EXHIBIT 7.1
AGREEMENT
AND
PLAN OF MERGER
BY AND AMONG
THE MAY DEPARTMENT STORES COMPANY
MS ACQUISITION, INC.
AND
ZIONS CO-OPERATIVE MERCANTILE INSTITUTION
October 14, 1999
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Articles of Incorporation; Bylaws. . . . . . . . . . 3
Section 1.5 Directors and Officers of the Surviving
Corporation. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II CONVERSION OF SHARES. . . . . . . . . . . . . . . . . . . 3
Section 2.1 Conversion of Common Stock . . . . . . . . . . . . . 3
Section 2.2 Exchange of Certificates . . . . . . . . . . . . . . 4
Section 2.3 Company Option Plans; Restricted Shares. . . . . . . 7
Section 2.4 Dissenters' Rights . . . . . . . . . . . . . . . . . 8
Section 2.5 Stockholders' Meeting. . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . 10
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . 11
Section 3.3 Authorization; Validity of Agreement . . . . . . . . 11
Section 3.4 No Violations; Consents and Approvals. . . . . . . . 12
Section 3.5 SEC Reports and Financial Statements . . . . . . . . 13
Section 3.6 Absence of Certain Changes . . . . . . . . . . . . . 14
Section 3.7 No Undisclosed Liabilities . . . . . . . . . . . . . 14
Section 3.8 Information in Registration Statement
and Proxy Statement. . . . . . . . . . . . . . . . . 14
Section 3.9 Employee Benefit Plans; ERISA. . . . . . . . . . . . 15
Section 3.10 Litigation; Compliance with Law. . . . . . . . . . . 18
Section 3.11 Intellectual Property. . . . . . . . . . . . . . . . 19
Section 3.12 Company Agreements . . . . . . . . . . . . . . . . . 19
Section 3.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Environmental Matters. . . . . . . . . . . . . . . . 21
Section 3.15 No Default . . . . . . . . . . . . . . . . . . . . . 23
Section 3.16 Opinion of Financial Advisors. . . . . . . . . . . . 23
Section 3.17 Brokers. . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.18 Property . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.19 Board Recommendations. . . . . . . . . . . . . . . . 24
Section 3.20 Labor Matters. . . . . . . . . . . . . . . . . . . . 24
Section 3.21 Year 2000. . . . . . . . . . . . . . . . . . . . . . 25
Section 3.22 Insurance. . . . . . . . . . . . . . . . . . . . . . 25
Section 3.23 Accounts Receivable; Inventory . . . . . . . . . . . 25
Section 3.24 Real Estate Matters. . . . . . . . . . . . . . . . . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . 28
Section 4.2 Authorization; Validity of Agreement . . . . . . . . 28
i
Section 4.3 Consents and Approvals; No Violations. . . . . . . . 29
Section 4.4 Information in Registration Statement
and Proxy Statement. . . . . . . . . . . . . . . . . 29
Section 4.5 Parent Common Stock. . . . . . . . . . . . . . . . . 29
Section 4.6 Absence of Certain Changes . . . . . . . . . . . . . 30
Section 4.7 No Undisclosed Liabilities . . . . . . . . . . . . . 30
Section 4.8 Litigation; Compliance with Law. . . . . . . . . . . 31
Section 4.9 No Default . . . . . . . . . . . . . . . . . . . . . 31
Section 4.10 Property . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11 Year 2000. . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.1 Interim Operations of the Company. . . . . . . . . . 32
Section 5.2 No Solicitations . . . . . . . . . . . . . . . . . . 36
Section 5.3 Access to Information. . . . . . . . . . . . . . . . 37
Section 5.4 Further Action; Reasonable Best Efforts. . . . . . . 37
Section 5.5 Employee Benefits. . . . . . . . . . . . . . . . . . 39
Section 5.6 Notification of Certain Matters. . . . . . . . . . . 41
Section 5.7 Directors' and Officers' Insurance and
Indemnification. . . . . . . . . . . . . . . . . . . 42
Section 5.8 Existing Credit Documents. . . . . . . . . . . . . . 44
Section 5.9 Parent Undertaking . . . . . . . . . . . . . . . . . 44
Section 5.10 WARN Act . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.11 Fashion Place. . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger. . . . . . . . . . . . . . . . . . 44
Section 6.2 Conditions to the Obligation of the
Company to Effect the Merger . . . . . . . . . . . . 45
Section 6.3 Conditions to Obligations of Parent and
Acquisition to Effect the Merger . . . . . . . . . . 45
Section 6.4. Election . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1 Termination. . . . . . . . . . . . . . . . . . . . . 46
Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . 48
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.1 Fees and Expenses. . . . . . . . . . . . . . . . . . 48
Section 8.2 Amendment; Waiver. . . . . . . . . . . . . . . . . . 49
Section 8.3 Survival . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.5 Interpretation . . . . . . . . . . . . . . . . . . . 50
Section 8.6 Section Headings . . . . . . . . . . . . . . . . . . 51
Section 8.7 Counterparts . . . . . . . . . . . . . . . . . . . . 51
Section 8.8 Entire Agreement . . . . . . . . . . . . . . . . . . 51
Section 8.9 Severability . . . . . . . . . . . . . . . . . . . . 51
Section 8.10 Governing Law; Waiver of Jury Trial;
Enforcement. . . . . . . . . . . . . . . . . . . . . 51
Section 8.11 Assignment . . . . . . . . . . . . . . . . . . . . . 52
ii
Section 8.12 Continuation of Attorney-Client
Privilege. . . . . . . . . . . . . . . . . . . . . . 52
Section 8.13 Publicity. . . . . . . . . . . . . . . . . . . . . . 52
iii
TABLE OF DEFINED TERMS
Term Section
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . .5.2
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Assertion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.13(b)
Average Closing Price. . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
beneficial ownership . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Company Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .3.4
Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . .3.23(a)
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
Company Employee . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5(a)
Company Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 5.5(a)
Company Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3
Company SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . .3.5
Conflict Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . .3.4
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4
DLJ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.5(a)(iii)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.4
Election Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.4
Encumbrance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Environmental Claim. . . . . . . . . . . . . . . . . . . . . . . 3.14(e)(i)
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . .3.14(e)(ii)
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)(ii)
Existing Credit Documents. . . . . . . . . . . . . . . . . . . . . . . .5.8
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.5
Government Antitrust Entity. . . . . . . . . . . . . . . . . . . . . 5.4(c)
Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . .3.4
Hazardous Substance. . . . . . . . . . . . . . . . . . . . . . 3.14(e)(iii)
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.4
Indemnified Liability. . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
iv
Indemnitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Indemnitors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.7
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 3.11
Key Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
Key Executives . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
knowledge of the Company . . . . . . . . . . . . . . . . . . . . . . . .3.6
Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(b)
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(b)
Leased Properties. . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Leased Property. . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.4
made available . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
Majority Shareholder . . . . . . . . . . . . . . . . . . . . . . . Recitals
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . .3.1
Material Company Agreements. . . . . . . . . . . . . . . . . . . . . . 3.12
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Merger Communications. . . . . . . . . . . . . . . . . . . . . . . . . 8.12
Non-Key Employees. . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(d)
Option Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3
Owned Property . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Parent Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
Parent Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5(c)
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Heading
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(c)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Primary Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . .5.8
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . .2.5(a)(iii)
Real Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . .3.24(a)
Registration Statement . . . . . . . . . . . . . . . . . . . . . 2.5(a)(ii)
Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.14(e)(iv)
Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.2
Restricted Plan Shares . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.5(a)(iii)
Securities Act.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.5
Shareowner Agreement . . . . . . . . . . . . . . . . . . . . . . . Recitals
Shareowner Agreements. . . . . . . . . . . . . . . . . . . . . . . Recitals
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1
Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . . .2.5(a)(i)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1
Supplemental Loan Agreement. . . . . . . . . . . . . . . . . . . . . . .5.8
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . .1.1
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.13(i)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.13(i)
Twelve Month Premiums. . . . . . . . . . . . . . . . . . . . . . . . . .5.7
v
URBCA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Utah DOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Voting Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
ZCMI Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . 5.5(b)
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)(ii)
1934 Act Rules . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(a)(ii)
vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 14, 1999, by and among THE MAY DEPARTMENT STORES COMPANY,
a Delaware corporation ("Parent"), MS ACQUISITION, INC., a Utah
corporation and a wholly-owned subsidiary of Parent
("Acquisition"), and ZIONS CO-OPERATIVE MERCANTILE INSTITUTION, a
Utah corporation (the "Company"). Parent, Acquisition and the
Company are later in this Agreement sometimes referred to
individually as a "Party" or collectively as the "Parties."
RECITALS
This Agreement is entered into with reference to the
following facts, objectives, and definitions:
A. The Boards of Directors of Parent, Acquisition and the
Company have each approved, and, if required by law, have
determined to recommend to their respective stockholders, the
acquisition of the Company by Parent upon the terms and subject
to the conditions set forth in this Agreement, which contemplates
a transaction in which Parent will acquire all of the outstanding
capital stock of the Company for securities of Parent as
described herein through a reverse subsidiary merger of
Acquisition with and into the Company.
B. It is contemplated by each of the Parties that the
transaction described above will constitute a tax-free
reorganization under Section 368(a)(2)(E) of the Internal Revenue
Code of 1986, as amended (the "Code").
C. In furtherance of such acquisition, the Boards of
Directors of Parent, Acquisition and the Company have each
approved this Agreement and the merger of Acquisition with and
into the Company in accordance with the terms of this Agreement
and the Utah Revised Business Corporation Act (the "URBCA").
D. Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness
of Parent and Acquisition to enter into this Agreement, Parent
has entered into separate Shareowner Voting Agreements each dated
as of the date hereof with each of ZCMI Reserve Trust (the
"Majority Shareholder"), Xxxxxxx Xxxxxx and Xxxxxxxx Xxxxxx
(collectively, the "Shareowner Agreements" and, individually, a
"Shareowner Agreement"). Pursuant to the Shareowner Agreements,
each of the Majority Shareholder, Xxxxxxx Xxxxxx and Xxxxxxxx
Xxxxxx has granted an option in favor of Parent to purchase all
of the shares of Company Common Stock (as hereafter defined) held
by each, respectively, and has granted Parent an irrevocable
proxy to vote all of the shares of Company Common Stock held by
each, respectively, in favor of the Merger (as hereafter
defined).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the Parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to
the conditions of this Agreement and in accordance with the
URBCA, at the Effective Time (as defined in Section 1.2),
Acquisition shall be merged (the "Merger") with and into the
Company and the separate corporate existence of Acquisition shall
cease. After the Merger, the Company shall continue as the
surviving corporation (sometimes later in this Agreement referred
to as the "Surviving Corporation"). The Merger shall have the
effects set forth in the URBCA. Without limiting the generality
of the foregoing, at the Effective Time, all the rights,
privileges, immunities, powers, properties and franchises of the
Company and Acquisition shall vest in the Surviving Corporation
and all obligations, duties, debts and liabilities of the Company
and Acquisition shall become the obligations, duties, debts and
liabilities of the Surviving Corporation.
Section 1.2 Effective Time. On or as promptly as
practicable following the Closing (as hereafter defined), the
Company will cause appropriate Articles of Merger (the "Articles
of Merger") to be filed with the Department of Commerce, Division
of Corporations and Commercial Code, of the State of Utah (the
"Utah DOC") in such form and executed as provided in the URBCA.
The Merger shall become effective at such time as the Articles of
Merger have been duly filed with the Utah DOC or such later time
as is agreed upon by the Parties and specified in the Articles of
Merger in accordance with the URBCA, and such time is later in
this Agreement referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., Salt Lake City time, on
a date to be specified by the Parties, which shall be no later
than the second business day after satisfaction or waiver of all
of the conditions set forth in Article VI, other than those
conditions (including the vote of the shareholders of the
Company) that by their nature are to be satisfied at the Closing,
2
but subject to the fulfillment or waiver of those conditions (the
"Closing Date"), at the offices of Stoel Rives LLP, 000 Xxxxx
Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxx Xxxx, XX 00000, unless another
date or place is agreed to in writing by the
Parties.Notwithstanding the foregoing, in the event the Parent
delivers an Election (as hereafter defined) in the manner set
forth in Section 6.4, the Closing will take place at a time prior
to February 1, 2000 as determined in the sole discretion of
Parent.
Section 1.4 Articles of Incorporation; Bylaws. The
Articles of Incorporation of the Company, in effect immediately
prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law. The Bylaws of the
Company in effect immediately prior to the Effective Time, shall
be the Bylaws of the Surviving Corporation until thereafter
amended as provided by law, the Articles of Incorporation and
such Bylaws.
Section 1.5 Directors and Officers of the Surviving
Corporation.
(a) The directors of Acquisition immediately prior to
the Effective Time shall, from and after the Effective Time, be
the directors of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with
the URBCA, and the Surviving Corporation's Articles of
Incorporation and Bylaws.
(b) The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective
successors are duly appointed and qualified, or until their
earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Common Stock. As of the
Effective Time, by virtue of the Merger and without any action on
the part of the Parties or the holders of any shares of common
stock, par value $.001 per share, of the Company (the "Shares" or
the "Company Common Stock"):
(a) Each issued and outstanding share of the Company
Common Stock (other than Shares to be canceled in accordance with
Section 2.1(c), Restricted Plan Shares (as defined in Section
3
2.3(b)) to be canceled in accordance with Section 2.3(b) and
Dissenting Shares (as defined in Section 2.4)) shall be converted
into the right to receive such number of shares of the common
stock of Parent ("Parent Common Stock") which is the equivalent
of $22.50, based on the arithmetic average rounded to two decimal
places of the high and low trading prices of the Parent Common
Stock (the "Average Closing Price") as reported on the Composite
Tape for New York Stock Exchange listed securities for the 12th
through the 3rd business days immediately preceding the Closing
Date (the "Merger Consideration"), upon surrender of the
certificate formerly representing such share of the Company
Common Stock in the manner provided in Section 2.2. All such
shares of the Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the
Merger Consideration therefor upon the surrender of such
certificate in accordance with Section 2.2. Any payment made
pursuant to this Section 2.1(a) shall be made net of applicable
withholding taxes to the extent such withholding is required by
law in accordance with Section 2.2(d).
