EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
▇▇▇▇▇▇▇▇'▇, INC.,
FIFTH MERGER CORPORATION
AND
SAKS HOLDINGS, INC.
__________________
DATED AS OF JULY 4, 1998
__________________
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . 2
Section 1.3 Effects of the Merger . . . . . . . . . . . . . 2
Section 1.4 Directors of the Surviving Corporation . . . . . 2
Section 1.5 Officers of the Surviving Corporation . . . . . 3
Section 1.6 Charter and By Laws . . . . . . . . . . . . . . 3
Section 1.7 Conversion of Securities . . . . . . . . . . . . 3
Section 1.8 Parent to Make Certificates Available . . . . . 4
Section 1.9 Dividends; Transfer Taxes; Withholding . . . . . 5
Section 1.10 No Fractional Securities . . . . . . . . . . . . 6
Section 1.11 Return of Exchange Fund . . . . . . . . . . . . 6
Section 1.12 Adjustment of Conversion Number . . . . . . . . 6
Section 1.13 No Further Ownership Rights in
Company Common Stock . . . . . . . . . . . . . . 7
Section 1.14 Closing of Company Transfer Books . . . . . . . 7
Section 1.15 Lost Certificates . . . . . . . . . . . . . . . 7
Section 1.16 Affiliates . . . . . . . . . . . . . . . . . . . 7
Section 1.17 Further Assurances . . . . . . . . . . . . . . . 7
Section 1.18 Closing . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power . . . . . . . . 8
Section 2.2 Capital Structure . . . . . . . . . . . . . . . 9
Section 2.3 Authority . . . . . . . . . . . . . . . . . . 10
Section 2.4 Consents and Approvals; No Violation . . . . . 11
Section 2.5 SEC Documents and Other Reports . . . . . . . 12
Section 2.6 Registration Statement and Joint
Proxy Statement . . . . . . . . . . . . . . . 13
Section 2.7 Absence of Certain Changes or Events . . . . . 14
Section 2.8 Permits and Compliance . . . . . . . . . . . . 14
Section 2.9 Tax Matters . . . . . . . . . . . . . . . . . 15
Section 2.10 Actions and Proceedings . . . . . . . . . . . 16
Section 2.11 Certain Agreements . . . . . . . . . . . . . . 16
Section 2.12 ERISA . . . . . . . . . . . . . . . . . . . . 17
Section 2.13 Compliance with Certain Laws . . . . . . . . . 19
Section 2.14 Liabilities . . . . . . . . . . . . . . . . . 19
Section 2.15 Labor Matters . . . . . . . . . . . . . . . . 19
Section 2.16 Intellectual Property . . . . . . . . . . . . 20
Section 2.17 Opinion of Financial Advisor . . . . . . . . . 20
Section 2.18 Pooling of Interests/Tax Free Treatment. . . 20
Section 2.19 Required Vote of Parent Shareholders . . . . . 20
Section 2.20 Ownership of Shares . . . . . . . . . . . . . 21
Section 2.21 Operations of Sub . . . . . . . . . . . . . . 21
Section 2.22 Brokers . . . . . . . . . . . . . . . . . . . 21
Section 2.23 State Takeover Statutes and Shareholder
Rights Plan . . . . . . . . . . . . . . . . . 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power . . . . . . . 22
Section 3.2 Capital Structure . . . . . . . . . . . . . . 22
Section 3.3 Authority . . . . . . . . . . . . . . . . . . 23
Section 3.4 Consents and Approvals; No Violation . . . . . 24
Section 3.5 SEC Documents and Other Reports . . . . . . . 25
Section 3.6 Registration Statement and Joint
Proxy Statement . . . . . . . . . . . . . . . . 26
Section 3.7 Absence of Certain Changes or Events . . . . . 26
Section 3.8 Permits and Compliance . . . . . . . . . . . . 27
Section 3.9 Tax Matters . . . . . . . . . . . . . . . . . 28
Section 3.10 Actions and Proceedings . . . . . . . . . . . 28
Section 3.11 Certain Agreements . . . . . . . . . . . . . . 29
Section 3.12 ERISA. . . . . . . . . . . . . . . . . . . . . 29
Section 3.13 Compliance with Certain Laws . . . . . . . . . 31
Section 3.14 Liabilities . . . . . . . . . . . . . . . . . 32
Section 3.15 Labor Matters . . . . . . . . . . . . . . . . 32
Section 3.16 Intellectual Property . . . . . . . . . . . . 32
Section 3.17 Opinion of Financial Advisor . . . . . . . . . 33
Section 3.18 Pooling of Interests/Tax Free Treatment . . . 33
Section 3.19 Required Vote of Company Stockholders . . . . 33
Section 3.20 Ownership of Shares . . . . . . . . . . . . . 33
Section 3.21 Brokers . . . . . . . . . . . . . . . . . . . 33
Section 3.22 State Takeover Statutes . . . . . . . . . . . 33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger . . . . 34
Section 4.2 No Solicitation . . . . . . . . . . . . . . . 39
Section 4.3 Third Party Standstill Agreements . . . . . . 41
Section 4.4 Pooling of Interests; Reorganization . . . . . 41
Section 4.5 Tax Representation Letters . . . . . . . . . . 42
Section 4.6 Transfer Taxes . . . . . . . . . . . . . . . . 42
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings . . . . . . . . . . . . . 42
Section 5.2 Preparation of the Registration Statement
and the Joint Proxy Statement . . . . . . . . 43
Section 5.3 Access to Information . . . . . . . . . . . . 44
Section 5.4 Compliance with the Securities Act;
Pooling Period . . . . . . . . . . . . . . . . 44
Section 5.5 Designation of Directors . . . . . . . . . . 45
Section 5.6 NYSE Listing . . . . . . . . . . . . . . . . . 45
Section 5.7 Fees and Expenses . . . . . . . . . . . . . . 45
Section 5.8 Company Stock Options . . . . . . . . . . . . 46
Section 5.9 Convertible Subordinated Notes . . . . . . . . 47
Section 5.10 Reasonable Efforts . . . . . . . . . . . . . . 48
Section 5.11 Public Announcements . . . . . . . . . . . . . 49
Section 5.12 State Takeover Laws . . . . . . . . . . . . . 49
Section 5.13 Indemnification; Directors and Officers
Insurance . . . . . . . . . . . . . . . . . . . 49
Section 5.14 Notification of Certain Matters . . . . . . . 50
Section 5.15 Employee Matters. . . . . . . . . . . . . . . 50
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . 52
Section 6.2 Conditions to Obligation of the Company to
Effect the Merger . . . . . . . . . . . . . . 53
Section 6.3 Conditions to Obligations of Parent and Sub to
Effect the Merger . . . . . . . . . . . . . . 55
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination . . . . . . . . . . . . . . . . . 56
Section 7.2 Effect of Termination . . . . . . . . . . . . 58
Section 7.3 Amendment . . . . . . . . . . . . . . . . . . 58
Section 7.4 Waiver . . . . . . . . . . . . . . . . . . . . 58
Section 7.5 Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . . . 59
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties 59
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . 59
Section 8.3 Interpretation . . . . . . . . . . . . . . . . 60
Section 8.4 Counterparts . . . . . . . . . . . . . . . . . 60
Section 8.5 Entire Agreement; No Third-Party Beneficiaries 61
Section 8.6 Governing Law . . . . . . . . . . . . . . . . 61
Section 8.7 Assignment . . . . . . . . . . . . . . . . . . 61
Section 8.8 Severability . . . . . . . . . . . . . . . . . 61
Section 8.9 Enforcement of this Agreement . . . . . . . . 61
List of Exhibits
Exhibit A1 Form of Affiliate Letter (▇▇▇▇▇▇▇▇'▇ Inc.)
Exhibit A2 Form of Affiliate Letter (Saks Holdings, Inc.)
Exhibit B Executive Severance Policy Term Sheet
Exhibit C Employment Agreement Term Sheet (PBM)
Exhibit D Employment Agreement Term Sheet (BEK)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 4, 1998 (this
"Agreement"), among ▇▇▇▇▇▇▇▇'▇, INC., a Tennessee corporation ("Parent"),
FIFTH MERGER CORPORATION, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), and SAKS HOLDINGS, INC., a Delaware
corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding share of
Common Stock, par value $.01 per share, of the Company ("Company Common
Stock") not owned directly or indirectly by Parent or directly by the
Company will be converted into shares of Common Stock, par value $.10 per
share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the Merger is in the best interest of their respective
shareholders and is in furtherance of and consistent with their respective
long-term business strategies and Parent has approved this Agreement and
the Merger as the sole shareholder of Sub;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, (i) Parent has entered into an agreement (the "Company
Stockholders Agreement") with certain stockholders of the Company pursuant
to which such stockholders agreed to vote the shares of Company Common
Stock owned by them in favor of the Merger and (ii) Parent has entered into
an agreement (the "Registration Rights Agreement") with certain
stockholders of the Company pursuant to which Parent grants certain rights
to such stockholders regarding the registration of Parent Common Stock to
be received by them in the Merger (the Company Stockholders Agreement, the
Registration Rights Agreement and this Agreement are collectively referred
to herein as the "Transaction Agreements");
WHEREAS, for U.S. Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be treated for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Delaware General Corporation
Law (the "Del.C."), Sub shall be merged with and into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in
accordance with the Del.C.
Section 1.2 Effective Time. The Merger shall become effective when
a Certificate of Merger (the "Certificate of Merger"), duly executed in
accordance with the relevant provisions of the Del.C., is filed with the
Secretary of State of the State of Delaware; provided, however, that, upon
mutual consent of the Constituent Corporations, the Certificate of Merger
may provide for a later date or time of effectiveness of the Merger. When
used in this Agreement, the term "Effective Time" shall mean the later of
the date and time at which the Certificate of Merger is filed or such later
date and time established by the Certificate of Merger. The filing of the
Certificate of Merger in accordance with the Del.C. shall be made on the
date of the Closing (as hereinafter defined), or as promptly thereafter as
practicable.
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the Del.C.
Section 1.4 Directors of the Surviving Corporation. The directors
of Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation as of the Effective Time and shall hold office
until their successors are duly appointed or elected in accordance with
applicable law and the Certificate of Incorporation and By-laws of the
Surviving Corporation.
Section 1.5 Officers of the Surviving Corporation. The officers of
the Company immediately prior to the Effective Time shall be the officers
of the Surviving Corporation as of the Effective Time and shall hold office
until their successors are duly appointed or elected in accordance with
applicable law and the Certificate of Incorporation and By-laws of the
Surviving Corporation.
Section 1.6 Charter and By Laws. At the Effective Time, the
Certificate of Incorporation of the Company shall be amended so that
Article Fourth thereof reads in its entirety as follows: "The total number
of shares of stock which the Corporation shall have the authority to issue
shall be 1,000 shares of common stock, par value $.01 per share ("Common
Stock"), as so amended, it shall be the Certificate of Incorporation of the
Surviving Corporation, until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the By-Laws of Sub,
as in effect immediately prior to the Effective Time, shall be amended to
provide that the name of the corporation is "SAKS Holdings, Inc." and, as
so amended, shall be the By-Laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by the Certificate of
Incorporation of the Surviving Corporation or by applicable law.
Section 1.7 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock of Sub shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury
of the Company and any shares of Company Common Stock owned by Parent or
Sub shall be canceled and no capital stock of Parent or other consideration
shall be delivered in respect thereof.
(c) Subject to the provisions of Sections 1.10 and 1.12 hereof, each
share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled in accordance with
Section 1.7(b)) shall be converted into 0.82 (the "Conversion Number") of a
validly issued, fully paid and nonassessable share of Parent Common Stock.
All such shares of Company Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and each
holder of a certificate formerly representing any such shares shall cease
to have any rights with respect thereto, except the right to receive any
dividends and other distributions in accordance with Section 1.9,
certificates representing the shares of Parent Common Stock into which such
shares are converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the surrender of
such certificate in accordance with Section 1.8. Each certificate shall,
from and after the Effective Time until surrendered in exchange for Parent
Common Stock, for all purposes be deemed to represent the shares of Parent
Common Stock into which such Company Common Stock was converted in the
Merger.
Section 1.8 Parent to Make Certificates Available.
(a) Exchange of Certificates. Parent shall authorize a commercial
bank reasonably acceptable to the Company (or such other person or persons
as shall be reasonably acceptable to Parent and the Company) to act as
Exchange Agent hereunder (the "Exchange Agent"). As soon as practicable
after the Effective Time, Parent shall deposit with the Exchange Agent, in
trust for the holders of shares of Company Common Stock converted in the
Merger, certificates representing the shares of Parent Common Stock
issuable pursuant to Section 1.7(c) in exchange for outstanding
certificates representing shares of Company Common Stock and cash, as
required to make payments in lieu of any fractional shares pursuant to
Section 1.10 (such cash and shares of Parent Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund"). Except as contemplated by this
Section 1.8, and Sections 1.10 and 1.11, the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each record holder
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock converted in
the Merger (the "Certificates") a letter of transmittal (which shall be in
customary form, shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Exchange Agent, and shall contain instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock and cash in lieu of
fractional shares. Upon surrender for cancellation to the Exchange Agent
of a Certificate, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock into which the shares represented by the surrendered
Certificate shall have been converted at the Effective Time pursuant to
this Article I, cash in lieu of any fractional share in accordance with
Section 1.10 and any dividends and other distributions payable in
accordance with Section 1.9, and any Certificate so surrendered shall
forthwith be canceled.
Section 1.9 Dividends; Transfer Taxes; Withholding. No dividends
or other distributions that are declared on or after the Effective Time on
Parent Common Stock, or are payable to the holders of record thereof on or
after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Parent Common Stock and no
cash payment in lieu of fractional shares will be paid to any such person
pursuant to Section 1.10 until such person surrenders the related
Certificate or Certificates, as provided in Section 1.8. Subject to the
effect of applicable law, there shall be paid to each record holder of a
new certificate representing such Parent Common Stock: (i) at the time of
such surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to the
shares of Parent Common Stock represented by such new certificate and
having a record date on or after the Effective Time and a payment date
prior to such surrender; (ii) at the appropriate payment date or as
promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Stock
and having a record date on or after the Effective Time but prior to such
surrender and a payment date on or subsequent to such surrender; and (iii)
at the time of such surrender or as promptly as practicable thereafter, the
amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 1.10. In
no event shall the person entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing shares of Parent
Common Stock is to be paid to or issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be
a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other Taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such Tax has been paid or is not
applicable. Except as otherwise provided in Section 4.6 of this Agreement,
Parent or the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or under any provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by
Parent or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the
Company Common Stock in respect of which such deduction and withholding was
made by Parent or the Exchange Agent.
