SETTLEMENT AGREEMENT
EXHIBIT
10.1
This
Settlement Agreement, dated as of May 8, 2008 (the “Agreement”), is by
and among Charming Shoppes, Inc., a Pennsylvania corporation (the “Company”), and the
other parties signatory hereto (collectively, the “Committee,” and
individually, a “member of the
Committee”).
WHEREAS, the Committee
beneficially owns (as defined below) shares of Common Stock, $0.10 par value, of
the Company (the “Common Stock”) as
specified on Schedule A of
this Agreement (the “Shares”);
WHEREAS, prior to the date
hereof the Committee (i) delivered a letter (the “Nomination Letter”)
to the Company, dated as of January 14, 2008, stating its intention to nominate
(the “Committee
Nomination”) three individuals for election to the Board of Directors of
the Company (the “Board”) by the
shareholders of the Company (the “Shareholders”) and (ii) filed a
definitive proxy statement on Schedule 14A with the Securities and Exchange
Commission (the “SEC”) related to the
matters set forth in the Nomination Letter;
WHEREAS, the Company and the
Committee have agreed that it is in their mutual interests to enter into this
Agreement, which, among other things, terminates the pending proxy contest for
the election of directors at the 2008 Annual Meeting (as defined
below);
WHEREAS, the Company has
agreed that the size of the Board will be increased from eight to eleven members
as permitted by the Company’s Articles of Incorporation, such increase to be
effective as of the 2008 Annual Meeting;
WHEREAS, the Company has
agreed that, in connection with the Company’s 2008 Annual Meeting of
Shareholders (including any adjournment or postponement thereof in accordance
with this Agreement, the “2008 Annual
Meeting”), the Board will include in its nominations for election as
members of the Board, and recommend that the shareholders vote to elect as
directors of the Company, Xxxxxxx Xxxxx and Xxxxxx Xxxxxx (each, a “Committee Nominee”);
and
WHEREAS, the Company has
agreed to submit a proposal at the 2008 Annual Meeting for the declassification
of the Company’s Board.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Defined
Terms. For purposes of this Agreement:
(a) The term
“Affiliate”
shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
(b) The terms
“beneficial
owner” and “beneficially own”
have the same meanings as set forth in Rule 13d-3 promulgated by the SEC
under the Exchange Act except that a person will also be deemed to beneficially
own and to be the beneficial owner of all shares of capital stock of the Company
which such person has the right to acquire pursuant to the exercise of any
rights in connection with any securities or any agreement, regardless of when
such rights may be exercised and whether they are conditional.
(c) The term
“Person” will
mean any individual, partnership, corporation, group, syndicate, trust,
government or agency, or any other organization, entity or
enterprise.
Section
1.2 Interpretation. When
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. Whenever the
words “include”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation.” The
words “hereof,” “herein,” “hereby” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
ARTICLE
II
COVENANTS
Section
2.1 Board of Directors, Annual
Meeting and Related Matters.
(a) Board
Expansion. As promptly as practicable following the date of
this Agreement, the Company shall increase the size of the Board from eight to
eleven directors, such increase to be effective as of the date hereafter that
the Company’s Proxy Statement and proxy card are first sent to
shareholders.
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(b) 2008 Annual Meeting.
The Company shall adjourn the 2008 Annual Meeting until June 26, 2008 for
purposes of the election of directors and the declassification of the Board as
contemplated herein.
(c) Nomination of New
Directors. The Company agrees that at the 2008 Annual Meeting,
the Board will:
(1) nominate
each of Xxxxxxx Xxxxx, Arnaud Ajdler, Xxxxxx X. Xxxx and Xxxx Xxxxxxxx for
election as a director of the Company at the 2008 Annual Meeting to serve as
Class C directors with terms scheduled to end in 2011;
(2) nominate
each of Xxxxxxx Xxxxxxxxx and Xxxxxxx X. Xxxxxx III for election as directors of
the Company at the 2008 Annual Meeting to serve as Class B directors with terms
schedule to end in 2010; and
(3) cause all
proxies received by the Company to be voted in the manner specified by such
proxies.
(d) Board
Declassification. In accordance with the Company’s Restated
Articles of Incorporation, Amended and Restated Bylaws and applicable state law,
the Company will submit, recommend and actively solicit proxies in favor of a
resolution for approval by its shareholders at the 2008 Annual Meeting to
declassify the Company’s Board to provide for the annual election of all
directors (the “Declassification
Proposal”). The Company will seek to have such Declassification Proposal
classified as a “routine matter” under New York Stock Exchange
rules. Under such proposal, if approved by the Company’s
shareholders, the first of such annual elections would take place at the
Company’s 2009 Annual Meeting. The members of the Board will vote all
of their shares in favor of the Declassification Proposal.