(b) Each issued and outstanding share of common stock,
par value $1.00 per share, of Acquisition shall be converted into
and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
(c) All shares of Company Common Stock that are owned
at the Effective Time by the Company, Parent, Acquisition or any
other direct or indirect wholly-owned Subsidiary (as later
defined) of the Company, Parent or Acquisition shall be canceled
and retired and no Merger Consideration shall be delivered in
exchange therefor.
Section 2.2 Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall
designate an agent reasonably satisfactory to the Company to act
as paying agent in connection with the Merger (the "Paying
Agent") for purposes of effecting the exchange of the Merger
Consideration for certificates which, prior to the Effective
Time, represented Shares and with respect to which the owner
thereof is entitled to receive the Merger Consideration pursuant
to Section 2.1. On the Closing Date, Parent and Acquisition will
provide the Paying Agent, in trust for the benefit of the holders
of Shares, that number of whole shares of Parent Common Stock
equal to the aggregate Merger Consideration to be paid to the
holders of Shares pursuant to Section 2.1.
4
(b) As promptly as practicable after the Effective
Time, the Paying Agent shall mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares
(the "Certificates" or individually, a "Certificate"), a form of
letter of transmittal that is reasonably acceptable to the
Company (which shall specify that delivery shall be effective,
and risk of loss and title to a Certificate shall pass, only upon
proper delivery of the Certificate to the Paying Agent) and
instructions for effecting the surrender of a Certificate in
consideration of payment of the Merger Consideration for the
Shares represented by the Certificate. Upon surrender to the
Paying Agent of a Certificate, together with such letter of
transmittal duly executed and completed in accordance with the
instructions thereto, and any other required documents, the
holder of such Certificate shall receive promptly in exchange
therefor the Merger Consideration for each Share formerly
evidenced thereby, and such Certificate shall forthwith be
canceled. No interest will be paid or accrued on the cash
payable upon the surrender of a Certificate. If payment is to be
made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered be properly endorsed
or otherwise be in proper form for transfer and that the person
requesting such payment shall (i) pay any transfer or other taxes
required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or (ii)
establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. One hundred eighty
(180) days after the Effective Time, the Surviving Corporation
shall be entitled to require the Paying Agent to deliver to it
any shares of Parent Common Stock which have been made available
to the Paying Agent for payment of the Merger Consideration
hereunder and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to
look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general unsecured
creditors thereof with respect to the cash payable upon due
surrender of their Certificate(s). Parent shall pay all charges
and expenses, including those of the Paying Agent, in connection
with the distribution of the Merger Consideration for Shares.
From and after the Effective Time, until surrendered in
accordance with the provisions of this Section 2.2(b), each
Certificate (other than Certificates which represented (i)
Restricted Plan Shares, (ii) Shares held by the Company, Parent,
Acquisition or any direct or indirect wholly-owned Subsidiary of
Parent or Acquisition and (iii) Dissenting Shares) shall
represent for all purposes only the right to receive
consideration equal to the Merger Consideration multiplied by the
number of Shares evidenced by such Certificate, without any
5
interest thereon. From and after the Effective Time, holders of
Certificates shall have no right to vote or to receive any
dividends or other distributions with respect to any Shares which
were theretofore represented by such Certificates, other than any
dividends or other distributions payable to holders of record as
of a date prior to the Effective Time, and shall have no other
rights other than as provided herein or by applicable law.
Unless and until any such outstanding Certificate shall be so
surrendered, no dividend or other distribution, if any, payable
to holders of record of Parent Common Stock as of any date on or
subsequent to the Effective Time shall be paid to the holder of
such outstanding Certificate, but upon surrender of such
outstanding Certificate, there shall be paid to the record owner
of such outstanding Certificate shares of Parent Common Stock
issued in exchange therefor and the amount, without interest
thereon, of dividends and other distributions, if any, which
theretofore and subsequent to the Effective Time have become
payable with respect to the number of whole shares of Parent
Common Stock represented thereby.
(c) From and after the Effective Time, there shall be
no transfers on the stock transfer books of the Company of the
Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented
to the Paying Agent or the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration in accordance
with the procedures set forth in this Article II.
(d) The Paying Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Shares such amounts, if any,
as the Paying Agent is required to deduct and withhold with
respect to the making of such payment under the Code. To the
extent that amounts are so withheld by the Paying Agent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Certificate(s)
in respect of which such deduction and withholding was made by
the Paying Agent.
(e) In the event 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, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with
this Article II; provided, that the person to whom the Merger
Consideration is paid shall, as a condition precedent to the
payment thereof, give the Surviving Corporation a bond in such
sum as it may direct or otherwise indemnify the Surviving
Corporation in a manner satisfactory to it against any claim that
may be made against the Surviving Corporation with respect to the
Certificate claimed to have been lost, stolen or destroyed.
6
(f) No fractional shares of Parent Common Stock shall
be issued in the Merger, but, in lieu of any such fractional
shares of Parent Common Stock, each holder of Shares who would
otherwise have been entitled to a fraction of a share of Parent
Common Stock upon surrender of stock certificates for exchange
pursuant to this Section 2.2 will be paid an amount of cash
(without interest) determined by multiplying (i) the Average
Closing Price by (ii) the fractional share interest in Parent
Common Stock to which such holder would otherwise be entitled.
(g) If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or a
different class by reason of any reclassification,
recapitalization, split-up, stock split, combination, exchange of
shares or similar readjustment, or a stock dividend thereon shall
be declared with a record date after the Election Date, if any,
and prior to the Effective Time, the number of shares or class of
Parent Common Stock to be issued and delivered in the Merger in
exchange for each outstanding share of Company Common Stock as
provided in this Agreement shall be appropriately adjusted.
Section 2.3 Company Option Plans; Restricted Shares.
(a) The Company shall take such actions as are
appropriate to provide that, immediately prior to the Closing
Date, (i) each option (a "Company Option") outstanding under the
Company's ZCMI 1996 Equity-Based Incentive Plan (the "Option
Plan"), whether or not then exercisable or vested, shall become
fully exercisable and vested, (ii) each such Company Option shall
be canceled and (iii) in consideration of such cancellation and
in full satisfaction of all rights of the holder of the Company
Option and as promptly as possible after the Effective Time
Parent shall cause the Paying Agent to provide to the holder of
the Company Option cash in an amount equal to the product of (A)
the excess of $22.50 over the exercise price of the Company
Option, multiplied by (B) the number of Shares subject to the
Company Option (such payment to be net of applicable withholding
taxes).
(b) The Company shall take such actions as are
appropriate to provide that, immediately prior to the Closing
Date, (i) each restricted Share of Company Common Stock issued to
employees of the Company pursuant to the Option Plan (the
"Restricted Plan Shares") shall be canceled and (ii) in
consideration of such cancellation and in full satisfaction of
all rights of each holder of the Restricted Plan Shares and as
promptly as possible after the Effective Time Parent shall cause
the Paying Agent to provide to each holder of the Restricted Plan
7
Shares cash in an amount equal to the product of $22.50
multiplied by the number of Restricted Plan Shares held by each
such holder (such payment to be net of applicable withholding
taxes).
(c) The Company shall take such actions as are
appropriate to provide that from and after the Closing Date the
Company will not be bound by any options, warrants, rights or
agreements which would entitle any person, other than Parent or
its wholly-owned subsidiaries, to own beneficially, or to receive
any payments (other than as otherwise contemplated by this
Agreement) in respect of, any capital stock or equity of the
Company or the Surviving Corporation.
Section 2.4 Dissenters' Rights. Notwithstanding anything
in this Agreement to the contrary, Shares that are outstanding
immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in
writing and who has delivered a written demand for payment of
such shares in accordance with Sections 16-10a-1301 through 16-
10a-1331 of the URBCA ("Dissenting Shares"), shall not be
converted into the right to receive the Merger Consideration, as
provided in Section 2.1, unless and until such holder fails to
perfect or effectively withdraws or otherwise loses his or her
right to payment as a dissenting shareholder under the URBCA.
If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or otherwise loses his or her right to
payment as a dissenting shareholder, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger
Consideration, without interest or dividends thereon. The
Company shall give Parent prompt notice of any demands received
by the Company for payment of Shares, and, prior to the Effective
Time, Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, except with the
prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands.
Section 2.5 Stockholders' Meeting.
(a) As soon as practicable following the execution and
delivery of this Agreement,
(i) the Company, acting through its Board of
Directors, shall, in accordance with applicable law, duly
call, give notice of, convene and hold a special meeting
(the "Special Meeting") of its stockholders and submit this
Agreement to a vote of the Company s stockholders;
8
(ii) Parent and the Company shall prepare a
Joint Proxy/Registration Statement (the "Registration
Statement") which shall comply as to form with all
applicable laws and which shall include all information
concerning the Company, Parent and Acquisition required to
be set forth therein pursuant to the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the applicable
rules and regulations thereunder (the "1934 Act Rules" and,
together with the 1934 Act, the "Exchange Act");
(iii) the Company shall, subject to review of the
Registration Statement by the Securities and Exchange
Commission (the "SEC") and notification (either orally or in
writing) to the Company that the SEC has no further comments
relating to such Registration Statement, distribute a letter
to stockholders, notice of meeting, proxy statement and form
of proxy to stockholders of the Company in connection with
the Merger (collectively, including any amendments or
supplements thereto, the "Proxy Statement"), and include in
the Proxy Statement (A) the recommendation of the Board of
Directors of the Company that stockholders of the Company
vote to approve this Agreement and the Merger and (B) the
written opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation ("DLJ") that the Merger Consideration is fair to
the stockholders of the Company (other than stockholders who
are Affiliates of the Company) from a financial point of
view;
(iv) the Company shall file a definitive form of
the Proxy Statement, which shall reflect compliance with the
comments and requests in accordance with the Exchange Act
from the SEC as the Company and Parent shall deem
appropriate;
(v) the Company shall distribute the definitive
Proxy Statement to its stockholders in accordance with
applicable law; and
(vi) the Company shall take all such other
action reasonably necessary or appropriate to obtain the
lawful approval of this Agreement by the stockholders of the
Company.
(b) The Company and Parent shall each pay one-half (1/2)
of the expenses related to the printing, preparation, filing and
mailing of the Proxy Statement. The Parent shall pay the
registration statement fee to the SEC.
(c) Parent and Acquisition shall furnish to the
Company all information concerning Parent, Acquisition and their
9
Affiliates (as defined in Section 8.5) required by the Exchange
Act or as otherwise required by the SEC to be set forth in the
Proxy Statement.
(d) Each of the Company and Parent shall consult and
confer with the other and the other's counsel regarding the
Registration Statement and the Proxy Statement and each shall
have the opportunity to comment on the Registration Statement and
the Proxy Statement and any amendments and supplements thereto
before the Registration Statement and the Proxy Statement, and
any amendments or supplements thereto, are filed with the SEC or
mailed to Company stockholders. Each of the Company and Parent
will provide to the other copies of all correspondence between it
(or its advisors) and the SEC relating to the Registration
Statement and the Proxy Statement.
(e) Parent will vote, or cause to be voted, all Shares
acquired by Parent, Acquisition or any other Subsidiary of Parent
in favor of the Merger and the approval of this Agreement.
(f) Parent, Acquisition and the Company shall also
take such actions as reasonably may be required to be taken under
applicable "blue sky" laws in connection with the issuance of the
Parent Common Stock pursuant to the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and
Acquisition that:
Section 3.1 Organization. The Company is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Utah, has all requisite corporate power and
corporate authority and all necessary governmental approvals to
own, lease and operate its properties and to conduct its business
as it is now being conducted, and is qualified to do business as
a foreign corporation and is in good standing in each
jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except where the failure to
be so organized, existing and in good standing or to have such
power, authority or governmental approvals, or to be so qualified
would not have a Material Adverse Effect (as defined below) on
the Company. The Company has previously delivered to Parent a
complete and correct copy of each of the Company s Articles of
Incorporation, as amended, and its Bylaws, as currently in
effect. The Company has no Subsidiaries. For purposes of this
Agreement, (i) any reference to any event, change or effect
having a "Material Adverse Effect" on or with respect to any
10
entity (or group of entities taken as a whole) means an event,
change or effect, individually or in the aggregate with other
events, changes, or effects, that is materially adverse to the
financial condition, businesses, results of operations, assets,
liabilities or properties of such entity (or, if used with
respect thereto, of such group of entities taken as a whole);
(ii) "Subsidiary" shall mean with respect to any Person, any
corporation or other entity of which more than 50% of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such entity
is directly or indirectly owned by such Person; and (iii)
"Person" shall mean an individual, partnership, joint venture,
limited liability company, trust, corporation, unincorporated
entity or Governmental Entity (as defined in Section 3.4).