Section 1.10 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of Certificates pursuant to this Article 1, and
no Parent dividend or other distribution or stock split shall relate to any
fractional share, and no fractional share shall entitle the owner thereof
to vote or to any other rights of a security holder of Parent. In lieu of
any such fractional share, each holder of Company Common Stock who
otherwise would have been entitled to a fraction of a share of Parent
Common Stock upon surrender of Certificates for exchange pursuant to this
Article I will be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the average per share Closing
Price on The New York Stock Exchange ("NYSE") of Parent Common Stock for
the ten most recent Trading Days ending on the Trading Day immediately
preceding the Closing Date by (ii) the fractional interest to which such
holder would otherwise be entitled. For purposes of this Agreement,
"Closing Price" means the last reported selling price as reported on the
NYSE Transaction Tape for a given date and "Trading Day" means a day on
which securities are traded on the NYSE. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional share interests, the Exchange Agent shall so notify the Parent,
and the Parent shall deposit such amount with the Exchange Agent and shall
cause the Exchange Agent to forward payments to such holders of fractional
share interests subject to and in accordance with the terms of Section 1.9
and this Section 1.10.
Section 1.11 Return of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the former stockholders of the Company
for one year after the Effective Time shall be delivered to Parent, upon
demand of Parent, and any such former stockholders who have not theretofore
complied with this Article I shall thereafter look only to Parent for
payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock. Neither Parent nor either Constituent
Corporation shall be liable to any former holder of Company Common Stock
for any such shares of Parent Common Stock, cash and dividends and
distributions held in the Exchange Fund which is delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
Section 1.12 Adjustment of Conversion Number. In the event of any
reclassification, recapitalization, stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible
into Parent Common Stock) or subdivision with respect to Parent Common
Stock, any change or conversion of Parent Common Stock into other
securities, any other dividend or distribution with respect to the Parent
Common Stock as the same may be adjusted from time to time pursuant to the
terms of this Agreement (or if a record date with respect to any of the
foregoing should occur), prior to the Effective Time, appropriate and
proportionate adjustments, shall be made to the Conversion Number, and all
references to the Conversion Number in this Agreement shall be deemed to be
to the Conversion Number as so adjusted.
Section 1.13 No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued pursuant to the terms hereof
(including any cash paid pursuant to Section 1.10) shall be deemed to have
been issued in full satisfaction of all rights pertaining to the shares of
Company Common Stock represented by such Certificates.
Section 1.14 Closing of Company Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock outstanding prior to the
Effective Time shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
canceled and exchanged as provided in this Article 1.
Section 1.15 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and,
if reasonably required by the Surviving Corporation, the posting by such
person of a bond, in such reasonable amount as the Surviving Corporation
may direct (but consistent with the practices Parent applies to its own
shareholders), as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to
which the holders thereof are entitled pursuant to Section 1.10 and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 1.9.
Section 1.16 Affiliates. Certificates surrendered for exchange by
any Affiliate (as determined pursuant to Section 5.4) of the Company for
purposes of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder and
for purposes of applicable interpretations regarding pooling of interests
accounting, shall not be exchanged until Parent has received a written
agreement from such Person as provided in Section 5.4 hereof.
Section 1.17 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties
or assets of either of the Constituent Corporations, or (ii) otherwise to
carry out the purposes of this Agreement, the Surviving Corporation and its
proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of either of the Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and
to do, in the name and on behalf of either Constituent Corporation, all
such other acts and things as may be necessary, desirable or proper to
vest, perfect or confirm the Surviving Corporation's right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry
out the purposes of this Agreement.
Section 1.18 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") and all actions specified in this
Agreement to occur at the Closing shall take place immediately following
the time the last of the conditions set forth in Article VI shall have been
fulfilled or, where appropriate, waived or at such other time as Parent and
the Company shall agree. The date on which the Closing occurs is referred
to herein as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
Section 2.1 Organization, Standing and Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee, and has the requisite corporate power and
authority to carry on its business as now being conducted. Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. Each Subsidiary
(as hereinafter defined) of Parent is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power and authority to
carry on its business as now being conducted, except where the failure to
be so organized, existing or in good standing or to have such power or
authority would not, individually or in the aggregate, have a Material
Adverse Effect (as hereinafter defined) on Parent. Parent and each of its
Subsidiaries are duly qualified to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held
under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement (a) each of "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to Parent or the
Company, as the case may be, any change or effect that is materially
adverse to the assets, liabilities, results of operation or financial
condition of Parent and its Subsidiaries, taken as a whole, or the Company
and its Subsidiaries, taken as a whole, as the case may be, and (b)
"Subsidiary" means any corporation, partnership, joint venture or other
legal entity of which Parent or the Company, as the case may be (either
alone or through or together with any other Subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders
of which generally are entitled to vote for the election of the board of
directors or other governing body of such corporation, partnership, joint
venture or other legal entity. Parent has heretofore delivered to the
Company complete and correct copies of Parent's certificate of
incorporation ("Parent Charter") and by-laws ("Parent By-Laws"), as in
effect on the date hereof.
Section 2.2 Capital Structure. The authorized capital stock of
Parent consists of 300,000,000 shares of Parent Common Stock and 10,000,000
shares of Preferred Stock, par value $1.00 per share (the "Parent Preferred
Stock"). At the close of business on June 30, 1998, (i) 90,751,553 shares
of Parent Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and free of preemptive rights;
(ii) 37,721,369 shares of Parent Common Stock were held in the treasury of
Parent or by the Subsidiaries of Parent, (iii) 7,682,674 shares of Parent
Common Stock were reserved for future issuance pursuant to Parent's 1994
Long-Term Incentive Plan, the 1987 Stock Option Plan, the 1997 Stock-Based
Incentive Plan, the Parisian Stock Option Plans and the ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
& Co. Stock Options Plan (the "Parent Stock Plans"); (iii) 582,339 shares
of Parent Common Stock were reserved for future issuance pursuant to
Parent's 1994 Employee Stock Purchase Plan; and (iv) no shares of Parent
Preferred Stock were issued or outstanding. All of the shares of Parent
Common Stock issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable, free of
preemptive rights and be entitled to the benefits of the Parent Rights Plan
(as hereinafter defined) under the terms thereof. As of the date of this
Agreement, except for (a) this Agreement, (b) stock options covering not in
excess of 6,999,674 shares of Parent Common Stock (collectively, the
"Parent Stock Options"), (c) the 1994 Employee Stock Purchase Plan, (d)
contingent stock grants of 683,000 shares of Parent Common Stock to key
executives, and (e) securities issuable pursuant to the stock purchase
rights declared as a dividend on March 28, 1995 (the "Parent Rights") and
the rights agreement dated as of March 28, 1995 between Parent and Union
Planters National Bank (as amended, the "Parent Rights Agreement", and
together with the Parent Rights, the "Parent Rights Plan"), there are no
options, warrants, calls, rights or agreements to which Parent or any of
its Subsidiaries is a party or by which any of them is bound obligating
Parent or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of Parent or
any of its Subsidiaries, or securities convertible into or exchangeable for
such capital stock, or obligating Parent or any of its Subsidiaries to
grant, extend or enter into any such option, warrant call, right or
agreement. Except as disclosed in Parent SEC Documents (as hereinafter
defined) filed prior to the date hereof, since June 30, 1998, Parent has
not issued any shares of its capital stock, or securities convertible into
or exchangeable for such capital stock, other than shares issued in the
ordinary course pursuant to the Parent Stock Plans and the Parent Rights.
Except as disclosed in Parent SEC Documents filed prior to the date hereof,
there are no outstanding contractual obligations of Parent or any of
Parent's Subsidiaries (i) restricting the transfer of, (ii) affecting the
voting rights of, (iii) requiring the repurchase, redemption or disposition
of, (iv) requiring the registration for sale of, or (v) granting any
preemptive or antidilutive right with respect to, any shares of Parent
Common Stock or any capital stock of any Subsidiary of Parent. Each
outstanding share of capital stock of each Subsidiary of Parent that is a
corporation is duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights and, except as disclosed in Parent SEC
Documents filed prior to the date hereof, each such share is owned by
Parent or another Subsidiary of Parent, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of
any nature whatsoever.
Section 2.3 Authority. On or prior to the date of this Agreement,
the respective Boards of Directors of Parent and Sub have declared the
Merger advisable and in the best interest of the shareholders of Parent
and Sub, respectively, and approved this Agreement in accordance with
applicable law, and the Board of Directors of Parent has (a) resolved to
recommend the approval by Parent's shareholders of the matters covered by
the Parent Shareholders' Approvals (as hereinafter defined) and (b)
directed that this Agreement and the other matters subject to Parent
Shareholders' Approvals be submitted to Parent's shareholders for approval.
Each of Parent and Sub has all requisite corporate power and authority to
enter into the Transaction Agreements to which it is a party and, subject
to approval by the shareholders of Parent of (i) this Agreement (the
"Merger Agreement Approval"), (ii) and the issuance of Parent Common Stock
in connection with the Merger (the "Share Issuance") and (iii) amendments
to the Charter of Parent to (x) increase the authorized shares of Parent
Common Stock (the "Share Increase Amendment"), (y) change the name of
Parent to Saks Incorporated (the "Name Change Amendment"), and (z) increase
the number of members of Parent's Board of Directors (the "Board Amendment"
and, collectively with the Share Increase Amendment and the Name Change
Amendment, the "Charter Amendments" and, collectively with the Share
Increase Amendment, Name Change Amendment, Merger Agreement Approval and
the Share Issuance, the "Parent Shareholders' Approvals"), to consummate
the transactions contemplated hereby and thereby. The execution and
delivery by each of Parent and Sub of the Transaction Agreements to which
it is a party and the consummation by Parent and Sub of the transactions
contemplated hereby and thereby, including the Share Issuance, have been
duly authorized by all necessary corporate action on the part of Parent and
Sub, subject to (y) the Parent Shareholders' Approvals and (z) the filing
of the Certificate of Merger pursuant to the Del.C. Each of Parent and Sub
have duly executed and delivered the Transaction Agreements to which it is
a party and (assuming the valid authorization, execution and delivery
thereof by the other parties thereto) each such Transaction Agreement
constitutes the valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with their terms. The Share Issuance
and the filing of a registration statement on Form S-4 with the Securities
and Exchange Commission ("SEC") by Parent under the Securities Act for the
purpose of registering the shares of Parent Common Stock to be issued in
the Merger (together with any amendments or supplements thereto, whether
prior to or after the effective date thereof, the "Registration Statement")
and the taking of all actions in connection therewith have been duly
authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming that
all consents, approvals, authorizations and other actions described in this
Section 2.4 have been obtained and all filings and obligations described in
this Section 2.4 have been made, the execution and delivery of the
Transaction Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof
and thereof will not conflict with, result in any violation of, or breach
or default (with or without notice or lapse of time, or both) under, or
give to others a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Parent or any of its Subsidiaries under, any
provision of (i) the Parent Charter or Parent By-Laws, (ii) any provision
of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
lease, indenture, or other contract, agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or any of its Subsidiaries or any
of their respective properties or assets, other than, in the case of
clauses (ii), (iii) or (iv), any such conflicts, violations, breaches,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent, or prevent or materially delay the consummation of any of the
transactions contemplated hereby or thereby. No filing, notification or
registration with, or authorization, consent or approval of, any domestic
(federal and state), or foreign court, commission, governmental body,
regulatory or administrative agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of the
Transaction Agreements by Parent or Sub or is necessary for the
consummation of the Merger and the other transactions contemplated by the
Transaction Agreements, except for (i) in connection, or in compliance,
with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
and the filing of the appropriate documents with the relevant authorities
of other states in which Parent or any of its Subsidiaries is qualified to
do business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by
the transactions contemplated by the Transaction Agreements, (iv) such
filings, authorizations, orders and approvals as may be required by state
takeover laws (the "State Takeover Approvals"), (v) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under the laws of any foreign country in which the
Company or any of its Subsidiaries conducts any business or owns any
property or assets, (vi) such filings as may be required under the laws of
the State of Tennessee and other states to effectuate the Charter
Amendments and filings with other Governmental Entities in connection with
the Name Change Amendment, (vii) such filings and consents as may be
required under federal and state securities laws in connection with the
Registration Rights Agreement, (viii) applicable requirements, if any, of
Blue Sky Laws and the NYSE, and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, or prevent or materially delay
the consummation of any of the transactions contemplated hereby or by any
other Transaction Agreement.
Section 2.5 SEC Documents and Other Reports. Parent has filed all
required documents with the SEC since January 1, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and, at the respective times
they were filed, none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any notes
thereto) of Parent included in the Parent SEC Documents complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles
("GAAP") (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and
fairly present in accordance with GAAP the consolidated financial position
of Parent and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to any other adjustments described therein and normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in Parent SEC Documents filed prior to the date hereof
or as required by GAAP, Parent has not, since January 31, 1998, made any
change in the accounting practices or policies applied in the preparation
of financial statements. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in accordance with GAAP
and other applicable legal and accounting requirements.
