AGREEMENT AND PLAN OF MERGER
Dated as of September 25, 1997
Among
THE WARNACO GROUP, INC.,
WAC ACQUISITION CORPORATION
and
DESIGNER HOLDINGS LTD.
TABLE OF CONTENTS
Page
ARTICLE I
The Merger . . . . . . . . . . . 2
SECTION 1.01 The Merger . . . . . . . . . . . . . . . . . 2
SECTION 1.02 Closing . . . . . . . . . . . . . . . . . . 2
SECTION 1.03 Effective Time of the Merger . . . . . . . . 2
SECTION 1.04 Effects of the Merger . . . . . . . . . . . 3
SECTION 1.05 Certificate of Incorporation; By-Laws . . . 3
SECTION 1.06 Directors . . . . . . . . . . . . . . . . . 3
SECTION 1.07 Officers . . . . . . . . . . . . . . . . . . 3
ARTICLE II
Effect of the Merger on the Capital Stock
of the Constituent Corporations . . . . . . . 3
SECTION 2.01 Effect on Capital Stock . . . . . . . . . . 3
SECTION 2.02 Stock Plans . . . . . . . . . . . . . . . . 4
SECTION 2.03 Exchange of Certificates . . . . . . . . . . 5
SECTION 2.04 Fractional Shares . . . . . . . . . . . . . 7
ARTICLE III
Representations and Warranties . . . . . 8
SECTION 3.01 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . 8
SECTION 3.02 Representations and Warranties of Parent
and Sub . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
Covenants Relating to Conduct
of Business Prior to Merger . . . . . . 29
SECTION 4.01 Conduct of Business of the Company . . . . . 29
SECTION 4.02 Conduct of Business of Parent . . . . . . . 32
ARTICLE V
Additional Agreements . . . . . . . . 33
SECTION 5.01 Preparation of Form S-4 and the Joint
Proxy Statement; Stockholder Meetings . . . 33
SECTION 5.02 Letter of the Company's Accountants . . . . 34
SECTION 5.03 Letter of Parent's Accountants . . . . . . . 35
SECTION 5.04 Access to Information; Confidentiality . . . 35
SECTION 5.05 Reasonable Best Efforts . . . . . . . . . . 36
SECTION 5.06 Benefit Plans . . . . . . . . . . . . . . . 36
SECTION 5.07 Indemnification . . . . . . . . . . . . . . 37
SECTION 5.08 Expenses . . . . . . . . . . . . . . . . . . 39
SECTION 5.09 Public Announcements . . . . . . . . . . . . 40
SECTION 5.10 Affiliates . . . . . . . . . . . . . . . . . 40
SECTION 5.11 Stock Exchange Listing . . . . . . . . . . . 40
SECTION 5.12 Certain Provisions . . . . . . . . . . . . . 41
SECTION 5.13 No Solicitation . . . . . . . . . . . . . . 41
SECTION 5.14 Board of Directors . . . . . . . . . . . . . 42
SECTION 5.15 Certain Agreements . . . . . . . . . . . . . 43
SECTION 5.16 Stop Transfer . . . . . . . . . . . . . . . 43
SECTION 5.17 Officer's Certificate . . . . . . . . . . . 43
SECTION 5.18 Parent to Vote in Favor of Merger . . . . . 43
SECTION 5.19 Anti-Dilution . . . . . . . . . . . . . . . 44
ARTICLE VI
Conditions Precedent . . . . . . . . 44
SECTION 6.01 Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . 44
SECTION 6.02 Conditions to Obligations of Parent and
Sub . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.03 Conditions to Obligation of the Company . . 46
ARTICLE VII
Termination, Amendment and Waiver . . . . . 47
SECTION 7.01 Termination . . . . . . . . . . . . . . . . 47
SECTION 7.02 Effect of Termination . . . . . . . . . . . 49
SECTION 7.03 Amendment . . . . . . . . . . . . . . . . . 49
SECTION 7.04 Extension; Waiver . . . . . . . . . . . . . 50
SECTION 7.05 Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . . 50
ARTICLE VIII
General Provisions . . . . . . . . . 50
SECTION 8.01 Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . . . 50
SECTION 8.02 Notices . . . . . . . . . . . . . . . . . . 50
SECTION 8.03 Definitions . . . . . . . . . . . . . . . . 51
SECTION 8.04 Interpretation . . . . . . . . . . . . . . . 51
SECTION 8.05 Counterparts . . . . . . . . . . . . . . . . 51
SECTION 8.06 Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . 51
SECTION 8.07 Governing Law . . . . . . . . . . . . . . . 51
SECTION 8.08 Assignment . . . . . . . . . . . . . . . . . 51
SECTION 8.09 Enforcement; Jurisdiction . . . . . . . . . 52
SECTION 8.10 Severability . . . . . . . . . . . . . . . . 52
EXHIBIT
Exhibit A Form of Company Affiliate Letter
AGREEMENT AND PLAN OF MERGER dated as of September
25, 1997 among THE WARNACO GROUP, INC., a Delaware
corporation ("Parent"), WAC ACQUISITION CORPORATION,
a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and DESIGNER HOLDINGS LTD., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of
Parent, Sub and the Company have determined that the merger of
Sub (or, at the election of Parent as set forth in Section
1.01, a direct wholly owned subsidiary of Parent other than
Sub) with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement,
would be fair to and in the best interests of their respective
stockholders, and such Boards of Directors have approved such
Merger, pursuant to which (a) each share of Common Stock, each
having a par value of one cent ($0.01) of the Company
("Company Common Stock") issued and outstanding immediately
prior to the Effective Time of the Merger (as defined in
Section 1.03) will be converted into the right to receive
shares of Class A Common Stock, par value $0.01 per share, of
Parent ("Parent Class A Common Stock"), other than shares of
Company Common Stock owned, directly or indirectly, by the
Company or any wholly owned subsidiary (as defined in Section
8.03) of the Company or held by the Company as treasury shares
or owned by Parent, Sub or any other subsidiary of Parent.
WHEREAS, the affirmative vote of a majority of the
outstanding shares of the Company Common Stock is required for
the approval and adoption of the Merger and this Merger
Agreement (the "Company Stockholder Approval");
WHEREAS, to the extent required in accordance with
applicable regulations of the New York Stock Exchange (the
"NYSE"), the issuance of shares of Parent Class A Common Stock
in connection with the transactions contemplated hereby
requires the affirmative vote of a majority of shares present
in person or represented by proxy and entitled to vote thereon
at a meeting of the holders of Parent Class A Common Stock;
WHEREAS, as a condition to their willingness to
enter into this Agreement, Parent and Sub have required that
New Rio, L.L.C. (the "Stockholder") and the members of
Stockholder signatory thereto (the "Members") (collectively,
the "Sellers") enter into, and the Sellers have agreed to
enter into, the Stock Exchange Agreement with Parent dated of
even date herewith (as amended from time to time in accordance
with its terms, the "Stock Exchange Agreement") relating to
the exchange by the Stockholder (the "Exchange") of all of the
outstanding shares of Company Common Stock owned by it (the
"Stockholder Shares"), which represent a majority of the
outstanding shares of Company Common Stock, in exchange for
shares of Parent Class A Common Stock on the terms set forth
in the Stock Exchange Agreement, and, in order to induce
Parent and Sub to enter into this Agreement, the Board of the
Directors of the Company has approved the entering into by
Parent, the Members and the Stockholder of the Stock Exchange
Agreement and the consummation of the transactions
contemplated thereby;
WHEREAS, Parent, Sub and the Company desire to make
certain representations, warranties, covenants and agreements
in connection with the Merger and also to prescribe various
conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is
intended that the Exchange and the Merger qualify as a
reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01 The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance
with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time
of the Merger. Upon the Effective Time of the Merger, the
separate existence of Sub shall cease, and the Company shall
continue as the surviving corporation (the "Surviving
Corporation"). At the election of Parent, any direct wholly
owned subsidiary of Parent other than Sub may be substituted for
Sub as a constituent corporation in the Merger, and, in the
event that Parent notifies the Company that it desires to
substitute such a subsidiary, the parties agree to amend this
Agreement so that such substituted subsidiary shall become a
signatory hereto as "Sub."
SECTION 1.02 Closing. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 7.01 and subject to the
satisfaction or waiver of the conditions set forth in Article
VI, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which date shall be no later than the second
business day after satisfaction of the conditions set forth in
Article VI, at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date,
time or place is agreed to in writing by the parties hereto.
SECTION 1.03 Effective Time of the Merger. Upon the
Closing, the parties shall file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the
State of Delaware and shall make all other filings or
recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger shall have
been duly filed with the Secretary of State of the State of
Delaware, or at such later time as is agreed by Parent and the
Company and specified in the Certificate of Merger (the time
the Merger becomes effective being the "Effective Time of the
Merger").
SECTION 1.04 Effects of the Merger. The Merger shall
have the effects set forth in Section 259 of the DGCL (or any
successor provision).
SECTION 1.05 Certificate of Incorporation; By-Laws.
(a) The certificate of incorporation of the Company, as in
effect immediately prior to the Effective Time of the Merger,
shall be the certificate of incorporation of the Surviving
Corporation, except that at the Effective Time of the Merger
such certificate of incorporation shall be amended as follows:
(i) Article Fourth shall be amended to read in its entirety as
follows: "The total number of shares of stock which the
Corporation shall have the authority to issue is 1,000 shares,
each having a par value of one cent ($0.01)"; (ii) paragraph (6)
of Article Fifth shall be deleted in its entirety; and (iii) the
second paragraph of Article Sixth shall be deleted in its
entirety.
(b) The By-laws of Sub as in effect at the
Effective Time of the Merger shall be the By-laws of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.06 Directors. The directors of Sub at the
Effective Time of the Merger shall be the directors of the
Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.07 Officers. The officers of Sub at the
Effective Time of the Merger shall be the officers of the
Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected
and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01 Effect on Capital Stock. As of the
Effective Time of the Merger, by virtue of the Merger and
without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Common Stock of Sub. Each share of common
stock, par value $0.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of the common stock
of the Surviving Corporation and shall constitute the only
issued and outstanding capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock. Each share of Company Common Stock that
is owned by the Company or held by the Company as treasury
shares or owned by any direct or indirect wholly owned
subsidiary of the Company, and each share of Company Common
Stock that is owned by Parent, Sub or any other direct or
indirect wholly owned subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no
Parent Class A Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as
otherwise provided herein, each issued and outstanding share
of Company Common Stock shall be converted into the right to
receive from Parent .324 of a fully paid and nonassessable
share of Parent Class A Common Stock (the "Exchange Ratio");
provided, however, that, in any event, if between the date of
this Agreement and the Effective Time of the Merger the
outstanding shares of Parent Class A Common Stock shall have
been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(d) Treatment of Trust Preferred Securities;
Convertible Debentures. Prior to or concurrently with the
Closing, Parent and the Company shall take such steps as are
necessary to ensure the resignation of Xxxxxx X. Xxxxx and
Xxxxxx X. Xxxxxxx as Trustees of Designer Finance Trust. In
addition, Parent and the Company shall take such actions as
may be necessary to ensure compliance by the Company and
Parent with Section 1304 of the Indenture dated as of November
1, 1996 (the "Indenture"), relating to $123,711,350 of 6%
Convertible Debentures Due 2016 (the "Convertible
Debentures"), and shall take such steps as are necessary to
ensure that holders of the Convertible Debentures shall, after
the Effective Time of the Merger, have the right to convert
such securities into shares of Parent Class A Common Stock on
the terms and conditions set forth in the Indenture.
(e) Cancellation and Retirement of Company Common
Stock. From and after the Effective Time of the Merger, all
shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall no
longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time of
the Merger represented shares of Company Common Stock
("Company Share Certificate") shall cease to have any rights
with respect thereto, except the right to receive the
consideration to be issued to holders of Company Common Stock
in the Merger pursuant to Section 2.01(c) (the "Merger
Consideration"), any cash in lieu of fractional shares of
Parent Class A Common Stock to be paid in consideration
therefor upon surrender of such certificate in accordance with
Section 2.04 and any dividends payable pursuant to Section
2.03(f).
SECTION 2.02 Stock Plans. As soon as practicable
following the date of this Agreement, but in any event prior to
the consummation of the Exchange, the Board of Directors of the
Company (or, if appropriate, any committee administering the
Stock Plans (as defined below)) shall adopt such resolutions or
take such other actions as may be required to effect the
following (it being understood that if the following is not
permitted pursuant to the terms of the Stock Plans, the Company
shall use its reasonable best efforts to obtain any consents or
take any other action necessary in order to effect the
following):
(a) The Company shall adjust the terms of all
outstanding employee or director stock options to purchase
shares of Company Common Stock ("Company Stock Options")
granted under any stock option or stock purchase plan, program
or arrangement of the Company, including the Designer Holdings
Ltd. 1996 Stock Option and Incentive Plan and the 1996 Outside
Director Stock Option Plan (collectively, the "Stock Plans"),
whether or not then exercisable, to provide that, at the
Effective Time of the Merger, each Company Stock Option
outstanding immediately prior to the Effective Time of the
Merger shall be cancelled to the extent that the exercise
price of such Company Stock Option equals or exceeds $11 per
share. With respect to any Company Stock Option not
cancelled pursuant to the preceding sentence, such Company
Stock Option shall be deemed to constitute an option (each, a
"Parent Stock Option") to acquire, on the same terms and
conditions as were applicable under such Company Stock Option,
the number of shares of Parent Class A Common Stock equal to
the product of (1) the number of shares of Company Common
Stock issuable upon exercise of such Company Stock Option and
(2) the Exchange Ratio, at a price per share equal to (1) the
aggregate exercise price for the shares of Company Common
Stock otherwise purchasable pursuant to such Company Stock
Option divided by (2) the number of shares of Parent Class A
Common Stock issuable per share of Company Common Stock upon
exercise of such Company Stock Option as set forth above;
provided, however, that, after aggregating all the shares of a
holder subject to Company Stock Options, any fractional share
of Parent Class A Common Stock resulting from such calculation
for such holder shall be rounded down to the nearest whole
share; and provided, further, that in the case of any Company
Stock Option to which Sections 422 and 423 of the Code applies
by reason of its qualification under any of Sections 422-424
of the Code ("qualified stock options"), Parent and the
Company shall use their reasonable best efforts to cause the
option price, the number of shares purchasable pursuant to
such option, the terms and conditions of exercise of such
option and such other terms and conditions of such option to
be determined in order to comply with Section 424(a) of the
Code; and
(b) Except as provided herein or as otherwise
agreed to by the parties, the Stock Plans and any other plan,
program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective
Time of the Merger. After the Merger, each Parent Stock
Option shall be exercisable upon the same terms and conditions
(including conditions relating to vesting and exercisability)
as were applicable to the Company Stock Options immediately
prior to the Merger and the Company shall use its reasonable
best efforts to ensure that following the Effective Time of
the Merger no holder of a Company Stock Option nor any
participant in any Stock Plan shall have any right thereunder
to acquire equity securities of the Company or the Surviving
Corporation.
