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EXHIBIT 1
Execution Copy
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
between
HARCOURT GENERAL, INC.
and
THE NEIMAN MARCUS GROUP, INC.
Dated as of July 1, 1999
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS...............................................2
SECTION 1.1 General.....................................................2
SECTION 1.2 References; Interpretation..................................7
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS;
CERTAIN COVENANTS.........................................7
SECTION 2.1 The Distribution and Other Transactions.....................7
SECTION 2.2 Declaration Date; Further Assurances.......................11
SECTION 2.3 Representations and Warranties.............................12
SECTION 2.4 Certain Post-Distribution Transactions.....................15
SECTION 2.5 Certain Limitations on Actions by Harcourt General.........16
SECTION 2.6 Right of First Offer.......................................16
SECTION 2.7 Xxxxx Family...............................................18
ARTICLE III. INDEMNIFICATION.................................................18
SECTION 3.1 Indemnification by Neiman Marcus...........................18
SECTION 3.2 Indemnification by Harcourt General........................18
SECTION 3.3 Procedures for Indemnification.............................18
SECTION 3.4 Indemnification Payments...................................20
ARTICLE IV. COVENANTS........................................................20
SECTION 4.1 Access to Information......................................20
SECTION 4.2 Confidentiality............................................21
SECTION 4.3 Retention of Records.......................................21
SECTION 4.4 Litigation Cooperation.....................................22
SECTION 4.5 Other Matters..............................................22
SECTION 4.6 No Solicitation............................................22
SECTION 4.7 Registration Rights Agreement..............................23
SECTION 4.8 Disclosure of Indemnification Obligations..................23
ARTICLE V. MISCELLANEOUS.....................................................23
SECTION 5.1 Complete Agreement; Construction...........................23
SECTION 5.2 Counterparts...............................................23
SECTION 5.3 Survival of Agreements.....................................23
SECTION 5.4 Expenses...................................................23
SECTION 5.5 Notices....................................................23
SECTION 5.6 Waivers....................................................25
SECTION 5.7 Amendments.................................................25
SECTION 5.8 Assignment.................................................25
SECTION 5.9 Successors and Assigns.....................................25
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Page
SECTION 5.10 Termination...............................................25
SECTION 5.11 Subsidiaries..............................................25
SECTION 5.12 Third Party Beneficiaries.................................26
SECTION 5.13 Title and Headings........................................26
SECTION 5.14 Exhibits and Schedules....................................26
SECTION 5.15 GOVERNING LAW.............................................26
SECTION 5.16 Consent to Jurisdiction...................................26
SECTION 5.17 Severability..............................................26
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AMENDED AND RESTATED DISTRIBUTION AGREEMENT
AMENDED AND RESTATED DISTRIBUTION AGREEMENT, dated as of July 1, 1999,
amending and restating the DISTRIBUTION AGREEMENT, dated as of May 14, 1999
(this "Agreement"), between HARCOURT GENERAL, INC., a Delaware corporation
("Harcourt General"), and THE NEIMAN MARCUS GROUP, INC., a Delaware corporation
("Neiman Marcus").
WHEREAS, Harcourt General will own, immediately prior to the
Recapitalization (as defined below), 21,440,960 shares of Common Stock, par
value $.01 per share, of Neiman Marcus ("Common Stock") and HGI Investment
Trust, a wholly-owned subsidiary of Harcourt General ("HGI"), will own 4,988,542
shares of Common Stock (the "Retained Shares");
WHEREAS, simultaneously with the execution hereof, Neiman Marcus and
Spring Merger Corporation, a Delaware corporation and a wholly-owned subsidiary
of Harcourt General ("Merger Sub"), are entering into an Amended and Restated
Agreement and Plan of Merger dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Recapitalization
Agreement"), pursuant to which, among other things, Merger Sub will merge with
and into Neiman Marcus with the following consequent capital stock changes: (i)
21,440,960 shares of the Common Stock held by Harcourt General will be
contributed to Merger Sub and, as of the Declaration Date (as defined herein),
will automatically be canceled and retired with no securities or other
consideration issued in exchange therefor, (ii) all of the common stock of
Merger Sub, owned by Harcourt General, will be converted into 21,440,960 shares
of a new Class B Common Stock, par value $.01 per share, of Neiman Marcus
("Class B Common Stock" and, together with the Class A Common Stock, the "Neiman
Marcus Common Stock"), which class of stock will be entitled to elect at least
82% of the members of the board of directors of Neiman Marcus and in all other
respects will be substantially identical to the Class A Common Stock and (iii)
all other shares of Common Stock will be converted into Class A Common Stock,
par value $.01 per share, of Neiman Marcus ("Class A Common Stock"), including
4,988,542 shares of Common Stock held by HGI, which class of stock shall be
entitled to elect up to 18% of the members of the board of directors of Neiman
Marcus (the "Recapitalization");
WHEREAS, the Board of Directors of Harcourt General has determined
that it is appropriate, desirable and in the best interests of Harcourt General
and its stockholders to distribute on the Distribution Date all the shares of
Class B Common Stock that Harcourt General will receive in the Recapitalization,
on the terms and subject to the conditions set forth in this Agreement, to the
holders of record of the Common Stock, par value $1.00 per share, of Harcourt
General and the Class B Stock, par value $1.00 per share, of Harcourt General
(collectively, "Harcourt General Common Stock"), as of the Distribution Record
Date (as defined herein), on a pro rata basis (the "Distribution");
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WHEREAS, Harcourt General will submit a request for a ruling (as it
may be amended from time to time, the "Ruling Request") from the Internal
Revenue Service to the effect that the Distribution will be a tax-free
distribution within the meaning of Section 355 of the Code (as defined herein);
WHEREAS, each of Harcourt General and Neiman Marcus has determined
that it is necessary and desirable to set forth the principal corporate
transactions required to effect the Distribution and the Recapitalization and to
set forth other agreements that will govern certain other matters following the
Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 General. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or
other regulatory or administrative agency, body or commission or any
arbitration tribunal.
(b) "Affiliate" shall mean, when used with respect to a specified
person, another person that controls, is controlled by, or is under common
control with the person specified. As used herein, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting securities or other interests, by contract or
otherwise.
(c) "Assets" shall mean assets, properties and rights (including
goodwill), wherever located (including in the possession of vendors or
other third parties or elsewhere), whether real, personal or mixed,
tangible, intangible or contingent, in each case whether or not recorded or
reflected or required to be recorded or reflected on the books and records
or financial statements of any Person.
(d) "Authorized Capital Amendment" shall mean an amendment to the
Neiman Marcus Certificate of Incorporation providing for an increase in
authorized capital and the creation of a new class of low-vote common stock
having one-tenth (1/10) of one vote per share.
(e) "Business Entity" shall mean any corporation, partnership, limited
liability company or other entity which may legally hold title to Assets.
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(f) "Class A Common Stock" shall have the meaning set forth in the
recitals hereto.
(g) "Class B Common Stock" shall have the meaning set forth in the
recitals hereto.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the Treasury regulations promulgated thereunder, including any
successor legislation.
(i) "Commission" shall mean the U.S. Securities and Exchange
Commission.
(j) "Declaration Date" shall mean the date on which (i) the Harcourt
General Board of Directors shall declare the dividend constituting the
Distribution and (ii) the certificate of merger effecting the
Recapitalization shall be filed with the Secretary of State of the State of
Delaware.
(k) "DGCL" shall mean the General Corporation Law of the State of
Delaware.
