[EXECUTION COPY]
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 31, 2001
BY AND AMONG
XXXXX KARAN INTERNATIONAL INC.,
LVMH MOET XXXXXXXX XXXXX VUITTON INC.
AND
DKI ACQUISITION, INC.
TABLE OF CONTENTS
1. CERTAIN DEFINED TERMS..............................................2
2. THE MERGER.........................................................7
2.1. The Merger.........................................................7
2.2. Closing............................................................8
2.3. Effective Time of the Merger.......................................8
2.4. Effects of the Merger..............................................8
3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES.................9
3.1. Effect on Capital Stock............................................9
3.2. Conversion of Shares...............................................9
3.3. Payment for Shares................................................10
3.4. Stock Transfer Books..............................................11
3.5. STOCK OPTION PLANS AND OTHER EQUITY-BASED AWARDS..................11
3.6. Dissenting Shares.................................................12
4. REPRESENTATIONS AND WARRANTIES....................................13
4.1. General Statement.................................................13
4.2 Representations and Warranties of the Company.....................13
4.3. Representations and Warranties of LVMH and Acquisition Sub........25
5. COVENANTS RELATING TO CONDUCT OF BUSINESS.........................27
5.1. Affirmative Covenants of the Company..............................27
5.2. Certain Other Covenants of the Company............................28
5.3. LVMH Consents.....................................................31
6. ADDITIONAL AGREEMENTS.............................................31
6.1. Access to Information; Confidentiality............................31
6.2. Acquisition Proposal..............................................32
6.3. Fees and Expenses.................................................33
6.4. Brokers or Finders................................................33
6.5. Indemnification and Insurance.....................................33
6.6. Reasonable Best Efforts; Cooperation..............................35
6.7. Publicity.........................................................36
6.8. Intentionally Omitted.............................................36
6.9. Notification of Certain Matters...................................36
6.10. Trustees..........................................................37
6.11. Preparation and Filing of Proxy Statement and
Schedule 13E-3; Stockholders' Meeting.............................37
6.12. Intentionally Omitted.............................................37
6.13. Employment Matters................................................38
6.14. Covenants of LVMH.................................................38
6.15. Obligations of LVMH and Acquisition Sub...........................38
7. CONDITIONS PRECEDENT..............................................38
7.1. Conditions to the Company's Obligations...........................38
7.2. Conditions to LVMH's and Acquisition Sub's Obligations............39
7.3. Conditions to Each Party's Obligations............................39
8. TERMINATION AND AMENDMENT.........................................40
8.1. Termination.......................................................40
8.2. Effect of Termination.............................................41
8.3. Amendment.........................................................42
8.4. Extension; Waiver.................................................42
8.5. Special Committee.................................................43
9. MISCELLANEOUS.....................................................43
9.1. Notices...........................................................43
9.2. Nonsurvival of Covenants and Agreements...........................44
9.3. Entire Agreement; No Third Party Beneficiaries....................44
9.4. Assignment........................................................45
9.5. Director, Officer and Stockholder Liability.......................45
9.6. Specific Performance..............................................45
9.7. Effectiveness.....................................................45
9.8. Legal Holiday.....................................................45
9.9. Construction......................................................45
9.10. Governing Law.....................................................46
9.11. Remedies Cumulative...............................................46
9.12. Counterparts......................................................46
9.13. Severability......................................................46
9.14. Submission to Jurisdiction; Waivers...............................46
9.15. Definition of Knowledge...........................................46
ii
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), made as of March 31,
2001, by and among Xxxxx Karan International Inc., a Delaware corporation (the
"COMPANY"), LVMH Moet Xxxxxxxx Xxxxx Vuitton Inc., a Delaware corporation
("LVMH"), and DKI Acquisition, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of LVMH ("ACQUISITION SUB"),
W I T N E S S E T H: T H A T
----------------------------
WHEREAS, the Boards of Directors of each of LVMH, Acquisition Sub and the
Company have approved, and each deems it advisable and in the best interests of
its stockholders to consummate, the acquisition of the Company by LVMH by means
of the merger (the "MERGER") of Acquisition Sub with and into the Company, upon
the terms and subject to the conditions set forth herein, and
WHEREAS, as a result of the Merger, Acquisition Sub will be merged with
and into the Company, and the Company will be the surviving corporation (the
Company, as such surviving corporation, the "SURVIVING CORPORATION"), and
WHEREAS, as a result of the Merger, the outstanding shares of the
Common Stock of the Company, the Class A Common Stock and the Class B Common
Stock of the Company (each as hereafter defined) (collectively, the "COMPANY