Section 2.6 Registration Statement and Joint Proxy Statement. None
of the information to be supplied by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the joint proxy
statement/prospectus included therein (together with any amendments or
supplements thereto, the "Joint Proxy Statement") relating to the
Shareholder Meetings (as hereinafter defined) will (i) in the case of the
Registration Statement, at the time it becomes effective, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Joint Proxy Statement, at
the time of the mailing of the Joint Proxy Statement, the time of each of
the Shareholder Meetings and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If
at any time prior to the Effective Time any event with respect to Parent,
its officers and directors or any of its Subsidiaries shall occur which is
required to be described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment
or supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of Parent and the Company. The
Registration Statement will comply (with respect to Parent) as to form in
all material respects with the provisions of the Securities Act, and the
Joint Proxy Statement will comply (with respect to Parent) as to form in
all material respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in Parent SEC Documents filed prior to the date hereof, since
January 31, 1998, (A) none of Parent or any of its Subsidiaries has
incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or
other transaction, that is not in the ordinary course of business or that
would result in a Material Adverse Effect on Parent, except for any such
changes or effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof; (B) none of Parent or any
of its Subsidiaries has sustained any loss or interference with their
business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that would have a Material
Adverse Effect on Parent; (C) there has been no action taken by Parent or
any of its Subsidiaries that, if taken during the period from the date of
this Agreement through the Effective Time, would constitute a breach of
Section 4.1(a); and (D) there has been no event, circumstance or
development that would have a Material Adverse Effect on Parent, excluding
any changes and effects resulting from changes in economic, market,
regulatory or political conditions or changes in conditions generally
applicable to the industries in which Parent and Subsidiaries of Parent are
involved and except for any such changes or effects resulting from this
Agreement, the transactions contemplated hereby or the announcement
thereof.
Section 2.8 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity ("Permits")
necessary for it to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Parent Permits"), except
where the failure to have any of the Parent Permits would not, individually
or in the aggregate, have a Material Adverse Effect on Parent, and, as of
the date of this Agreement, no suspension or cancellation of any of the
Parent Permits is pending or, to the Knowledge of Parent (as hereinafter
defined), threatened, except where the suspension or cancellation of any of
the Parent Permits would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. None of Parent or any of its
Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative
or governmental rule or regulation or (C) any order, decree or judgment of
any Governmental Entity having jurisdiction over Parent or any of its
Subsidiaries, except, in the case of clauses (A) and (B), for any
violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent. Except as disclosed in Parent SEC
Documents filed prior to the date hereof, as of the date hereof, there is
no contract or agreement that is material to the business, financial
condition or results of operations of Parent and its Subsidiaries, taken as
a whole. Except as set forth in Parent SEC Documents filed prior to the
date hereof, no event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default
exists or, upon the consummation by Parent of the transactions contemplated
by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other contract, agreement or instrument to which
Parent or any of its Subsidiaries is a party or by which Parent or any such
Subsidiary is bound or to which any of the properties, assets or operations
of Parent or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent. As used in this Agreement, "Knowledge of Parent" means the
actual knowledge of any of the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, General Counsel or Principal Accounting
Officer of Parent.
Section 2.9 Tax Matters. (a) Each of Parent and its Subsidiaries
has timely filed, or has caused to be timely filed on its behalf, all Tax
Returns required to have been filed (or extensions have been duly obtained)
and has timely paid all Taxes required to have been paid by it, except
where failure to file such Tax Returns or pay such Taxes would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
(b) The most recent financial statements contained in Parent SEC
Documents reflect an adequate reserve for all Taxes payable by Parent and
its Subsidiaries for all Taxable periods and portions thereof through the
date of such financial statements. No deficiency with respect to any Taxes
has been proposed, asserted or assessed against the Parent or any of its
Subsidiaries, and no requests for waivers of the time to assess any such
Taxes are pending, except to the extent any such deficiency or request for
waiver, individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect on the Parent.
(c) There are no material liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of Parent or any of its
Subsidiaries. Neither Parent nor any of its Subsidiaries are bound by any
agreement except in the ordinary course with respect to Taxes.
(d) Parent has no reason to believe that any conditions exist that
could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(e) For purposes of this Agreement: (i) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or added minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority and (ii) "Tax Return" means
any return, report or similar statement required to be filed with respect
to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 2.10 Actions and Proceedings. Except as set forth in Parent
SEC Documents filed prior to the date hereof or on Schedule 2.10 of the
disclosure letter delivered by Parent to the Company concurrently with the
execution of this Agreement, (the "Parent Disclosure Letter") (a) there are
no outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries,
against or involving any of the present directors or officers of Parent or
any of its Subsidiaries, as such, or involving any of its or their
properties, assets or business that, individually or in the aggregate,
would have a Material Adverse Effect on Parent and (b) as of the date of
this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to
the Knowledge of Parent, threatened against or involving Parent or any of
its Subsidiaries against or involving any of the present directors or
officers of Parent or any of its Subsidiaries, as such, or involving any of
its or their properties, assets or business that, individually or in the
aggregate, would have a Material Adverse Effect on Parent. As of the date
hereof, there are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending,
or, to the Knowledge of Parent, threatened against or affecting Parent or
any of its Subsidiaries or any of its or their present directors or
officers, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by the Transaction Agreements.
Section 2.11 Certain Agreements. As of the date of this Agreement,
neither Parent nor any of its Subsidiaries is a party to any oral or
written agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement. No holder of any option to purchase shares of Parent
Common Stock, or shares of Parent Common Stock granted in connection with
the performance of services for Parent or its Subsidiaries, is or will be
entitled to receive cash from the Parent or any Subsidiary in lieu of or in
exchange for such option or shares as a result of the transactions
contemplated by this Agreement. Neither Parent nor any Subsidiary is a
party to any termination benefits agreement or severance agreement or
employment agreement which would be triggered by the consummation of the
transactions contemplated by this Agreement.
Section 2.12 ERISA.
(a) With respect to each material Parent Plan (as hereinafter
defined), Parent has made (or as soon as practicable will make) available
to the Company a true and correct copy of (i) the three most recent annual
reports (Form 5500) filed with the Internal Revenue Service (the "IRS"),
(ii) such Parent Plan, (iii) each trust agreement, insurance contract or
administration agreement relating to such Parent Plan, (iv) the most recent
summary plan description of each Parent Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Parent Plan subject to Title IV of ERISA and (vi) the most
recent determination letter, if any, issued by the IRS with respect to any
Parent Plan intended to be qualified under section 401(a) of the Code.
Except as would not have a Material Adverse Effect on Parent, each Parent
Plan (as defined herein) complies in all material respects with all
applicable statutes and governmental rules and regulations, including but
not limited to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code and the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and (i) no "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred with
respect to any Parent Plan, (ii) neither Parent nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Parent
Multiemployer Plan (as hereinafter defined) or instituted, or is currently
considering taking, any action to do so, (iii) no action has been taken, or
is currently being considered, to terminate any Parent Plan subject to
Title IV of ERISA, and (iv) Parent and its ERISA Affiliates have complied
in all material respects with the continued medical coverage requirements
of COBRA; other than, in each case, such events or actions that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent. Except as would not have a Material Adverse Effect on Parent,
no Parent Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived.
(b) With respect to any Parent Plan which is subject to Title IV of
ERISA, the present value of accrued benefit obligations, as determined in
accordance with FAS 87 in accordance with the actuarial assumptions used to
prepare the most recent reports of such Parent Plan, did not exceed the
fair market value of the Plan assets as of the most recent valuation date
for which an actuarial report has been prepared and Parent has no Knowledge
of any Material Adverse Change to such status. With respect to the Parent
Plans, no event has occurred in connection with which Parent or any ERISA
Affiliate would be subject to any liability under the terms of such Parent
Plans, ERISA, the Code or any other applicable law which would have a
Material Adverse Effect on Parent. With respect to any current or former
employee or contractor of Parent or its Subsidiaries, consummation of the
transactions contemplated by this Agreement shall not result in the payment
or provision of additional compensation or benefits or accelerate the
vesting, payment or funding of any compensation or benefits. No amounts
payable or provided by Parent or its Subsidiaries related to the
transactions contemplated by this Agreement will constitute "excess
parachute payments" within the meaning of Section 280G of the Code. All
Parent Plans that are intended to be qualified under Section 401(a) of the
Code have been determined by the Internal Revenue Service (the "IRS") to be
so qualified or a timely application for such determination is pending, and
to the Knowledge of Parent, there is no reason why any such Parent Plan is
not so qualified in operation. Neither Parent nor any of its ERISA
Affiliates has been notified by any Parent Multiemployer Plan that such
Parent Multiemployer Plan is currently in reorganization or insolvency
under and within the meaning of Section 4241 or 4245 of ERISA or that such
Parent Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA. Neither Parent nor any of its ERISA Affiliates has
any liability or obligation under any welfare plan to provide benefits
after termination of employment to any employee or dependent other than as
required by ERISA or as disclosed in the Parent SEC Documents filed prior
to the date hereof. There are no pending or, to the knowledge of Parent,
threatened, claims, suits, audits or investigations related to any Parent
Plan other than claims for benefits in the ordinary course and other than
claims, suits, audits or investigations that would not, individually or in
the aggregate, have a Material Adverse Effect on Parent. As used herein,
(i) "Parent Plan" means a "pension plan" (as defined in Section 3(2) of
ERISA (other than a Parent Multiemployer Plan)) or a "welfare plan" (as
defined in Section 3(l) of ERISA) established or maintained by Parent or
any of its ERISA Affiliates or as to which Parent or any of its ERISA
Affiliates has contributed or otherwise may have any liability and all
other retirement, deferred compensation, severance, termination, change in
control, stock option, restricted stock or phantom stock plans, policies or
programs of Parent or its Subsidiaries, (ii) "Parent Multiemployer Plan"
means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to
which Parent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability, and (iii) with respect to
any person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of
the Code and the regulations promulgated under those sections or pursuant
to Section 4001(b) of ERISA and the regulations promulgated thereunder,
including without limitation, each of Parent's Subsidiaries. Parent has
made (or as soon as practicable will make) available to Company the most
recent summary plan description of each Parent Plan for which a summary
plan description is required and each Parent Plan.
Section 2.13 Compliance with Certain Laws. The properties, assets
and operations of Parent and its Subsidiaries are in compliance in all
material respects with all applicable federal, state, local and foreign
laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively,
"Worker Safety Laws"), the protection and clean-up of the environment and
activities or conditions related thereto, including, without limitation,
those relating to the generation, handling, disposal, transportation or
release of hazardous materials (collectively, "Environmental Laws") and all
consumer credit laws, including, without limitation, bankruptcy laws
relating to post-petition collection procedures (collectively, "Consumer
Credit Laws"), except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. With
respect to such properties, assets and operations, including any previously
owned, leased or operated properties, assets or operations, there are no
past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent
or any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety
Laws and Environmental Laws, other than any such interference or prevention
as would not, individually or in the aggregate with any such other
interference or prevention, have a Material Adverse Effect on Parent. The
term "hazardous materials" shall mean those substances that are regulated
by or form the basis for liability under any applicable Environmental Laws.
Parent will make available to the Company such certificates and
environmental studies with respect to such properties as Parent has
available on the date hereof.
Section 2.14 Liabilities. Except as fully reflected or reserved
against in the consolidated balance sheet of Parent and its Subsidiaries as
of January 31, 1998 (included in the Parent SEC Documents) or as reflected
in the Parent SEC Documents filed prior to the date hereof, Parent and its
Subsidiaries have no liabilities (including, without limitation, tax
liabilities) absolute or contingent, that would be required to be reflected
on a balance sheet or in notes thereto prepared in accordance with GAAP,
other than liabilities incurred in the ordinary course of business or that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
Section 2.15 Labor Matters. Except as set forth in Parent SEC
Documents filed prior to the date hereof, or on Schedule 2.15 of the Parent
Disclosure Letter, neither Parent nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract. Neither Parent nor
any of its Subsidiaries has engaged in any unfair labor practice with
respect to any persons employed by or otherwise performing services for
Parent or any of its Subsidiaries (the "Parent Business Personnel"), and
there is no unfair labor practice complaint or grievance against Parent or
any of its Subsidiaries by the National Labor Relations Board or any
comparable state agency pending or threatened in writing with respect to
the Parent Business Personnel, except where such unfair labor practice,
complaint or grievance would not have a Material Adverse Effect on Parent.
There is no labor strike, dispute, slowdown or stoppage pending or, to the
Knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries which may interfere with the respective business activities of
Parent or any of its Subsidiaries, except where such dispute, strike or
work stoppage would not have a Material Adverse Effect on Parent. Parent
and its Subsidiaries are in material compliance with all labor, employment
and wage payment-related laws, regulations and rules.
Section 2.16 Intellectual Property. Parent and its Subsidiaries own
or possess adequate licenses or other legal rights to use, free to Parent's
Knowledge of infringement by others, all patents, trademarks, trade names,
trade dress, service marks, trade secrets, copyrights, software, mailing
lists and other proprietary intellectual property rights including all
applications with respect thereto (collectively, "Intellectual Property
Rights") as are necessary in connection with the business of Parent and its
Subsidiaries as currently conducted, taken as a whole, except where the
failure to have such Intellectual Property Rights or such infringement by
others would not have a Material Adverse Effect on Parent. To Parent's
Knowledge, neither Parent nor any of its Subsidiaries has infringed any
Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent.
Section 2.17 Opinion of Financial Advisor. Parent has received the
written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, dated the date hereof, to the
effect that, as of such date, the Conversion Number is fair to Parent from
a financial point of view, a copy of which opinion will be made available
to the Company promptly after the date of this Agreement.
Section 2.18 Pooling of Interests/Tax Free Treatment. Parent has
made available to Price Waterhouse Coopers LLP ("PWC") substantially all
documents and other written materials and other information relating to
Parent that, based upon the advice of PWC, Parent management believes would
be material to their conclusion that no conditions exist with respect to
either company which would preclude accounting for the Merger as a pooling
of interests. Neither Parent nor any of its Subsidiaries, nor to Parent's
Knowledge, any of Parent's Affiliates, has taken any action or failed to
take any action which action or failure would jeopardize the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of
the Code.
Section 2.19 Required Vote of Parent Shareholders. Under applicable
Tennessee law and the Parent Charter and Parent Bylaws, (i) the affirmative
vote of a majority of the votes eligible to be cast is required for Merger
Agreement Approval, (ii) the affirmative vote of a majority of a quorum is
required to approve the Share Issuance, the Share Increase Amendment and
the Name Change Amendment and (iii) the affirmative vote of eighty percent
of the outstanding shares of Parent Common Stock are required to approve
the Board Amendment. No other vote of the shareholders of Parent is
required by law, the Parent Charter or Parent By-Laws of Parent or
otherwise in order for Parent to consummate the Merger and the transactions
contemplated hereby.
Section 2.20 Ownership of Shares. Neither Parent nor any of its
Subsidiaries owns any Shares of Company Common Stock.