(l) "Distribution" shall have the meaning set forth in the recitals
hereto.
(m) "Distribution Agent" shall mean the distribution agent selected by
Harcourt General to effect the Distribution.
(n) "Distribution Date" shall mean the date determined by the Board of
Directors of Harcourt General following the consummation of the
Recapitalization for the mailing of certificates of Class B Common Stock to
stockholders of Harcourt General in the Distribution.
(o) "Distribution Record Date" shall mean the date determined by the
Board of Directors of Harcourt General as the record date for the
determination of the holders of record of Harcourt General Common Stock
entitled to receive shares of Class B Common Stock in the Distribution.
(p) "Effective Time" shall mean immediately prior to the midnight, New
York time, that ends the 24-hour period comprising the Distribution Date.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(r) "Form 8-A" shall mean a Neiman Marcus registration statement on
Form 8-A pursuant to which the Class B Common Stock shall be registered
under the Exchange Act, including all amendments thereto.
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(s) "Governance Amendments" shall mean (i) an amendment to the Neiman
Marcus Certificate of Incorporation establishing a range for the number of
directors on the Neiman Marcus Board of Directors from six to nine, the
actual number to be determined exclusively by resolution of the Neiman
Marcus Board of Directors, and a provision that prohibits the alteration or
repeal of this provision without the vote of 66 2/3% of the total voting
power of the outstanding shares of Neiman Marcus voting stock, voting
together as a single class and (ii) an amendment to the Neiman Marcus
Certificate of Incorporation providing for a requirement that the approval
of 66 2/3% of the total voting power of the outstanding shares of Neiman
Marcus is necessary to approve any merger or consolidation, any sale,
lease, exchange or other disposition of all or substantially all of Neiman
Marcus' assets and, unless approved by two-thirds of the Neiman Marcus
Board of Directors, any issuance of voting securities of Neiman Marcus that
would require stockholder approval.
(t) "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or
governmental authority.
(u) "Harcourt General Business" shall mean each and every business
conducted at any time by Harcourt General or any Subsidiary of Harcourt
General (other than Neiman Marcus and its subsidiaries) prior to the
Effective Time, except the Neiman Marcus Business.
(v) "Harcourt General Common Stock" shall have the meaning set forth
in the recitals hereto.
(w) "Harcourt General Group" shall mean Harcourt General and each
Person (other than any member of the Neiman Marcus Group) that is a
Subsidiary of Harcourt General immediately prior to the Effective Time.
(x) "Harcourt General Indemnitees" shall mean Harcourt General, each
member of the Harcourt General Group, each of their respective present and
former directors, officers, employees and agents and each of the heirs,
executors, successors and assigns of any of the foregoing except Neiman
Marcus Indemnitees; provided that any Person who is a present or former
director, officer, employee or agent (or is an heir, executor, successor or
assign of such Person) of Harcourt General or any member of the Harcourt
General Group (excluding the Neiman Marcus Group) shall be covered by this
definition in such capacity.
(y) "Harcourt General Liabilities" shall mean collectively, all
Liabilities of Harcourt General or any Subsidiary of Harcourt General
(other than Neiman Marcus and its Subsidiaries) immediately prior to the
Effective Time, except the Neiman Marcus Liabilities.
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(z) "Indemnifiable Losses" shall mean any and all losses,
Liabilities, claims, damages, demands, costs or expenses (including
reasonable attorneys' fees and any and all out-of-pocket expenses)
reasonably incurred in investigating, preparing for or defending
against any Actions or potential Actions or in settling any Action or
potential Action or in satisfying any judgment, fine or penalty
rendered in or resulting from any Action.
(aa) "Indemnifying Party" shall have the meaning set forth in Section
3.3.
(bb) "Indemnitee" shall have the meaning set forth in Section 3.3.
(cc) "Intercompany Services Agreement" shall mean the agreement, dated
as of July 24, 1987, between Harcourt General (formerly General Cinema
Corporation) and The Neiman Marcus Group, Inc.
(dd) "IRS Ruling" shall have the meaning set forth in Section
2.1(b)(i).
(ee) "Liabilities" shall mean any and all losses, claims, charges,
debts, demands, actions, causes of action, suits, damages, obligations,
payments, costs and expenses, sums of money, accounts, reckonings, bonds,
specialties, indemnities and similar obligations, exonerations, covenants,
contracts, controversies, agreements, promises, doings, omissions,
variances, guarantees, make whole agreements and similar obligations, and
other liabilities, including all contractual obligations, whether absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and including those arising
under any law, rule, regulation, Action, threatened or contemplated Action
(including the costs and expenses of demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any
and all costs and expenses, whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or
threatened or contemplated Actions), order or consent decree of any
governmental or other regulatory or administrative agency, body or
commission or any award of any arbitrator or mediator of any kind, and
those arising under any contract, commitment or undertaking, including
those arising under this Agreement or the Recapitalization Agreement, in
each case, whether or not recorded or reflected or required to be recorded
or reflected on the books and records or financial statements of any
person.
(ff) "Material Adverse Effect" shall mean, with respect to any Person,
any change, effect, event, occurrence or development that is, individually
or in the aggregate, materially adverse to the business, operations,
assets, liabilities, condition (financial or otherwise), results of
operations or prospects of such Person.
(gg) "Neiman Marcus" shall have the meaning set forth in the heading
of this Agreement.
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(hh) "Neiman Marcus Business" shall mean each and every business
conducted at any time prior to, on or after the Effective Time by Neiman
Marcus or any Subsidiary of Neiman Marcus or other Business Entity
controlled by Neiman Marcus, whether or not such Subsidiary is a Subsidiary
of Neiman Marcus or such Business Entity is controlled by Neiman Marcus on
the date hereof.
(ii) "Neiman Marcus Group" shall mean Neiman Marcus and each Person
that is a Subsidiary of Neiman Marcus immediately prior to the Effective
Time.
(jj) "Neiman Marcus Indemnitees" shall mean Neiman Marcus, each member
of the Neiman Marcus Group, each of their respective present and former
directors, officers, employees and agents and each of the heirs, executors,
successors and assigns of any of the foregoing.
(kk) "Neiman Marcus Liabilities" shall mean, collectively, any and all
Liabilities whatsoever that arise out of, result from, are related to, or
are enforceable against, Neiman Marcus or any Subsidiary of Neiman Marcus
or any Business Entity controlled by Neiman Marcus, whether or not such
Subsidiary was a Subsidiary of Neiman Marcus or such Business Entity was
controlled by Neiman Marcus prior to, on or after the date hereof, or the
ownership or operation of the Neiman Marcus Business, whether such
Liabilities arise before, on or after the Effective Time and whether known
or unknown, fixed or contingent, including:
(i) any and all Liabilities arising from or based upon "controlling
person" liability relating to the Proxy Statement (or any amendment
thereto) or any other report or document filed by Neiman Marcus with the
Commission at any time before, on or after the Effective Time; and
(ii) any and all Liabilities that are expressly contemplated by this
Agreement or the Recapitalization Agreement (or the Schedules hereto or
thereto) as Liabilities to be assumed by Neiman Marcus or any member of the
Neiman Marcus Group or to remain with Neiman Marcus or any member of the
Neiman Marcus Group, and all Liabilities of Neiman Marcus under this
Agreement and the Recapitalization Agreement.
(ll) "NYSE" shall mean the New York Stock Exchange, Inc.
(mm) "Person" shall mean any natural person, Business Entity,
corporation, business trust, joint venture, association, company,
partnership, other entity or government, or any agency or political
subdivision thereof.
