer Plan (as hereinafter defined), or instituted, or is
currently considering taking, any action to do so, and (iv) no action has been
taken, or is currently being considered, to terminate any Company Plan subject
to Title IV of ERISA, and (v) the Company and its ERISA Affiliates have complied
in all material respects with the continued medical coverage requirements of
COBRA. Except as would not have a Material Adverse Effect on the Company, no
Company Plan, nor any trust created thereunder, has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived.
With respect to any Company Plan which is subject to Title IV of ERISA, the
present value of accrued benefit obligations, as determined in accordance with
FAS 87 in accordance with the actuarial assumptions used to prepare the most
recent reports of such Company Plan, did not exceed the fair market value of the
Plan assets as of the most recent valuation date for which an actuarial report
has been prepared, and the Company has no Knowledge of any Material Adverse
Change to such status.
(b) With respect to the Company Plans, no event has occurred in connection
with which the Company or any ERISA Affiliate would be subject to any liability
under the terms of such Company Plans, ERISA, the Code or any other applicable
law which would have a Material Adverse Effect on the Company. All Company Plans
that are intended to be qualified under Section 401(a) of the Code have been
determined by the Internal Revenue Service to be so qualified, or a timely
application for such determination is now pending, and to the Knowledge of the
Company, there is no reason why any Company Plan is not so qualified in
operation. Neither the Company nor any of its ERISA Affiliates has been notified
by any Company Multiemployer Plan that such Company Multiemployer Plan is
currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. Except as
disclosed in the Company SEC Documents, neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to provide
benefits after termination of employment to any employee or dependent other than
as required by ERISA or as disclosed in the Company Annual
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Report. As used herein, (i) "Company Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Company Multiemployer Plan)) or a "welfare
plan" (as defined in Section 3(1) of ERISA) established or maintained by the
Company or any of its ERISA Affiliates or as to which the Company or any of its
ERISA Affiliates has contributed or otherwise may have any liability, (ii)
"Company Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or
has been obligated to contribute or otherwise may have any liability and (iii)
with respect to any person, "ERISA Affiliate" means any trade or business
(whether or not incorporated) which is under common control or would be
considered a single employer with such person pursuant to Section 414(b), (c),
(m) or (o) of the Code and the regulations promulgated under those sections or
pursuant to Section 4001(b) of ERISA and the regulations promulgated thereunder,
including, without limitation, each of the Company's Subsidiaries.
Section 3.14 Compliance with Certain Laws. Except as disclosed in Schedule
3.14 hereto, the properties, assets and operations of the Company and its
Subsidiaries are in compliance in all material respects with all applicable
Worker Safety Laws, Environmental Laws and Consumer Credit Laws, except as would
not have a Material Adverse Effect on the Company. Except as disclosed in
Schedule 3.14 hereto, with respect to such properties, assets and operations,
including any previously owned, leased or operated properties, assets or
operations, there are no past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices, incidents, actions or plans of
the Company or any of its Subsidiaries that may interfere with or prevent
compliance or continued compliance in all material respects with applicable
Worker Safety Laws and Environmental Laws, except as would not have a Material
Adverse Effect on the Company. The Company will make available to Parent such
certificates and environmental studies with respect to such properties as the
Company has available on the date hereof.
Section 3.15 Liabilities. Except as fully reflected or reserved against in
the consolidated balance sheet of the Company and its Subsidiaries as of
February 1, 1997, included in the Company SEC Documents, or disclosed in the
footnotes thereto, the Company and its Subsidiaries had no liabilities
(including, without limitation, tax liabilities) at the date of such balance
sheet, absolute or contingent, that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with GAAP other than
liabilities incurred in the ordinary course of business or that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
Section 3.16 Labor Matters. Except as set forth in Schedule 3.16, neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or labor contract. Neither the Company nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons employed by or
otherwise performing services primarily for the Company or any of its
Subsidiaries (the "Company Business Personnel"), and there is no unfair labor
practice complaint or grievance against the Company or any of its Subsidiaries
by the National Labor Relations Board or any comparable state agency pending or
threatened in writing with respect to the Company Business Personnel, except
where such unfair labor practice, complaint or grievance would not have a
Material Adverse Effect on the Company. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries which may interfere
with the respective business activities of the Company or any of its
Subsidiaries, except where such dispute, strike or work stoppage would not have
a Material Adverse Effect on the Company.
Section 3.17 Intellectual Property. The Company and its Subsidiaries own or
possess adequate licenses or other legal rights to use, free to the Company's
Knowledge of infringement by others, all Intellectual Property Rights as are
necessary in connection with the business of the Company and its Subsidiaries as
currently conducted, taken as a whole, except where the failure to have such
Intellectual Property Rights or such infringement by others would not have a
Material Adverse Effect on the Company. To the Company's Knowledge, neither the
Company nor any of its Subsidiaries has infringed any Intellectual
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Property Rights of any third party other than any infringements that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.18 Opinion of Financial Advisor. The Company has received the
written opinion of SBC Warburg Dillon Read Inc., dated the date hereof, to the
effect that, as of the date hereof, the Conversion Number (as defined in such
opinion) is fair to the Company's shareholders from a financial point of view, a
copy of which opinion will be delivered to Parent promptly after the date of
this Agreement.
Section 3.19 State Takeover Statutes and Shareholder Rights Plan. (a)
Assuming the accuracy of Parent's representations and warranties contained in
Section 2.20 (Ownership of Shares), the Board of Directors of the Company has
taken all action so that prior to the execution hereof, the Board of Directors
has approved the Merger pursuant to Sections 5/7.85 and 5/11.75 of the Ill.C. As
of the date hereof, no other state takeover statutes, including without
limitation, any business combination act, are applicable to the Merger, this
Agreement and the transactions contemplated hereby.
(b) The Company has taken all necessary action so that, as of the Effective
Time, (i) the Company will have no additional obligations and Parent will have
no obligations under the rights to purchase Company Common Stock (the "Rights")
issued pursuant to the Rights Agreement between the Company and Harris Trust &
Savings Bank , dated as of November 2,1993 (the "Rights Agreement") (the Rights
and Rights Agreement collectively are the "Company Rights Plan") or the Rights
Agreement and (ii) the holders of the Rights will have no additional rights
under the Rights or the Rights Agreement, in each case as a result of the
transactions contemplated by this Agreement. Execution and delivery of this
Agreement does not, and compliance with the provisions hereof will not, cause
the holders of the Rights to have any rights under the Rights or the Rights
Agreement.
Section 3.20 Required Vote of Company Shareholders. The affirmative vote of
the holders of not less than a majority of the outstanding shares of Company
Common Stock is required to approve the transactions contemplated by this
Agreement. No other vote of the shareholders of the Company is required by law,
the Articles of Incorporation or By-Laws of the Company or otherwise for the
Company to consummate the Merger and the transactions contemplated hereby.
Section 3.21 Pooling of Interests; Reorganization. To the Knowledge of the
Company, neither it nor any of its Subsidiaries or Affiliates has, or will have
prior to Closing, (i) taken any action or failed to take any action which action
or failure would jeopardize the treatment of the Merger as a pooling of
interests for accounting purposes or (ii) taken any action or failed to take any
action which action or failure would jeopardize the qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
Section 3.22 Brokers. No broker, investment banker or other person, other
than SBC Warburg Dillon Read Inc., the fees and expenses of which will be paid
by the Company (and are reflected in an agreement between SBC Warburg Dillon
Read Inc. and the Company, a copy of which has been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.23 Share Repurchases. The Board of Directors has rescinded the $20
million share repurchase program adopted in January, 1997 (the "Share Repurchase
Program"), and has directed management publicly to disclose that fact in
connection with the first press release related to this Agreement.