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company
consists of 5,000,000 shares of Company Common Stock, par value
$.001 per share. As of the date of this Agreement, (i) 2,209,159
shares of Company Common Stock are issued and outstanding
(including 42,000 Restricted Plan Shares) and (ii) Company
Options to acquire 113,450 shares of Company Common Stock are
outstanding under the Option Plan. All the outstanding shares of
the Company's capital stock are duly authorized, validly issued,
fully paid and non-assessable. There are no bonds, debentures,
notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt")
of the Company issued and outstanding. Except as set forth
above, (i) there are no shares of the capital stock of the
Company authorized, issued or outstanding and (ii) there are no
existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of the Company
obligating the Company to issue, transfer or sell or cause to be
issued, transferred or sold any shares of its capital stock or
Voting Debt of, or other equity interest in, the Company or
securities convertible into or exchangeable for such shares or
equity interests or obligations of the Company to grant, extend
or enter into any such option, warrant, call, subscription or
other right, convertible security, agreement, arrangement or
commitment. There are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any Shares
of the capital stock of the Company or Affiliate of the Company
or to provide funds to make any investment (in the form of a
loan, capital contribution or otherwise) in any other entity and
following the Merger, the Company will not have any obligation to
issue, transfer or sell any shares of its capital stock.
11
(b) There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to
the voting of the capital stock of the Company. The Company is
not required to redeem, repurchase or otherwise acquire shares of
the capital stock of the Company as a result of the transactions
contemplated by this Agreement.
(c) At the Effective Time, the number of shares of
Company Common Stock outstanding (assuming all Company Options
outstanding on the date hereof are exercised) shall not exceed
2,322,609.
Section 3.3 Authorization; Validity of Agreement.
(a) The Company has the requisite corporate power and
corporate authority to execute and deliver this Agreement and,
subject to approval of its stockholders as contemplated by
Section 2.5, to consummate the transactions contemplated by this
Agreement. The execution and delivery by the Company of this
Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by the Board of
Directors of the Company and, except for obtaining the
stockholder approval contemplated by Section 2.5 in the case of
this Agreement, no other corporate proceedings on the part of the
Company are necessary to authorize the execution and delivery of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery of
this Agreement by Parent and Acquisition, this Agreement is a
valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that such
enforcement may be subject to or limited by (i) bankruptcy,
insolvency or other similar laws, now or later in effect,
affecting creditors' rights generally, and (ii) the effect of
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(b) The Board of Directors of the Company has duly and
validly approved and taken all corporate action required to be
taken by it for the consummation by the Company of the
transactions contemplated by this Agreement. The affirmative
vote of the holders of a majority of the Shares is the only vote
of the holders of any class or series of the capital stock of the
Company necessary to approve this Agreement and the Merger.
Section 3.4 No Violations; Consents and Approvals.
Except as set forth in Section 3.4 of the Disclosure Schedule
12
attached hereto and incorporated herein (the "Disclosure
Schedule"), and except for filings, permits, authorizations,
consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the URBCA, for the approval of this
Agreement and the Merger by the Company's stockholders and the
filing and recordation of the Articles of Merger required by the
URBCA, neither the execution and delivery of this Agreement by
the Company nor the consummation by the Company of the
transactions contemplated by this Agreement will (i) conflict
with or violate any provision of the Articles of Incorporation or
ByLaws of the Company, (ii) require any filing with, or any
permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority, agency or official (a
"Governmental Entity"), (iii) assuming the accuracy of the
representations and warranties of, and performance of the
covenants by Parent and Acquisition as set forth in this
Agreement, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment,
cancellation or acceleration) or require any consent under, any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, guarantee, other evidence of indebtedness,
lease, license, contract, agreement or other instrument or
obligation to which the Company is a party or by which the
Company or any of its assets may be bound (collectively, the
"Company Agreements") or result in the imposition or creation of
any lien, charge, security interest, option, claim or encumbrance
of any nature whatsoever (collectively, "Liens") on the assets of
the Company or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of
its properties or assets; except in the case of clauses (ii),
(iii) or (iv), (A) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings
would not have a Material Adverse Effect on the Company, or (B)
such violations, breaches or defaults which would not have a
Material Adverse Effect on the Company.
Section 3.5 SEC Reports and Financial Statements. The
Company has filed with the SEC, and has made available to Parent
through XXXXX true and complete copies of, all forms and
documents required to be filed by it since January 1, 1996 and on
or before the Closing Date under the Exchange Act, or the
Securities Act of 1933, as amended (the "Securities Act") (as
such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"). Except as set forth
in Section 3.5 of the Disclosure Schedule, as of their respective
dates (or, if amended, as of the date of the last such
13
amendment), the Company SEC Documents, including, without
limitation, any financial statements or schedules included
therein (i) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations
of the SEC thereunder. The consolidated financial statements
included in the Company SEC Documents (i) have been prepared
from, and are in accordance with, the books and records of the
Company, (ii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as otherwise
noted therein and except that the quarterly financial statements
are subject to year end adjustment and do not contain all
footnote disclosures required by GAAP), (iii) comply in all
material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect
thereto and (iv) fairly present in all material respects the
financial position and the results of operations and cash flows
of the Company as at the dates thereof or for the periods
presented therein.
Section 3.6 Absence of Certain Changes. Except as
expressly disclosed in the Company SEC Documents filed prior to
the date of this Agreement or as disclosed in Section 3.6 of the
Disclosure Schedule, since January 31, 1999, the Company has
conducted its businesses and operations only in the ordinary
course and consistent with past practice, and there have not
occurred (i) any events or changes (including the incurrence of
any liabilities of any nature, whether or not accrued, contingent
or otherwise) having or which would have a Material Adverse
Effect on the Company; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the equity interests of the
Company; or (iii) any change by the Company in accounting
principles or methods, except insofar as was or may be required
by a change in GAAP. Except as expressly disclosed in the
Company SEC Documents filed prior to the date of this Agreement
or in Section 5.1 of the Disclosure Schedule, since January 31,
1999, the Company has not taken any of the actions prohibited by
Section 5.1. For purposes of this Agreement, "knowledge of the
Company" shall mean the actual knowledge of the individuals
specified in Item 4 of Section 3.6 of the Disclosure Schedule.
Section 3.7 No Undisclosed Liabilities. Except as
expressly disclosed in the Company SEC Documents filed prior to
the date of this Agreement and except for liabilities and
14
obligations incurred in the ordinary course of business and
consistent with past practice, since January 31, 1999, the
Company has not incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that
have, or would have, a Material Adverse Effect on the Company, or
that would be required to be reflected or reserved against in the
financial statements of the Company (including notes thereto)
prepared in accordance with GAAP. Section 3.7 of the Disclosure
Schedule describes all material personal property leases of the
Company.
Section 3.8 Information in Registration Statement and
Proxy Statement. The Registration Statement, and the Proxy
Statement at the date it is mailed to Company stockholders and at
the time of the Special Meeting, (i) will not 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 and (ii) will comply in all
material respects with the provisions of the Exchange Act;
provided, that no representation is made by the Company with
respect to statements made in the Registration Statement and
Proxy Statement based on written information supplied by Parent
or Acquisition for inclusion in the Registration Statement and
Proxy Statement.
Section 3.9 Employee Benefit Plans; ERISA.
(a) Section 3.9(a) of the Disclosure Schedule contains
a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance
or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program, agreement,
fund, policy, practice or arrangement, including all employee
benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
sponsored, maintained or contributed to by the Company (or for
which the Company makes payroll deductions) or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company would be deemed a "single
employer" within the meaning of section 4001 of ERISA, for the
benefit of any employee or former employee of the Company and
their dependents, or any ERISA Affiliate (collectively, the
"Plans"). Section 3.9(a) of the Disclosure Schedule identifies
each of the Plans that is an "employee benefit plan," as defined
in section 3(3) of ERISA (collectively, the "ERISA Plans").
15
(b) With respect to each Plan, the Company has
heretofore delivered or made available to Parent true and
complete copies of each of the following documents:
(i) the Plan document, including all amendments
thereto;
(ii) the annual report and actuarial report for
the most recent three plan years, if required under ERISA;
(iii) the most recent Summary Plan Description
(as defined in ERISA) required under ERISA with respect thereto,
including all summaries of material modifications;
(iv) if the Plan is funded through a trust or
any third party funding vehicle, the trust or other funding
agreement and the latest financial statements thereof; and
(v) the most recent determination letter
received from the Internal Revenue Service with respect to each
Plan intended to qualify under section 401(a) of the Code or
copies of any pending determination letter requests.
(c) No liability under Title IV of ERISA or any
applicable state laws has been incurred by the Company or any
ERISA Affiliate with respect to the Plans that has not been
satisfied or otherwise discharged in full, and no condition
exists or is, to the knowledge of the Company, reasonably likely
to arise that presents a material risk to the Company or any
ERISA Affiliate of incurring a liability under such Title or any
applicable state laws, other than liability for contributions due
in the ordinary course and premiums due the Pension Benefit
Guaranty Corporation (the "PBGC") (which contributions and
premiums have been paid when due). There are no amendments or
revisions to any Plan which have been communicated to employees
but not reflected in Plan documents or summaries.
(d) No ERISA Plan is a "multiemployer pension plan,"
as defined in section 3(37) of ERISA, nor is any ERISA Plan a
plan described in section 4063(a) of ERISA.
(e) To the knowledge of the Company, no ERISA Plan or
any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of each ERISA Plan ended prior
to the Closing Date. There have been no reportable events under
section 4043 of ERISA in relation to the ERISA Plans. No Lien
imposed under the Code or ERISA exists or is to the knowledge of
the Company likely to be imposed on account of any ERISA Plan.
16
The form of each ERISA Plan intended to be "qualified" within the
meaning of section 401(a) of the Code has been determined as of
October 3, 1996 (the date of the most recent determination
letters) by the Internal Revenue Service to be so qualified (or
timely application has been made therefor); to the knowledge of
the Company, no event has occurred since the date of such
determination that would adversely affect such qualification for
which the cost of correction would have a Material Adverse Effect
on the Company; and each trust maintained thereunder has been
determined by the Internal Revenue Service to be exempt from
taxation under section 501(a) of the Code. Except as disclosed
in Section 3.10(b) of the Disclosure Schedule, each Plan has been
operated and administered in accordance with its terms and
applicable law, including but not limited to ERISA, the Code and
applicable state laws, except for such non-compliance that would
not have a Material Adverse Effect on the Company.
(f) There are no pending, threatened in writing or, to
the knowledge of the Company, anticipated actions, suits,
proceedings or claims (other than routine claims for benefits)
by, on behalf of, or against, any of the Plans or any trusts
related thereto that if determined adversely to the Company would
have a Material Adverse Effect on the Company.
(g) The PBGC has not instituted proceedings to
terminate any of the ERISA Plans and to the knowledge of the
Company, no condition exists that presents a material risk that
such proceedings will be instituted.
(h) There are no pending, scheduled or, to the
knowledge of the Company, anticipated audits or investigations
with respect to the Plans by any governmental agency or authority
as a result of which the Plans or the Company could be subject to
liability which would have a Material Adverse Effect on the
Company.
(i) As of December 31, 1998, the present value of
accrued benefits under the Company's defined benefit plan subject
to Title IV of ERISA, as determined using the actuarial
assumptions and methods used for SFAS 87 and 132 financial
disclosure purposes as of January 31, 1999, did not exceed the
market value of the assets of such plan by more than $4,200,000.
As of August 31, 1999, the market value of the assets of such
plan was approximately $23,652,173.38. During the period from
February 1, 1999 to August 31, 1999, the total amount of payments
which were made from the plan to satisfy obligations under the
plan was approximately $1,309,000.
(j) To the knowledge of the Company, none of the
Company, any ERISA Affiliate, any of the ERISA Plans, any trust
17
created thereunder, any trustee or administrator and any other
person or entity acting as a fiduciary thereof has engaged in a
transaction or has taken or failed to take any action in
connection with which the Company, any ERISA Affiliate, any of
the ERISA Plans, any such trust, any trustee or administrator
thereof, or any party dealing with the ERISA Plans or any such
trust could be subject to either a civil penalty assessed
pursuant to section 409 or 502(i) of ERISA or a tax imposed
pursuant to section 4975, 4976 or 4980B of the Code that would
have a Material Adverse Effect on the Company.
(k) No amounts payable under the Plans or any other
agreement or arrangement to which the Company is a party will, as
a result of the transaction contemplated by this Agreement, fail
to be deductible for federal income tax purposes by virtue of
section 280G of the Code.
(l) Except as disclosed in Section 3.9(l) of the
Disclosure Schedule, no Plan provides benefits, including without
limitation death, medical, dental or life insurance benefits
(whether or not insured), with respect to current or former
employees after retirement or other termination of employment,
other than (i) coverage mandated by applicable law, (ii)
disability, death or retirement benefits under any "employee
pension plan," as that term is defined in section 3(2) of ERISA,
(iii) deferred compensation benefits or severance benefits
accrued as liabilities on the books of the Company or an ERISA
Affiliate, (iv) severance pay, disability benefits and benefit
claims under ERISA Plans incurred on or prior to a termination of
employment but not reported or paid until after such termination,
or (v) benefits, the full cost of which is borne by the current
or former employee (or his or her beneficiary).
(m) Except as disclosed in Section 3.9(m) of the
Disclosure Schedule, the Company does not have employment
agreements or severance agreements with any officer, director or
other employee as of the date of this Agreement. There are no
such agreements whose terms have expired but pursuant to which
the Company has any continuing liability to any officer, director
or employees or any former officer, director or employee of the
Company.
Section 3.10 Litigation; Compliance with Law.
(a) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or in Section
3.10(a) of the Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge
of the Company, threatened, against or affecting the Company or
18
any of its properties which, if determined adversely to the
Company, would have a Material Adverse Effect on the Company or
would prevent or delay the Company from consummating the Merger
or the other transactions contemplated by this Agreement.