(nn) "Proxy Statement" shall have the meaning set forth in the
Recapitalization Agreement.
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(oo) "Recapitalization" shall have the meaning set forth in the
recitals hereto.
(pp) "Recapitalization Agreement" shall have the meaning set forth in
the recitals hereto.
(qq) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(rr) "Subsidiary" shall mean any corporation, partnership or other
entity of which another entity (i) owns, directly or indirectly, ownership
interests sufficient to elect a majority of the Board of Directors (or
persons performing similar functions) (irrespective of whether at the time
any other class or classes of ownership interests of such corporation,
partnership or other entity shall or might have such voting power upon the
occurrence of any contingency) or (ii) is a general partner or an entity
performing similar functions (e.g., a trustee).
(ss) "Third Party Claim" shall have the meaning set forth in Section
3.3.
SECTION 1.2 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
such Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
ARTICLE II. DISTRIBUTION AND OTHER TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.1 The Distribution and Other Transactions.
(a) The Distribution. Subject to the conditions set forth in Section
2.1(b) of this Agreement, on the Declaration Date the Board of Directors of
Harcourt General shall declare the Distribution upon the terms set forth in this
Agreement. To effect the Distribution, Harcourt General shall cause the
Distribution Agent to distribute, on the Distribution Date, on a pro rata basis
and taking into account Section 2.1(c), to the holders of record of Harcourt
General Common Stock on the Distribution Record Date, all shares of Class B
Common Stock held by Harcourt General on the Distribution Date. During the
period commencing on the date the certificates representing shares of Class B
Common Stock are delivered to the Distribution Agent and ending upon the date(s)
on which certificates evidencing such shares are mailed to holders of
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record of Harcourt General Common Stock on the Distribution Record Date or on
which fractional shares of Class B Common Stock are sold on behalf of such
holders, the Distribution Agent shall hold the certificates representing shares
of Class B Common Stock on behalf of such holders. Harcourt General shall
deliver to the Distribution Agent the share certificates representing the shares
of Class B Common Stock held by Harcourt General which are to be distributed to
the holders of Harcourt General Common Stock in the Distribution. Neiman Marcus
agrees, if required by Harcourt General, to provide all certificates evidencing
shares of Class B Common Stock that Harcourt General shall require in order to
effect the Distribution.
(b) Conditions to the Distribution. The Harcourt General Board
of Directors shall declare a dividend constituting the Distribution on the
Declaration Date following the satisfaction or waiver by Harcourt General, as
determined by Harcourt General in its sole discretion, of the conditions set
forth below:
(i) A private letter ruling from the Internal Revenue Service shall
have been obtained, and shall continue in effect, providing that, among
other things, the Recapitalization and the Distribution will qualify as
tax-free transactions for federal income tax purposes under Sections 354
and 355 of the Code (the "IRS Ruling"); such ruling shall be in form and
substance satisfactory to Harcourt General in its sole discretion; and
Harcourt General and Neiman Marcus shall have complied with all conditions
set forth in such ruling that are required to be complied with prior to the
Distribution;
(ii) Any material governmental approvals and consents necessary to
consummate the Distribution and the other transactions contemplated hereby
and by the Recapitalization Agreement shall have been obtained and shall be
in full force and effect;
(iii) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Distribution and the other transactions
contemplated hereby and by the Recapitalization Agreement shall be in
effect and no other event outside the control of Harcourt General shall
have occurred or failed to occur that prevents the consummation of the
Distribution;
(iv) The transactions contemplated hereby shall be in compliance with
applicable federal and state securities and other applicable laws;
(v) Each of Neiman Marcus and Harcourt General shall have received
such consents, and shall have received executed copies of such agreements
or amendments of agreements, as Harcourt General shall deem appropriate in
connection with the completion of the Distribution or the transactions
contemplated by this Agreement and the Recapitalization Agreement;
(vi) The Recapitalization shall have been consummated;
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(vii) The Form 8-A shall have been filed with the Commission and there
shall be no impediment to the certification by the NYSE to the Commission
of the listing of the Class B Common Stock;
(viii) The Class B Common Stock shall have been approved for listing
on the NYSE, subject to official notice of issuance;
(ix) The stockholders of Harcourt General shall have approved an
amendment to the Harcourt General Certificate of Incorporation creating a
class of low-vote common stock;
(x) The Board of Directors of Harcourt General shall have received an
opinion of Lazard Freres as to the fairness of the Distribution to the
Harcourt General stockholders from a financial point of view;
(xi) The Board of Directors of Harcourt General shall have received a
customary opinion as to the legality of the dividend constituting the
Distribution under Delaware law;
(xii) The Board of Directors of Harcourt General shall have received a
customary opinion as to the Distribution not constituting a sale, lease,
exchange or other disposition of all or substantially all of its assets;
(xiii) Each of the representations and warranties of Neiman Marcus set
forth in this Agreement shall have been true and correct when made and
shall be true and correct as of the Declaration Date; and Neiman Marcus
shall have performed or complied with all agreements and covenants required
to be performed by it under this Agreement and the Recapitalization
Agreement at or prior to the Declaration Date; and Harcourt General shall
have received a certificate of the chief financial officer of Neiman Marcus
as to the foregoing;
(xiv) All actions and other documents and instruments deemed necessary
or advisable in connection with the transactions contemplated hereby shall
have been taken or executed, as the case may be, in form and substance
satisfactory to Harcourt General; and
(xv) No event or development shall have occurred which the Board of
Directors of Harcourt General determines, in its sole discretion, makes the
Distribution not in the best interests of Harcourt General and/or its
stockholders.
The foregoing conditions are for the sole benefit of Harcourt General and shall
not give rise to or create any duty on the part of Harcourt General to waive or
not waive any such condition.
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(c) Sale of Fractional Shares. In response to the request of Neiman
Marcus that no fractional shares of Class B Common Stock be distributed in the
Distribution, Harcourt General shall appoint the Distribution Agent as agent for
each holder of record of Harcourt General Common Stock who would receive in the
Distribution any fractional share of Class B Common Stock. The Distribution
Agent shall aggregate all such fractional shares and sell them in an orderly
manner after the Distribution Date in the open market and, after completion of
such sales, distribute a pro rata portion of the net proceeds from such sales,
based upon the gross selling price of all such fractional shares, to each
shareholder of Harcourt General who would otherwise have received a fractional
share. Harcourt General shall reimburse the Distribution Agent for its
reasonable costs, expenses and fees (including selling expenses) in connection
with the sale of fractional shares of Class B Common Stock and the distribution
of the proceeds thereof in accordance with this Section 2.1(c).
(d) Other Actions. (i) Harcourt General and Neiman Marcus shall
prepare and mail, at such time as determined by Harcourt General, to the holders
of Harcourt General Common Stock, such information concerning Neiman Marcus, its
business, operations and management, the Distribution and the tax consequences
thereof and such other matters as Harcourt General shall reasonably determine or
as may be required by law. Neiman Marcus agrees to cooperate with Harcourt
General in the preparation of, and provide any information reasonably requested
by Harcourt General for inclusion in, such mailing. Harcourt General and Neiman
Marcus will prepare, and Neiman Marcus will, to the extent required under
applicable law, file with the Commission any such documentation, including any
no action letters or other requests for interpretive or regulatory assistance,
if any, which Harcourt General determines are necessary or desirable to
effectuate the Distribution and the other transactions contemplated hereby and
by the Recapitalization Agreement and Harcourt General and Neiman Marcus shall
each use its reasonable best efforts to obtain all necessary approvals from the
Commission with respect thereto as soon as practicable.