Section 2.21 Operations of Sub. Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
Section 2.22 Brokers. No broker, investment banker or other person,
other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, the fees and expenses of which will be
paid by Parent (and as reflected in agreements between ▇▇▇▇▇▇▇ ▇▇▇▇▇
Barney, and Parent, a copy of which has been furnished to the Company), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent.
Section 2.23 State Takeover Statutes and Shareholder Rights Plan.
(a) Assuming the accuracy of the Company's representations and
warranties contained in Section 3.20 (Ownership of Shares), as of the date
hereof, no state takeover statutes or other state statutes, including any
business combination act, or any supermajority Parent Charter provisions
are applicable to the Merger, this Agreement and the transactions
contemplated hereby, other than the Board Amendment.
(b) As of the date hereof and as of the Effective Time, (i) Parent
will have no additional obligations under the Parent Rights or the Parent
Rights Agreement and (ii) the holders of the Parent Rights will have no
additional rights under the Parent Rights or the Parent Rights Agreement,
in each case, as a result of any of the transactions contemplated by this
Agreement. Execution and delivery of this Agreement does not, and
compliance with the provisions hereof will not, cause the holders of the
Parent Rights to have any rights under the Parent Rights or the Parent
Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. Each Subsidiary
of the Company is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized and has the
requisite corporate or other power and authority to carry on its business
as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power or authority would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the
character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. The Company has heretofore
delivered to Parent complete and correct copies of the Company's
Certificate of Incorporation ("Company Charter") and by-laws ("Company By-
Laws"), as in effect on the date hereof.
Section 3.2 Capital Structure. The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock, par value
$.0l per share. At the close of business on July 2, 1998, (i) 64,020,413
shares of Company Common Stock were issued and outstanding, all of which
were validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) 24,000 shares of Company Common Stock were held in the
treasury of the Company or by the Subsidiaries of the Company, (iii) not
more than 6,235,000 shares of Company Common Stock were reserved for future
issuance pursuant to the Saks Holdings, Inc. 1996 Management Stock
Incentive Plan, (the "Company Stock Plan" (iv) 6,641,000 shares of Company
Common Stock were reserved for issuance pursuant to the Company's 51/2%
Convertible Subordinated Notes due September 15, 2006 (the "Notes") and (v)
64,000 shares of Company Common Stock were reserved for issuance pursuant
to the 1997 Non-Employee Directors Plan. As of the date of this Agreement,
except for stock options covering not in excess of 5,375,000 shares of
Company Common Stock issued under the Company Stock Plans (collectively,
the "Company Stock Options") and except for the outstanding Notes, there
are no options, warrants, calls, rights or agreements to which the Company
or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such capital stock, or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right or agreement. Except as disclosed in the
Company SEC Documents (as hereinafter defined) filed prior to the date
hereof, since July 2, 1998, the Company has not issued any shares of its
capital stock, or securities convertible into or exchangeable for such
capital stock, other than shares issued in the ordinary course pursuant to
the Company Stock Plans. Except as disclosed in the Company SEC Documents
filed prior to the date hereof, there are no outstanding contractual
obligations of the Company or any of the Company's Subsidiaries (i)
restricting the transfer of, (ii) affecting the voting rights of, (iii)
requiring the repurchase, redemption or disposition of, (iv) requiring the
registration for sale of, or (v) granting any preemptive or antidilutive
right with respect to, any shares of Company Common Stock or any capital
stock of any Subsidiary of the Company. Each outstanding share of capital
stock of each Subsidiary of the Company that is a corporation is duly
authorized, validly issued, fully paid, nonassessable and free of
preemptive rights, and except as disclosed in the Company SEC Documents
filed prior to the date hereof, each such share is owned by the Company or
another Subsidiary of the Company, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of
any nature whatsoever.
Section 3.3 Authority. The Board of Directors of the Company has
on or prior to the date of this Agreement (a) declared the Merger advisable
and in the best interest of the Company and its stockholders and approved
this Agreement in accordance with applicable law, (b) resolved to recommend
the approval of this Agreement by the Company's stockholders and (c)
directed that this Agreement be submitted to the Company's stockholders for
approval. The Company has all requisite corporate power and authority to
enter into the Transaction Agreements to which it is a party and, subject
to approval by the stockholders of the Company of the Merger (which
approval, for all purposes in this Agreement, shall be deemed to include
any necessary approval of amendments to the Company's Stock plans)
(collectively, the "Company Shareholder Approvals"), to consummate the
transactions contemplated hereby and thereby. The execution and delivery
of the Transaction Agreements to which it is a party by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of the Company, subject to (x) Company Shareholder Approvals and (y)
the filing of the Certificate of Merger pursuant to the Del.C. The
Transaction Agreements to which it is a party have been duly executed and
delivered by the Company and (assuming the valid authorization, execution
and delivery thereof by the other parties thereto) each such Transaction
Agreement constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with their terms. The filing
of the Joint Proxy Statement with the SEC and the taking of all actions in
connection therewith have been duly authorized by the Company's Board of
Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming all
consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in
this Section 3.4 have been made and except as set forth in Schedule 3.4 of
the disclosure letter delivered by the Company to Parent concurrently with
the execution of this Agreement (the "Company Disclosure Letter"), the
execution and delivery of the Transaction Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with,
result in any violation of, or breach or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company
or any of its Subsidiaries under, any provision of (i) the Company Charter
or Company By-Laws, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan
or credit agreement, note, bond, mortgage, lease, indenture or other
contract, agreement, instrument, permit, concession, franchise or license
applicable to the Company or any of its Subsidiaries, or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or
(iv), any such conflicts, violations, breaches, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, or
prevent or materially delay the consummation of any of the transactions
contemplated hereby or thereby. No filing, notification or registration
with, or authorization, consent or approval of, any Governmental Entity is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of the Transaction Agreements by
the Company or is necessary for the consummation of the Merger and the
other transactions contemplated by the Transaction Agreements, except for
(i) in connection, or in compliance, with the provisions of the HSR Act,
the Securities Act and the Exchange Act, (ii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and the
filing of appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by
the transactions contemplated by this Agreement, (iv) such filings,
authorizations, orders and approvals as may be required to obtain the State
Takeover Approvals, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws
of any foreign country in which the Company or any of its Subsidiaries
conducts any business or owns any property or assets, (vi) applicable
requirements, if any, of Blue Sky Laws and the NYSE, and (vii) such other
consents, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of any of the transactions contemplated
hereby or thereby or by any other Transaction Agreement. The execution and
delivery of the Transaction Agreements do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, result in any
violation of, or breach or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company
or any of its Subsidiaries under, any leases, subleases, reciprocal
operating agreements or reciprocal easement agreements relating to the
Company stores listed on Schedule 3.4 of the Company Disclosure Letter.
Section 3.5 SEC Documents and Other Reports. The Company has filed
all required documents with the SEC since January 1, 1995 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and, at the respective times
they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any notes
thereto) of the Company included in the Company SEC Documents complied as
to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto,
were prepared in accordance with GAAP (except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in
the notes thereto) and fairly present in accordance with GAAP the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated
results of their operations and their consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the Company SEC Documents or as required by GAAP,
the Company has not, since January 31, 1998, made any change in the
accounting practices or policies applied in the preparation of financial
statements. The books and records of the Company and its Subsidiaries have
been, and are being, maintained in accordance with GAAP and other
applicable legal and accounting requirements.
Section 3.6 Registration Statement and Joint Proxy Statement. None
of the information to be supplied by the Company for inclusion or
incorporation by reference in the Registration Statement or the Joint Proxy
Statement will (i) in the case of the Registration Statement, at the time
it becomes effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading or (ii) in the case
of the Joint Proxy Statement, at the time of the mailing of the Joint Proxy
Statement, the time of each of the Shareholder Meetings and at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time
any event with respect to the Company, its officers and directors or any of
its Subsidiaries shall occur which is required to be described in the Joint
Proxy Statement or the Registration Statement, such event shall be so
described, and an appropriate amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the
shareholders of Parent and the Company. The Joint Proxy Statement will
comply (with respect to the Company) as to form in all material respects
with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date
of this Agreement or in Schedule 3.7 of the disclosure letter delivered by
the Company to Parent concurrently with the execution of this Agreement
(the "Company Disclosure Letter"), since January 31, 1998, (A) none of the
Company or any of its Subsidiaries has incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material
oral or written agreement or other transaction, that is not in the ordinary
course of business or that would result in a Material Adverse Effect on the
Company, except for any such changes or effects resulting from this
Agreement, the transactions contemplated hereby or the announcement
thereof; (B) the Company or any of its Subsidiaries has sustained any loss
or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance)
that would have a Material Adverse Effect on the Company; (C) there has
been no action taken by the Company or any of Subsidiaries, that, if taken
during the period from the date of this Agreement through the Effective
Time, would constitute a breach of Section 4.1(b); and (D) there has been
no event, circumstance or development that would have a Material Adverse
Effect on the Company, excluding any changes and effects resulting from
changes in economic, market, regulatory or political conditions or changes
in conditions generally applicable to the industries in which the Company
and Subsidiaries of the Company are involved and except for any such
changes or effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all Permits necessary for it to own, lease
and operate its properties or to carry on its business as it is now being
conducted (the "Company Permits"), except where the failure to have any of
the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company, and, as of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company (as hereinafter defined),
threatened, except where the suspension or cancellation of any of the
Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. None of the Company or any of its
Subsidiaries is in violation of (A) its certificate, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative
or governmental rule or regulation or (C) any order, decree or judgment of
any Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except, in the case of clauses (A) (as to the Company's
Subsidiaries only), (B) and (C), for any violations that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
Except as disclosed in the Company SEC Documents filed prior to the date of
this Agreement or in Schedule 3.8(a) of the Company Disclosure Letter, as
of the date hereof there is no contract or agreement that is material to
the business, financial condition or results of operations of the Company
and its Subsidiaries, taken as a whole. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement or in Schedule
3.8(b) of the Company Disclosure Letter, no event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute
an event of default exists or, upon the consummation by the Company of the
transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any contractual license or other contract, agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary is bound or to which any of the
properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. As used in this
Agreement "Knowledge of the Company" means the actual knowledge of any of
the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer or the General Counsel of the Company.
Section 3.9 Tax Matters. (a) Each of the Company and its
Subsidiaries has timely filed, or has caused to be timely filed on its
behalf, all Tax Returns required to have been filed (or extensions have
been duly obtained) and has timely paid all Taxes required to have been
paid by it, except where failure to file such Tax Returns or pay such Taxes
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
(b) The most recent financial statements contained in the Company SEC
Documents reflect an adequate reserve for all Taxes payable by the Company
and its Subsidiaries for all Taxable periods and portions thereof through
the date of such financial statements. No deficiency with respect to any
Taxes has been proposed, asserted or assessed against the Company or any of
its Subsidiaries, and no requests for waivers of the time to assess any
such Taxes are pending, except to the extent any such deficiency or request
for waiver, individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company.
(c) There are no material liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries are bound by
any agreement, except for agreements entered into in the ordinary course
with respect to Taxes.
(d) The Company has no reason to believe that any conditions exist
that could reasonably be expected to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
Section 3.10 Actions and Proceedings. Except as set forth in the
Company SEC Documents filed prior to the date hereof or in Schedule 3.10 of
the Company Disclosure Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or
involving the Company or any of its Subsidiaries, against or involving any
of the present directors or officers of the Company or any of its
Subsidiaries, as such, or involving any of its or their properties, assets
or business that, individually or in the aggregate, would have a Material
Adverse Effect on the Company. Except as set forth in the Company SEC
Documents filed prior to the date hereof or on Schedule 3.10 of the Company
Disclosure Letter, as of the date of this Agreement, there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened
against or involving the Company or any of its Subsidiaries against or
involving any of the present directors or officers, of the Company or any
of its Subsidiaries as such or involving any of its or their properties,
assets or business that, individually or in the aggregate, would have a
Material Adverse Effect on the Company. As of the date hereof, there are
no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending, or, to
the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries or any of its or their present directors or
officers, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by the Transaction Agreements.
Section 3.11 Certain Agreements. Except as set forth in Schedule
3.11 of the Company Disclosure Letter, as of the date of this Agreement,
neither the Company nor any of its Subsidiaries is a party to any oral or
written agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement. No holder of any option to purchase shares of Company
Common Stock, or shares of Company Common Stock granted in connection with
the performance of services for the Company or its Subsidiaries, is or will
be entitled to receive cash from the Company or any Subsidiary in lieu of
or in exchange for such option or shares as a result of the transactions
contemplated by this Agreement (other than in lieu of fractional shares).
Neither the Company nor any Subsidiary is a party to any termination
benefits agreement or severance agreement or employment agreement which
would be triggered by the consummation of the transactions contemplated by
this Agreement, except as set forth in Schedule 3.11 of the Company
Disclosure Letter.
Section 3.12 ERISA.
(a) With respect to each material Company Plan (as hereinafter
defined), the Company has made (or as soon as practicable will make)
available to Parent a true and correct copy of (i) the three most recent
annual reports (Form 5500) filed with the IRS, (ii) such Company Plan,
(iii) each trust agreement, insurance contract or administration agreement
relating to such Company Plan, (iv) the most recent summary plan
description of each Company Plan for which a summary plan description is
required, (v) the most recent actuarial report or valuation relating to a
Company Plan subject to Title IV of ERISA and (vi) the most recent
determination letter, if any, issued by the IRS with respect to any Company
Plan intended to be qualified under Section 401(a) of the Code. Except as
would not have a Material Adverse Effect on the Company, (i) each Company
Plan complies in all material respects with all applicable statutes and
governmental rules and regulations, including but not limited to ERISA, the
Code and COBRA, (ii) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any Company Plan, (iii) neither
the Company nor any of its ERISA Affiliates has withdrawn from any Company
Multiemployer Plan (as hereinafter defined), or instituted, or is currently
considering taking, any action to do so, and (iv) no action has been taken,
or is currently being considered, to terminate any Company Plan subject to
Title IV of ERISA, and (v) the Company and its ERISA Affiliates have
complied in all material respects with the continued medical coverage
requirements of COBRA, other than, in each case, such events or actions
that, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. Except as would not have a Material Adverse Effect
on the Company, no Company Plan, nor any trust created thereunder, has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived. Except as disclosed on Schedule 3.12(a) of
the Company Disclosure Letter, with respect to any Company Plan which is
subject to Title IV of ERISA, the present value of accrued benefit
obligations, as determined in accordance with FAS 87 in accordance with the
actuarial assumptions used to prepare the most recent reports of such
Company Plan, did not exceed the fair market value of the Plan assets as of
the most recent valuation date for which an actuarial report has been
prepared, and the Company has no Knowledge of any Material Adverse Change
to such status.