(b) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or in Section
3.10(b) of the Disclosure Schedule, the Company is in compliance
in all material respects with all laws, statutes, regulations,
rules, ordinances, judgments, decrees, orders, writs and
injunctions, of any court or Governmental Entity relating to any
of the property currently or formerly owned or leased by it, or
applicable to its business, including, but not limited to,
employment and employment practices, labor relations,
occupational safety and health, environmental, tax, interstate
commerce and antitrust laws, except for such noncompliance which
would not have a Material Adverse Effect on the Company. Except
as expressly set forth in the Company SEC Documents filed prior
to the date of this Agreement, neither the Company nor any of its
properties is subject to any judgment, decree, order, writ or
injunction having, or which would have, a Material Adverse Effect
on the Company, or which would prevent or delay the consummation
of the transactions contemplated by this Agreement.
(c) The Company holds all licenses, permits, variances
and approvals of Governmental Entities necessary for the lawful
conduct of its businesses as currently conducted except where the
failure to hold such licenses, permits, variances or approvals
would not have a Material Adverse Effect on the Company.
Section 3.11 Intellectual Property.
Section 3.11 of the Disclosure Schedule is a complete
list of all patents, trademarks and service marks (registered or
unregistered), trade names and copyrights and applications
therefor (collectively, the "Intellectual Property") owned or
filed by or licensed to the Company, and with respect to
registered trademarks and service marks, contains a list of all
jurisdictions in which such trademarks and service marks are
registered or applied for and all registration and application
numbers. Except as disclosed in Item 3 of Section 3.11 of the
Disclosure Schedule, such Intellectual Property that is owned by
the Company is not subject to any Liens except for such Liens
that would not have a Material Adverse Effect on the Company and,
to the knowledge of the Company, there are no infringements or
other violations or conflicts with the rights of others with
respect to the (i) use of or other conduct by the Company within
the scope of, (ii) ownership of, (iii) validity of, or (iv)
enforceability of, any Intellectual Property owned by the Company
that has or would have a Material Adverse Effect on the Company.
19
Section 3.12 Company Agreements. Each of the Company
Agreements that is material to the business and operations of the
Company as currently conducted (collectively, the "Material
Company Agreements") is a valid, binding and enforceable
obligation of the Company, except where the failure to be valid,
binding and enforceable would not have a Material Adverse Effect
on the Company, and there are no defaults thereunder on the part
of the Company or, to the knowledge of the Company, on the part
of any other party thereto), except those defaults that would not
have a Material Adverse Effect on the Company. Except as
disclosed in Section 3.12 of the Disclosure Schedule, the Company
is not a party to any license agreement or sales agency or
distributorship agreement that limits in any material manner the
ability of the Company to compete in or conduct any significant
line of business or compete with any Person or in any geographic
area or during any period of time exceeding one year from the
date of this Agreement. The Company is not bound by any
agreement or contract for consulting, advisory, professional or
other similar services which is not unilaterally terminable by
the Company upon notice of 30 days or less without penalty or
additional cost to the Company.
Section 3.13 Taxes.
(a) The Company has (i) filed (or there have been
filed on its behalf) with the appropriate Governmental Entity all
material Tax Returns (as later defined) required to be filed by
it and such Tax Returns are true, correct and complete in all
material respects, (ii) maintained in all material respects all
required records with respect to all material Tax Returns, (iii)
withheld or paid, as appropriate, in full (or there has been paid
on its behalf) all material Taxes (as later defined) that are due
and payable for all taxable periods and portions thereof except
to the extent of reserves established in accordance with GAAP on
the financial statements included in the Company SEC Documents
and (iv) made provision, in accordance with GAAP, for all future
material Tax liabilities (including reserves for deferred Taxes
established in accordance with GAAP and for all material
contingent Tax liabilities) for all taxable periods and portions
thereof.
(b) No federal, state, local or foreign audit or other
administrative proceeding ("Audit") or court proceedings are
presently pending with regard to any Taxes or Tax Returns of the
Company, and the Company has not received written or, to the
knowledge of the Company, oral notice of either the commencement
of any such Audit or of the intention on the part of any
Governmental Entity to commence any such Audit, and the Company
has not received written notice that it has not filed a Tax
Return or paid Taxes required to be filed or paid by it.
20
(c) No Governmental Entity has asserted in writing
against the Company any material deficiency for any Taxes which
have not been satisfied in full or adequately reserved for in
accordance with GAAP on the financial statements included in the
Company SEC Documents.
(d) There are no Liens for Taxes upon any property or
assets of the Company (except for current Taxes that are not yet
due and payable).
(e) The income Tax Returns of or including the Company
have been examined by and settled with the appropriate
Governmental Entity (or the applicable statutes of limitation for
the assessment of income Taxes for such periods have expired) for
all periods through and including January 28, 1995.
(f) The Company has not waived any statute of
limitation with respect to Taxes (which waiver is currently in
effect) or agreed to any extension of time with respect to a Tax
assessment or deficiency (which has not yet been paid) or
extended the time to file any income or other material Tax Return
(which Tax Return has not subsequently been filed).
(g) The Company is not a party to any income tax
allocation, tax indemnity or tax sharing agreement or
arrangement, nor has the Company ever joined in the filing of a
consolidated, combined, unitary or other group Tax Return with
any other corporation since January 28, 1995. The Company could
not have any liability for Taxes of any other corporation, person
or entity under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law) by contract, or
otherwise that, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
(h) The Company has complied in all material respects
with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and, except to the extent of any
reserves established in accordance with GAAP on the financial
statements included in the Company SEC Documents has, within the
time and manner prescribed by law, withheld and paid over to the
proper Governmental Entity all amounts required to be withheld
and paid over under all applicable laws.
(i) For purposes of this Agreement: "Taxes" shall
mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
income, gross receipts, excise, stamp, real or personal property,
ad valorem, withholding, workers compensation, estimated, social
security, unemployment, occupation, sales, use, service, service
use, license, net worth, payroll, franchise, severance, transfer,
21
recording or other taxes, assessments or charges imposed by any
Governmental Entity and any interest, penalties, or additions to
tax attributable thereto; and "Tax Return" shall mean 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, including any information
return or report with respect to backup withholding and other
payments to third parties, claim for refund, amended return or
declaration of estimated Tax.
Section 3.14 Environmental Matters.
(a) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as
disclosed in Section 3.14(a) of the Disclosure Schedule, the
Company is in compliance in all respects with all applicable
Environmental Laws (as later defined) which compliance includes
(i) the possession of permits, licenses, registrations,
variances, exemptions, orders and other governmental
authorizations and financial assurances required under applicable
Environmental Laws for the Company to operate its businesses as
currently conducted, and (ii) compliance with the terms and
conditions thereof, except in all cases above where such
non-compliance would not have a Material Adverse Effect on the
Company.
(b) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as
disclosed in Section 3.14(b) of the Disclosure Schedule, (i)
there are no Environmental Claims (as later defined) pending or,
to the knowledge of the Company, threatened, against the Company
that would result in a Material Adverse Effect on the Company,
(ii) the Company has not received any written request for
information under any Environmental Law (as later defined) from
any Governmental Entity with respect to any actual or alleged
environmental contamination which has not been remediated or
otherwise resolved and the remediation of which contamination or
the resolution of the request would have a Material Adverse
Effect on the Company; (iii) neither the Company, nor to the
knowledge of the Company, any Governmental Entity, is conducting
or has conducted (or, to the knowledge of the Company, is
threatening to conduct) any environmental remediation or
investigation which would result in a Material Adverse Effect on
the Company under any Environmental Law; and (iv) the Company is
not subject to the order of any Governmental Entity under any
Environmental Law or relating to the remediation of any Hazardous
Substance (as later defined) contamination.
(c) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as
22
disclosed in Section 3.14(c) of the Disclosure Schedule, (i) to
the knowledge of the Company, there is no friable
asbestos-containing material in or on any real property currently
or formerly owned or leased by the Company, (ii) there are no
polychlorinated biphenyls in any equipment currently or formerly
owned or leased by the Company and (iii) there are and, to the
knowledge of the Company, have been no underground storage tanks
(whether or not required to be registered under any applicable
law), dumps, landfills, lagoons, hydraulic lifts, surface
impoundments, injection xxxxx or other land disposal units in or
on any property currently or, to the knowledge of the Company,
formerly owned or leased by the Company where in each case, the
ownership or leasing of which would result in a Material Adverse
Effect on the Company.
(d) Except as expressly disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as
disclosed in Section 3.14(d) of the Disclosure Schedule, to the
knowledge of the Company, there have been no Releases (as later
defined) of Hazardous Substances (as later defined) at any of the
property currently or formerly owned or leased by the Company, or
of Hazardous Substances which were generated, stored, disposed of
or transported by the Company, which could form the basis of any
Environmental Claim against the Company, or to the knowledge of
the Company, against any person or entity whose liability for any
Releases the Company has or may have retained or assumed either
contractually or by operation of law, which would have a Material
Adverse Effect on the Company.
(e) As used in this Agreement:
(i) the term "Environmental Claim" means any
claim, action, investigation or written notice to the Company by
any person or entity alleging potential liability or
responsibility of the Company (including, without limitation,
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, personal
injuries, or penalties) arising out of, based on, or resulting
from (a) the presence, or release into the environment, of any
Hazardous Substance at any location, whether or not currently or
formerly owned or leased by the Company or (b) circumstances
forming the basis of any violation or alleged violation of any
applicable Environmental Law;
(ii) the term "Environmental Law" means all
federal, state, local and foreign laws, rules, regulations,
ordinances, decrees, orders and other binding legal
requirements, as in effect as of the date of this Agreement,
relating to pollution or protection of the environment or human
health in any manner applicable to the Company, including without
23
limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous
Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances;
(iii) the term "Hazardous Substance" means any
materials, chemicals, pollutants, contaminants, hazardous wastes,
toxic substances or radioactive materials regulated under any
Environmental Law, and oil and petroleum products; and
(iv) the term "Release" means any release,
spill, emission, discharge, leaking, pumping, injection, deposit,
disposal, dispersal, leaching or migration into the indoor or
outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata).
Section 3.15 No Default. Except as expressly disclosed in
the Company SEC Documents filed prior to the date of this
Agreement or as disclosed in Section 3.15 of the Disclosure
Schedule the business of the Company is not being conducted in
default or violation of any term, condition or provision of (a)
its Articles of Incorporation or Bylaws, (b) any Material Company
Agreement, or (c) any federal, state, local or foreign law,
statute, regulation, rule, ordinance, judgement, decree, writ,
injunction, franchise, permit or license or other governmental
authorization or approval applicable to the Company, excluding
from the foregoing clauses (b) or (c), defaults or violations
that would not have a Material Adverse Effect on the Company or
would not materially impair the ability of the Company to
consummate the Merger or the other transactions contemplated by
this Agreement.
Section 3.16 Opinion of Financial Advisors. The Board of
Directors of the Company has received an opinion from DLJ to the
effect that, as of the date of this Agreement, the Merger
Consideration is fair to the stockholders of the Company (other
than stockholders who are Affiliates of the Company) from a
financial point of view, and a true and correct copy of such
opinion has been delivered to Parent.
Section 3.17 Brokers. Except for the fees payable by the
Company to DLJ (a true and complete copy of whose engagement
letter has been provided to Parent), no broker, finder or
investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
24
Section 3.18 Property. The Company has (i) good and valid
title to, or in the case of leased property, has valid leasehold
interests in all real and personal, whether tangible or
intangible, properties and assets, and (ii) all rights, licenses,
easements and other contractual rights, in the case of each of
clause (i) and (ii) above, as necessary to conduct the business
of the Company as currently conducted, except to the extent the
failure of this representation and warranty to be true would not
have a Material Adverse Effect on the Company.
Section 3.19 Board Recommendations. The Board of
Directors of the Company, at a meeting duly called and held, has
by a majority vote of those directors present (i) determined that
this Agreement and the transactions contemplated by this
Agreement are fair to and in the best interests of the
stockholders of the Company and has approved the same, and (ii)
resolved to recommend that the holders of the shares of Company
Common Stock approve this Agreement and the transactions
contemplated in this Agreement.
Section 3.20 Labor Matters. Except as expressly disclosed
in the Company SEC Documents filed prior to the date of this
Agreement, the Company is not a party to or bound by any
collective bargaining agreement or other labor union contract
applicable to persons employed by the Company nor, to the
knowledge of the Company, as of the date of this Agreement, are
there any activities or proceedings of any labor union to
organize any such employees. Except as expressly disclosed in
the Company SEC Documents filed prior to the date of this
Agreement, as of the date of this Agreement, (i) there are no
current union representation questions involving employees of the
Company which have, had or would have a Material Adverse Effect
on the Company, (ii) there are no unfair labor practice charges
or complaints pending against the Company before the National
Labor Relations Board and (iii) there is no labor strike,
lockout, organized slowdown or organized work stoppage in effect
or, to the knowledge of the Company, threatened against the
Company.
Section 3.21 Year 2000. Except as disclosed in Section
3.21 of the Disclosure Schedule, to the Company s knowledge,
there are no material impediments to the Company being year 2000
compliant by December 31, 1999 (i.e., that products, hardware,
software and other date-sensitive equipment manufactured, sold,
owned, leased, licensed or used by the Company will be capable of
correctly storing and processing date data (including, but not
limited to, calculating, comparing and sequencing) accurately
prior to, during and after the calendar year 2000 when used,
assuming that all third party products, hardware, software and
25
other date-sensitive equipment used in combination therewith are
capable of properly exchanging date data) except to the extent
the failure of this representation to be true would not have a
Material Adverse Effect on the Company.