SECTION 2.03 Exchange of Certificates. (a) Prior to
the Effective Time of the Merger, Parent shall appoint an agent
(the "Exchange Agent") for the purpose of exchanging Company
Share Certificates for the Merger Consideration. Immediately
following the Effective Time of the Merger, Parent shall deposit
with the Exchange Agent, for the benefit of the holders of
Company Share Certificates, certificates representing the Parent
Common Stock issuable pursuant to Section 2.01 in exchange for
Company Share Certificates. Promptly after the Effective Time of
the Merger Parent will send, or will cause the Exchange Agent to
send, to each holder of Company Share Certificates at the
Effective Time of the Merger (i) a letter of transmittal for use
in such exchange which shall specify that delivery of the Merger
Consideration shall be effected, and risk of loss and title to
the certificates representing Parent Class A Common Stock and
Company Share Certificates shall pass, only upon proper delivery
of the Company Share Certificates to the Exchange Agent and (ii)
instructions for use in effecting the surrender of such Company
Share Certificates in exchange for the certificates representing
Parent Class A Common Stock.
(b) Each holder of Company Share Certificates that
have been converted into a right to receive the Merger
Consideration, upon surrender to the Exchange Agent of such
Company Share Certificates, together with a properly completed
letter of transmittal covering such Company Share
Certificates, will be entitled to receive the Merger
Consideration payable in respect of such Company Share
Certificates and any dividends payable pursuant to Section
2.03(f). Until so surrendered, each such Company Share
Certificate shall, after the Effective Time, represent for all
purposes only the right to receive the Merger Consideration,
any cash payable in lieu of fractional shares pursuant to
Section 2.04 and any dividends payable pursuant to Section
2.03(f).
(c) If any portion of the Merger Consideration is
to be paid to a person other than the registered holder of a
Company Share Certificate, it shall be a condition to such
payment that such Company Share Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required by
reason of the issuance of shares of Parent Class A Common
Stock in exchange for the Company Share Certificate so
surrendered or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(d) After the Effective Time, there shall be no
further registration of transfers of shares of Company Common
Stock. If, after the Effective Time, Company Share
Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth,
in this Article II.
(e) Any portion of the Merger Consideration made
available to the Exchange Agent pursuant to Section 2.03(a)
that remains unclaimed by the holders of Company Share
Certificates six months after the Effective Time of the Merger
shall be returned to Parent, upon demand, and any such holder
who has not exchanged his Company Share Certificates for the
Merger Consideration in accordance with this Section 2.03
prior to that time shall thereafter look only to Parent for
payment of the Merger Consideration, any cash payable in lieu
of fractional shares pursuant to Section 2.04 and any
dividends payable pursuant to Section 2.03(f) in respect of
his shares. Notwithstanding the foregoing, Parent shall not
be liable to any holder of Company Share Certificates for any
amount paid to a public official pursuant to applicable
abandoned property laws. Any amounts remaining unclaimed by
holders of Company Share Certificates seven years after the
Effective Time of the Merger (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to
or become property of any governmental entity) shall, to the
extent permitted by applicable law, become the property of
Parent free and clear of any claims or interest of any person
previously entitled thereto.
(f) No dividends or other distributions with
respect to Parent Class A Common Stock issued in the Merger
shall be paid to the holder of any unsurrendered Company Share
Certificates until such certificates are surrendered as
provided in this Section 2.03. Subject to the effect of
applicable laws, following the surrender of such certificates,
there shall be paid, without interest, to the record holder of
the Parent Class A Common Stock issued in exchange therefor at
the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time of
the Merger payable prior to or on the date of such surrender
with respect to such whole shares of Parent Class A Common
Stock and not previously paid, less the amount of any
withholding taxes (if any) which may be required thereon.
SECTION 2.04 Fractional Shares. (a) No fractional
shares of Parent Class A Common Stock shall be issued in the
Merger, but in lieu thereof each holder of Company Share
Certificates otherwise entitled to a fractional share of Parent
Class A Common Stock will be entitled to receive, from the
Exchange Agent in accordance with the provisions of this Section
2.04, a cash payment in lieu of such fractional shares of Parent
Class A Common Stock representing such holder's proportionate
interest, if any, in the net proceeds from the sale by the
Exchange Agent in one or more transactions of (i) the number of
shares of Parent Class A Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 2.03(a) over (ii) the
aggregate number of whole shares of Parent Class A Common Stock
to be distributed to the holders of the Company Share
Certificates pursuant to Section 2.03(b) (such excess being
herein called the "Excess Shares"). As soon as practicable after
the Effective Time of the Merger, the Exchange Agent, as agent
for the holders of the Company Share Certificates, shall sell
the Excess Shares at then prevailing prices on the NYSE all in
the manner provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange
Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the
extent practicable. The proceeds from such sale or sales
available for distribution to the holders of Company Share
Certificates shall be reduced by the compensation payable to
the Exchange Agent and the expenses incurred by the Exchange
Agent, in each case, in connection with such sale or sales of
the Excess Shares, including all related commissions, transfer
taxes and other out-of-pocket transaction costs. Until the
net proceeds of such sale or sales have been distributed to
the holders of Company Share Certificates, the Exchange Agent
shall hold such net proceeds in trust for the holders of
Company Share Certificates (the "Common Shares Trust"). The
Exchange Agent shall determine the portion of the Common
Shares Trust to which each holder of Company Share
Certificates shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such holder
of Company Share Certificates would otherwise be entitled and
the denominator of which is the aggregate amount of fractional
share interests to which all holders of Company Share
Certificates would otherwise be entitled.
(c) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of
Company Share Certificates in lieu of any fractional shares of
Parent Class A Common Stock, the Exchange Agent shall pay such
amounts without interest to such holders of Company Share
Certificates who have surrendered their Company Share
Certificates to the Exchange Agent.
ARTICLE III
Representations and Warranties
SECTION 3.01 Representations and Warranties of the
Company. The Company represents and warrants to Parent and Sub
as follows:
(a) Organization, Standing and Corporate Power.
Each of the Company and each of its Subsidiaries (as defined
in Section 3.01(b)) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it
is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted.
Each of the Company and each of its Subsidiaries is duly
qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) could not be reasonably
expected to have a material adverse effect (as defined in
Section 8.03) with respect to the Company. Attached as
Section 3.01(a) of the disclosure schedule ("Disclosure
Schedule") delivered to Parent by the Company at the time of
execution of this Agreement are complete and correct copies of
the Certificate of Incorporation and By-laws of the Company.
The Company has delivered to Parent complete and correct
copies of the articles of organization (or other
organizational documents) and by-laws of each of its
Subsidiaries, in each case as amended to the date of this
Agreement, as well as correct and complete copies of all
minutes of meetings of the Board of Directors and committees
thereof of the Company since March 1995.
(b) Subsidiaries. The only direct or indirect
subsidiaries of the Company (other than subsidiaries of the
Company that would not constitute in the aggregate a
"Significant Subsidiary" within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the
"SEC")) are those listed in Section 3.01(b) of the Disclosure
Schedule (the "Subsidiaries"). All the outstanding shares of
capital stock of each such Subsidiary have been validly issued
and are fully paid and nonassessable and are owned (of record
and beneficially) by the Company, by another Subsidiary
(wholly owned) of the Company or by the Company and another
such Subsidiary (wholly owned), free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"). Except
for the ownership interests set forth in Section 3.01(b) of
the Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest, and
does not have any option or similar right to acquire any
assets or equity or other ownership interest, in any
corporation, partnership, business association, joint venture
or other entity.
(c) Capital Structure. As of September 22, 1997,
the authorized capital stock of the Company consists of (i)
75,000,000 shares of Company Common Stock, (ii) 1,300,000
shares of Non-Voting Common Stock, each having a par value of
one cent ($0.01) ("Non-Voting Common Stock"), and (iii)
15,000,000 shares of preferred stock, each having a par value
of one cent ($0.01) ("Preferred Stock"). As of the close of
business on September 22, 1997, there were (i) 32,139,334
shares of Company Common Stock, 0 shares of Non-Voting Common
Stock and 0 shares of Preferred Stock issued and outstanding;
(ii) 20,000 shares of Company Common Stock held in the
treasury of the Company; (iii) 784,734 shares of Company
Common Stock reserved for issuance upon exercise of authorized
but unissued Company Stock Options pursuant to the Stock
Plans; (iv) 5,102,400 shares of Company Common Stock reserved
for issuance upon the conversion of the Convertible
Debentures; and (v) 1,662,966 shares of Company Common Stock
issuable upon exercise of outstanding Company Stock Options.
Schedule 3.01(c) sets forth the name of each holder of
outstanding options to acquire shares of Company Common Stock,
the number of options held and the exercise prices of such
options. Except as set forth above, no shares of capital
stock or other equity securities of the Company are issued,
reserved for issuance or outstanding. All outstanding shares
of capital stock of the Company are, and all shares which may
be issued pursuant to the Stock Plans will be, when issued,
duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Other than the
Convertible Debentures and the Company Stock Options, there
are no outstanding bonds, debentures, notes or other
indebtedness or other securities of the Company having the
right to vote (or convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any
matters on which stockholders of the Company may vote. Except
as set forth above, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company
or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity or
voting securities of the Company or of any of its subsidiaries
or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. As of September 22, 1997, the only outstanding
indebtedness for borrowed money of the Company and its
subsidiaries is set forth on Schedule 3.01(c). Other than the
Convertible Debentures and the Company Stock Options, (i)
there are no outstanding contractual obligations, commitments,
understandings or arrangements of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire or
make any payment in respect of any shares of capital stock of
the Company or any of its subsidiaries and (ii) to the
knowledge of the Company, there are no irrevocable proxies
with respect to shares of capital stock of the Company or any
subsidiary of the Company. Except (i) as set forth above,
(ii) for the Registration Rights Agreement, dated as of May 9,
1996, among the Company, the Stockholder and Xxxxxx Xxxxx,
Inc., the registration obligations under which will expire
upon the issuance to Xxxxxx Xxxxx, Inc. of shares of Parent
Class A Common Stock in the Merger, and (iii) Sections 11.2
and 11.3 of the Third Amended and Restated Limited Liability
Company Agreement of New Rio, L.L.C., dated as of May 9, 1996,
the registration obligations under which will expire upon the
issuance to the Stockholder of shares of Parent Class A Common
Stock in the Exchange, there are no agreements or arrangements
pursuant to which the Company is or could be required to
register shares of Company Common Stock or other securities
under the Securities Act of 1933, as amended (the "Securities
Act"), or other agreements or arrangements with or among any
securityholders of the Company with respect to securities of
the Company.
(d) Authority; Noncontravention. The Company has
the requisite corporate and other power and authority to enter
into this Agreement and, subject to the Company Stockholder
Approval with respect to the consummation of the Merger, to
consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the Company Stockholder
Approval. This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance
with its terms. Except as disclosed in Section 3.01(d) of the
Disclosure Schedule, the execution and delivery of this
Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the
provisions hereof will not, conflict with, or result in any
breach or violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right
with respect to any obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any of its
subsidiaries under, (i) the Certificate of Incorporation or
By-laws of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) any
loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award
applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches,
violations, defaults, rights, losses or Liens that
individually or in the aggregate could not be reasonably
expected to have a material adverse effect with respect to the
Company or could not reasonably be expected to prevent or
materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Federal, state
or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic
or foreign (a "Governmental Entity"), is required by or with
respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the
transactions contemplated hereby or thereby, except, with
respect to this Agreement, for (i) the filing of a premerger
notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing with the SEC of (y) a
proxy statement relating to the Company Stockholder Approval
(such proxy statement as amended or supplemented from time to
time, together with the proxy statement, if necessary, for the
Parent Stockholder Approval, if necessary (as defined in
Section 3.02(j)), the "Joint Proxy Statement"), and (z) such
reports under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, the filing of
a certificate of merger with the appropriate authorities in
the necessary jurisdictions in the event Parent makes an
election referred to in Section 1.01, and appropriate
documents with the relevant authorities of other states in
which the Company is qualified to do business and (iv) such
other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices as are set
forth in Section 3.01(d) of the Disclosure Schedule.
(e) SEC Documents; Undisclosed Liabilities. The
Company has filed all material required reports, schedules,
forms, statements and other documents with the SEC since May
9, 1996, and the Company has delivered or made available to
Parent all reports, schedules, forms, statements and other
documents filed by the Company with the SEC since such date
(collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference
therein, the "SEC Documents"). As of their respective dates,
the SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents (including any and all financial
statements included therein) as of such dates contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Except to the extent set forth in Section 3.01(e) of the
Disclosure Schedule and except to the extent revised or
superseded by a subsequent filing with the SEC (a copy of
which has been provided to Parent prior to the date of this
Agreement), none of the SEC Documents filed by the Company
since January 1, 1997 and prior to the date of this Agreement
(the "Recent SEC Documents") contains any untrue statement of
a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements of the Company included in all SEC Documents filed
since January 1, 1997 (the "SEC Financial Statements") comply
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the
case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments). Except as
set forth in Schedule 3.01(e), at the date of the most recent
audited financial statements of the Company included in the
Recent SEC Documents, neither the Company nor any of its
subsidiaries had, and since such date neither the Company nor
any of such subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect with respect to the Company. To the best of
the Company's knowledge, (i) all historical financial
statements supplied to Parent by the Company for periods
subsequent to June 30, 1997 have been prepared in accordance
with generally accepted accounting principles (except as
permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods
then ended (subject to normal year-end adjustments) and (ii)
all financial data so supplied for such periods is true and
accurate in all material respects.
(f) Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the registration statement
on Form S-4 to be filed with the SEC by Parent in connection
with the issuance of Parent Class A Common Stock in the Merger
(the "Form S-4") will, at the time the Form S-4 is filed with
the SEC, and at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
(ii) the Joint Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the
Company Stockholder Meeting (as defined in Section 5.01(b)),
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
The Joint Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder, except
that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on
information supplied by Parent or Sub for inclusion or
incorporation by reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except
as disclosed in Section 3.01(g) of the Disclosure Schedule or
in the case of clause (ii), except as included in the Recent
SEC Documents, since the date of the most recent audited
financial statements included in the Recent SEC Documents (or,
in the case of clauses (i) and (iii), since June 30, 1997),
the Company has conducted its business in all material
respects only in the ordinary course consistent with past
practice, and there is not and has not been: (i) any material
adverse change with respect to the Company (except for changes
generally applicable to the economy in general and the
specific industry in which the Company operates); (ii) any
condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect or give rise to a material adverse change with
respect to the Company (except for changes generally
applicable to the economy in general and the specific industry
in which the Company operates); (iii) any event which, if it
had taken place following the execution of this Agreement,
would not have been permitted by Section 4.01 without the
prior consent of Parent; or (iv) any condition, event or
occurrence which could reasonably be expected to prevent or
materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
(h) Litigation; Labor Matters; Compliance with Laws.