(ii) Harcourt General and Neiman Marcus shall take all such action as
may be necessary or appropriate under the securities or blue sky laws of
the United States (and any comparable laws under any foreign jurisdiction)
in connection with the Distribution and the other transactions contemplated
hereby and by the Recapitalization Agreement.
(iii) Neiman Marcus shall prepare and file, and shall use its
reasonable best efforts to have approved, subject to official notice of
issuance, an application for the listing on the NYSE of the Class B Common
Stock to be distributed in the Distribution.
(iv) Subject to Section 2.1(d)(vii), Neiman Marcus shall prepare and
file the Form 8-A (which may include or incorporate by reference
information contained in the Proxy Statement) with the Commission as
promptly as practicable following the execution hereof, and shall use its
best efforts to cause the Form 8-A to become effective under the Exchange
Act immediately following the consummation of the Recapitalization on the
Declaration Date or as soon thereafter as practicable.
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(v) On or prior to the Distribution Date, each of Harcourt General and
Neiman Marcus shall consummate those other transactions in connection with
the Distribution (including the Recapitalization) that are contemplated by
the Ruling Request and any related submissions by Harcourt General to the
Internal Revenue Service.
(vi) In addition to those matters specifically set forth above,
Harcourt General and Neiman Marcus also shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section
2.1(b) to be satisfied and to effect the Distribution on the Distribution
Date.
(vii) Neiman Marcus agrees that it shall not file with the Commission
any report or other document that contains any disclosure relating to the
Distribution, this Agreement, the Recapitalization Agreement or any of the
transactions contemplated hereby or thereby without the prior written
consent of Harcourt General with respect to such disclosure, which consent
shall not be unreasonably withheld.
(viii) Prior to the Distribution Date, Neiman Marcus shall not amend,
and the Neiman Marcus Board of Directors shall not approve any amendment
to, Neiman Marcus's restated Certificate of Incorporation, other than the
Governance Amendments, the Authorized Capital Amendment and the amendments
to the Certificate of Incorporation that will take effect upon the filing
of the certificate of merger with the Secretary of State of the State of
Delaware in connection with the Recapitalization in accordance with the
terms of the Recapitalization Agreement.
(ix) Harcourt General agrees to vote, or cause to be voted, all shares
of Neiman Marcus Common Stock owned by it in favor of the adoption of the
Recapitalization Agreement, the Governance Amendments and the Authorized
Capital Amendment.
(x) Harcourt General and Neiman Marcus shall enter into an Amended and
Restated Intercompany Services Agreement, pursuant to which Harcourt
General will continue to provide corporate services to Neiman Marcus.
(xi) Except as set forth above in clause (x), all agreements and
arrangements existing on the date hereof between Harcourt General or any of
its Subsidiaries on the one hand and Neiman Marcus and any of its
Subsidiaries on the other hand, whether written or oral, shall continue in
full force and effect in accordance with their terms and consistent with
past practice from the date hereof, through the Distribution Date and
thereafter.
SECTION 2.2 Declaration Date; Further Assurances. (a) The parties
agree that the Declaration Date shall occur as soon as reasonably practicable
following the satisfaction or waiver of the conditions to the declaration of the
Distribution set forth in Section 2.1(b). To the extent any action of the Board
of Directors of Neiman Marcus or Harcourt General is necessary
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to consummate the Distribution, the parties shall cause their respective Boards
of Directors to meet telephonically or at the same location on the Declaration
Date and each shall take such corporate action at such meeting as shall be
required to effect the transactions contemplated hereby and by the
Recapitalization Agreement. Immediately following such meetings, Neiman Marcus
shall take all actions required to consummate the Recapitalization in accordance
with the terms of the Recapitalization Agreement, including the filing of the
certificate of merger relating to the Recapitalization with the Secretary of
State of the Delaware.
(b) Subject to Harcourt General's right to terminate this Agreement in
accordance with Section 5.10, in case at any time after the date hereof any
further action is reasonably necessary or desirable to carry out the
Recapitalization or Distribution or any other purpose of this Agreement or the
Recapitalization Agreement, the proper officers of each party to this Agreement
shall take all such necessary action, and shall execute and deliver all
necessary instruments related thereto. Without limiting the foregoing, and
subject as aforesaid, Harcourt General and Neiman Marcus shall use their
respective reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, promptly to obtain all consents and approvals, to
enter into all amendatory agreements (including, without limitation, agreeing to
such other amendments or modifications of this Agreement in order to obtain the
IRS Ruling), to make all filings and applications that may be required for the
consummation of the transactions contemplated by this Agreement and the
Recapitalization Agreement, including all applicable governmental and regulatory
filings, and to permit each other to review and comment on all correspondence
and filings related to the foregoing.
SECTION 2.3 Representations and Warranties. (a) Neiman Marcus hereby
represents and warrants to Harcourt General as follows:
(i) Organization; Good Standing. Neiman Marcus is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power required to consummate the
transactions contemplated hereby and by the Recapitalization Agreement.
(ii) Authorization. The execution, delivery and performance by Neiman
Marcus of this Agreement and the Recapitalization Agreement and the
consummation by Neiman Marcus of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of Neiman Marcus, other than the approval of the Recapitalization by
the stockholders of Neiman Marcus. Each of this Agreement and the
Recapitalization Agreement constitutes, and each other agreement or
instrument executed and delivered or to be executed and delivered by Neiman
Marcus pursuant to this Agreement or the Recapitalization Agreement will,
upon such execution and delivery, constitute a legal, valid and binding
obligation of Neiman Marcus, enforceable against Neiman Marcus in
accordance with its
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terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(iii) Consents and Filings. Except (w) for the filing of a certificate
of merger in connection with the Recapitalization and any other filings
required to be made with the Secretary of State of the State of Delaware,
(x) for the IRS Ruling, (y) for the filing of the Proxy Statement and the
Form 8-A and any other reports or documents required to be filed under the
Exchange Act and (z) for any filings required to be made with the NYSE, no
consent of, or filing with, any Governmental Entity which has not been
obtained or made is required for or in connection with the execution and
delivery of this Agreement or the Recapitalization Agreement by Neiman
Marcus, and the consummation by Neiman Marcus of the transactions
contemplated hereby or thereby.
(iv) Noncontravention. Except in the case of any consents that will be
obtained prior to the Distribution Date, the execution, delivery and
performance of this Agreement and the Recapitalization Agreement by Neiman
Marcus does not, and the consummation by Neiman Marcus of the transactions
contemplated hereby and thereby will not, (i) violate any applicable
federal, state or local statute, law, rule or regulation, (ii) violate any
provision of the Certificate of Incorporation or By-Laws of Neiman Marcus
or (iii) violate any provision of, or result in the termination or
acceleration of, or entitle any party to accelerate any obligation or
indebtedness under, any mortgage, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree to
which Neiman Marcus or any of its Subsidiaries is a party or by which any
of them are bound, except for, in the case of clause (iii) above, such
violations that would not result in a Material Adverse Effect with respect
to Neiman Marcus or prevent Harcourt General from complying with the terms
and provisions of this Agreement or the Recapitalization Agreement in any
material respect.