COMMON STOCK") will be converted into the right to receive, and become
exchangeable for, the Merger Consideration (as hereafter defined), and
WHEREAS, as a condition and inducement to the Company's, LVMH's and
Acquisition Sub's entering into this Agreement and incurring the obligations set
forth herein, concurrently with the execution and delivery of this Agreement,
the Company, LVMH, Acquisition Sub, Xxxxx Karan, Xxxxxxx Xxxxx and the Trusts
(as hereafter defined and, collectively with Xxxxx Karan and Xxxxxxx Xxxxx, the
"DK/SW STOCKHOLDERS") are entering into a voting agreement (the "DK AGREEMENT")
pursuant to which the DK/SW Stockholders have agreed to vote their respective
shares of Company Common Stock in favor of the Merger, and
WHEREAS, as a condition and inducement to LVMH and Acquisition Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, LVMH,
Acquisition Sub, Takihyo Inc., Xxxxx Xxxx, and Xxxxx Xxxx are entering into a
voting agreement (collectively with the DK Agreement, the "VOTING AGREEMENTS")
pursuant to which, among other things, they have agreed to vote their respective
shares of Company Common Stock in favor of the Merger, and
WHEREAS, as a result of the Merger, the outstanding shares of
Acquisition Sub will be converted into shares of stock of the Surviving
Corporation, and
WHEREAS, after the Merger, the merger of Karma Acquisition, Inc. with
and into the Surviving Corporation and assuming the exercise of all options by
the DK/SW Stockholders,
LVMH will beneficially own 85.7% of the issued and outstanding common stock of
the Surviving Corporation and 100% of the issued and outstanding shares of the
Series A Preferred Stock of the Surviving Corporation and the DK/SW Stockholders
will, collectively, beneficially own 14.3% of the issued and outstanding common
stock of the Surviving Corporation, and
WHEREAS, LVMH, Acquisition 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 consummation thereof,
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings:
"ACQUISITION PROPOSAL" shall mean any agreement, offer or proposal for,
any indication of interest in, or any submission of inquiries from any Person
(other than the Merger) for: (i) any merger, consolidation, share exchange,
recapitalization, reorganization, business combination, or other similar
transaction involving the Company or any of its Subsidiaries; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition relating to 25%
or more of the assets of the Company and its Subsidiaries, taken as a whole, in
a single transaction or series of related transactions; (iii) any sale,
transfer, encumbrance, or issuance of 25% or more of any class of the
outstanding shares of capital stock of the Company or any of its Subsidiaries in
a single transaction or series of related transactions; (iv) any tender offer
(including a self-tender) or exchange offer that, if consummated, would result
in any Person beneficially owning 25% or more of any class of equity securities
of the Company or any of its Subsidiaries; or (v) any other transaction the
consummation of which could reasonably be expected to prevent or materially
delay the Merger.
"AFFILIATE" of any Person shall mean any other Person (i) which
controls such first Person, (ii) which such first Person controls, or (iii)
which is under common control with such first Person.
"AGREEMENT" shall mean this Agreement as the same may be amended or
modified in accordance with SECTION 8.3 below.
"ANTITRUST DIVISION" shall mean the Antitrust Division of the United
States Department of Justice.
"CERTIFICATES" shall mean certificates, which, immediately prior to the
Effective Time, evidenced outstanding shares of Company Common Stock.
"CLAIMS" shall mean any and all options, proxies, voting trusts, voting
agreements, judgments, pledges, charges, escrows, rights of first refusal or
first offer, mortgages, indentures, claims, transfer restrictions, liens,
security interests and other encumbrances of every kind and nature whatsoever,
whether arising by agreement, operation of law or otherwise, in each case other
than Permitted Encumbrances.
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"CLASS A COMMON STOCK" shall mean the Company's Class A common stock,
par value $0.01 per share.
"CLASS B COMMON STOCK" shall mean the Company's Class B common stock,
par value $0.01 per share.
"CODE" shall mean the Internal Revenue Code of 1986, as amended. All
citations to the Code, or to the Treasury Regulations promulgated thereunder,
shall include any amendments or any substitute or successor provisions thereto.
"COMMON STOCK" shall mean the Company's common stock, par value $0.01
per share.
"COMPANY BENEFIT PLAN" shall mean all employee benefit plans, whether
oral or written, under which any current or former employee or director of the
Company or any of its ERISA Affiliates has any present or future right to
benefits and which is contributed to, sponsored by or maintained by the Company
or any of its ERISA Affiliates or to which the Company or any of its ERISA
Affiliates has any obligation or liability, contingent or otherwise, including
the Equity Incentive Plans, the Xxxxx Karan International Inc. Voluntary
Deferred Compensation Plan for Non-Employee Directors, the Xxxxx Karan
International Inc. Executive Incentive Plan, the Xxxxx Karan International Inc.
Wealth Accumulation Plan, the Xxxxx Karan International Inc. Deferred Bonus
Plan, each as amended and currently in force on the date hereof, and any other
material plan, program, agreement or arrangement providing for the payment,
issuance or grant of any performance or other compensation awards or benefits to
any employees, consultants, officers or directors of the Company or its ERISA
Affiliates.
"COMPANY CERTIFICATE OF INCORPORATION" shall mean the Amended and
Restated Certificate of Incorporation of the Company as filed with the Secretary
of State of the State of Delaware, including all amendments thereto.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"DKI LICENSE AGREEMENT" shall mean the Agreement dated as of July 3,
1996 between Gabrielle Studio, Inc. and Xxxxx Karan Studio, as amended.