(i) Schedule 3.01(h) of the Disclosure Schedule set forth, as of
the date of this Agreement, all suits, actions, counterclaims,
proceedings or governmental or internal investigations pending
or, to the knowledge of the Company, threatened in writing
against or affecting the Company or any of its subsidiaries
other than those which could not reasonably be expected to
result in liability to the Company in excess of $150,000 in the
aggregate. None of such suits, actions, counterclaims,
proceedings or investigations (and no other suits, actions,
counterclaims, proceedings or investigations), individually or
in the aggregate, could reasonably be expected to have a
material adverse effect with respect to the Company or prevent
or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement or exploit all of
the Company's licensed and other intellectual property rights;
in addition, there is not any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries having, or which,
insofar as reasonably could be foreseen by the Company, in the
future could have, any such effect.
(ii) Except as disclosed in Section 3.01(h)(ii)
of the Disclosure Schedule, neither the Company nor any of
its subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor
is it or any of its subsidiaries the subject of any
proceeding asserting that it or any subsidiary has
committed an unfair labor practice or seeking to compel it
to bargain with any labor organization as to wages or
conditions of employment nor is there any strike, work
stoppage or other labor dispute involving it or any of its
subsidiaries pending or, to its knowledge, threatened, any
of which could reasonably be expected to have a material
adverse effect with respect to the Company.
(iii) The conduct of the business of each of the
Company and each of its subsidiaries and, to the knowledge
of the Company, its contractors complies with all statutes,
laws, regulations, ordinances, rules, judgments, orders,
decrees or arbitration awards applicable thereto, including
the Foreign Corrupt Practices Act, except for violations or
failures so to comply, if any, that, individually or in the
aggregate, could not reasonably be expected to have a
material adverse effect with respect to the Company.
(i) Absence of Changes in Employee Benefit Plans.
Except as set forth on Schedule 3.01(i), since January 1,
1997, there has not been any adoption or amendment by the
Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or
understanding (whether formal or informal, oral or written)
under which the Company or any of its subsidiaries currently
has an obligation to provide benefits to any current or former
employee, officer or director of the Company or any of its
subsidiaries (collectively, "Employee Benefit Plans"). Except
as disclosed in Section 3.01(i) of the Disclosure Schedule,
there exist no written employment, consulting, severance,
change in control, termination or indemnification agreements
or any oral agreement regarding compensation, benefits and
other perquisites with respect to any employee expected to
earn in excess of $100,000 in total compensation in 1997,
between the Company or any of its subsidiaries and any current
or former employee, officer or director of the Company or any
of its subsidiaries ("Employment Arrangements").
(j) ERISA Plans. (i) Section 3.01(j) of the Disclosure
Schedule contains a list of all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred
to herein as "Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA, hereinafter a "Welfare
Plan"), stock option, stock purchase, deferred compensation
plans or arrangements, and other material employee fringe
benefit plans or arrangements with respect to which the Company
and its subsidiaries or any other person or entity that,
together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each, including the
Company, a "Commonly Controlled Entity") have any liability on
account of any present or former officers, employees, directors
or independent contractors of the Company (all the foregoing, in
addition to Employee Benefit Plans defined in Section 3.01(i),
collectively being herein called "Benefit Plans"). The Company
has made available to Parent true, complete and correct copies
of (1) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (2) the two most recent
annual reports on Form 5500 and attached schedules filed with
the Internal Revenue Service with respect to each Benefit Plan
(if any such report was required by applicable law), (3) the
most recent summary plan description for each Benefit Plan for
which such a summary plan description is required by applicable
law, (4) each trust agreement and material insurance or annuity
contract relating to any Benefit Plan, (5) the most recent
determination letter, if applicable, for any Benefit Plan and
(6) each written Employment Arrangement.
(ii) Except as disclosed in Section 3.01(j) of
the Disclosure Schedule, each Benefit Plan has been
established and administered in all material respects in
accordance with its terms. All the Benefit Plans are in
compliance in all material respects with the applicable
provisions of ERISA, the Code and other applicable laws,
rules and regulations. Except as disclosed in Section
3.01(j) of the Disclosure Schedule, all reports, returns
and similar documents with respect to the Benefit Plans
required to be filed with any governmental agency or
distributed to any Benefit Plan participant have been duly
and timely filed or distributed. Except as disclosed in
Section 3.01(j) of the Disclosure Schedule, the Company has
not received notice of any investigations by any
governmental agency, termination proceedings or other
claims (except claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any
rights or claims to benefits under any Benefit Plan that
could give rise to any material liability, and, to the best
of the Company's knowledge, there are not any facts that
could give rise to any material liability in the event of
any such investigation, claim, suit or proceeding. No event
has occurred and no condition exists that could reasonably
be expected to subject any Commonly Controlled Entity to
any material tax, fine or penalty imposed by ERISA, the
Code or other applicable laws, rules and regulations.
(iii) Except as disclosed in Section 3.01(j) of
the Disclosure Schedule, (1) all contributions to, and
payments from, the Benefit Plans that may have been
required to be made in accordance with the terms of the
Benefit Plans, any applicable collective bargaining
agreement and, when applicable, Section 302 of ERISA or
Section 412 of the Code, have been timely made.
(iv) Except as disclosed in Schedule 3.01(j),
each Company Benefit Plan intended to qualify under Section
401(a) of the Code has been the subject of a determination
letter from the Internal Revenue Service to the effect that
such Benefit Plan is qualified and exempt from Federal
income taxes under Sections 401(a) and 501(a),
respectively, of the Code or application therefor has been
timely made; no such determination letter has been revoked,
and, to the knowledge of the Company, revocation has not
been threatened nor is it expected.
(v) Schedule 3.01(j) discloses whether: (1) any
"prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred during the past
three years that involves the assets of any Benefit Plan
that could subject the Company, any of its employees or a
Company indemnified fiduciary under any Benefit Plan to a
material tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under
Title I of ERISA; or (2) any of the Company Benefit Plans
has been terminated.
(vi) Other than the ILGWU National Retirement
Fund, no Commonly Controlled Entity sponsors, maintains,
contributes to or has any liability in respect of any
"employee benefit plan" which is subject to Title IV of
ERISA, including any multiemployer plan, multiple employer
plan or single-employer plan.
(vii) No Commonly Controlled Entity has incurred
any material liability that remains unsatisfied to a
Pension Plan (other than for contributions not yet due) or
to the Pension Benefit Guaranty Corporation (other than for
the payment of premiums not yet due).
(viii) Except as disclosed in Schedule 3.01(j),
no Commonly Controlled Entity has incurred any "withdrawal
liability" (as defined in Section 4201 of ERISA), which
liability has not been fully paid as of the date hereof, or
has announced an intention to withdraw, but has not yet
completely withdrawn, from a "multiemployer plan"; and, to
the best of the Company's knowledge, no action has been
taken, and no circumstances exist, that alone or with the
passage of time could result in either a partial or
complete withdrawal from such a Multiemployer Plan by any
Commonly Controlled Entity.
(k) Certain Employee Payments. Except as disclosed
in Section 3.01(k) of the Disclosure Schedule, or as may be
necessary or appropriate to give effect to Section 2.02 no
Benefit Plan or Employment Arrangement provides for the
payment to any current or former director or employee of the
Company or any Commonly Controlled Entity of any money, other
property or rights, or accelerate other rights or benefits to
any such employee or director as a result of the transactions
contemplated by this Agreement, whether or not (i) such
payment, acceleration or provision would constitute a
"parachute payment" (within the meaning of Section 280G of the
Code), or (ii) some other subsequent action or event would be
required to cause such payment, acceleration or provision to
be triggered. Except as disclosed in Section 3.01(k) of the
Disclosure Schedule, no payment, acceleration or provision
referred to in the preceding sentence would constitute or give
rise to a "parachute payment" within the meaning of Section
280G of the Code.
(l) Tax Returns and Tax Payments. The Company and
each of its subsidiaries, and any consolidated, combined,
unitary or aggregate group for Tax purposes of which the
Company or any of its subsidiaries is or has been a member (a
"Consolidated Group") has timely filed all Tax Returns
required to be filed by it and has paid all Taxes shown
thereon to be due. The Company and its subsidiaries have made
adequate provision (to the extent required by, and in
accordance with generally accepted accounting principles
("GAAP")) for all Taxes payable for any periods that end
before the Effective Time of the Merger for which no Tax
Returns have yet been filed and for any periods that begin
before the Effective Time of the Merger and end after the
Effective Time of the Merger to the extent such Taxes are
attributable to the portion of any such period ending at the
Effective Time of the Merger, and the charges, accruals and
reserves for Taxes reflected in the financial statements of
the Company and its subsidiaries are adequate under GAAP to
cover the Tax liability accruing or payable by the Company and
its subsidiaries in respect of periods prior to the date
hereof. Except as set forth in Section 3.01(l) of the
Disclosure Schedule: (i) no material claim for unpaid Taxes
has become a lien against the property of the Company or any
of its subsidiaries or is being asserted against the Company
or any of its subsidiaries, (ii) no audit or other proceeding
with respect to any Taxes due from the Company or any of its
subsidiaries or any Tax Return of the Company or any of its
subsidiaries is pending, threatened, to the best of the
Company's knowledge, or being conducted by a Tax authority,
and (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by the Company nor
any of its subsidiaries and is currently in effect, (iv)
neither the Company or any of its subsidiaries (A) has been a
member of a Consolidated Group filing a consolidated federal
income Tax Return (other than a group the common parent of
which was the Company) or (B) has any liability for the Taxes
of any person (other than the Company and its subsidiaries),
including liability arising from the application of Treasury
Regulation section 1.1502-6 or any analogous provision of
state, local or foreign law, or as a transferee or successor,
by contract, or otherwise, (v) no consent under Section 341(f)
of the Code has been filed with respect to the Company or any
of its subsidiaries and (vi) all Taxes required to be
withheld, collected or deposited by or with respect to the
Company and each of its subsidiaries have been timely
withheld, collected or deposited, as the case may be, and, to
the extent required, have been paid to the relevant taxing
authority. As used herein, "Taxes" shall mean all taxes of
any kind, including those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority, domestic or
foreign. As used herein, "Tax Return" shall mean any return,
report or statement required to be filed with any governmental
authority with respect to Taxes.
(m) Section 203 of the DGCL Not Applicable. The
Board of Directors of the Company has, prior to the execution
hereof and prior to the execution of the Stock Exchange
Agreement, (i) approved the execution and delivery by the
Company of this Agreement, and the execution and delivery by
the parties thereto of the Stock Exchange Agreement and the
consummation of the Merger and the other transactions
contemplated by this Agreement and the Exchange and the other
transactions contemplated by the Stock Exchange Agreement, and
such approval and amendment are sufficient to render
inapplicable to this Agreement, the Merger, the Exchange, the
Stock Exchange Agreement and the other transactions
contemplated hereby and thereby, the restrictions of Section
203(a) of the DGCL. Other than Section 203 of the DGCL, (y)
no state takeover statute or similar statute or regulation of
the State of Delaware (and, to the knowledge of the Company
after due inquiry, of any other state or jurisdiction) applies
or purports to apply to this Agreement, the Merger, the
Exchange, the Stock Exchange Agreement or any of the other
transactions contemplated hereby or thereby and (z) no
provision of the certificate of incorporation, by-laws or
other governing instruments of the Company or any of its
subsidiaries or the terms of any rights plan or preferred
stock of the Company would, directly or indirectly, restrict
or impair the ability of Parent to vote, or otherwise to
exercise the rights of a stockholder with respect to,
securities of the Company and its subsidiaries that may be
acquired or controlled by Parent (including the Stockholder
Shares acquired pursuant to the Exchange) or permit any
stockholder to acquire securities of the Company or the
Surviving Corporation on a basis not available to Parent in
the event that Parent were to acquire securities of the
Company (including the Stockholder Shares acquired pursuant to
the Exchange).
(n) Environmental Matters. (i) Except as disclosed
in Section 3.01(n) of the Disclosure Schedule:
(A) The Company and its subsidiaries
including their predecessors (I)
are, and have been at all times
since their formation, in
compliance in all material
respects with all applicable
Environmental Laws; (II) hold
all material Environmental
Permits (each of which is in
full force and effect) required
for any of their current or
intended operations or for any
property owned, leased, or
otherwise operated by any of
them; (III) are, and have been,
in compliance in all material
respects with all of their
Environmental Permits; and (IV)
reasonably believe that: each
of their Environmental Permits
will be timely renewed and
complied with, without material
expense; any additional
Environmental Permits that may
be required of any of them will
be timely obtained and complied
with, without material expense;
and compliance with any
Environmental Law that is or is
expected to become applicable to
any of them will be timely
attained and maintained, without
material expense;
(B) None of the Company or its
subsidiaries has received any
Environmental Claim, and none of
the Company or its subsidiaries
is aware, after reasonable
inquiry, of any threatened
Environmental Claim or of any
circumstances, conditions or
events that could reasonably be
expected to give rise to an
Environmental Claim, against the
Company or any of its
subsidiaries, in each case that,
individually or in the
aggregate, could reasonably be
expected to have a material
adverse effect on the Company;
(C) None of the Company or its
subsidiaries has entered into or
agreed to any consent decree or
order under any Environmental
Law, and none of the Company or
its subsidiaries is subject to
any judgment, decree or order of
any governmental authority
relating to compliance with any
Environmental Law or to
investigation, cleanup,
remediation or removal of
regulated substances under any
Environmental Law;
(D) There are no (I) underground
storage tanks,
(II) polychlorinated biphenyls,
(III) asbestos or asbestos-
containing materials or (IV)
Hazardous Materials present at
any facility currently or
formerly owned, leased or
operated by the Company or any
of its subsidiaries that could
reasonably be expected to give
rise to material liability of
the Company or any of its
subsidiaries under any
Environmental Laws;
(E) There are no past (including
with respect to assets or
businesses formerly owned,
leased or operated by the
Company or any of its
subsidiaries) or present
actions, activities, events,
conditions or circumstances,
including the release,
threatened release, emission,
discharge, generation,
treatment, storage or disposal
of Hazardous Materials, that
could reasonably be expected to
give rise to material liability
of the Company or any of its
subsidiaries under any
Environmental Laws or any
contract or agreement; and
(F) None of the Company or its
subsidiaries has assumed or
retained, by contract or
operation of law, any material
liabilities of any kind, fixed
or contingent, under any
Environmental Law or with
respect to any Hazardous
Material or Environmental Claim.