(v) Litigation. There are no actions or suits against Neiman Marcus
pending, or to the knowledge of Neiman Marcus, threatened which seek to,
and Neiman Marcus is not subject to any judgments, decrees or orders which,
enjoin or rescind the transactions contemplated by this Agreement or the
Recapitalization Agreement or otherwise prevent Neiman Marcus from
complying with the terms and provisions of this Agreement or the
Recapitalization Agreement in any material respect.
(vi) Change of Control Adjustments. Except as would not result in a
Material Adverse Effect with respect to Neiman Marcus and except in the
case of any consents that will be obtained prior to the Distribution Date,
neither the Recapitalization nor the Distribution nor any of the other
transactions contemplated hereby or by the Recapitalization Agreement will
(x) constitute a "change of control" or otherwise result in the increase or
acceleration of any benefits, including to employees of Neiman Marcus,
under any agreement to which Neiman Marcus or any of its Subsidiaries is a
party or by
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which it or any of its Subsidiaries is bound, or (y) result in any
adjustment of the number of shares subject to, or the terms of, including
exercise price, any outstanding employee stock options of Neiman Marcus.
(b) Harcourt General hereby represents and warrants to Neiman Marcus
as follows:
(i) Organization; Good Standing. Harcourt General is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware and has all corporate power required to consummate
the transactions contemplated hereby.
(ii) Authorization. The execution, delivery and performance by
Harcourt General of this Agreement and the consummation by Harcourt General
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Harcourt General, other than the
formal declaration of the Distribution. This Agreement constitutes, and
each other agreement or instrument executed and delivered or to be executed
and delivered by Harcourt General pursuant to this Agreement will, upon
such execution and delivery, constitute, a legal, valid and binding
obligation of Harcourt General, enforceable against Harcourt General in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(iii) Consents and Filings. Except (w) for the filing of a certificate
of merger in connection with the Recapitalization, a certificate of
amendment to the Harcourt General Certificate of Incorporation and any
other filings required to be made with the Secretary of State of the State
of Delaware, (x) for the IRS Ruling, (y) for the filing of the Proxy
Statement, the Form 8-A and a proxy statement in respect of the proposed
amendment to Harcourt General's Certificate of Incorporation referred to in
Section 2.1(b)(ix) and any other reports or documents required to be filed
under the Exchange Act and (z) for any filings required to be made with the
NYSE, no material consent of, or filing with, any Governmental Entity which
has not been obtained or made is required for or in connection with the
execution and delivery of this Agreement by Harcourt General, and the
consummation by Harcourt General of the transactions contemplated hereby.
(iv) Noncontravention. Except in the case of any consents that will be
obtained prior to the Distribution Date, the execution, delivery and
performance of this Agreement and the Recapitalization Agreement by
Harcourt General does not, and the consummation by Harcourt General of the
transactions contemplated hereby and thereby will not, (i) violate any
applicable federal, state or local statute, law, rule or regulation, or
(ii) violate any provision of the Certificate of Incorporation or By-Laws
of Harcourt
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General or (iii) violate any provision of, or result in the termination or
acceleration of, or entitle any party to accelerate any obligation or
indebtedness under, any mortgage, lease, franchise, license, permit,
agreement, instrument, order, arbitration award, judgment or decree to
which Harcourt General or any of its Subsidiaries is a party or by which
any of them are bound, except for, in the case of clause (iii) above, such
violations that would not prevent Harcourt General from complying with the
terms and provisions of this Agreement or the Recapitalization Agreement in
any material respect.
SECTION 2.4 Certain Post-Distribution Transactions. (a)(i) Neiman
Marcus shall comply and shall cause its Subsidiaries to comply with and
otherwise not take action inconsistent with each representation and statement
made to the Internal Revenue Service in connection with the request by Harcourt
General for a ruling letter in respect of the Distribution as to certain tax
aspects of the Distribution and (ii) until two years after the Distribution
Date, Neiman Marcus will maintain its status as a company engaged in the active
conduct of a trade or business, as defined in Section 355(b) of the Code.
(b) Neiman Marcus agrees that until two years after the Distribution
Date, it will not (i) merge or consolidate with or into any other corporation,
(ii) liquidate or partially liquidate, (iii) sell or transfer all or
substantially all of its assets (within the meaning of Rev. Proc. 77-37, 1977 -
2 C.B. 568) in a single transaction or series of related transactions, (iv)
redeem or otherwise repurchase any Neiman Marcus stock (other than as described
in Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696), or (v) take any
other action or actions which in the aggregate (and taking into account the
Recapitalization) would have the effect of causing or permitting one or more
persons to acquire directly or indirectly stock representing a 50 percent or
greater interest (within the meaning of Section 355(e) of the Code) in Neiman
Marcus, unless prior to taking any such action set forth in the foregoing
clauses (i) through (v), Neiman Marcus has obtained (and provided to Harcourt
General) a written opinion in form and substance reasonably acceptable to
Harcourt General of a law firm reasonably acceptable to Harcourt General, or
Harcourt General has obtained (at the reasonable request and at the expense of
Neiman Marcus) a supplemental ruling from the Internal Revenue Service, that
such action or actions will not result in (i) the Distribution failing to
qualify under Section 355(a) of the Code or (ii) the Neiman Marcus shares
failing to qualify as qualified property for purposes of Section 355(c)(2) of
the Code by reason of Section 355(e) of the Code. Harcourt General agrees to
cooperate with Neiman Marcus in obtaining such opinion or, as the case may be,
to use its commercially reasonable best efforts in obtaining any supplemental
ruling reasonably requested by Neiman Marcus, including, where appropriate, by
providing written representations as to factual events that transpired prior to
the Distribution Date.
(c) Notwithstanding anything to the contrary herein, if Neiman Marcus
(or any of its Subsidiaries) fails to comply with any of its obligations under
Sections 2.4(a) and 2.4(b) above or takes or fails to take any action (including
any action referred to in Section 2.4(a) or clauses (i) through (v) of Section
2.4(b) without regard to when such action occurs) on or after the Distribution
Date, and such failure to comply, action or omission contributes to a
determination that (i) the Distribution fails to qualify under Section 355(a) of
the Code or (ii) the
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Neiman Marcus shares fail to qualify as qualified property for purposes of
Section 355(c)(2) of the Code by reason of Section 355(e) of the Code, then
Neiman Marcus shall indemnify and hold harmless Harcourt General and each member
of the consolidated group of which Harcourt General is a member from and against
any and all federal, state and local taxes, including any interest, penalties or
additions to tax, imposed upon or incurred by Harcourt General, any member of
its group or any stockholder of Harcourt General as a result of the failure of
the Distribution to qualify under Section 355(a) of the Code or the application
of Section 355(e) (including any taxes payable by reason of any payment made
pursuant to this Section 2.4(c)). The obligation of Neiman Marcus to indemnify
Harcourt General pursuant to the preceding sentence shall not be affected by the
delivery of any legal opinion or supplemental ruling under Section 2.4(b),
unless the circumstances described in clause (i) or (ii) of this Section 2.4(c)
shall occur solely by reason of (x) the failure of a representation made by
Harcourt General pursuant to the last sentence of Section 2.4(b) to be true and
correct in all material respects, (y) a material omission in any such
representation or (z) a breach by Harcourt General or any of the Shared
Representatives (as defined in Section 4.6) of any of the covenants contained in
Section 4.6; provided, however, that in the event that Harcourt General or any
of the Shared Representatives shall have breached any of such covenants, which
breach shall have been disclosed to a director of Neiman Marcus that is not
affiliated with Harcourt General (an "Independent Director"), and
notwithstanding such breach, a majority of the Independent Directors shall
determine (as evidenced in writing) to proceed with a Transaction Proposal (as
defined in Section 4.6), the indemnity provided by this Section 2.4(c) shall not
be affected.