Section 3.24 Ownership of Shares. Neither Company nor any of its
Subsidiaries (i) "Beneficially Owns" or is the "Beneficial Owner" of (as such
terms are defined in Parent's Rights Agreement), or (ii) "owns," any Shares of
Parent Common Stock.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Except as expressly permitted by clauses (i) through
(ix) of this Section 4.1(a), during the period from the date of this Agreement
through the Effective Time, Parent, subject to Section 4.2 hereof, shall, and
shall cause each of its Subsidiaries to, in all material respects carry on its
business in the ordinary course of its business as currently conducted and, to
the extent consistent therewith, use reasonable best efforts to preserve intact
its current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, Parent, subject to Section 4.2 hereof, shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of the
Company:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such (other than dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, (y) purchase, redeem or otherwise acquire any shares
of capital stock of Parent or any other securities thereof or the capital
stock of any Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities, or (z)
institute any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options to
acquire any such shares, voting securities, equity equivalent or convertible
securities, other than (A) subject to Section 4.4, the issuance of stock
options and shares of Parent Common Stock to employees of Parent or any of
its Subsidiaries in the ordinary course of business consistent with past
practice, (B) the issuance of Parent securities pursuant to the Parent
Rights Plan, and (C) the issuance by any wholly-owned Subsidiary of Parent
of its capital stock to Parent or another wholly-owned Subsidiary of Parent;
(iii) amend its Charter or By-Laws; provided, however, that Parent may
amend its Charter to increase its authorized capital stock and its By-Laws
in accordance with Section 5.14 hereof;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than acquisitions of assets in the
ordinary course of business consistent with past practice, unless (i) the
entering into a definitive agreement relating to or the consummation of such
acquisition, merger, consolidation or purchase would not (A) impose any
material delay in the obtaining of, or significantly increase the risk of
not obtaining, any authorizations, consents, orders, declarations or
approvals of any Governmental Entity necessary to consummate the Merger or
the expiration or termination of any applicable waiting period, (B)
significantly increase the risk of any Governmental Entity entering an order
prohibiting the consummation of the Merger or (C) significantly increase the
risk of not being able to remove any such order on appeal or otherwise, and
(ii) in the case of any individual acquisition, merger, consolidation or
purchase, the value of which does not exceed $175 million;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business consistent with past
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practice and not material to Parent and its Subsidiaries taken as a whole,
(B) as may be required by any Governmental Entity and (C) subject to
Sections 4.4 and 5.8(d), dispositions involving an aggregate consideration
not in excess of $100 million;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) in the ordinary
course of business consistent with past practice, and (B) indebtedness,
loans, advances, capital contributions and investments between Parent and
any of its wholly-owned Subsidiaries or between any of such wholly-owned
Subsidiaries;
(vii) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(viii) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP); or
(ix) authorize, recommend or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
(b) Actions by the Company. Except as expressly permitted by clauses (i)
through (xiii) of this Section 4.1(b) and as set forth in Schedule 4.1(b),
during the period from the date of this Agreement through the Effective Time,
the Company, subject to Section 4.2 hereof, shall, and shall cause each of its
Subsidiaries to, in all material respects, carry on its business in, the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve intact its current
business organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement, the Company, subject to Section 4.2 hereof, shall not, and shall
not permit any of its Subsidiaries to, without the prior written consent of
Parent:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such (other than dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, (y) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any other securities thereof or the
capital stock of any Subsidiaries, or any securities thereof, or any rights,
warrants or options to acquire any such shares or other securities or (z)
reinstate the Share Repurchase Program or institute any similar share
repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options to
acquire any such shares, voting securities, equity equivalent or convertible
securities, other than (A) the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms, (B) the issuance of
Company securities pursuant to the 1996 Directors' Stock Compensation Plan
or the Company Rights Plan, or (C) the issuance by any wholly-owned
Subsidiary of the Company of its capital stock to the Company or another
wholly-owned Subsidiary of the Company;
(iii) amend its Articles of Incorporation or By-Laws;
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(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a portion of the assets of or equity in, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets other than acquisitions of assets in the ordinary course of
business consistent with past practice;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business consistent with past practice and not
material to the Company and its Subsidiaries taken as a whole and (B) as may
be required by any Governmental Entity;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) indebtedness incurred
in the ordinary course of business consistent with past practice and (B)
indebtedness, loans, advances, capital contributions and investments between
the Company and any of its wholly-owned Subsidiaries or between any of such
wholly-owned Subsidiaries;
(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company
or any Subsidiary;
(viii) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, other than (A) as required by law, or
(B) as expressly contemplated by this Agreement;
(ix) increase the compensation payable or to become payable to its
officers or employees, except for increases in the ordinary course of
business consistent with past practice in salaries or wages of employees of
the Company or any of its Subsidiaries who are not officers of the Company
or any of its Subsidiaries, or grant any additional rights to severance or
termination pay to, or enter into any employment or severance agreement
with, any director or officer of the Company or any of its Subsidiaries, or
establish, adopt, enter into, or, except as set forth on Schedule 4.1(b) or
as may be required to comply with applicable law, amend or take action in
any such case in a manner so as to enhance or accelerate any rights or
benefits under, any labor, collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP);
(xii) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability; or
(xiii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 4.2 No Solicitation. From and after the date hereof, neither Parent
nor the Company will, and each will use its best efforts to cause any of its
officers, directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries not to, directly or
indirectly, (a) solicit, initiate or knowingly encourage (including by way of
furnishing non-public information) any proposal or offer from any person that
constitutes, or may reasonably be expected to lead to, a Takeover Proposal (as
hereinafter defined), or (b) engage in or continue discussions or negotiations
relating to a Takeover
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Proposal; provided, however, that prior to the receipt of approval by their
respective shareholders, either Parent or the Company may engage in discussions
or negotiations with, or furnish information concerning itself and its
Subsidiaries, business, properties or assets to, any third party which makes a
Takeover Proposal (as hereinafter defined) if the Board of Directors of either
Parent or the Company concludes in good faith on the basis of the advice of its
outside counsel (Sommer & Barnard, PC and Wachtell, Lipton, Rosen & Katz,
respectively) that the failure to take such action would violate the fiduciary
obligations of such Board under applicable law. Each of Parent and the Company
will promptly (but in no case later than 24 hours) notify (and if in writing,
provide a copy to) the other of any Takeover Proposal, including the material
terms and conditions thereof. As used in this Agreement, "Takeover Proposal"
shall mean any proposal or offer, or any expression of interest by any third
party relating to Parent's or the Company's willingness or ability to receive or
discuss a proposal or offer, for (A) a tender or exchange offer, or other
acquisition of beneficial ownership of, in each case 30% or more of the
outstanding voting capital stock of Parent or the Company, respectively, (B) a
merger, consolidation or other business combination involving either Parent or
the Company or any of their respective Subsidiaries or (C) any proposal to
acquire in any manner 30% or more of the assets of, either Parent or the Company
and their respective Subsidiaries, taken as a whole.
Section 4.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, neither the Parent nor the
Company, without the consent of the other party, shall terminate, amend, modify
or waive any provision of any confidentiality or standstill agreement to which
Parent or the Company or any of their respective Subsidiaries is a party and
which relates to a Takeover Proposal for Parent or the Company, respectively
(other than any involving the other party hereto), unless the Board of Directors
of Parent or the Company, as the case may be, concludes in good faith on the
basis of the advice of its outside counsel (who may be its regularly engaged
outside counsel), that the failure to terminate, amend, modify or waive any such
confidentiality or standstill agreement would violate the fiduciary obligations
of the Board under applicable law. Subject to such fiduciary duties, during such
period, each of Parent and the Company agrees to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States or any state thereof having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the period from the
date of this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries or Affiliates over which they exercise control shall (a)
knowingly take or fail to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (b) knowingly take or fail to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code. Between the date of this
Agreement and the Effective Time, Parent and the Company each shall take all
reasonable actions necessary to cause the characterization of the Merger as a
pooling of interests for accounting purposes if such a characterization were
jeopardized by action taken by Parent or the Company, respectively, prior to the
Effective Time. Following the Effective Time, Parent shall not knowingly take
any action, or fail to take any action, that would jeopardize the
characterization of the Merger as a "pooling of interests" for accounting
purposes. Parent shall cause financial results covering the first full month of
post-Merger combined operations to be published within 75 days after the
Effective Time.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings. Except to the extent legally required for
the discharge by the board of directors of its fiduciary duties as advised by
counsel, the Company and Parent each shall call a meeting of its shareholders
(respectively, the "Company Shareholder Meeting" and the "Parent Shareholder
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Meeting" and, collectively, the "Shareholder Meetings") to be held on the same
day and as promptly as practicable after the date on which the Registration
Statement becomes effective, but in no event prior to January 20, 1998, for the
purpose of considering the approval of this Agreement (in the case of the
Company) and the Parent Shareholders' Approvals (in the case of Parent). The
Company and Parent will, through their respective Boards of Directors, recommend
to their respective shareholders approval of such matters and shall not withdraw
such recommendation; provided, however, that a Board of Directors shall not be
required to make, and shall be entitled to withdraw, such recommendation if such
Board concludes in good faith on the basis of the advice of Wachtell, Lipton,
Rosen & Katz in the case of the Company and Sommer & Barnard, PC in the case of
Parent that the making of, or the failure to withdraw, such recommendation would
violate the fiduciary obligations of such Board under applicable law. The Boards
of Directors of the Company, Parent and Sub will not rescind their respective
declarations that the Merger is advisable, fair to and in the best interest of
such company and its shareholders unless, in any such case, any such Board
concludes in good faith on the basis of the advice of Wachtell, Lipton, Rosen &
Katz in the case of the Company and Sommer & Barnard, PC in the case of Parent
that the failure to rescind such determination would violate the fiduciary
obligations of such Board under applicable law.
Section 5.2 Preparation of the Registration Statement and the Joint Proxy
Statement. The Company and Parent shall promptly prepare and file with the SEC
the Joint Proxy Statement and Parent shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use its reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. As promptly as practicable after
the Registration Statement shall have become effective, each of Parent and the
Company shall mail the Joint Proxy Statement to its respective shareholders.
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger, and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action. No amendment or
supplement to the Joint Proxy Statement or the Registration Statement will be
made by Parent or the Company without the prior approval of the other party.
