Contract

EXHIBIT 2.1 EXECUTION COPY AGREEMENT AND PLAN OF MERGER BY AND AMONG FEDERATED DEPARTMENT STORES, INC., MILAN ACQUISITION CORP. AND THE MAY DEPARTMENT STORES COMPANY DATED AS OF FEBRUARY 27, 2005 TABLE OF CONTENTS

PAGE —- ARTICLE I THE MERGER………………………………………………. 1 Section 1.1 The Merger………………………………………….. 1 Section 1.2 Closing…………………………………………….. 2 Section 1.3 Effective Time………………………………………. 2 Section 1.4 Effects of the Merger………………………………… 2 Section 1.5 Certificate of Incorporation and By-laws……………….. 2 Section 1.6 Directors and Officers of the Surviving Corporation……… 2 Section 1.7 Tax Consequences…………………………………….. 3 Section 1.8 Adjustments to Preserve Tax Consequences……………….. 3ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES AND PAYMENT………………………………….. 3 Section 2.1 Effect on Capital Stock………………………………. 3 Section 2.2 Exchange of Certificates……………………………… 4 Section 2.3 Certain Adjustments………………………………….. 7 Section 2.4 Dissenters’ Rights…………………………………… 8 Section 2.5 Further Assurances…………………………………… 8 Section 2.6 Withholding Rights…………………………………… 8ARTICLE III REPRESENTATIONS AND WARRANTIES…………………………….. 9 Section 3.1 Organization, Standing and Corporate Power……………… 9 Section 3.2 Subsidiaries………………………………………… 9 Section 3.3 Capital Structure……………………………………. 10 Section 3.4 Authority…………………………………………… 11 Section 3.5 Non-Contravention; Consents and Approvals………………. 12 Section 3.6 SEC Reports and Financial Statements…………………… 13 Section 3.7 Information Supplied…………………………………. 13 Section 3.8 Absence of Certain Changes or Events…………………… 14 Section 3.9 Compliance with Applicable Laws……………………….. 14 Section 3.10 Employee Benefit Plans……………………………….. 14 Section 3.11 Taxes………………………………………………. 16 Section 3.12 Environmental Matters………………………………… 17

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PAGE —- Section 3.13 Voting Requirements………………………………….. 19 Section 3.14 State Takeover Statutes………………………………. 19 Section 3.15 Opinion of Financial Advisors…………………………. 19 Section 3.16 Brokers…………………………………………….. 20 Section 3.17 The Company Rights Agreement………………………….. 20 Section 3.18 Financing…………………………………………… 20 Section 3.19 Merger Sub………………………………………….. 20ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS…………………… 20 Section 4.1 Conduct of Business………………………………….. 20 Section 4.2 No Solicitation by the Company………………………… 25ARTICLE V ADDITIONAL AGREEMENTS…………………………………….. 28 Section 5.1 Preparation of the Form S-4 and the Joint Proxy Statement; Stockholders Meetings………………………………… 28 Section 5.2 Letters of the Company’s Accountants…………………… 30 Section 5.3 Letters of Parent’s Accountants……………………….. 30 Section 5.4 Access to Information; Confidentiality…………………. 30 Section 5.5 Reasonable Best Efforts………………………………. 30 Section 5.6 Company Stock Options; Stock Plans…………………….. 32 Section 5.7 Indemnification……………………………………… 34 Section 5.8 Public Announcements…………………………………. 35 Section 5.9 Affiliates………………………………………….. 35 Section 5.10 NYSE Listing………………………………………… 35 Section 5.11 Stockholder Litigation……………………………….. 36 Section 5.12 Tax Treatment……………………………………….. 36 Section 5.13 Section 16(b)……………………………………….. 36 Section 5.14 Employee Benefit Matters……………………………… 36 Section 5.15 Parent Board………………………………………… 38 Section 5.16 Dividends…………………………………………… 38 Section 5.17 St. Louis Operations and Community Involvement………….. 38ARTICLE VI CONDITIONS PRECEDENT……………………………………… 38 Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger.. 38

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PAGE —- Section 6.2 Conditions to Obligations of Parent and Merger Sub………. 39 Section 6.3 Conditions to Obligations of the Company……………….. 40 Section 6.4 Frustration of Closing Conditions……………………… 40ARTICLE VII TERMINATION……………………………………………… 40 Section 7.1 Termination…………………………………………. 40 Section 7.2 Effect of Termination………………………………… 42 Section 7.3 Fees and Expenses……………………………………. 42ARTICLE VIII GENERAL PROVISIONS……………………………………….. 43 Section 8.1 Nonsurvival of Representations and Warranties…………… 43 Section 8.2 Notices…………………………………………….. 43 Section 8.3 Interpretation………………………………………. 44 Section 8.4 Counterparts………………………………………… 46 Section 8.5 Entire Agreement; No Third-Party Beneficiaries………….. 46 Section 8.6 Governing Law……………………………………….. 47 Section 8.7 Assignment………………………………………….. 47 Section 8.8 Consent to Jurisdiction; Waiver of Jury Trial…………… 47 Section 8.9 Specific Enforcement…………………………………. 47 Section 8.10 Amendment…………………………………………… 48 Section 8.11 Extension; Waiver……………………………………. 48 Section 8.12 Severability………………………………………… 48

-iii- EXHIBITSEXHIBIT A FORM OF COMPANY AFFILIATE LETTER……………………. A-1 TABLE OF DEFINED TERMS

TERM PAGE- —- —- “ENVIRONMENTAL CONDITION”………………………………………………… 20″knowledge”…………………………………………………………….. 47″MATERIAL………………………………………………………………. 48″material adverse effect”………………………………………………… 48″PARENT ADVERSE RECOMMENDATION CHANGE”…………………………………….. 30″PARENT STOCK OPTIONS”…………………………………………………… 12″PARENT STOCK PLANS”…………………………………………………….. 12″PARENT TAKEOVER PROPOSAL”……………………………………………….. 31″PCBS”…………………………………………………………………. 201992 EEIP………………………………………………………………. 111995 EEIP………………………………………………………………. 11ADJUSTED OPTION…………………………………………………………. 34ADJUSTMENT EVENT………………………………………………………… 8AFFILIATE………………………………………………………………. 47AGREEMENT………………………………………………………………. 1ANTITRUST DIVISION………………………………………………………. 32ANTITRUST FILINGS……………………………………………………….. 32AVERAGE CLOSING PRICE……………………………………………………. 7BENEFIT PLANS…………………………………………………………… 16BENEFITS MAINTENANCE PERIOD………………………………………………. 38BUSINESS DAY……………………………………………………………. 2CASH CONSIDERATION………………………………………………………. 4CERTIFICATE OF MERGER……………………………………………………. 2CLOSING………………………………………………………………… 2CLOSING DATE……………………………………………………………. 2CODE…………………………………………………………………… 1COMPANY………………………………………………………………… 1COMPANY ADVERSE RECOMMENDATION CHANGE……………………………………… 27COMPANY CERTIFICATE……………………………………………………… 4COMPANY COMMON STOCK…………………………………………………….. 1COMPANY DISCLOSURE LETTER………………………………………………… 9COMPANY EMPLOYEES……………………………………………………….. 38COMPANY REPRESENTATIVES………………………………………………….. 26COMPANY RIGHTS………………………………………………………….. 11COMPANY RIGHTS AGREEMENT…………………………………………………. 11COMPANY STOCK OPTIONS……………………………………………………. 11COMPANY STOCK PLANS……………………………………………………… 11

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TERM PAGE- —- —- COMPANY STOCKHOLDER APPROVAL……………………………………………… 20COMPANY STOCKHOLDERS MEETING……………………………………………… 30COMPANY SUBSIDIARY………………………………………………………. 22COMPANY TAKEOVER PROPOSAL………………………………………………… 27CONFIDENTIALITY AGREEMENT………………………………………………… 31DCP……………………………………………………………………. 11DGCL…………………………………………………………………… 1DIRECTORS DCP…………………………………………………………… 11DISSENTING SHARES……………………………………………………….. 8DISSENTING STOCKHOLDER…………………………………………………… 8EDCP…………………………………………………………………… 11EFFECTIVE TIME………………………………………………………….. 2ENVIRONMENT…………………………………………………………….. 19ENVIRONMENTAL CLAIM……………………………………………………… 19ENVIRONMENTAL LAWS………………………………………………………. 19ENVIRONMENTAL PERMIT…………………………………………………….. 20ERISA………………………………………………………………….. 15ESOP PREFERENCE SHARES…………………………………………………… 11EXCHANGE ACT……………………………………………………………. 13EXCHANGE AGENT………………………………………………………….. 5EXCHANGE FUND…………………………………………………………… 5EXPENSES……………………………………………………………….. 44FOREIGN PLAN……………………………………………………………. 16FORM S-4……………………………………………………………….. 14FTC……………………………………………………………………. 32GAAP…………………………………………………………………… 14GOVERNMENTAL ENTITY……………………………………………………… 13HAZARDOUS SUBSTANCE……………………………………………………… 19HSR ACT………………………………………………………………… 14HSR FILING……………………………………………………………… 32IBP……………………………………………………………………. 11INDEMNIFIED PARTIES……………………………………………………… 36JOINT PROXY STATEMENT……………………………………………………. 13JUNIOR PREFERENCE SHARES…………………………………………………. 11LAW……………………………………………………………………. 47LEASES…………………………………………………………………. 47LIENS………………………………………………………………….. 47MAXIMUM PREMIUM…………………………………………………………. 36MERGER…………………………………………………………………. 1MERGER CONSIDERATION…………………………………………………….. 4MERGER SUB……………………………………………………………… 1MULTIEMPLOYER PLAN………………………………………………………. 15NOTICE OF ADVERSE RECOMMENDATION………………………………………….. 28,30OUTSIDE DATE……………………………………………………………. 43PARENT…………………………………………………………………. 1PARENT COMMON STOCK……………………………………………………… 1

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TERM PAGE- —- —- PARENT DISCLOSURE LETTER…………………………………………………. 9PARENT STOCKHOLDER APPROVAL………………………………………………. 20PARENT STOCKHOLDERS MEETING………………………………………………. 30PERMITS………………………………………………………………… 15PERMITTED LIENS…………………………………………………………. 48PERSON…………………………………………………………………. 48PRIOR PLAN……………………………………………………………… 39RELEASE………………………………………………………………… 20REPRESENTING PARTY………………………………………………………. 9,48REPRESENTING PARTY DISCLOSURE LETTER………………………………………. 9REPRESENTING PARTY ENTITIES………………………………………………. 10REPRESENTING PARTY SUBSIDIARIES…………………………………………… 10SEC……………………………………………………………………. 13SEC DOCUMENTS…………………………………………………………… 14SECURITIES ACT………………………………………………………….. 14SERIES A PREFERRED STOCK…………………………………………………. 11SERP…………………………………………………………………… 11SIP……………………………………………………………………. 11STOCK CONSIDERATION……………………………………………………… 3,4SUBSIDIARY……………………………………………………………… 48SUCCESSOR PLAN………………………………………………………….. 39SUPERIOR PROPOSAL……………………………………………………….. 27SURVIVING CORPORATION……………………………………………………. 2TAKEOVER STATUTE………………………………………………………… 20TAX CERTIFICATES………………………………………………………… 34TAX RETURN……………………………………………………………… 18TAXES………………………………………………………………….. 18TERMINATION FEE…………………………………………………………. 45TRANSFEREE……………………………………………………………… 5

-vi- AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this “AGREEMENT”), dated as ofFebruary 27, 2005, by and among Federated Department Stores, Inc., a Delawarecorporation (“PARENT”), Milan Acquisition Corp., a Delaware corporation and adirect wholly owned subsidiary of Parent (“MERGER SUB”), and The May DepartmentStores Company, a Delaware corporation (the “COMPANY”). WITNESSETH: WHEREAS, the respective Boards of Directors of the Company andParent have each determined that a business combination between Parent and theCompany is in the best interests of their respective companies and stockholdersand accordingly have agreed to effect the merger of the Company with and intoMerger Sub (the “MERGER”), upon the terms and subject to the conditions setforth in this Agreement and in accordance with the General Corporation Law ofthe State of Delaware (the “DGCL”), whereby the separate corporate existence ofthe Company shall cease and each issued and outstanding share of common stock,par value $0.50 per share, of the Company (together with any associated CompanyRights (as defined below), “COMPANY COMMON STOCK”), other than Dissenting Sharesand any shares of Company Common Stock owned by Parent or any direct or indirectsubsidiary of Parent or held in the treasury of the Company, will be convertedinto the right to receive shares of common stock, par value $0.01 per share, ofParent (“PARENT COMMON STOCK”) and cash as provided in Section 2.1; WHEREAS, the Board of Directors of each of the Company, Parent andMerger Sub has determined that the Merger is advisable and fair to and in thebest interests of their respective companies and stockholders; WHEREAS, the Company, Parent and Merger Sub desire to make certainrepresentations, warranties, covenants and agreements in connection with theMerger and also to prescribe various conditions to the Merger; and WHEREAS, for federal income tax purposes, it is intended that theMerger will qualify as a reorganization under the provisions of Section 368(a)of the Internal Revenue Code of 1986, as amended (the “Code”). NOW, THEREFORE, in consideration of the mutual representations,warranties, covenants and agreements contained in this Agreement, and for othergood and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, and upon the terms and subject to the conditions set forth herein,the parties hereto agree as follows: ARTICLE I THE MERGER Section 1.1 The Merger. On the terms and subject to the conditionsset forth in this Agreement, and in accordance with the DGCL, the Company willbe merged with and into -1-Merger Sub at the Effective Time and the separate corporate existence of theCompany will thereupon cease. Following the Effective Time, Merger Sub will bethe surviving corporation (the “SURVIVING CORPORATION”). Section 1.2 Closing. The closing of the Merger (the “CLOSING”) willtake place at a time and on a date to be specified by the parties, which is tobe no later than the second Business Day after satisfaction or waiver (to theextent permitted by applicable Law) of the conditions (excluding conditionsthat, by their terms, cannot be satisfied until the Closing Date, but subject tothe fulfillment or (to the extent permitted by applicable Law) waiver of thoseconditions) set forth in Article VI, unless another time or date is agreed to bythe parties to this Agreement. The Closing will be held at the offices of JonesDay, 222 East 41st Street, New York, New York 10017, or such other location towhich the parties to this Agreement agree in writing. The date on which theClosing occurs is hereinafter referred to as the “CLOSING DATE.” “BUSINESS DAY”means any day other than Saturday, Sunday or any day on which banking andsavings and loan institutions are authorized or required by Law to be closed. Section 1.3 Effective Time. On the terms and subject to theconditions set forth in this Agreement, (i) as soon as practicable on theClosing Date, the parties shall file a certificate of merger (the “CERTIFICATEOF MERGER”) in such form as is required by, and executed in accordance with, therelevant provisions of the DGCL and the terms of this Agreement and (ii) as soonas practicable on or after the Closing Date, the parties shall make all otherfilings or recordings required under the DGCL. The Merger will become effectiveat such time as the Certificate of Merger is duly filed with the Secretary ofState of the State of Delaware on the Closing Date, or at such subsequent dateor time as the Company, Parent and Merger Sub agree and specify in theCertificate of Merger (the date and time the Merger becomes effective ishereinafter referred to as the “EFFECTIVE TIME”). Section 1.4 Effects of the Merger. The Merger will have the effectsset forth in the DGCL. Without limiting the generality of the foregoing, andsubject thereto, at the Effective Time, all the property, rights, privileges,powers and franchises of the Company and Merger Sub will be vested in theSurviving Corporation, and all debts, liabilities and duties of the Company andMerger Sub will become the debts, liabilities and duties of the SurvivingCorporation. Section 1.5 Certificate of Incorporation and By-laws. Thecertificate of incorporation and by-laws of Merger Sub as in effect immediatelybefore the Effective Time will be the certificate of incorporation and by-laws,respectively, of the Surviving Corporation, until thereafter changed or amendedas provided therein or by applicable Law, except that Article I of thecertificate of incorporation of the Surviving Corporation shall state “The nameof the corporation is The May Department Stores Company.” Section 1.6 Directors and Officers of the Surviving Corporation. Thedirectors of Merger Sub immediately prior to the Effective Time will be thedirectors of the Surviving Corporation, until the earlier of their death,resignation or removal or until their respective successors are duly elected andqualified, as the case may be. The officers of the Company immediately prior tothe Effective Time will be the officers of the Surviving Corporation, until theearlier of their death, resignation or removal or until their respectivesuccessors are duly elected and qualified, as the case may be. Section 1.7 Tax Consequences. It is intended by the parties heretothat the Merger shall constitute a “reorganization” within the meaning ofSection 368(a) of the Code. The parties hereto adopt this Agreement as a “planof reorganization” within the meaning of Sections 354 and 361 of the Code andSections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations, and for allrelevant tax purposes. Section 1.8 Adjustments to Preserve Tax Consequences. (a) If the value of the Stock Consideration on the Closing Datedeclines to a level that prevents the satisfaction of the condition expressed ineither or both of Section 6.2(d) and Section 6.3(d), then Parent shall have theoption, exercisable in its sole discretion, to increase the number of shares (orfraction of a number of shares) of Parent Common Stock comprising the StockConsideration such that the conditions expressed in both Section 6.2(d) andSection 6.3(d) are satisfied. If Parent exercises the option provided in thisSection 1.8(a), then for all purposes in this Agreement the term “STOCKCONSIDERATION” shall mean the number (or fraction of a number) of fully paid,nonassessable shares of Parent Common Stock as so increased. (b) If Parent declines or fails to exercise the option provided inSection 1.8(a) within three Business Days of the putative Closing Date, theCompany shall have the option to require that the Company and not Merger Sub bethe Surviving Corporation in the Merger for all purposes in this Agreement andthat the Cash Consideration be increased by $1.00 per share of Company CommonStock. In such event, all parties to this Agreement shall be deemed to havewaived the conditions expressed in Section 6.2(d) and Section 6.3(d). If theCompany exercises the option provided in this Section 1.8(b), then for allpurposes in this Agreement: (i) the Merger shall be the merger of Merger Sub with and into the Company; (ii) the Company will be the Surviving Corporation; and (iii) the Cash Consideration shall be $18.75. ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES AND PAYMENT Section 2.1 Effect on Capital Stock. At the Effective Time, byvirtue of the Merger and without any action on the part of the holder of anyshares of capital stock of the Company, Parent or Merger Sub: (a) Merger Sub’s Common Stock. Each share of Merger Sub’s commonstock, par value $0.01 per share, outstanding immediately prior to the EffectiveTime will be converted into and become one fully paid and nonassessable share ofcommon stock of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent Owned Stock. Eachshare of Company Common Stock that is owned by the Company, Parent or any director indirect majority owned subsidiary of the Company or Parent immediately priorto the Effective Time will automatically be canceled and retired and will ceaseto exist, and no consideration will be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to Section 2.2(e),each issued and outstanding share of Company Common Stock, other than shares ofCompany Common Stock to be canceled in accordance with Section 2.1(b) andDissenting Shares, will be converted into the right to receive (i) $17.75 incash (the “CASH CONSIDERATION”) without interest and (ii) 0.3115 fully paid,nonassessable shares of Parent Common Stock (the “STOCK CONSIDERATION” and,together with the Cash Consideration, the “MERGER CONSIDERATION”). (d) ESOP Preference Shares. Each issued and outstanding ESOPPreference Share will be converted into the Merger Consideration on an asconverted basis in the same manner as shares of Company Common Stock underSection 2.1(c). The Company shall use its reasonable best efforts to comply withthe terms of the Certificate of Designation, Preferences and Rights governingthe ESOP Preference Shares in order to effect the foregoing. (e) Cancellation of Shares of Company Common Stock. As of theEffective Time, all shares of Company Common Stock shall no longer beoutstanding and will automatically be canceled and retired and shall cease toexist, and each holder of a certificate which immediately prior to the EffectiveTime represented any shares of Company Common Stock (a “COMPANY CERTIFICATE”)shall cease to have any rights with respect thereto, except either (i) therights of Dissenting Shares contemplated in Section 2.4 or (ii) the right toreceive the Merger Consideration, certain dividends or other distributions, ifany, and cash in lieu of fractional shares of Parent Common Stock to be issuedor paid in consideration therefor upon surrender of such Company Certificate, ineach case, in accordance with this Article II, without interest. Section 2.2 Exchange of Certificates. (a) Exchange Agent. As soon as practicable following the date ofthis Agreement and in any event not less than 15 Business Days prior to theClosing Date, Parent will designate a national bank or trust company reasonablysatisfactory to the Company to act as agent of Parent for purposes of, amongother things, mailing and receiving transmittal letters and distributing theMerger Consideration to the Company stockholders (the “EXCHANGE AGENT”). TheExchange Agent shall also act as the agent for the Company’s stockholders forthe purpose of receiving and holding their Company Certificates and shall obtainno rights or interests in the shares represented by such Company Certificates.As of the Effective Time, Parent and the Exchange Agent shall enter into anagreement which will provide that Parent shall have deposited with the ExchangeAgent as of the Effective Time, for the benefit of the holders of shares ofCompany Common Stock, for exchange in accordance with this Article II, throughthe Exchange Agent, cash and certificates representing the shares of ParentCommon Stock (such cash and such shares of Parent Common Stock, together withany dividends or distributions with respect thereto with a record date after theEffective Time and any cash payable in lieu of any fractional shares of ParentCommon Stock, being hereinafter referred to as the “EXCHANGEFUND”) issuable pursuant to Section 2.1 in exchange for outstanding shares ofCompany Common Stock. (b) Exchange Procedures. (i) As soon as reasonably practicable after the Effective Time, the Exchange Agent will mail to each holder of record of a Company Certificate whose shares of Company Common Stock were converted into the right to receive the Merger Consideration (A) a letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to the Company Certificates will pass, only upon proper delivery of the Company Certificates to the Exchange Agent and will be in such form and have such other provisions as Parent may specify consistent with this Agreement) and (B) instructions for use in effecting the surrender of the Company Certificates in exchange for the Merger Consideration. (ii) After