"DK/SW AGREEMENTS" shall mean the DK Agreement, the Stockholders
Agreement, the Bylaws of the Company, as amended, the Employment Agreement dated
as of July 3, 1996 between the Company and Xxxxx Karan, as amended, the License
Agreement dated as of February 20, 2001 between Gabrielle Studio, Inc. and XX XX
LLC, the Employment Agreement dated as of July 3, 1996 between the Company and
Xxxxxxx Xxxxx, as amended, the Voting Agreement dated as of July 3, 1996 among
the Company, Xxxxx Karan, Xxxxxxx Xxxxx, Xxxxx Xxxx and Xxxxx X. Xxxx, and the
Agreement between Xxxxx Karan Studio and Urban Zen, LLC dated as of October 29,
1998, as amended.
"EC MERGER REGULATION" shall mean Council Regulation No. 4064/89 of the
European Community, as amended.
"EQUITY INCENTIVE PLANS" shall mean the Xxxxx Karan International Inc. 1996
Non-Employee Director Stock Option Plan, the Xxxxx Karan International Inc. 1996
Stock Incentive
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Plan, the Xxxxx Karan International Inc. 1998 Non-Employee Director Restricted
Stock Plan, and any other plan, program, agreement or arrangement providing for
the issuance or grant of any interest in respect of the capital stock of the
Company or any Affiliate.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"GOVERNMENTAL AUTHORITY" shall mean any court or any agency,
commission, department (including the executive department) or body of any
municipal, township, county, local, state, federal or foreign governmental,
regulatory, administrative, judicial or quasi-governmental unit, entity or
authority.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"INTELLECTUAL PROPERTY" shall mean (i) all Trademarks, together with
information regarding all registrations and pending applications to register any
such Trademarks; (ii) all proprietary formulations, manufacturing methods,
inventions, designs, know-how and trade secrets; (iii) Internet technologies,
designs and domain names; (iv) all patents on and pending applications to patent
any technology or design; (v) all copyrights, whether or not registered; (vi)
all licenses of rights in Trademarks, patents, copyrights, unpatented
formulations, manufacturing methods and other know-how, including those to or by
the Company; and (vii) all goodwill associated with any of the above, in each
case owned, used or held for use by the Company or any of its Subsidiaries.
"IRS" shall mean the United States Internal Revenue Service.
"LAW" shall mean any federal, state, local or foreign statute, law,
ordinance, rule, code, order or regulation of any Governmental Authority.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any party, any
events, changes or effects which, individually or in the aggregate, would have a
material adverse effect on the business, operations, assets, condition
(financial or otherwise) or results of operations of such party and its
Subsidiaries, taken as a whole; provided, however, that in determining whether
there has been a Material Adverse Effect, any adverse effect principally
attributable to any of the following shall be disregarded: (i) general economic,
business, industry or financial market conditions; (ii) the taking of any action
permitted or required by this Agreement; (iii) the announcement or pendency of
the Merger, including any suit, action or proceeding arising in connection with
the Merger; (iv) in the case of a Material Adverse Effect on the Company, the
breach of this Agreement by LVMH or Acquisition Sub; (v) in the case of a
Material Adverse Effect on LVMH, the breach of this Agreement by the Company;
(vi) in the case of a Material Adverse Effect on the Company, the breach by
Gabrielle Studio, Inc. of any of its obligations
4
under the DKI License Agreement or the failure of Gabrielle Studio, Inc. to act
in good faith and in accordance with its judgment, which shall be exercised in a
commercially reasonable manner, under the DKI License Agreement; (vii) in the
case of a Material Adverse Effect on the Company, the breach by any of the DK/SW
Stockholders or any of their respective Affiliates of any of the DK/SW
Agreements or the failure of any of the DK/SW Stockholders or any of their
respective Affiliates to act in good faith and in accordance with their
judgment, which shall be exercised in a commercially reasonable manner, under
any of the DK/SW Agreements; (viii) in the case of a Material Adverse Effect on
the Company, the approval by LVMH or Acquisition Sub of any action prohibited by
SECTION 5.2; and (ix) in the case of a Material Adverse Effect on the Company,
the failure of LVMH or Acquisition Sub to approve of any action prohibited by
SECTION 5.2.
"PERMITTED ENCUMBRANCES" shall mean, only to the extent that they would
not have a Material Adverse Effect, (i) Claims for Taxes, assessments or
governmental charges or levies not yet due or delinquent and being diligently
contested in good faith, (ii) statutory Claims of carriers, warehousemen,
mechanics, materialmen and the like arising in the ordinary course of business
and for obligations not yet due and payable, (iii) recorded easements,
restrictive covenants, rights of way and other similar imperfections of title,
(iv) zoning, building and other similar restrictions and (v) pledges or deposits
in connection with workers' compensation, unemployment insurance and other
social security legislation.
"PERSON" shall mean any individual, partnership, corporation, limited
liability company, joint venture, trust, firm, association, unincorporated
organization or other entity.