Parent and the Company each will advise the other, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
Section 5.3 Access to Information. Subject to currently existing contractual
and legal restrictions applicable to Parent or to the Company or any of their
Subsidiaries, each of Parent and the Company shall, and shall cause each of its
Subsidiaries to, afford to the accountants, counsel, financial advisors and
other representatives of the other party hereto reasonable access to, and permit
them to make such inspections as they may reasonably require of, during normal
business hours during the period from the date of this Agreement through the
Effective Time, all their respective properties, books, contracts, commitments
and records (including, without limitation, the work papers of independent
accountants, if available and subject to the consent of such independent
accountants) and, during such period, Parent and the Company shall, and shall
cause each of its Subsidiaries to, furnish promptly to the other (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its business, properties and
personnel as the other may reasonably request. No investigation pursuant to this
Section 5.3 shall affect any representation or warranty in this Agreement of any
party hereto or any condition to the obligations of the parties hereto. All
information obtained by Parent or the Company pursuant to this Section 5.3 shall
be kept confidential in accordance with the Confidentiality Agreement dated
October 15, 1997 between Parent and the Company (the "Confidentiality
Agreement").
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Section 5.4 Compliance with the Securities Act; Pooling Period.
(a) Not less than 45 days prior to the Effective Time, the Company shall
deliver to Parent a list of names and addresses of those persons who were, in
the opinion of the Company at the time of the Company Shareholder Meeting
referred to in Section 5.1, "affiliates" of the Company within the meaning of
Rule 145 under the Securities Act and for the purposes of applicable
interpretations regarding the pooling-of-interests method of accounting; it
being understood that the mere fact that a shareholder owns more than 10% of the
Company's Common Stock shall not, absent such shareholder's having board
representation or otherwise having the ability to control the management of the
Company, mean that such holder is an Affiliate ("Affiliates"). The Company shall
provide to Parent such information and documents as Parent shall reasonably
request for purposes of reviewing such list. There shall be added to such list
the names and addresses of any other person which Parent reasonably identifies
(by written notice to the Company within ten business days after Parent's
receipt of such list) as being a person who may be deemed to be an Affiliate of
the Company; provided, however, that no such person identified by Parent shall
be added to the list of Affiliates of the Company if Parent shall receive from
the Company, on or before the Effective Time, an opinion of counsel reasonably
satisfactory to Parent to the effect that such person is not an Affiliate. The
Company shall exercise all reasonable efforts to deliver or cause to be
delivered to Parent, not later than 30 days prior to the Effective Time, from
each of such Affiliates of the Company identified in the foregoing list, an
affiliate letter in the form attached hereto as Exhibit A.
(b) Not less than 45 days prior to the Effective Time, Parent shall deliver
to the Company a list of names and addresses of those persons who were, in the
opinion of Parent at the time of the Parent Shareholder Meeting referred to in
Section 5.1, "affiliates" of Parent within the meaning of Rule 145 under the
Securities Act and for the purposes of applicable interpretations regarding the
pooling-of-interests method of accounting; it being understood that the mere
fact that a shareholder owns more than 10% of the Parent's Common Stock shall
not, absent such shareholder's having board representation or otherwise having
the ability to control the management of Parent, mean that such holder is an
Affiliate ("Affiliates"). Parent shall provide to the Company such information
and documents as the Company shall reasonably request for purposes of reviewing
such list. There shall be added to such list the names and addresses of any
other person which the Company reasonably identifies (by written notice to
Parent within ten business days after the Company's receipt of such list) as
being a person who may be deemed to be an Affiliate of the Parent; provided,
however, that no such person identified by the Company shall be added to the
list of Affiliates of Parent if the Company shall receive from Parent, on or
before the Effective Time, an opinion of counsel reasonably satisfactory to the
Company to the effect that such person is not an Affiliate. Parent shall
exercise all reasonable efforts to deliver or cause to be delivered to the
Company, not later than 30 days prior to the Effective Time, from each of such
Affiliates of Parent identified in the foregoing list, an affiliate letter in
the form attached hereto as Exhibit B.
(c) If the Merger would otherwise qualify for pooling-of-interests
accounting treatment, shares of Parent Common Stock issued to such Affiliates of
the Company in exchange for Shares shall not be transferable until such time as
financial results covering at least 30 days of combined operations of Parent and
the Company have been published within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies, regardless whether each such
Affiliates has provided the written agreement referred to in this Section 5.4,
except to the extent permitted by, and in accordance with, Accounting Series
Release 135 and Staff Accounting Bulletins 65 and 76. Any shares of Company
Common Stock held by such Affiliates shall not be transferable, regardless
whether each such Affiliate has provided the written agreement referred to in
this Section 5.4, if such transfer, either alone or in the aggregate with other
transfers by Affiliates, would preclude Parent's ability to account for the
business combination to be effected by the Merger as a pooling of interests. The
Company shall not register the transfer of any Certificate, unless such transfer
is made in compliance with the foregoing. Parent shall not be required to
maintain the effectiveness of the S-4 Registration Statement or any other
registration statement under the Securities Act for the purposes of resale of
Parent Common Stock by such Affiliates received in the
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Merger and the certificates representing Parent Common Stock received by such
Affiliates shall bear a customary legend regarding applicable Securities Act
restrictions and the provisions of this Section 5.4.
Section 5.5 NYSE Listing. Parent shall use its reasonable best efforts to
list on the NYSE, upon official notice of issuance, the shares of Parent Common
Stock to be issued in connection with the Merger.
Section 5.6 Fees and Expenses.
(a) Except as provided in this Section 5.6, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby including, without limitation, the fees
and disbursements of counsel, financial advisors and accountants, shall be paid
by the party incurring such costs and expenses, provided that all printing
expenses and filing fees shall be divided equally between Parent and the
Company.
(b) (i) If any event referred to in Section 7.1(i) occurs at a time when the
Company does not have a right to terminate under Section 7.1(k), this Agreement
is terminated thereafter by the Company or Parent (whether or not pursuant to
such clause) and prior to such termination the shareholders of the Company did
not approve this Agreement, then, so long as Parent is not in material breach of
any representation, warranty or material covenant herein, the Company shall
(without prejudice to any other rights of Parent against the Company) pay to
Parent a fee of $20.0 million in cash, such payment to be made promptly, but in
no event later than the second business day following such termination.
(ii) If at a time when the Company does not have a right to terminate under
Section 7.1(k):
(A) this Agreement is terminated by the Company pursuant to Section
7.1(d) where prior to the Company Shareholder Meeting a Takeover Proposal
with respect to the Company was made and within twelve months after such a
termination a Company Acquisition Transaction (as hereinafter defined)
occurs;
(B) (x) this Agreement is terminated by the Company or Parent at a time
when Parent is entitled to terminate this Agreement pursuant to Section
7.1(e), and (y) prior to the Company Shareholder Meeting but after the date
of this Agreement a Takeover Proposal with respect to the Company was made;
(C) this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(g) and within twelve months after such termination a Company
Acquisition Transaction occurs; or
(D) this Agreement is terminated by Parent pursuant to Section 7.1(i)
following the occurrence of a Company Acquisition Transaction;
then, in each case, so long as Parent is not in material breach of any
representation, warranty or material covenant herein, the Company shall (without
prejudice to any other rights of Parent against the Company) pay to Parent a fee
of $20.0 million in cash, such payment to be made promptly, but in no event
later than the second business day following, in the case of clause (A) and (C),
the Company Acquisition Transaction, or, in the case of clause (B) or (D), such
termination. Regardless of the circumstances giving rise to termination, a
maximum of $20.0 million will be payable under clauses (b)(i) and (b)(ii).
A "Company Acquisition Transaction" means any of the following events: (A)
any Person other than Parent or its Affiliates, acquires or becomes the
beneficial owner of 30% or more of the outstanding shares of Company Common
Stock; (B) any new group is formed which, at the time of formation, beneficially
owns 30% or more of the outstanding shares of Company Common Stock (other than a
group which includes or may reasonably be deemed to include Parent or any of its
Affiliates); (C) the Company enters into an agreement, including, without
limitation, an agreement in principle, providing for a merger or other business
combination involving the Company or the acquisition of a 30% interest in, or at
least 30% of the assets, business or operations of, the Company (other than the
transactions contemplated by this Agreement); or (D) any Person (other than
Parent or its Affiliates) is granted any option or right,
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conditional or otherwise, to acquire or otherwise become the beneficial owner of
shares of Company Common Stock which, together with all shares of Company Common
Stock beneficially owned by such Person, results or would result in such Person
being the beneficial owner of 30% or more of the outstanding shares of Company
Common Stock. For purposes of this Section 5.6, the terms "group" and
"beneficial owner" shall be defined by reference to Section 13(d) of the
Exchange Act.
(c) (i) If any event referred to in Section 7.1(j) occurs, this Agreement is
terminated thereafter by the Company or Parent (whether or not pursuant to such
clause) and prior to such termination the shareholders of Parent did not approve
this Agreement, then, so long as the Company is not in material breach of any
representation, warranty or material covenant herein, Parent shall (without
prejudice to any other rights of Company against Parent) pay to the Company a
fee of $30.0 million in cash, such payment to be made promptly, but in no event
later than the second business day following such termination.