the Effective Time, upon surrender of a Company Certificate for cancellation to the Exchange Agent, together with the letter of transmittal contemplated in Section 2.2(b)(i), duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Company Certificate will be entitled to receive in exchange therefor the Merger Consideration that such holder has the right to receive pursuant to the provisions of this Article II, certain dividends or other distributions, if any, in accordance with Section 2.2(c) and cash in lieu of any fractional share of Parent Common Stock in accordance with Section 2.2(e), and the Company Certificate so surrendered will forthwith be canceled. In the event of a transfer of ownership of shares of Company Common Stock that are not registered in the transfer records of the Company, payment may be issued to a person other than the person in whose name the Company Certificate so surrendered is registered (the “TRANSFEREE”), if such Company Certificate is properly endorsed or otherwise in proper form for transfer and the Transferee pays any transfer or other Taxes required by reason of such payment to a person other than the registered holder of such Company Certificate or establishes to the satisfaction of the Exchange Agent that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2(b), each Company Certificate will be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration that the holder thereof has the right to receive in respect of such Company Certificate pursuant to the provisions of this Article II, certain dividends or other distributions, if any, in accordance with Section 2.2(c) and cash in lieu of any fractional share of Parent Common Stock in accordance with Section 2.2(e). No interest will be paid or will accrue on any cash payable to holders of Company Certificates pursuant to the provisions of this Article II. (c) Dividends; Other Distributions. No dividends or otherdistributions with respect to Parent Common Stock with a record date after theEffective Time will be paid to the holder of any unsurrendered CompanyCertificate with respect to the shares of Parent Common Stock representedthereby and no cash payment in lieu of fractional shares will be paid to anysuch holder pursuant to Section 2.2(e), and all such dividends, otherdistributions and cash in lieu of fractional shares of Parent Common Stock willbe paid by Parent to the Exchange Agent and will be included in the ExchangeFund, in each case until the surrender of such CompanyCertificate in accordance with this Article II. Subject to the effect ofapplicable escheat or similar Laws, following surrender of any such CompanyCertificate in accordance herewith, there will be paid to the holder of thecertificate representing whole shares of Parent Common Stock issued in exchangetherefor, without interest, (i) at the time of such surrender, the amount ofdividends or other distributions with a record date after the Effective Timetheretofore paid with respect to such whole shares of Parent Common Stock andthe amount of any cash payable in lieu of a fractional share of Parent CommonStock to which such holder is entitled pursuant to Section 2.2(e) and (ii) atthe appropriate payment date, the amount of dividends or other distributionswith a record date after the Effective Time but prior to such surrender and witha payment date subsequent to such surrender payable with respect to such wholeshares of Parent Common Stock. (d) No Further Ownership Rights in Company Common Stock. All sharesof Parent Common Stock issued and all Cash Consideration paid upon the surrenderfor exchange of Company Certificates in accordance with the terms of thisArticle II (including any cash paid pursuant to Section 2.2(c) and Section2.2(e)) will be deemed to have been issued or paid, as the case may be, in fullsatisfaction of all rights pertaining to the shares of Company Common Stocktheretofore represented by such Company Certificates, subject, however, to theSurviving Corporation’s obligation to pay any dividends or make any otherdistributions, in each case with a record date (i) prior to the Effective Timethat may have been declared or made by the Company on such shares of CompanyCommon Stock in accordance with the terms of this Agreement or (ii) prior to thedate of this Agreement and in each case which remain unpaid at the EffectiveTime, and there will be no further registration of transfers on the stocktransfer books of the Surviving Corporation of the shares of Company CommonStock that were outstanding immediately prior to the Effective Time. If, afterthe Effective Time, Company Certificates are presented to Parent, the SurvivingCorporation or the Exchange Agent for any reason, they will be canceled andexchanged as provided in this Article II. (e) No Fractional Shares. (i) No certificates or scrip representing fractional shares of Parent Common Stock will be issued upon the surrender for exchange of Company Certificates, no dividend or distribution of Parent will relate to such fractional share interests and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent. (ii) Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock converted pursuant to the Merger who would otherwise be entitled to receive a fraction of a share of Parent Common Stock (after taking into account all shares of Company Common Stock held at the Effective Time by such holder) shall receive, in lieu thereof, an amount in cash (without interest), rounded to the nearest cent, equal to the product obtained by multiplying (A) the fractional share interest to which such former holder would otherwise be entitled by (B) the average of the closing prices for a share of Parent Common Stock as reported on the NYSE Composite Transactions Reports (as reported in the Wall Street Journal, or, if not reported thereby, any other authoritative source) for the ten trading days prior to, but not including, the Closing Date (the “AVERAGE CLOSING PRICE”). (iii) As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Company Certificates formerly representing shares of Company Common Stock with respect to any fractional share interests, the Exchange Agent shall make available such amounts to such holders of Company Certificates formerly representing shares of Company Common Stock subject to and in accordance with the terms of Section 2.2(c). (f) Termination of Exchange Fund. Any portion of the Exchange Fundthat remains undistributed to the holders of the Company Certificates for sixmonths after the Effective Time will be delivered to Parent, upon demand, andany holders of Company Certificates who have not theretofore complied with thisArticle II may thereafter look only to Parent for payment of their claim forStock Consideration, Cash Consideration and any dividends or distributions, ifany, with respect to Parent Common Stock and any cash in lieu of fractionalshares of Parent Common Stock. (g) No Liability. None of Parent, the Surviving Corporation or theExchange Agent will be liable to any person in respect of any shares of ParentCommon Stock, any dividends or distributions with respect thereto, any cash inlieu of fractional shares of Parent Common Stock or any cash from the ExchangeFund, in each case, delivered to a public official pursuant to any applicableabandoned property, escheat or similar Law. (h) Investment of Exchange Fund. The Exchange Agent shall invest anycash included in the Exchange Fund as directed by Parent in direct obligationsof the U.S. Treasury, on a daily basis. Any interest and other income resultingfrom such investments will be paid to Parent. If for any reason (includinglosses) the cash in the Exchange Fund shall be insufficient to fully satisfy allof the payment obligations to be made in cash by the Exchange Agent hereunder,Parent shall promptly deposit cash into the Exchange Fund in an amount which isequal to the deficiency in the amount of cash required to fully satisfy suchcash payment obligations. (i) Lost Certificates. If any Company Certificate has been lost,stolen or destroyed, upon the making of an affidavit of that fact by the personclaiming such Company Certificate to be lost, stolen or destroyed and, ifrequired by Parent or the Surviving Corporation, as the case may be, the postingby such person of a bond in such reasonable amount as Parent or the SurvivingCorporation, as the case may be, may direct as indemnity against any claim thatmay be made against it with respect to such Company Certificate, the ExchangeAgent shall issue, in exchange for such lost, stolen or destroyed CompanyCertificate, the Merger Consideration and, if applicable, any unpaid dividendsand distributions on shares of Parent Common Stock deliverable in respectthereof and any cash in lieu of fractional shares, in each case, due to suchperson pursuant to this Agreement. Section 2.3 Certain Adjustments. If, after the date of thisAgreement and at or prior to the Effective Time, the outstanding shares ofParent Common Stock or Company Common Stock are changed into a different numberof shares by reason of any reclassification, recapitalization, split-up, stocksplit, subdivision, combination or exchange of shares or readjustment, or anydividend payable in stock or other securities is declared thereon or rightsissued in respect thereof with a record date within such period, or any similarevent occurs (anysuch action, an “ADJUSTMENT EVENT”), the Merger Consideration will beproportionately and appropriately adjusted to reflect such Adjustment Event. Section 2.4 Dissenters’ Rights. Shares of Company Common Stock thathave not been voted for adoption of this Agreement and with respect to whichappraisal has been properly demanded in accordance with Section 262 of the DGCL(“DISSENTING SHARES”) will not be converted into the right to receive the MergerConsideration at or after the Effective Time unless and until the holder of suchshares (a “DISSENTING STOCKHOLDER”) withdraws such demand for such appraisal (inaccordance with Section 262(k) of the DGCL) or becomes ineligible for suchappraisal. If a holder of Dissenting Shares withdraws such demand for appraisal(in accordance with Section 262(k) of the DGCL) or becomes ineligible for suchappraisal, then, as of the Effective Time or the occurrence of such event,whichever last occurs, each of such holder’s Dissenting Shares will cease to bea Dissenting Share and will be converted as of the Effective Time into andrepresent the right to receive the Merger Consideration, without interestthereon. The Company shall give Parent prompt notice of any demands forappraisal, attempted withdrawals of such demands and any other instrumentsreceived by the Company relating to stockholders’ rights of appraisal, andParent shall have the right to participate in all negotiations and proceedingswith respect to such demands except as required by applicable Law. The Companyshall not, except with prior written consent of Parent, make any payment withrespect to, or settle or offer to settle, any such demands, unless and to theextent required to do so under applicable Law. Only the Company shall beentitled to make any payment with respect to any demands for appraisal ofDissenting Shares, and Parent shall not reimburse the Company, directly orindirectly, for any such payment made by the Company. Section 2.5 Further Assurances. At and after the Effective Time, theofficers and directors of the Surviving Corporation will be authorized toexecute and deliver, in the name and on behalf of the Company or Merger Sub, anydeeds, bills of sale, assignments or assurances and to take and do, in the nameand on behalf of the Company or Merger Sub, any other actions and things tovest, perfect or confirm of record or otherwise in the Surviving Corporation anyand all right, title and interest in, to and under any of the rights, propertiesor assets acquired or to be acquired by the Surviving Corporation as a resultof, or in connection with, the Merger. Section 2.6 Withholding Rights. The Surviving Corporation, Parent orthe Exchange Agent, as the case may be, shall be entitled to deduct and withholdfrom the consideration otherwise payable pursuant to this Agreement to anyperson such amounts, if any, as it is required to deduct and withhold withrespect to the making of such payment under the Code, or any provision of state,local or foreign tax Law. To the extent that amounts are so withheld and paidover to the appropriate taxing authority by the Surviving Corporation, Parent orthe Exchange Agent, as the case may be, such amounts withheld shall be treatedfor purposes of this Agreement as having been paid to such person in respect ofwhich such deduction and withholding was made by the Surviving Corporation,Parent or the Exchange Agent, as the case may be. ARTICLE III REPRESENTATIONS AND WARRANTIES Except as set forth in the disclosure letter delivered by theCompany to Parent prior to the execution of this Agreement (the “COMPANYDISCLOSURE LETTER”), and except as set forth in the Company’s SEC Documentsfiled prior to the date of this Agreement, the Company hereby represents andwarrants to Parent and Merger Sub, and, except as set forth in the disclosureletter delivered by Parent and Merger Sub to the Company prior to the executionof this Agreement (the “PARENT DISCLOSURE LETTER”), and except as set forth inParent’s SEC Documents filed prior to the date of this Agreement, each of Parentand Merger Sub hereby represents and warrants to the Company, in each case, asset forth in this Article III, with the party making such representations andwarranties being referred to as the “REPRESENTING PARTY” and such RepresentingParty’s Disclosure Letter as the “REPRESENTING PARTY DISCLOSURE LETTER.”Notwithstanding the foregoing, any representation or warranty which expresslyrefers to the Company, Parent or Merger Sub is being made solely by the Company,Parent or Merger Sub, as the case may be. Section 3.1 Organization, Standing and Corporate Power. TheRepresenting Party and each of its subsidiaries is a corporation or other legalentity duly organized, validly existing and in good standing (with respect tojurisdictions that recognize such concept) under the laws of the jurisdiction inwhich it is organized and has the requisite corporate or other power, as thecase may be, and authority to carry on its business as now being conducted,except for such failures of such organization, existence, good standing andpower which would not, individually or in the aggregate, reasonably be expectedto have or result in a material adverse effect on the Representing Party. TheRepresenting Party and each of its subsidiaries is duly qualified or licensed todo business in each jurisdiction in which the nature of its business or theownership, leasing or operation of its properties makes such qualification orlicensing necessary, except for those jurisdictions where the failure to be soqualified or licensed would not, individually or in the aggregate, reasonably beexpected to have or result in a material adverse effect on the RepresentingParty. The Representing Party has made available to the other Representing Partyprior to the execution of this Agreement complete and correct copies of itscertificate of incorporation and by-laws, each as amended to the date of thisAgreement. Section 3.2 Subsidiaries. All outstanding shares of capital stockof, or other equity interests in, each subsidiary of the Representing Party(collectively, the “REPRESENTING PARTY SUBSIDIARIES” and, together with theRepresenting Party, the “REPRESENTING PARTY ENTITIES”) (i) have been validlyissued and are fully paid and nonassessable and (ii) are free and clear of allLiens other than Permitted Liens. All outstanding shares of capital stock (orequivalent equity interests of entities other than corporations) of each of theRepresenting Party Subsidiaries are beneficially owned, directly or indirectly,by the Representing Party. The Representing Party does not, directly orindirectly, own more than 20% but less than 100% of the capital stock or otherequity interest in any person. Section 3.3 Capital Structure. (a) The Company represents and warrants that the authorized capitalstock of the Company consists entirely of (i) 1,000,000,000 shares of CompanyCommon Stock and (ii) 25,000,000 shares of preference stock, par value $0.50 pershare, of the Company, of which (A) 1,000,000 shares have been designated asJunior Participating Preference Shares, par value $0.50 per share (the “JUNIORPREFERENCE SHARES”), and (B) 800,000 shares have been designated ESOP PreferenceShares, par value $0.50 per share (the “ESOP PREFERENCE SHARES”). Each share ofCompany Common Stock carries with it an associated share purchase right issuedpursuant to the Amended and Restated Rights Agreement between the Company andThe Bank of New York, as rights agent, dated as of August 31, 2004 (as amendedfrom time to time, the “COMPANY RIGHTS AGREEMENT”), which entitles the holderthereof to purchase, on the occurrence of certain events, Junior PreferenceShares (the “COMPANY RIGHTS”). At the close of business on February 25, 2005:(i) 293,834,196 shares of Company Common Stock were issued and outstanding(including 1,550,298 shares of restricted stock); (ii) 26,621,298 shares ofCompany Common Stock were held by the Company in its treasury; (iii) 1,000,000Junior Preference Shares were reserved for issuance in connection with theCompany Rights; (iv) 26,559,937 shares of Company Common Stock were subject toissued and outstanding options to purchase Company Common Stock granted underthe Company’s 1994 Stock Incentive Plan, as amended (the “SIP”); (v) 2,199,589shares of Company Common Stock were subject to issuance under the Company’sDeferred Compensation Plan (the “DCP”); (vi) 171,285 shares of Company CommonStock were subject to issuance under the Company’s Deferred Compensation Planfor Non-Management Directors (the “DIRECTORS DCP” and, together with the SIP andthe DCP, the “COMPANY STOCK PLANS” and, such stock options collectively, the”COMPANY STOCK OPTIONS”); and (vii) 415,451 ESOP Preference Shares were issuedand outstanding. All outstanding shares of capital stock of the Company are, andall shares that may be issued will be, when issued, duly authorized, validlyissued, fully paid and nonassessable and not subject to or issued in violationof preemptive rights. (b) Parent and Merger Sub represent and warrant that the authorizedcapital stock of Parent consists entirely of (i) 500,000,000 shares of ParentCommon Stock and (ii) 125,000,000 shares of preferred stock, par value $0.01 pershare, of Parent, of which 5,000,000 shares have been designated as Series AJunior Participating Preferred Stock, par value $0.01 per share (the “SERIES APREFERRED STOCK”). At the close of business on February 25, 2005: (i)167,417,349 shares of Parent Common Stock were issued and outstanding (including272,278 shares of restricted stock); (ii) 31,242,770 shares of Parent CommonStock were held by Parent in its treasury; (iii) no shares of Parent CommonStock were subject to issued and outstanding Parent Series D Warrants; and (iv)19,585,374 shares of Parent Common Stock were subject to issued and outstandingoptions to purchase Parent Common Stock granted under Parent’s 1992 ExecutiveEquity Incentive Plan (the “1992 EEIP”), Parent’s 1995 Executive EquityIncentive Plan, as amended (the “1995 EEIP”), Parent’s 1992 Incentive BonusPlan, as amended (the “IBP”), Parent’s Supplementary Executive Retirement Plan,as amended (the “SERP”), and Parent’s Executive Deferred Compensation Plan, asamended (the “EDCP” and, together with the 1992 EEIP, the 1995 EEIP, the IBP andthe SERP, the “PARENT STOCK PLANS”) (collectively, the “PARENT STOCK OPTIONS”).All outstanding shares of capital stock of Parent are, and all shares that maybe issued will be, when issued, duly authorized, validly issued, fully paid andnonassessable and not subject to or issued in violation of preemptive rights. (c) Except as set forth in Section 3.3(a) or 3.3(b), as the case maybe, as of February 25, 2005, (1) there are not issued, reserved for issuance oroutstanding (i) any shares of capital stock or other voting securities of theRepresenting Party, (ii) any securities convertible into or exchangeable orexercisable for shares of capital stock or voting securities of the RepresentingParty, or (iii) any warrants, calls, options or other rights to acquire from theRepresenting Party or any Representing Party Subsidiary any capital stock,voting securities or securities convertible into or exchangeable or exercisablefor capital stock or voting securities of the Representing Party or anyRepresenting Party Subsidiary and (2) there are no outstanding obligations ofthe Representing Party or any Representing Party Subsidiary to (i) issue,deliver or sell, or cause to be issued, delivered or sold, any capital stock,voting securities or securities convertible into or exchangeable or exercisablefor capital stock or voting securities of the Representing Party or anyRepresenting Party Subsidiary or (ii) repurchase, redeem or otherwise acquireany such securities. Section 3.4 Authority. (a) The Company represents and warrants that it has all requisitecorporate power and authority to enter into this Agreement and, subject to theCompany Stockholder Approval, to consummate the transactions contemplated bythis Agreement. The execution and delivery of this Agreement by the Company andthe consummation by the Company of the transactions contemplated hereby havebeen duly authorized by all necessary corporate action on the part of theCompany, subject, in the case of the Merger, to receipt of the CompanyStockholder Approval. This Agreement has been duly executed and delivered by theCompany and, assuming the due authorization, execution and delivery by Parentand Merger Sub, constitutes the legal, valid and binding obligation of theCompany, enforceable against the Company in accordance with its terms, except asthe enforcement thereof may be limited by applicable bankruptcy, insolvency,reorganization, moratorium, fraudulent conveyance or similar Laws generallyaffecting the rights of creditors and subject to general equity principles. TheBoard of Directors of the Company has (i) duly and validly approved thisAgreement, (ii) determined that the transactions contemplated by this Agreementare advisable and in the best