(i) The items on Section 3.01(n) of the
Disclosure Schedule, individually and in the aggregate,
could not reasonably be expected to have a material adverse
effect with respect to the Company.
(ii) The Company has provided or made available
to Parent and Subsidiary true and complete copies of all
Environmental Reports in its possession or control.
(iii) For purposes of this Agreement, the
following terms shall have the following meanings:
"Environmental Claim" means any written notice,
claim, demand, action, suit, complaint, proceeding
or other communication by any person alleging
liability or potential liability (including
liability or potential liability for investigatory
costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating
to, based on or resulting from (i) the presence,
discharge, emission, release or threatened release
of any Hazardous Materials at any location, whether
or not owned, leased or operated by the Company or
any of its subsidiaries, or Parent or any of its
subsidiaries, as the case may be, or (ii) any
Environmental Law or Environmental Permit.
"Environmental Laws" means any and all laws,
rules, orders, regulations, statutes, ordinances,
guidelines, codes, decrees, or other legally
enforceable requirement (including common law) of
any foreign government, the United States, or any
state, local, municipal or other governmental
authority, regulating, relating to or imposing
liability or standards of conduct concerning
protection of the environment or of human health, or
employee health and safety, as has been, is now, or
may at any time hereafter be, in effect.
"Environmental Permits" means any and all
permits, licenses, approvals, registrations,
notifications, exemptions and any other
authorization required under any Environmental Law.
"Environmental Report" means any report, study,
assessment, audit, or other similar document that
addresses any issue of actual or potential
noncompliance with, or actual or potential liability
under or cost arising out of, any Environmental Law
that may in any way affect the Company.
"Hazardous Materials" means any gasoline or
petroleum (including crude oil or any fraction
thereof) or petroleum products, polychlorinated
biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any
other substances or forces of any kind, whether or
not any such substance or force is defined as
hazardous or toxic under any Environmental Law, that
is regulated pursuant to or could give rise to
liability under any Environmental Law.
(o) Material Contract Defaults; Non-Competes. (i) The
Company has provided or made available to Parent copies, and has
provided a true and correct list to Parent, of all material
contracts, agreements, commitments, arrangements, leases,
licenses, policies or other instruments to which it or any of
its subsidiaries is a party or by which it or any such
subsidiary is bound ("Material Contracts"). Neither the Company
nor any of its subsidiaries is, or has received any notice or
has any knowledge that any other party is, in default or unable
to perform in any respect under any such Material Contract,
including any license or agreement relating to intellectual
property, except for those defaults which could not reasonably
be expected, either individually or in the aggregate, to have a
material adverse effect with respect to the Company; and there
has not occurred any event that with the lapse of time or the
giving of notice or both would constitute such a material
default.
(ii) Except as disclosed in Schedule 3.01(o),
neither the Company nor any of its subsidiaries is a party
to any agreement that expressly limits the ability of the
Company or any of its subsidiaries to compete in or conduct
any line of business or compete with any person in any
geographic area or during any period of time.
(p) Brokers. No broker, investment banker,
financial advisor or other person other xxxx Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated is entitled to any
broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf
of the Company.
(q) Opinion of Financial Advisor. The Company has
received the opinion of Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated, dated the date of this Agreement, to the effect
that, as of the date thereof, the Exchange Ratio is fair, from
a financial point of view, to the holders of the Company
Common Stock (other than the Stockholder and its affiliates
and Parent and its affiliates).
(r) Board Recommendation. The Board of Directors
of the Company, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions
contemplated hereby, including the Merger, and the Stock
Exchange Agreement and the transactions contemplated thereby,
including the Exchange, taken together, are fair to and in the
best interests of the stockholders of the Company (other than
the Stockholder and its affiliates), and (ii) resolved to
recommend that the holders of the shares of Company Common
Stock approve this Agreement and the transactions contemplated
herein, including the Merger.
(s) Required Company Vote. The Company Stockholder
Approval, being the affirmative vote of a majority of the
outstanding shares of Company Common Stock, is the only vote
of the holders of any class or series of the Company's
securities necessary to approve the Merger Agreement, the
Merger and the other transactions contemplated hereby. There
is no vote of the holders of any class or series of the
Company's securities necessary to approve the Stock Exchange
Agreement or the transactions contemplated thereby.
(t) Properties. Except as disclosed in Schedule
3.01(t) hereto, each of the Company and its subsidiaries (i)
has good and marketable title to all the properties and assets
reflected in the latest audited balance sheet included in the
Recent SEC Documents as being owned by the Company or one of
its subsidiaries or acquired after the date thereof which are,
individually or in the aggregate, material to the Company's
business on a consolidated basis (except properties sold or
otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of (A) all Liens except
(1) statutory liens securing payments not yet due and (2) such
imperfections or irregularities of title, or other Liens
(other than real property mortgages or deeds of trust) as do
not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially
impair business operations at such properties, and (B) all
real property mortgages and deeds of trust and (ii) is the
lessee of all leasehold estates reflected in Schedule 3.01(t)
hereto or acquired after the date thereof which are material
to its business on a consolidated basis and is in possession
of the properties purported to be leased thereunder, and each
such lease is in full force and effect and is valid without
material default (and the lessee has not received any notice
of default, whether or not material) thereunder by the lessee
or, to the Company's knowledge, the lessor.
(u) Trademarks and Related Contracts. The Company
and each of its subsidiaries owns the trademarks (including
common law names and marks and federally registered names and
marks) set forth on Schedule 3.01(u) in the United States and
throughout the world, and owns and or is licensed to use (in
each case, clear of any Liens), all patents, trademarks, trade
names, copyrights, technology, know-how and processes used in
or necessary for the conduct of its business as currently
conducted which are material to the condition (financial and
other), business, or operations of the Company (including all
exclusive licensed rights in and to the names and trademarks
"Xxxxxx Xxxxx", "CK/Xxxxxx Xxxxx", "Xxxxxx Xxxxx Jeans",
"CK/Xxxxxx Xxxxx Jeans", "Xxxxxx Xxxxx Khakis" and "CK/Xxxxxx
Xxxxx Khakis" (and variations thereof) for, on and in
connection with certain men's and women's jeans and jeans-
related items, khakis and khaki-related items and boys' and
girls' jeans and jeans-related items in the United States, its
territories and possessions, Mexico, Canada, South America and
Central America (as more fully described in Schedule 3.01(u)
hereto) and any variations or derivatives thereof used by the
Company or its subsidiaries and its licensees, agents and
distributors). To the best knowledge of the Company, (i) the
use of such patents, trademarks, trade names, service marks,
copyrights, technology, know-how and processes by the Company
and its subsidiaries and authorized users does not infringe on
the rights of any person, subject to such claims and
infringements as do not, in the aggregate, give rise to any
liability on the part of the Company and its subsidiaries
which could have a material adverse effect with respect to
the Company and (ii) no person is infringing on any right of
the Company or any of its subsidiaries, licensees or
authorized users with respect to any such patents, trademarks,
service marks, trade names, copyrights, technology, know-how
or processes, except in each of cases (i) or (ii) as set forth
on Schedule 3.01(u). The Company and its subsidiaries, and,
to the best of the Company's knowledge, licensees or
authorized users are not in breach or violation in any
material respect of any agreement relating to the use of any
of the intellectual property identified in this provision, and
they have not received any notification written or oral from
any third party that there is any such violation, breach or
inability to perform under any such agreement. There are no
agreements, written or oral, except as set forth in Schedule
3.01(u), which in any material respect limit or otherwise
relate to any rights by the Company or its shareholders to use
any of its intellectual property.
(v) Transactions with Affiliates. Except as set
forth on Schedule 3.01(v) and in the SEC Documents, from
January 1, 1996 through the date of this Agreement, there has
been no transaction, agreement, arrangement or understanding,
or any related series thereof, between the Company or its
subsidiaries or contractors, on the one hand, and the
Company's affiliates (other than wholly-owned (excluding
directors' and nominee shares) subsidiaries of the Company),
on the other hand, in which the amount or value involved
exceeded $60,000. As used in the definition of "affiliate",
the term "control" means possession, directly or indirectly,
of the power to direct or cause the direction of the
management or policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
SECTION 3.02 Representations and Warranties of Parent
and Sub. Parent and Sub represent and warrant to the Company as
follows:
(a) Organization, Standing and Corporate Power.
Each of Parent, Sub and the other Parent Subsidiaries (as
defined in Section 3.02(b)) is duly organized, validly
existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now
being conducted. Each of Parent, Sub and the other Parent
Subsidiaries is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties
makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) could not
reasonably be expected to have a material adverse effect with
respect to Parent. Parent has delivered to the Company
complete and correct copies of its Restated Certificate of
Incorporation and By-laws and the certificate of incorporation
(or other organizational documents) and by-laws of Sub and the
Significant Subsidiaries of Parent as listed in Section
3.02(b) of the disclosure schedule (the "Parent Disclosure
Schedule") delivered to the Company by Parent at the time of
execution of this Agreement, in each case as amended to the
date of this Agreement.
(b) Subsidiaries. The only direct or indirect
subsidiaries of Parent (other than such subsidiaries that
would not constitute in the aggregate a Significant
Subsidiary) are listed in Section 3.02(b) of the Parent
Disclosure Schedule (together with Sub, the "Parent
Subsidiaries"). All the outstanding shares of capital stock
of each such Parent Subsidiary have been validly issued and
are fully paid and nonassessable and are owned (of record and
beneficially) by Parent, by another Parent Subsidiary (wholly
owned) or by Parent and another such Parent Subsidiary (wholly
owned), free and clear of all Liens. Except for the ownership
interests set forth in Section 3.02(b) of the Parent
Disclosure Schedule, Parent does not own, directly or
indirectly, any capital stock or other ownership interest, and
does not have any option or other right to acquire any assets
or equity or other ownership interest in any corporation,
partnership, business association, joint venture or other
entity.
(c) Capital Structure. The authorized capital
stock of Parent consists of (i) 130,000,000 shares of Parent
Class A Common Stock and (ii) 10,000,000 shares of preferred
stock, par value $0.01 per share ("Parent Preferred Stock").
As of the close of business on September 22, 1997, there are
(i) 52,097,548 shares of Parent Class A Common Stock and no
shares of Parent Preferred Stock issued and outstanding;
(ii) 739,363 shares of Parent Class A Common Stock held in the
treasury of Parent; and (iii) 8,441,164 shares of Parent Class
A Common Stock reserved for issuance pursuant to the Employee
Stock Plan, the 1993 Stock Plan for Non-Employee Directors,
and the Amended and Restated 1993 Stock Plan (the "Parent
Stock Plans"). Except as set forth above, no shares of
capital stock or other equity securities of Parent are issued,
reserved for issuance or outstanding. All outstanding shares
of capital stock of Parent are, and all shares which may be
issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no outstanding
bonds, debentures, notes or other indebtedness or other
securities of Parent having the right to vote (or convertible
into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of Parent may vote.
Except as set forth above, there are no outstanding
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
Parent or any of its subsidiaries is a party or by which any
of them is bound obligating Parent or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity or
voting securities of Parent or any of its subsidiaries or
obligating Parent or any of its subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking.
Other than pursuant to the Parent Stock Plans and the Citibank
Equity Options Stock Buyback Program, there are no outstanding
contractual obligations, commitments, understandings or
arrangements of Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of Parent or any of its
subsidiaries. The authorized capital stock of Sub consists of
100 shares of common stock, par value $0.01 per share, all of
which have been validly issued, are fully paid and
nonassessable and are owned by Parent, free and clear of any
Lien.
(d) Authority; Noncontravention. Parent and Sub
have all requisite corporate and other power and authority to
enter into this Agreement and, subject to the Parent
Stockholder Approval, to consummate the transactions
contemplated hereby and thereby. The execution and delivery
of this Agreement by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate
action on the part of Parent and Sub, subject to the Parent
Stockholder Approval. This Agreement has been duly executed
and delivered by each of Parent and Sub and constitutes a
valid and binding obligation of each of Parent and Sub,
enforceable against such party in accordance with its terms.
The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement
will not, conflict with, or result in any breach or violation
of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to
any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties
or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent or Sub or
the comparable charter or organizational documents of any
other subsidiary of Parent, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to Parent, Sub or any other subsidiary of Parent or
their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to
Parent, Sub or any other subsidiary of Parent or their
respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, breaches,
violations, defaults, rights, losses or Liens that
individually or in the aggregate could not reasonably be
expected to have a material adverse effect with respect to
Parent or could not reasonably be expected to prevent or
materially delay the ability of Parent to consummate the
transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Governmental
Entity is required by or with respect to Parent, Sub or any
other subsidiary of Parent in connection with the execution
and delivery of this Agreement by Parent or Sub or the
consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated hereby or thereby, except, with
respect to this Agreement, for (i) the filing of a premerger
notification and report form under the HSR Act, (ii) the
filing with the SEC of (y) the Joint Proxy Statement relating
to the Parent Stockholder Approval and the Form S-4 and (z)
such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State
of Delaware, the filing of a certificate of merger with the
appropriate authorities in the necessary jurisdictions in the
event Parent makes an election referred to in Section 1.01 and
the filing of appropriate documents with the relevant
authorities of other states in which the Company is qualified
to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings
or notices as may be required under the "takeover" or "blue
sky" laws of various states.
(e) SEC Documents; Undisclosed Liabilities. Parent
has filed all material required reports, schedules, forms,
statements and other documents with the SEC since January 1,
1996, and Parent has delivered or made available to the
Company all reports, schedules, forms, statements and other
documents filed with the SEC since such date (collectively,
and in each case including all exhibits and schedules thereto
and documents incorporated by reference therein, the "Parent
SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents (including any
and all consolidated financial statements included therein) as
of such date contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Except to the extent set forth in Section 3.02(e)
of the Parent Disclosure Schedule and except to the extent
revised or superseded by a subsequent filing with the SEC (a
copy of which has been provided to the Company prior to the
date of this Agreement), none of the Parent SEC Documents
filed by Parent since January 1, 1997 and prior to the date of
this Agreement (the "Recent Parent SEC Documents") contains
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in such
Recent Parent SEC Documents comply as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial
position of Parent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end
audit adjustments). Except as set forth in Schedule 3.02(e),
at the date of the most recent audited financial statements of
Parent included in the Recent Parent SEC Documents, neither
Parent nor any of its subsidiaries had, and since such date
neither Parent nor any of such subsidiaries has incurred, any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which, individually or in
the aggregate, could reasonably be expected to have a material
adverse effect with respect to Parent.
