1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
PAYLESS SHOESOURCE, INC.,
PAYLESS SHOESOURCE HOLDINGS, INC.
AND
PAYLESS MERGER CORP.
DATED AS OF APRIL 20, 1998, AS AMENDED
2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of April 20, 1998, as amended, among Payless ShoeSource, Inc., a Missouri
corporation (the "Company"), Payless ShoeSource Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Parent"), and
Payless Merger Corp., a Missouri corporation and a wholly-owned subsidiary of
Parent ("Merger Sub").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "Merger"), further approved the Merger upon the terms and subject to the
conditions set forth in this Agreement and approved this Agreement;
WHEREAS, Parent and Merger Sub are newly formed corporations organized for
the purpose of participating in the transactions contemplated by this Agreement;
WHEREAS, the Boards of Directors of the Company and Merger Sub have
directed the submission of this Agreement to a vote of their respective
shareholders;
WHEREAS, the Company desires to create a new holding company structure and
permit its shareowners to own equity interests in a Delaware corporation by
consummating the Merger and converting each outstanding Share (as defined
herein) into one share of Parent Common Stock (as defined herein), all in
accordance with the terms of this Agreement;
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a corporate reorganization under common control
similar to a pooling of interests; and
WHEREAS, the parties will not permit the Effective Time (as defined herein)
to occur prior to May 5, 1998;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME
1.1. THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.2) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"), and except as provided herein, the separate corporate existence
of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Merger shall have the
effects specified in the Missouri General and Business Corporation Law, as
amended (the "MGCL").
1.2. EFFECTIVE TIME. As soon as practicable following the satisfaction of
the conditions set forth in this Agreement, the Company and Merger Sub will
cause Articles of Merger (the "Missouri Articles of Merger") to be executed in
duplicate as provided in Section 351.430 of the MGCL and delivered to the
Secretary of State of Missouri as provided in Section 351.435 of the MGCL. The
Merger shall become effective at the time when the Secretary of State of
Missouri issues a Certificate of Merger attaching to it the Missouri Articles of
Merger (the "Effective Time").
1
3
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. THE ARTICLES OF INCORPORATION. The amended and restated
articles of incorporation of the Company as in effect immediately prior to
the Effective Time shall be the articles of incorporation of the Surviving
Corporation (the "Charter"), until duly amended as provided therein or by
applicable law, except that Article TENTH shall be deleted in its entirety and
each following Article shall be correspondingly renumbered, Article ELEVENTH
shall be amended by amending each reference therein to Article ELEVENTH to be a
reference to Article TENTH and Articles SECOND, THIRD and FOURTH of the Charter
shall each be amended in their entirety to provide as follows:
"SECOND. The Corporation's registered agent shall be Corporation
Service Company d/b/a CSC-Lawyers Incorporating Service Company at 000
Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx Xxxx, Xxxxxxxx 00000.
THIRD. The aggregate number of shares that the Corporation shall have
authority to issue is 10,000,000 shares of Common Stock, par value
$.01 per share.
FOURTH. The number of directors constituting the first Board of
Directors is FIVE (5). The number of directors to constitute all
subsequent Boards of Directors shall be fixed by, or in the manner
provided in, the Corporation's bylaws. Any change in the number of
directors constituting the Board of Directors shall be reported by the
corporation to the Missouri Secretary of State within 30 calendar days
after such change."
2.2. THE BY-LAWS. The by-laws of Merger Sub in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1. OFFICERS. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation or By-laws.
3.2. DIRECTORS. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected and qualified or until their
earlier death, resignation or removal in accordance with the Articles of
Incorporation or By-laws or as otherwise provided by law.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1. EFFECT ON CAPITAL STOCK. At the Effective Time, as a result of the
Merger and without any action on the part of Parent, the Company, Merger Sub or
the holder of any capital stock of the Company:
(a) MERGER CONSIDERATION. Each share of the Common Stock, par value
$.01 per share, of the Company (a "Share" or, collectively, the "Shares")
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by any direct or indirect subsidiary of the Company not held
on behalf of third parties or Shares ("Dissenting Shares") that are owned
by stockholders ("Dissenting Stockholders") exercising dissenters' rights
pursuant to Section 351.455 of the MGCL (collectively, "Excluded Shares"))
shall be converted into one share of Common Stock, par value $.01 per
share, of
2
4
Parent ("Parent Common Stock") together with one attached right ("Rights")
to purchase shares of Series A Preferred Stock par value $.01 per share of
Parent which shall have the rights and preferences described in the Rights
Agreement dated as of April 20, 1998 between Parent and UMB Financial Corp.
(b) CANCELLATION OF SHARES AND CERTAIN SHARES OF PARENT COMMON
STOCK. Each share of Parent Common Stock owned by the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the Company, cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor and
shall cease to exist.
(c) MERGER SUB. At the Effective Time, each share of Common Stock,
par value $1.00 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation.
(d) OPTIONS. At the Effective Time, each option or right to purchase
(each, a "Company Option") Shares pursuant to any of the Company's
incentive plans or employee benefit plans, including the Company's 1996
Stock Incentive Plan and the Company's Stock Ownership Plan (the "Option
Plans") shall become an option or right to purchase shares of Parent Common
Stock on the same terms as an option or right to purchase Shares under an
Option Plan at an exercise price equal to the exercise price per share of
such Company Option under an Option Plan.