interests of the Company and its stockholders and(iii) resolved to recommend to such stockholders that they vote in favor of theMerger. (b) Parent and Merger Sub represent and warrant that each of Parentand Merger Sub has all requisite corporate power and authority to enter intothis Agreement and, subject to the Parent Stockholder Approval, to consummatethe transactions contemplated by this Agreement. The execution and delivery ofthis Agreement by Parent and Merger Sub and the consummation by Parent andMerger Sub of the transactions contemplated hereby have been duly authorized byall necessary corporate action on the part of Parent and Merger Sub,respectively, subject, in the case of the Merger, to receipt of the ParentStockholder Approval. This Agreement has been duly executed and delivered byeach of Parent and Merger Sub and, assuming the due authorization, execution anddelivery by the Company, constitutes the legal, valid and binding obligation ofParent and Merger Sub, enforceable against Parent and Merger Sub in accordancewith its terms, except as the enforcement thereof may be limited by applicablebankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance orsimilar Laws generally affecting the rights of creditors and subject to generalequity principles. The Board of Directors of Parent has (i) duly and validlyapproved this Agreement, (ii) determined that thetransactions contemplated by this Agreement are advisable and in the bestinterests of Parent and its stockholders and (iii) resolved to recommend to suchstockholders that they vote in favor of the issuance of Parent Common Stockpursuant to this Agreement. Section 3.5 Non-Contravention; Consents and Approvals. (a) The execution and delivery of this Agreement does not, and theconsummation of the transactions contemplated by this Agreement and compliancewith the provisions of this Agreement will not, (i) conflict with thecertificate of incorporation or by-laws (or comparable organizational documents)of any of the Representing Party Entities, (ii) except in connection with theLeases, result in any breach, violation or default (with or without notice orlapse of time, or both) under, or give rise to a right of termination,cancellation or creation or acceleration of any obligation or right of a thirdparty or loss of a benefit under, or result in the creation of any Lien upon anyof the properties or assets of any of the Representing Party Entities under, anyloan or credit agreement, note, bond, mortgage, indenture or other agreement,instrument, permit, concession, franchise, license or other authorizationapplicable to any of the Representing Party Entities or their respectiveproperties or assets or (iii) subject to the governmental filings and othermatters referred to in Section 3.5(b), conflict with or violate any judgment,order, decree or Law applicable to any of the Representing Party Entities ortheir respective properties or assets, other than, in the case of clauses (ii)and (iii), any such conflicts, breaches, violations, defaults, rights, losses orLiens that, individually or in the aggregate, would not reasonably be expectedto have or result in a material adverse effect on the Representing Party andthat would not prevent or materially delay consummation of the Merger. (b) No consent, approval, order or authorization of, action by or inrespect of, or registration, declaration or filing with, any federal, state orlocal or foreign government, any court, administrative, regulatory or othergovernmental agency, commission or authority or any non-governmental UnitedStates or foreign self-regulatory agency, commission or authority or anyarbitral tribunal (each, a “GOVERNMENTAL ENTITY”) or any third party is requiredby the Representing Party in connection with the execution and delivery of thisAgreement by the Representing Party or the consummation by the RepresentingParty of the transactions contemplated hereby, except for: (i) the filing withthe Securities and Exchange Commission (the “SEC”) of (A) a joint proxystatement relating to the Company Stockholders Meeting and the ParentStockholders Meeting (such proxy statement, as amended or supplemented from timeto time, the “JOINT PROXY STATEMENT”) and, in the case of Parent and Merger Sub,the Form S-4 and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a) orsuch other applicable sections of the Securities Exchange Act of 1934, asamended (the “EXCHANGE ACT”), as may be required in connection with thisAgreement and the transactions contemplated hereby; (ii) the filing of theCertificate of Merger with the Secretary of State of the State of Delaware;(iii) the filing of a premerger notification and report form by the RepresentingParty under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended(the “HSR ACT”); (iv) notifications to the NYSE and, in the case of Parent,filings with and approvals of the NYSE to permit the shares of Parent CommonStock that are to be issued in the Merger to be listed on the NYSE; and (v) suchconsents, approvals, orders or authorizations the failure of which to be made orobtained, individually or in the aggregate, would not reasonably be expected tohave or result in a material adverse effect on the Representing Party and thatwould not prevent or materially delay consummation of the Merger. Section 3.6 SEC Reports and Financial Statements. (a) The Representing Party has filed all required reports,schedules, forms, statements and other documents (including exhibits and allother information incorporated therein) under the Securities Act of 1933, asamended (the “SECURITIES ACT”), and the Exchange Act with the SEC since January31, 2003 (as such reports, schedules, forms, statements and documents have beenamended since the time of their filing, collectively, the “SEC DOCUMENTS”). Asof their respective dates, or if amended prior to the date of this Agreement, asof the date of the last such amendment, the Representing Party’s SEC Documentscomplied in all material respects with the requirements of the Securities Act orthe Exchange Act, as the case may be, and the rules and regulations of the SECpromulgated thereunder applicable to such SEC Documents, and none of theRepresenting Party’s SEC Documents when filed, or as so amended, contained anyuntrue statement of a material fact or omitted to state a material fact requiredto be stated therein or necessary in order to make the statements therein, inlight of the circumstances under which they were made, not misleading. (b) The consolidated financial statements of the Representing Partyincluded in its SEC Documents comply as to form, as of their respective date offiling with the SEC, in all material respects with applicable accountingrequirements and the published rules and regulations of the SEC with respectthereto, have been prepared in accordance with United States generally acceptedaccounting principles (“GAAP”) (except, in the case of unaudited statements, aspermitted by Form 10-Q of the SEC) applied on a consistent basis during theperiods involved (except as may be indicated in the notes thereto), and fairlypresent in all material respects the consolidated financial position of theRepresenting Party and its consolidated subsidiaries as of the dates thereof andthe consolidated statements of income, cash flows and stockholders’ equity forthe periods then ended (subject, in the case of unaudited statements, to normalrecurring year-end audit adjustments). No Representing Party Subsidiary isrequired to make any filings with the SEC. Section 3.7 Information Supplied. None of the information suppliedor to be supplied by the Representing Party specifically for inclusion orincorporation by reference in (i) the registration statement on Form S-4 to befiled with the SEC by Parent in connection with the issuance of Parent CommonStock in the Merger (the “FORM S-4”) will, at the time the Form S-4 becomeseffective under the Securities Act, contain any untrue statement of a materialfact or omit to state any material fact required to be stated therein ornecessary to make the statements therein, in light of the circumstances underwhich they are made, not misleading or (ii) the Joint Proxy Statement will, atthe date it is first mailed to the Company’s stockholders and Parent’sstockholders or at the time of the Company Stockholders Meeting or the ParentStockholders Meeting, contain any untrue statement of a material fact or omit tostate any material fact required to be stated therein or necessary in order tomake the statements therein, in light of the circumstances under which they aremade, not misleading. The Joint Proxy Statement will comply as to form in allmaterial respects with the requirements of the Exchange Act and the rules andregulations thereunder, except that no representation or warranty is made by theRepresenting Party with respect to statements made or incorporated by referencetherein based on information supplied by the other party specifically forinclusion or incorporation by reference in the Joint Proxy Statement. Section 3.8 Absence of Certain Changes or Events. Except forliabilities incurred in connection with this Agreement or the transactionscontemplated hereby, since January 31, 2004, (i) each of the Representing PartyEntities has conducted its respective operations only in the ordinary courseconsistent with past practice and (ii) there has not been a material adversechange in the Representing Party. Section 3.9 Compliance with Applicable Laws. (a) The operations of the Representing Party Entities have not beenand are not being conducted in violation of any Law (including theSarbanes-Oxley Act of 2002, including Section 404 thereof, and the USA PATRIOTAct of 2001) or any Permit necessary for the conduct of their respectivebusinesses as currently conducted, except where any such violations,individually or in the aggregate, would not reasonably be expected to have orresult in a material adverse effect on the Representing Party. (b) The Representing Party Entities hold all licenses, permits,variances, consents, authorizations, waivers, grants, franchises, concessions,exemptions, orders, registrations and approvals of Governmental Entities orother persons (“PERMITS”) necessary for the conduct of their respectivebusinesses as currently conducted, except where the failure to hold suchPermits, individually or in the aggregate, would not reasonably be expected tohave or result in a material adverse effect on the Representing Party. Section 3.10 Employee Benefit Plans. (a) The Representing Party has made available to the otherRepresenting Party a true and complete list of (i) each material United Statesbonus, pension, profit sharing, deferred compensation, incentive compensation,stock ownership, stock purchase, stock option, phantom stock, retirement,vacation, employment, consulting, disability, death benefit, hospitalization,medical insurance, life insurance, welfare, severance or other employee benefitplan, agreement, arrangement or understanding maintained by the RepresentingParty or any Representing Party Subsidiary or to which the Representing Party orany Representing Party Subsidiary contributes or is obligated to contribute orwith respect to which the Representing Party or any Representing PartySubsidiary has any liability, including each multiemployer plan (as defined inSection 4001(a)(3) of the Employee Retirement Income Security Act of 1974, asamended (“ERISA”)) (a “MULTIEMPLOYER PLAN”) and (ii) each change of controlagreement providing benefits to any current or former employee, officer ordirector of the Representing Party or any Representing Party Subsidiary, towhich the Representing Party or any Representing Party Subsidiary is a party orby which the Representing Party or any Representing Party Subsidiary is bound(collectively, the “BENEFIT PLANS”). For purposes of this Agreement, the term”FOREIGN PLAN” refers to each plan, agreement, arrangement or understanding thatis subject to or governed by the Laws of any jurisdiction other than the UnitedStates other than any such plan, the establishment or maintenance of which ismandated by applicable Law, and that would have been treated as a Benefit Planhad it been a United States plan, agreement, arrangement or understanding. TheRepresenting Party has made available or shall, as soon as practicable after thedate of this Agreement, make available to the other Representing Party a trueand correct list of the Foreign Plans. With respect to each Benefit Plan andForeign Plan, no event has occurred and there exists no condition or set ofcircumstances in connection with which the RepresentingParty or any Representing Party Subsidiary would reasonably be expected to besubject to any liability that, individually or in the aggregate, wouldreasonably be expected to have or result in a material adverse effect on theRepresenting Party. (b) Each Benefit Plan (other than a Multiemployer Plan) is incompliance with, and has been administered in accordance with, its terms, allapplicable Laws, including ERISA and the Code, and the terms of all applicablecollective bargaining agreements, except for any failures so to administer anyBenefit Plan that, individually or in the aggregate, would not reasonably beexpected to have or result in a material adverse effect on the RepresentingParty. Each Benefit Plan (other than a Multiemployer Plan) that is intended tobe qualified under Section 401(a), 401(k) or 4975(e)(7) of the Code has receiveda favorable determination letter from the IRS as to its qualified status and, tothe knowledge of the Representing Party, no fact or event has occurred which isreasonably likely to affect adversely the qualified status of any such BenefitPlan or the exempt status of any related trust, except for any occurrence that,individually or in the aggregate, would not reasonably be expected to have orresult in a material adverse effect on the Representing Party. All trustsproviding funding for Benefit Plans that are intended to comply with Section501(c)(9) of the Code are exempt from federal income taxation and, together withany other welfare benefit funds (as defined in Section 419(e)(1) of the Code)maintained in connection with any of the Benefit Plans, have been operated andadministered in compliance with all applicable requirements, except where afailure to comply with such requirements would not reasonably be expected tohave or result in a material adverse effect on the Representing Party. EachForeign Plan is in compliance with, and has been administered in accordancewith, its terms and applicable Laws, except for any failures so to administerany Foreign Plan that, individually or in the aggregate, would not reasonably beexpected to have or result in a material adverse effect on the RepresentingParty. (c) No Benefit Plan (other than a Multiemployer Plan) providesmedical or life insurance benefits (whether or not insured) with respect tocurrent or former employees or officers or directors after retirement or othertermination of service, other than any such coverage required by Law, and,except as provided in the Benefit Plans, the Representing Party and theRepresenting Party Subsidiaries have reserved all rights necessary to amend orterminate each of the Benefit Plans without the consent of any other person. (d) Except as provided in the Benefit Plans, the consummation of thetransactions contemplated by this Agreement will not, either alone or incombination with another event, entitle any current or former employee, officeror director of the Representing Party or the Representing Party Subsidiaries toseverance pay, unemployment compensation or any other payment, except asexpressly provided in this Agreement. (e) Neither the Representing Party nor any Representing PartySubsidiary is a party to any agreement, contract or arrangement (including thisAgreement) that would reasonably be likely to result, separately or in theaggregate, in the payment of any “excess parachute payments” within the meaningof Section 280G of the Code as a result of the consummation of the transactionscontemplated by this Agreement (either alone or in combination with otherevents). No Benefit Plan provides for the reimbursement of excise taxes underSection 4999 of the Code or any income taxes under the Code. (f) With respect to each Benefit Plan (other than a MultiemployerPlan), the Representing Party has delivered or made available to the otherRepresenting Party or shall, as soon as practicable following the date of thisAgreement, deliver or make available a true and complete copy of: (i) eachwriting constituting a part of such Benefit Plan, including all Benefit Plandocuments and trust agreements; (ii) the three most recent Annual Reports (Form5500 Series) and accompanying schedules, if any; (iii) the most recent annualfinancial report, if any; (iv) the most recent actuarial report, if any; and (v)the most recent determination letter from the Internal Revenue Service, if any. (g) There are no pending or, to the knowledge of the RepresentingParty, threatened claims (other than claims for benefits in the ordinarycourse), lawsuits or arbitrations that have been asserted or instituted againstthe Benefit Plans, any fiduciaries thereof with respect to their duties to theBenefit Plans or the assets of any of the trusts under any of the Benefit Plansthat would reasonably be expected to have or result in a material adverse effecton the Representing Party. Section 3.11 Taxes. (i) The Representing Party and each RepresentingParty Subsidiary has filed all Tax Returns required to be filed, and all suchreturns are materially complete and accurate, other than such Tax Returns, thefailure of which to file has not had or would not reasonably be expected to havea material adverse effect on the Representing Party; (ii) the Representing Partyand each Representing Party Subsidiary has paid all Taxes due except for thoseTaxes being disputed in good faith through appropriate proceedings; (iii) thereare no Liens for Taxes upon the assets of the Representing Party or any of theRepresenting Party Subsidiaries, other than Liens for Taxes not yet due andLiens for Taxes that are being contested in good faith by appropriateproceedings; (iv) neither the Representing Party nor any of the RepresentingParty Subsidiaries has any liability for Taxes of any person (other than theRepresenting Party and the Representing Party Subsidiaries) under TreasuryRegulation Section 1.1502-6 (or any comparable provision of Law as a transfereeor successor, by contract, or otherwise); (v) neither the Representing Party norany Representing Party Subsidiary is a party to any agreement relating to theallocation or sharing of Taxes; (vi) neither the Representing Party nor anyRepresenting Party Subsidiary has taken any action or knows of any fact,agreement, plan or other circumstance that is reasonably likely to prevent theMerger from qualifying as a reorganization within the meaning of Section 368(a)of the Code; (vii) no deficiencies for any Taxes have been proposed, asserted orassessed against the Representing Party or any Representing Party Subsidiary forwhich adequate reserves in accordance with GAAP have not been created; (viii)the financial statements included in the Representing Party’s SEC Documentsreflect an adequate reserve in accordance with GAAP for all Taxes for which theRepresenting Party or any Representing Party Subsidiary may be liable for alltaxable periods and portions thereof through the date hereof; (ix) theRepresenting Party and each Representing Party Subsidiary has withheld and paidall material Taxes required to have been withheld and paid in connection withany amounts paid or owing to any employee, independent contractor, creditor,stockholder or other third party; (x) since January 1, 2003, neither theRepresenting Party nor any Representing Party Subsidiary has distributed stockof another person or has had its stock distributed by another person, in atransaction that was purported or intended to be governed in whole or in part bySection 355 or Section 361 of the Code; (xi) neither the Representing Party norany Representing Party Subsidiary has participated in any listed transactionwithin the meaning of Treasury Regulation Section 1.6011-4; and (xii) theconsolidated federal income Tax Returns of the Representing Party have beenexamined and such examinations have been completed with respect to all taxableyears through and including 2000. As used in this Agreement, “TAXES” includesall federal, state or local or foreign net and gross income, alternative oradd-on minimum, environmental, gross receipts, ad valorem, value added, goodsand services, capital stock, profits, license, single business, employment,severance, stamp, unemployment, customs, property, sales, excise, use,occupation, service, transfer, payroll, franchise, withholding and other taxesor similar governmental duties, charges, fees, levies or other assessments,including any interest, penalties or additions with respect thereto. As usedherein, “TAX RETURN” shall mean any return, report, statement or informationrequired to be filed with any Governmental Entity with respect to Taxes. Section 3.12 Environmental Matters. (a) Except where noncompliance, individually or in the aggregate,would not reasonably be expected to have or result in a material adverse effecton the Representing Party, the Representing Party Entities are and have been forthe past five years in compliance with all applicable Environmental Laws andEnvironmental Permits. (b) There are no written Environmental Claims pending against theRepresenting Party or any Representing Party Subsidiary, except for mattersthat, individually or in the aggregate, would not reasonably be expected to haveor result in a material adverse effect on the Representing Party. (c) The Representing Party has made available to other RepresentingParty all material information, including such studies, reports, correspondence,notices of violation, requests for information, audits, analyses and testresults in the possession, custody or control of the Representing Party Entitiesrelating to (i) the Representing Party Entities’ present compliance ornoncompliance within the past five years with Environmental Laws andEnvironmental Permits, and (ii) Environmental Conditions on, under or about anyof the properties owned, leased or