(f) Information Supplied. None of the information
supplied or to be supplied by Parent or Sub for inclusion or
incorporation by reference in (i) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, and (ii) the Joint Proxy Statement will, at
the date it is first mailed to Parent's stockholders or at the
time of the Parent Stockholder Meeting (as defined in Section
5.01(c)), if such meeting is being held, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they are made, not misleading. The Form S-4 will
comply as to form in all material respects with the
requirements of the Securities Act and the rules and
regulations promulgated thereunder, except that no
representation or warranty is made by Parent or Sub with
respect to statements made or incorporated by reference
therein based on information supplied by the Company for
inclusion or incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Except
as disclosed in Section 3.02(g) of the Disclosure Schedule or,
in the case of clause (ii), except as included in the Recent
Parent SEC Documents, since the date of the most recent
audited financial statements included in such Recent Parent
SEC Documents (or, in the case of clauses (i) and (iii), since
June 30, 1997), Parent has conducted its business in all
material respects only in the ordinary course consistent with
past practice, and there is not and has not been (i) any
material adverse change with respect to Parent (except for
changes generally applicable to the economy in general and the
specific industry in which Parent operates); (ii) any
condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a material
adverse effect or give rise to a material adverse change with
respect to Parent; (iii) any event which, if it had taken
place following the execution of this Agreement, would not
have been permitted by Section 4.02 without the prior consent
of the Company; or (iv) any condition, event or occurrence
which could reasonably be expected to prevent or materially
delay the ability of Parent to consummate the transactions
contemplated by this Agreement.
(h) Brokers. No broker, investment banker,
financial advisor or other person other than Lazard Freres &
Co. LLC is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent.
(i) Opinion of Financial Advisor. Parent has
received the opinion of Lazard Freres & Co. LLC, dated the
date of this Agreement, to the effect that the Exchange Ratio
in connection with the Exchange and the Merger, taken as a
whole, is fair, from a financial point of view, to Parent and
the holders of the Parent Class A Common Stock.
(j) Required Parent Stockholder Vote. The issuance
of shares in connection with the transactions contemplated
hereby would, to the extent required by the applicable
regulations of the NYSE, require the affirmative vote of the
holders of a majority of the shares of Parent Class A Common
Stock present in person or represented by proxy and entitled
to vote at the Parent Stockholder Meeting. The stockholder
action specified above is collectively referred to as the
"Parent Stockholder Approval."
(k) Interim Operations of Sub. Sub was formed on
September 18, 1997 solely for the purpose of engaging in the
transactions contemplated hereby and, in all material
respects, has engaged in no other business activities and has
conducted its operations only as contemplated hereby, except
that Sub is required in accordance with the terms of the
existing bank credit agreement of Warnaco Inc., a wholly owned
subsidiary of Parent, to guarantee Warnaco Inc.'s obligations
thereunder.
(l) Board Recommendation. The Board of Directors
of Parent, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions
contemplated hereby, including the issuance of shares of
Parent Class A Common Stock in the Merger and the Exchange,
are fair to and in the best interests of the stockholders of
Parent, and (ii) resolved to recommend that the holders of the
shares of Parent Class A Common Stock approve the issuance of
shares of Parent Class A Common Stock in connection with the
Merger and the reservation of such shares in accordance with
Section 2.01(e) and 2.02.
(m) Certain Employee Payments. No Benefit Plan or
Employment Arrangement provides for the payment to any current
or former director or employee of Parent of any money or other
property or rights or accelerates or provides any other rights
or benefits to any such employee or director as a result of
the transactions contemplated by this Agreement, whether or
not (i) such payment, acceleration or provision would
constitute a "parachute payment" (within the meaning of
Section 280G of the Code), or (ii) some other subsequent
action or event would be required to cause such payment,
acceleration or provision to be triggered.
(n) Tax Returns and Tax Payments. Parent and each
of its subsidiaries, and any consolidated, combined, unitary
or aggregate group for Tax purposes of which Parent or any of
its subsidiaries is or has been a member has timely filed all
Tax Returns required to be filed by it and has paid all Taxes
shown thereon to be due, except to the extent that any such
failure to file or pay could not reasonably be expected to
have a material adverse effect on Parent.
(o) Litigation, Compliance With Law. (i) There are
no suits, actions, counterclaims, proceedings or investigations
pending or, to the knowledge of Parent, threatened in writing
against Parent or any of its subsidiaries other than those
which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect with respect to
Parent.
(ii) The conduct of the business of each of
Parent and each of its subsidiaries and, to the knowledge
of Parent, its contractors complies with all statutes,
laws, regulations, ordinances, rules, judgments, orders,
decrees or arbitration awards applicable thereto, including
the Foreign Corrupt Practices Act, except for violations or
failures so to comply, if any, that, individually or in the
aggregate, could not reasonably be expected to have a
material adverse effect with respect to Parent.
(p) Material Contract Defaults. Neither Parent nor
any of its subsidiaries is, or has received any notice or has
any knowledge that any other party is, in default or unable to
perform in any respect under any of its Material Contracts,
including any license or agreement relating to intellectual
property, except for those defaults or inabilities to perform
which could not reasonably be expected, either individually or
in the aggregate, to have a material adverse effect with
respect to Parent.
(q) Assets. The assets, properties, rights and
contracts, including (as applicable), title or leaseholds
thereto, of Parent and its subsidiaries, taken as a whole, are
sufficient to permit Parent and its subsidiaries to conduct
their business as currently being conducted with only such
exceptions as could not be reasonably expected to have a
material adverse effect on Parent.
(r) Trademarks and Related Contracts. Parent and
each of its subsidiaries owns and/or is licensed to use (in
each case, clear of any Liens), all patents, trademarks, trade
names, copyrights, technology, know-how and processes used in
or necessary for the conduct of its business as currently
conducted which are material to the condition (financial and
other), business, or operations of the Company, except to the
extent any such failure could not reasonably be expected to
have a material adverse effect on Parent.
ARTICLE IV
Covenants Relating to Conduct of
Business Prior to Merger
SECTION 4.01 Conduct of Business of the Company. (a)
Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time of the Merger
(except as otherwise specifically required by the terms of this
Agreement), the Company shall, and shall cause its subsidiaries
to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past
practice and, to the extent consistent therewith, use its
reasonable best efforts to preserve intact their current
business organizations, keep available the services of their
current officers and employees and preserve their relationships
with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them to
the end that their goodwill and ongoing businesses shall be
materially unimpaired at the Effective Time of the Merger.
Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time of
the Merger, the Company shall not, and shall not permit any of
its subsidiaries to, without the prior written consent of Parent
(which consent will not be unreasonably withheld and shall be
deemed granted if not denied within 48 hours after written
notice to Parent):
(i) (x) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of
its capital stock, other than dividends and distributions
paid by Designer Preferred Trust on its 6% Convertible
Trust Originated Preferred Securities in accordance with
the terms of such securities, by a direct or indirect
wholly owned subsidiary of the Company to its parent, (y)
split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities;
(ii) authorize for issuance, issue, deliver,
sell, transfer, pledge or otherwise encumber any shares of
its capital stock or the capital stock of any of its
subsidiaries, any other voting securities or any securities
convertible into or exercisable or exchangeable for, or any
rights, warrants, calls, commitments or options to acquire,
any such shares, voting securities or convertible
securities or any other securities or equity equivalents
(including stock appreciation rights) (other than the
issuance of Company Common Stock upon the exercise of
options to purchase shares of Company Common Stock
outstanding on the date of this Agreement and in accordance
with their present terms);
(iii) amend its certificate of incorporation,
by-laws or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion
of the stock or assets of, or by any other manner, any
business or any corporation, partnership, joint venture,
association or other business organization or division
thereof;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any
of, close or shut down its properties or assets, other than
reasonable sales of inventory in the ordinary course of
business and assets having an aggregate value not in excess
of $250,000, except that the foregoing shall not preclude
the Company from entering into a sublease on commercially
reasonable terms with respect to its distribution centers
in North Arlington and Secaucus, New Jersey and the second
floor of 0000 Xxxxxxxx in New York City;
(vi) (x) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person,
issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any
of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of
another person or enter into any arrangement having the
economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of
business consistent with past practice, (y) amend the terms
of any outstanding security in a manner that would increase
its obligations thereunder or (z) make any loans, advances
or capital contributions to, or investments in, any other
person, other than to the Company or any direct or indirect
wholly owned subsidiary of the Company;
(vii) acquire or agree to acquire any assets
(other than inventory not in excess of 105% of the monthly
cumulative budget set forth on Schedule 4.01(vii)) the
value of which, individually or in the aggregate, exceeds
$250,000, or make or agree to make any capital expenditures
other than those set forth on Schedule 4.01(vii);
(viii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the
payment, discharge or satisfaction, (x) of liabilities or
obligations in the ordinary course of business consistent
with past practice, (y) liabilities reflected or reserved
against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of
the Company included in the Recent SEC Documents or (z)
other claims, liabilities or obligations in the aggregate
in an amount (or having a value in an amount) not in excess
of $1,000,000, or waive, release, grant, or transfer any
rights of value or modify or change any existing license,
lease, contract or other document in any manner that would
be material to the Company or enter into any new outlet
lease or license, or any other material lease, contract or
other document;
(ix) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing
such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization;
(x) enter into any new collective bargaining
agreement or any successor collective bargaining agreement
to any collective bargaining agreement or amend any
existing collective bargaining agreement disclosed in
Section 3.01(h)(ii) of the Disclosure Schedule;
(xi) change any accounting principle used by it,
except for such changes as may be required to be
implemented following the date of this Agreement pursuant
to generally accepted accounting principles or rules and
regulations of the SEC promulgated following the date
hereof;
(xii) settle or compromise any litigation
(whether or not commenced prior to the date of this
Agreement), other than litigation not in excess of amounts
reserved for in the most recent consolidated financial
statements of the Company included in the Recent SEC
Documents or, if not so reserved for, in an aggregate
amount not in excess of $250,000 (provided in either case
such settlement documents do not involve any material
non-monetary obligations on the part of the Company);
(xiii) close, shut down or otherwise eliminate
any of its facilities;
(xiv) enter into (or commit to enter into) any
new lease or amend or renew any existing lease or purchase
or acquire or enter into any agreement to purchase or
acquire any real estate or terminate any existing lease
other than leases for machinery or equipment requiring an
aggregate annual commitment not in excess of $100,000;
(xv) change any Tax election, change any annual
Tax accounting period, change any method of Tax accounting,
file any amended Tax return, enter into any closing
agreement relating to any material Tax, settle any material
Tax claim or assessment, surrender any right to claim a Tax
refund or consent to any extension or waiver of the
limitations period applicable to any Tax claim or
assessment, if such acts, either separately or in the
aggregate, would have the effect of materially increasing
the Tax liability of or materially reducing the Tax assets
of the Company or any of its subsidiaries or of Parent or
any of its subsidiaries;
(xvi) except as contemplated by Section 5.14,
change the composition, fill any vacancies or increase the
size of the Company's Board of Directors; or
(xvii) authorize any of, or commit or agree to
take any of, the foregoing actions.
(b) Changes in Employment Arrangements. Without
the written consent of Parent (which consent will not be
unreasonably withheld), neither the Company nor any of its
subsidiaries shall (except as may be required in order to give
effect to the requirements of Section 2.02) adopt or amend
(except as may be required by law) any bonus, profit sharing,
compensation, stock option (including by accelerating or
altering the vesting thereof) pension, retirement, deferred
compensation, severance, change-in-control, fringe benefits,
employment or other employee benefit plan, agreement, trust,
fund or other arrangement (including any Benefit Plan or
Employment Arrangement) for the benefit or welfare of any
employee, director or former director or employee, increase
the compensation, bonus or fringe benefits of any director,
employee or former director or employee or pay any benefit not
required by any existing plan, arrangement or agreement,
except that the Company will be permitted to (i) provide for
the payment of up to $3,500,000 to certain employees on terms
reasonably acceptable to Parent and (ii) grant merit increases
in salaries of employees (other than officers) at regularly
scheduled times in customary amounts consistent with past
practices.
(c) Severance. Neither the Company nor any of its
subsidiaries shall grant any new or modified severance or
termination arrangement or increase or accelerate any benefits
payable under its severance or termination pay policies in
effect on the date hereof.
(d) Transition. In order to facilitate an orderly
transition of the business of the Company to a wholly owned
subsidiary of Parent and to permit the coordination of their
related operations on a timely basis, the Company shall
consult with Parent on all strategic and material operational
matters. The Company shall make available to Parent at the
Company's facilities office space in order to assist it in
observing all operations and reviewing all matters concerning
the Company's affairs. Without in any way limiting the
provisions of Section 5.04, Parent, its subsidiaries,
officers, employees, counsel, financial advisors and other
representatives shall, upon reasonable notice to the Company,
be entitled to review the operations and visit the facilities
of the Company and its subsidiaries at all times as may be
deemed reasonably necessary by Parent in order to accomplish
the foregoing arrangement.
SECTION 4.02 Conduct of Business of Parent. (a) During
the period from the date of this Agreement to the Effective Time
of the Merger (except as otherwise specifically required by the
terms of this Agreement), Parent shall, to the extent consistent
with Parent's reasonable commercial judgment and to the extent
material, use its reasonable best efforts to preserve intact its
and its subsidiaries' current business organizations, keep
available the services of their current officers and employees
and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others
having business dealings with them to the end that their
goodwill and ongoing businesses shall be materially unimpaired
at the Effective Time of the Merger.
(b) Without limiting the generality of the
foregoing, during the period from the date of this Agreement
to the Effective Time of the Merger, Parent shall not, without
the prior written consent of the Company (which consent will
not be unreasonably withheld and shall be deemed granted if
not denied within 48 hours after written notice to the
Company), adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or
a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization.
ARTICLE V
Additional Agreements
SECTION 5.01 Preparation of Form S-4 and the Joint
Proxy Statement; Stockholder Meetings. (a) Promptly following
the execution of this Agreement, the Company and Parent shall
prepare and file with the SEC the Joint Proxy Statement, and
Parent shall prepare and file with the SEC the Form S-4, in
which the Joint Proxy Statement will be included as a
prospectus. Each of the Company and Parent shall use its
reasonable best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such
filing. The Company will use its reasonable best efforts to
cause the Joint Proxy Statement to be mailed to the Company's
stockholders, and Parent will use its reasonable best efforts to
cause the Joint Proxy Statement to be mailed to Parent's
stockholders, in each case as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. The
information provided and to be provided by Parent, Sub and the
Company, respectively, for use in the Form S-4 shall, at the
time the Form S-4 becomes effective and on the dates of each of
the Company Stockholder Meeting and the Parent Stockholder
Meeting, be true and correct in all material respects and shall
not omit to state any material fact required to be stated
therein or necessary in order to make such information not
misleading, and the Company, Parent and Sub each agree to
correct immediately upon the discovery thereof any information
provided by it for use in the Form S-4 which shall have become
false or misleading.