(ii) If:
(A) this Agreement is terminated by Parent pursuant to Section 7.1(d)
where prior to the Parent Shareholder Meeting a Takeover Proposal with
respect to the Parent was made and within twelve months after such a
termination a Parent Acquisition Transaction (as hereinafter defined)
occurs;
(B) (x) this Agreement is terminated by the Company or Parent at a time
when the Company is entitled to terminate this Agreement pursuant to Section
7.1(f), and (y) prior to the Parent Shareholder Meeting but after the date
of this Agreement a Takeover Proposal with respect to the Parent was made;
(C) this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(h) and within twelve months after such termination a Parent
Acquisition Transaction occurs; or
(D) this Agreement is terminated by the Company pursuant to Section
7.1(j) following the occurrence of a Parent Acquisition Transaction;
then, in each case, so long as the Company is not in material breach of any
representation, warranty or material covenant herein, Parent shall (without
prejudice to any other rights of the Company against Parent) pay to the Company
a fee of $30.0 million in cash in the case of clauses (A), (C) and (D) or $25.0
million in the case of clause (B), such payment to be made promptly, but in no
event later than the second business day following, in the case of clause (A)
and (C), the Parent Acquisition Transaction or, in the case of clauses (B) or
(D), such termination. Regardless of the circumstances giving rise to
termination, a maximum of $30.0 million will be payable under clauses (c)(i) and
(c)(ii).
A "Parent Acquisition Transaction" means any of the following events: (A)
any Person acquires or becomes the beneficial owner of 30% or more of the
outstanding shares of Parent Common Stock; (B) any new group is formed which, at
the time of formation, beneficially owns 30% or more of the outstanding shares
of Parent Common Stock (other than a group which includes or may reasonably be
deemed to include Parent or any of its Affiliates); (C) Parent enters into an
agreement, including, without limitation, an agreement in principle, providing
for a merger or other business combination involving Parent (other than this
Agreement) or the acquisition of a 30% interest in, or at least 30% of the
assets, business or operations of, Parent or (D) any Person (other than the
Company or its Affiliates) is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of shares of
Parent Common Stock which, together with all shares of Parent Common Stock
beneficially owned by such Person, results or would result in such Person being
the beneficial owner of 30% or more of the outstanding shares of Parent Common
Stock.
(iii) If the event referred to in Section 7.1(k) occurs, (w) the directors
of the Company determine not to terminate the Agreement as a result of such
event, (x) the directors of the Company determine not to withdraw their
recommendation, (y) SBC Warburg Dillon Read Inc. does not withdraw its opinion,
and (z) the shareholders of the Company do not approve this Agreement at the
Company Shareholder Meeting or
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any adjournment or postponement thereof and this Agreement is terminated as a
result thereof pursuant to Section 7.1(e), Parent shall pay to the Company a fee
of $20.0 million in cash, such payment to be made immediately into an escrow
account to be released to the Company only if no Company Acquisition Transaction
occurs within 6 months of the Company Shareholder Meeting, and otherwise to
Parent.
(d) Parent and the Company acknowledge that the agreements contained in
Sections 5.6(b) and 5.6(c) are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, Parent and Sub and the
Company would not enter into this Agreement. Accordingly, if either Parent or
the Company fails promptly to pay the amount due pursuant to Sections 5.6(b) and
5.6(c), and, to obtain such payment, Company, on the one hand, or Parent or Sub,
on the other hand, commences a suit which results in a judgment for the fee set
forth in Section 5.6(b) or 5.6(c), the Company or Parent, as the case may be,
shall pay to Parent or Sub, on the one hand, or the Company, on the other hand,
its costs and expenses (including attorneys' fees) in connection with such suit
together with interest on the amount of the fee at the prime rate of NationsBank
of North Carolina, N.A., in effect on the date such payment was required to be
made.
Section 5.7 Company Stock Options; Stock Purchase Plan; Employee Benefits.
(a) At the Effective Time, by virtue of the Merger and without any further
action on the part of the Company or the holder thereof, each unexpired and
unexercised option to purchase shares of Company Common Stock (a "Company Stock
Option"), under the Company Stock Option Plans, or otherwise granted by the
Company outside of any Company Stock Option Plan, will be assumed by Parent as
hereinafter provided. At the Effective Time, by virtue of the Merger and without
any further action on the part of the Company or the holder thereof, each
Company Stock Option will be automatically converted into an option (the "Parent
Stock Option") to purchase a number of shares of Parent Common Stock equal to
the number of shares of Company Common Stock that could have been purchased
under such Company Stock Option multiplied by the Conversion Number, at a price
per share of Parent Common Stock equal to the per share option exercise price
specified in the Company Stock Option, divided by the Conversion Number. Such
Parent Stock Option shall otherwise be subject to the same terms and conditions
as such Company Stock Option. Each Company Stock Option that is outstanding
prior to the Effective Time shall, pursuant to its terms and without any further
action on the part of the Board of Directors of the Company, become fully vested
and exercisable as of the Effective Time. The resolutions of the Parent Board
approving this Agreement shall specifically approve the terms and conditions of
the Company Stock Options so assumed for purposes of Rule 16b-3(d)(1) under the
Exchange Act. At the Effective Time, (i) all references in the Company Stock
Option Plans, the applicable stock option or other awards agreements issued
thereunder and in any other Company Stock Options to the Company shall be deemed
to refer to Parent; and (ii) Parent shall assume the Company Stock Option Plans
and all of the Company's obligations with respect to the Company Stock Options.
(b) In respect of each Company Stock Option as converted into a Parent Stock
Option pursuant to Section 5.7(a) and assumed by Parent, and the shares of
Parent Common Stock underlying such option, Parent shall file as soon as
practicable after the Effective Time with the Securities and Exchange
Commission, and keep current the effectiveness of, a registration statement on
Form S-8 (which may be accomplished by amendment of the registration statement
on Form S-4) or other appropriate form for as long as such options remain
outstanding (and maintain the current status of the prospectus with respect
thereto). Parent agrees to reserve a number of shares of Parent Common Stock
equal to the number of shares of Parent Common Stock issuable upon the exercise
of such Company Stock Options.
(c) The Company agrees that it will not grant any stock options, restricted
stock, stock appreciation rights or limited stock appreciation rights and will
not permit cash payments to holders of Company Stock Options in lieu of the
substitution therefor of Parent Stock Options, as described in this Section 5.7.
(d) From and after the Effective Time, Parent shall honor, and shall cause
the Company and Company Subsidiaries to honor, in accordance with their terms
all existing employment and severance
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agreements and severance and bonus plans which apply to current or former
employees or directors of the Company or the Company Subsidiaries. Parent and
the Company acknowledge and agree that the transactions contemplated by this
Agreement shall constitute, as of the receipt of the Company Shareholder
Approvals or the Effective Time (depending on such arrangement language), a
"Change of Control" as such term is defined in all Company change of control
benefit arrangements.
(e) To the extent that service is relevant for purposes of eligibility,
participation, vesting or (except in the case of a defined benefit pension plan
maintained by Parent, and not previously maintained by the Company or any
Company Subsidiary) benefit accrual under any employee benefit plan, program or
arrangement established or maintained by Parent, the Company or any of their
respective Subsidiaries, employees of the Company and the Company Subsidiaries
shall be credited for service accrued or deemed accrued prior to the Effective
Time with the Company or a Company Subsidiary, as the case may be.
(f) For one year immediately following the Effective Time, Parent will cause
the Company or its Subsidiaries to pay bonuses pursuant to the Company's current
bonus plans, consistent with past practices, as determined by the current
Chairman of the Board of Directors of the Company.
(g) In addition to the matters referred to on Schedule 5.7(g), for one year
immediately following the Effective Time, any changes to the Company's and the
Company's Subsidiaries' benefit plans and arrangements shall be subject to the
determination of the current Chairman of the Board of Directors of the Company.
Section 5.8 Reasonable Best Efforts; Pooling of Interests.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act and State Takeover Approvals), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by this Agreement. Parent and the Company shall
cooperate with each other in connection with the making of such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, accepting all reasonable suggestions
in connection therewith.
The parties hereto will consult and cooperate with one another, and consider
in good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or in behalf of any party hereto in connection with
proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law. Each party shall promptly notify the other
party of any communication to that party from any Governmental Entity in
connection with any required filing with, or approval or review by, such
Governmental Entity in connection with the Merger and permit the other party to
review in advance any such proposed communication to any Governmental Entity.
Neither party shall agree to participate in any meeting with any Governmental
Entity in respect of any such filings, investigation or other inquiry unless it
consults with the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat. No party to this Agreement shall consent
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to any voluntary delay of the consummation of the Merger at the behest of any
Governmental Entity without the consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld.
(b) The Company agrees to cooperate with and use all reasonable efforts to
assist Parent to make all applications to, and obtain all necessary approvals
of, all Regulatory Authorities having jurisdiction over the Bank and/or its
directors and executive officers as a result of the transactions contemplated
herein.
(c) Each party shall use all reasonable best efforts to not take any action,
or enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of any
covenant made by it in this Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement,(i)
neither Parent nor the Company shall be obligated to use its reasonable best
efforts or to take any action pursuant to this Section 5.8 if the Board of
Directors of Parent or the Company, as the case may be, shall conclude in good
faith on the basis of the advice of Wachtell, Lipton, Rosen & Katz in the case
of the Company and Sommer & Barnard, PC in the case of Parent that such action
would violate the fiduciary obligations of such Board under applicable law, and
(ii) in connection with any filing or submission required or action to be taken
by either Parent or the Company to effect the Merger and to consummate the other
transactions contemplated hereby, neither Parent nor the Company shall, without
the other party's prior written consent, commit to any material divestiture
transaction, and neither Parent nor the Company shall be required to agree to
such a divestiture or to commit to take any action that limits Parent's freedom
of action with respect to, or its ability to retain, the Company or any of the
material businesses, or assets of Parent or any of its Affiliates or that
otherwise would have a Material Adverse Effect on Parent.