(b) With respect to the Company Plans, no event has occurred in
connection with which the Company or any ERISA Affiliate would be subject
to any liability under the terms of such Company Plans, ERISA, the Code or
any other applicable law which would have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents or set forth in
Schedule 3.12(b) of the Company Disclosure Letter, with respect to any
current or former employee or contractor of the Company or its
subsidiaries, consummation of the transactions contemplated by this
Agreement shall not result in the payment or provision of additional
compensation or benefits or accelerate the vesting, payment or funding of
any compensation or benefits. Except as disclosed in the Company SEC
Documents or set forth in Schedule 3.12(b) of the Company Disclosure
Letter, no amounts payable or provided by the Company or its subsidiaries
related to the transactions contemplated by this Agreement will constitute
"excess parachute payments" within the meaning of Section 280G of the Code.
Company Plans that are intended to be qualified under Section 401(a) of the
Code have been determined by the IRS to be so qualified, or a timely
application for such determination is now pending, and to the Knowledge of
the Company, there is no reason why any Company Plan is not so qualified in
operation. Neither the Company nor any of its ERISA Affiliates has been
notified by any Company Multiemployer Plan that such Company Multiemployer
Plan is currently in reorganization or insolvency under and within the
meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of
ERISA. Except as disclosed in the Company SEC Documents filed prior to the
date hereof or set forth in Schedule 3.12(b) of the Company Disclosure
Letter, neither the Company nor any of its ERISA Affiliates has any
liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent other than as
required by ERISA or as disclosed in the Company Annual Report. There are
no pending, or to the knowledge of the Company, threatened, claims, suits,
audits or investigations related to any Company Plan other than claims for
benefits in the ordinary course and other than claims, suits, audits or
investigations that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. As used herein, (i) "Company Plan"
means a "pension plan" (as defined in Section 3(2) of ERISA (other than a
Company Multiemployer Plan)) or a "welfare plan" (as defined in Section
3(l) of ERISA) established or maintained by the Company or any of its ERISA
Affiliates or as to which the Company or any of its ERISA Affiliates has
contributed or otherwise may have any liability and all other retirement,
deferred compensation, severance, termination, change in control, stock
option, restricted stock or phantom stock plans, policies or programs of
the Company or its Subsidiaries, (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
the Company or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability and (iii) with respect to
any person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of
the Code and the regulations promulgated under those sections or pursuant
to Section 4001(b) of ERISA and the regulations promulgated thereunder,
including, without limitation, each of the Company's Subsidiaries.
Section 3.13 Compliance with Certain Laws. Except as disclosed in
Schedule 3.13 of the Company Disclosure Letter, the properties, assets and
operations of the Company and its Subsidiaries are in compliance in all
material respects with all applicable Worker Safety Laws, Environmental
Laws and Consumer Credit Laws, except for any violations that individually
or in the aggregate would not have a Material Adverse Effect on the
Company. Except as disclosed in Schedule 3.13 of the Company Disclosure
Letter, with respect to such properties, assets and operations, including
any previously owned, leased or operated properties, assets or operations,
there are no past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries that may interfere with or
prevent compliance or continued compliance in all material respects with
applicable Worker Safety Laws and Environmental Laws, other than
interference or prevention that would not individually or in the aggregate
with any other such interference or prevention have a Material Adverse
Effect on the Company. The Company will make available to Parent such
certificates and environmental studies with respect to such properties as
the Company has available on the date hereof.
Section 3.14 Liabilities. Except as fully reflected or reserved
against in the consolidated balance sheet of the Company and its
Subsidiaries as of January 31, 1998 (included in the Company SEC Documents)
or as reflected in the Company SEC Documents filed prior to the date
hereof, or set forth in Schedule 3.14 of the Company Disclosure Letter, the
Company and its Subsidiaries have no liabilities (including, without
limitation, tax liabilities) absolute or contingent, that would be required
to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP, other than liabilities incurred in the ordinary
course of business or that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
Section 3.15 Labor Matters. Except as set forth in Schedule 3.15 of
the Company Disclosure Letter or in the Company SEC Documents filed prior
to the date hereof, neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract. Neither
the Company nor any of its Subsidiaries has engaged in any unfair labor
practice with respect to any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries (the "Company
Business Personnel"), and there is no unfair labor practice complaint or
grievance against the Company or any of its Subsidiaries by the National
Labor Relations Board or any comparable state agency pending or threatened
in writing with respect to the Company Business Personnel, except where
such unfair labor practice, complaint or grievance would not have a
Material Adverse Effect on the Company. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries
which may interfere with the respective business activities of the Company
or any of its Subsidiaries, except where such dispute, strike or work
stoppage would not have a Material Adverse Effect on the Company. The
Company and its subsidiaries are in material compliance with all labor,
employment and wage payment-related laws, regulations and rules.
Section 3.16 Intellectual Property. The Company and its
Subsidiaries own or possess adequate licenses or other legal rights to use,
free to the Company's Knowledge of infringement by others, all Intellectual
Property Rights as are necessary in connection with the business of the
Company and its Subsidiaries as currently conducted, taken as a whole,
except where the failure to have such Intellectual Property Rights or such
infringement by others would not have a Material Adverse Effect on the
Company. To the Company's Knowledge, neither the Company nor any of its
Subsidiaries has infringed any Intellectual Property Rights of any third
party other than any infringements that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
Section 3.17 Opinion of Financial Advisor. The Company has received
the written opinions of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. dated
the date hereof, to the effect that, as of the date hereof, the Conversion
Number is fair to the Company's stockholders from a financial point of
view, a copy of which opinion will be made available to Parent promptly
after the date of this Agreement.
Section 3.18 Pooling of Interests/Tax Free Treatment. The Company
has made available to PWC substantially all documents and other written
materials and other information relating to the Company that, based upon
the advice of PWC, the Company believes would be material to their
conclusion that no conditions exist with respect to either Company which
would preclude accounting for the Merger as a pooling of interests.
Neither the Company nor to the Company's Knowledge, any of Company's
Affiliates, has taken any action or failed to take any action which action
or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.19 Required Vote of Company Stockholders. Under
applicable Delaware law and the Company Charter and Company Bylaws, the
affirmative vote of the holders of not less than a majority of the
outstanding shares of Company Common Stock is required to approve the
Merger. No other vote of the stockholders of the Company is required by
law, the Company Charter or Company By-Laws or otherwise for the Company to
consummate the Merger and the transactions contemplated hereby.
Section 3.20 Ownership of Shares. Neither Company nor any of its
Subsidiaries owns any Shares of Parent Common Stock.
Section 3.21 Brokers. No broker, investment banker or other person,
other than ▇▇▇▇▇▇▇, Sachs & Co. and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., the fees and
expenses of which will be paid by the Company (and are reflected in
agreements between ▇▇▇▇▇▇▇, Sachs & Co. and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. and the
Company, respectively, copies of which have been furnished to Parent), is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.22 State Takeover Statutes. Assuming the accuracy of
Parent's representations and warranties contained in Section 2.20
(Ownership of Shares), the Board of Directors of the Company has taken all
action so that, prior to the execution hereof, the Board of Directors has
approved the Merger and the Company Stockholders Agreement prior to the
execution hereof pursuant to Section 203 of the Del.C. As of the date
hereof, except as set forth in Section 2.23(a), no other state takeover
statutes, including without limitation, any business combination act or
supermajority Company Charter provisions are applicable to the Merger, this
Agreement and the transactions contemplated hereby.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. Except as expressly permitted by clauses (i)
through (ix) of this Section 4.1(a), during the period from the date of
this Agreement through the Effective Time, Parent shall, and shall cause
each of its Subsidiaries to, in all material respects carry on its business
in the ordinary course as currently conducted and, to the extent consistent
therewith, use reasonable best efforts to preserve intact its current
business organizations, keep available the services of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement to the
Effective Time, Parent, shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Company:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such (other than dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (y) purchase, redeem or otherwise acquire any
shares of capital stock of Parent or any other securities thereof or the
capital stock of any Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities
(other than the redemption of the Parisian 9 7/8% Senior Subordinated
Notes), or (z) institute any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) subject to Section 4.4, the issuance
of stock options and shares of Parent Common Stock to employees of Parent
or any of its Subsidiaries in the ordinary course of business consistent
with past practice, (B) the issuance of Parent securities pursuant to the
Parent Rights Plan, and (C) the issuance by any wholly-owned Subsidiary of
Parent of its capital stock to Parent or another wholly-owned Subsidiary of
Parent;
(iii) amend its charter or by-laws;
(iv) except as set forth on Schedule 4.1 of the Parent Disclosure
Letter and except for inventory, merchandise, finished goods and accounts
receivable acquired in the ordinary course of business, acquire or agree to
acquire by merging or consolidating with, or by purchasing a portion of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets, other
than acquisitions of assets in the ordinary course of business consistent
with past practice, unless (i) the entering into a definitive agreement
relating to or the consummation of such acquisition, merger, consolidation
or purchase would not (A) impose any material delay in the obtaining of, or
significantly increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Entity
necessary to consummate the Merger or the expiration or termination of any
applicable waiting period, (B) increase the risk of any Governmental Entity
entering an order prohibiting the consummation of the Merger or (C)
increase the risk of not being able to remove any such order on appeal or
otherwise, and (ii) in the case of any individual acquisition, merger,
consolidation or purchase, the value of which does not exceed $750 million;
(v) sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets, other than (A) sales of
inventory, merchandise and finished goods in the ordinary course of
business, (B) transactions that are in the ordinary course of business
consistent with past practice and not material to Parent and its
Subsidiaries taken as a whole, (C) as may be required by any Governmental
Entity and (D) subject to Sections 4.4, dispositions involving an aggregate
consideration not in excess of $500 million;
(vi) incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (A) indebtedness in
the ordinary course of business consistent with past practice, (B)
indebtedness, loans, advances, capital contributions and investments
between Parent and any of its wholly-owned Subsidiaries or between any of
such wholly-owned Subsidiaries, (C) the issuance of up to $300 million in
senior notes and (D) such indebtedness as may be necessary to fund actions
allowed under Section 4.1(a)(iv) hereof;
(vii) knowingly violate or knowingly fail to perform any
material obligation or duty imposed upon it or any Subsidiary by any
applicable federal, state or local law, rule, regulation, guideline or
ordinance;
(viii) take any action, other than reasonable and usual
actions in the ordinary course of business consistent with past practice,
with respect to accounting policies or procedures (other than actions
required to be taken by GAAP); or
(ix) authorize, recommend or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) Actions by the Company. Except as expressly permitted by clauses
(i) through (xvi) of this Section 4.1(b), during the period from the date
of this Agreement through the Effective Time, the Company, subject to
Section 4.2 hereof, shall, and shall cause each of its Subsidiaries to, in
all material respects, carry on its business in the ordinary course as
currently conducted and, to the extent consistent therewith, use reasonable
best efforts to preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this
Agreement, from the date of this Agreement to the Effective Time, the
Company, subject to Section 4.2 hereof, shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Parent:
(i) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than dividends and other distributions by
Subsidiaries), (x) other than in the case of any Subsidiary, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (y) except as set forth in Schedule 4.1(b)(i)
of the Company Disclosure Letter, purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof or
the capital stock of any Subsidiaries, or any securities thereof, or any
rights, warrants or options to acquire any such shares or other securities
or (z) institute any share repurchase program;
(ii) issue, deliver, sell, pledge, dispose of, grant, transfer or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible or
exchangeable into, or exercisable for, or any rights, warrants or options
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than the issuance of shares of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date of
this Agreement in accordance with their current terms;
(iii) amend its charter, or by-laws;
(iv) except as set forth in Schedule 4.1(b)(iv) of the Company
Disclosure Letter and except for inventory, merchandise, finished goods and
accounts receivable acquired in the ordinary course of business, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
portion of the assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire or agree to acquire any assets
other than acquisitions of assets in the ordinary course of business
consistent with past practice, the value of which do not exceed $50 million
in the aggregate;
(v) except as set forth in Schedule 4.1(b)(v) of the Company
Disclosure Letter, sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets other than (A) sales of
inventory, merchandise and finished goods in the ordinary course of
business, (B) transactions that are in the ordinary course of business
consistent with past practice, not material to the Company and its
Subsidiaries taken as a whole, and in an aggregate amount greater than $50
million and (C) as may be required by any Governmental Entity;
(vi) except as set forth in Schedule 4.1(b)(vi) of the Company
Disclosure Letter, incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (A) indebtedness
incurred in the ordinary course of business consistent with past practice
and (B) indebtedness, loans, advances, capital contributions and
investments between the Company and any of its wholly-owned Subsidiaries or
between any of such wholly-owned Subsidiaries;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or ownership
of the Company or any Subsidiary;
(viii) enter into or adopt, or amend any existing, severance
plan, agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, other than (A) as required by law, or
(B) as expressly contemplated by this Agreement;
(ix) increase the compensation payable or to become payable to
its officers, employees, or directors except for increases in the ordinary
course of business consistent with past practice in salaries or wages of
employees of the Company or any of its Subsidiaries who are not officers of
the Company or any of its Subsidiaries, or grant any additional rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director or officer of the Company or any of its
Subsidiaries, or establish, adopt, enter into, or, except as set forth on
Schedule 4.1(b)(ix) of the Company Disclosure Letter or as may be required
to comply with applicable law, amend or take action in any such case in a
manner so as to enhance or accelerate any rights or benefits under, any
labor, collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
federal, state or local law, rule, regulation, guideline or ordinance;
(xi) take any action, other than reasonable and usual actions in
the ordinary course of business consistent with past practice, with respect
to accounting policies or procedures (other than actions required to be
taken by GAAP);
(xii) make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability or refund
involving taxes in excess of $1,000,000;
(xiii) except as set forth in Schedule 4.1(b)(xiii) of the
Company Disclosure Letter, enter into any contract (other than for
inventory, merchandise or finished goods) that cannot be canceled on 30
days' notice pursuant to which it is obligated in an amount in excess of
$1,000,000;
(xiv) other than as required by law, make any material
changes to terms and conditions of its credit cards issued, or change in
any material respect the underwriting standards therefor;
(xv) make any capital expenditure in the aggregate in excess of
$2,000,000, other than expenditures (and contracts for such expenditures)
set forth in the Company's current capital budget included as Schedule
4.1(b)(xv) of the Company Disclosure Letter; or
(xvi) authorize, recommend, or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(c) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective Subsidiaries to, take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement
that is qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that is not so qualified becoming untrue in
any material respect or (iii) except as otherwise permitted by Section 4.2
with regard to the Company, any condition to the Merger set forth in
Article VI not being satisfied.