operated by any of the Representing PartyEntities for which any of the Representing Party Entities may be responsible orliable as a result of a written Environmental Claim, which, in the case of bothclause (i) and clause (ii) above, would reasonably be expected to have or resultin a material adverse effect on the Representing Party Entities, taken as awhole. (d) Within the past five years, there have been no Releases of anyHazardous Substance in, on, under, from or affecting any currently or, to theknowledge of the Representing Party, previously owned, leased or operatedproperties that, individually or in the aggregate, would reasonably be expectedto have or result in a material adverse effect on the Representing Party. (e) Within the past five years, none of the Representing Party orthe Representing Party Subsidiaries has received from any Governmental Entity orother third party any written notice that any of them or any of theirpredecessors is or may be a potentially responsible party in respect of, or mayotherwise bear liability for, any actual or threatened Release of any HazardousSubstance at any site or facility that is or has been listed on the NationalPriorities List, the Comprehensive Environmental Response, Compensation andLiability Information System, the National Corrective Action Priority System orany similar oranalogous federal, state, provincial, territorial, municipal, county, local orother domestic or foreign list, schedule, inventory or database of HazardousSubstance sites or facilities, except as would not reasonably be expected tohave or result in a material adverse effect on the Representing Party Entities,taken as a whole. (f) None of the Representing Party or the Representing PartySubsidiaries has assumed, undertaken or otherwise become subject to anyliability of any other person relating to or arising from Environmental Laws,except for such liabilities that would not, individually or in the aggregate,reasonably be expected to have or result in a material adverse effect on theRepresenting Party. (g) As used in this Agreement: (i) the term “ENVIRONMENT” means soil, surface waters, ground water, land, stream sediment, surface and subsurface strata, ambient air, indoor air or indoor air quality; (ii) the term “ENVIRONMENTAL CLAIM” means any written demand, suit, action, proceeding, order, investigation or notice to any of the Representing Party Entities by any person alleging any potential liability (including potential liability for investigatory costs, risk assessment costs, cleanup costs, removal costs, remedial costs, operation and maintenance costs, governmental response costs, natural resource damages, or penalties) under any Environmental Law; (iii) the term “ENVIRONMENTAL LAWS” means all Laws relating to (A) pollution or protection of the Environment, (B) emissions, discharges, Releases or threatened Releases of Hazardous Substances, (C) threats to human health or ecological resources arising from exposure to Hazardous Substances, or (D) the manufacture, generation, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport or handling of Hazardous Substances; (iv) the term “HAZARDOUS SUBSTANCE” means any chemical, substance or waste that is regulated under any Environmental Law as toxic, hazardous or radioactive or as a pollutant or a contaminant and any substance that is or contains asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls (“PCBS”), petroleum or petroleum-derived substances or wastes, leaded paints or radon gas; (v) the term “RELEASE” means any releasing, disposing, discharging, injecting, spilling, leaking, pumping, dumping, emitting, escaping, emptying, migration, placing and the like, or otherwise entering into the Environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Hazardous Substances); (vi) the term “ENVIRONMENTAL CONDITION” means any contamination, damage, injury or other condition related to Hazardous Substances and includes any present or former Hazardous Substance treatment, storage, or disposal or recycling units, underground storage tanks, wastewater treatment or management systems, wetlands, sumps, lagoons, impoundments, landfills, ponds, incinerators, wells, asbestos-containing materials, lead paint or PCB-containing materials. (vii) the term “ENVIRONMENTAL PERMIT” means all Permits and the timely submission of applications for Permits, as required under Environmental Laws. Section 3.13 Voting Requirements. (a) The Company represents and warrants that the affirmative vote atthe Company Stockholders Meeting of at least a majority of the votes entitled tobe cast by the holders of outstanding shares of Company Common Stock and ESOPPreference Shares, voting together as one class, is the only vote of the holdersof any class or series of the Company’s capital stock necessary to adopt andapprove this Agreement and the Merger and the transactions contemplated hereby(collectively, the “COMPANY STOCKHOLDER APPROVAL”). (b) Parent and Merger Sub represent and warrant that the affirmativevote at the Parent Stockholders Meeting of at least a majority of the votes castby the holders of outstanding shares of Parent Common Stock present (in personor by proxy) at the Parent Stockholders Meeting, where the holders of at least amajority of all outstanding shares of Parent Common Stock vote on the proposalto approve the issuance of Parent Common Stock pursuant to this Agreement (whichwill constitute a quorum), is the only vote of the holders of any class orseries of Parent’s capital stock necessary to authorize the issuance of theshares of Parent Common Stock to be issued in connection with the Merger (the”PARENT STOCKHOLDER APPROVAL”). Section 3.14 State Takeover Statutes. The Company represents andwarrants that the Board of Directors of the Company has taken all necessaryaction so that no “fair price,” “moratorium,” “control share acquisition” orother anti-takeover Law (each, a “TAKEOVER STATUTE”) (including the interestedstockholder provisions codified in Section 203 of the DGCL) or any anti-takeoverprovision in the Company’s Amended and Restated Certificate of Incorporation(including Article 12 thereof) or by-laws is applicable to this Agreement, theMerger and the transactions contemplated by this Agreement. Section 3.15 Opinion of Financial Advisors. (a) The Company represents and warrants that the Company hasreceived the opinions of Morgan Stanley & Co Incorporated and Peter J. SolomonCompany, each dated the date of this Agreement, to the effect that, as of suchdate and subject to the considerations set forth therein, the MergerConsideration is fair from a financial point of view to holders of shares ofCompany Common Stock. (b) Parent and Merger Sub represent and warrant that Parent hasreceived the opinion of Goldman Sachs, dated the date of this Agreement, to theeffect that, as of such date and subject to the considerations set forththerein, the Merger Consideration is fair from a financial point of view toParent, without taking into account any adjustments made pursuant to Section1.8. Section 3.16 Brokers. (a) The Company represents and warrants that, except for MorganStanley & Co Incorporated and Peter J. Solomon Company, no broker, investmentbanker, financial advisor or other person is entitled to any broker’s, finder’s,financial advisor’s or other similar fee or commission in connection with thetransactions contemplated by this Agreement based upon arrangements made by oron behalf of the Company. (b) Parent and Merger Sub represent and warrant that, except forGoldman Sachs, no broker, investment banker, financial advisor or other personis entitled to any broker’s, finder’s, financial advisor’s or other similar feeor commission in connection with the transactions contemplated by this Agreementbased upon arrangements made by or on behalf of Parent. Section 3.17 The Company Rights Agreement. The Company representsand warrants that the Company has taken all corporate action on behalf of theCompany required to authorize an amendment to the Company Rights Agreement so asto render the Company Rights Agreement inapplicable to the Merger and the othertransactions contemplated by this Agreement. Section 3.18 Financing. Parent and Merger Sub represent and warrantthat Parent will have at the Effective Time, sufficient funds available to paythe Cash Consideration and all other cash amounts payable to holders of CompanyCommon Stock pursuant to this Agreement. Section 3.19 Merger Sub. Parent and Merger Sub represent and warrantthat Merger Sub is a duly incorporated, validly existing direct, wholly ownedDelaware subsidiary of Parent, was formed for the purpose of engaging in thetransactions contemplated by this Agreement, and does not have any subsidiariesand has not undertaken any business or other activities other than in connectionwith entering into this Agreement and engaging in the transactions contemplatedhereby. ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS Section 4.1 Conduct of Business. (a) Conduct of Business by the Company. Except as set forth onSection 4.1(a) of the Company Disclosure Letter, except as otherwise required,permitted or contemplated by this Agreement or except as consented to in writingby Parent, which consent shall not be unreasonably withheld or delayed, duringthe period from the date of this Agreement to the Effective Time, the Companyshall, and shall cause the Company Subsidiaries to, carry on their respectivebusinesses in the ordinary course. Without limiting the generality of theforegoing, except as set forth on Section 4.1(a) of the Company DisclosureLetter, except as otherwise required, permitted or contemplated by thisAgreement or except as consented to in writing by Parent, which consent shallnot be unreasonably withheld or delayed, during the period from the date of thisAgreement to the Effective Time, the Company shall not and shall not permit anysubsidiary of the Company (each, a “COMPANY SUBSIDIARY”) to: (i) (A) other than (x) dividends and distributions by a direct orindirect wholly owned Company Subsidiary to its parent, (y) regular quarterlycash dividends with respect to Company Common Stock not in excess of $0.245 pershare of Company Common Stock and (z) as required under the terms of the ESOPPreference Shares, declare, set aside or pay any dividends on, or make any otherdistributions in respect of, any of its capital stock, (B) split, combine orreclassify any of its capital stock or (C) except as required under the terms ofthe ESOP Preference Shares or pursuant to agreements entered into with respectto the Company Stock Plans that are in effect as of the close of business on thedate of this Agreement, purchase, redeem or otherwise acquire any shares ofcapital stock of the Company or any of the Company Subsidiaries or any othersecurities thereof or any rights, warrants or options to acquire any such sharesor other securities; (ii) issue or authorize the issuance of, deliver or sell any sharesof its capital stock (or any other securities in respect of, in lieu of, or insubstitution for, shares of its capital stock), any other voting securities orany securities convertible into, or any rights, warrants or options to acquire,any such shares, voting securities or convertible securities, other than theissuance of shares of Company Common Stock and associated Company Rights (A)upon the exercise of the Company Stock Options under the Company Stock Plans orin connection with other awards or issuances of Company Common Stock under theCompany Stock Plans or (B) upon the conversion of shares of ESOP PreferenceShares, in any such case, outstanding as of the date of this Agreement (orgranted hereafter as permitted under this Agreement) and in accordance withtheir terms as in effect on the date of this Agreement (or, in the case ofgrants made subsequent to the date of this Agreement, in accordance with theirterms as in effect on the date of grant, which terms shall be consistent withpast practice); (iii) amend its certificate of incorporation or by-laws (or othercomparable organizational documents), other than amendments or changes to anysuch documents of the Company Subsidiaries in the ordinary course of business; (iv) other than in the ordinary course of business, sell, lease,license, mortgage or otherwise encumber or subject to any Lien (other thanPermitted Liens) or otherwise dispose of any of its material properties ormaterial assets; (v) incur any material long-term indebtedness (whether evidenced bya note or other instrument, pursuant to a financing lease, sale-leasebacktransaction, or otherwise) or incur material short-term indebtedness other thanindebtedness incurred in the ordinary course of business or under lines ofcredit existing on the date of this Agreement (or any refinancing thereof not toexceed the amount borrowable thereunder); (vi) other than in the ordinary course of business: (A) grant anyincrease in the compensation or benefits payable or to become payable by theCompany or any Company Subsidiary to any current or former director orconsultant of the Company or any Company Subsidiary; (B) grant any increase inthe compensation or benefits payable or to become payable by the Company or anyCompany Subsidiary to any officer or employee of the Company or any CompanySubsidiary; (C) adopt, enterinto, amend or otherwise increase, reprice or accelerate the payment or vestingof the amounts, benefits or rights payable or accrued or to become payable oraccrued under any Benefit Plan or Foreign Plan of the Company; (D) enter into oramend any employment, bonus, severance, change in control, retention agreementor any similar agreement or any collective bargaining agreement or, grant anyseverance, bonus, termination, or retention pay to any officer, director,consultant or employee of the Company or any Company Subsidiaries; or (E) pay oraward any pension, retirement, allowance or other non-equity incentive awards,or other employee or director benefit not required by any outstanding BenefitPlan or Foreign Plan of the Company; provided, however, that nothing in thisAgreement, including this Section 4.1(a)(vi) or Section 4.1(a)(ii) shall beconstrued as preventing the Company from taking any of the actions described inSchedule 5.14(d); (vii) change the accounting principles used by it unless required byGAAP (or, if applicable with respect to foreign subsidiaries, the relevantforeign generally accepted accounting principles) or any Governmental Entity; (viii) acquire by merging or consolidating with, by purchasing anysubstantial equity interest in or a substantial portion of the assets of, or byany other manner, any significant business or any corporation, partnership,association or other business organization or division thereof, or otherwiseacquire any assets that are material, individually or in the aggregate, to theCompany Entities, taken as a whole, except for (A) the purchase of assets fromsuppliers or vendors in the ordinary course of business, (B) items reflected inthe capital plan of the Company previously made available to Parent and (C)acquisitions of businesses or assets not contemplated in clause (A) or (B)involving consideration up to an aggregate amount not to exceed $50,000,000; (ix) except in the ordinary course of business, make or rescind anymaterial express or deemed election or settle or compromise any material claimor action relating to Taxes, or change any of its methods of accounting or ofreporting income or deductions for Tax purposes in any material respect; (x) satisfy any material claims or liabilities, other than in theordinary course of business or in accordance with their terms; (xi) make any loans, advances or capital contributions to, orinvestments in, any other person in excess of $25,000,000 in the aggregate,except for (A) loans, advances, capital contributions or investments between anywholly owned Company Subsidiary and the Company or another wholly owned CompanySubsidiary, (B) employee advances for expenses in the ordinary course ofbusiness or (C) ordinary course proprietary credit card transactions; (xii) other than in the ordinary course of business, (A) terminateor adversely modify or amend any contract having a duration of more than oneyear and total payment obligations of the Company in excess of $25,000,000(other than (1) contracts terminable within one year or (2) the renewal, onsubstantially similar terms, of any contract existing on the date of thisAgreement), (B) waive, release, relinquish orassign any right or claim of material value to the Company, or (C) cancel orforgive any material indebtedness owed to the Company or any Company Subsidiary;or (xiii) authorize, commit or agree to take any of the foregoingactions. (b) Conduct of Business by Parent. Except as set forth on Section4.1(b) of the Parent Disclosure Letter, except as otherwise required, permittedor contemplated by this Agreement or except as consented to in writing by theCompany, which consent shall not be unreasonably withheld or delayed, during theperiod from the date of this Agreement to the Effective Time, Parent shall, andshall cause the Parent Subsidiaries to, carry on their respective businesses inthe ordinary course. Without limiting the generality of the foregoing, except asset forth on Section 4.1(b) of the Parent Disclosure Letter, except as otherwiserequired, permitted or contemplated by this Agreement or except as consented toin writing by the Company, which consent shall not be unreasonably withheld ordelayed, during the period from the date of this Agreement to the EffectiveTime, Parent shall not and shall not permit any Parent Subsidiary to: (i) (A) other than (1) dividends and distributions by a direct or indirect wholly owned Parent Subsidiary to its parent and (2) regular quarterly cash dividends with respect to Parent Common Stock, which shall be $0.14 per share of Parent Common Stock, declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock or (B) split, combine or reclassify any of its capital stock or (C) except pursuant to agreements entered into with respect to the Parent Stock Plans that are in effect as of the close of business on the date of this Agreement, purchase, redeem or otherwise acquire any shares of capital stock of Parent or any of the Parent Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue or authorize the issuance of, deliver or sell any shares of its capital stock (or any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock), any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than the issuance of shares of Parent Common Stock upon the exercise of the Parent Stock Options under the Parent Stock Plans or in connection with other awards or issuance of Parent Common Stock under the Parent Stock Plans, in any such case, outstanding as of the date of this Agreement (or granted hereafter as permitted under this Agreement) and in accordance with their terms as in effect on the date of this Agreement (or, in the case of grants made subsequent to the date of this Agreement, in accordance with their terms as in effect on the date of grant, which terms shall be consistent with past practice); (iii) amend its certificate of incorporation or by-laws (or other comparable organizational documents), other than amendments or changes to any such documents of the Parent Subsidiaries in the ordinary course of business; (iv) other than in the ordinary course of business, sell, lease, license, mortgage or otherwise encumber or subject to any Lien (other than Parent Permitted Liens) or otherwise dispose of any of its material properties or material assets; (v) change the accounting principles used by it unless required by GAAP (or, if applicable with respect to foreign subsidiaries, the relevant foreign generally accepted accounting principles); or any Governmental Entity; (vi) acquire by merging or consolidating with, by purchasing any substantial equity interest in or a substantial portion of the assets of, or by any other manner, any significant business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire any assets that are material, individually or in the aggregate, to Parent and the Parent Subsidiaries, taken as a whole, except for (A) the purchase of assets from suppliers or vendors in the ordinary course of business, (B) items reflected in the capital plan of Parent previously provided to the Company or (C) acquisitions of businesses or assets not contemplated in clause (A) or (B) involving consideration up to an aggregate amount not to exceed $50,000,000; (vii) except in the ordinary course of business, make or rescind any material express or deemed election or settle or compromise any material claim or action relating to Taxes, or change any of its methods of accounting or of reporting income or deductions for Tax purposes in any material respect; (viii) satisfy any material claims or liabilities, other than in the ordinary course of business or in accordance with their terms; (ix) other than in the ordinary course of business, (A) terminate or adversely modify or amend any contract having a duration of more than one year and total payment obligations of Parent in excess of $25,000,000 (other than (1) contracts terminable within one year or (2) the renewal, on substantially similar terms, of any contract existing on the date of this Agreement), (B) waive, release, relinquish or assign any right or claim of material value to Parent, or (C) cancel or forgive any material indebtedness owed to Parent or any Parent Subsidiary; or (x) authorize, commit or agree to take any of the foregoing actions. (c) Conduct of Business by Merger Sub. During the period from thedate of this Agreement to the Effective Time, Merger Sub shall not engage in anyactivities of any nature except as provided in or contemplated by thisAgreement. (d) Advice of Changes. Each of the Company, Parent and Merger Subshall promptly advise the other parties to this Agreement orally and in writingto the extent it has knowledge of any change or event having, or which, insofaras can reasonably be foreseen, would reasonably be expected to have, a materialadverse effect on such party or the ability of the conditions set forth inArticle VI to be satisfied; provided, however, that no such notification willaffect the representations, warranties, covenants or agreements of the parties(or