(e) Proxy Solicitation
Materials. The Company and the Board agree that the Company’s
Proxy Statement and proxy cards for the 2008 Annual Meeting and all other
solicitation materials to be delivered to shareholders in connection with the
2008 Annual Meeting (in each case excepting any materials delivered prior to the
date hereof) shall be prepared in accordance with, and in furtherance of, this
Agreement. The Company will provide the Committee with copies of any
portion of proxy materials or other solicitation materials that contain
statements relating to the Committee, the Committee Nominees or this Agreement a
reasonable period in advance of filing such materials with the SEC or
disseminating the same in order to permit the Committee a reasonable opportunity
to review and comment on such materials. The Committee will provide,
as promptly as reasonably practicable, all information relating to the Committee
Nominees (and other information, if any) to the extent required under applicable
law to be included in the Company’s Proxy Statement and any other solicitation
materials to be delivered to shareholders in connection with the 2008 Annual
Meeting.
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(f) Committees. At
the first meeting of the Board following the 2008 Annual Meeting, the Company
shall cause at least one Committee Nominee, such Committee Nominee to be
selected by the Company, to be a member of each committee of the Board and each
committee of the Board which is created after the date of this
Agreement.
(g) Expenses. Within
fifteen business days from the date of this Agreement, the Company shall
reimburse the Committee an amount equal to the Committee’s actual out-of-pocket
expenses incurred in connection with the Committee Nomination (the Committee
shall provide reasonable documentation with respect to such expenses), including
the preparation of related filings with the SEC, the fees and disbursements of
counsel and other advisors, and expenses incurred in connection with the
litigation between the Company and the Committee, up to a maximum reimbursement
of $1,000,000, and the Committee hereby agrees that such payment shall be in
full satisfaction of any claims or rights it may have as of the date hereof for
reimbursement of fees, expenses or costs in connection with the Committee
Nomination.
Section
2.2 Voting
Provisions. The Committee, together with its Affiliates, will
cause all shares of Common Stock for which they have the right to vote as of the
record date for the 2008 Annual Meeting to be present for quorum purposes and to
be voted at such meeting or at any adjournments or postponements thereof,
(a) in favor of each director nominated and recommended by the Board for
election at such meeting, (b) in favor of the Declassification Proposal
and each other matter recommended by the Board at such meeting, and
(c) against any shareholder nominations for director which are not approved
and recommended by the Board for election at such meeting.
Section
2.3 Additional Undertakings by
the Committee. By executing this Agreement and in
consideration of the agreements contained herein, the Committee hereby
irrevocably withdraws its Nomination Letter and any nominations to the Board
made prior to the date hereof and agrees to terminate the pending proxy contest
with respect to the election of directors at the 2008 Annual
Meeting. Within two business days of the date of this Agreement, the
Committee shall file, or cause to be filed on its behalf, with the SEC an
amendment to its Schedule 13D with respect to the Company disclosing the
material contents of this Agreement.
Section
2.4 Publicity. Promptly
after the execution of this Agreement, the Company and the Committee will issue
a press release in the form attached hereto as Schedule B. Any
press release to be issued by the Committee relating to the matter covered by
this Agreement shall be provided prior to issuance to the Company for the
Company’s review and approval, such approval not to be unreasonably
withheld.
Section
2.5 Dismissal of
Claims. Promptly after the execution of this Agreement, the
Company and the Committee shall stipulate to the voluntary dismissal with
prejudice and without costs the action entitled Charming Shoppes v. Crescendo
Partners II, L.P., et al., No. 08-CV-1156-AB, pending in the United
States District Court for the Eastern District of Pennsylvania, and file with
the Court a stipulation of dismissal.
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Section
2.6 Mutual
Releases. Promptly after the execution of this Agreement, the
Company and the Committee shall provide mutual releases in the forms annexed
hereto as Schedule
C.
ARTICLE
III
OTHER
PROVISIONS
Section
3.1 Representations and
Warranties.
(a) Representations and
Warranties of the Company. The Company hereby represents and
warrants that this Agreement and the performance by the Company of its
obligations hereunder (i) has been duly authorized, executed and delivered
by it, and is a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, (ii) does not require the
approval of the shareholders of the Company and (iii) does not and will not
violate any law, any order of any court or other agency of government, the
Articles of Incorporation of the Company, as amended, or the Bylaws of the
Company, as amended, or any provision of any indenture, agreement or other
instrument to which the Company or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of, or give rise to, any lien, charge,
restriction, claim, encumbrance or adverse penalty of any nature whatsoever
pursuant to any such indenture, agreement or other instrument.
(b) Representations and
Warranties of the Committee. Each member of the Committee
represents and warrants that this Agreement and the performance by each such
member of its obligations hereunder (i) has been duly authorized, executed
and delivered by such Committee members, and is a valid and binding obligation
of such members, enforceable against such members in accordance with its terms,
(ii) does not require approval by any owners or holders of any equity
interest in such members of the Committee (except as has already been obtained)
and (iii) does not and will not violate any law, any order of any court or
other agency of government, the charter or other organizational documents of
such members of the Committee, as amended, or any provision of any agreement or
other instrument to which such members of the Committee or any of their
properties or assets are bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
agreement or other instrument, or result in the creation or imposition of, or
give rise to, any lien, charge, restriction, claim, encumbrance or adverse
penalty of any nature whatsoever pursuant to any such agreement or
instrument. Each member of the Committee hereby further represents
and warrants that, as of the date hereof, it is the beneficial owner of such
number of shares of Common Stock as are set forth with respect to such member of
the Committee on Schedule A of
this Agreement.