SECTION 2.5 Certain Limitations on Actions by Harcourt General.
Subject to the representations and undertakings required by Harcourt General to
be made in order to obtain the IRS Ruling, following the Distribution, in
matters requiring a vote of the holders of Class A Common Stock, for such time
as Harcourt General holds the Retained Shares, Harcourt General will vote the
Retained Shares in proportion to the votes cast affirmatively or negatively by
all other holders of Class A Common Stock voting.
SECTION 2.6 Right of First Offer. (a) Commencing immediately after the
consummation of the Distribution, and prior to the second anniversary of the
Distribution Date, Harcourt General shall not, and shall not permit any
Subsidiary to, sell, exchange or transfer ("Transfer"), other than to a direct
or indirect wholly owned Subsidiary of Harcourt General, Neiman Marcus or
pursuant to a bona fide merger, tender offer, exchange offer, consolidation or
other similar transaction in which the opportunity to Transfer shares is made
available on the same basis to all holders of Class A Common Stock, a number of
shares of Class A Common Stock in any 60-day period representing 5% or more of
the outstanding shares of Class A Common Stock and Class B Common Stock, taken
together, unless Harcourt General shall have given to Neiman Marcus at least ten
days' prior written notice (the "Right of First Offer") that it or its
Subsidiary is considering effecting such a Transfer (a "Transferor's Notice").
Such notice shall state (i) the number of shares of Class A Common Stock that
Harcourt General or its Subsidiary may Transfer (the "Offered Securities") and
(ii) the price, if applicable, at which Harcourt General or its Subsidiary would
be willing to Transfer the Offered Securities, other than in a "block trade" or
other public offering (a "Public Sale"), including to a third party (the
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"Private Price"), and/or if Harcourt General or its Subsidiary anticipates the
possibility of a Transfer of such shares in a Public Sale, a statement to such
effect. Upon receipt of the Transferor's Notice, Neiman Marcus, acting through
its Board of Directors, shall have ten days (the "Offer Period") to elect to
purchase the Offered Securities at a price in cash equal to (x) the Private
Price or (y) if no Private Price has been stated by Harcourt General, the
closing price on the New York Stock Exchange Composite Transactions Tape (the
"NYSE Tape") on the trading day immediately preceding the date of the
Transferor's Notice. The foregoing Right of First Offer shall not apply to any
Transfer for shares of stock or other property, so long as the transferee in any
such Transfer shall agree in writing to be bound by the provisions of this
Section 2.6.
(b) If Neiman Marcus does not exercise its Right of First Offer, then
Harcourt General or its Subsidiary shall have the right, for a period ending
upon the later of (i) 120 days from the expiration of the Offer Period, (ii) 45
days after such time as a registration statement filed with respect to such
Offered Securities shall be declared effective by the Commission or (iii) 15
days after the expiration of such time as the parties to any transaction
reasonably require to comply with applicable United States federal and state
laws and regulations, to Transfer or, in the case of Harcourt General, cause its
Subsidiary to Transfer all or any portion of the Offered Securities at a price
no less than (i) if the Transferor's Notice sets forth a Private Price, the
Private Price or (ii) if the Transferor's Notice does not set forth a Private
Price, (A) in a Public Sale, 90% of the low sales price on the NYSE Tape on the
trading day on which such Transfer is made (as opposed to the settlement date of
such Transfer) or (B) in a Transfer other than a Public Sale, the low sales
price on the NYSE Tape on the trading day on which an agreement to Transfer is
made. If Harcourt General or its Subsidiary does not Transfer or, in the case of
Harcourt General, cause its Subsidiary to Transfer all or any portion of the
Offered Securities within the time period provided for in this Section 2.6(b),
the Right of First Offer in this Section 2.6 shall again become applicable with
respect to any Transfer of shares of Class A Common Stock by Harcourt General or
its Subsidiary.
(c) If Neiman Marcus exercises its Right of First Offer, the closing
of the purchase of the Offered Securities with respect to which such right has
been exercised shall take place on the 15th day after the later of (i) the date
Neiman Marcus gives notice of such exercise and (ii) the expiration of such time
as the parties may reasonably require in order to comply with applicable United
States federal and state laws and regulations, which in no event shall be more
than 45 days after the date specified in clause (c)(i).
(d) Upon exercise by Neiman Marcus of its Right of First Offer under
this Section 2.6, Neiman Marcus and Harcourt General or, if applicable, its
Subsidary, shall be legally obligated to consummate the purchase contemplated
thereby and shall use their respective reasonable best efforts to make all
necessary filings and to secure any approvals required and to comply as soon as
practicable with all applicable United States federal and state laws and
regulations in connection therewith; provided, however, that Harcourt General or
its Subsidiary may determine, at any time prior to the consummation of a
Transfer to Neiman Marcus, not to Transfer or, in the case of Harcourt General,
cause its Subsidiary to Transfer the Offered
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Securities, in which case all of the provisions of this Section 2.6 shall again
become applicable with respect to any Transfer of shares of Class A Common Stock
by Harcourt General or its Subsidiary.
SECTION 2.7 Xxxxx Family. Harcourt General shall use its commercially
reasonable best efforts to procure the agreement of each member of the Xxxxx
family currently reporting its ownership of Harcourt General Common Stock on
Schedule 13D under the Exchange Act (the "Xxxxx Stockholders") that, for a
period of 180 days from the Distribution Date, such Xxxxx Stockholder shall not
Transfer any shares of Class B Common Stock held by such Xxxxx Stockholder other
than to any other Xxxxx Stockholder or any other Person to whom such Xxxxx
Stockholder would be permitted to transfer shares of Class B Stock of Harcourt
General in accordance with the Harcourt General Certificate of Incorporation
(including for bona fide estate planning or charitable purposes); provided,
however, that such Xxxxx Stockholder shall be permitted to Transfer shares of
Class B Common Stock pursuant to a bona fide tender offer, exchange offer,
merger, consolidation or similar transaction in which the opportunity to
Transfer shares is made available on the same basis to all holders of Class B
Common Stock.
ARTICLE III. INDEMNIFICATION
SECTION 3.1 Indemnification by Neiman Marcus. Except as otherwise
specifically set forth in any provision of this Agreement, Neiman Marcus shall
indemnify, defend and hold harmless the Harcourt General Indemnitees from and
against any and all Indemnifiable Losses of the Harcourt General Indemnitees
arising out of, by reason of or otherwise in connection with the Neiman Marcus
Liabilities or alleged Neiman Marcus Liabilities, including any breach by Neiman
Marcus of any representation, warranty, covenant or other provision of this
Agreement or the Recapitalization Agreement.
SECTION 3.2 Indemnification by Harcourt General. Except as otherwise
specifically set forth in any provision of this Agreement, Harcourt General
shall indemnify, defend and hold harmless the Neiman Marcus Indemnitees from and
against any and all Indemnifiable Losses of the Neiman Marcus Indemnitees
arising out of, by reason of or otherwise in connection with the Harcourt
General Liabilities or alleged Harcourt General Liabilities, including any
breach by Harcourt General of any representation, warranty, covenant or other
provision of this Agreement or the Recapitalization Agreement.