remedies with respect thereto) or the conditions to the obligations of theparties under this Agreement. Section 4.2 No Solicitation by the Company. (a) Company Takeover Proposal. From and after the date of thisAgreement, the Company shall, and shall cause the Company Subsidiaries to, andit shall use its reasonablebest efforts to cause any of its and their officers, directors, employees,financial advisors, attorneys, accountants and other advisors, investmentbankers, representatives and agents retained by the Company or any of theCompany Subsidiaries (collectively, “COMPANY REPRESENTATIVES”) to, immediatelycease and cause to be terminated immediately all existing activities,discussions and negotiations with any parties conducted heretofore with respectto, or that would reasonably be expected to lead to, any Company TakeoverProposal. From and after the date of this Agreement, the Company shall not, norshall it permit any of the Company Subsidiaries to, and it shall use itsreasonable best efforts to cause any of the Company Representatives not to,directly or indirectly, (i) solicit, initiate or knowingly encourage the makingof a Company Takeover Proposal, (ii) enter into any agreement, arrangement orunderstanding with respect to any Company Takeover Proposal (other than aconfidentiality agreement entered into in accordance with the provisions of thisSection 4.2(a)) or (iii) other than informing persons of the existence of theprovisions contained in this Section 4.2, participate in any discussions ornegotiations regarding, or furnish or disclose to any person (other than a partyto this Agreement) any non-public information with respect to the Company inconnection with any inquiries or the making of any proposal that constitutes, orwould reasonably be expected to lead to, any Company Takeover Proposal;provided, however, that, at any time prior to obtaining the Company StockholderApproval, in response to an unsolicited Company Takeover Proposal that the Boardof Directors of the Company determines in good faith (after consultation withoutside counsel and a financial advisor of nationally recognized reputation)constitutes or would reasonably be expected to lead to a Superior Proposal, andwhich Company Takeover Proposal was made after the date hereof and did nototherwise result from a breach of this Section 4.2, the Company may, subject tocompliance with Section 4.2(a), (i) furnish information with respect to theCompany Entities to the person making such Company Takeover Proposal (and itsrepresentatives) pursuant to a customary confidentiality agreement not lessrestrictive of such person than the Confidentiality Agreement; provided,however, that all such information is, in substance, provided to Parentcontemporaneously as it is provided to such person, and (ii) participate indiscussions or negotiations with the person making such Company TakeoverProposal (and its representatives) regarding such Company Takeover Proposal. (b) Definitions. As used herein, (i) “SUPERIOR PROPOSAL” means aCompany Takeover Proposal from any person to acquire, directly or indirectly,for consideration consisting of cash and/or securities, all of the combinedvoting power of the Company then outstanding or all or substantially all of theassets of the Company that the Board of Directors of the Company determines inits good faith judgment (after consulting with a nationally recognizedinvestment banking firm), taking into account all legal, financial andregulatory and other aspects of the proposal and the person making the proposal(including any break-up fees, expense reimbursement provisions and conditions toconsummation), (A) would be more favorable from a financial point of view to thestockholders of the Company than the transactions contemplated by this Agreement(including any adjustment to the terms and conditions proposed by Parent inresponse to such Company Takeover Proposal) and (B) for which financing, to theextent required, is then committed or may reasonably be expected to be committedand (ii) “COMPANY TAKEOVER PROPOSAL” means any bona fide written proposal oroffer from any person relating to any (A) direct or indirect acquisition orpurchase of a business that constitutes 50% or more of the net revenues, netincome or the assets of the Company and the Company Subsidiaries, taken as awhole, (B) direct or indirect acquisition or purchase of equity securities ofthe Company representing 50% or more of the combined voting power of theCompany, (C) any tender offer orexchange offer that if consummated would result in any person beneficiallyowning equity securities of the Company representing 50% or more of the combinedvoting power of the Company, or (D) any merger, consolidation, businesscombination, recapitalization, liquidation, dissolution or similar transactioninvolving the Company, other than the transactions contemplated by thisAgreement. (c) Actions by the Company. Neither the Board of Directors of theCompany nor any committee thereof shall (i) (A) withdraw (or modify in a manneradverse to Parent), or publicly propose to withdraw (or modify in a manneradverse to Parent), the approval recommendation or declaration of advisabilityby such Board of Directors or any such committee thereof of this Agreement, theMerger or the other transactions contemplated by this Agreement or (B)recommend, adopt or approve, or propose publicly to recommend, adopt or approve,any Company Takeover Proposal (any action described in this clause (i) beingreferred to as a “COMPANY ADVERSE RECOMMENDATION CHANGE”) or (ii) approve orrecommend, or allow the Company or any of the Company Subsidiaries to execute orenter into, any letter of intent, memorandum of understanding, agreement inprinciple, merger agreement, acquisition agreement, option agreement, jointventure agreement, partnership agreement or other similar agreement constitutingor related to any Company Takeover Proposal (other than a confidentialityagreement referred to in Section 4.2(a)). Notwithstanding the foregoing, if,prior to obtaining the Company Stockholder Approval, (v) the Company receives aCompany Takeover Proposal, (w) the Board of Directors of the Company shall havedetermined in good faith, after consultation with outside counsel, that it isnecessary for the proper discharge of its fiduciary duties under applicable Law,(x) the Company provides written notice (a “NOTICE OF ADVERSE RECOMMENDATION”)advising Parent that the Board of Directors of the Company has made thedetermination described in clause (w) above, (y) for a period of three calendardays (at least one of which shall be a Business Day) following Parent’s receiptof a Notice of Adverse Recommendation, the Company negotiates with Parent ingood faith to make such adjustments to the terms and conditions of thisAgreement as would enable the Company to proceed with its recommendation of thisAgreement and the Merger and not make such Company Adverse Recommendation Changeand (z) at the end of such three-day period the Board of Directors of theCompany maintains its determination described in clause (w) above (after takinginto account such proposed adjustments to the terms and conditions of thisAgreement), then the Board of Directors of the Company may (A) make a CompanyAdverse Recommendation Change and/or (B) upon termination of this Agreement inaccordance with Section 7.1(d)(ii) and concurrent payment of the Termination Feein accordance with Section 7.3(b), approve and enter into an agreement relatingto a Company Takeover Proposal that constitutes a Superior Proposal. No CompanyAdverse Recommendation Change shall change the approval of the Board ofDirectors of the Company for purposes of causing Article 12 of the Company’sAmended and Restated Certificate of Incorporation, any state takeover Law(including Section 203 of the DGCL) or other state Law to be inapplicable to theMerger and the other transactions contemplated by this Agreement. (d) Notice of Company Takeover Proposal. From and after the dateof this Agreement, unless the Board of Directors of the Company shall havedetermined in good faith, after consultation with outside counsel, that takingsuch action would result in a reasonable probability that the Board of Directorsof the Company would breach its fiduciary duties under applicable Law, theCompany shall promptly (but in any event within one Business Day) adviseParent and Merger Sub of the receipt, directly or indirectly, of any inquiries,requests, discussions, negotiations or proposals relating to a Company TakeoverProposal, or any request for nonpublic information relating to any of theCompany Entities by any person that informs the Company or any CompanyRepresentative that such person is considering making, or has made, a CompanyTakeover Proposal, or an inquiry from a person seeking to have discussions ornegotiations relating to a possible Company Takeover Proposal. Any such noticeshall be made orally and confirmed in writing, and shall indicate the materialterms and conditions thereof and the identity of the other party or partiesinvolved and promptly furnish to Parent and Merger Sub a copy of any suchwritten inquiry, request or proposal and copies of any material informationprovided to or by any third party relating thereto. (e) Rule 14e-2(a), Rule 14d-9 and Other Applicable Law. Nothingcontained in this Section 4.2 shall prohibit the Company from (i) taking anddisclosing to its stockholders a position contemplated by Rule 14e-2(a) or Rule14d-9 promulgated under the Exchange Act or (ii) making any disclosure to thestockholders of the Company if, in the good faith judgment of the Board ofDirectors (after consultation with outside counsel), failure so to disclosewould be inconsistent with the fulfillment of its fiduciary duties or any otherobligations under applicable Law; provided, however, that compliance with suchrules and Laws shall not in any way limit or modify the effect that any actiontaken pursuant to such rules and Laws has under any other provision of thisAgreement, including that such compliance could result in a Company AdverseRecommendation Change. (f) Return or Destruction of Confidential Information. The Companyagrees that immediately following the execution of this Agreement it shallrequest each person (other than Parent) which has heretofore executed aconfidentiality agreement within the past two years in connection with suchperson’s consideration of acquiring the Company to return or destroy allconfidential information heretofore furnished to such person by or on theCompany’s behalf. ARTICLE V ADDITIONAL AGREEMENTS Section 5.1 Preparation of the Form S-4 and the Joint Proxy Statement; Stockholders Meetings. (a) Form S-4 Proxy Statement. As soon as practicable following thedate of this Agreement, the Company and Parent shall prepare and file with theSEC the Joint Proxy Statement and Parent shall prepare and file with the SEC theForm S-4, in which the Joint Proxy Statement will be included as a prospectus.Each of the Company and Parent shall use reasonable best efforts to have theForm S-4 declared effective under the Securities Act as promptly as practicableafter such filing and to maintain the effectiveness of the Form S-4 through theEffective Time and to ensure that it complies in all material respects with theapplicable provisions of the Exchange Act or Securities Act. The Company shalluse all reasonable best efforts to cause the Joint Proxy Statement to be mailedto the Company’s stockholders, and Parent shall use all reasonable best effortsto cause the Joint Proxy Statement to be mailed to Parent’s stockholders, ineach case as promptly as practicable after the Form S-4 is declared effectiveunder the Securities Act. Parent shall also take any action (other thanqualifying to do business in any jurisdiction in which it is not now soqualified or to file a general consent to service of process) required to betaken under any applicable state securities laws in connection with the issuanceof Parent Common Stock in the Merger and the Company shall furnish allinformation concerning the Company and the holders of the Company Common Stockas may be reasonably requested in connection with any such action. The Company,in connection with a Company Adverse Recommendation Change, may amend orsupplement the Form S-4 or Joint Proxy Statement (including by incorporation byreference) to effect such a Company Adverse Recommendation Change. No filing of,or amendment or supplement to, the Form S-4 will be made by Parent, and nofiling of, or amendment or supplement to the Joint Proxy Statement will be madeby the Company or Parent, in each case, without providing the other party andits respective counsel the reasonable opportunity to review and comment thereon.The parties shall notify each other promptly of the receipt of any comments fromthe SEC or its staff and of any request by the SEC or its staff for amendmentsor supplements to the Joint Proxy Statement or the Form S-4 or for additionalinformation and shall supply each other with copies of all correspondencebetween such party or any of its representatives, on the one hand, and the SECor its staff, on the other hand, with respect to the Joint Proxy Statement, theForm S-4 or the Merger. Parent will advise the Company, promptly after itreceives notice thereof, of the time when the Form S-4 has become effective, theissuance of any stop order or the suspension of the qualification of the ParentCommon Stock issuable in connection with the Merger for offering or sale in anyjurisdiction. If at any time prior to the Effective Time any informationrelating to the Company or Parent, or any of their respective affiliates,officers or directors, should be discovered by the Company or Parent whichshould be set forth in an amendment or supplement to the Form S-4 or the JointProxy Statement, so that any of such documents would not include anymisstatement of a material fact or omit to state any material fact necessary tomake the statements therein, in light of the circumstances under which they weremade, not misleading, the party which discovers such information shall promptlynotify the other parties hereto and the parties shall cooperate in the promptfiling with the SEC of an appropriate amendment or supplement describing suchinformation and, to the extent required by Law, in the disseminating theinformation contained in such amendment or supplement to the stockholders ofeach of the Company and Parent. (b) Stockholders Meetings. (i) The Company shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the “COMPANY STOCKHOLDERS MEETING”) in accordance with applicable Law, the Company’s Amended and Restated Certificate of Incorporation and by-laws for the purpose of obtaining the Company Stockholder Approval and shall, subject to Section 4.2(c), (A) through the Board of Directors of the Company, recommend to its stockholders the approval and adoption of this Agreement, the Merger and the other transactions contemplated hereby and include in the Joint Proxy Statement such recommendation and (B) use its reasonable best efforts to solicit and obtain such approval and adoption. (ii) Parent shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the “PARENT STOCKHOLDERS MEETING”) in accordance with applicable Law, Parent’s Second Restated Certificate of Incorporation and by-laws for the purpose of obtaining the Parent Stockholder Approval and shall (A) through the Board of Directors of Parent, recommend to its stockholders the approval of the issuance of Parent Common Stock pursuant to this Agreement and include in the Joint Proxy Statement such recommendation and (B) use its reasonable best efforts to solicit and obtain such approval and (C) not withdraw or modify, or publicly propose to withdraw or modify, the recommendation contemplated by clause (A) (any such action being referred to as a “PARENT ADVERSE RECOMMENDATION CHANGE”); provided, however, that, notwithstanding the foregoing, Parent may make a Parent Adverse Recommendation Change if, prior to obtaining the Parent Stockholder Approval, (v) Parent receives a Parent Takeover Proposal, (w) the Board of Directors of Parent shall have determined in good faith, after consultation with outside counsel, that it is necessary for the proper discharge of its fiduciary duties under applicable Law, (x) Parent provides written notice advising the Company that the Board of Directors of Parent has made the determination described in clause (w) above, (y) for a period of three calendar days (at least one of which shall be a Business Day) following the Company’s receipt of such notice, Parent negotiates with the Company in good faith to make such adjustments to the terms and conditions of this Agreement as would enable Parent to proceed with its recommendation of this Agreement and the Merger and not withdraw or modify such recommendation and (z) at the end of such three-day period the Board of Directors of Parent maintains its determination described in clause (w) above (after taking into account such proposed adjustments to the terms and conditions of this Agreement). For purposes of this Agreement “PARENT TAKEOVER PROPOSAL” means any bona fide written proposal or offer from any person relating to any (A) direct or indirect acquisition or purchase of a business that constitutes 50% or more of the net revenues, net income or the assets of Parent and the Parent Subsidiaries, taken as a whole, (B) direct or indirect acquisition or purchase of equity securities of Parent representing 50% or more of the combined voting power of Parent, (C) any tender offer or exchange offer that if consummated would result in any person beneficially owning equity securities of Parent representing 50% or more of the combined voting power of Parent, or (D) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Parent. (iii) Each of Parent and the Company agrees to use its reasonable best efforts to hold the Parent Stockholders Meeting and the Company Stockholders Meeting on the same day. Section 5.2 Letters of the Company’s Accountants. The Company shallrequest to be delivered to Parent two letters from the Company’s independentaccountants, one dated a date within two Business Days before the date on whichthe Form S-4 will become effective and one dated a date within two Business Daysbefore the Closing Date, each addressed to Parent customary in scope andsubstance for comfort letters delivered by independent public accountants inconnection with registration statements similar to the Form S-4. The Companyshall be deemed to have fully discharged its obligations under this Section 5.2if it mails or hand delivers a letter of request stating the terms of thisSection 5.2 to its client account partner at Deloitte & Touche, regardless ofwhether Deloitte & Touche delivers the letters contemplated by this Section 5.2. Section 5.3 Letters of Parent’s Accountants. Parent shall requestto be delivered to the Company two letters from Parent’s independentaccountants, one dated a date within two Business Days before the date on whichthe Form S-4 will become effective and one dated a date within two Business Daysbefore the Closing Date, each addressed to the Company customary in scope andsubstance for comfort letters delivered by independent public accountants inconnection with registration statements similar to the Form S-4. Parent shall bedeemed to have fully discharged its obligations under this Section 5.3 if itmails or hand delivers a letter of request stating the terms of this Section 5.3to its client account partner at KPMG, regardless of whether KPMG delivers theletters contemplated by this Section 5.3. Section 5.4 Access to Information; Confidentiality. To the extentpermitted by applicable Law and subject to the Confidentiality Agreement, datedFebruary 4, 2005, between the Company and Parent (the “CONFIDENTIALITYAGREEMENT”), each of the Company and Parent shall, and shall cause each of itsrespective subsidiaries to, afford to the other party and its respectiverepresentatives reasonable access, during normal business hours and afterreasonable prior notice, during the period prior to the Effective Time, to suchother party’s and its subsidiaries’ properties, books, contracts, commitments,personnel and records and all other information concerning their business,properties and personnel as such party may reasonably request. Parent and theCompany shall hold, and shall cause their respective affiliates andrepresentatives to hold, any nonpublic information in accordance with the termsof the Confidentiality Agreement. Notwithstanding the foregoing or Section 5.5,neither party shall be required to provide any information which it reasonablybelieves it may not provide to the other party by reason of contractual or legalrestrictions, including applicable Law, or which it believes is competitivelysensitive information. In addition, either party may designate any competitivelysensitive information provided to the other under this Agreement as “outsidecounsel only.” Such information shall be given only to outside counsel of therecipient. Each party will use reasonable best efforts to minimize anydisruption to the businesses of the other party and its subsidiaries which mayresult from the requests for access, data and information hereunder. Section 5.5 Reasonable Best Efforts. (a) Reasonable Best Efforts. Upon the terms and subject to theconditions set forth in this Agreement, each of the parties shall use itsreasonable best efforts to take, or cause to be taken, all actions, and to do,or cause to be done, and to assist and cooperate with the other parties indoing, all things necessary, proper or advisable to consummate and makeeffective, as promptly as practicable, but in no event later than the OutsideDate, the Merger and the other transactions to be performed or consummated bysuch party in accordance with the terms of this Agreement, including (i) thetaking of all acts necessary to cause the conditions to Closing to be satisfiedas promptly as practicable, (ii) the obtaining of all necessary actions ornonactions, waivers, consents and approvals from Governmental Entities and themaking of all necessary registrations and filings (including filings withGovernmental Entities, if any) and the taking of all steps as may be necessaryto obtain an approval or waiver from, or to avoid an action