"REPRESENTATIVE" of a Person shall mean that Person's employees,
officers, directors, representatives (including any investment banker, attorney
or accountant), agents or Affiliates.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SUBSIDIARY" shall mean, with respect to any Person, any other Person
whether incorporated or unincorporated, of which: (i) such first Person or any
other Subsidiary of such first Person is, directly or indirectly, a general
partner; (ii) voting power to elect, directly or indirectly, a majority of the
Board of Directors or others performing similar functions with respect to such
second Person is held by such first Person or by any one or more of its
Subsidiaries, or by such first Person and any one or more of its Subsidiaries;
or (iii) at least 50% of the equity, other securities or other interests in such
second Person is, directly or indirectly, owned or controlled by such first
Person or by any one or more of its Subsidiaries, or by such first Person and
any one or more of its Subsidiaries.
"TAKEOVER STATUTES" shall mean any "fair price," "moratorium," "control
share acquisition," "interested shareholder" or other similar anti-takeover
statute or regulation known to the Company (after consultation with legal
counsel) to apply to the Merger and the Voting Agreements (including Section 203
of the DGCL).
"TAX" (and, with correlative meaning, "TAXES") shall mean (i) any net
income, alternative or add-on minimum, gross income, gross receipts, sales, use,
ad valorem, value
5
added, transfer, franchise, profits, license, withholding on amounts paid by the
Company or any of its Subsidiaries, payroll, employment, excise, production,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest and/or any penalty,
addition to tax or additional amount imposed by any taxing authority, (ii) any
liability of the Company or any of its Subsidiaries for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated or consolidated group or arrangement whereby liability of the Company
or any of its Subsidiaries for the payment of such amounts was determined or
taken into account with reference to the liability of any other Person for any
period, and (iii) liability of the Company or any of its Subsidiaries with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person.
"TAX RETURN" shall mean all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect to
the Company or any of its Subsidiaries in respect of any Taxes, including (i)
any consolidated federal income Tax return in which the Company or any of its
Subsidiaries is included and (ii) any state, local or foreign income Tax returns
filed on a consolidated, combined or unitary basis (for purposes of determining
tax liability) in which the Company or any of its Subsidiaries is included.
"TRADEMARKS" shall mean all registered or common law trademarks,
derivative marks and abbreviations thereof and associated trademarks, service
marks, service names, tag lines, slogans, graphics, symbols, domain names,
logos, trade names and business names, trade dress and the like, all
registrations and applications for registration of the foregoing, and all
goodwill associated therewith.
"TRUSTS" shall mean, collectively, the Trust FBO Xxxx Xxxxx Xxxxx,
Xxxxx Xxxxx and Xxxxxxxxx Xxxxx U/A/D 2/2/96, the 2000 Xxxxxxx Xxxxx Revocable
Trust and the Xxxxxxx Xxxxx and Xxxxx Karan Alaska Community Property Trust.
In addition to the terms defined above, the following capitalized terms
shall have the meanings set forth in the referenced section:
TERM SECTION WHERE DEFINED
---- ---------------------
ACQUISITION SUB Preamble
AGREEMENT Preamble
CERTIFICATE OF MERGER 2.3
CLOSING 2.2
CLOSING DATE 2.2
COBRA 4.2.11(i)
COMPANY Preamble
COMPANY COMMON STOCK Premises
COMPANY DEBT 4.2.3
COMPANY LITIGATION 4.2.8
COMPANY ORDER 4.2.8
COMPANY PERMITS 4.2.7
COMPANY PREFERRED STOCK 4.2.3
COMPANY RESTRICTED SHARE 3.5.3
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TERM SECTION WHERE DEFINED
---- ---------------------
COMPANY SEC DOCUMENTS 4.2.5
COMPANY STOCKHOLDER APPROVAL 4.2.15
COMPANY STOCKHOLDERS' MEETING 6.11.4
CONFIDENTIALITY AGREEMENT 6.1
CONSTITUENT CORPORATIONS 2.1
CORPORATE TAKEOVER PROVISIONS 4.2.22
DISCLOSURE SCHEDULES 4.1
DISSENTING SHARES 3.6.1
DK AGREEMENT Premises
DK/SW STOCKHOLDERS Premises
EFFECTIVE TIME 2.3
ERISA AFFILIATE 4.2.11(i)
FINANCIAL ADVISOR 4.2.14
INJUNCTION 7.3.3
LVMH Preamble
LVMH S.A. 6.15
MATERIAL CONTRACTS 4.2.19(i)
MEETING DATE 4.2.6
MERGER Premises
MERGER CONSIDERATION 3.2.1
OPTION CONSIDERATION 3.5.1
OPTIONS 3.5.1
PAYING AGENT 3.3.1
PAYMENT FUND 3.3.1
PROXY STATEMENT 4.2.4(iii)
REAL PROPERTY LEASES 4.2.17
REGULATORY LAW 6.6.3
SCHEDULE 13E-3 4.2.4(iii)
SPECIAL COMMITTEE 4.2.18
STOCKHOLDERS AGREEMENT 4.2.3
SUBSIDIARY DEBT 4.2.2
SUPERIOR PROPOSAL 6.2.2
SURVIVING CORPORATION Premises
TERMINATION DATE 8.1.2
UNAUDITED 2000 FINANCIALS 4.2.5(ii)
VIOLATION 4.2.4(ii)
VOTING AGREEMENTS Premises
2. THE MERGER
2.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Acquisition Sub shall
be merged with and into the Company at the Effective Time. At the Effective
Time, the separate corporate existence of
7
Acquisition Sub shall cease, and the Company shall continue as the Surviving
Corporation (Acquisition Sub and the Company are sometimes hereinafter referred
to as the "CONSTITUENT CORPORATIONS") and shall continue under the name "Xxxxx
Karan International Inc."