(b) Unless the Board of Directors of the Company
shall take any action permitted by the fifth sentence of this
Section 5.01(b), the Company shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly
called and held as soon as practicable after the date of this
Agreement for the purpose of voting on the approval and
adoption of this Agreement and the Merger. The Board of
Directors of the Company shall set the record date for the
Company Stockholder Meeting to occur immediately following the
consummation of the Exchange so that (and only if) Parent is
the holder of record for purposes of such Company Stockholder
Meeting of the shares of Company Common Stock acquired in the
Exchange, which shares shall constitute in excess of a
majority of the issued and outstanding shares of Company
Common Stock. In the event that it becomes necessary to delay
the date of the Company Stockholder Meeting, the Company shall
use its best efforts to ensure that any such delay does not
frustrate the purpose of the immediately preceding sentence,
including by issuing shares of Company Common Stock in
accordance with Section 5.19 immediately prior to setting any
new record date. The Board of Directors of the Company shall
recommend approval and adoption of this Agreement and the
Merger by the Company's stockholders. The Board of Directors
of the Company shall not be permitted to withdraw, amend or
modify in a manner adverse to Parent such recommendation (or
announce publicly its intention to do so), except that prior
to the consummation of the Exchange, the Board of Directors
shall be permitted to withdraw, amend or modify its
recommendation (or publicly announce its intention to do so)
but only if (i) the Company has complied with Section 5.13,
(ii) an Alternative Transaction (as defined in Section 7.01)
shall have been proposed by any person other than Parent or
its affiliates, (iii) the Company shall have notified Parent
of such Alternative Transaction at least five business days in
advance of such withdrawal, amendment or modification and (iv)
the Board of Directors of the Company shall have determined in
its good faith judgment that such Alternative Transaction is
more favorable to the Company's stockholders than this
Agreement and the Merger and, as a result, the Board of
Directors of the Company shall have determined in good faith,
based upon the advice of outside counsel, that it is obligated
by its fiduciary obligations under applicable law to modify,
amend or withdraw such recommendation; provided that no such
withdrawal, amendment or modification shall be made unless the
Company shall have delivered to Parent in accordance with
Section 5.13(b) a written notice advising Parent that the
Board of Directors of the Company has received an Acquisition
Proposal and identifying the person making such Acquisition
Proposal.
(c) Unless the Board of Directors of the Company
shall take any action permitted by the fifth sentence of
paragraph (b) above, and only to the extent required by
applicable regulations of the NYSE, Parent shall cause a
meeting of its stockholders (the "Parent Stockholder Meeting")
to be called and held as soon as reasonably practicable after
the date of this Agreement for the purpose of voting on the
issuance of shares of Parent Class A Common Stock in
connection with the transactions contemplated hereby and, at
such meeting, the Board of Directors of Parent shall recommend
approval by Parent's stockholders of such issuance of shares
of Parent Class A Common Stock. Nothing contained in this
Section 5.01(c) shall prohibit Parent from making any
disclosure to Parent's stockholders if, in the good faith
judgment of the Board of Directors of Parent, upon the advice
of counsel, failure to make such disclosure would be
inconsistent with applicable laws.
(d) If the Parent Stockholder Meeting is being
held, the recommendations of the Boards of Directors of Parent
and the Company referred to in paragraphs (b) and (c) above,
together with copies of the opinions referred to in Sections
3.01(q) and 3.02(i), shall be included in the Joint Proxy
Statement. Parent and the Company will use reasonable efforts
to hold such meetings on the same day and use their best
efforts to hold such meetings as soon as practicable after the
date hereof.
(e) The Company will cause its transfer agent to
make stock transfer records relating to the Company available
to the extent reasonably necessary to effectuate the intent of
this Agreement.
SECTION 5.02 Letter of the Company's Accountants. The
Company shall use its reasonable best efforts to cause to be
delivered to Parent a letter of Coopers & Xxxxxxx LLP, the
Company's independent public accountants, dated a date within
two business days before the date on which the Form S-4 shall
become effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public
accountants in connection with registration statements similar
to the Form S-4. In connection with the Company's efforts to
obtain such letter, if requested by Coopers & Xxxxxxx LLP,
Parent shall provide a representation letter to Coopers &
Xxxxxxx LLP complying with SAS 72, if then required.
SECTION 5.03 Letter of Parent's Accountants. Parent
shall use its reasonable best efforts to cause to be delivered
to the Company a letter of Price Waterhouse LLP, Parent's
independent public accountants, dated a date within two business
days before the date on which the Form S-4 shall become
effective and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public
accountants in connection with registration statements similar
to the Form S-4. In connection with the Parent's efforts to
obtain such letter, if requested by Price Waterhouse LLP, the
Company shall provide a representation letter to Price
Waterhouse LLP complying with SAS 72, if then required.
SECTION 5.04 Access to Information; Confidentiality.
a) The Company shall, and shall cause its subsidiaries,
officers, employees, counsel, financial advisors and other
representatives to, afford to Parent and its representatives
reasonable access during normal business hours during the period
prior to the Effective Time of the Merger to its properties,
books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause its
subsidiaries, officers, employees and representatives to,
furnish promptly to Parent (i) a copy of each report, schedule,
registration statement and other document filed by it during
such period pursuant to the requirements of Federal or state
securities laws and (ii) all other information concerning its
business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably
request. During the period prior to the Effective Time of the
Merger, Parent shall provide the Company and its representatives
with reasonable access during normal business hours to its
properties, books, contracts, commitments, personnel and records
as may be necessary to enable the Company to confirm the
accuracy of the representations and warranties of Parent set
forth herein and compliance by Parent and Sub of their
obligations hereunder, and, during such period, Parent shall,
and shall cause its subsidiaries, officers, employees and
representatives to, furnish promptly to the Company (i) a copy
of each report, schedule, registration statement and other
document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (ii) all
other information concerning its business, properties, financial
condition, operations and personnel as such other party may from
time to time reasonably request. The foregoing shall not require
Parent or the Company to share any information with respect to
legal proceedings that could reasonably be expected to give rise
to a breach of attorney-client privilege. Parent will hold, and
will cause its directors, officers, employees, accountants,
counsel, financial advisors and other representatives to hold,
any nonpublic information of the Company in confidence to the
extent required by, and in accordance with, the provisions of
the letter dated September 11, 1997, between Parent and the
Company (the "Confidentiality Agreement"). The Company will
hold, and will cause its directors, officers, employees,
accountants, counsel, financial advisors and other
representatives to hold, any nonpublic information of Parent in
confidence to the same extent Parent is required to hold
nonpublic information of the Company in confidence pursuant to
the Confidentiality Agreement.
(b) No investigation pursuant to this Section 5.04
shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties
hereto.
SECTION 5.05 Reasonable Best Efforts. Upon the terms
and subject to the conditions set forth in this Agreement, each
of the parties agrees to use its reasonable 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 in
doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this
Agreement. Parent, Sub and the Company will use their reasonable
best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or
consents, approvals, waivers, permits or authorizations are
required to be obtained (or, which if not obtained, would result
in an event of default, termination or acceleration of any
agreement or any put right under any agreement) under any
applicable law or regulation or from any governmental
authorities or third parties, including parties to loan
agreements or other debt instruments and including such
consents, approvals, waivers, permits or authorizations as may
be required or necessary to transfer any assets and related
liabilities of the Company to the Surviving Corporation in the
Merger, in connection with the transactions contemplated by this
Agreement, including the Merger and the Stock Exchange Agreement
and (ii) in promptly making any such filings, in furnishing
information required in connection therewith and in timely
seeking to obtain any such consents, approvals, permits or
authorizations. Parent and the Company shall mutually cooperate
in order to facilitate the achievement of the benefits
reasonably anticipated from the Merger. In connection with the
legal opinions referred to in Sections 6.02(c) and 6.03(c),
Parent, Sub and the Company agree to deliver letters of
representation reasonable under the circumstances as to their
present intention and present knowledge.
SECTION 5.06 Benefit Plans. (a) Effective as of the
Closing, Parent shall provide that all retained employees of the
Company and its subsidiaries, who are not subject to collective
bargaining agreements, shall participate in the Company's
existing employee benefit plans or, at the option of the Parent,
to participate in the employee benefit plans and arrangements of
Parent (other than those plans that are the subject of
collective bargaining) on a basis no less favorable in the
aggregate than similarly situated employees of Parent and its
subsidiaries and, with respect to employees who are the subject
of collective bargaining agreements, all benefits and other
terms and conditions of employment shall be provided in
accordance with the applicable collective bargaining agreement;
provided, however, that for purposes of the foregoing, no Stock
Plan or other plan, program or arrangement related to the stock
of the Company or its subsidiaries shall be considered nor shall
Parent or any affiliate thereof have any obligation to issue or
provide any benefits related to the stock of the Company or its
subsidiaries, other than as provided in Section 2.02. In the
event that any employee of the Company or its affiliates is
transferred to the Parent or any affiliate of Parent or becomes
a participant in an employee benefit plan, program or
arrangement maintained by or contributed by the Surviving
Corporation or its affiliates, Parent shall cause such plan,
program or arrangement to treat the prior service of such
employee with the Company or its affiliates, to the extent such
prior service is recognized under the comparable plan, program
or arrangement of the Company, as service rendered to the
Surviving Corporation or its affiliate, as the case may be;
provided, however, that Parent may cause a reduction of benefits
under any such plans, programs or arrangements to the extent
necessary to avoid duplication of benefits with respect to the
same covered matter or years of service and with respect to any
defined benefit pension plan of Parent or any affiliate of
Parent, no such prior service shall be recognized for any
purposes other than eligibility to participate or vesting of
benefits.
(b) To the extent that retained employees of the
Company and its subsidiaries become eligible to participate in
plans sponsored by Parent and its subsidiaries (other than
Company Benefit Plans), Parent shall (i) waive all limitations
as to preexisting condition exclusions and waiting periods
with respect to participation and coverage requirements
applicable to such employees and their respective dependents
under any welfare benefit plans that such employees and
dependents may be eligible to participate in, effective on or
after the Closing Date, but only to the extent that such
exclusions and waiting periods were inapplicable or satisfied
under the analogous Company Benefit Plan; and (ii) provide
each such employee or dependent with credit for any co-
payments and deductibles paid prior to the Closing Date in
respect of the plan year in progress at the time such
participation begins in satisfying any applicable co-payment,
deductible or out-of-pocket requirement under any analogous
welfare plans that such employees or dependents are eligible
to participate in on or after the Closing Date, but only to
the extent such co-payment, deductible or out-of-pocket
requirements would be deemed satisfied under the analogous
Company Benefit Plan.
SECTION 5.07 Indemnification. (a) Commencing at the
Effective Time of the Merger and for six years thereafter, the
Surviving Corporation shall indemnify all present and former
directors or officers of the Company and its subsidiaries for
acts or omissions occurring prior to the Effective Time of the
Merger to the fullest extent now provided in their respective
certificate of incorporation or by-laws, provided such
indemnification is consistent with applicable law, to the extent
such acts or omissions are uninsured (provided, that to the
extent that during any period insurance does not fully indemnify
any person contemplated to be indemnified in accordance with the
first sentence of this Section 5.07, the Surviving Corporation
shall indemnify such person in accordance with such terms; and,
provided further, that to the extent that the Surviving
Corporation's insurance is not sufficient to fully indemnify any
such person, Parent shall, during such period, provided such
indemnification is consistent with applicable law, indemnify
such person to the same extent as provided in the Company's
current certificate of incorporation and by-laws). For six years
after the Effective Time of the Merger, Parent shall also
indemnify the Sellers (together with all present and former
directors of the Company and its subsidiaries, the "indemnified
parties") for all claims asserted by other stockholders of the
Company, including derivative lawsuits, costs of defense,
settlement, judgment and other amounts, in connection with the
transactions contemplated by this Agreement and the Stock
Exchange Agreement alleging any breach of fiduciary duty on the
part of the Stockholder as a result of the transactions
contemplated by the Exchange Agreement, to the extent such
indemnification is consistent with applicable law.
(b) Parent will cause to be maintained for a period
of not less than six years from the Effective Time of the
Merger the Company's current directors' and officers'
insurance and indemnification policy (or at Parent's option a
replacement policy having terms no less advantageous than the
Company's current policy) to the extent that it provides
coverage for events occurring prior to the Effective Time of
the Merger for all persons who are or were directors and
officers of the Company on the date of this Agreement, so long
as the annual premium therefor would not be in excess of 150%
of the last annual premium paid prior to the date of this
Agreement (150% of such premium, the "Maximum Premium"). If
the existing D&O Insurance expires, is terminated or cancelled
during such six-year period, Parent will use reasonable
efforts to cause to be obtained as much D&O Insurance as can
be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous than the existing D&O
Insurance. The Company represents to Parent that the Maximum
Premium is $567,400.
(c) Each indemnified party shall, promptly after
receipt of notice of a claim or action against such
indemnified party in respect of which indemnity may be sought
thereunder, notify the Surviving Corporation or the Parent, as
the case may be (each an "indemnifying party") in writing of
the claim or action. If any such claim or action shall be
brought against an indemnified party, and it shall have
notified the indemnifying party thereof, unless based on the
written advice of counsel to such indemnified party, of
conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense
thereof. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of
such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 5.07 for
any legal or other expenses subsequently incurred by the
indemnified party in connection with defense thereof. Any
indemnifying party against whom indemnity may be sought under
this Section 5.07 shall not be liable to indemnify an
indemnified party if such indemnified party settles such claim
or action without the consent of the indemnifying party. The
indemnifying party may not agree to any settlement of any such
claim or action, other than solely for monetary damages for
which the indemnifying party shall be responsible hereunder,
as a result of which any remedy or relief shall be applied to
or against the indemnified party, without the prior written
consent of the indemnified party, which consent shall not be
unreasonably withheld. In any action hereunder as to which
the indemnifying party has assumed the defense thereof, the
indemnified party shall continue to be entitled to participate
in the defense thereof, with counsel of its own choice, but
the indemnifying party shall not be obligated hereunder to
reimburse the indemnified party of the costs thereof.
SECTION 5.08 Expenses.
(a) Except as set forth in this Section 5.08, all
fees and expenses incurred in connection with this Agreement,
the Stock Exchange Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided,
however, that Parent and the Company shall share equally all
fees and expenses, other than accountants' and attorneys'
fees, incurred in connection with the printing and filing of
the Joint Proxy Statement (including any preliminary materials
related thereto) and the Form S-4 (including financial
statements and exhibits) and any amendments or supplements
thereto.