or proceeding by,any Governmental Entity, (iii) the avoidance of each and every impediment underany antitrust, merger control, competition or trade regulation Law that may beasserted by any Governmental Entity with respect to the Merger so as to enablethe Closing to occur as soon as reasonably possible, (iv) the obtaining of allnecessary consents, approvals or waivers from third parties, including any suchconsents, approvals or waivers required in connection with anydivestiture, (v) the defending of any lawsuits or other legal proceedings,whether judicial or administrative, challenging this Agreement or theconsummation of the transactions contemplated hereby, including seeking to haveany stay or temporary restraining order entered by any court or otherGovernmental Entity vacated or reversed and (vi) the execution and delivery ofany additional instruments necessary to consummate the Merger and othertransactions contemplated hereby and to fully carry out the purposes of thisAgreement. In connection with and without limiting the foregoing, the Companyand Parent shall (A) duly file with the United States Federal Trade Commission(the “FTC”) and the Antitrust Division of the United States Department ofJustice (the “ANTITRUST DIVISION”) the notification and report form (the “HSRFILING”) required under the HSR Act and (B) duly make all notifications andother filings required (together with the HSR Filing, the “ANTITRUST FILINGS”)under any other applicable competition, merger control, antitrust or similar Lawthat the Company and Parent deem advisable or appropriate, in each case withrespect to the transactions contemplated by this Agreement and as promptly aspracticable. The Antitrust Filings shall be in substantial compliance with therequirements of the HSR Act or other Laws, as applicable. For the avoidance ofdoubt and notwithstanding anything to the contrary contained in this Agreement,Parent and its subsidiaries shall commit to any and all divestitures, licensesor hold separate or similar arrangements with respect to assets or conduct ofbusiness arrangements as a condition to obtaining any and all approvals from anyGovernmental Entity for any reason in order to consummate and make effective, aspromptly as practicable, but in no event later than the Outside Date, the Mergerand the other transactions to be performed or consummated by Parent and itssubsidiaries, including, without limitation, taking any and all actionsnecessary in order to ensure that (x) no requirement for non-action, a waiver,consent or approval of the FTC, the Antitrust Division, any State AttorneyGeneral or other Governmental Entity, (y) no decree, judgment, injunction,temporary restraining order or any other order in any suit or proceeding, and(z) no other matter relating to any antitrust or competition Law or regulation,would preclude consummation of the Merger by the Outside Date; provided,however, that in no event shall Parent or Merger Sub be required to dispose ofor hold separate assets of the Company, Parent or their respective subsidiarieswhich, in the aggregate, accounted for annual net sales for the most recentlycompleted fiscal year exceeding $4,000,000,000. Neither party shall, nor shallit permit any of its subsidiaries to, acquire or agree to acquire any business,person or division thereof, or otherwise acquire or agree to acquire any assetsif the entering into of a definitive agreement relating to or the consummationof such acquisition, would reasonably be expected to materially increase therisk of not obtaining the applicable clearance, approval or waiver from anyGovernmental Entity with respect to the transactions contemplated by thisAgreement. (b) Cooperation. Each party shall, subject to applicable Law andexcept as prohibited by any applicable representative of any applicableGovernmental Entity: (i) promptly notify the other party of any writtencommunication to that party from the FTC, the Antitrust Division, any StateAttorney General or any other Governmental Entity relating to this Agreement orthe Merger, and permit the other Party to review in advance any proposed writtencommunication to any of the foregoing; (ii) not agree to participate in anysubstantive meeting or discussion with any Governmental Entity in respect of anyfilings, investigation or inquiry concerning this Agreement or the Merger unlessit consults with the other party in advance and, to the extent permitted by suchGovernmental Entity, gives the other party the opportunity to attend andparticipate thereat; and (iii) furnish the other party with copies of allcorrespondence, filings, and written communications (and memoranda setting forththe substance thereof)between them and its affiliates and their respective representatives, on the onehand, and any Governmental Entity or members or their respective staffs, on theother hand, with respect to this Agreement and the Merger. Each party shall (y)respond as promptly as practicable under the circumstances to any inquiriesreceived from the FTC or the Antitrust Division for additional information ordocumentation and to all inquiries and requests received from any State AttorneyGeneral or other Governmental Entity in connection with antitrust mattersrelating to this Agreement or the Merger and (z) not extend any waiting periodunder the HSR Act or enter into any agreement with the FTC or the AntitrustDivision not to consummate the transactions contemplated by this Agreement. (c) No Takeover Statutes Apply. In connection with and withoutlimiting the foregoing, the Company, Parent and Merger Sub shall (i) take allaction reasonably necessary to ensure that no Takeover Statute or similar Law isor becomes applicable to the Merger, this Agreement or any of the othertransactions contemplated hereby and (ii) if any Takeover Statute or similar Lawbecomes applicable to the Merger, this Agreement or any of the othertransactions contemplated hereby, take all action reasonably necessary to ensurethat the Merger and the other transactions contemplated hereby may beconsummated as promptly as practicable on the terms contemplated by thisAgreement and otherwise to minimize the effect of such Law on the Merger and theother transactions contemplated by this Agreement. (d) Opinions Regarding Tax Treatment. Parent and the Company shallcooperate with each other in obtaining the opinions of Jones Day, counsel toParent, for the benefit of Parent, and Skadden, Arps, Slate, Meagher, & FlomLLP, counsel to the Company, for the benefit of the Company’s stockholders,respectively, dated as of the Closing Date, to the effect that the Merger willconstitute a reorganization within the meaning of Section 368(a) of the Code. Inconnection therewith, each of Parent and the Company shall deliver to Jones Dayand Skadden, Arps, Slate, Meagher, & Flom LLP customary representation lettersin form and substance reasonably satisfactory to such counsel, and at such timeor times that may be reasonably requested by such law firms (the representationletters referred to in this sentence are collectively referred to as the “TAXCERTIFICATES”). Section 5.6 Company Stock Options; Stock Plans. (a) Assumption of Company Stock Options. At the Effective Time,(i) each outstanding Company Stock Option, whether vested or unvestedimmediately prior to the Effective Time, to purchase shares of Company CommonStock, and (ii) each of the Company Stock Plans and all agreements thereunder,shall be assumed by Parent. To the extent provided under the terms of theCompany Stock Plans, all such outstanding options shall accelerate and becomeimmediately exercisable in connection with the Merger in accordance with theirexisting terms (or, in the case of grants made after the date hereof aspermitted by this Agreement, in accordance with their terms as in effect on thedate of grant). Except for the acceleration of the Company Stock Options inaccordance with the terms of the Company Stock Plans and any agreementsthereunder, prior to or at the Effective Time, each Company Stock Option soassumed by Parent under this Agreement (an “ADJUSTED OPTION”) shall continue tohave, and be subject to, the same terms and conditions as were applicable underthe Company Stock Plans and the documents governing the Company Stock Optionsimmediately before the Effective Time, except that (x) each Company Stock Optionwill be exercisable for that number of shares(rounded up or down to the nearest share) of Parent Common Stock equal to theproduct of the number of shares of Company Common Stock that were issuable uponexercise of such option immediately prior to the Effective Time multiplied bythe sum of (1) the Stock Consideration plus (2) the Cash Consideration dividedby the Average Closing Price and (y) the per share exercise price for the sharesof Parent Common Stock issuable upon exercise of such Company Stock Option willbe equal to the quotient (rounded up or down to the nearest cent) determined bydividing the per share exercise price of the Company Stock Option by the sum of(1) the Stock Consideration plus (2) the Cash Consideration divided by theAverage Closing Price. The date of grant of each Adjusted Option will be thedate on which the corresponding Company Stock Option was granted.Notwithstanding the foregoing, with respect to each Company Stock Option that isan incentive stock option (within the meaning of Section 422(b) of the Code), noadjustment will be made that would be a modification (within the meaning ofSection 424(h) of the Code) to such option. (b) Stock Plans. The Company and Parent agree that each of theCompany Stock Plans and all relevant Parent Stock Plans will be amended, to theextent necessary, to reflect the transactions contemplated by this Agreement,including conversion of shares of the Company Common Stock held or to be awardedor paid pursuant to such benefit plans, programs or arrangements into shares ofParent Common Stock on a basis consistent with the transactions contemplated bythis Agreement. The Company and Parent agree to submit the amendments to theParent stock plans or the Company Stock Plans to their respective stockholdersif such submission is determined to be necessary by counsel to the Company orParent after consultation with one another; provided, however, that suchapproval will not be a condition to the consummation of the Merger. (c) Reservation of Shares. Parent will (i) reserve for issuancethe number of shares of Parent Common Stock that will become subject to thebenefit plans, programs and arrangements referred to in this Section 5.6 and(ii) issue or cause to be issued the appropriate number of shares of ParentCommon Stock, pursuant to applicable plans, programs and arrangements, upon theexercise or maturation of rights existing thereunder on the Effective Time orthereafter granted or awarded. Promptly after the Effective Time, Parent willprepare and file with the SEC a registration statement on Form S-8 (or otherappropriate form) registering a number of shares of Parent Common Stocknecessary to fulfill Parent’s obligations under this Section 5.6. Suchregistration statement will be kept effective (and the current status of theprospectus required thereby will be maintained) for at least as long as awardsgranted under the Company Stock Plans remain outstanding. (d) Notices. As soon as practicable after the Effective Time,Parent will deliver to the holders of the Company Stock Options appropriatenotices setting forth such holders’ rights pursuant to the Company Stock Plansand the agreements evidencing the grants of such Company Stock Options and thatsuch Company Stock Options and the related agreements will be assumed by Parentand will continue in effect on the same terms and conditions (subject to theadjustment required by this Section 5.6 after giving effect to the Merger). Section 5.7 Indemnification. (a) Rights Assumed by Surviving Corporation. The SurvivingCorporation shall, and Parent shall cause the Surviving Corporation to,indemnify and hold harmless, and provide advancement of expenses to, all currentand former directors, officers and employees of the Company and the CompanySubsidiaries (in all of their capacities) (i) to the same extent such personsare indemnified or have the right to advancement of expenses as of the date ofthis Agreement by the Company or a Company Subsidiary pursuant to the Company’sor such Company Subsidiary’s certificates of incorporation, by-laws (orcomparable organizational documents) and indemnification agreements, if any, inexistence on the date hereof with any current or former directors, officers andemployees of the Company and the Company Subsidiaries and (ii) withoutlimitation to clause (i), to the fullest extent permitted by Law, in each casefor acts or omissions occurring at or prior to the Effective Time (including foracts or omissions occurring in connection with the approval of this Agreementand the consummation of the transactions contemplated hereby). Without limitingthe foregoing, Parent agrees that all rights to indemnification (including anyobligations to advance funds for expenses) and exculpation from liabilities foracts or omissions occurring at or prior to the Effective Time now existing infavor of the current or former directors, officers or employees of the Companyand the Company Subsidiaries as provided in their respective certificates ofincorporation or by-laws (or comparable organizational documents),indemnification agreements or otherwise will be assumed by the SurvivingCorporation without further action, as of the Effective Time, and will survivethe Merger and will continue in full force and effect in accordance with theirterms and such rights will not be amended, or otherwise modified in any mannerthat would adversely affect the rights of individuals who on or prior to theEffective Time were directors, officers, employees or agents of the Company,unless such modification is required by Law. (b) Successors and Assigns of Surviving Corporation. In the eventthat Parent or the Surviving Corporation or any of their respective successorsor assigns (i) consolidates with or merges into any other person and is not thecontinuing or surviving corporation or entity of such consolidation or merger or(ii) transfers or conveys all or substantially all of its properties and assetsto any person, then, and in each such case, Parent shall cause proper provisionsto be made so that the successors and assigns of Parent or the SurvivingCorporation, as the case may be, assume the obligations set forth in thisSection 5.7. (c) Continuing Coverage. For six years after the Effective Time,Parent shall cause to be maintained in effect the current policies of directors’and officers’ liability insurance maintained by the Company (provided thatParent may substitute therefor policies with reputable and financially soundcarriers of at least the same coverage and amounts containing terms andconditions which are no less advantageous) covering acts or omissions occurringat or prior to the Effective Time with respect to those persons who arecurrently covered by the Company’s directors’ and officers’ liability insurancepolicy (a copy of which has been heretofore made available to Parent) (the”INDEMNIFIED PARTIES”); provided, however, that in no event will Parent or theSurviving Corporation be required to expend in any one year an amount in excessof 300% of the annual premiums currently paid by the Company for such insurance(the “MAXIMUM PREMIUM”); and provided further, however, that, if the annualpremiums of such insurance coverage exceed such amount, Parent will be obligatedto obtain a policy with the greatest coverage available for a cost not exceedingthe Maximum Premium; and provided further, however, that, if the Company in itssole discretion elects, by giving written notice to Parent at least 30 daysprior to the Effective Time, then, in lieu of the foregoing insurance, effectiveas ofthe Effective Time, the Company shall purchase a directors’ and officers’liability insurance “tail” or “runoff” insurance program for a period of sixyears after the Effective Time with respect to wrongful acts and/or omissionscommitted or allegedly committed at or prior to the Effective Time (suchcoverage shall have an aggregate coverage limit over the term of such policy inan amount not to exceed the annual aggregate coverage limit under the Company’sexisting directors and officers liability policy, and in all other respectsshall be comparable to such existing coverage), provided that the premium forsuch “tail” or “runoff” coverage shall not exceed an amount equal to the MaximumPremium. (d) Intended Beneficiaries. The obligations of Parent and theSurviving Corporation under this Section 5.7 shall not be terminated or modifiedafter the Effective Time in such a manner as to adversely affect any IndemnifiedParty without the express written consent of such Indemnified Party. Theprovisions of this Section 5.7 are (i) intended to be for the benefit of, andwill be enforceable by, each Indemnified Party, his or her heirs and his or herrepresentatives and (ii) in addition to, and not in substitution for, any otherrights to indemnification or contribution that any such person may have bycontract or otherwise. Section 5.8 Public Announcements. Parent and the Company shallconsult with each other before holding any press conferences and before issuingany press release or other public announcements with respect to the transactionscontemplated by this Agreement, including the Merger. The parties will provideeach other the opportunity to review and comment upon any press release or otherpublic announcement or statement with respect to the transactions contemplatedby this Agreement, including the Merger, and shall not issue any such pressrelease or other public announcement or statement prior to such consultation,except as, in the reasonable judgment of the relevant party, may be required byapplicable Law, court process or by obligations pursuant to any listingagreement with any national securities exchange. The parties agree that theinitial press release or releases to be issued with respect to the transactionscontemplated by this Agreement shall be mutually agreed upon prior to theissuance thereof. Section 5.9 Affiliates. The Company shall deliver to Parent priorto the Closing Date a letter identifying all persons who are, at the time thisAgreement is submitted for adoption by the stockholders of the Company,”affiliates” of the Company for purposes of Rule 145 of the rules andregulations promulgated under the Securities Act. The Company shall usereasonable best efforts to cause each such person to deliver to Parent on orprior to the Closing Date a written agreement substantially in the form attachedas Exhibit A hereto. Section 5.10 NYSE Listing. Parent shall use its reasonable bestefforts to cause the shares of Parent Common Stock issuable to the Company’sstockholders as contemplated by this Agreement to be approved for listing on theNYSE, subject to official notice of issuance, as promptly as practicable afterthe date of this Agreement, and in any event prior to the Closing Date. Section 5.11 Stockholder Litigation. The parties to this Agreementshall cooperate and consult with one another in connection with any stockholderlitigation against any of them or any of their respective directors or officerswith respect to the transactions contemplated by this Agreement. In furtheranceof and without in any way limiting the foregoing, each of the parties shall useits respective reasonable best efforts to prevail in suchlitigation so as to permit the consummation of the transactions contemplated bythis Agreement in the manner contemplated by this Agreement. Notwithstanding theforegoing, the Company agrees that it will not compromise or settle (other thancompromises or settlements involving solely monetary damages) any litigationcommenced against it or its directors and officers relating to this Agreement orthe transactions contemplated hereby (including the Merger) without Parent’sprior written consent, not to be unreasonably withheld or delayed, it beingunderstood and agreed that the Company may compromise or settle any suchlitigation without Parent’s consent solely for monetary damages. Section 5.12 Tax Treatment. Each of Parent, Merger Sub and theCompany shall use its reasonable best efforts to cause the Merger to qualify asa reorganization under the provisions of Section 368(a) of the Code and toobtain the opinions of counsel referred to in Sections 6.2(d) and 6.3(d),including forbearing from taking any action that would cause the Merger not toqualify as a reorganization under the provisions of Section 368(a) of the Code. Section 5.13 Section 16(b). Parent and the Company shall take allsteps reasonably necessary to cause the transactions contemplated hereby and anyother dispositions of equity securities of the Company (including derivativesecurities) or acquisitions of Parent equity securities (including derivativesecurities) in connection with this Agreement by each individual who is adirector or officer of the Company to be exempt under Rule 16b-3 under theExchange Act. Section 5.14 Employee Benefit Matters. (a) Company Obligations. The Company shall adopt such amendmentsto the Benefit Plans or Foreign Plans of the Company as may reasonably berequested by Parent and as may be necessary to ensure that Benefit Plans andForeign Plans of the Company cover only employees and former employees (andtheir dependents and beneficiaries) of the Company and the Company Subsidiariesfollowing the consummation of the transactions contemplated by this Agreement. (b) Parent Obligations. Parent shall and shall cause the ParentSubsidiaries (including the Surviving Corporation) to: (i) assume the terms of all Benefit Plans and Foreign Plans of the Company and honor and pay or provide the benefits required thereunder in accordance with their terms, recognizing that the consummation of the transactions contemplated hereby or approval of this Agreement by the Company’s stockholders, as the case may be, will constitute a “change in control” for purposes of such Benefit Plans that include a definition of “change in control”; (ii) until the first anniversary of the Effective Time, except as may be required by applicable Law, continue the terms of all Benefit Plans and Foreign Plans of the