Section 5.9 Public Announcements. The initial press release shall be a joint
press release and thereafter the Company and Parent each shall consult with the
other prior to issuing any press releases or otherwise making public
announcements with respect to the Merger and the other transactions contemplated
by this Agreement and prior to making any filings with any third party and/or
any Governmental Entity (including any national securities exchange or
interdealer quotation service) with respect thereto, except as may be required
by law or by obligations pursuant to any listing agreement with or rules of the
NYSE.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.11 Indemnification; Directors and Officers Insurance. For three
years from and after the Effective Time, Parent agrees to, and to cause the
Surviving Corporation to, indemnify and hold harmless all past and present
directors, officers and employees of the Company and of its Subsidiaries to the
same extent such persons are indemnified as of the date of this Agreement by the
Company pursuant to the Company's Articles of Incorporation and By-Laws and
indemnification agreements, if any, in existence on the date hereof with any
directors, officers and employees of the Company and its Subsidiaries for acts
or omissions occurring at or prior to the Effective Time; provided, however,
that Parent agrees to, and to cause the Surviving Corporation to, indemnify and
hold harmless such persons to the fullest extent permitted by law for acts or
omissions occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby. Parent shall cause the
Surviving Corporation to provide, for an aggregate period of not less than two
years from the Effective Time, the Company's current directors and officers an
insurance and indemnification policy that provides coverage for events occurring
prior to the Effective Time (the "D&O Insurance") that is no less favorable than
the Company's existing
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<PAGE>
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Surviving Corporation shall
not be required to pay an annual premium for the D&O Insurance in excess of 200
percent of the last annual premium paid prior to the date hereof (which premium
the Company represents and warrants to be approximately $300,000).
Section 5.12 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or
nonoccurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
all material respects, (ii) any failure of Parent or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
or event which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the delivery
of any notice pursuant to this Section 5.12 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.13 Directors. The directors of Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and By-Laws.
Section 5.14 Designation of Directors. At the Effective Time, Parent shall
cause Stanton J. Bluestone for the class of 1998 and John W. Burden III for the
class of 1999 to be appointed to its Board of Directors, each of whom shall
serve until the next regularly scheduled annual meeting of Parent or until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and
By-Laws. Parent shall cause its Board to renominate Mr. Bluestone for the class
of 2001 and Mr. Burden for the class of 2002. In addition, in connection with
the next regularly scheduled annual meeting of the shareholders of Parent,
Messrs. Bluestone, Burden and R. Brad Martin shall jointly make a recommendation
for an additional Parent board member, who may or may not be a current director
of the Company, to the Strategic Planning and Corporate Governance Committee of
the Board of Directors of Parent. The Strategic Planning and Corporate
Governance Committee shall, consistent with its fiduciary obligations, consider
any such recommendation. Section 13 of Article III of Parent's By-Laws shall be
amended so that the resignation requirement shall not apply to the Company's
nominees.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved by
the requisite vote of shareholders of the Company in accordance with applicable
law and the Articles of Incorporation and By-Laws of the Company, and the Parent
Shareholders' Approvals shall have been obtained by the requisite vote of the
shareholders of Parent in accordance with applicable rules of the NYSE,
applicable law, and the Charter and By-Laws of Parent.
(b) Listing on the NYSE. The Parent Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(c) HSR, OCC and Other Approvals.
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<PAGE>
(i) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(ii) The OCC shall have approved the change of control of the Bank.
(iii) All authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity, which the failure to obtain, make or
occur would have the effect of making the Merger or any of the transactions
contemplated hereby illegal or would have a Material Adverse Effect on
Parent (assuming the Merger had taken place), shall have been obtained,
shall have been made or shall have occurred.
(iv) All authorizations, consents, or approvals of, any third party,
which the failure to obtain would have a Material Adverse Effect on Parent
or the Company shall have been obtained.
(d) Accounting. Parent shall have received an opinion of Coopers & Lybrand,
LLP, dated as of the Effective Time, in form and substance reasonably
satisfactory to Parent and the Company, that the Merger will qualify for pooling
of interests accounting treatment under generally accepted accounting principles
if closed and consummated in accordance with this Agreement. Parent shall have
received a "cold comfort" letter of Coopers & Lybrand, LLP, dated the date on
which the Registration Statement shall become Effective and the Effective Time,
respectively, in form and substance reasonably satisfactory to Parent and the
Company and reasonably customary in scope and substance for letters of such
type.
(e) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated
or, to the Knowledge of Parent or the Company, threatened by the SEC. All
necessary state securities or blue sky authorizations (including State Takeover
Approvals) shall have been received.
(f) No Order. No court or other Governmental Entity having jurisdiction over
the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger or any of the transactions contemplated hereby illegal.
(g) Litigation. There shall not be instituted or pending any suit, action or
proceeding by a Governmental Entity or any other person as a result of this
Agreement or any of the transactions contemplated herein which, in the opinion
of Sommer & Barnard, PC, would have a Material Adverse Effect on Parent
(assuming for purposes of this paragraph (g) that the Merger shall have
occurred).
(h) Dissenting Shares. At the time of Closing, holders of no more than 5% of
the outstanding shares of Company Common Stock shall have dissented and
preserved their rights to seek appraisal (excluding Company Common Stock owned
by any of the Company's Subsidiaries).
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as
I-33
<PAGE>
contemplated or permitted by this Agreement, and the Company shall have
received a certificate signed on behalf of each of Parent and Sub by its
Chief Executive Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of Wachtell,
Lipton, Rosen & Katz in form and substance reasonably satisfactory to the
Company, dated the Effective Time, substantially to the effect that on the
basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as of the Effective
Time, for federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code;
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of the
Company upon the conversion of their shares of Company Common Stock into
shares of Parent Common Stock pursuant to the Merger, except with respect
to cash, if any, received in lieu of fractional shares of Parent Common
Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger (including fractional shares of Parent Common Stock for which cash
is received) will be the same as the aggregate tax basis of such shares
of Company Common Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will
include the holder's holding period for such shares of Company Common
Stock, provided such shares of Company Common Stock were held as capital
assets by the holder at the Effective Time; and
(vi) a shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's basis in the
fractional share (as described in clause (iv) above) and the amount of
cash received.
In rendering such opinion, Wachtell, Lipton, Rosen & Katz may receive and rely
upon representations from Parent, the Company, and others.
(c) The Company shall have received an opinion of Sommer & Barnard, PC,
counsel to Parent, in form and substance reasonably satisfactory to the
Company, dated the Closing Date, to the effect that the Parent Common Stock
to be issued in the Merger will, when issued, have been duly authorized,
validly issued and shall not be subject to further assessment. In rendering
such opinion, Sommer & Barnard, PC may rely upon the opinion of Tennessee
counsel reasonably satisfactory to the Company.