2.2. CLOSING. Unless this Agreement shall have been terminated and
the Merger shall have been abandoned pursuant to SECTION 8.1, and subject to the
satisfaction or waiver of the conditions set forth in SECTION 7, the closing of
the Merger (the "CLOSING") shall take place at 10:00 a.m., New York City time,
as promptly as practicable (but in no event later than the second business day)
after satisfaction and/or waiver of all of the conditions set forth in SECTION 7
(the "CLOSING DATE"), at the offices of Xxxxx Xxxx & Xxxxxxxx, unless another
date, time or place is agreed to in writing by the parties hereto.
2.3. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Delaware, as provided in the DGCL, and make all other
filings or recordings required under the DGCL, as soon as practicable after the
Closing. The Merger shall become effective upon such filing or at such time
thereafter as is provided in the Certificate of Merger as the Company and
Acquisition Sub shall agree (the "EFFECTIVE TIME").
2.4. EFFECTS OF THE MERGER.
2.4.1. DGCL. At and after the Effective Time, the Merger
shall have the effects as set forth in the applicable provisions of the DGCL,
this Agreement and the Certificate of Merger. From and after the Effective Time,
the Surviving Corporation shall possess all of the rights, powers, privileges
and franchises and be subject to all of the obligations, liabilities,
restrictions and disabilities of the Company and Acquisition Sub, all as
provided under the DGCL, this Agreement and the Certificate of Merger.
2.4.2. DIRECTORS AND OFFICERS. The directors of Acquisition
Sub holding office immediately prior to the Effective Time and the officers of
the Company holding office immediately prior to the Effective Time shall, from
and after the Effective Time, be the initial directors and officers of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified, or until their earlier death, resignation or removal, in
accordance with the Surviving Corporation's certificate of incorporation and
bylaws.
2.4.3. CERTIFICATE OF INCORPORATION. At the Effective Time,
the Company Certificate of Incorporation, as in effect immediately prior to the
Effective Time, shall be amended and restated in the form attached as EXHIBIT A,
by operation of this Agreement and by virtue of the Merger without any further
action by the stockholders or directors of the Surviving Corporation and, as so
amended, such certificate of incorporation shall be the certificate of
incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
2.4.4. BYLAWS. At the Effective Time, the bylaws of the
Company, as in effect immediately prior to the Effective Time, shall be amended
and restated in the form attached as EXHIBIT B, by operation of this Agreement
and by virtue of the Merger without any further
8
action by the stockholders or directors of the Surviving Corporation and, as so
amended, such bylaws shall be the bylaws of the Surviving Corporation, until
duly amended in accordance with the terms thereof, the certificate of
incorporation of the Surviving Corporation and the DGCL.
3. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.
3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of LVMH, the Company, Acquisition
Sub, any of the holders of Company Common Stock or any holder of shares of
capital stock of Acquisition Sub:
3.1.1. CAPITAL STOCK OF ACQUISITION SUB. Each share of the
common stock of Acquisition Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
non-assessable share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and each share of the
Series A Preferred Stock of Acquisition Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and non-assessable share of Series A Preferred Stock of the Surviving
Corporation with the same rights, powers and privileges as the shares so
converted.
3.1.2. CANCELLATION OF TREASURY STOCK AND STOCK HELD BY
LVMH. Each share of Company Common Stock and all other shares of capital stock
of the Company that are owned, directly or indirectly, by the Company or any
wholly-owned Subsidiary of the Company or by LVMH or Acquisition Sub or any
other wholly-owned Subsidiary of LVMH shall be canceled and retired and shall
cease to exist, and no consideration shall be delivered or deliverable in
exchange therefor.
3.2. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of LVMH, Acquisition Sub, the Company
or any of the holders of Company Common Stock:
3.2.1. CONVERSION FOR MERGER CONSIDERATION. Subject to the
other provisions of this SECTION 3.2, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (excluding shares of
Company Common Stock canceled pursuant to SECTION 3.1.2 and any Dissenting
Shares) shall be converted into the right to receive $10.75 per share (the
"MERGER CONSIDERATION"), payable to the holder thereof in cash, without any
interest thereon, less any required withholding taxes, upon surrender and
exchange of the Certificate representing such share of Company Common Stock
pursuant to the terms hereof.
3.2.2. EFFECT OF CONVERSION. All such shares of Company
Common Stock, when converted as provided in SECTION 3.2.1, no longer shall be
outstanding and shall automatically be canceled and shall cease to exist, and
each Certificate previously evidencing such shares of Company Common Stock shall
thereafter represent only the right to receive the Merger Consideration. The
holders of Certificates previously evidencing shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares except as otherwise provided herein or by Law
and, upon the surrender of Certificates in accordance with the provisions of
SECTION 3.3, shall only have the
9
right to receive for such shares the Merger Consideration, less any required
withholding taxes, without any interest thereon. Notwithstanding the foregoing,
if between the date of this Agreement and the Effective Time the outstanding
shares of Company 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 Merger Consideration shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, with the aggregate Merger Consideration payable to each
holder of shares of Company Common Stock in such case being rounded to the
nearest xxxxx.