Company in accordance with their terms in effect as of immediately prior to the Effective Time; and (iii) from the first anniversary of the Effective Time until the third anniversary of the Effective Time (the “BENEFITS MAINTENANCE PERIOD”), with respect to employees of the Company and the Company Subsidiaries as of the Effective Time (collectively, the “COMPANY EMPLOYEES”) (other than those subject to collective bargaining obligations or agreements), (x) provide a level of aggregate employee benefits and compensation (excluding equity based awards), taking into account all Benefit Plans of the Company and other programs sponsored or maintained by the Company and the Company Subsidiaries (other than equity based plans) immediately prior to the Effective Time (including amendments thereto that are permitted or contemplated by this Agreement, including those described on Schedule 5.14(d)), that is substantially comparable in the aggregate to the aggregate employee benefits and compensation provided, with respect to service to the Company or any of the Company Subsidiaries, to Company Employees immediately prior to the Effective Time and (y) consider Company Employees for equity based award grants on the same basis that similarly situated employees of Parent are considered for such grants. (c) Credit for Service of Company Employees. If Company Employeesare included in any benefit plan maintained by Parent or any subsidiary ofParent following the Effective Time, such Company Employees shall receive creditfor service with the Company and the Company Subsidiaries and their predecessorsprior to the Effective Time to the same extent and for the same purposesthereunder as such service was counted under similar Benefit Plans of theCompany for all purposes (except that, with respect to benefit accrual, suchservice shall not be counted to the extent that it would result in a duplicationof benefits and shall not be counted for purposes of benefit accrual under anydefined benefit plan, provided that such service shall be taken into account forpurposes of determining the applicable credit rate in effect under the Parent’squalified cash balance pension plan); provided, however, that service of CompanyEmployees subject to collective bargaining agreements or obligations shall bedetermined under such collective bargaining agreements or obligations. IfCompany Employees or their dependents are included in any medical, dental orhealth plan (a “SUCCESSOR PLAN”) other than the plan or plans in which theyparticipated immediately prior to the Effective Time (a “PRIOR PLAN”), any suchSuccessor Plan shall not include any restrictions or limitations with respect topre-existing condition exclusions or any actively-at-work requirements (exceptto the extent such exclusions were applicable under any similar Prior Plan atthe Effective Time) and any eligible expenses incurred by any Company Employeeand his or her covered dependents during the portion of the plan year of suchPrior Plan ending on the date such Company Employee’s participation in suchSuccessor Plan begins shall be taken into account under such Successor Plan forpurposes of satisfying all deductible, coinsurance and maximum out-of-pocketrequirements applicable to such Company Employee and his or her covereddependents for the applicable plan year as if such amounts had been paid inaccordance with such Successor Plan. Without limiting the generality of theforegoing, for purposes of determining severance pay and benefits under anyapplicable Benefit Plan of the Company covering a Company Employee at or afterthe Effective Time other than a Company Employee subject to collectivebargaining agreements or obligations, each such Company Employee shall receivecredit for service prior to the Effective Time with the Company and the CompanySubsidiaries and their predecessors to the same extent and for the same purposesas such service was counted under the applicable Benefit Plan of the Company asin effect before the Effective Time, as well as for service from and after theEffective Time with Parent and any Parent Subsidiary (including the SurvivingCorporation). (d) Additional Matters. Parent agrees to the additionalcompensation and benefits matters set forth on Schedule 5.14(d) to thisAgreement. (e) No Third-Party Beneficiaries. Nothing in this Section 5.14shall (i) except as provided in Schedule 5.14(d), confer any rights upon anyperson, including any Company Employee or former employees of the Company, otherthan the parties hereto and their respective successors and permitted assigns or(ii) constitute or create an employment agreement. Section 5.15 Parent Board. Parent shall select two individuals whoare directors of the Company as of the date of this Agreement and who arerecommended by the nominating committee of the Board of Directors of Parent and,if such individuals are willing to serve, Parent shall use its reasonable bestefforts to appoint such individuals, as of the Effective Time, to the Board ofDirectors of Parent. Section 5.16 Dividends. Parent shall increase its quarterly dividendon the Parent Common Stock to $0.25 per share beginning with the first quarterlydividend with a record date on or after the Effective Time. It is Parent’sintention to continue its quarterly dividend at this amount for the foreseeablefuture. Section 5.17 St. Louis Operations and Community Involvement. (a) Parent will maintain in St. Louis, Missouri a major divisionalheadquarters, as well as certain regional corporate support functions. (b) After the Effective Time, Parent will honor any charitablecontribution obligations of the Company that exist as of the date of thisAgreement. For one year following the Effective Time, Parent shall not reducethe total aggregate amount of funding for charitable causes by the Company fromthe total amount of such funding in the twelve month period immediatelypreceding the Closing Date. Between the first and second anniversary of theClosing Date, Parent shall not reduce the total aggregate amount of funding forcharitable causes by the Company by more than 50% from the total amount of suchfunding in the prior twelve month period. Between the second and thirdanniversary of the Closing Date, Parent shall not reduce the total aggregateamount of funding for charitable causes by the Company by more than 75% from thetotal amount of such finding in the prior twelve month period. For the avoidanceof doubt and notwithstanding anything to the contrary contained in the precedingsentence, Parent’s obligations as set forth in this Section 5.17(b) shall bereduced by the total aggregate amount of funding for charitable causes by theMay Department Stores Company Foundation during the same time period. ARTICLE VI CONDITIONS PRECEDENT Section 6.1 Conditions to Each Party’s Obligation to Effect theMerger. The respective obligation of each party to effect the Merger is subjectto the satisfaction or waiver on or prior to the Closing Date of the followingconditions: (a) Stockholder Approvals. Each of the Company StockholderApproval and the Parent Stockholder Approval shall have been obtained. (b) No Orders or Injunctions. None of the parties hereto shall besubject to any order or injunction of any Governmental Entity of competentjurisdiction that prohibits the consummation of the Merger; provided, however,that prior to asserting this condition, each of the parties shall have used itsreasonable best efforts to prevent the entry of any such order or injunction andto appeal as promptly as possible any such order or injunction that may beentered. (c) Form S-4. The Form S-4 shall have become effective under theSecurities Act and shall not be the subject of any stop order or proceedingsseeking a stop order. (d) HSR. The waiting period applicable to the consummation of theMerger under the HSR Act shall have expired or been terminated. (e) NYSE Listing. The shares of Parent Common Stock issuable tothe Company’s stockholders as contemplated by this Agreement must shall havebeen approved for listing on the NYSE, subject to official notice of issuance. Section 6.2 Conditions to Obligations of Parent and Merger Sub. The obligation of Parent and Merger Sub to effect the Merger isfurther subject to satisfaction or waiver of the following conditions: (a) Representations and Warranties. The representations andwarranties of the Company set forth herein shall be true and correct in allrespects (without giving effect to any materiality or material adverse effectqualifications contained therein) both when made and at and as of the ClosingDate, as if made at and as of such time (except to the extent expressly made asof an earlier date, in which case as of such date), except where the failure ofsuch representations and warranties to be so true and correct would notreasonably be expected to have or result in, individually or in the aggregate, amaterial adverse effect on the Company. (b) Performance of Obligations of the Company. The Company shallhave performed (i) in all material respects all of its obligations (other thanpursuant to Section 4.1(a)) required to be performed by it under this Agreementat or prior to the Closing Date and (ii) in all respects all of its obligationsrequired to be performed by it under Section 4.1(a) at or prior to the ClosingDate, except where the failure to perform such obligations would not reasonablybe expected to have or result in, individually or in the aggregate, a materialadverse effect on the Company. Notwithstanding the foregoing, the delivery ofthe comfort letters by Deloitte & Touche contemplated by Section 5.2 is not acondition to Parent’s obligation to effect the Merger. (c) Officer’s Certificate. The Company shall have furnished Parentwith a certificate dated the Closing Date signed on its behalf by an executiveofficer to the effect that the conditions set forth in Sections 6.2(a) and6.2(b) have been satisfied. (d) Tax Opinion. Parent shall have received from Jones Day,counsel to Parent, an opinion dated as of the Closing Date, to the effect thatthe Merger will constitute a”reorganization” within the meaning of Section 368(a) of the Code, and Parentand the Company will each be a party to such reorganization within the meaningof Section 368(b) of the Code. In rendering such opinion, counsel for Parent mayrequire delivery of, and rely upon, the Tax Certificates. Section 6.3 Conditions to Obligations of the Company. Theobligation of the Company to effect the Merger is further subject tosatisfaction or waiver of the following conditions: (a) Representations and Warranties. The representations andwarranties of Parent and Merger Sub set forth herein shall be true and correctin all respects (without giving effect to any materiality or material adverseeffect qualifications contained therein) both when made and at and as of theClosing Date, as if made at and as of such time (except to the extent expresslymade as of an earlier date, in which case as of such date), except where thefailure of such representations and warranties to be so true and correct wouldnot reasonably be expected to have or result in, individually or in theaggregate, a material adverse effect on Parent and Merger Sub. (b) Performance of Obligations of Parent and Merger Sub. Each ofParent and Merger Sub shall have performed (i) in all material respects allobligations (other than pursuant to Section 4.1(b)) required to be performed byit under this Agreement at or prior to the Closing Date and (ii) in all respectsall of its obligations required to be performed by it under Section 4.1(b) at orprior to the Closing Date, except where the failure to perform such obligationswould not reasonably be expected to have or result in, individually or in theaggregate, a material adverse effect on Parent. Notwithstanding the foregoing,the delivery of the comfort letters by KPMG contemplated by Section 5.3 is not acondition to the Company’s obligation to effect the Merger. (c) Officer’s Certificate. Each of Parent and Merger Sub shallhave furnished the Company with a certificate dated the Closing Date signed onits behalf by an executive officer to the effect that the conditions set forthin Sections 6.3(a) and 6.3(b) have been satisfied. (d) Tax Opinion. The Company shall have received from Skadden,Arps, Slate, Meagher, & Flom LLP, counsel to the Company, an opinion dated as ofthe Closing Date, to the effect that the Merger will constitute a”reorganization” within the meaning of Section 368(a) of the Code, and Parentand the Company will each be a party to such reorganization within the meaningof Section 368(b) of the Code. In rendering such opinion, counsel for theCompany may require delivery of, and rely upon, the Tax Certificates. Section 6.4 Frustration of Closing Conditions. Neither Parent norMerger Sub nor the Company may rely on the failure of any condition set forth inSection 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure wascaused by such party’s failure to comply with its obligations to consummate theMerger and the other transactions contemplated by this Agreement, as required byand subject to Section 5.5. ARTICLE VII TERMINATION Section 7.1 Termination. (a) Termination by Mutual Consent. This Agreement may beterminated at any time prior to the Effective Time, whether before or after theCompany Stockholder Approval or the Parent Stockholder Approval, by mutualwritten consent of Parent, Merger Sub and the Company. (b) Termination by Parent or the Company. This Agreement may beterminated at any time prior to the Effective Time, whether before or after theCompany Stockholder Approval or the Parent Stockholder Approval, by writtennotice of either Parent or the Company: (i) if the Merger has not been consummated by October 3, 2005, or such later date, if any, as Parent and the Company agree upon in writing (as such date may be extended, the “OUTSIDE DATE”); provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) is not available to any party whose breach of any provision of this Agreement results in or causes the failure of the Merger to be consummated by such time; provided further, however, that if on the Outside Date the conditions to the Closing set forth in Sections 6.1(b) or 6.1(d) shall not have been fulfilled (and Section 7.1(b)(iv) is not applicable) but all other conditions to the Closing either have been fulfilled or are then capable of being fulfilled, then the Outside Date shall, without any action on the part of the parties hereto, be extended to August 31, 2006, and such date shall become the Outside Date for purposes of this Agreement; (ii) if the Company Stockholders Meeting (including any adjournment or postponement thereof) has concluded, the Company’s stockholders have voted and the Company Stockholder Approval was not obtained; or (iii) if the Parent Stockholders Meeting (including any adjournment or postponement thereof) has concluded, Parent’s stockholders have voted and the Parent Stockholder Approval was not obtained; or (iv) if any Governmental Entity of competent jurisdiction issues an order or injunction that permanently prohibits the Merger and such order or injunction has become final and non-appealable; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(iv) is not available to any party whose breach of any provision of this Agreement results in or causes such order or injunction or who has not used its reasonable best efforts to prevent the entry of such order or injunction or to appeal or lift such order or injunction. (c) Termination by Parent. This Agreement may be terminated at anytime prior to the Effective Time, whether before or after the CompanyStockholder Approval or the Parent Stockholder Approval, by written notice ofParent: (i) if the Company (A) has breached or failed to perform any of its covenants or other agreements contained in this Agreement to be complied with by the Company such that the closing condition set forth in Section 6.2(b) would not be satisfied or (B) there exists a breach of any representation or warranty of the Company contained in this Agreement such that the closing condition set forth in Section 6.2(a) would not be satisfied and, in the case of both (A) and (B), such breach or failure to perform (1) is not cured within 60 days after receipt of written notice thereof or (2) is incapable of being cured by the Company by the Outside Date; or (ii) if the Board of Directors of the Company or any committee thereof has made a Company Adverse Recommendation Change. (d) Termination by the Company. This Agreement may be terminatedat any time prior to the Effective Time, whether before or after the CompanyStockholder Approval or the Parent Stockholder Approval, by written notice ofthe Company. (i) if either Parent or Merger Sub (A) has breached or failed to perform any of its covenants or other agreements contained in this Agreement to be complied with by Parent or Merger Sub such that the closing condition set forth in Section 6.3(b) would not be satisfied, or (B) there exists a breach of any representation or warranty of Parent or Merger Sub contained in this Agreement such that the closing condition set forth in Section 6.3(a) would not be satisfied and, in the case of both (A) and (B), such breach or failure to perform (1) is not cured within 60 days after receipt of written notice thereof or (2) is incapable of being cured by Parent by the Outside Date; (ii) if, prior to receipt of the Company Stockholder Approval, the Company (A) receives a Superior Proposal, (B) shall have given Parent a Notice of Adverse Recommendation, and (C) shall have thereafter satisfied the conditions for making a Company Adverse Recommendation Change in accordance with Section 4.2(c); provided, however, that such termination shall not be effective until such time as payment of the Termination Fee required by Section 7.3(b) shall have been made by the Company; provided further, however, that the Company’s right to terminate this Agreement under this Section 7.1(d)(ii) shall not be available if the Company is then in material breach of Section 4.2; (iii) if the Board of Directors of Parent or any committee thereof has made a Parent Adverse Recommendation Change. Section 7.2 Effect of Termination. In the event of termination ofthis Agreement by either the Company or Parent as provided in Section 7.1, thisAgreement will forthwith become void and have no effect, without any liabilityor obligation on the part of Parent, Merger Sub or the Company, other than theprovisions of the Confidentiality Agreement, this Section 7.2, Section 7.3 andArticle VIII, which provisions shall survive such termination; provided,however, that nothing herein will relieve any party from any liability for anywillful and material breach by such party of this Agreement. Section 7.3 Fees and Expenses. (a) Division of Fees and Expenses. Except as provided in thisSection 7.3, all Expenses incurred in connection with the Merger, this Agreementand the transactions contemplated hereby will be paid by the party incurringsuch Expenses, whether or not the Merger is consummated, except that (i) each ofParent and the Company will bear and pay one-half of the costs and expensesincurred in connection with the filing, printing and mailing of the Form S-4 andthe Joint Proxy Statement (including SEC filing fees) and (ii) any real estatetransfer, gain or other similar Taxes to the Company or any of the CompanySubsidiaries resulting from the transactions contemplated by this Agreementshall be borne by the Company. Parent shall not reimburse the Company, directlyor indirectly, for any payment made by the Company pursuant to this Section7.3(a). As used in this Agreement, “EXPENSES” includes all out-of-pocket feesand expenses (including all fees and expenses of accountants, investmentbankers, counsel, experts and consultants to a party hereto and its affiliates)incurred by a party or on its behalf in connection with or related to theauthorization, preparation, negotiation, execution and performance of thisAgreement and the transactions contemplated hereby. (b) Termination Fee Payable By Company. In the event that thisAgreement (i) is terminated pursuant to Section 7.1(c)(ii), (ii) is terminatedpursuant to Section 7.1(d)(ii), or (iii) is terminated pursuant to Section7.1(b)(i), Section 7.1(b)(ii) or Section 7.1(c)(i) and at such time oftermination Parent is not in breach in any material respect of any of itsrepresentations, warranties or covenants contained in this Agreement and (A)prior to such termination, any person publicly announces a Company TakeoverProposal which shall not have been withdrawn and (B) within 12 months of suchtermination the Company or any of the Company Subsidiaries enters into adefinitive agreement with respect to, or consummates, any Company TakeoverProposal, then the Company shall (1) in the case of termination pursuant toclause (i) or (ii) of this Section 7.3(b), promptly, but in no event later thantwo Business Days after the date of such termination, or (2) in the case oftermination pursuant to clause (iii) of this Section 7.3(b), upon the earlier tooccur of the execution of such definitive agreement and such consummation, payParent a non-refundable fee equal to $350,000,000 (the “TERMINATION FEE”),payable by wire transfer of same day funds to an account designated in writingto the Company by Parent. (c) Termination Fees Payable By Parent. In the event that thisAgreement is terminated pursuant to Section 7.1(d)(iii), then Parent shall,promptly, but in no event later than two Business Days after the date of suchtermination, pay the Company a non-refundable fee equal to the Termination Fee,payable by wire transfer of same day funds to an account designated in writingto Parent by the Company. In the event that this Agreement is terminatedpursuant to Section 7.1(b)(i) and at the time of any such termination all of theconditions set forth in Article VI have been satisfied or waived except for (1)any of the conditions set forth in Sections 6.1(b) and 6.1(d), (2) any of theconditions set forth in Sections 6.1(e) or 6.2(d) if, at the time of suchtermination, such conditions are capable of being satisfied, and (3) such otherconditions that are capable of being satisfied on the date of termination but,by their terms, cannot be satisfied until the Closing Date, then Parent shallpromptly, but