SECTION 3.3 Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against a Neiman
Marcus Indemnitee or a Harcourt General Indemnitee (each, an "Indemnitee") by
any person who is not a party to this Agreement (a "Third Party Claim") as to
which such Indemnitee is entitled to indemnification pursuant to this Agreement,
such Indemnitee shall notify the party which is or may be required pursuant to
the terms hereof to make such indemnification (the "Indemnifying Party") in
writing, and in reasonable detail, of the Third Party Claim promptly (and in any
event within 15 business days) after receipt by such Indemnitee of written
notice of the Third Party
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Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnitee failed to give such notice).
Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly
(and in any event within five business days) after the Indemnitee's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnitee relating to the Third Party Claim. Any Indemnitee shall
cooperate with the Indemnifying Party in the defense or prosecution of any Third
Party Claim, including by providing or causing to be provided records and
witnesses as soon as reasonably practicable after receiving any request therefor
from or on behalf of the Indemnifying Party.
If a Third Party Claim is made against an Indemnitee with respect to
which a claim for indemnification is made pursuant to Section 3.1 or Section 3.2
hereof, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses and acknowledges in writing its obligation to
indemnify the Indemnitee therefor, to assume the defense thereof with counsel
selected by the Indemnifying Party; provided that such counsel is not reasonably
objected to by the Indemnitee. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party shall, within 30 days
(or sooner if the nature of the Third Party Claim so requires), notify the
Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter
not be liable to the Indemnitee for legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
that such Indemnitee shall have the right to employ counsel to represent such
Indemnitee if, in such Indemnitee's reasonable judgment, a conflict of interest
between such Indemnitee and such Indemnifying Party exists in respect of such
claim which would make representation of both such parties by one counsel
inappropriate, and in such event the fees and expenses of such separate counsel
shall be paid by such Indemnifying Party. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate in the defense
thereof and to employ counsel, subject to the proviso of the preceding sentence,
at its own expense, separate from the counsel employed by the Indemnifying
Party, it being understood that the Indemnifying Party shall control such
defense. The Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense thereof (other than during the period
prior to the time the Indemnitee shall have given notice of the Third Party
Claim as provided above). If the Indemnifying Party so elects to assume the
defense of any Third Party Claim, all of the Indemnitees shall cooperate with
the Indemnifying Party in the defense or prosecution thereof, including by
providing or causing to be provided, records and witnesses as soon as reasonably
practicable after receiving any request therefor from or on behalf of the
Indemnifying Party.
If the Indemnifying Party acknowledges in writing responsibility for a
Third Party Claim, then in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, any Third Party Claim without
the Indemnifying Party's prior written consent (which shall not be unreasonably
withheld); provided, however, that the Indemnitee shall have the right to
settle, compromise or discharge such Third Party Claim without the consent of
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the Indemnifying Party if (i) the Indemnitee releases the Indemnifying Party
from its indemnification obligation hereunder with respect to such Third Party
Claim, (ii) such settlement, compromise or discharge is solely for money damages
and would not otherwise adversely affect the Indemnifying Party and (iii) such
settlement, compromise or discharge does not subject the Indemnifying Party to
any equitable remedy. If the Indemnifying Party acknowledges in writing
responsibility for a Third Party Claim, the Indemnifying Party shall be
permitted to enter into, and the Indemnitee shall agree to, any settlement,
compromise or discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and releases
the Indemnitee completely in connection with such Third Party Claim and that
would not otherwise adversely affect the Indemnitee or subject the Indemnitee to
any equitable remedy; provided, however, that the Indemnitee may refuse to agree
to any such proposed settlement, compromise or discharge if the Indemnitee
agrees that the Indemnifying Party's indemnification obligation with respect to
such Third Party Claim shall not exceed the amount that would be required to be
paid by or on behalf of the Indemnifying Party in connection with such proposed
settlement, compromise or discharge; and provided further that the Indemnifying
Party shall not agree to any other settlement, compromise or discharge of a
Third Party Claim not described above without the prior written consent of the
Indemnitee, such consent not to be unreasonably withheld. If an Indemnifying
Party elects not to assume the defense of a Third Party Claim, or fails to
notify an Indemnitee of its election to do so as provided herein, such
Indemnitee may compromise, settle or defend such Third Party Claim.
(b) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
(c) The remedies provided in this Article III shall be cumulative and
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
SECTION 3.4 Indemnification Payments. Indemnification required by this
Article III shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or loss,
liability, claim, damage or expense is incurred.
ARTICLE IV. COVENANTS
SECTION 4.1 Access to Information. (a) Other than in circumstances in
which indemnification is sought pursuant to Article III (in which event the
provisions of such Article
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will govern), from and after the Distribution Date, each of Neiman Marcus and
Harcourt General shall afford to the other and its authorized accountants,
counsel and other designated representatives reasonable access during normal
business hours, subject to appropriate restrictions for classified, privileged
or confidential information, to the personnel, properties, books and records of
such party and its Subsidiaries insofar as such access is reasonably required by
the other party and relates to such other party's performance of its obligations
under this Agreement or the Recapitalization Agreement or such party's
financial, tax and other reporting obligations.
(b) A party providing information or access to information to the
other party under this Article IV shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such information or access to
information.
SECTION 4.2 Confidentiality. Each of Neiman Marcus and its
Subsidiaries and Harcourt General and its Subsidiaries shall keep, and shall
cause its consultants and advisors to keep, confidential all information
concerning the other parties in its possession, its custody or under its control
(except to the extent that (A) such information has been in the public domain
through no fault of such party or (B) such information has been later lawfully
acquired from other sources by such party or (C) this Agreement or the
Recapitalization Agreement or any other agreement entered into pursuant hereto
or thereto permits the use or disclosure of such information) to the extent such
information (i) relates to or was acquired during the period up to the Effective
Time or pursuant to Section 4.1, or (ii) is based upon or is derived from
information described in the preceding clause (i), and each party shall not
(without the prior written consent of the other) otherwise release or disclose
such information to any other person, except such party's auditors and
attorneys, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by law and such
party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure.
SECTION 4.3 Retention of Records. Except as otherwise required by law
or agreed to in writing, each party shall preserve and retain all information
relating to the other party's business in accordance with the record retention
policies of such party as may be in effect from time to time. Notwithstanding
the foregoing, any party may destroy or otherwise dispose of any information at
any time; provided that prior to such destruction or disposal (i) such party
shall provide no less than 90 days prior written notice to the other party,
specifying the information proposed to be destroyed or disposed of and (ii) if
the recipient of such notice shall request in writing prior to the scheduled
date for such destruction or disposal that any of the information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the information as was requested at the expense of the requesting party.
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SECTION 4.4 Litigation Cooperation. Each of Harcourt General and
Neiman Marcus shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, employees and agents as witnesses
to the extent that such persons may reasonably be required in connection with
any Action arising out of (i) the business of such other party and its
predecessors, if any, in which the requesting party may from time to time be
involved, provided, that such Action does not involve a claim between either of
Harcourt General or Neiman Marcus against the other or (ii) the matters
contained in Section 2.4 hereof.
SECTION 4.5 Other Matters. Each of Harcourt General and Neiman Marcus
shall negotiate in good faith to execute prior to the Distribution Date such
further certificates, agreements and other documents (including, without
limitation, with respect to transition services, intellectual property, employee
benefits and insurance matters) which are necessary or appropriate to consummate
or implement the transactions contemplated hereby and by the Recapitalization
Agreement.