3.3. PAYMENT FOR SHARES.
3.3.1. PAYING AGENT. Prior to the Effective Time, LVMH shall
appoint a United States bank or trust company reasonably acceptable to the
Company to act as paying agent (the "PAYING AGENT") for the payment of funds in
amounts and at times necessary for the payment of the Merger Consideration, and
immediately following the Effective Time, LVMH shall deposit, or shall cause to
be deposited, with the Paying Agent the funds, in amounts and at times necessary
for the payment of the Merger Consideration, in a separate fund (the "PAYMENT
FUND") established for the benefit of the holders of Certificates, for payment
in accordance with this SECTION 3, through the Paying Agent, and such deposit
shall be in immediately available funds in amounts necessary to make the
payments pursuant to SECTION 3.2.1 and this SECTION 3.3.1. The Paying Agent
shall, pursuant to irrevocable instructions, pay the Merger Consideration out of
the Payment Fund as soon as practicable following the Effective Time.
If for any reason the Payment Fund is inadequate to pay the amounts to
which holders of shares of Company Common Stock shall be entitled under SECTION
3.2.1 and this SECTION 3.3.1, LVMH shall take all steps necessary to deposit, or
cause to be deposited, in trust additional cash with the Paying Agent sufficient
to make all payments required under this Agreement, and LVMH and the Surviving
Corporation shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
3.3.2. PAYMENT PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Paying
Agent to mail to each holder of record of a Certificate or Certificates (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as the Surviving Corporation reasonably may
specify and as shall be reasonably acceptable to the Company) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent together with such letter of transmittal, duly
executed, or an "agents message" in the case of a book entry transfer, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in respect thereof cash
in an amount equal to the product of (a) the number of shares of Company Common
Stock formerly represented by such Certificate, multiplied by (b) the Merger
Consideration, less any required withholding taxes, and the Certificate so
surrendered shall forthwith be canceled. No interest shall be paid or accrued on
the Merger Consideration payable upon the surrender of any Certificate. If any
holder of a Certificate shall be unable to
10
surrender such holder's Certificates because such Certificates have been lost,
mutilated or destroyed, such holder may deliver in lieu thereof an affidavit and
indemnity bond in form and substance and with surety reasonably satisfactory to
the Surviving Corporation. If payment is to be made to a Person other than the
Person in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable.
3.3.3. TERMINATION OF PAYMENT FUND; INTEREST. Any portion of
the Payment Fund which remains undistributed to the holders of shares of Company
Common Stock for 180 days after the Effective Time shall be delivered to the
Surviving Corporation, upon demand, and any holder of Company Common Stock who
has not theretofore complied with this SECTION 3 and the instructions set forth
in the letter of transmittal mailed to such holder after the Effective Time
shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration to which such holder is entitled. All interest accrued in
respect of the Payment Fund shall inure to the benefit of and be paid to the
Surviving Corporation.
3.3.4. NO LIABILITY. None of LVMH, the Company or the
Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any cash from the Payment Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
3.4. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
3.5. STOCK OPTION PLANS AND OTHER EQUITY-BASED AWARDS.
3.5.1 CANCELLATION OF OPTIONS. The Company shall take all
actions necessary to provide that, immediately prior to the Effective Time, (i)
each then outstanding option (each, an "OPTION" and collectively, the "OPTIONS")
to purchase or acquire shares of Company Common Stock under any of the Equity
Incentive Plans, whether or not then exercisable or vested, shall become fully
exercisable and vested, (ii) each Option which is then outstanding shall be
canceled as of the Effective Time and (iii) in consideration of such
cancellation, each Option shall, as of the Effective Time, represent for all
purposes only the right to receive in cash, with respect to each Option, an
amount (net of any applicable withholding tax) equal to the difference between
the Merger Consideration and the per share exercise price of such Option to the
extent such difference is a positive number, multiplied by the number of shares
of Company Common Stock subject to such Option (such amount in cash as described
above being hereinafter referred to as the "OPTION CONSIDERATION"), payable as
provided in SECTION 3.5.2.
3.5.2. PAYMENT PROCEDURES. Upon the Effective Time, LVMH
shall, or shall cause the Surviving Corporation to, pay to each holder of an
Option the Option Consideration (net of any applicable withholding tax and
without any interest thereon) in respect thereof; PROVIDED, HOWEVER, that with
respect to any Person subject to Section 16(a) of the Exchange Act,
11
any such Option Consideration shall not be payable until the first date payment
can be made without liability to such Person under Section 16(b) of the Exchange
Act, but shall be paid as soon as practicable thereafter. No interest shall be
paid or accrued on the Option Consideration. Until settled in accordance with
the provisions of this SECTION 3.5.2, each Option shall be deemed at any time
after the Effective Time to represent for all purposes only the right to receive
the Option Consideration.