Section 3.22 Insurance. The Company is covered by
insurance in scope and amount customary and reasonable for the
businesses in which it is engaged. Each insurance policy to
which the Company is a party is in full force and effect and will
not require any consent as a result of the consummation of the
Merger. The Company is not in material breach or default
(including with respect to the payment of premiums or the giving
of notices) under any insurance policy to which it is a party,
and no event has occurred which, with notice or the lapse of
time, would constitute such a material breach or default by the
Company or would permit termination, modification or
acceleration, under such policies. The Company has not received
any written notice from the insurer disclaiming coverage or
reserving rights with respect to any material claim or any such
policy in general.
Section 3.23 Accounts Receivable; Inventory.
(a) Subject to any reserves set forth in the balance
sheet of the Company included in the most recent Company SEC
Documents (the "Company Balance Sheet"), the accounts receivable
shown in the Company Balance Sheet arose in the ordinary course
of business, were not, as of the date of the Company Balance
Sheet, subject to any material discount, contingency, claim of
offset or recoupment or counterclaim, and represented, as of the
date of the Company Balance Sheet, bona fide claims against
debtors for sales, leases, licenses and other charges. All
accounts receivable of the Company arising after the date of the
Company Balance Sheet through the date of this Agreement arose in
the ordinary course of business and, as of the date of this
Agreement, are not subject to any material discount, contingency,
claim of offset or recoupment or counterclaim, except for normal
reserves consistent with past practice. The amount carried for
doubtful accounts and allowances disclosed in the Company Balance
Sheet is believed by the Company as of the date of the Company
Balance Sheet to be sufficient to provide for any material losses
which may be sustained or failure to realize the accounts
receivable shown in the Company Balance Sheet.
(b) To the knowledge of the Company, as of the date of
the Company Balance Sheet, the inventories shown on the Company
Balance Sheet consisted in all material respects of items of a
quantity and quality usable or saleable in the ordinary course of
business. All of such inventories were acquired by the Company
in the ordinary course of business and, as of the date of this
26
Agreement, have been replenished by the Company in all material
aspects in the ordinary course of business consistent with past
practices. All such inventories are valued on the Company
Balance Sheet in accordance with GAAP, applied on a basis
consistent with the Company s past practices, and, except as
disclosed in Section 3.23(b) of the Disclosure Schedule,
provision has been made or reserves have been established on the
Company Balance Sheet, in each case in an amount believed by the
Company as of the date of this Agreement to be adequate in all
material respects, for all slow-moving, obsolete or unusable
inventories.
Section 3.24 Real Estate Matters.
(a) The Company has good, valid, and insurable title
to: (i) the fee interest in the real property listed (together
with all agreements having a bearing on the Company s costs
therewith, or occupancy or operation thereof) in Section
3.24(a)(i) of the Disclosure Schedule (the "Owned Property"), and
(ii) all of the leasehold estates in all real properties listed
(together with all agreements having a bearing on the Company s
costs therewith, or occupancy or operation thereof) in Section
3.24(a)(ii) of the Disclosure Schedule (collectively, the "Leased
Properties or individually, a "Leased Property"; the Owned
Property and Leased Properties being sometimes collectively
referred to in this Agreement as the "Real Properties" or
individually as a "Real Property"), in each case free and clear
of all mortgages, liens, security interests, easements,
covenants, rights-of-way, subleases and other similar
restrictions and encumbrances ("Encumbrances" or individually, an
"Encumbrance"), except for Encumbrances (x) set forth in the
copies of title commitments delivered to Parent for the Real
Properties listed in Sections 3.24(a)(i) and 3.24(a)(ii) of the
Disclosure Schedule or (y) which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse
Effect on the Company. The Company neither owns, leases,
licenses, uses, occupies or otherwise holds any interest in any
real estate other than the Real Properties.
(b) Except to the extent that the inaccuracy of any of
the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on the Company: (i)
each of the agreements by which the Company has obtained a
leasehold interest in a Leased Property (individually, a "Lease"
and collectively, the "Leases") is in full force and effect in
accordance with its respective terms and the Company is the
holder of the lessee's or tenant's interest thereunder; to the
knowledge of the Company, there exists no default under any Lease
27
and no circumstance exists which, with the giving of notice, the
passage of time or both, is reasonably likely to result in such a
default including, without limitation, the transactions
contemplated by this Agreement; the Company has complied with and
timely performed all conditions, covenants, undertakings and
obligations on its part to be complied with or performed under
each of the Leases; the Company has paid all rents and other
charges to the extent due and payable under the Leases; (ii)
other than as described in Section 3.24(b) of the Disclosure
Schedule, there are no leases, subleases, licenses, concessions
or any other contracts or agreements granting to any person or
entity other than the Company any right to the possession, use,
occupancy or enjoyment of any Real Property or any portion
thereof; (iii) the current operation and use of the Real
Properties does not violate any statute, law, regulation, rule,
ordinance, permit, requirement, order or decree now in effect;
the use being made of each Real Property at present is in
conformity with the certificate of occupancy, if any, issued for
such Real Property; (iv) there are no existing, or to the
knowledge of the Company, threatened, condemnation or eminent
domain proceedings (or proceedings in lieu thereof) affecting the
Real Properties or any portion thereof; (v) no default or breach
exists under any of the covenants, conditions, restrictions,
rights-of-way, or easements, if any, affecting all or any portion
of a Real Property, which are to be performed or complied with by
the Company; and (vi) all the buildings, structures, equipment
and other tangible assets of the Company (whether owned or
leased) are in normal operating condition (normal wear and tear
excepted) and are fit for use in the ordinary course of business
of the Company.
(c) The Company is not obligated under or bound by any
option, right of first refusal, purchase contract, or other
contractual right or obligation to acquire, use or operate any
real property not listed in Sections 3.24(a)(i) or 3.24(a)(ii) of
the Disclosure Schedule nor to sell or dispose of any Real
Property or any portions thereof or interests therein.
(d) Other than as disclosed in Section 3.24(d) of the
Disclosure Schedule, the Company has not transferred, sold,
terminated or otherwise disposed of any real property interests
for which the Company has any continuing liability with respect
to such real property.
(e) Any error, misstatement, omission or inaccuracy
with respect to the representations set forth in this Section
3.24, viewed as if it were individually made without reference to
Material Adverse Effect, which either individually or
collectively would result in a material ongoing impairment in the
28
operation of, or material adverse financial arrangements with
respect to, one or more of the Real Properties as a warehouse, a
specialty store or a department store, as the case may be, shall
constitute a Material Adverse Effect.
(f) The Company has provided to Parent prior to the
execution of this Agreement title commitments for all Real
Properties listed in Sections 3.24(a)(i) or 3.24(a)(ii) of the
Disclosure Schedule except with respect to the downtown Salt Lake
City auto service center.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition, jointly and severally, represent and
warrant to the Company as follows:
Section 4.1 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws
of Delaware and Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Utah. Each of Parent and Acquisition has all requisite
corporate power and corporate authority to own, lease and operate
its respective properties and to carry on its respective business
as now being conducted except where the failure to have such
power or authority would not have a Material Adverse Effect on
Parent or Acquisition, taken as a whole, or materially impair or
delay the consummation of the transactions contemplated by this
Agreement.
Section 4.2 Authorization; Validity of Agreement. Each
of Parent and Acquisition has the requisite corporate power and
corporate authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The
execution and delivery by Parent and Acquisition of this
Agreement and the consummation of the transactions contemplated
by this Agreement have been duly authorized by the respective
Boards of Directors of Parent and Acquisition and no other
corporate proceedings on the part of Parent or Acquisition are
necessary to authorize the execution and delivery of this
Agreement by Parent and Acquisition and the consummation of the
transactions contemplated by this Agreement. This Agreement has
been duly executed and delivered by Parent and Acquisition.
Assuming due authorization, execution and delivery of this
Agreement by the Company, this Agreement is a valid and binding
obligation of Parent and Acquisition, enforceable against each of
them in accordance with its terms, except that such enforcement
may be subject to or limited by (i) bankruptcy, insolvency or
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other similar laws, now or later in effect, affecting creditors'
rights generally, and (ii) the effect of general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 4.3 Consents and Approvals; No Violations.
Except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable
requirements of, the Exchange Act and the HSR Act and the filing
and recordation of the Articles of Merger as required by the
URBCA, no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the
consummation by Parent or Acquisition of the transactions
contemplated by this Agreement. Neither the execution and
delivery of this Agreement by Parent or Acquisition nor the
consummation by Parent or Acquisition of the transactions
contemplated by this Agreement nor compliance by Parent or
Acquisition with any of the provisions of this Agreement will (i)
conflict with or violate any provision of the Articles of
Incorporation or Certificate of Incorporation, as the case may
be, or Bylaws, of Parent or Acquisition or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or Acquisition or any of their respective
properties or assets, except in the case of clause (ii) where
such violations would not have a Material Adverse Effect on
Parent and Acquisition taken as a whole.
Section 4.4 Information in Registration Statement and
Proxy Statement. None of the information supplied by Parent or
Acquisition for inclusion in the Registration Statement and the
Proxy Statement will, at the date mailed to stockholders and at
the time of the Special Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated in the Registration Statement and the Proxy Statement or
necessary in order to make the statements in the Registration
Statement and the Proxy Statement, in light of the circumstances
under which they are made, not misleading.
Section 4.5 Parent Common Stock.
(a) The authorized capital stock of Parent consists of
(i) 25,000,000 shares of Preference Stock, including ESOP
Preference Shares, par value $0.50 per share, of which 633,273
were issued and outstanding as of July 31, 1999 and (ii)
1,000,000,000 shares of common stock, par value $0.50 per share,
of which 331,739,531 shares were issued and outstanding and
138,715,963 shares were held in treasury by Parent as of July 31,
1999. All the shares of Parent Common Stock will, when issued
pursuant to this Agreement, be duly authorized, validly issued,
fully paid and non-assessable.
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(b) The authorized capital stock of Acquisition
consists of 1,000 shares of common stock, par value $1.00 per
share. The issued capital stock consists of 100 shares of common
stock, all or which are owned by Parent on the date of this
Agreement. Acquisition was incorporated in the State of Utah on
September 7, 1999, is validly existing and in good standing under
the laws of the State of Utah and has engaged in no business and
incurred no liabilities except as contemplated by this Agreement.
All the outstanding shares of Acquisition's capital stock are
duly authorized, validly issued, fully paid and non-assessable.
(c) Since January 31, 1999, each of Parent and its
subsidiaries that is required to make filings under the
Securities Act or the Exchange Act has filed with the SEC all
forms, reports and documents required to be filed by it pursuant
to the Securities Act and the Exchange Act, all of which, as of
their respective filing dates, complied in all material respects
with all applicable requirements of the Securities Act and the
Exchange Act. Parent has heretofore made available to the
Company through XXXXX a true and complete copy of (i) each
registration statement, final prospectus and definitive proxy
statement filed by Parent or any of its subsidiaries with the SEC
since January 31, 1999, and (ii) each report filed by Parent or
any of its subsidiaries with the SEC since January 31, 1999 (the
documents referred to in clauses (i) and (ii) being hereinafter
referred to as the "Parent Filings"). None of the Parent Filings
as of the respective dates on which they were filed with the SEC
contained any untrue statement of a material fact or omitted to
state a material fact necessary to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Parent shall use all reasonable efforts to obtain,
prior to the effective date of the Registration Statement, all
necessary state securities law or "blue sky" permits and
approvals required to carry out the transactions contemplated by
this Agreement and the Merger, and will pay all expenses incident
thereto.
Section 4.6 Absence of Certain Changes. Except as
disclosed in the Parent Filings filed prior to the date of this
Agreement, since January 31, 1999 Parent has conducted its
businesses and operations only in the ordinary course and
consistent with past practice, and there have not occurred any
events or changes (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise)
having or which would have a Material Adverse Effect on Parent.
Section 4.7 No Undisclosed Liabilities. Except as
disclosed in the Parent Filings filed prior to the date of this
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Agreement and except for liabilities and obligations incurred in
the ordinary course of business and consistent with past
practice, since January 31, 1999, Parent has not incurred any
liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would have, a Material
Adverse Effect on Parent, or that would be required to be
reflected or reserved against in the financial statements of
Parent (including notes thereto) prepared in accordance with
GAAP.
Section 4.8 Litigation; Compliance with Law.
(a) Except as disclosed in the Parent Filings filed
prior to the date of this Agreement, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge
of Parent, threatened, against or affecting Parent or any
Affiliate of Parent or any of their respective properties which,
if determined adversely to Parent or any Affiliate of Parent,
would have a Material Adverse Effect on Parent or would prevent
or delay Parent from consummating the Merger or the other
transactions contemplated by this Agreement.
(b) Except as disclosed in the Parent Filings filed
prior to the date of this Agreement, Parent and each Affiliate of
Parent are in compliance in all material respects with all laws,
statutes, regulations, rules, ordinances, judgments, decrees,
orders, writs and injunctions, of any court or Governmental
Entity relating to any of the property owned, leased or used by
it, or applicable to its business, including, but not limited to,
employment and employment practices, labor relations,
occupational safety and health, environmental, tax, interstate
commerce and antitrust laws, except for such noncompliance which
would not have a Material Adverse Effect on Parent. Except as
set forth in the Parent Filings filed prior to the date of this
Agreement, neither Parent, any Affiliate of Parent nor any of
their respective properties is subject to any judgment, decree,
order, writ or injunction having, or which would have, a Material
Adverse Effect on Parent, or which would prevent or delay the
consummation of the transactions contemplated by this Agreement.
(c) Parent and each Affiliate of Parent holds all
licenses, permits, variances and approvals of Governmental
Entities necessary for the lawful conduct of its businesses as
currently conducted except where the failure to hold such
licenses, permits, variances or approvals would not have a
Material Adverse Effect on Parent.