(d) Parent shall have proffered executed employment agreements in forms
heretofore agreed for Mr. Stanton J. Bluestone and Mr. Michael R. MacDonald,
which proffers shall not have been withdrawn, and shall have complied with
the agreements in Schedule 6.2(d) hereof.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
condition:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true
and correct on and
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<PAGE>
as of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties which
address matters only as of a certain date which shall be true and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Parent shall have received
a certificate signed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the shareholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (provided such party is not then in
material breach) if the other party shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within ten business
days following receipt by such other party of written notice of such failure
to comply; provided, however, that if any such breach is curable by the
breaching party through the exercise of the breaching party's best efforts
and for so long as the breaching party shall be so using its best efforts to
cure such breach, the non-breaching party may not terminate this Agreement
pursuant to this paragraph;
(c) by either Parent or the Company (provided such party is not then in
material breach) if there has been (i) a breach by the other party (in the
case of Parent, including any material breach by Sub) of any representation
or warranty that is not qualified as to materiality which has the effect of
making such representation or warranty not true and correct in all material
respects or (ii) a breach by the other party (in the case of Parent,
including any material breach by Sub) of any representation or warranty that
is qualified as to materiality, in each case which breach has not been cured
within ten business days following receipt by the breaching party of written
notice of the breach; provided, however, that if any such breach is curable
by the breaching party through the exercise of the breaching party's best
efforts and for so long as the breaching party shall be so using its best
efforts to cure such breach, the non-breaching party may not terminate this
Agreement pursuant to this paragraph;
(d) by Parent or the Company if the Merger has not been effected on or
prior to the close of business on April 15, 1998 (the "Termination Date");
provided, however, that the right to terminate this Agreement pursuant to
this Section 7.1(d) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date;
(e) by Parent or the Company if the shareholders of the Company do not
approve this Agreement at the Company Shareholder Meeting or any adjournment
or postponement thereof;
(f) by Parent or the Company if the Parent Shareholders' Approvals are
not obtained at the Parent Shareholder Meeting or any adjournment or
postponement thereof;
(g) by Parent or the Company prior to approval of this Agreement by the
Company's shareholders if the Board of Directors of the Company reasonably
determines that a Takeover Proposal with respect to the Company constitutes
a Superior Proposal (as hereinafter defined); provided, however, that the
Company may not terminate this Agreement pursuant to this Section 7.1(g)
until three
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<PAGE>
business days have elapsed following delivery to Parent of a written notice
of such determination by the Board of Directors of the Company (which
written notice shall inform Parent of the material terms and conditions of
the Takeover Proposal) and the delivery of a copy thereof if such Takeover
Proposal is in writing;
(h) by Parent or the Company prior to the receipt of the Parent
Shareholder Approvals if the Board of Directors of Parent reasonably
determines that a Takeover Proposal with respect to Parent constitutes a
Superior Proposal (as hereinafter defined); provided, however, that the
Parent may not terminate this Agreement pursuant to this Section 7.1(h)
until three business days have elapsed following delivery to the Company of
a written notice of such determination by the Board of Directors of Parent
(which written notice shall inform the Company of the material terms and
conditions of the Takeover Proposal) and the delivery of a copy thereof if
such Takeover Proposal is in writing;
(i) by Parent prior to approval of this Agreement by the Company's
shareholders if (i) the Board of Directors of the Company shall not have
recommended, or shall have resolved not to recommend, or shall have modified
or withdrawn its recommendation of the Merger or declaration that the Merger
is advisable and fair to and in the best interest of the Company and its
shareholders, or shall have resolved to do so, (ii) the Board of Directors
of the Company shall have recommended to the shareholders of the Company any
Takeover Proposal or shall have resolved to do so, or (iii) a tender offer
or exchange offer for 30% or more of the outstanding shares of capital stock
of the Company is announced or commenced, and, after fifteen (15) business
days, the Board of Directors of the Company fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders
(including by taking no position with respect to the acceptance of such
tender offer or exchange offer by its shareholders);
(j) by the Company prior to the receipt of the Parent Shareholder
Approvals if (i) the Board of Directors of Parent shall not have
recommended, or shall have resolved not to recommend or shall have modified
or withdrawn its recommendation of the Parent Shareholders' Approvals or
declaration that the Merger is advisable and fair to and in the best
interests of Parent and its shareholders, or shall have resolved to do so,
(ii) the Board of Directors of the Parent shall have recommended to the
shareholders of the Parent any Takeover Proposal or shall have resolved to
do so, or (iii) a tender offer or exchange offer for 30% or more of the
outstanding capital stock of Parent is announced or commenced, and, after
fifteen (15) business days, the Board of Directors of Parent fails to
recommend against acceptance of such offer by its shareholders (including
taking no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders); or
(k) by the Company if the closing price on the NYSE of the Parent Common
Stock is less than $22.00 per share on each trading day in any period of
fifteen (15) consecutive trading days beginning seven calendar days after
execution of this Agreement.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
"Superior Proposal" shall mean a bona fide proposal or offer made by a third
party to acquire Parent or the Company (as applicable) pursuant to a Takeover
Proposal which a majority of the members of the Board of Directors of Parent or
the Company (as applicable) determines in their good faith reasonable judgment
(based on the advice of independent financial advisors) to be more favorable to
Parent or the Company and to its shareholders than the transactions contemplated
hereby, provided that in making such determination the Board considers the
likelihood that such third party is able to consummate such proposed
transaction.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith terminate and there shall be no
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<PAGE>
liability hereunder on the part of the Company, Parent, Sub or their respective
officers or directors (except for the last sentence of Section 5.3 and the
entirety of Section 5.6, which shall survive the termination); provided,
however, that nothing contained in this Section 7.2 shall relieve any party
hereto from any liability for any willful breach of a representation or warranty
contained in this Agreement or the breach of any covenant contained in this
Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the shareholders of Parent and the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
such shareholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate at the Effective
Time or upon the termination of this Agreement pursuant to Section 7.1, as the
case may be, except that the agreements set forth in Article I and Sections 4.4,
5.7 and 5.11, 5.14 and this Article VIII shall survive the Effective Time, and
those set forth in the last sentence of Section 5.3 and Sections 5.6 and 7.2 and
this Article VIII and the Confidentiality Agreement shall survive termination.
Section 8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn.: Mr. R. Brad Martin
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn.: Brian J. Martin, Esquire
with copies to:
James A. Strain, Esquire
Sommer & Barnard, PC
4000 Bank One Tower
Indianapolis, Indiana 46204
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<PAGE>
(b) if to the Company, to:
Carson Pirie Scott & Co.
331 W. Wisconsin Avenue
Milwaukee, Wisconsin 53203
Attn.: Charles J. Hansen, Esquire
with copies to:
Patricia A. Vlahakis, Esquire
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
together with the Confidentiality Agreement, is the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF PARENT, THE COMPANY, OR SUB IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity. Each party
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the United States District Court located in the State
of Indiana (unless such courts assert no jurisdiction, in which case the Company
consents to the exclusive jurisdiction of the courts of the State of Indiana)
for any actions, suits
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or proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and each party hereto agrees not to commence any action,
suit or proceeding relating thereto except in such courts), and further agrees
that service of any process, summons, notice or document by U.S. registered mail
to the addresses set forth herein shall be effective service of process for any
such action, suit or proceeding brought against the each party in such court.
Each party hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby, in the United States District
Courts located in the State of Indiana (unless such courts assert no
jurisdiction, in which case each party consents to the exclusive jurisdiction of
the courts of the State of Indiana). Each party hereby further irrevocably and
unconditionally waives and agrees not to plead or to claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
<TABLE>
<S> <C> <C>
PROFFITT'S, INC.
By: /s/ R. BRAD MARTIN
-----------------------------------------
Name: R. Brad Martin
Title: Chairman of the Board and Chief
Executive Officer
</TABLE>
Attest:
By: /s/ Douglas E. Coltharp
---------------------------
Name: Douglas E. Coltharp
Title: Executive Vice President and Chief
Financial Officer
<TABLE>
<S> <C> <C>
LASALLE MERGER CORPORATION
By: /s/ R. BRAD MARTIN
-----------------------------------------
Name: R. Brad Martin
Title: President
</TABLE>
Attest:
By: /s/ Brian J. Martin
---------------------------
Name: Brian J. Martin
Title: Executive Vice President
<TABLE>
<S> <C> <C>
CARSON PIRIE SCOTT & CO.
By: /s/ STANTON J. BLUESTONE
-----------------------------------------
Name: Stanton J. Bluestone
Title: Chairman of the Board and
Chief Executive Officer
</TABLE>
Attest:
By: /s/ Charles J. Hansen
---------------------------
Name: Charles J. Hansen
Title: Vice President, General
Counsel and Secretary
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<PAGE>
APPENDIX II
OPINION
OF
SALOMON BROTHERS INC
<PAGE>
SALOMON BROTHERS INC
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
212-783-7000
---------------
SALOMON BROTHERS
---------------
SALOMON
BROTHERS INC
& WORLDWIDE
AFFILIATES
ATLANTA
BERLIN
BOSTON
CHICAGO
DALLAS
FRANKFURT
HONG KONG
LONDON
LOS ANGELES
MADRID
MELBOURNE
NEW YORK
OSAKA
PARIS
SAN FRANCISCO
SEOUL
SINGAPORE
SYDNEY
TAIPEI
TOKYO
TORONTO
ZURICH
October 29, 1997
Board of Directors
Proffitt's, Inc.
115 North Calderwood
Alcoa, TN 37701-9388
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Proffitt's, Inc. ("Parent") of the consideration to be paid by Parent
in connection with the proposed merger (the "Merger") of Lasalle Merger
Corporation ("Sub"), a wholly owned subsidiary of Parent, with Carson Pirie
Scott & Co. (the "Company"), pursuant to an Agreement and Plan of Merger, dated
as of October 29, 1997 (the "Merger Agreement"), among the Company, Parent and
Sub. Upon the effectiveness of the Merger, each share of common stock, par value
$.01 per share ("Company Common Stock"), of the Company
issued and outstanding immediately prior to the effectiveness of the
Merger (other than shares owned by Parent, any wholly owned subsidiary of
Parent, the Company or any wholly owned subsidiary of the Company and any shares
the subject of appraisal rights) will be converted into and represent the right
to receive a number (the "Conversion Number") of shares of common stock, par
value $.10 per share ("Parent Common Stock"), of Parent. The "Conversion Number"
shall be determined as follows: (i) in the event that the Closing Date Market
Price (as defined in the Merger Agreement) is less than $27.75, the Conversion
Number shall be 1.80; (ii) in the event that the Closing Date Market Price is
equal to or greater than $27.75 and less than $28.57, the Conversion Number
shall be equal to $50.00 divided by the Closing Date Market Price of one share
of Parent Common Stock; (iii) in the event that the Closing Date Market Price is
equal to or greater than $28.57 and less than $30.86, the Conversion Number
shall be 1.75; (iv) in the event that the Closing Date Market Price is equal to
or greater than $30.86 and less than $31.77, the Conversion Number shall be
equal to $54.00 divided by the Closing Date Market Price of one share of Parent
Common Stock; and (v) in the event that the Closing Date Market Price is equal
to or greater than $31.77, the Conversion Number shall be equal to 1.70. We
understand that the Merger will be accounted for as a pooling-of-interests in
accordance with generally accepted accounting principles as described in
Accounting Principles Board Opinion Number 16.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning Parent and the Company and certain other
financial information concerning Parent and the Company, including financial
forecasts, that were provided to us by Parent and the Company, respectively, and
financial forecasts regarding the Company and estimates of synergies for the
combined company that were prepared by Parent. We have discussed the past and
current business operations, financial condition and prospects of Parent and the
Company with certain officers and employees of Parent and the Company,
respectively. We have also considered such other information, financial studies,
analyses, investigations and financial, economic and market criteria that we
deemed relevant.