(b) The Company shall pay Parent a fee of
$12,500,000 (the "Fee"), plus actual, documented and
reasonable out-of-pocket expenses of Parent relating to the
transactions contemplated by this Agreement not in excess of
$3,000,000 in the aggregate (including reasonable fees and
expenses of Parent's counsel, accountants and financial
advisers) ("Expenses"), upon the termination of this Agreement
pursuant to Section 7.01(f) or (g).
(c) The Company shall pay Parent the Fee plus the
Expenses if and when all of the following events have
occurred:
(i) an Alternative Transaction (as defined in
Section 7.01) is publicly commenced, publicly disclosed,
publicly proposed or publicly communicated to the Company
at any time on or after the date of this Agreement and on
or prior to the date of the Company Stockholder Meeting
(including the last date on which any adjourned session
thereof is reconvened);
(ii) either Parent or the Company terminates this
Agreement pursuant to Section 7.01(c) or Parent terminates
this Agreement pursuant to Section 7.01(d) if, in the case
of termination under either such Section, the requisite
vote for approval and adoption of the Merger Agreement by
the stockholders of the Company shall not have been
obtained by June 30, 1998; and
(iii) thereafter on or prior to the second
anniversary of the date of termination, (A) such
Alternative Transaction is consummated or (B) there is
consummated any other Alternative Transaction, whether or
not commenced, publicly disclosed, publicly proposed or
communicated to the Company prior to such termination.
(d) The Company shall pay Parent the Fee plus the
Expenses if and when both of the following events have
occurred:
(i) Parent terminates this Agreement pursuant to
Section 7.01(i) prior to the closing of the Exchange; and
(ii) thereafter on or prior to the second
anniversary of the date of termination, there is
consummated any Alternative Transaction, whether or not
commenced, publicly disclosed, publicly proposed or
communicated to the Company prior to such termination.
(e) The Fee and Expenses payable pursuant to
Section 5.08(b) shall be paid (i) with respect to a
termination pursuant to Section 7.01(f), within one business
day after such termination and (ii) with respect to a
termination pursuant to Section 7.01(g), simultaneously with
and as a condition to such termination. The Fee and Expenses
payable pursuant to Section 5.08(c) or 5.08(d) shall be paid
within one business day following the consummation of the
Alternative Transaction referred to in such Section.
(f) All transfer, documentary, sales, use,
registration, stock transfer Taxes and other such Taxes
(including all applicable real estate transfer or gains Taxes)
and related fees (including any penalties, interest and
additions to Tax) incurred in connection with this Agreement
and the transactions contemplated hereby, including the
Exchange, shall be paid by the Company and the Company shall
timely make all filings, returns, reports and forms as may be
required to comply with the provisions of such Tax laws.
SECTION 5.09 Public Announcements. Parent and Sub, on
the one hand, and the Company, on the other hand, will consult
with each other before holding any press conferences or analyst
calls and before issuing any press releases. The parties will
provide each other the opportunity to review and comment upon,
any press release with respect to the transactions contemplated
by this Agreement and the Stock Exchange Agreement, including
the Merger, and shall not issue any such press release prior to
such consultation, except as may be required by applicable law,
court process or by obligations pursuant to any listing
agreement with any national securities exchange. The parties
agree that the initial press release or releases to be issued
with respect to the transactions contemplated by this Agreement
shall be mutually agreed upon prior to the issuance thereof.
SECTION 5.10 Affiliates. Prior to the Closing Date,
the Company shall deliver to Parent a letter identifying all
persons who are, at the time this Agreement is submitted for
approval to the stockholders of the Company, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The
Company shall deliver to Parent with respect to each such
"affiliate" on or prior to the Closing a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 5.11 Stock Exchange Listing. Parent shall use
its reasonable best efforts to cause the shares of Parent Class
A Common Stock to be issued in the Merger and under the Stock
Plans to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
SECTION 5.12 Certain Provisions. The Company shall not
take, and shall not permit any of its affiliates to take, any
action which would require or permit, or could reasonably be
expected to require or permit, the Company or any other person
or entity to treat Parent or Sub, in acting pursuant to and as
permitted by this Agreement or the Stock Exchange Agreement, as
an "interested stockholder" with whom the Company is prevented
for any period pursuant to Section 203 of the DGCL from engaging
in any "business combination" (as defined in Section 203 of the
DGCL) or take any action (including any charter or by-law
amendment) that has the effect of rendering Section 203 of the
DGCL applicable to Parent or any of its subsidiaries). The
Company shall not, and shall not permit any of its affiliates
to, announce or disclose the Company's or such affiliate's
intention to take any such action or to treat Parent or Sub as
such an "interested stockholder". In the event that there shall
be instituted or pending any action or proceeding before any
Governmental Entity to which the Company is a party claiming or
seeking a determination, directly or indirectly, that the
Company is prevented for any period pursuant to Section 203 of
the DGCL from engaging in any "business combination" with Parent
or Sub, the Company shall take the position that the Company is
not so prevented. The Company shall, upon the request of Parent,
take all reasonable steps to assist in any challenge by Parent
or Sub to the validity or applicability to the transactions
contemplated by this Agreement, including the Merger, the Stock
Exchange Agreement or the transactions contemplated by any of
the foregoing, of any state law.
SECTION 5.13 No Solicitation.
(a) The Company shall not, directly or indirectly,
through any officer, director, employee, representative or
agent of the Company or any of its subsidiaries or otherwise,
(i) solicit, initiate or encourage any inquiries, offers or
proposals, or any indications of interest, regarding any
merger, sale of substantial assets, sale of shares of capital
stock (including by way of a tender offer) or similar
transactions involving the Company or any significant
subsidiary of the Company other than the Merger (any of the
foregoing inquiries or proposals being referred to herein as
an "Acquisition Proposal") or (ii) participate in negotiations
or discussions concerning, or provide any nonpublic
information to any person relating to, any Acquisition
Proposal; provided, however, that, prior to the consummation
of the Exchange, the Company may participate in negotiations
or discussions with, and provide nonpublic information to, any
person concerning an Acquisition Proposal submitted in writing
by such person to the Board of Directors of the Company after
the date of this Agreement if (A) such Acquisition Proposal
was not solicited, initiated or encouraged in violation of
this Agreement, (B) the Board of Directors of the Company, in
its good faith judgment, believes that such Acquisition
Proposal is reasonably likely to result in an Alternative
Transaction that would be more favorable to the Company's
Stockholders than the Merger or this Agreement and (C) failing
to take such action would constitute a breach of the Board's
fiduciary duties under applicable law. Nothing contained in
this Section 5.13 shall prohibit the Board of Directors of the
Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer;
provided that the Board shall not recommend that the
stockholders of the Company tender or exchange any shares of
Company Common Stock in connection with such tender or
exchange offer unless failing to take such action would
constitute a breach of the Board's fiduciary duties under
applicable law.
(b) The Company shall notify Parent as promptly as
practicable if any Acquisition Proposal is made and shall in
such notice indicate in reasonable detail the identity of the
person making such Acquisition Proposal and the terms and
conditions of such Acquisition Proposal and shall keep Parent
promptly advised of all developments which could reasonably be
expected to culminate in the Board of Directors withdrawing,
modifying or amending its recommendation of the Merger and the
other transactions contemplated by this Agreement.
(c) If, pursuant to the proviso to Section
5.13(a)(ii), the Company provides nonpublic information to any
person who makes an Acquisition Proposal, the Company shall
require such person to enter into a confidentiality agreement
substantially similar to the Confidentiality Agreement as a
condition to and before providing any such information.
(d) The Company shall immediately cease and cause
to be terminated any existing discussions or negotiations with
any persons (other than Parent and Sub) conducted heretofore
with respect to any Acquisition Proposal. The Company agrees
not to release (by waiver or otherwise) any third party from
the provisions of any confidentiality or standstill agreement
to which the Company is a party.
(e) The Company shall ensure that the officers,
directors and employees of the Company and its subsidiaries
and any investment banker or other advisor or representative
retained by the Company are aware of the restrictions
described in this Section 5.13.
SECTION 5.14 Board of Directors. In the event the
Exchange is consummated pursuant to the Stock Exchange Agreement
prior to the Effective Time of the Merger, Parent shall from and
after such closing of the Exchange, be entitled to designate, at
its option, upon notice to the Company, up to that number of
directors, rounded up to the nearest whole number, of the
Company's Board of Directors, subject to compliance with Section
14(f) of the Exchange Act, as will make the percentage of the
Company's directors designated by Parent equal to the greater of
(i) the majority of the Company's Board of Directors and (ii)
the aggregate voting power of the shares of Company Common Stock
held by Parent or any of its subsidiaries as a percentage of the
total voting power outstanding. Parent shall determine for the
approval of the Board of Directors the classes into which such
directors are placed, so long as such placement does not violate
or conflict with the Company's Certificate of Incorporation or
By-laws or the DGCL and the Company shall cause Parent's
designees to be so placed. In the event that Parent's designees
are elected or appointed to the Board of Directors of the
Company, such Board of Directors shall have, until the Effective
Time, at least one director who is a director of the Company
prior to the closing of the Exchange (the "Continuing
Director"); provided, however, that if no Continuing Director
remains, the other directors shall designate an individual to
fill such vacancy who shall not be an officer, director,
employee or affiliate of Parent or any of its affiliates and
shall otherwise be an "independent director" under the rules of
the NYSE (such designee to be deemed to be a Continuing Director
for purposes of this Agreement). To the fullest extent permitted
by applicable law, the Company shall take all actions requested
by Parent which are reasonably necessary to effect the
appointment or election of the designees of Parent to the Board
of Directors, including mailing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder promptly following the date hereof in order to permit
designees of Parent to serve on the Board of Directors of the
Company immediately upon consummation of the Exchange (provided
that Parent shall have provided to the Company on a timely basis
all information required to be included with respect to Parent
designees). In connection with the foregoing, the Company will
promptly either increase the size of the Company's Board of
Directors and/or obtain the resignation of such number of its
current directors as is necessary to enable Parent designees to
be elected or appointed to the Company's Board of Directors as
provided above and shall cause the appointment of Parent's
designees to fill such vacancies or newly created directorships
effective upon the closing of the Exchange. Following the
election or appointment of Parent's designees pursuant to this
Section 5.14(a) and prior to the Effective Time, any termination
or amendment of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the
obligations or other acts of Parent or waiver or assertion of
any of the Company's rights hereunder, or any other consents or
actions by the Board of Directors with respect to this
Agreement, will require the concurrence of a majority of the
Continuing Directors.
SECTION 5.15 Certain Agreements. Neither the Company
nor any subsidiary of the Company will waive or fail to enforce
any provision of any confidentiality or standstill or similar
agreement to which it is a party without the prior written
consent of Parent.
SECTION 5.16 Stop Transfer. The Company acknowledges
and agrees to be bound by and comply with the provisions of
Section 12 of the Stock Exchange Agreement as if a party thereto
with respect to transfers of record ownership of shares of
Company Common Stock, and agrees to notify the transfer agent
for any shares of Company Common Stock or voting rights
certificates and provide such documentation and do such other
things as may be necessary to effectuate the provisions of such
agreement.
SECTION 5.17 Officer's Certificate. The Company, at
the request of Parent, shall deliver a certificate to Parent
executed by the chief executive officer and the chief financial
officer of the Company in the form and with respect to the
matters referred to in Section 6.4 of the Stock Exchange
Agreement dated as of the date of the closing of the Exchange,
or, alternatively, inform Parent that it is unable to give such
certificate because of the inaccuracy of the matters that would
otherwise be set forth therein.
SECTION 5.18 Parent to Vote in Favor of Merger. Parent
agrees that it will vote (or cause to be voted) all shares of
Company Common Stock owned by it or its subsidiaries at the time
of the Company Stockholder Meeting in favor of the approval and
adoption of the Merger Agreement.
SECTION 5.19 Anti-Dilution. The Company will as
promptly as practicable notify Parent if it issues any shares of
Company Common Stock, whether upon the exercise, exchange or
conversion of securities exercisable or exchangeable for or
convertible into shares of Company Common Stock, or otherwise.
If the Exchange is consummated, the Company agrees that if, at
the time of closing of the Exchange or at any time thereafter
until the later of (a) the Effective Time of the Merger and (b)
two years from the closing of the Exchange the number of
Stockholder Shares held by Parent and its subsidiaries shall not
represent a majority of the outstanding shares of Company Common
Stock as a result of the issuance of shares of Company Common
Stock by the Company, whether upon the exercise, exchange or
conversion of securities exercisable or exchangeable for or
convertible into shares of Company Common Stock, or otherwise,
it will sell to Parent, upon notice from Parent, at a price per
share equal to the product of (i) the Exchange Ratio and (ii)
the average of the closing sales prices of Parent Class A Common
Stock on the New York Stock Exchange Composite Transactions Tape
on each of the five consecutive trading days immediately
preceding the date of such notice, in cash, such number of fully
paid and non- assessable shares of Company Common Stock, which
shares shall be approved for listing on the NYSE, as may be
necessary so that the percentage of outstanding shares of
Company Common Stock held by Parent (including the Stockholder
Shares) represents a majority of such outstanding shares.
ARTICLE VI
Conditions Precedent
SECTION 6.01 Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party to
effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company
Stockholder Approval shall have been obtained;
(b) Parent Stockholder Approval. If the Parent
Stockholder Approval is required in accordance with the
applicable regulations of the NYSE, the Parent Stockholder
Approval shall have been obtained;
(c) NYSE Listing. The shares of Parent Class A
Common Stock issuable to the Company's stockholders
pursuant to this Agreement (including upon the exercise of
options and upon the conversion of the Convertible
Subordinated Debentures) shall have been approved for
listing on the NYSE, subject to official notice of
issuance;
(d) HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired;
(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction
or other legal restraint or prohibition enjoining or
preventing the consummation of the Merger shall be in
effect;
(f) Form S-4. The Form S-4 shall have become
effective under the Securities Act and no stop order
suspending the effectiveness thereof shall be in effect and
no procedures for such purpose shall be pending before or
threatened by the SEC.
SECTION 6.02 Conditions to Obligations of Parent and
Sub. The obligations of Parent and Sub to effect the Merger are
further subject to the satisfaction (or waiver by Parent) of the
following conditions; provided, however, upon the closing of the
Exchange pursuant to the terms of the Stock Exchange Agreement,
the conditions set forth in clauses (a), (b), (d) and (e) of
this Section 6.02 shall no longer be applicable.
(a) Representations and Warranties. The
representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and
as of the Closing Date as though made on and as of the
Closing Date, except for those representations and
warranties which address matters only as of a particular
date (which shall have been true and correct in all
material respects as of such date). Parent shall have
received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer
of the Company to the effect set forth in this paragraph.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material respects
the obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial
officer of the Company to such effect.