Section 4.9 No Default. Except as disclosed in the
Parent Filings filed prior to the date of this Agreement, the
business of Parent and each Affiliate of Parent is not being
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conducted in default or violation of any term, condition or
provision of (a) its Certificate of Incorporation, Articles of
Incorporation or Bylaws or (b) any federal, state, local or
foreign law, statute, regulation, rule, ordinance, judgement,
decree, writ, injunction, franchise, permit or license or other
governmental authorization or approval applicable to Parent or
such Affiliate, excluding from the foregoing, defaults or
violations that would not have a Material Adverse Effect on
Parent or would not materially impair the ability of Parent to
consummate the Merger or the other transactions contemplated by
this Agreement.
Section 4.10 Property. Parent and each Affiliate of
Parent has good and valid title to, or in the case of leased
property, has valid leasehold interests in all real and personal,
whether tangible or intangible, properties and assets necessary
to conduct the business of Parent or such Affiliate as currently
conducted, except to the extent the failure of this
representation and warranty to be true would not have a Material
Adverse Effect on Parent.
Section 4.11 Year 2000. To Parent s knowledge, there are
no material impediments to Parent and each Affiliate of Parent
being year 2000 compliant by December 31, 1999 (i.e., that
products, hardware, software and other date-sensitive equipment
manufactured, sold, owned, leased, licensed or used by Parent and
each Affiliate of Parent will be capable of correctly storing and
processing date data (including, but not limited to, calculating,
comparing and sequencing) accurately prior to, during and after
the calendar year 2000 when used, assuming that all third party
products, hardware, software and other date-sensitive equipment
used in combination therewith are capable of properly exchanging
date data) except to the extent the failure of this
representation to be true would not have a Material Adverse
Effect on Parent.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The
Company covenants and agrees that, except as (i) provided to the
contrary in this Agreement, (ii) disclosed in Section 5.1 of the
Disclosure Schedule or (iii) approved in writing by Parent (which
approval Parent shall not unreasonably withhold, delay, or
condition), after the date of this Agreement and prior to the
Effective Time:
(a) the business of the Company shall be conducted
only in the ordinary course consistent with the requirements of
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law and past practice and, to the extent consistent therewith,
the Company shall use its commercially reasonable efforts to
preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees,
creditors and business partners, and the Company shall use its
reasonable efforts to cause the key executive employees of the
Company (such individuals being later collectively referred to as
the "Key Executives" or individually as a "Key Executive" (which
Key Executives are identified and listed on Section 5.1 of the
Disclosure Schedule) to continue to perform their duties as
currently performed for the Company;
(b) the Company will not, directly or indirectly,
split, combine or reclassify the outstanding Company Common
Stock;
(c) the Company shall not: (i) amend its Articles of
Incorporation or Bylaws; (ii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property
with respect to its capital stock; (iii) issue, sell, transfer,
pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire,
any shares of the capital stock of any class of the Company,
other than issuances pursuant to the exercise of Company Options
and Company benefit plan obligations disclosed in Section 3.9(a)
of the Disclosure Schedule, in each case which are outstanding on
the date hereof; (iv) transfer, lease, license, sell, mortgage,
pledge, dispose of or encumber any material assets other than in
the ordinary and usual course of business; or (v) redeem,
purchase or otherwise acquire directly or indirectly any of its
capital stock;
(d) the Company shall not, except as required by law
or as otherwise expressly provided elsewhere in this Agreement:
(i) grant any increase in the compensation payable or to become
payable by the Company to any of the Key Executives, key
employees or directors or (A) adopt any new, or (B) amend or
otherwise increase, or accelerate the payment or vesting of the
amounts payable or to become payable under any existing, bonus,
incentive compensation, deferred compensation, severance, profit
sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan agreement, program,
fund, policy, practice or arrangement; or (ii) enter into any, or
amend any existing, employment or severance agreement with or,
except in accordance with the existing written policies of the
Company, grant any severance or termination pay to any officer,
director or employee of the Company; provided, however, that the
Company may, in the ordinary course of business, consistent with
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past practice, enter into termination agreements or arrangements
with employees other than any Key Executive (collectively, the
"Non-Key Employees"), so long as the aggregate value of such
agreements and arrangements does not exceed the aggregate amounts
that are payable under the Company's present Severance Pay Plan
listed in Section 3.9(a) of the Disclosure Schedule by more than
$100,000, and with respect to any individual Non-Key Employee
does not have a value not in excess of $10,000.
(e) the Company shall not modify, amend or terminate
any of the Material Company Agreements or waive, release or
assign any material rights or claims with respect to such
Material Company Agreements, except in the ordinary course of
business and consistent with past practice;
(f) the Company shall not permit any material
insurance policy naming it as a beneficiary or a loss payable
payee to be canceled or terminated without notice to and consent
of Parent, unless equivalent replacement policies, without lapse
of coverage, shall be put in place;
(g) the Company shall not: (i) except as described in
Section 5.1of the Disclosure Schedule, incur or assume any
indebtedness for borrowed money or enter into any capital leases
or other arrangements with similar economic effects except
pursuant to the Existing Credit Documents (as later defined);
(ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person; (iii) make any loans, advances
or capital contributions to, or investments in, any other person
(other than customary loans or advances to employees in
accordance with past practice); or (iv) except as described in
Section 5.1 of the Disclosure Schedule, enter into any material
commitment or transaction (including, but not limited to, any
borrowing, capital expenditure or purchase, sale or lease of
assets);
(h) the Company shall not settle or compromise any
claim, liability or obligation which is described in the Company
SEC documents filed prior to the date hereof and the Company
shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, (x)
to the extent reflected or reserved against in, or contemplated
by, the Company Balance Sheet (or the notes thereto), (y)
incurred in the ordinary course of business and consistent with
past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims,
liabilities or obligations referred to in this clause (z) are
35
legally required to be paid and are also not otherwise payable in
accordance with clauses (x) or (y) above, the Company will notify
Parent in writing if such claims, liabilities or obligations
exceed, individually or in the aggregate, $200,000 in value,
reasonably in advance of their payment), provided that
notwithstanding anything to the contrary set forth in this
Section 5.1(h), the Company shall not settle or compromise any
claim or litigation brought by any stockholder of the Company
making such claim or bringing such litigation as such a
stockholder, either individually or on behalf of any class;
(i) the Company will not adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the
Company (other than with respect to the Merger);
(j) the Company will not change any method of
accounting or any accounting principle or practice, except for
changes required by a concurrent change in GAAP;
(k) the Company will not take, or agree to commit to
take, any action that would make any representation or warranty
of the Company contained in this Agreement inaccurate at, or as
of any time prior to, the Effective Time;
(l) the Company shall (i) use reasonable efforts to
maintain or otherwise preserve its rights in all of the
Intellectual Property owned by the Company that is material to
the business and operations of the Company and use reasonable
efforts not to permit any of such Intellectual Property to lapse,
expire or go abandoned by any action or inaction on its part;
(ii) diligently and responsively prosecute all applications or
registrations before whichever Governmental Entity the same may
be pending; and (iii) not allow any rights with respect to
trademarks material to the Company to go abandoned for failure to
timely file new applications for registrations corresponding to
the subject matter thereof;
(m) the Company shall not voluntarily make or agree to
make any material change in any Tax accounting method, waive or
consent to the extension of any statute of limitations with
respect to income or other material Taxes, or consent to any
material assessment of Taxes, or settle any judicial proceeding
affecting any material amount of Taxes;
(n) the Company shall not fail to take all reasonable
steps in defense of any claim (which would be disclosable by the
Company in a filing pursuant to the Exchange Act or the
Securities Act) asserted against the Company in any proceedings
before any Governmental Entity; and
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(o) Except as otherwise expressly permitted in this
Agreement, the Company shall not (i) issue, sell or otherwise
distribute or dispose of any shares of Company Common Stock to,
(ii) become indebted in respect of borrowed money or make any
commitment with respect to borrowed money from, (iii) sell (other
than sales of retail merchandise), distribute, mortgage, license,
lease or otherwise dispose of any assets of the Company to, or
(iv) enter into any other such agreement, arrangement or
transaction involving the Company s assets or finances with any
officer, director or legal or beneficial owner of more than 5% of
the Company Common Stock and their affiliates, without the prior
consent of Parent, which consent is in Parent s sole and absolute
discretion;
(p) the Company shall not make, or commit to make, any
capital expenditures in excess of $100,000 for each such
individual expenditure or $300,000 in the aggregate;
(q) the Company shall not amend, modify, supplement or
terminate any agreement listed in Sections 3.24(a)(i) and
3.24(a)(ii) of the Disclosure Schedule with respect to Real
Property or enter into any new agreement or arrangement with
respect to real property; except Company may, with Parent s
written consent, which consent may not be unreasonably withheld,
delayed or conditioned, enter into and execute subordination
agreements, estoppel certificates and similar instruments
required to be executed pursuant to the terms of the agreements
listed in Sections 3.24(a)(i) or 3.24(a)(ii) with respect to the
Real Property leases;
(r) the Company will not enter into any agreement,
contract or other commitment with any beneficial owner of more
than 5% of the Company Common Stock without Parent s consent,
which consent is in Parent s sole and absolute discretion; and
(s) the Company will not enter into an agreement,
contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Section 5.2 No Solicitations.
Neither the Company nor any of its Affiliates shall
(and the Company shall use its best efforts to cause its
officers, directors, employees, representatives and agents
(collectively, "Representatives"), including, but not limited to,
investment bankers, attorneys and accountants, not to), directly
or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group
37
(other than Parent or any of its Affiliates or Representatives)
concerning any merger, consolidation, tender offer, exchange
offer, sale of a material portion or product line of the assets
and business of the Company (whether in one or more
transactions), sale of shares of capital stock or debt
securities, restructuring, recapitalization, or similar
transactions involving the Company or any division or operating
or principal business unit of the Company (whether in one or more
transactions) (an "Acquisition Proposal"). The Company further
will, and will cause its Representatives to, immediately cease
any existing activities, discussions or negotiations with any
parties previously conducted with respect to any of the
foregoing.
Section 5.3 Access to Information.
(a) From the date of this Agreement until the
Effective Time, the Company shall afford to Parent and the
Parent s Representatives reasonable access upon reasonable prior
notice to all of its books, records, files, documents and Company
Agreements and, during such period, the Company shall furnish
promptly to Parent (i) a copy of each report, schedule,
registration statement and other document filed or received by it
during such period pursuant to the requirements of the federal
securities laws and (ii) such other information including,
without limitation, copies of books, records, files, documents
and Company Agreements, concerning the Company's business,
properties and personnel as Parent may reasonably request;
provided, that Parent and Parent s Representatives will conduct
all such inspections in a reasonable manner and so as to not
unreasonably interfere with the conduct of the business or
affairs of the Company. The Company shall provide Parent and
Parent s Representatives with reasonable access upon reasonable
prior notice to the Key Executives and the Key Executives shall
reasonably cooperate with Parent and Parent s Representatives and
provide Parent and Parent s Representatives with such information
regarding the Company as may be reasonably requested. The
Company shall in addition use its reasonable efforts to provide
Parent and Parent s Representatives with access to the
Representatives, commercial bankers, actuaries, trustees, outside
Plan administrators and consultants of the Company and to use its
best efforts to cause such Representatives, commercial bankers,
actuaries, trustees, outside Plan administrators and consultants
to provide Parent and Parent s Representatives with such
information regarding the Company as may be reasonably requested.
Parent and Parent s Representatives shall use reasonable efforts
to conduct any activities pursuant to this Section 5.3(a) in a
manner that does not interfere in any material respect with the
38
management and conduct of the Company's operations. The
obligations of the Company under this Section 5.3(a) are subject
to any and all limitations imposed by law.
(b) Until the Effective Time, Parent and Acquisition
will, with respect to the information furnished to Parent by or
on behalf of the Company, and the Company will, with respect to
the information furnished to the Company by or on behalf of
Parent or Acquisition, have the same confidentiality obligations
as set forth in the letter agreement dated August 11, 1999
between Parent and the Company.
Section 5.4 Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions
provided in this Agreement, each of the Parties shall use its
reasonable best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including,
without limitation, (i) to comply promptly with all legal
requirements which may be imposed on it with respect to this
Agreement and the transactions contemplated by this Agreement
(which actions shall include, without limitation, furnishing all
information required by applicable law in connection with
approvals of or filings with any Governmental Entity), (ii) to
satisfy the conditions precedent to the obligations of such
Party, (iii) to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or
other public or private third party required to be obtained or
made by Parent, Acquisition, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any
action contemplated by this Agreement, (iv) to effect all
necessary registrations and filings and (v) to take any action
reasonably necessary to vigorously defend, lift, mitigate,
rescind the effect of any litigation or administrative proceeding
adversely affecting the Merger or this Agreement, including
promptly appealing any adverse court or administrative decision.
(b) Subject to appropriate confidentiality
protections, each of the Parties will furnish to the other
Parties such necessary information and reasonable assistance as
such other Parties may reasonably request in connection with the
foregoing and will provide the other Parties with copies of all
filings made by such Party with any Governmental Entity and, upon
request, any other information supplied by such Party to a
Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement. Upon the terms and
subject to the conditions provided in this Agreement, in case at
any time after the Effective Time any further action is necessary
39
or desirable to carry out the purposes of this Agreement, the
proper officers and/or directors of the Parties shall use their
reasonable best efforts to take or cause to be taken all such
necessary action.