in no event later than two Business Days after the date of suchtermination, pay the Company a non-refundable fee equal to $350,000,000, payableby wire transfer of same day funds to an account designated in writing to Parentby the Company. In the event that this Agreement is terminated pursuant toSection 7.1(b)(iv) and at the time of any such termination all of the conditionsset forth in Article VI have been satisfied or waived except for (1) any of theconditions set forth in Sections 6.1(b) and 6.1(d), (2) any of the conditionsset forth in Sections 6.1(e) or 6.2(d), if at the time of suchtermination, such conditions are capable of being satisfied, and (3) such otherconditions that are capable of being satisfied on the date of termination but,by their terms, cannot be satisfied until the Closing Date, then the Parentshall promptly, but in no event later than two Business Days after the date ofsuch termination, pay the Company a non-refundable fee equal to the product of(x) $20,000,000 and (y) the quotient (rounded to the fourth decimal point)determined by dividing (1) the number of calendar days between the date hereofand the date of such termination by (2) 30, provided that the amount of such feeshall not be less than $150,000,000 or more than $350,000,000. Thenon-refundable fee referred to in the previous sentence shall be payable by wiretransfer of same day funds to an account designated in writing to Parent by theCompany. ARTICLE VIII GENERAL PROVISIONS Section 8.1 Nonsurvival of Representations and Warranties. None ofthe representations and warranties in this Agreement or in any instrumentdelivered pursuant to this Agreement will survive the Effective Time. ThisSection 8.1 shall not limit any covenant or agreement of the parties which byits terms contemplates performance after the Effective Time. Section 8.2 Notices. All notices, requests, claims, demands andother communications under this Agreement must be in writing and will be deemedgiven if delivered personally, telecopied (which is confirmed by telephone) orsent by a nationally recognized overnight courier service (providing proof ofdelivery) to the parties at the following addresses (or at such other addressfor a party as is specified by like notice): if to the Company, to: The May Department Stores Company 611 Olive Street St. Louis, Missouri 63101 Telecopy No.: (314) 342-3040 Attention: Alan Charlson with a copy to: Skadden, Arps, Slate, Meagher, & Flom LLP Four Times Square New York, New York 10036-6522 Telecopy No.: (212) 735-2000 Attention: J. Michael Schell, Esq. Margaret L. Wolff, Esq. if to Parent or Merger Sub, to: Federated Departments Stores, Inc. 7 West Seventh Street Cincinnati, Ohio 45202 Telecopy No.: (513) 579-7354 Attention: Dennis Broderick with a copy to: Jones Day North Point 901 Lakeside Avenue Cleveland, Ohio 44114 Telecopy No.: (216) 579-0212 Attention: Lyle G. Ganske Section 8.3 Interpretation. When a reference is made in thisAgreement to an Article, Section or Exhibit, such reference is to an Article orSection of, or an Exhibit to, this Agreement unless otherwise indicated. Thetable of contents, table of defined terms and headings contained in thisAgreement are for reference purposes only and do not affect in any way themeaning or interpretation of this Agreement. Whenever the words “include,””includes” or “including” are used in this Agreement, they will be deemed to befollowed by the words “without limitation.” The words “hereof,” “herein” and”hereunder” and words of similar import when used in this Agreement will referto this Agreement as a whole and not to any particular provision of thisAgreement. All terms defined in this Agreement will have the defined meaningswhen used in any certificate or other document made or delivered pursuant heretounless otherwise defined therein. The definitions contained in this Agreementare applicable to the singular as well as the plural forms of such terms and tothe masculine as well as to the feminine and neuter genders of such term. Anyagreement, instrument or statute defined or referred to herein or in anyagreement or instrument that is referred to herein means such agreement,instrument or statute as from time to time amended, modified or supplemented,including (in the case of agreements or instruments) by waiver or consent and(in the case of statutes) by succession of comparable successor statutes. Theparties hereto have participated jointly in the negotiating and drafting of thisAgreement and, in the event an ambiguity or question of intent arises, thisAgreement shall be construed as jointly drafted by the parties hereto and nopresumption or burden of proof shall arise favoring or disfavoring any party byvirtue of the authorship of any provision of this Agreement. For purposes ofthis Agreement: (a) “AFFILIATE” of any person means another person that directlyor indirectly, through one or more intermediaries, controls, is controlled by,or is under common control with, such first person, where “control” means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management policies of a person, whether through the ownershipof voting securities, by contract or otherwise; (b) “KNOWLEDGE” of any person that is not a natural person meansthe actual knowledge of such person’s executive officers; (c) “LAW” means any foreign, federal, state or local law, statute,code, ordinance, regulation, legally binding rule or other legally enforceableobligation imposed by a court or other Governmental Entity; (d) “LEASES” means all leases of real property leased by theCompany or any of its subsidiaries; (e) “LIENS” means all pledges, claims, liens, options, charges,mortgages, easements, restrictions, covenants, conditions of record,encroachments, encumbrances and security interests of any kind or naturewhatsoever; (f) “MATERIAL ADVERSE CHANGE” or “MATERIAL ADVERSE EFFECT” means,when used in connection with the Company or Parent (including references to the”Representing Party”), as the case may be, any change, effect, event, occurrenceor state of facts that is, or would reasonably be expected to be, materiallyadverse to the business, financial condition, or results of operations of suchparty and its subsidiaries taken as a whole, other than any changes, effects,events, occurrences or state of facts relating to (i) the economy or financialmarkets in general, (ii) the industry in which such party and its subsidiariesoperate in general, (iii) negotiation and entry into this Agreement, theannouncement of this Agreement or the undertaking and performance or observanceof the obligations contemplated by this Agreement or necessary to consummate thetransactions contemplated hereby (including adverse effects on results ofoperations attributable to the uncertainties associated with the period betweenthe date hereof and the Closing Date), (iv) the effect of incurring and payingExpenses in connection with negotiating, entering into, performing andconsummating the transactions contemplated by this Agreement, (v) changes inapplicable Laws after the date hereof and (vi) changes in GAAP after the datehereof; provided, that with respect to clauses (i) and (ii) such changes,effects, events, occurrences or state of facts do not disproportionately affectsuch persons relative to the other participants in the industries in which suchpersons operate; provided, further, that, for the avoidance of doubt, compliancewith (and the consequences thereof) the terms of this Agreement (includingSection 5.5) shall not be taken into account in determining whether a materialadverse change or material adverse effect shall have occurred or shall beexpected to occur for any and all purposes of this Agreement; and provided,further, that it is understood and agreed that the terms “material” and”materially” have correlative meanings; (g) “PERMITTED LIENS” means (i) mechanics’, carriers’, workmen’s,repairmen’s or other like Liens arising or incurred in the ordinary course ofbusiness relating to obligations that are not delinquent or that are beingcontested in good faith by the relevant party or any subsidiary of it and forwhich the relevant party or a subsidiary of it has established adequatereserves, (ii) Liens for Taxes that are not due and payable, that are beingcontested in good faith by appropriate proceedings or that may thereafter bepaid without interest or penalty, (iii) Liens that are reflected as liabilitieson the balance sheet of the relevant party and its consolidated subsidiaries asof October 30, 2004, contained in its SEC Documents or the existence of which isreferred to in the notes to such balance sheet and (iv) Liens that, individuallyor in the aggregate, do not materially impair, and would not reasonably beexpected materially to impair, the value or the continued use and operation ofthe assets to which they relate; (h) “PERSON” means an individual, corporation, partnership,limited liability company, joint venture, association, trust, unincorporatedorganization, Governmental Entity or other entity (including its permittedsuccessors and assigns); and (i) a “SUBSIDIARY” of any person means another person, an amountof the voting securities, other voting ownership or voting partnership interestsof which is sufficient to elect at least a majority of its Board of Directors orother governing body (or, if there are no such voting interests, 50% or more ofthe equity interest of which) is owned directly or indirectly by such firstperson. Section 8.4 Counterparts. This Agreement may be executed in two ormore counterparts, all of which will be considered one and the same agreementand will become effective when one or more counterparts have been signed by eachof the parties and delivered to the other parties. Section 8.5 Entire Agreement; No Third-Party Beneficiaries. ThisAgreement (including the documents and instruments relating to the Mergerreferred to herein) and the Confidentiality Agreement, taken together with theCompany Disclosure Letter and Parent Disclosure Letter, (a) constitute theentire agreement, and supersede all prior agreements and understandings, bothwritten and oral, among the parties with respect to the subject matter of thisAgreement and (b) except for the provisions of Section 5.7, Section 5.14 and theapplicable provisions of Schedule 5.14(d), are not intended to confer upon anyperson other than the parties any rights or remedies. Notwithstanding clause (b)of the immediately preceding sentence, following the Effective Time theprovisions of Article II shall be enforceable by holders of CompanyCertificates. Section 8.6 Governing Law. This Agreement is to be governed by, andconstrued in accordance with, the laws of the State of Delaware, regardless ofthe laws that might otherwise govern under applicable principles of conflict oflaws thereof. Section 8.7 Assignment. Neither this Agreement nor any of therights, interests or obligations under this Agreement may be assigned, in wholeor in part, by operation of law or otherwise by any of the parties heretowithout the prior written consent of the other parties. Any assignment inviolation of this Section 8.7 will be void and of no effect. Subject to thepreceding two sentences, this Agreement is binding upon, inures to the benefitof, and is enforceable by, the parties and their respective successors andassigns. Section 8.8 Consent to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto (i) consents to submit itself tothe personal jurisdiction of any federal court located in the State of Delawareor any Delaware state court in the event any dispute arises out of thisAgreement or any of the transactions contemplated by this Agreement, (ii) agreesthat it will not attempt to deny or defeat such personal jurisdiction by motionor other request for leave from any such court and (iii) agrees that it will notbring any action relating to this Agreement or any of the transactionscontemplated by this Agreement in any court other than a federal court sittingin the state of Delaware or a Delaware state court. (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICHMAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULTISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHTIT MAY HAVE TO ATRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OFOR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTIONHEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTYCERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANYOTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULDNOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) ITUNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKESSUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THISAGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THISSECTION 8.8(b). Section 8.9 Specific Enforcement. The parties agree thatirreparable damage would occur in the event that any of the provisions of thisAgreement were not performed in accordance with their specific terms or wereotherwise breached. The parties accordingly agree that the parties will beentitled to an injunction or injunctions to prevent breaches of this Agreementand to enforce specifically the terms and provisions of this Agreement in anyfederal court located in the State of Delaware or a Delaware state court, thisbeing in addition to any other remedy to which they are entitled at law or inequity. Section 8.10 Amendment. This Agreement may be amended by the partiesat any time before or after the Company Stockholder Approval or the ParentStockholder Approval; provided, however, that, after such approval, there is notto be made any amendment that by Law or stock exchange regulation requiresfurther approval by the stockholders of the Company or the stockholders ofParent, as applicable, without further approval of such stockholders. ThisAgreement may not be amended except by an instrument in writing signed on behalfof each of the parties. Section 8.11 Extension; Waiver. At any time prior to the EffectiveTime, a party may (a) extend the time for the performance of any of theobligations or other acts of the other party, (b) waive any inaccuracies in therepresentations and warranties of the other party contained in this Agreement orin any document delivered pursuant to this Agreement or (c) subject to theproviso of Section 8.10, waive compliance by the other parties with any of theagreements or conditions contained in this Agreement. Any agreement on the partof a party to any such extension or waiver will be valid only if set forth in aninstrument in writing signed on behalf of such party. The failure of any partyto this Agreement to assert any of its rights under this Agreement or otherwisewill not constitute a waiver of such rights. Section 8.12 Severability. If any term or other provision of thisAgreement is invalid, illegal or incapable of being enforced by any rule of lawor public policy, all other conditions and provisions of this Agreement willnevertheless remain in full force and effect. Upon such determination that anyterm or other provision is invalid, illegal or incapable of being enforced, theparties hereto shall negotiate in good faith to modify this Agreement so as toeffect the original intent of the parties as closely as possible to the fullestextent permitted by applicable law in an acceptable manner to the end that thetransactions contemplated hereby are fulfilled tothe extent possible. (SIGNATURES ARE ON THE FOLLOWING PAGE.) IN WITNESS WHEREOF, the parties hereto have caused this Agreement tobe signed by their respective officers thereunto duly authorized, all as of thedate first written above. THE MAY DEPARTMENT STORES COMPANY By: /s/ John L. Dunham —————————————– Name: John L. Dunham Title: President and Acting Chairman and Chief Executive Officer FEDERATED DEPARTMENT STORES, INC. By: /s/ Terry J. Lundgren ——————————————- Name: Terry J. Lundgren Title: Chairman of the Board, President and Chief Executive Officer MILAN ACQUISITION CORP. By: /s/ Dennis J. Broderick —————————————— Name: Dennis J. Broderick Title: Senior Vice President and Secretary EXHIBIT A FORM OF COMPANY AFFILIATE LETTER _____________ , 200_FEDERATED DEPARTMENT STORES, INC.7 West Seventh StreetCincinnati, Ohio 45202Ladies and Gentlemen: ***Pursuant to the terms of the Agreement and Plan of Merger, dated as ofFebruary 27, 2005 (the “MERGER AGREEMENT”), by and among THE MAY DEPARTMENTSTORES COMPANY, a Delaware corporation (the “COMPANY”), MILAN ACQUISITION CORP.,a Delaware corporation (“MERGER SUB”), and FEDERATED DEPARTMENT STORES, INC., aDelaware corporation (“PARENT”), the Company will merge with and into Merger Sub(the “MERGER”), with Merger Sub as the surviving corporation. As a result of theMerger, the undersigned may receive shares of common stock, par value $0.01 pershare, of Parent (“PARENT COMMON STOCK”) in exchange for shares owned by theundersigned of common stock, par value $0.50 per share, of the Company (the”COMPANY COMMON STOCK”). The undersigned has been advised that the undersigned may be deemed an”AFFILIATE” of the Company, as such the term is defined for purposes ofparagraphs (c) and (d) of Rule 145 (“RULE 145”) promulgated under the SecuritiesAct of 1933 (the “SECURITIES ACT”) by the Securities and Exchange Commission(the “SEC”). However, it is understood and agreed that the execution anddelivery of this letter agreement by the undersigned shall not be deemed anadmission that the undersigned is an “affiliate” of the Company or as a waiverof any rights the undersigned may have to object to any claim that theundersigned is such an affiliate on or after the date of this letter. If in factthe undersigned is an affiliate of the Company under the Securities Act, theundersigned’s ability to sell, assign or transfer Parent Common Stock receivedby the undersigned in exchange for any shares of the Company Common Stock inconnection with the Merger may be restricted unless such transaction isregistered under the Securities Act or an exemption from such registration isavailable. The undersigned understands that such exemptions are limited and theundersigned has obtained or will obtain advice of counsel as to the nature andconditions of such exemptions, including information with respect to theapplicability to the sale of such securities of Rules 144 and 145(d) promulgatedunder the Securities Act. The undersigned understands that Parent is under noobligation to register the sale, assignment, transfer or other disposition ofParent Common Stock to be received by the undersigned in the Merger or to takeany other action necessary in order to make compliance with an exemption fromsuch registration available. The undersigned hereby represents to and covenants with Parent that theundersigned will not sell, assign, transfer or otherwise dispose of any ParentCommon Stock received by the undersigned in exchange for shares of the CompanyCommon Stock in connection with the Merger except (i) pursuant to an effectiveregistration statement under the Securities Act, (ii) in conformity with thevolume and other limitations of Rule 145 promulgated under the Securities Act or(iii) in a transaction which, in the opinion of counsel, or as described in a”no-action” or interpretive letter from the Staff of the SEC specifically issuedwith respect to a transaction to be engaged in by the undersigned, is notrequired to be registered under the Securities Act. In the event of a sale or other disposition by the undersigned of theshares of Parent Common Stock pursuant to Rule 145, the undersigned will supplyParent with evidence of compliance with such Rule, in the form of a letter inthe form of Annex I hereto or the opinion of counsel or no-action letterreferred to above. The undersigned understands that Parent may instruct itstransfer agent to withhold the transfer of any shares of Parent Common Stockdisposed of by the undersigned, but that (provided such transfer is notprohibited by any other provision of this letter agreement) upon receipt of suchevidence of compliance, the transfer agent shall effectuate the transfer of suchshares indicated as sold, transferred or otherwise disposed of in such letter. The undersigned acknowledges that (i) the undersigned has carefully readthis letter and understands the requirements hereof and the limitations imposedupon the sale, assignment, transfer or other disposition of Parent Common Stockand (ii) the receipt by Parent of this letter is an inducement to Parent’sobligations to consummate the Merger. Very truly yours, ________________________________ [Name]Agreed to and acceptedFEDERATED DEPARTMENT STORES, INC.By: ___________________________________ Name: Title: -2- Annex I _____________ , 200_FEDERATED DEPARTMENT STORES, INC.7 West Seventh StreetCincinnati, Ohio 45202Ladies and Gentlemen:On ____________, the undersigned sold ___________ shares of common stock(“Common Stock”) of FEDERATED DEPARTMENT STORES, INC., a Delaware corporation(the “Company”), received by it in connection with the merger of THE MAYDEPARTMENT STORES COMPANY, a Delaware corporation, and MILAN ACQUISITION CORP.,a Delaware corporation and a wholly-owned subsidiary of the Company. The undersigned represents that the Common Stock has been sold inconformity with Rule 145 and the undersigned has complied with its covenants inthe affiliate letter between the Company and the undersigned dated ___________,200_. Based upon the most recent report or statement filed by the Company withthe Securities and Exchange Commission, the shares of Common Stock sold by theundersigned were within the prescribed limitations set forth in paragraph (e) ofRule 144 promulgated under the Securities Act of 1933 (the “Act”). The undersigned hereby represents that the above-described shares ofCommon Stock were sold in “brokers’ transactions” within the meaning of Section4(4) of the Act or in transactions directly with a “market maker” as the term isdefined in Section (3)(a)(38) of the Securities Exchange Act of 1934. Theundersigned further represents that it has not solicited or arranged for thesolicitation of orders to buy the above-described shares of Common Stock, andthat the undersigned has not made any payment in connection with the offer orsale of such shares to any person other than to the broker who executed theorder in respect of such sale. Very truly yours, ________________________________ [Name] A-1