Section 4.2 No Solicitation. (a) The Company shall not, nor shall
it permit any Subsidiary of the Company to, nor shall it authorize any
officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, the Company or any Subsidiary of the
Company to, (i) directly or indirectly solicit, initiate or encourage the
submission of, any Company Takeover Proposal (as hereinafter defined), (ii)
enter into or, other than in connection with a termination of this
Agreement pursuant to Section 7.1(g), approve any agreement with respect to
any Company Takeover Proposal or (iii) directly or indirectly participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Company Takeover Proposal; provided, however,
that prior to the approval of this Agreement by the stockholders of the
Company, the Company (A) following receipt of a Company Takeover Proposal
from a third party, may participate in any discussions or negotiations
(including, as a part thereof, making any counterproposal) with such third
party or its agents or representatives, or furnish information with respect
to the Company to such third party or its agents or representatives
pursuant to a customary confidentiality agreement, or take any such other
action otherwise prohibited by clause (i) or (ii) above with respect to
such third party or its agents or representatives with respect to any
Company Takeover Proposal if the Company's Board of Directors determines in
good faith, after receipt of advice from counsel, that the failure to
participate in such discussions or negotiations or to furnish such
information, or take such other action, may constitute a breach of its
fiduciary duties under, or otherwise violate, applicable law, provided that
the Company shall not be permitted to take any such actions with respect to
any proponent of a Company Takeover Proposal after the thirtieth day
following the date on which the Company's Board of Directors first makes
such determination with respect to such proponent (it being understood that
the Company will notify Parent promptly as to any such date), and (B) shall
be permitted to (x) take and disclose to the Company's stockholders a
position or make a recommendation with respect to any Company Takeover
Proposal or amend or withdraw such position or amend or withdraw its
position with respect to the Merger, including pursuant to Rules 14d-9 and
14e-2 promulgated under the Exchange Act, or (y) make appropriate
disclosure to the Company's stockholders, in each case, if the Company's
Board of Directors determines in good faith, after receipt of advice from
counsel, that the failure to take such action may constitute a breach of
its fiduciary duties under, or otherwise violate, applicable law. For
purposes of this Agreement, "Company Takeover Proposal" means any proposal
for a merger or other business combination involving the Company and its
Subsidiaries or the acquisition or purchase of more than 25% of any class
of equity securities of the Company or any of its Significant Subsidiaries
(as hereinafter defined), or any tender offer (including self-tenders) or
exchange offer that, if consummated, would result in any person
beneficially owning more than 25% of any class of equity securities of the
Company or any of its Significant Subsidiaries, or a majority of the assets
of the Company or any of its Significant Subsidiaries, other than the
transactions contemplated by this Agreement. For purposes of this
Agreement, "Parent Takeover Proposal" means any proposal for a merger or
other business combination involving Parent and its Subsidiaries or the
acquisition or purchase of more than 25% of any class of equity securities
of Parent or any of its Significant Subsidiaries, or any tender offer
(including self-tenders) or exchange offer that, if consummated, would
result in any person beneficially owning more than 25% of any class of
equity securities of Parent or any of its Significant Subsidiaries, or a
majority of the assets of Parent or any of its Significant Subsidiaries,
other than the transactions contemplated by this Agreement. For purposes
of this Agreement, "Significant Subsidiary" shall have the meaning ascribed
to it in Rule 1-02 of Regulation S-X promulgated under the Exchange Act.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Sub, the approval or recommendation by the
Board of Directors of the Company or any such committee of this Agreement
or the Merger, or approve or recommend, or propose to approve or recommend,
any Company Takeover Proposal, unless (i) the Board of Directors of the
Company determines in good faith, after receipt of advice from counsel,
that the failure to do so may constitute a breach of its fiduciary duties
under, or otherwise violate, applicable law, and (ii) any of the following
is true: (A) a Company Takeover Proposal has been made and not withdrawn,
(B) the Company then has the right to terminate this Agreement pursuant to
Section 7.1(j) or (C) the Company then has the right to terminate this
Agreement pursuant to Section 7.1(b) or (c).
(c) The Company promptly shall advise Parent orally and in writing of
its receipt of any Company Takeover Proposal, the identity of the person
making any such Company Takeover Proposal, the material terms of any such
Company Takeover Proposal and any changes to such material terms. The
Company shall provide to Parent, as soon as practicable after receipt or
delivery thereof, copies of any written Company Takeover Proposal and
documents reflecting any changes to such material terms.
Section 4.3 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, neither the
Parent nor the Company, without the prior written consent of the other
party, shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which Parent or the Company or
any of their respective Subsidiaries is a party and which relates to a
Parent or Company Takeover Proposal (other than any involving the other
party hereto), unless the Board of Directors of Parent or the Company, as
the case may be, determines in good faith after receipt of advice from
counsel, that the failure to terminate, amend, modify or waive any such
confidentiality or standstill agreement may constitute a breach of its
fiduciary duties under, or otherwise violate, applicable law. Subject to
such fiduciary duties, during such period, each of Parent and the Company
agrees to enforce, to the fullest extent permitted under applicable law,
the provisions of any such agreements, including, but not limited to,
seeking to obtain injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court
of the United States or any state thereof having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the
period from the date of this Agreement through the Effective Time, unless
the other party shall otherwise agree in writing, none of Parent, the
Company or any of their respective Subsidiaries or Affiliates shall (a)
knowingly take or fail to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (b) knowingly take or fail to take any action which
action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code. Between
the date of this Agreement and the Effective Time, Parent and the Company
each shall take all reasonable actions (including taking all reasonable
actions with respect to seeking consents from third parties) necessary to
cause the characterization of the Merger as a pooling of interests for
accounting purposes if such a characterization were jeopardized by action
taken by Parent or the Company, respectively, prior to the Effective Time;
provided, however that nothing contained herein shall require either party
to take any actions without receipt of appropriate or desirable consents
from third parties.
Section 4.5 Tax Representation Letters. For purposes of the tax
opinions described in Section 6.2(b) of this Agreement, Parent and the
Company shall provide representation letters reasonably customary in scope
and substance, dated as of the date that is two business days prior to the
date the Joint Proxy Statement is mailed to shareholders of the Company and
reissued as of the date of Closing.
Section 4.6 Transfer Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, applications or
other documents regarding any real Property transfer, stamp, recording,
documentary or other taxes and any other fees and other similar taxes which
become payable in connection with the Merger (collectively, "Transfer
Taxes"). Parent shall pay or cause to be paid, without deduction or
withholding from any amounts payable to the holders of the Company Common
Stock, all Transfer Taxes.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Shareholder Meetings. Provided that the Board of
Directors of the Company has not publicly withdrawn or modified its
approval or recommendation of the Merger Agreement or the Merger in
accordance with Section 4.2(b), the Company and Parent each shall call a
meeting of its shareholders (respectively, the "Company Stockholder
Meeting" and the "Parent Shareholder Meeting" and, collectively, the
"Shareholder Meetings") to be held, if practicable, on the same day and as
promptly as practicable after the date on which the Registration Statement
becomes effective for the purpose of considering the approval of this
Agreement (in the case of the Company) and the Parent Shareholders'
Approvals (in the case of Parent). Subject to Section 4.2, the Company and
Parent will, through their respective Boards of Directors, recommend to
their respective shareholders approval of such matters. Without limiting
the generality of the foregoing, subject to Section 4.2, the Company and
Parent agree that their obligations pursuant to the first sentence of this
Section 5.1 shall not be affected by the commencement, public proposal,
public disclosure or communication to either party of any Company Takeover
Proposal.
Section 5.2 Preparation of the Registration Statement and the Joint
Proxy Statement. The Company and Parent shall promptly prepare and file
with the SEC the Joint Proxy Statement and Parent shall prepare and file
with the SEC the Registration Statement, in which the Joint Proxy Statement
will be included as a prospectus. Each of Parent and the Company shall use
its reasonable best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing. As promptly as practicable after the Registration Statement shall
have become effective, each of Parent and the Company shall mail the Joint
Proxy Statement to its respective shareholders. Parent shall also take any
action (other than qualifying to do business in any jurisdiction in which
it is now not so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Parent Common Stock in
the Merger, and the Company shall furnish all information concerning the
Company and the holders of Company Common Stock as may be reasonably
requested in connection with any such action. Notwithstanding any other
provision of this Agreement to the contrary (but without limiting the
parties respective termination rights under Section 7.1(h) or (i)), the
Company and Parent may make any disclosure to their respective shareholders
if their respective Boards of Directors determine in good faith, after
receipt of advice from counsel, that the failure to make such disclosure
may constitute a breach of their fiduciary duties under, or otherwise
violate, applicable law. Subject to the foregoing, no amendment or
supplement to the Joint Proxy Statement or the Registration Statement will
be made by Parent or the Company without the prior approval of the other
party. Parent and the Company each will advise the other, promptly after
it receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the
issuance of any stop order, of the suspension of the qualification of the
Parent Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or of any request by the SEC for amendment of the
Joint Proxy Statement or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
Section 5.3 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Parent or to the Company
or any of their respective Subsidiaries, each of Parent and the Company
shall, and shall cause each of its Subsidiaries to, afford to the
accountants, counsel, financial advisors and other representatives of the
other party hereto reasonable access to, and permit them to make such
inspections as they may reasonably require of, during normal business hours
during the period from the date of this Agreement through the Effective
Time, all their respective properties, books, contracts, commitments and
records (including, without limitation, the work papers of independent
accountants, if available and subject to the consent of such independent
accountants) and, during such period, Parent and the Company shall, and
shall cause each of its Subsidiaries to, furnish promptly to the other (i)
a copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or
state securities laws and (ii) all other information concerning its
business, properties and personnel as the other may reasonably request. No
investigation pursuant to this Section 5.3 shall affect any representation
or warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
Section 5.4 Compliance with the Securities Act; Pooling Period.
(a) Prior to mailing the Joint Proxy Statement, the Company shall
deliver to Parent and Parent shall deliver to the Company a list of names
and addresses of those persons who, in the opinion of the Company or
Parent, as the case may be, may, at the time of the Company Stockholders
Meeting or the Parent Shareholder Meeting, as the case may be, be deemed to
be "affiliates" of the Company within the meaning of Rule 145 under the
Securities Act and for the purposes of applicable interpretations regarding
the pooling-of-interests method of accounting ("Affiliates"). The Company
shall provide to Parent and Parent shall provide to the Company such
information and documents as each shall reasonably request for purposes of
reviewing such lists. There shall be added to such lists the names and
addresses of any other person which Parent or the Company, as the case may
be, reasonably identifies (by written notice to the other party within ten
business days after receipt of such list) as being a person who may be
deemed to be an Affiliate of the Company or Parent, as the case may be;
provided, however, that no such person identified by Parent or the Company,
as the case may be, shall be added to the list of Affiliates of the other
party if Parent or the Company, as the case may be, receives from such
other party, on or before the Effective Time, a reasonably satisfactory
opinion of counsel to the effect that such person is not an Affiliate.
Each party shall exercise all reasonable efforts to deliver or cause to be
delivered to the other party, not later than 30 days prior to the Effective
Time, from each of such Affiliates of such party identified in the
foregoing list, an affiliate letter in the form attached hereto as Exhibit
A-1 or A-2 respectively.
(b) If the Merger would otherwise qualify for pooling-of-interests
accounting treatment, shares of Parent Common Stock issued to such
Affiliates of the Company in exchange for shares of Company Common Stock
shall not be transferable until such time as financial results covering at
least 30 days of combined operations of Parent and the Company have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies (the "Pooling Financial Results"), regardless
whether each such Affiliate has provided the written agreement referred to
in this Section 5.4. Parent agrees to publish the Pooling Financial
Results within 45 days after the end of the first full fiscal month
following the Closing. Except as set forth in the Registration Rights
Agreement, Parent shall not be required to maintain the effectiveness of
the S-4 Registration Statement or any other registration statement under
the Securities Act for the purposes of resale of Parent Common Stock
received in the Merger by such Affiliates and the certificates representing
Parent Common Stock received by such Affiliates shall bear a customary
legend regarding applicable Securities Act restrictions and the provisions
of this Section 5.4.
Section 5.5 Designation of Directors. At the Effective Time,
Parent shall take all actions necessary to cause three designees of the
Company (two of whom shall be members of senior management of the Company)
to be appointed to its Board of Directors (and, if Parent has any
discretion in the matter, in such classes, as shall be mutually agreed by
Parent and the Company prior to the Closing Date), to serve until their
terms expire or until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the Parent Charter or Parent Bylaws.
Section 5.6 NYSE Listing. Parent shall use its reasonable best
efforts to have authorized for listing on the NYSE, subject to official
notice of issuance, the shares of Parent Common Stock to be issued in
connection with the Merger.
Section 5.7 Fees and Expenses.
(a) Except as provided in this Section 5.7, whether or not the Merger
is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby including, without
limitation, the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses for the Joint Proxy Statement shall be
divided equally between Parent and the Company.
(b) The Company shall pay to Parent a fee of $80 million if: (i) the
Company terminates this Agreement pursuant to Section 7.1(g); (ii) Parent
terminates this Agreement pursuant to Section 7.1(h); or (iii) any person
makes a Company Takeover Proposal that was not withdrawn by the date of the
Company Stockholders Meeting and, thereafter, this Agreement is terminated
pursuant to Section 7.1(e) and, within six months of the date of the
Company Stockholders Meeting, the Company enters into a definitive
agreement with respect to, or consummates, a Company Takeover Proposal.