II-1
<PAGE>
----------------
SALOMON BROTHERS
----------------
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts (including any estimates of synergies) prepared by Parent and the
Company, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgements of the
respective managements of Parent or the Company, and we express no opinion with
respect to such forecasts (including any estimates of synergies) or the
assumptions on which they are based. We have not assumed any responsibility for
any independent evaluation or appraisal of any of the assets (including
properties and facilities) or liabilities of Parent or the Company.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Parent Common Stock following the
consummation of the Merger, which may vary depending upon, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
Our opinion does not address Parent's underlying business decision to effect the
Merger. Our opinion is directed only to the fairness, from a financial point of
view, of the Conversion Number to Parent and does not constitute a
recommendation concerning how holders of Parent Common Stock should vote with
respect to the issuance of shares of Parent Common Stock in connection with the
Merger or the Charter Amendment (as defined in the Merger Agreement).
We have acted as financial advisor to Parent in connection with the Merger
and will receive a fee for our services, which is payable upon consummation of
the Merger. In the ordinary course of business, we may actively trade the
securities of Parent and the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, we have previously rendered certain investment
banking and financial advisory services to Parent and the Company for which we
have received customary compensation.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Conversion Number is fair to Parent from a financial point of
view.
<TABLE>
<S> <C> <C>
Very truly yours,
/s/ SALOMON BROTHERS INC
SALOMON BROTHERS INC
</TABLE>
II-2
<PAGE>
APPENDIX III
OPINION
OF
SBC WARBURG DILLON READ INC.
<PAGE>
[LOGO]
[LOGO]
October 29, 1997
Board of Directors
Carson Pirie Scott & Co.
331 W. Wisconsin Avenue
Milwaukee, WI 53203
Gentlemen:
We understand the Proffitt's, Inc., a Tennessee corporation ("Proffitt's"),
is undertaking a transaction whereby a wholly-owned subsidiary of Proffitt's
will be merged with and into Carson Pirie Scott & Co., an Illinois corporation
("Carson Pirie Scott & Co." or the "Company"), pursuant to the terms of an
Agreement and Plan of Merger and the exhibits and schedules thereto, dated as of
October 29, 1997 (the "Merger Agreement"), such that Carson Pirie Scott & Co.
will become a wholly-owned subsidiary of Proffitt's (the "Transaction").
Pursuant to the Transaction, each outstanding share of Carson Pirie Scott & Co.
Common Stock, $.01 par value (the "Carson Pirie Scott Common Stock"), shall be
converted into a number of shares of Proffitt's, Inc. Common Stock, $.10 par
value (the "Proffitt's Common Stock") as set forth in the Merger Agreement (the
"Conversion Number"). The terms and conditions of the Transaction are more fully
set forth in the Merger Agreement.
You have requested our opinion (the "Opinion") as to whether the Conversion
Number to be received by the holders of Carson Pirie Scott & Co. Common Stock
(the "Holders") in the Transaction is fair to such Holders, from a financial
point of view.
SBC Warburg Dillon Read Inc. has acted as financial advisor to the Board of
Directors of Carson Pirie Scott & Co. in connection with the Transaction and
will receive a fee upon the rendering of the Opinion. In the ordinary course of
business, we have traded securities of Carson Pirie Scott & Co. for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and Proffitt's, (ii) reviewed certain management
estimates for fiscal 1997 and financial projections provided by the managements
of the Company and Proffitt's, (iii) reviewed certain publicly available analyst
financial forecasts relating to the Company and Proffitt's, (iv) reviewed
certain financial information and other data provided to us by the Company that
is not publicly available relating to the business and prospects of the Company,
(v) reviewed certain financial information and other data provided to us by
Proffitt's that is not publicly available relating to the business and prospects
of Proffitt's, (vi) conducted discussions with members of the senior management
of the Company and Proffitt's with respect to the operations, financial
condition, history and prospects of each company, (vii) reviewed publicly
available financial and stock market data with respect to certain other
companies in lines of business we believe to be generally comparable to those of
the Company and Proffitt's, (viii) reviewed the historical market prices of the
Carson Pirie Scott Common Stock and the Proffitt's Common Stock, (ix) compared
the financial terms of the Transaction with the
III-1
<PAGE>
[LOGO]
financial terms of certain other transactions which we believe to be generally
comparable to the Transaction, (x) reviewed the Merger Agreement, and (xi)
conducted such other financial studies, analyses, and investigations, and
considered such other information as we deemed necessary or appropriate.
In conducting our review and arriving at our opinion, we have relied,
without independent investigation, upon the accuracy and completeness of all
financial and other information provided to us or publicly available, and we
have not assumed any responsibility in any respect for the accuracy,
completeness or reasonableness of, or any obligation to verify, the same or to
conduct any appraisal of assets. Without limiting the generality of the
foregoing, we have relied with your consent upon the management of the Company
as to the reasonableness and achievability of the financial and operating
forecasts and assumed that such forecasts and projections reflect the best
currently available estimates and judgments of management and that such
forecasts and projections will be realized in the amounts and in the time
periods currently estimated by management. Our opinion necessarily is based upon
economic, market and other conditions as they exist and can be evaluated on the
date hereof and the information made available to us through the date hereof.
It is understood that this letter is for the benefit and use of the Board of
Directors Carson Pirie Scott & Co. in connection with its consideration of the
Transaction and may not be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent, except that this opinion may be
included in its entirety in any filing with the Securities and Exchange
Commission in connection with the Transaction or as an attachment to the Joint
Proxy Statement/Prospectus to be mailed to the shareholders of the Company and
Proffitt's in connection with the Transaction. This letter addresses only the
fairness, from a financial point of view, of the Conversion Number to be
received by the Holders in the Transaction pursuant to the Merger Agreement,
does not address any other aspect of the Transaction and should not be construed
as any recommendation or advice to the Board of Directors to approve the Merger
or to any Holder to vote or take any other action in favor of the Transaction.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Conversion Number to be received by the Holders in the
Transaction is fair to such Holders from a financial point of view.
<TABLE>
<S> <C>
Very truly yours,
SBC WARBURG DILLON READ INC.
/s/ SBC Warburg Dillon Read Inc.
</TABLE>
III-2
<PAGE>
APPENDIX IV
SECTIONS 5/11.65 AND 5/11.70
OF THE
ILLINOIS BUSINESS CORPORATION ACT OF 1983
<PAGE>
ILLINOIS BUSINESS CORPORATION ACT
5/11.65 RIGHT TO DISSENT.--(a) A shareholder of a corporation is entitled to
dissent from, and obtain payment for his or her shares in the event of any of
the following corporate actions:
(1) consummation of a plan of merger or consolidation or a plan of share
exchange to which the corporation is a party if (i) shareholder authorization is
required for the merger or consolidation or the share exchange by Section 11.20
or the articles of incorporation or (ii) the corporation is a subsidiary that is
merged with its parent or another subsidiary under Section 11.30;
(2) consummation of a sale, lease or exchange of all, or substantially all,
of the property and assets of the corporation other than in the usual and
regular course of business;
(3) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of such shares;
(ii) alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
such shares;
(iii) in the case of a corporation incorporated prior to January 1, 1982,
limits or eliminates cumulative voting rights with respect to such shares;
or
(4) any other corporate action taken pursuant to a shareholder vote if the
articles of incorporation, by-laws, or a resolution of the board of directors
provide that shareholders are entitled to dissent and obtain payment for their
shares in accordance with the procedures set forth in Section 5/11.70 or as may
be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his or
her entitlement unless the action is fraudulent with respect to the shareholder
or the corporation or constitutes a breach of a fiduciary duty owed to the
shareholder.
(c) A record owner of shares may assert dissenters' rights as to fewer than
all the shares recorded in such person's name only if such person dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and the other shares
recorded in the names of different shareholders. A beneficial owner of shares
who is not the record owner may assert dissenters' rights as to shares held on
such person's behalf only if the beneficial owner submits to the corporation the
record owner's written consent to the dissent before or at the same time the
beneficial owner assets dissenters' rights.