(c) Tax Opinion. The opinion, which, in the event
the Parent Stockholder Approval is required, will be dated
on or about the date of and referred to in the Joint Proxy
Statement, based on appropriate representations of the
Company and Parent, of Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel
to Parent, to the effect that (i) the Merger will be
treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and (ii)
Parent, Sub and Company will each be a party to the
reorganization within the meaning of Section 368(b) of the
Code shall have been rendered and shall not have been
withdrawn or modified in any material respect.
(d) Consents, etc. Parent shall have received
evidence, in form and substance reasonably satisfactory to
it, that such licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental
authorities and other third parties as are necessary in
connection with the transactions contemplated hereby have
been obtained, except such licenses, permits, consents,
approvals, authorizations, qualifications and orders which
are not, individually or in the aggregate, material to
Parent or the Company or the failure of which to have
received would not materially dilute the aggregate benefits
to Parent of the transactions reasonably contemplated
hereby; provided that the receipt of all required consents
of the holders of Company Stock Options as contemplated by
Section 2.02 shall be considered material.
(e) No Litigation. There shall not be pending or
threatened by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood of success),
(i) challenging or seeking to restrain or prohibit the
consummation of the Merger or the Exchange or any of the
other transactions contemplated by this Agreement or the
Stock Exchange Agreement or seeking to obtain from Parent
or any of its subsidiaries any damages that are material in
relation to Parent and its subsidiaries taken as a whole,
(ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective
subsidiaries of any material portion of the business or
assets of the Company, Parent or any of their respective
subsidiaries, to dispose of or hold separate any material
portion of the business or assets of the Company, Parent or
any of their respective subsidiaries, as a result of the
Merger or any of the other transactions contemplated by
this Agreement or the Stock Exchange Agreement, (iii)
seeking to impose limitations on the ability of Parent or
Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock or Common
Stock of the Surviving Corporation, including the right to
vote the Company Common Stock or Common Stock of the
Surviving Corporation on all matters properly presented to
the stockholders of the Company or the Surviving
Corporation, respectively, or (iv) seeking to prohibit
Parent or any of its subsidiaries from effectively
controlling in any material respect the business or
operations of the Company or its subsidiaries.
SECTION 6.03 Conditions to Obligation of the Company.
The obligations of the Company to effect the Merger is further
subject to the satisfaction (or waiver by the Company) of the
following conditions; provided, however, upon the closing of the
Exchange pursuant to the provisions of the Stock Exchange
Agreement, the conditions set forth in clauses (a), (b) and (d)
of this Section 6.03 shall no longer be applicable.
(a) Representations and Warranties. The
representations and warranties of Parent and Sub set forth
in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and
as of the Closing Date as though made on and as of the
Closing Date, except for those representations and
warranties which address matters only as of a particular
date (which shall have been true and correct in all
material respects as of such date). The Company shall have
received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of
Parent to the effect set forth in this paragraph.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material
respects the obligations required to be performed by them
under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer and the
chief financial officer of Parent to such effect.
(c) Tax Opinion. The opinion, dated on or about
the date of and referred to in the Joint Proxy Statement as
first mailed to stockholders of the Company, based on
appropriate representations of the Company and Parent, of
Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel to the
Company, to the effect that (i) the Merger will be treated
for Federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code and (ii) Parent,
Sub and Company will each be a party to the reorganization
within the meaning of Section 368(b) of the Code, shall not
have been withdrawn or modified in any material respect.
(d) No Litigation. There shall not be pending or
threatened by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood of success),
which could reasonably be expected, if adversely
determined, to result in criminal or material uninsured and
unindemnified or unindemnifiable personal liability on the
part of one or more directors of the Company, (i)
challenging or seeking to restrain or prohibit the
consummation of the Merger or the Exchange or any of the
other transactions contemplated by this Agreement or (ii)
seeking to prohibit or limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries
of any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries, or
to dispose of or hold separate any material portion of the
business or assets of the Company, Parent or any of their
respective subsidiaries, as a result of the Merger or any
of the other transactions contemplated by this Agreement or
the Stock Exchange Agreement.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01 Termination. This Agreement may be
terminated and abandoned at any time prior to the Effective Time
of the Merger, whether before or after approval of matters
presented in connection with the Merger by the stockholders of
the Company or Parent:
(a) by mutual written consent of Parent and the
Company; or
(b) by either Parent or the Company if any
Governmental Entity within the United States or any country or
other jurisdiction in which either the Company or Parent,
directly or indirectly, has material assets or operations
shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(c) by either Parent or the Company if the Exchange
and the Merger shall not have been consummated on or before
June 30, 1998 (other than due to the failure of the party
seeking to terminate this Agreement to perform its obligations
under this Agreement required to be performed at or prior to
the Effective Time of the Merger); or
(d) by Parent, if any required approval of the
stockholders of the Company shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or at any
adjournment thereof; or
(e) by the Company, if any required approval of the
stockholders of Parent shall not have been obtained by reason
of the failure to obtain the required vote upon a vote held at
a duly held meeting of stockholders or at any adjournment
thereof; or
(f) by Parent, if prior to the closing of the
Exchange, the Board of Directors of the Company shall have (i)
withdrawn, modified or amended in any respect adverse to
Parent or Sub its approval or recommendation of this
Agreement, the Merger or any of the other transactions
contemplated herein or resolved to do so or (ii) recommended
an Alternative Transaction from a person other than Parent or
any of its affiliates or resolved to do so; or
(g) by the Company, prior to the closing of the
Exchange, if any person (other than Parent or any of its
affiliates) shall have proposed an Alternative Transaction (A)
that the Board of Directors of the Company determines in its
good faith judgment is more favorable to the Company's
stockholders than this Agreement and the Merger and (B) as a
result of which the Board of Directors of the Company
determines in good faith, based upon the advice of outside
counsel, that it is obligated by its fiduciary obligations
under applicable law to terminate this Agreement, provided
that such termination under this Section 7.01(g) shall not be
effective until the Company has made payment of the Fee and
the Expenses required by Section 5.08; or
(h) by the Company, if, prior to the closing of the
Exchange, there shall have been a material breach of any
covenant or agreement on the part of Parent or Sub contained
in this Agreement which materially adversely affects Parent's
or Sub's ability to consummate the Merger or any of the other
transactions contemplated herein and which shall not have been
cured prior to the date 10 business days following notice of
such breach; or
(i) by Parent, if, prior to the closing of the
Exchange, there shall have been a breach of any covenant or
agreement on the part of the Company contained in this
Agreement which is reasonably likely to have a material
adverse effect with respect to the Company or which materially
adversely affects (or materially delays) the consummation of
the Merger or any of the other transactions contemplated
herein and which shall not have been cured prior to the date
10 business days following notice of such breach; or
(j) by the Company, if the Board of Directors of
Parent shall withdraw, modify or change its approval or
recommendation of this Agreement or the transactions
contemplated hereby in a manner adverse to the Company or
shall have resolved to do so.
As used herein, "Alternative Transaction" means any
of (i) a transaction or series of transactions pursuant to
which any person (or group of persons) other than Parent or
its subsidiaries (a "Third Party") acquires or would acquire
more than 15% of the then outstanding shares of Company Common
Stock, whether from the Company, the Stockholder or pursuant
to a tender offer or exchange offer or otherwise, (ii) any
direct or indirect acquisition or proposed acquisition of the
Company or any of its significant subsidiaries by means of a
merger or other business combination transaction (including
any so-called "merger of equals" and whether or not the
Company or any of its significant subsidiaries is the entity
surviving any such merger or business combination transaction)
or (iii) any other transaction pursuant to which any Third
Party acquires or would acquire control of assets (including
for this purpose the outstanding equity securities of
subsidiaries of the Company and any entity surviving any
merger or business combination including any of them) of the
Company or any of its subsidiaries having a fair market value
equal to more than 15% of the fair market value of all the
assets of the Company and its subsidiaries, taken as a whole,
immediately prior to such transaction.
SECTION 7.02 Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as
provided in Section 7.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than the last two
sentences of Section 5.04(a), Section 5.08, Section 5.12,
Section 5.14, Section 5.16, Section 5.19 and this Section 7.02.
Nothing contained in this Section shall relieve any party for
any breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
SECTION 7.03 Amendment. Subject to Section 5.14, any
provision of this Agreement may be amended or waived prior to
the Effective Time of the Merger (whether before or after
approval of matters presented in connection with the Merger by
the stockholders of the Company or Parent) if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and Parent or, in the case of a
waiver, by the party against whom the waiver is to be effective;
provided that after the adoption of this Agreement by the
stockholders of (i) the Company, there shall be made no
amendment that by law requires further approval by the
stockholders of the Company without the further approval of such
stockholders and (ii) Parent, there shall be made no amendment
that by law requires further approval by the stockholders of
Parent without the further approval of such stockholders.
SECTION 7.04 Extension; Waiver. Subject to Section
5.14, at any time prior to the Effective Time of the Merger, the
parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties contained
in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.03, waive
compliance with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
SECTION 7.05 Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant to
Section 7.01, an amendment of this Agreement pursuant to Section
7.03 or an extension or waiver pursuant to Section 7.04 shall,
in order to be effective, comply with Section 5.14 and require
in the case of Parent, Sub or the Company, action by its Board
of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE VIII
General Provisions
SECTION 8.01 Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time of the Merger. This
Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 8.02 Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be
in writing and shall be deemed given if delivered personally or
sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Sub, to
The Warnaco Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
with a copy to:
The Warnaco Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
(b) if to the Company, to
Designer Holdings Ltd.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with copies to:
Designer Holdings Ltd.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
SECTION 8.03 Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person;
(b) "material adverse change" or "material
adverse effect" means, when used in connection with the
Company or Parent, any change or effect that either
individually or in the aggregate with all other such
changes or effects is materially adverse to the business,
assets, properties, condition (financial or otherwise) or
results of operations of such party and its subsidiaries
taken as a whole (after giving effect in the case of Parent
to the consummation of the Merger);
(c) "person" means an individual, corporation,
partnership, joint venture, association, trust,
unincorporated organization or other entity; and
(d) a "subsidiary" of any person means another
person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first
person.
SECTION 8.04 Interpretation. When a reference is made
in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule
to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation".
SECTION 8.05 Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
SECTION 8.06 Entire Agreement; No Third-Party
Beneficiaries. This Agreement and the other agreements referred
to herein constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this
Agreement. This Agreement, other than Section 5.07, is not
intended to confer upon any person other than the parties any
rights or remedies.
SECTION 8.07 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
state of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 8.08 Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its
sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct
wholly owned subsidiary of Parent pursuant to Section 1.01, but
no such assignment shall relieve Sub of any of its obligations
under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
SECTION 8.09 Enforcement; Jurisdiction. The parties
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of
Delaware or any Delaware state court, this being in addition to
any other remedy to which they are entitled at law or in equity.
Any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated by this
Agreement may be brought against any of the parties in any
Federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereto hereby consents to
the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action
or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on
any party anywhere in the world, whether within or without the
State of Delaware. Without limiting the generality of the
foregoing, each party hereto agrees that service of process upon
such party at the address referred to in Section 8.02, together
with written notice of such service to such party, shall be
deemed effective service of process upon such party.
SECTION 8.10 Severability. Whenever possible, each
provision or portion of any provision of this Agreement will be
interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion
of any provision in such jurisdiction, and this Agreement will
be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of
any provision had never been contained herein.
IN WITNESS WHEREOF, Parent, Sub and the Company have
caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first
written above.
THE WARNACO GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President & Chief
Executive Officer
WAC ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: President
DESIGNER HOLDINGS LTD.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: President & Chief
Executive Officer
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chairman
EXHIBIT A
Form of Company Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of Common Stock,
par value $.01 per share ("Company Common Stock"), of Designer
Holdings Ltd., a Delaware corporation (the "Company"), is
entitled to receive in connection with the merger (the
"Merger") of the Company with WAC Acquisition Corporation, a
Delaware corporation, securities (the "Parent Securities") of
The Warnaco Group, Inc. ("Parent"). The undersigned
acknowledges that the undersigned may be deemed an "affiliate"
of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the
"Act"), although nothing contained herein should be construed
as an admission of such fact.
If in fact the undersigned were an affiliate under
the Act, the undersigned's ability to sell, assign or transfer
the Parent Securities received by the undersigned in exchange
for any shares of Company Stock pursuant to the Merger may be
restricted unless such transaction is registered under the Act
or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the
nature and conditions of such exemptions, including
information with respect to the applicability to the sale of
such securities of Rules 144 and 145(d) promulgated under the
Act.
The undersigned hereby represents to and covenants
with the Company that the undersigned will not sell, assign or
transfer any of the Parent Securities received by the
undersigned in exchange for shares of Company Stock pursuant
to the Merger except (i) pursuant to an effective registration
statement under the Act, (ii) in conformity with the volume
and other limitations of Rule 145 or (iii) in a transaction
which, in the opinion of independent counsel reasonably
satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and
Exchange Commission (the "SEC"), is not required to be
registered under the Act.
In the event of a sale or other disposition by the
undersigned of Parent Securities pursuant to Rule 145, the
undersigned will supply Parent with evidence of compliance
with such Rule, in the form of a letter in the form of Annex I
hereto. The undersigned understands that Parent may instruct
its transfer agent to withhold the transfer of any Parent
Securities disposed of by the undersigned, but that upon
receipt of such evidence of compliance the transfer agent
shall effectuate the transfer of the Parent Securities sold as
indicated in the letter.
The undersigned acknowledges and agrees that
appropriate legends will be placed on certificates
representing Parent Securities received by the undersigned in
the Merger or held by a transferee thereof, which legends will
be removed by delivery of substitute certificates upon receipt
of an opinion in form and substance reasonably satisfactory to
Parent from independent counsel reasonably satisfactory to
Parent to the effect that such legends are no longer required
for purposes of the Act.
The undersigned acknowledges that (i) the
undersigned has carefully read this letter and understands the
requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Parent
Securities and (ii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligations to
consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT A
[Name] [Date]
On __________________ the undersigned sold the
securities ("Securities") of The Warnaco Group, Inc. (the
"Company") described below in the space provided for that
purpose (the "Securities"). The Securities were received by
the undersigned in connection with the merger of WAC
Acquisition Corporation with and into Designer Holdings Ltd.
Based upon the most recent report or statement filed
by the Company with the Securities and Exchange Commission,
the Securities sold by the undersigned were within the
prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the
"Act").
The undersigned hereby represents that the
Securities were sold in "brokers' transactions" within the
meaning of Section 4(4) of the Act or in transactions directly
with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has
not solicited or arranged for the solicitation of orders to
buy the Securities, and that the undersigned has not made any
payment in connection with the offer or sale of the Securities
to any person other than to the broker who executed the order
in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