(c) Parent shall pay to the Company a fee of $80 million if (i) the
Company terminates this Agreement pursuant to Section 7.1(i); or (ii) any
person makes a Parent Takeover Proposal that was not withdrawn by the date
of the Parent Shareholders Meeting and, thereafter, this Agreement is
terminated pursuant to Section 7.1(f) and within six months of the date of
the Parent Shareholders Meeting, Parent enters into a definitive agreement
with respect to, or consummates, a Parent Takeover Proposal.
(d) Any fee payable under Section 5.7(b) or (c) shall be paid by wire
transfer of same-day funds on the date of termination of this Agreement or,
in the case of clause (iii) of Section 5.7(b) or clause (ii) of Section
5.7(c), on the date of execution and delivery by the Company or Parent, as
the case may be, of the definitive agreement referred to therein or, if
later, the date of termination of this Agreement.
Section 5.8 Company Stock Options and Other Equity Based Awards.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, each
unexpired and unexercised option to purchase shares of Company Common Stock
(a "Company Stock Option"), under the Company Stock Plans, or otherwise
granted by the Company outside of any Company Stock Plan, will be assumed
by Parent as hereinafter provided. At the Effective Time, by virtue of the
Merger and without any further action on the part of the Company or the
holder thereof, each Company Stock Option will be automatically converted
into an option (the "Parent Stock Option") to purchase a number of shares
of Parent Common Stock equal to the number of shares of Company Common
Stock that could have been purchased under such Company Stock Option
multiplied by the Conversion Number, at a price per share of Parent Common
Stock equal to the per share option exercise price specified in the Company
Stock Option, divided by the Conversion Number. Such Parent Stock Option
shall otherwise be subject to the same terms and conditions as such Company
Stock Option. At the Effective Time, (i) all references in the Company
Stock Plans, the applicable stock option or other awards agreements issued
thereunder and in any other Company Stock Options to the Company shall be
deemed to refer to Parent; and (ii) Parent shall assume the Company Stock
Plans and all of the Company's obligations with respect to the Company
Stock Options.
(b) At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, each
restricted stock award of the Company ("Company Equity Based Award") shall
be assumed by the Parent and shall be automatically converted into an
identical award with respect to Parent Common Stock ("Parent Equity Based
Award"), adjusted based on the Conversion Number, and otherwise subject to
the same terms and conditions as the related Company Equity Based Award.
(c) In respect of each Company Stock Option as converted into a
Parent Stock Option pursuant to Section 5.8(a) and assumed by Parent, and
the shares of Parent Common Stock underlying such option, Parent shall
file as soon as practicable after the Effective Time with the Securities
and Exchange Commission, and keep current the effectiveness of, a
registration statement on Form S-8 (which may be accomplished by amendment
of the registration statement on Form S-4) or other appropriate form for as
long as such options or equity based awards remain outstanding (and
maintain the current status of the prospectus with respect thereto).
Parent agrees to reserve a number of shares of Parent Common Stock equal to
the number of shares of Parent Common Stock issuable upon the exercise of
such Company Stock Options.
(d) The Company agrees that it will not grant any stock options,
restricted stock, stock appreciation rights or limited stock appreciation
rights and will not permit cash payments to holders of Company Stock
Options in lieu of the substitution therefor of Parent Stock Options, as
described in this Section 5.8.
Section 5.9 Convertible Subordinated Notes.
At the Effective Time, by virtue of the Merger and without any further
action on the part of the Company or the Holder thereof, the Saks Holdings,
Inc. 5 1/2% Convertible Subordinated Notes due September 15, 2006 (the
"Convertible Notes") outstanding at the Effective Time shall become
obligations of the Surviving Corporation and shall remain outstanding
thereafter; and from and after the Effective Time, the holders of the
Convertible Notes shall have the right to convert such Convertible Notes
into such number of shares of Parent Common Stock and such amount of cash
in lieu of fractional shares received in the Merger by a holder of the
number of shares of Company Common Stock into which such Convertible Notes
were convertible immediately prior to the Effective Time.
Section 5.10 Reasonable Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, including, with regard to the Company, Section 4.2, each of the
parties agrees to use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement,
including, but not limited to: (i) the obtaining of all necessary actions
or nonactions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any Governmental Entity (including
those in connection with the HSR Act and State Takeover Approvals), (ii)
the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (iv) the execution and
delivery of any additional instruments necessary to consummate the
transactions contemplated by this Agreement. Parent and the Company shall
cooperate with each other in connection with the making of such filings,
including providing copies of all such documents to the non-filing party
and its advisors prior to filing and, if requested, accepting all
reasonable suggestions in connection therewith.
(b) The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or in behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or
any other federal, state or foreign antitrust or fair trade law. Each
party shall promptly notify the other party of any communication to that
party from any Governmental Entity in connection with any required filing
with, or approval or review by, such Governmental Entity in connection with
the Merger and permit the other party to review in advance any such
proposed communication to any Governmental Entity. Neither party shall
agree to participate in any meeting with any Governmental Entity in respect
of any such filings, investigation or other inquiry unless it consults with
the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat.
(c) Each party shall use all reasonable efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue in
any material respect or result in a material breach of any covenant made by
it in this Agreement.
Section 5.11 Public Announcements. The initial press release shall
be a joint press release and thereafter the Company and Parent each shall
consult with the other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings
with any third party and/or any Governmental Entity (including any national
securities exchange or interdealer quotation service) with respect thereto,
except as may be required by law or by obligations pursuant to any listing
agreement with or rules of the NYSE.
Section 5.12 State Takeover Laws. If any "fair price" "business
combin-ation" or "control share acquisition" statute or other similar
statute or regulation shall become applicable to the transactions
contemplated hereby, Parent and the Company and their respective Boards of
Directors shall use their reasonable best efforts to grant such approvals
and take such actions as are necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to minimize the effects of any
such statute or regulation on the transactions contemplated hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. For
not less than six (6) years from and after the Effective Time, Parent
agrees to, and to cause the Surviving Corporation to, indemnify and hold
harmless all past and present directors, officers and employees of the
Company and of its Subsidiaries to the same extent such persons are
indemnified as of the date of this Agreement by the Company pursuant to the
Company Charter and Company By-Laws and indemnification agreements, if any,
in existence on the date hereof with any directors, officers and employees
of the Company and its Subsidiaries for acts or omissions occurring at or
prior to the Effective Time; provided, however, that Parent agrees to, and
to cause the Surviving Corporation to, indemnify and hold harmless such
persons to the fullest extent permitted by law for acts or omissions
occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby. Parent shall cause
the Surviving Corporation to provide, for an aggregate period of not less
than six (6) years from the Effective Time, the Company's current directors
and officers an insurance and indemnification policy that provides coverage
for events occurring prior to the Effective Time (the "D&O Insurance") that
is no less favorable than the Company's existing policy or, if
substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that the Surviving Corporation shall
not be required to pay an annual premium for the D&O Insurance in excess of
200 percent of the last annual premium paid prior to the date hereof, which
premium the Company represents and warrants to be approximately $450,000.
Section 5.14 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the
Company shall use its reasonable best efforts to give prompt notice to
Parent, of: (i) the occurrence, or non-occurrence, of any event the
occurrence, or nonoccurrence, of which it is aware and which would be
reasonably likely to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect or (y)
any covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied in all material respects, (ii) any failure of
Parent or the Company, as the case may be, to comply in a timely manner
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or (iv) any change or event
which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the
delivery of any notice pursuant to this Section 5.14 shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 5.15 Employee Matters.
(a) For a period commencing on the date of the Closing and ending on
the date which is the second anniversary of the date of the signing of this
Agreement (the "Benefit Continuation Period"), the Parent agrees to cause
the Surviving Corporation and its Subsidiaries to provide to all active
employees of the Company who continue to be employed by the Company as of
the Effective Time ("Continuing Employees") coverage under those benefit
plans, arrangements and policies (including, but not limited to, those
relating to severance pay, except with respect to those Continuing
Employees who are eligible to receive severance in accordance with Exhibit
B attached hereto) that are maintained for the benefit of such employees by
the Company immediately prior to the date of the Closing (collectively, the
"Benefit Arrangements"); provided, however, that the foregoing shall not
apply to any equity-based compensation program or annual bonus program.
Parent further agrees that (1) no changes to any of the Benefit
Arrangements shall be made during the Benefit Continuation Period without
the prior approval of the chief executive officer of Saks Fifth Avenue; (2)
following the date of the Closing until December 31, 1998, Continuing
Employees shall be eligible to be granted options to acquire shares of
Parent Common Stock on a basis no less favorable than similarly situated
employees of Parent (or, in the event a similarly situated employee of
Parent is not currently eligible to be granted options to acquire Parent
Common Stock, on a basis relative to other Continuing Employees which is
substantially consistent with the Company's past practice); and (3)
following the date of the Closing, Parent shall provide annual bonus
programs to Continuing Employees which are substantially similar to the
annual bonus programs currently being provided for such employees by the
Company. Following December 31, 1998, the Continuing Employees shall
participate in annual bonus programs on the same basis as similarly
situated employees of Parent.
(b) Except to the extent necessary to avoid the duplication of
benefits, Parent will, or will cause the Surviving Corporation and its
Subsidiaries to, give Continuing Employees full credit for purposes of
eligibility, vesting and determination of the level of benefits under any
employee benefit plans or arrangements maintained by Parent, the Surviving
Corporation or any Subsidiary of Parent or the Surviving Corporation in
which such Continuing Employee is eligible to participate for such
Continuing Employees' service with the Company or any Subsidiary of the
Company to the same extent recognized by the Company immediately prior to
the Effective Time. Parent will, or will cause the Surviving Corporation
and its Subsidiaries to, (i) waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Continuing Employees under any
welfare plan that such employees may be eligible to participate in after
the Effective Time, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare plan maintained for
the Continuing Employees immediately prior to the Effective Time, and (ii)
provide each Continuing Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time.
(c) As soon as practicable following and effective as of the date of
the Closing in consideration of future services to be performed by such
employees, Parent shall cause to be granted to those Continuing Employees
selected by prior mutual agreement of Parent and the current Chief
Executive Officer of the Company, an aggregate of 89,500 restricted shares
of Parent Common Stock. Such shares shall vest at the rate of one third on
the second anniversary and the remaining two thirds on the third
anniversary of the Closing Date. The grant of such restricted shares shall
contain other customary terms and conditions.
(d) Parent and the Company agree to work together as expeditiously as
possible after the date hereof to adopt a Severance Policy for the benefit
of certain Company employees and to enter into Employment Agreements with
certain executive officers of the Company, substantially in accordance with
the term sheets annexed hereto as Exhibits C and D, respectively.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly
approved by the requisite vote of stockholders of the Company in accordance
with applicable law and the Company Charter and Company By-Laws, and the
Merger Agreement Approval and the approval of the Share Issuance shall have
been obtained by the requisite vote of the shareholders of Parent in
accordance with applicable rules of the NYSE, applicable law, and the
Parent Charter and Parent By-Laws.
(b) Listing on the NYSE. The Parent Common Stock issuable in the
Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(c) HSR. The waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or
been terminated.
(d) Accounting. Parent shall have received a letter from PWC, dated
as of the Effective Time, in customary form, to the effect that no
conditions exist which would preclude accounting for the Merger as a
pooling of interests. The Company shall have received a letter from PWC,
dated as of the Effective Time, in customary form, to the effect that, as
to the Company, no conditions exist which would preclude accounting for the
Merger as a pooling of interests.
(e) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall
have been initiated or, to the Knowledge of Parent or the knowledge of
Company, threatened by the SEC. All necessary state securities or blue sky
authorizations (including State Takeover Approvals) shall have been
received.
(f) No Governmental Action/Order. There shall not be pending any
action, suit or proceeding brought by any Governmental Entity which
challenges or seeks to enjoin the Merger or the other transactions
contemplated hereby. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect
and has the effect of making the Merger or any of the transactions
contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Effective Time, each of the representations
and warranties of Parent and Sub contained in this Agreement that is
qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true
and correct in all material respects on and as of the Effective Time as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), in each case,
except as contemplated or permitted by this Agreement, and the Company
shall have received a certificate signed on behalf of each of Parent and
Sub by its Chief Executive Officer and its Chief Financial Officer to such
effect; provided, that, for purposes of determining whether the condition
set forth in this Section 6.2(a) has been satisfied, no representation,
warranty, covenant or agreement of Parent and Sub shall be deemed untrue,
incorrect, not complied with or not performed as a consequence of the
existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other
facts, circumstances or events inconsistent with the representations,
warranties, covenants or agreements of Parent and Sub has had or would have
a Material Adverse Effect on Parent and its Subsidiaries taken as a whole
(disregarding for this purpose any materiality qualification contained in
such representations, warranties, covenants and agreements); provided,
further, however that the foregoing proviso shall not apply with respect to
(x) actions done with the actual prior knowledge of the Board of Directors
of Parent or any of the executive officers of Parent set forth in Section
3.8 or (y) actions set forth in subsections (i), (ii) or (iii) of Section
4.1(a).
(b) Tax Opinion. The Company shall have received an opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP in form and substance reasonably
satisfactory to the Company, dated the Effective Time, substantially to the
effect that on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
as of the Effective Time, for U.S. Federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code;
(ii) no gain or loss will be recognized by Parent or the Company
as a result of the Merger;
(iii) no gain or loss will be recognized by the stockholders
of the Company upon the conversion of their shares of Company Common Stock
into shares of Parent Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of Parent
Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger (including fractional shares of Parent Common Stock for which cash
is received) will be the same as the aggregate tax basis of such shares of
Company Common Stock;
(v) the holding period for shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger will include the holder's holding period for such shares of Company
Common Stock, provided such shares of Company Common Stock were held as
capital assets by the holder at the Effective Time; and
(vi) a shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's basis in the
fractional share (as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, and Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP may
receive and rely upon representations from Parent, the Company, and others,
including the representation letters referred to in Section 4.5.