5/11.70 PROCEDURE TO DISSENT.--(a) If the corporate action giving rise to
the right to dissent is to be approved at a meeting of shareholders, the notice
of meeting shall inform the shareholders of their right to dissent and the
procedure to dissent. If, prior to the meeting, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporate action giving rise to the right to dissent is not to be
approved at a meeting of shareholders, the notice to shareholders describing the
action taken under Section 11.30 or Section 7.10 shall inform the shareholders
of their right to dissent and the procedure to dissent. If, prior to or
concurrently with the notice, the corporation furnishes to the shareholders
material information with respect to the transaction that will objectively
enable a shareholder to determine whether or not to exercise
IV-1
<PAGE>
dissenter's rights, a shareholder may asset dissenters' rights only if he or she
delivers to the corporation within 30 days from the date of mailing the notice a
written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers
to the corporation the written demand for payment, whichever is later, the
corporation shall send each shareholder who has delivered a written demand for
payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are canceled or
modified by the consummation of the proposed corporate action. Upon consummation
of that action, the corporation shall pay to each dissenter who transmits to the
corporation the certificate or other evidence of ownership of the shares the
amount the corporation estimates to be the fair value of the shares, plus
accrued interest, accompanied by a written explanation of how the interest was
calculated.
(e) If the shareholder does not agree with the opinion of the corporation as
to the estimated fair value of the shares or the amount of interest due, the
shareholder, within 30 days from the delivery of the corporation's statement of
value, shall notify the corporation in writing of the shareholder's estimated
fair value and amount of interest due and demand payment for the difference
between the shareholder's estimate of fair value and interest due and the amount
of the payment by the corporation or the proceeds of sale by the shareholder,
whichever is applicable because of the procedure for which the corporation opted
pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the
corporation and the dissenting shareholder have not agreed in writing upon the
fair value of the shares and interest due, the corporation shall either pay the
difference in value demanded by the shareholder, with interest, or file a
petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced under
subsection (f) by a corporation is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the power described in the order
appointing them, or in any amendment to it.
IV-2
<PAGE>
(h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by the corporation or the
proceeds of sale by the shareholder whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may
award to that counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefited. Except as otherwise provided in this Section,
the practice, procedure, judgment and costs shall be governed by the Code of
Civil Procedure.
(j) As used in this Section:
(1) "Fair Value," with respect to a dissenter's shares, means the value
of the shares immediately before the consummation of the corporate action to
which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
IV-3
<PAGE>
PROXY PROXY
CARSON PIRIE SCOTT & CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, JANUARY 30, 1998
The undersigned appoints Stanton J. Bluestone, Charles J. Hansen and Michael
R. MacDonald, or any of them (the "Proxy Holders") proxies for the undersigned,
each with full power of substitution, to attend the Special Meeting of
Shareholders of Carson Pirie Scott & Co. ("CPS"), to be held on Friday, January
30, 1998 at 10:00 a.m., Milwaukee time, in the Towne Hall at CPS's principal
executive offices, 331 W. Wisconsin Avenue, 4th Floor, Milwaukee, Wisconsin
53203, or at any adjournments or postponements of the Special Meeting, and to
vote as specified in this Proxy all the shares of CPS Common Stock which the
undersigned would be entitled to vote if personally present.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, AND DATE THIS
PROXY ON THE REVERSE SIDE AND RETURN
IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
(Continued and to be signed on
reverse side)
<PAGE>
CARSON PIRIE SCOTT & CO.
[LOGO]
[LOGO]
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
This Proxy when properly executed will be voted in accordance with your
indicated directions. If no direction is made, this Proxy will be voted FOR
proposal 1.
1. APPROVAL OF MERGER AGREEMENT: Approval of the Agreement and Plan of Merger,
dated as of October 29, 1997, among CPS, Proffitt's, Inc. and LaSalle Merger
Corporation.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors recommends a vote FOR Proposal 1.
IN THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE UPON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and of the Joint Proxy Statement/Prospectus.
Dated:______________________199___
Signature(s):_____________________
__________________________________
Please sign exactly as your name
appears on the other side of this
card. Joint owners should each
sign personally. Where applicable,
indicate your official position or
representative capacity.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE.
<PAGE>
CARSON PIRIE SCOTT & CO. SAVINGS PLAN
VOTING INSTRUCTIONS TO TRUSTEE FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, JANUARY 30, 1998
As a participant in the Carson Pirie Scott & Co. Savings Plan, you have the
right to give instructions to the Plan Trustee as to the voting of certain
shares of Carson Pirie Scott & Co. ("CPS") stock allocated to your account at
the Special Meeting of Shareholders to be held on Friday, January 30, 1998 at
10:00 a.m., Milwaukee time, in the Towne Hall at CPS's principal executive
offices, 331 W. Wisconsin Avenue, 4th Floor, Milwaukee, Wisconsin 53203 or at
any and all adjournments or postponements of the Special Meeting. In this
regard, please indicate your voting choices on the reverse side of this card,
sign and date it, and return this card promptly in the enclosed postage prepaid
envelope. If your card is not received at least five days prior to the date of
the Special Meeting, or if you do not return this card, your shares will not be
voted, unless the Trustee is directed otherwise by the CPS Retirement Plan
Committee.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, AND DATE THIS
VOTING INSTRUCTIONS CARD ON THE
REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on
reverse side)
<PAGE>
CARSON PIRIE SCOTT & CO. SAVINGS PLAN
[LOGO]
VOTING INSTRUCTIONS TO TRUSTEE
[LOGO]
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
The shares of CPS stock represented by this voting instruction card when
properly executed will be voted in the manner described by the participant(s).
To the extent that no direction is given when the properly executed voting
instruction card is returned, such shares will be voted FOR proposal 1.
1. APPROVAL OF MERGER AGREEMENT: Approval of the Agreement and Plan of Merger,
dated as of October 29, 1997, among CPS, Proffitt's, Inc. and LaSalle Merger
Corporation.
/ / FOR / / AGAINST / / ABSTAIN
The Board of Directors of CPS recommends a vote FOR Proposal 1.
UNLESS YOU INDICATE OTHERWISE ON THIS VOTING INSTRUCTION CARD, THE TRUSTEE IS
HEREBY AUTHORIZED TO VOTE, IN HIS DISCRETION, UPON ANY OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and of the Joint Proxy Statement/Prospectus.
Dated:_______________________199___
Signature(s):______________________
___________________________________
Please sign exactly as your name
appears on the other side of this
voting instruction card. Joint
owners should each sign personally.
Where applicable, indicate your
official position or representative
capacity.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, AND DATE THIS VOTING INSTRUCTION CARD AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
<PAGE>
PROFITT'S, INC. REGISTRATION STATEMENT FOR PROPOSED
CARSON PIRIE SCOTT & CO. MERGER DECLARED EFFECTIVE;
DATES ANNOUNCED FOR SHAREHOLDERS' MEETINGS
Contacts: Proffitt's: Julia Bentley
(423) 981-6243
Carson's: Ed Carroll (media)
(414) 347-5340
Darren Jackson (investors)
(414) 278-5787
Birmingham, Alabama and Milwaukee, Wisconsin (December 11, 1997)--Department
store retailers Proffitt's, Inc. (NYSE:PFT) and Carson Pirie Scott & Co.
(NYSE:CRP) announced today the Proffitt's, Inc. Registration Statement on
Form S-4 has been declared effective by the Securities and Exchange Commission.
The Registration Statement relates to the proposed merger transaction between
Proffitt's, Inc. ("Proffitt's") and Carson Pirie Scott & Co. ("Carson's") and
contains the joint proxy statement/prospectus for the transaction.
A special meeting of shareholders for Proffitt's will be held at 10:00 a.m.
central time on January 30, 1998 at Proffitt's corporate offices in
Birmingham, Alabama to vote on the proposed transaction. The special meeting
of shareholders for Carson's will be held at 10:00 a.m. central time on
January 30, 1998 at Carson's corporate offices in Milwaukee, Wisconsin to
vote on the proposed transaction.
The Boards of Directors of both companies have established December 5, 1997
as the record date for the determination of Proffitt's and Carson's
shareholders entitled to notice of and to vote at the special meetings.
Proxy materials are expected to be mailed to shareholders on or about
December 12, 1997.
In October 1997, the Boards of Directors of both Proffitt's and Carson's
approved the merger unanimously. Under the terms of the transaction,
shareholders of Carson's will receive from 1.7 to 1.8 shares of
Proffitt's, Inc. Common Stock for each share of Carson Pirie Scott & Co.
Common Stock, depending on the price of Proffitt's Common Stock as provided
in the merger agreement. Cash will be paid in lieu of fractional shares.
In conjunction with the proposed merger, filings were made with the Office of
the Comptroller of the Currency on November 10, 1997 and under the
Hart-Scott-Rodino Anti-Trust Improvements Act on November 17, 1997. The
merger is subject to the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Anti-Trust Improvements Act, clearance by
the Comptroller of the Currency, and shareholder approval, among other
conditions. The merger is expected to be consummated on January 31, 1998,
the fiscal year end of both Proffitt's and Carson's.
(more)
<PAGE>
R. Brad Martin, Chairman and Chief Executive Officer of Proffitt's, Inc.,
stated, "We are very excited about combining two premier regional department
store companies. This transaction will create the fourth largest traditional
department store company in the United States, operating over 230 stores in
24 states with annual revenues in excess of $3.5 billion."
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL SECURITIES NOR A SOLICITATION
OF AN OFFER TO BUY SECURITIES. AN OFFERING WILL BE MADE ONLY BY MEANS OF A
JOINT PROXY STATEMENT/PROSPECTUS.
A copy of the joint proxy statement/prospectus may be obtained from the
Secretary, Proffitt's, Inc., 115 N. Calderwood, Alcoa, Tennessee 37701.
####
2