3.5.3. RESTRICTED STOCK. The Company shall take all actions
necessary to provide that, immediately prior to the Effective Time, each
restricted share of Company Common Stock granted pursuant to any of the Equity
Incentive Plans (each such share, a "COMPANY RESTRICTED SHARE") that is
outstanding immediately prior to the Effective Time shall vest and become free
of all restrictions to the extent provided by the terms thereof. At the
Effective Time, each Company Restricted Share issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
Merger Consideration, as provided in and in accordance with the terms set forth
in SECTION 3.2.1 and SECTION 3.2.2 hereof.
3.5.4. TERMINATION OF RIGHTS. Prior to the Effective Time,
the Company shall take all action necessary (including causing the Board of
Directors of the Company or any Subsidiary (or any respective committees
thereof) to take such actions as are allowed by the Equity Incentive Plans) to
ensure that (i) following the Effective Time, no holder of an Option or a
Company Restricted Share nor any party to or participant in any of the Equity
Incentive Plans shall have any right thereunder to acquire equity securities of
the Company, the Surviving Corporation or any Subsidiary thereof and (ii) the
Equity Incentive Plans shall terminate as of the Effective Time.
3.6. DISSENTING SHARES.
3.6.1. TREATMENT OF DISSENTING SHARES. Notwithstanding any
other provisions of this Agreement to the contrary, shares of Company Common
Stock that are outstanding immediately prior to the Effective Time and that are
held by stockholders who shall have not voted in favor of the Merger and who
properly shall have demanded appraisal for such shares in accordance with
Section 262 of the DGCL (collectively, the "DISSENTING SHARES") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders instead shall be entitled to receive payment of the appraised value
of such shares of Company Common Stock held by them in accordance with the
provisions of Section 262 of the DGCL, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or otherwise lost their rights to appraisal of such shares of Company
Common Stock under Section 262 of the DGCL shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive, without any interest thereon, the Merger
Consideration, less any required withholding taxes, upon surrender, in the
manner provided in SECTION 3.3, of the Certificate or Certificates that,
immediately prior to the Effective Time, evidenced such shares of Company Common
Stock.
3.6.2. NOTIFICATIONS WITH RESPECT TO DISSENTING SHARES. The
Company shall give LVMH (i) prompt notice of any demands for appraisal filed
pursuant to Section 262 of the DGCL received by the Company, withdrawals of such
demands and any other instruments
12
served or delivered in connection with such demands pursuant to the DGCL and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands under the DGCL consistent
with the obligations of the Company thereunder. The Company shall not, except
with the prior written consent of LVMH, (x) make any payment with respect to any
such demand, (y) offer to settle or settle any such demand or (z) waive any
failure to timely deliver a written demand for appraisal or timely take any
other action to perfect appraisal rights in accordance with the DGCL.
4. REPRESENTATIONS AND WARRANTIES
4.1 GENERAL STATEMENT. All representations and warranties of the
Company are made subject to the exceptions noted in the schedules delivered by
the Company to LVMH and Acquisition Sub concurrently herewith and identified as
the "DISCLOSURE Schedules." Each schedule contained in the Disclosure Schedules
shall be numbered to correspond to the applicable paragraph of SECTION 4.2 to
which such exception refers.
4.2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to LVMH and Acquisition Sub as follows:
4.2.1. ORGANIZATION; STANDING AND POWER. Each of the Company
and its Subsidiaries is a corporation or other entity duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and is duly
qualified to do business as a foreign corporation or other entity and in good
standing to conduct business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify or be in good standing would not have a Material Adverse Effect with
respect to the Company, impair the ability of the Company to perform its
obligations under this Agreement and/or prevent the consummation of the Merger.
The Company has heretofore made available to LVMH true, complete and correct
copies of the Company Certificate of Incorporation and its bylaws and the
certificates of incorporation and bylaws (or like organizational documents) of
each of its Subsidiaries.
4.2.2. SUBSIDIARIES. A complete list of all the Subsidiaries
of the Company, together with the jurisdiction of incorporation or formation of
each Subsidiary, the jurisdiction of qualification to do business of each
Subsidiary and the percentage of capital stock or equity interest of each
Subsidiary owned by the Company, each other Subsidiary of the Company, and any
other Person owning such capital stock or equity interest, is set forth on
SCHEDULE 4.2.2. Except as disclosed on SCHEDULE 4.2.2, all the outstanding
shares of capital stock of, or other equity interests in, each Subsidiary of the
Company (i) have been duly authorized, validly issued and are fully paid and
nonassessable, and (ii) are owned directly or indirectly by the Company, free
and clear of all Claims. Except as disclosed in SCHEDULE 4.2.2, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any Person. No shares of capital stock or other equity
interests of any Subsidiary of the Company are reserved for issuance. Except as
set forth on SCHEDULE 4.2.2, no bonds, debentures, notes or other instruments or
evidence of indebtedness of any Subsidiary of the Company ("SUBSIDIARY DEBT")
13
are issued or outstanding. There are no outstanding securities convertible into,
or exchangeable or exercisable for, shares of capital stock of any Subsidiary of
the Company. There are no options, warrants, calls, rights (including preemptive
rights), commitments or agreements (including employment, termination and
similar agreements) to which the Company or any of its Subsidiaries is a party
or by which it is bound, in any case obligating the Company or any of its
Subsidiaries to issue, deliver, sell, purchase, redeem or acquire, or cause to
be issued, delivered, sold, purchased, redeemed or acquired, any securities or
other equity interests of any Subsidiary of the Company, including shares of
capital stock and Subsidiary Debt, or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. With respect to the stock or other equity
interests of the Company's Subsidiaries owned by the Company or its
Subsidiaries, there are no restrictions on the Company or its Subsidiaries with
respect to the voting of such stock or other equity interests.