SECTION 4.6 No Solicitation. (a) Harcourt General agrees that neither
it nor any executive officer of Harcourt General named on Schedule 4.6 to this
Agreement or any director of Harcourt General who is also an executive officer
or director of Neiman Marcus (a "Shared Representative") shall solicit any
offers or proposals regarding (i) any merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Neiman Marcus, (ii) any purchase or sale of all
or substantially all of the assets of Neiman Marcus or (iii) any issuance or
other sale or transfer of any equity interest in Neiman Marcus held by Harcourt
General (collectively, a "Transaction Proposal"). The obligations set forth in
clauses (i) and (ii) of this Section 4.6(a) shall terminate on the date that is
two years following the Distribution Date and the obligations set forth in
clause (iii) of this Section 4.6(a) shall terminate on the Distribution Date.
(b) Upon receipt of an unsolicited Transaction Proposal, Harcourt
General or any Shared Representative, as the case may be, shall, in Harcourt
General's sole discretion, either (i) promptly reject such Transaction Proposal,
subject to the fiduciary obligations of any Shared Representative to Neiman
Marcus or its stockholders or to such Shared Representative's obligations as an
executive officer of Neiman Marcus, or (ii) refer such Transaction Proposal to
Xxxxxx X. Xxxxxx or another Independent Director and to the Person designated
pursuant to Section 5.5 to receive copies of any notices delivered to Neiman
Marcus and the Independent Directors of Neiman Marcus. In the event that the
Independent Directors determine that such Transaction Proposal should be
discussed further with the party making such Transaction Proposal, the
Independent Directors shall notify Harcourt General in writing, signed by a
majority of the Independent Directors of Neiman Marcus. Harcourt General and the
Shared Representatives shall be permitted to take such steps as they deem
appropriate, in their good faith judgment, in connection with such Transaction
Proposal without being deemed to violate this Section 4.6. The sole remedy for
breach by Harcourt General or any of the Shared Representatives of this Section
4.6 shall be the elimination of the indemnity obligation of Neiman Marcus set
forth in Section 2.4(c), as provided in the last sentence of Section 2.4(c),
except as provided in the proviso to such last sentence of Section 2.4(c).
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SECTION 4.7 Registration Rights Agreement. On the Distribution Date,
Harcourt General and Neiman Marcus will enter into a registration rights
agreement providing for two demand registration rights and two shelf
registration rights with respect to the shares of Class A Common Stock to be
held by Harcourt General following the Distribution Date, and otherwise
containing customary provisions reasonably acceptable to both Harcourt General
and Neiman Marcus.
SECTION 4.8 Disclosure of Indemnification Obligations. Neiman Marcus
agrees to disclose from time to time, in its audited consolidated financial
statements included in its Annual Report on Form 10-K, the existence, scope and
material terms of its indemnification obligations pursuant to Section 2.4(c),
for a period commencing on the Distribution Date and ending on the earlier to
occur of (i) the date that is five years from the Distribution Date and (ii)
such time as the Independent Directors of Neiman Marcus determine such
disclosure is no longer necessary.
ARTICLE V. MISCELLANEOUS
SECTION 5.1 Complete Agreement; Construction. This Agreement and the
Recapitalization Agreement, including the Exhibits and Schedules hereto and
thereto, shall constitute the entire agreement between the parties with respect
to the subject matter hereof and thereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
SECTION 5.2 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other parties.
SECTION 5.3 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 5.4 Expenses. Except as set forth on Schedule 5.4 or as
otherwise set forth in this Agreement or in the Recapitalization Agreement, all
costs and expenses incurred in connection with the preparation, execution,
delivery and implementation of this Agreement and the Recapitalization
Agreement, and the Distribution and the other transactions contemplated hereby
and thereby shall be charged to and paid by the party incurring such costs and
expenses.
SECTION 5.5 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
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To Harcourt General:
Harcourt General, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Chief Executive Officer
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 000-000-0000
Attn: Xxxx X. Xxxxxx, Esq.
To Neiman Marcus:
The Neiman Marcus Group, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Chief Executive Officer
and
The Independent Directors of Neiman Marcus
c/o The Secretary of Neiman Marcus
The Neiman Marcus Group, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telecopy: 000-000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
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SECTION 5.6 Waivers. The failure of any party to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 5.7 Amendments. Subject to the terms of Section 5.10 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
SECTION 5.8 Assignment. This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by any party hereto without the prior
written consent of the other party hereto, and any attempt to assign any rights
or obligations arising under this Agreement without such consent shall be void.
SECTION 5.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns. In addition, the
provisions of this Agreement shall be binding upon any person that acquires,
directly or indirectly, 50% or more of the (i) voting power, in an election of
directors or otherwise, represented by the outstanding common stock, (ii) shares
of outstanding common stock or (iii) assets of Neiman Marcus on or after the
Distribution Date, but Neiman Marcus shall not enter into any agreement with
respect to the foregoing or permit to be consummated any such transaction unless
and until a writing shall be signed by any such person and delivered to Harcourt
General whereby such person agrees to assume the obligations of Neiman Marcus
hereunder.
SECTION 5.10 Termination. This Agreement (including Article III
hereof) may be terminated and the Distribution may be amended, modified or
abandoned at any time prior to the filing of the certificate of merger relating
to the Recapitalization by and in the sole discretion of Harcourt General
without the approval of Neiman Marcus or the stockholders of Neiman Marcus;
provided that if, at the time of such termination Neiman Marcus is not in breach
of any of its obligations hereunder or under the Recapitalization Agreement,
Harcourt General shall pay the reasonable out-of-pocket expenses of Neiman
Marcus incurred in connection with this Agreement, the Recapitalization
Agreement and the transactions contemplated hereby and thereby. This Agreement
may be terminated by Neiman Marcus only upon material breach by Harcourt General
of a representation, warranty or covenant contained in this Agreement, which
breach would result in a Material Adverse Effect with respect to Neiman Marcus
after giving effect to the Distribution. In the event of termination of this
Agreement by either party hereto, except as set forth in the next preceding
sentence, no party shall have any liability of any kind to any other party or
any other person. After the filing of the certificate of merger relating to the
Recapitalization, this Agreement may not be terminated except by an agreement in
writing signed by both parties and a majority of the Independent Directors of
Neiman Marcus.
SECTION 5.11 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set
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forth herein to be performed by any Subsidiary of such party or by any entity
that is contemplated to be a Subsidiary of such party on or after the
Distribution Date.
SECTION 5.12 Third Party Beneficiaries. Except as provided in Article
III relating to Indemnitees, this Agreement is solely for the benefit of the
parties hereto and their respective Subsidiaries and Affiliates and should not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 5.13 Title and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
SECTION 5.14 Exhibits and Schedules. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
SECTION 5.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE COMMONWEALTH OF
MASSACHUSETTS.
SECTION 5.16 Consent to Jurisdiction. Each of the parties irrevocably
submits to the exclusive jurisdiction of (a) the Supreme Court of the
Commonwealth of Massachusetts, and (b) the United States District Court for the
District of Massachusetts, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the District of
Massachusetts or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the Supreme Court of the Commonwealth
of Massachusetts. Each of the parties further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in Massachusetts with respect to any matters to which
it has submitted to jurisdiction in this Section 5.16. Each of the parties
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Supreme Court of the Commonwealth of
Massachusetts, or (ii) the United States District Court for the District of
Massachusetts, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 5.17 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
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negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
HARCOURT GENERAL, INC.
By: /s/ Xxxx X. Xxxx
----------------------------------------------
Name: Xxxx X. Xxxx
Title: Senior Vice President and Chief
Financial Officer
THE NEIMAN MARCUS GROUP, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President, General
Counsel and Secretary