(e) RESTRICTED AND OTHER SHARE BASED AWARDS OR RIGHTS. At the
Effective Time, each right or obligation to receive a Share or payment of
an amount based on a Share under any of the Company's incentive plans or
benefit plans, including the Company's 1996 Stock Incentive Plan,
Restricted Stock Plan for Non-Management Directors, Spin-Off Stock Plan,
Deferred Compensation Plan and Deferred Compensation Plan for
Non-Management Directors shall become a right or obligation, as the case
may be, to receive shares or payment of an amount based on shares of Parent
Common Stock on the same terms as the right or obligation to receive Shares
or payment of an amount based on Shares existed under any of such plans
immediately prior to the Effective Time.
(f) NO SURRENDER OF CERTIFICATES. Until thereafter surrendered for
transfer or exchange in the ordinary course, each outstanding certificate
(other than certificates representing Excluded Shares) that, immediately
prior to the Effective Time, evidenced Company Common Stock shall, from the
Effective Time, be deemed and treated for all corporate purposes to
evidence the ownership of the same number of shares of Parent Common Stock
together with attached Rights.
(g) DISSENTERS' RIGHTS. No Dissenting Stockholder shall be entitled
to shares of Parent Common Stock or any dividends or other distributions
thereon unless and until the holder thereof shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to dissent
from the Merger Agreement under the MGCL, and any Dissenting Stockholder
shall be entitled to receive only the payment provided by Section 351.455
of the MGCL with respect to Shares owned by such Dissenting Stockholder. If
any person who otherwise would be deemed a Dissenting Stockholder shall
have failed to properly perfect or shall have effectively withdrawn or lost
the right to dissent with respect to any Shares, such Shares shall
thereupon be treated as though such Shares had been converted into shares
of Parent Common Stock pursuant to Section 4.1(a) hereof. The right to
payment pursuant to Section 351.455 of the MGCL shall cease to exist if and
when the Company shall abandon the Merger.
ARTICLE V
ACTIONS TO BE TAKEN IN
CONNECTION WITH THE MERGER
5.1. ASSUMPTION OF PLANS AND AGREEMENTS. Parent and the Company hereby
agree that they shall, at or prior to the Effective Time, execute, acknowledge
and deliver an assumption agreement pursuant to which Parent will, from and
after the Effective Time, be substituted for, assume and agree to perform, or
cause the Company to perform, all obligations of the Company pursuant to any and
all employee benefit plans established or maintained by the Company immediately
prior to the Effective Time, all severance and
3
5
employment agreements in effect immediately prior to the Effective Time between
the Company and an individual named therein and all compensation and incentive
plans established or maintained by the Company immediately prior to the
Effective Time, in each case as Parent and the Company may provide in such
assumption agreement, including the Option Plans, Restricted Stock Plan for
Non-Management Directors, Spin-Off Stock Plan, Profit Sharing Plan, Profit
Sharing Plan for Puerto Rico Associates, Deferred Compensation Plan, Deferred
Compensation Plan for Non-Management Directors and Stock Appreciation and
Phantom Stock Unit Plan for International Employees. In connection with such
assumption and without further action by shareholders of Parent or the Company,
such plans shall be amended such that all references to the Company and the
Shares shall become references to Parent, if provided in the assumption
agreement referred to in the preceding sentence, and Parent Common Stock,
respectively.
ARTICLE VI
CONDITIONS
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been duly
approved by holders of at least two-thirds of the issued and outstanding
Shares and shall have been duly approved by Parent as the sole stockholder
of Merger Sub in accordance with applicable law and the certificate of
incorporation and bylaws of each such corporation.
(b) NYSE LISTING. The shares of Parent Common Stock issuable to the
stockholders of the Company pursuant to this Agreement shall have been
authorized for listing on the NYSE upon official notice of issuance.
(c) CLOSING DATE. The date shall be after May 4, 1998. The parties
hereto acknowledge and agree that the condition set forth in this Section
5.1(c) may not be waived.
ARTICLE VII
TERMINATION
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company referred to in
Section 6.1(a), by mutual written consent of the Company and Parent by action of
their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1. MODIFICATION OR AMENDMENT. Subject to the provisions of the
applicable law, at any time prior to the Effective Time, whether before or after
the approval by shareholders of the Company referred to in Section 6.1(a), the
parties hereto may modify or amend this Agreement, by written agreement approved
by the respective parties' Boards of Directors and executed and delivered by
duly authorized officers of the respective parties, except that (i) the parties
may not amend Section 6.1(c) and (ii) no amendment shall alter or change the
amount or kind of shares to be received by shareholders of the Company or
otherwise alter or change any of the terms and conditions of this Agreement so
as to adversely affect the Company's shareholders.
8.2. WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law except for the condition set forth in Section 6.1(c).
4
6
8.3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
8.4. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF MISSOURI WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
8.5. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
5
7
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
PAYLESS SHOESOURCE, INC.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
PAYLESS SHOESOURCE HOLDINGS, INC.
By: /s/ XXXXXX X. XXXXXXXX
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
PAYLESS MERGER CORP.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
6