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Section
3.2 Remedies.
(a) Each
party hereto hereby acknowledges and agrees, on behalf of itself and its
Affiliates, that irreparable harm would occur in the event 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
will be entitled to specific relief hereunder, including an injunction or
injunctions to prevent and enjoin breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof in any state or
federal court in New York County in the State of New York, in addition to any
other remedy to which they may be entitled at law or in equity. Any
requirements for the securing or posting of any bond with such remedy are hereby
waived.
(b) Each
party hereto agrees, on behalf of itself and its Affiliates, that any actions,
suits or proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby will be brought solely and exclusively in any
state or federal court in New York County in the State of New York (and the
parties agree 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 respective addresses set forth
in Section 3.5 will be effective service of process for any such action,
suit or proceeding brought against any party in any such court. Each
party, on behalf of itself and its Affiliates, 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
state or federal courts in New York County in the State of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an improper or inconvenient forum.
Section
3.3 Entire
Agreement. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof and may be amended only by
an agreement in writing executed by the parties hereto.
Section
3.4 Notices. All
notices, consents, requests, instructions, approvals and other communications
provided for herein and all legal process in regard hereto shall be in writing
and shall be deemed validly given, made or served, if (a) given by
telecopy, when such telecopy is transmitted to the telecopy number set forth
below and the appropriate confirmation is received or (b) if given by any
other means, when actually received during normal business hours at the address
specified in this subsection:
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if
to the Company:
Charming
Shoppes, Inc.
000
Xxxxx Xxxx
Xxxxxxxx,
Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General
Counsel
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with
a copy to:
Cadwalader,
Xxxxxxxxxx & Xxxx LLP
Xxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention:Xxxxxx
X. Block, Esq.
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if
to the Committee:
Crescendo
Partners II, L.P.
Series
Q
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Facsimile: (000)
000-0000
Attention: Xxxx
Xxxxxxxxx
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with
a copy to:
Olshan,
Grundman, Frome, Xxxxxxxxxx & Wolosky LLP
Park
Avenue Tower
00 Xxxx
00xx
Xxxxxx
Xxx
Xxxx, XX 00000
Facsimile: Xxxxx
Xxxxxxx, Esq.
Attention: (000)
000-0000
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Section
3.5 Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
Section
3.6 Further
Assurances. Each party agrees to take or cause to be taken
such further actions, and to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments, and to obtain such
consents, as may be reasonably required or requested by the other party in order
to effectuate fully the purposes, terms and conditions of this
Agreement.
Section
3.7 No Third-Party
Beneficiaries. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns, and nothing in this Agreement is intended to confer on any person other
than the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
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Section
3.8 Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
[Remainder
of Page Left Blank Intentionally]
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IN
WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
caused the same to be executed by its duly authorized representative as of the
date first above written.
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CHARMING
SHOPPES, INC.
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By: /s/
Xxxxxx X. Xxxx
Name:
Xxxxxx X. Xxxx
Title: President
and Chief Executive Officer
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CRESCENDO
PARTNERS II, L.P., SERIES Q
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By:
Crescendo Investments II, LLC
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General
Partner
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By: /s/ Xxxx
Xxxxxxxxx
Name: Xxxx
Xxxxxxxxx
Title: Managing
Member
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CRESCENDO
INVESTMENTS II, LLC
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By: /s/ Xxxx
Xxxxxxxxx
Name: Xxxx
Xxxxxxxxx
Title: Managing
Member
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CRESCENDO
PARTNERS III, L.P.
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By:
Crescendo Investments III, LLC
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General
Partner
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By: /s/ Xxxx
Xxxxxxxxx
Name: Xxxx
Xxxxxxxxx
Title: Managing
Member
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CRESCENDO
INVESTMENTS III, LLC
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By: /s/ Xxxx
Xxxxxxxxx
Name: Xxxx
Xxxxxxxxx
Title: Managing
Member
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/s/ Xxxx
Xxxxxxxxx
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XXXX
XXXXXXXXX
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XXXX
MASTER FUND, LTD.
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By:
Myca Partners, Inc.
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Investment
Manager
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By: /s/ Xxxxxx
Frankfurt
Name: Xxxxxx
Frankfurt
Title: President
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MYCA
PARTNERS, INC.
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By: /s/ Xxxxxx
Frankfurt
Name: Xxxxxx
Frankfurt
Title: President
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/s/ Xxxxxx
Frankfurt
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XXXXXX
FRANKFURT
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/s/ Arnaud
Ajdler
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ARNAUD
AJDLER
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/s/ Xxxxxxx
Xxxxx
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XXXXXXX
XXXXX
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