(c) Without limiting the generality of the
undertakings in this Section 5.4, Parent and the Company shall
take or cause to be taken the following actions: (i) provide
promptly to Governmental Entities with regulatory jurisdiction
over enforcement of any applicable antitrust laws (a "Government
Antitrust Entity") information and documents requested by any
Government Antitrust Entity or necessary, proper or advisable to
permit consummation of the Merger and the transactions
contemplated by this Agreement; (ii) without in any way limiting
the provisions of Section 5.4(c)(i), file any Notification and
Report Form and related material required under the HSR Act as
soon as practicable and in any event not later than five (5)
business days after the date hereof, and thereafter use its
reasonable efforts to certify as soon as practicable its
substantial compliance with any requests for additional
information or documentary material that may be made under the
HSR Act; and (iii) Company and Parent shall take promptly, in the
event that any permanent or preliminary injunction or other order
is entered or becomes reasonably foreseeable to be entered in any
antitrust proceeding that would make consummation of the Merger
in accordance with the terms of this Agreement unlawful or that
would prevent or delay consummation of the Merger or the other
transactions contemplated by this Agreement, any and all steps
(including the appeal thereof or the posting of a bond) necessary
to vacate, modify or suspend such injunction or order so as to
permit such consummation on a schedule as close as possible to
that contemplated by this Agreement. Each of the Company and
Parent will provide to the other copies of all correspondence
between it (or its advisors) and any Government Antitrust Entity
relating to this Merger or any of the matters described in this
Section 5.4(c).
Section 5.5 Employee Benefits.
(a) Fair and Non-Discriminatory Treatment. Except as
provided in Section 5.5(b) and to the extent Company employees
timely complete any required enrollment forms, on and after the
Effective Time, Parent shall, and shall cause its Affiliates
(including the Surviving Corporation) to, provide on an
uninterrupted basis employee benefits (including, if applicable,
group medical and dental, life insurance, defined contribution
retirement plan, short- and long-term disability, severance,
vacation and sick pay) for nonbargaining unit employees of the
Company as of the Effective Time (collectively, the "Company
Employees" or individually, a "Company Employee") which are, in
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the aggregate, no less favorable than (i) the employee benefits
they were provided immediately prior to the Effective Time or, at
Parent's option, (ii) the employee benefits provided to similarly
situated employees of Parent and its Affiliates.
(b) Retirement Plans.
(1) The ZCMI Employee Retirement Plan (the "ZCMI
Retirement Plan") in effect at the Effective Time shall continue
until such time as it may be amended, terminated or merged into
another qualified defined benefit plan. On and after the
Effective Time, Parent shall take all actions necessary to ensure
that the benefits calculated for Company Employees pursuant to
the terms of the ZCMI Retirement Plan (i) credit all service of a
Company Employee with the Parent and its Affiliates after the
Effective Time for purposes of eligibility and vesting under such
plan (including eligibility for early or normal retirement) and
(ii) for periods during which (a) a defined benefit plan is
maintained by the Parent or its Affiliates for similarly situated
employees of Parent and its Affiliates, but (b) Company Employees
are not covered by such defined benefit plan, credit service for
such periods with the Parent or its Affiliates after the
Effective Time for purposes of accruing a retirement benefit
under the ZCMI Retirement Plan; and
(2) At all times during which Company Employees
are covered by a defined benefit plan (other than the ZCMI
Retirement Plan) maintained by Parent or any of its Affiliates,
Parent shall take all actions necessary to provide Company
Employees with (1) credit under the defined benefit plan for past
service with the Company for eligibility and vesting purposes
(including eligibility for early or normal retirement) and
otherwise in accordance with the terms of such defined benefit
plan, and (2) the retirement benefit accrued under such defined
benefit plan based solely on their service after the Effective
Time, and without any offset for benefits accrued under the ZCMI
Retirement Plan. Notwithstanding the foregoing, a period of
service shall be credited to a Company Employee for the purpose
of accruing a benefit under either the ZCMI Retirement Plan or
another defined benefit plan providing accruals for similarly
situated employees of the Parent and its Affiliates, but not
under both such plans.
(c) Past Service Credit. Except with respect to the
ZCMI Retirement Plan, all service by Company Employees with the
Company shall be counted as service with Parent and its
Affiliates for all purposes, including eligibility to
participate, vesting and determining the amount of a benefit, but
without duplication of benefits provided under any Company Plan
to Company Employees after the Effective Time, under the employee
41
benefit plans and compensation practices (including, if
applicable, group medical and dental, life insurance, defined
contribution retirement plan, short- and long-term disability,
severance, vacation and sick pay) covering or otherwise
benefitting Company Employees on and after the Effective Time.
Parent shall take or cause its Affiliates (including Surviving
Corporation) to take such action as may be necessary or
appropriate under all employee benefit plans and compensation
practices covering or otherwise benefitting Company Employees on
or after the Effective Time to provide for such past service
credit.
(d) Co-payments and Deductibles. Each Company
Employee shall be given credit for any deductible or co-payment
amounts paid under Plans maintained by the Company in respect of
the Plan year in which the Effective Time occurs, to the extent
that, following the Effective Time, he or she participates in
comparable plans maintained by Parent or its Affiliates for which
deductibles or co-payments are required. Parent shall also cause
each of its and its Affiliates plans to waive any preexisting
condition requirement to the extent waived under the terms of any
Plan maintained by the Company immediately prior to the Effective
Time.
(e) Labor Agreements. To the extent required by
applicable law, Parent shall cause the Surviving Corporation to
honor all labor or collective bargaining agreements pertaining to
employees of the Company in effect at the Effective Time.
(f) Vacation. Parent shall or shall cause its
Affiliates (including the Surviving Corporation) to provide all
vacation entitlement to Company Employees for the 1999 calendar
year as determined under the Company's vacation pay policies in
effect as of the Effective Time.
(g) COBRA. Parent shall provide or cause its
Affiliates to provide continuation coverage for purposes of Part
6 of Title I of ERISA to former non-bargaining unit employees of
the Company and their eligible dependents comparable to the
benefits, as from time to time in effect, provided to similarly
situated employees of the Company.
(h) Employee Discounts. Parent shall provide
discounts on merchandise purchases to current and former
employees of the Company in the manner described on Section
5.5(h) of the Disclosure Schedule.
(i) Continuing Employment; Severance. On or before
the Closing Date, Parent shall interview and/or offer continuing
employment with the Surviving Corporation to Company Employees
42
after the Effective Time under the terms described in Item 1 of
Section 5.5(i) of the Disclosure Schedule. In the event the
employment of any Company Employee is terminated by Parent or the
Surviving Corporation after the Effective Time, such Company
Employees will be entitled to the severance benefits, if any,
described in Item 1 of Section 5.5(i) of the Disclosure Schedule.
(j) Employment and Consulting Agreements. Parent
shall offer (i) an employment agreement and a consulting
agreement substantially in the respective forms set forth in
Section 5.5(j)(i) of the Disclosure Schedule to each of the
respective individuals listed in Section 5.5(j)(i) of the
Disclosure Schedule and (ii) an employment agreement
substantially in the form set forth in Section 5.5(j)(ii) of the
Disclosure Schedule to each of the respective individuals listed
in Section 5.5(j)(ii) of the Disclosure Schedule.
Section 5.6 Notification of Certain Matters. The Company
shall give prompt notice to Parent and Parent shall give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would cause
any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of the Company, Parent
or Acquisition, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it under this Agreement and (iii) the commencement or the
threat of any action, suit, claim, investigation or proceeding
which relates to this Agreement or the transactions contemplated
by this Agreement; provided, however, that the delivery of any
notice pursuant to this Section 5.6 shall not limit or otherwise
affect the remedies, if any, available under this Agreement to
the party receiving such notice.
Section 5.7 Directors' and Officers' Insurance and
Indemnification. Following the Effective Time, Parent shall
indemnify, or shall cause the Surviving Corporation to indemnify,
each person who is now, or has been at any time prior to the date
of this Agreement, an employee, agent, director or officer of the
Company (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the same extent and in the same manner
as is now provided in the URBCA, Articles of Incorporation or
Bylaws of the Company, or pursuant to indemnification agreements
described in Section 5.7 of the Disclosure Schedule in effect on
the date of this Agreement, with respect to any claim, liability,
loss, damage, cost or expense, whenever asserted or claimed
("Indemnified Liability"), based in whole or in part on, or
arising in whole or in part out of, any matter existing or
occurring at or prior to the Effective Time, including, without
43
limitation, matters arising out of or pertaining to the Merger,
this Agreement or the transactions contemplated by this
Agreement. Parent shall, or shall cause the Surviving
Corporation to, maintain in effect for not less than four years
after the Effective Time policies of directors' and officers'
liability insurance equivalent in all material respects to those
maintained by or on behalf of the Company on the date of this
Agreement (and having at least the same coverage and containing
terms and conditions which are no less advantageous to the
persons currently covered by such policies) with respect to
matters existing or occurring at or prior to the Effective Time;
provided, however, that if the aggregate annual premiums for such
insurance at any time during such period shall exceed 200% of the
premiums paid by the Company for such insurance for the twelve
calendar months immediately preceding the date of this Agreement
(the "Twelve Month Premiums"), then Parent shall cause the
Surviving Corporation to, and the Surviving Corporation shall,
provide the maximum coverage that shall then be available at an
annual premium equal to 200% of the Twelve Month Premiums.
Without limiting the foregoing, in the event any Indemnified
Party becomes involved in any capacity in any action, proceeding
or investigation based in whole or in part on, or arising in
whole or in part out of, any matter, including the transactions
contemplated by this Agreement, existing or occurring at or prior
to the Effective Time, then to the maximum extent permitted by
law Parent shall, or shall cause the Surviving Corporation to,
periodically advance to such Indemnified Party his or her legal
and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the
provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final
determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto. Promptly after
receipt by an Indemnified Party of notice of the assertion (an
"Assertion") of any claim or the commencement of any action
against him or her as a result of which indemnity or
reimbursement may be sought against Parent, the Company, the
Surviving Corporation (collectively, the "Indemnitors" or
individually, an "Indemnitor") under this Agreement, such
Indemnified Party shall notify any Indemnitor in writing of the
Assertion, but the failure to so notify any Indemnitor shall not
relieve any Indemnitor of any liability it may have to such
Indemnified Party under this Agreement, except to the extent that
such failure shall have materially prejudiced the Indemnitor in
defending against such Assertion. The Indemnitors shall be
entitled to participate in and, to the extent the Indemnitors
elect by written notice to such Indemnified Party within 30 days
after receipt by any Indemnitor of notice of such Assertion, to
assume the defense of such Assertion, at their own expense, with
counsel chosen by the Indemnitors and reasonably satisfactory to
44
such Indemnified Party. Notwithstanding that the Indemnitors
shall have elected by such written notice to assume the defense
of any Assertion, such Indemnified Party shall have the right to
participate in the investigation and defense thereof, with
separate counsel chosen by such Indemnified Party, but in such
event the fees and expenses of such counsel shall be paid by such
Indemnified Party. Notwithstanding the foregoing, in the event
the Indemnified Party reasonably believes, based on the advice of
his or her independent counsel under applicable standards of
professional conduct that there is reasonably likely to be, with
respect to a particular matter, a conflict on any significant
issue between the positions of any two or more Indemnified
Parties or with any Indemnitor (a "Conflict Matter") such
Indemnified Party may select a separate counsel, reasonably
acceptable to the Indemnitors, to represent such Indemnified
Party with respect to such Conflict Matter and the Indemnitors
shall pay the reasonable fees and expenses of counsel so selected
by the Indemnified Party in connection with such Conflict Matter.
No Indemnified Party shall settle any Assertion without the prior
written consent of Parent, which, in the case of a settlement
solely for a cash payment, shall not be unreasonably withheld,
delayed, or conditioned, nor shall Parent or any other Indemnitor
settle any Assertion without either (i) the written consent of
all Indemnified Parties against whom such Assertion was made, or
(ii) obtaining an unconditional general release from the party
making the Assertion for all Indemnified Parties as a condition
of such settlement. The provisions of this Section 5.8 are
intended for the benefit of, and shall be enforceable by, the
respective Indemnified Parties. In the event the Surviving
Corporation or Parent or any of their successors or assigns (i)
consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each
case, proper provision shall be made so that the successors and
assigns of the Surviving Corporation or Parent shall assume all
of Parent's obligations set forth in this Section 5.7.
Section 5.8 Existing Credit Documents. The Company will
use reasonable efforts to assist Parent to negotiate and to enter
into arrangements with (i) First Security Bank, N.A. and Zions
First National Bank and the other lenders party to the Loan
Agreement with the Company dated as of April 15, 1999 (the
"Primary Loan Agreement") and (ii) First Security Bank, N.A. and
Zions First National Bank as parties to the Loan Agreement with
the Company referenced in Section 5.1 of the Disclosure Schedule
(the "Supplemental Loan Agreement"), which arrangements will
permit the Company to terminate, on and as of the Closing Date,
the Primary Loan Agreement, the Supplemental Loan Agreement and
45
all related loan documentation (collectively, the "Existing
Credit Documents"), upon payment in full of all obligations of
the Company thereunder as of the Closing Date, without any
requirement that the Company deliver irrevocable prior notices of
termination under the Existing Credit Documents or to make any
payment with respect to the Existing Credit Documents except upon
the occurrence of the Merger.
Section 5.9 Parent Undertaking. Parent shall be
responsible for and shall cause Acquisition to perform all of its
obligations under this Agreement in a timely manner.
Section 5.10 WARN Act. Parent will comply, and will cause
the Surviving Corporation to comply, in all material respects
with the Workers Adjustment and Retraining Notification Act.
Section 5.11 Fashion Place. The Company will use
reasonable efforts to (i) assist Parent to negotiate and (ii)
enter into an agreement with Xxxxx-Fashion Place, LLC for the
continued use and operation by the Company of a retail facility
at the Fashion Place Mall.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each Party to
consummate the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions:
(a) This Agreement shall have been approved and
adopted by the shareholders of the Company in accordance with the
URBCA;
(b) No Governmental Entity shall have issued, given
notice of its intent to issue or commenced any proceeding for the
purpose of issuing any order, and there shall not be any statute,
rule, decree or regulation restraining, prohibiting or making
illegal the consummation of the Merger; and
(c) Any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been
terminated.