(c) The Company shall have received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
PC, counsel to Parent, in form and substance reasonably satisfactory to the
Company, dated the Closing Date, to the effect that the Parent Common Stock
to be issued in the Merger will, when issued, have been duly authorized,
validly issued, fully paid and not subject to further assessment. In
rendering such opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PC may rely upon the opinion of
State of Tennessee counsel reasonably satisfactory to the Company.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect
the Merger. The obligations of Parent and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of the
following additional condition:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and its Chief Financial Officer
to such effect; provided, that, for purposes of determining whether the
condition set forth in this Section 6.3(a) has been satisfied, no
representation, warranty, covenant or agreement of the Company shall be
deemed untrue, incorrect, not complied with or not performed as a
consequence of the existence or absence of any fact, circumstance or event
unless such fact, circumstance or event, individually or when taken
together with all other facts, circumstances or events inconsistent with
the representations, warranties, covenants or agreements of the Company,
has had or would have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole (disregarding for this purpose any
materiality qualification contained in such representations or warranties);
provided, further, however that the foregoing proviso shall not apply with
respect to (x) actions done with the actual prior knowledge of the Board of
Directors of the Company or any of the executive officers of the Company
set forth in Section 2.8 or (y) actions set forth in subsections (i), (ii),
(iii), (viii) and (ix) of Section 4.1(b).
(b) Affiliate Letters. The letters from Affiliates required by
Section 5.4 shall have been delivered.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after any approval of
the matters presented in connection with the Merger by the shareholders of
the Company or Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company (provided such party is not then
in material breach) if the other party shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has the effect set forth in the
proviso to Section 6.2(a) or Section 6.3(a), as applicable, and has not
been cured within ten business days following receipt by such other party
of written notice of such failure to comply; provided, however, that if any
such breach is curable by the breaching party through the exercise of the
breaching party's best efforts and for so long as the breaching party shall
be so using its best efforts to cure such breach, the non-breaching party
may not terminate this Agreement pursuant to this paragraph;
(c) by either Parent or the Company (provided such party is not then
in material breach) if there has been a breach by the other party (in the
case of Parent, including any breach by Sub) of any representation or
warranty of such other party contained in this Agreement, which breach has
the effect set forth in the proviso to Section 6.2(a) or Section 6.3(a), as
applicable, and which breach has not been cured within ten business days
following receipt by the breaching party of written notice of the breach;
provided, however, that if any such breach is curable by the breaching
party through the exercise of the breaching party's best efforts and for so
long as the breaching party shall be so using its best efforts to cure such
breach, the non-breaching party may not terminate this Agreement pursuant
to this paragraph;
(d) by Parent or the Company
(i) if any governmental entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree or ruling shall have become
final and nonappealable; or
(ii) if the Merger has not been effected on or prior to the close
of business on March 31, 1999 (the "Termination Date"); provided, however,
that the right to terminate this Agreement pursuant to this Section 7.1(d)
shall not be available to any party whose failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or prior to the aforesaid
date;
(e) by Parent or the Company if the stockholders of the Company do
not approve this Agreement at the Company Stockholders Meeting or any
adjournment or postponement thereof,
(f) by Parent or the Company if the Merger Agreement Approval and
approval of the Share Issuance are not obtained at the Parent Shareholder
Meeting or any adjournment or postponement thereof;
(g) by the Company in connection with the concurrent execution by the
Company of an agreement with respect to a Superior Takeover Proposal that
the Board of Directors of the Company has determined, in good faith, in the
exercise of its fiduciary duties after receipt of advice from counsel and
after consultation with its financial advisors, is more favorable to the
Company's stockholders than the Merger. As used herein, a "Superior
Takeover Proposal" means a Company Takeover Proposal for more than 50% of
any class of equity securities of the Company or any of its Significant
Subsidiaries, or any tender offer (including self-tenders) or exchange
offer than, if consummated, would result in any person beneficially owning
more than 50% of any class of equity securities of the Company or any of
its Significant Subsidiaries, or a majority of the assets of, the Company
or any of its Significant Subsidiaries;
(h) by Parent if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
modified or withdrawn in a manner adverse to Parent its recommendation of
the Merger, or (ii) the Board of Directors of the Company shall have
recommended to the stockholders of the Company any Company Takeover
Proposal or shall have resolved to do so;
(i) by the Company if (i) the Board of Directors of Parent shall not
have recommended, or shall have resolved not to recommend or shall have
modified or withdrawn its recommendation in a manner adverse to the Company
of the Parent Shareholders' Approvals, or (ii) the Board of Directors of
Parent shall have recommended to the shareholders of the Parent any Parent
Takeover Proposal or shall have resolved to do so; and
(j) by the Company prior to the Company Stockholders Meeting if the
Average Parent Stock Price is less than $30.52. As used in this Agreement,
(i) "Average Parent Stock Price" means the average of the daily per share
Closing Price of Parent Common Stock for the fifteen (15) consecutive
Trading Days ending on the third Trading Day prior to the Company
Stockholders Meeting.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto,
any person controlling any such party or any of their respective officers
or directors, whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 7.1,
this Agreement shall forthwith terminate and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective
officers or directors (except for the last sentence of Section 5.3, the
entirety of Section 5.7, and Article VIII which shall survive the
termination); provided, however, that nothing contained in this Section 7.2
shall relieve any party hereto from any liability for any willful breach of
a representation or warranty contained in this Agreement or the breach of
any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of Parent and
the Company; provided, however, after any such approval, no amendment shall
be made which by law requires further approval by such shareholders without
such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions
contained herein which may legally be waived. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
Section 7.5 Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.1, an
amendment of this Agreement pursuant to Section 7.3 or an extension or
waiver pursuant to Section 7.4 shall, to be effective, require in the case
of Parent, Sub or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time
or upon the termination of this Agreement pursuant to Section 7.1.
Section 8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, one day after being delivered to an overnight courier or when
telecopied (with a confirmatory copy sent by overnight courier) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to:
▇▇▇▇▇▇▇▇'▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Mr. R. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇'▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
with copies to:
▇▇▇▇▇ ▇. Strain, Esquire
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PC
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Cravath, Swaine & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to the Company, to:
Saks Holdings, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Section 8.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. Except
for the Confidentiality Agreement between the parties dated June 24, 1998,
this Agreement is the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect
to the subject matter hereof. Other than Section 5.8, the second sentence
of Section 5.4(b) and Section 5.15(d), this Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF PARENT, THE COMPANY, OR SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties.
Section 8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby are
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. (a) The parties
acknowledge and agree that any payment made pursuant to Section 5.6 does
not relieve either party from any liability it otherwise may have for
breach of this Agreement.
(b) The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity. Each
party hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the Courts of the State of Delaware for any
actions, suits or proceedings arising out of or relating to this Agreement
and the transactions contemplated hereby (and each party hereto agrees not
to commence any action, suit or proceeding relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to the addresses set forth herein shall be
effective service of process for any such action, suit or proceeding
brought against the each party in such court. Each party hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the United States District Courts
located in the State of Delaware (unless such courts assert no
jurisdiction, in which case each party consents to the exclusive
jurisdiction of the courts of the State of Delaware). Each party hereby
further irrevocably and unconditionally waives and agrees not to plead or
to claim in any such court that any such action, suit or proceeding brought
in any such court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as
of the date first written above.
▇▇▇▇▇▇▇▇'▇ INC.
By: /s/ R. ▇▇▇▇ ▇▇▇▇▇▇
_______________________________
Name: R. ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman of the Board
and Chief Executive Officer
FIFTH MERGER CORPORATION
By: /s/ R. ▇▇▇▇ ▇▇▇▇▇▇
________________________________
Name: R. ▇▇▇▇ ▇▇▇▇▇▇
Title: President
SAKS HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board
and Chief Executive Officer
EXHIBIT A-1
▇▇▇▇▇▇▇▇'▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Saks Holdings, Inc., a Delaware corporation
(the "Company"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series, Releases 130 and
135, as amended, of the Commission. Pursuant to the terms of the Agreement
and Plan of Merger dated as of July 4, 1998 (the "Agreement") among
▇▇▇▇▇▇▇▇'▇, Inc., a Tennessee corporation ("Parent"), Fifth Merger
corporation, a Delaware corporation ("Merger Sub"), and the Company, Merger
Sub will be merged with and into the Company (the "Merger").
As a result of the Merger, I may receive shares of common stock,
par value $.10 per share, of Parent (the "Parent Securities"). I would
receive such shares in exchange for shares owned by me of common stock, par
value $.01 per share, of the Company (the "Company Securities").
I represent, warrant and covenant to Parent that in the event I
receive any Parent Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of
the Parent Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Parent Securities, to the extent I felt necessary, with my counsel or
counsel for the Company.
C. I further represent to, and covenant with, Parent that I
will not, during the 30 days prior to the Effective Time (as defined
in the Agreement), sell, transfer or otherwise dispose of, or reduce
my risk (as contemplated by Commission Accounting Series Release
No. 135) with respect to, any shares of Company Securities or shares
of the capital stock of Parent that I may hold and, furthermore, that
I will not sell, transfer or otherwise dispose of Parent Securities
received by me in the Merger or any other shares of the capital stock
of Parent until after such time as results covering at least 30 days
of combined operations of the Company and Parent have been published
by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the results of the combined operations.
Parent agrees to take such measures and file such information,
documents and reports as shall be required by the Commission as a condition
to the availability of Rules 144 and 145 under the Securities Act (or any
successor rules thereto).
Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, or as a waiver of any rights I may have to object
to any claim that I am such an affiliate on or after the date of this
letter.
Very truly yours,
____________________________
Name:
Accepted this _______ day of
________________, 1998 by
▇▇▇▇▇▇▇▇'▇, Inc.
By:_______________________
Name:
Title:
EXHIBIT A-2
Saks Holdings, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of ▇▇▇▇▇▇▇▇'▇, Inc., a Tennessee corporation
("Parent"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
and/or (ii) used in and for purposes of Accounting Series, Releases 130 and
135, as amended, of the Commission. Pursuant to the terms of the Agreement
and Plan of Merger dated as of July 4, 1998 (the "Agreement") among Parent,
Fifth Merger Corporation, a Delaware corporation (the "Merger Sub"), and
Saks Holdings, Inc., a Delaware corporation (the "Company"), Merger Sub
will be merged with and into the Company (the "Merger").
I represent, warrant and covenant to Parent that, with respect to
shares of common stock, par value $.10 per share, of Parent (the "Parent
Securities"):
A. I shall not make any sale, transfer or other disposition of
the Parent Securities in violation of the Act or the Rules and
Regulations.
B. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Parent Securities, to the extent I felt necessary, with my counsel or
counsel for Parent.
C. I further represent to, and covenant with, the Company that
I will not, during the 30 days prior to the Effective Time (as defined
in the Agreement), sell, transfer or otherwise dispose of, or reduce
my risk (as contemplated by Commission Accounting Series Release
No. 135) with respect to, the Parent Securities or shares of the
capital stock of the Company that I may hold and, furthermore, that I
will not sell, transfer or otherwise dispose of Parent Securities and
any other shares of the capital stock of Parent until after such time
as results covering at least 30 days of combined operations of the
Company and Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement filed
with the Commission, a report to the Commission on Form 10-K, 10-Q, or
8-K, or any other public filing or announcement which includes the
results of the combined operations.
Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of Parent as described in the first
paragraph of this letter, or as a waiver of any rights I may have to object
to any claim that I am such an affiliate on or after the date of this
letter.
Very truly yours,
____________________________
Name:
Accepted this ______ day of
_______________, 1998 by
Saks Holdings, Inc.
By:_______________________
Name:
Title:
EXHIBIT B
EXECUTIVE SEVERANCE POLICY (1)
TERM SHEET
Eligibility EVPs who do not enter into employment
agreements(2); SVPs; Selected VPs
Severance Benefits - 2 x (salary + target bonus) for EVPs
(payment upon (total of 3)
involuntary - 1.5 x (salary + target bonus) for SVPs
termination (total of 20)
without Cause(3) - 1 x (salary + target bonus) for Selected VPs
during the time (approximately 45-50)
period beginning - 2, 1.5 or 1 year(s), respectively, continued
as of the merger participation in all welfare benefit plans
and ending at the - additional retirement accruals for SVP
end of the Spring and above
2000 individual - outplacement services for one year
performance review - reimbursement of legal fees in the event
process) of a dispute (if Executive prevails)
- reduction in cash severance payments to
avoid excise tax
Effectiveness - commences immediately following closing
of merger
_________________________
* Can not be amended or terminated until the end of the Spring 2000
individual performance review process.
** EVPs who enter into employment agreements will get at least the
benefits described in this Term Sheet.
*** Customary definition of Cause.
EXHIBIT C
EMPLOYMENT AGREEMENT TERM SHEET (PBM)
Term (A) July 1, 1998 through June 30, 2001
(B) July 1, 2001 through June 30, 2003
Titles (A) Chief Executive Officer of Company; Director
of Parent
(B) Consultant to Company; Director of Parent
Compensation Term (A)
- annual salary: $1,350,000
- annual bonus opportunity: 25% of salary
- option grant at closing: 160,000 shares
(vest in three equal installments on each
of the first and second anniversary of the
Closing and on June 30, 2001)
- participation in benefit plans
- annual option grants at comparable level to
Parent senior executives
- other perquisites:
o $40,000 per year expense account
o car service for work-related travel
o reimbursement for wife's travel expenses
for work-related travel
Term (B)
- annual cash compensation: $1,350,000
- participation in benefit plans
- guaranteed minimum of 26 years SERP and Pension
credits at end of term
Payments upon - 3 x (annual salary + annual bonus opportunity)
Termination - 3 years continued participation in all benefit plans
(payable upon - vesting of all options granted on or after merger
involuntary - excise tax gross-up
termination - guaranteed minimum of 26 years SERP and Pension
without Cause or credits
voluntary
termination for
Good Reason(4))
Other Customary - reimbursement of legal fees in the
Provisions event of a dispute (if Executive prevails)
- customary indemnification
- 2-year noncompete with respect to luxury retailing
- resignation from Board, if Executive's service
terminates prior to end of terms
_____________________
**** Customary definitions of Cause and Good Reason
(including Change in Control)
EXHIBIT D
EMPLOYMENT AGREEMENT TERM SHEET (BEK)
▇▇. ▇▇▇▇▇▇▇▇ and Parent are currently negotiating the terms of
his employment. Details regarding such terms are forthcoming.