(d) The Registration Statement shall have become
effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding
for that purpose shall have been initiated by the SEC. Parent
shall have received all state securities laws or "blue sky"
permits and other authorizations necessary to consummate the
Merger.
46
Section 6.2 Conditions to the Obligation of the Company
to Effect the Merger. The obligation of the Company to effect
the Merger is further subject to the satisfaction or waiver at or
prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and
Acquisition contained in this Agreement shall be true and correct
in all material respects both when made and (except for those
representations and warranties that address matters only as of a
particular date which need only be true and accurate as of such
date) as of the Closing Date after giving effect to the Merger as
if made at and as of such time and the Company shall have
received at the Closing Date a certificate to that effect dated
the Closing Date and executed on behalf of the Parent and
Acquisition by an executive officer of each of Parent and
Acquisition; and
(b) Each of Parent and Acquisition shall have
performed in all material respects its obligations under this
Agreement required to be performed by it at or prior to the
Closing Date pursuant to the terms hereof.
Section 6.3 Conditions to Obligations of Parent and
Acquisition to Effect the Merger. The obligations of Parent and
Acquisition to effect the Merger are further subject to the
satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all
material respects both when made and (except for those
representations and warranties that address matters only as of a
particular date which need only be true and accurate as of such
date) as of the Closing Date after giving effect to the Merger as
if made at and as of such time and Parent shall have received at
the Closing Date a certificate to that effect dated the Closing
Date and executed on behalf of the Company by an executive
officer of the Company;
(b) The Company shall have performed in all material
respects each of its obligations under this Agreement required to
be performed by it at or prior to the Closing Date pursuant to
the terms hereof; and
(c) Since January 31, 1999, the Company shall not have
experienced events, changes or effects, the effect of which, on
an overall basis, would have, or, in the written opinion of an
independent investment banking firm of national stature, would be
likely to have, a Material Adverse Effect, other than resulting
from any matter expressly disclosed in the Company SEC Documents
filed after January 31, 1999 and prior to the date hereof or in
Section 6.3(c) of the Disclosure Schedule.
47
Section 6.4. Election. Notwithstanding any other
provision of this Article VI, if Parent elects at any time to
irrevocably waive the conditions set forth in Sections 6.1(a),
6.1(c), 6.1(d), 6.3(a), 6.3(b) and 6.3(c) by delivering a written
statement (the "Election") to the Company to such effect and in
form and substance reasonably satisfactory to the Company, then
effective on the effective date of the delivery of the Election
(the "Election Date"), the board of directors of the Company
will, in accordance with the URBCA and the Company s Bylaws, take
action to expand the number of directors on the board to such
extent as may be necessary, and shall elect nominees designated
by Parent to serve as directors, so that the nominees designated
by Parent shall constitute a majority of the board of directors
of the Company. In addition, effective on and after the Election
Date, and notwithstanding any other provision of this Agreement,
Parent shall have the full right of approval over the operations
of the Company. The exercise by Parent of the option granted
pursuant to the Shareowner Agreement of the Majority Shareholder
will, for all purposes, constitute and have the same effect as a
delivery by Parent of the Election. The receipt of notice from a
Government Antitrust Entity of the early termination of the
waiting period with respect to the HSR Act will, for all
purposes, constitute and have the same effect as a delivery by
Parent of the Election. The delivery by Parent of the Election
will not constitute an exercise by Parent of the option granted
pursuant to any of the Shareowner Agreements.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Notwithstanding anything in
this Agreement to the contrary, this Agreement may be terminated
and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after stockholder approval
thereof:
(a) By the mutual consent of Parent and the Company.
(b) By either the Company or Parent if:
(i) the stockholders of the Company fail to
approve and adopt this Agreement at the Special Meeting
(including any postponement or adjournment thereof); or
(ii) any Governmental Entity shall have issued
or threatened to issue a statute, order, decree or
regulation or taken any other action, in each case
permanently restraining or enjoining the consummation
of the transactions contemplated by this Agreement and
such statute, order, decree, regulation or other action
shall have become final and non-appealable.
48
(c) By the Company if Parent or Acquisition materially
breaches or fails in any material respect to perform or comply
with any of its covenants and agreements contained in this
Agreement or breaches its representations and warranties in this
Agreement in any material respect; provided, however, that if any
such breach is curable by the breaching party through the
exercise of the breaching party's reasonable best efforts and for
so long as such breaching party shall be so attempting to cure
such breach for a period not to exceed 20 days, the Company may
not terminate this Agreement pursuant to this section.
(d) By Parent if (i) the Company breaches or fails in
any respect to perform or comply with any of its covenants set
forth in Sections 5.1(b), 5.1(c), 5.1(d), 5.1(e), 5.1(g), 5.1(i),
5.1(o), 5.1(q), 5.1(r), 5.1(s), 5.2 or 5.3 as concerns any
agreement, contract, commitment or arrangement relating to a
matter subject to any of the foregoing subsections of Section 5.1
of this Agreement or breaches its representations and warranties
set forth in Sections 3.6, 3.7, 3.9(h), 3.9(m) or 3.24(f), or
(ii) if there are any breaches or failures by the Company of its
covenants and agreements contained in this Agreement which
individually or in the aggregate constitute a Material Adverse
Effect, or (iii) if the Company materially breaches or fails in
any material respect to perform or comply with any of its other
covenants or agreements contained in this Agreement or breaches
its other representations and warranties in this Agreement in any
material respect; provided, however, that if any such breach is
curable by the Company through the exercise of its reasonable
best efforts and for so long as the Company shall be so
attempting to cure such breach for a period not to exceed 20
days, the Board of Directors of Parent may not terminate this
Agreement pursuant to this section; or
(e) If the Merger has not been consummated by January
31, 2000, this Agreement shall automatically terminate; provided,
however, that if the Merger has not been consummated by January
31, 2000 by reason of a failure of a Party to fulfill any
obligations under this Agreement, the other Party shall have all
rights and remedies provided for in this Agreement.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, written
notice thereof shall forthwith be given by the terminating Party
or Parties to the other Party or Parties specifying the
provision(s) of this Agreement pursuant to which such termination
is made, and this Agreement shall forthwith terminate and there
shall be no liability on the part of Parent, Acquisition or the
Company or their respective directors or officers under this
Agreement except that Sections 7.2, 8.1 and 8.10 of this
Agreement shall survive any such termination. Without limiting
49
the generality of the foregoing, Parent, Acquisition and the
Company expressly agree that the sole remedy for any breach of
this Agreement prior to the Election Date, if any (including,
without limitation, as contemplated by Sections 8.1(b) and
8.1(c)), shall be the termination rights contained in Section 7.1
and any fee payable pursuant to Section 8.1, and in the event of
any such breach, the breaching party shall have no liability
whatsoever (including, without limitation, liability for actual,
direct, indirect, consequential (including lost profits),
punitive, exemplary or special damages), other than the
obligation to pay any fee required to be paid pursuant to Section
8.1. Any such fee shall constitute liquidated damages and shall
not be deemed a penalty. No Party shall be obligated to pay more
than one such fee. After the Election Date and notwithstanding
anything in this Agreement to the contrary, Parent and the
Company shall each have the right to receive any fee payable
under Section 8.1 hereof and shall also have all other remedies
available at law or in equity in the event of a breach of this
Agreement by the other Party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses.
(a) Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated in this
Agreement shall be paid by the Party incurring such expenses.
(b) If this Agreement is terminated by the Company
pursuant to Section 7.1(c), then Parent shall immediately pay to
the Company an amount equal to $3,000,000 in immediately
available funds.
(c) If this Agreement is terminated by Parent pursuant
to Section 7.1(d), then the Company shall immediately pay to
Parent an amount equal to $3,000,000 in immediately available
funds.
(d) Parent shall be solely responsible for any and all
filing fees that are payable in connection with or on account of
any filing by Parent or any other Party concerning the
transactions contemplated by this Agreement under or pursuant to
the HSR Act.
Section 8.2 Amendment; Waiver.
(a) This Agreement may be amended by the Parties, by
action taken or authorized by their respective Boards of
50
Directors, at any time before or after approval by the
stockholders of the Company of the matters presented in
connection with the Merger, but after any such approval no
amendment shall be made without the approval of such stockholders
if such amendment changes the Merger Consideration or alters or
changes any of the other terms or conditions of this Agreement in
a matter that materially adversely affects the rights of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the Parties.
(b) At any time prior to the Effective Time, the
Parties may (i) extend the time for the performance of any of the
obligations or other acts of the Parties, (ii) waive any
inaccuracies in the representations and warranties of one or more
Parties contained in this Agreement or in any document,
certificate or writing delivered pursuant to this Agreement or
(iii) waive compliance with any of the agreements or conditions
of the Parties contained in this Agreement. Any agreement on the
part of any Party 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 8.3 Survival. The respective representations and
warranties of Parent, Acquisition and the Company contained
herein or in any certificates or other documents delivered prior
to or as of the Effective Time shall not survive beyond the
Effective Time. The covenants and agreements of the Parties
(including the Surviving Corporation after the Merger) shall
survive the Effective Time without limitation (except for such
covenants and agreements which, by their terms, contemplate a
shorter survival period).
Section 8.4 Notices. All notices and other
communications under this Agreement shall be in writing and shall
be deemed given upon (a) transmitter's confirmation of a receipt
of a facsimile transmission provided that a confirmed delivery by
a standard overnight carrier or a hand delivery is made within
two business days of the date such facsimile is sent or (b)
confirmed delivery by a standard overnight carrier or when
delivered by hand, addressed at the following addresses (or at
such other address for a Party as shall be specified by like
notice):
(a) if to the Company, to:
Zions Co-operative Mercantile Institution
0000 Xxxxx 000 Xxxx
Xxxx Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
51
with a copy to:
Stoel Rives LLP
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
and
(b) if to Parent or Acquisition, to:
The May Department Stores Company
000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: R. Xxxx Xxxxx
with a copy to:
The May Department Stores Company
000 Xxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Section 8.5 Interpretation. When a reference is made in
this Agreement to Sections, 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 phrase "made available" when used in this
Agreement shall mean that the information referred to has been
made available if requested by the Party to which such
information is to be made available. The words "Affiliates" and
"Associates" when used in this Agreement shall have the
respective meanings ascribed to them in Rule 12b-2 under the
Exchange Act. The phrase "beneficial ownership" and words of
similar import when used in this Agreement shall have the meaning
ascribed to it in Rule 13d-3 under the Exchange Act.
Section 8.6 Section Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
52
Section 8.7 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original but all of which shall be considered one and the same
agreement.
Section 8.8 Entire Agreement. This Agreement, together
with the schedules, documents, letter agreements, and instruments
referred to therein or in this Agreement, (i) constitute the
entire agreement between the Parties on the subject matter of
this Agreement, and supersedes all prior agreements and
understandings (written and oral), among the Parties with respect
to the subject matter of this Agreement and (ii) except as
provided in Section 5.7, is not intended to confer upon any
person other than the Parties any rights or remedies under this
Agreement.
Section 8.9 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
Section 8.10 Governing Law; Waiver of Jury Trial;
Enforcement. This Agreement shall be governed and construed in
accordance with the laws of the State of Utah without giving
effect to the principles of conflicts of law thereof. Each Party
(a) waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any
action, suit or proceeding arising out of or relating to this
Agreement, (b) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Utah or
any Utah state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this
Agreement, (c) agrees that it will not attempt to deny such
personal jurisdiction by motion or other request for leave from
any such court and (d) agrees that it will not bring any action
relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal
or state court sitting in the State of Utah.
Section 8.11 Assignment. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement
shall be assigned or delegated by any of the Parties (whether by
operation of law or otherwise) without the prior written consent
of the other Parties, except that Acquisition may, in its sole
discretion, assign any or all of its rights, interests and
obligations under this Agreement to Parent or any majority-owned
Affiliate of Parent.
53
Section 8.12 Continuation of Attorney-Client Privilege.
The Company has been represented by counsel in connection with
the Merger and representatives of the Company, including certain
of the Key Executives, have had and through the Closing will have
communications with such counsel concerning or related to the
Merger, the reasons for the Merger, alternatives available to the
Company to resolve its financial situation, existing or possible
financing arrangements, and other similar or related matters that
are entitled to be treated as confidential attorney-client
communications under the Utah Rules of Professional Conduct and
Utah law (collectively, the "Merger Communications"). Subsequent
to the consummation of the transactions contemplated by this
Agreement, the confidential nature of the Merger Communications
shall be preserved and, therefore, the Merger Communications
shall be treated as confidential by Parent and shall not be
directly or indirectly disclosed to or used by Parent or any
representative of Parent or the Company, notwithstanding that the
Company is owned by Parent.
Section 8.13 Publicity. The initial press release with
respect to the Merger shall be a joint press release.
Thereafter, subject to their respective legal obligations
(including requirements of stock exchanges and other similar
regulatory bodies), the Company, Parent and Acquisition shall
consult with each other before issuing any such press release or
otherwise making public statements with respect to the Merger.
[signature page follows]
54
IN WITNESS WHEREOF, Parent, Acquisition and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
THE MAY DEPARTMENT STORES
COMPANY
By: /s/ R. Xxxx Xxxxx
R. Xxxx Xxxxx
Executive Vice President
MS ACQUISITION , INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Vice President
ZIONS CO-OPERATIVE MERCANTILE
INSTITUTION
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chairman, Chief Executive
Officer and President
55