4.2.3. CAPITAL STRUCTURE. The authorized capital stock of
the Company consists of (i) 35,000,000 shares of Common Stock, (ii) 18 shares of
Class A Common Stock, (iii) two shares of Class B Common Stock, and (iv)
1,000,000 shares of preferred stock, par value $0.01 per share ("COMPANY
PREFERRED STOCK"). At the close of business on March 28, 2001: (a) 22,253,254
shares of Common Stock were issued and outstanding (including Company Restricted
Shares); (b) 18 shares of Class A Common Stock were issued and outstanding; (c)
2 shares of Class B Common Stock were issued and outstanding; (d) 16,270 shares
of Company Common Stock were held by the Company in its treasury or by its
Subsidiaries; (e) no shares of Company Preferred Stock were issued or
outstanding; and (f) no shares of Company Preferred Stock were held by the
Company in its treasury or by its Subsidiaries. At the close of business on
March 28, 2001, 2,700,000 shares of Common Stock were reserved for issuance
pursuant to the Equity Incentive Plans, of which 886,431 shares were subject to
outstanding Options. A complete list of all Options, together with the current
exercise price, date of grant, number granted and vesting schedule of such
Options for each holder thereof, is set forth on SCHEDULE 4.2.3. All outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights, and all
shares that are reserved for issuance pursuant to the Equity Incentive Plans are
duly authorized and, when issued in accordance with the terms of the applicable
Equity Incentive Plan, will be validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except as set forth on SCHEDULE 4.2.3, no
bonds, debentures, notes or other instruments or evidence of indebtedness of the
Company ("COMPANY DEBT") are issued or outstanding. Other than the Options, (A)
there are no outstanding securities convertible into, or exchangeable or
exercisable for, shares of capital stock or other securities of the Company and
(B) there are no options, warrants, calls, rights (including preemptive rights),
commitments or agreements (including employment, termination and similar
agreements) to which the Company or any of its Subsidiaries is a party or by
which it is bound, in any case obligating the Company or any of its Subsidiaries
to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, any securities of the Company,
including shares of capital stock, or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. Except for the DK Agreement, the Stockholders
Agreement, dated as of June 10, 1996, among the Company, Xxxxx Karan, Xxxxxxx
Xxxxx, the trust under trust agreement for the benefit of Xxxx Xxxxx Xxxxx,
Xxxxx Xxxxx and Xxxxxxxxx Xxxxx and the trust under the trust agreement for the
benefit of Xxxxx Karan, Gabrielle Studio, Inc., Takihyo Inc., Xxxxx Xxxx, Xxxxx
X. Xxxx, Xxxxxxxxxxx Xxxx and Xxxxxxx Xxxx, as amended (the
14
"STOCKHOLDERS AGREEMENT"), and the Voting Agreement dated as of July 3, 1996,
among the Company, Xxxxx Karan, Xxxxxxx Xxxxx, Xxxxx Xxxx and Xxxxx X. Xxxx,
neither the Company nor any of its Subsidiaries is a party to any voting
agreement with respect to the voting of any securities of the Company or any of
its Subsidiaries. To the knowledge of the Company, other than as set forth in
the Company SEC Documents as of the date hereof, no Person or group beneficially
owns 5% or more of the Company's outstanding voting securities.
4.2.4. AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
(I) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to, with respect to
the consummation of the Merger, the Company Stockholder Approval, to
consummate the Merger. The execution and delivery of this Agreement and
the DK Agreement and the consummation of the Merger have been duly
authorized by all necessary corporate action on the part of the
Company, subject to, with respect to the consummation of the Merger,
the Company Stockholder Approval. This Agreement has been duly executed
and delivered by the Company and, assuming this Agreement constitutes
the valid and binding agreement of LVMH and Acquisition Sub,
constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms and conditions except
that the enforcement hereof may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity) or by an implied covenant of good faith or fair
dealing.
(II) Except as set forth on SCHEDULE 4.2.4(II), the
execution and delivery of this Agreement and the DK Agreement and the
consummation of the Merger by the Company will not (A) conflict with,
or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation, modification, amendment, creation of a payment
obligation, or acceleration (including pursuant to any put right) of
any material obligation or the loss of a material benefit under, or the
creation of a Claim on assets or property, or right of first refusal
with respect to any asset or property (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss,
creation or right of first refusal, a "VIOLATION"), pursuant to, any
provision of the Company Certificate of Incorporation or bylaws or the
certificate of incorporation or bylaws or like organizational documents
of any of its Subsidiaries or (B) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in
SCHEDULE 4.2.4(II) or paragraph (iii) of this SECTION 4.2.4 are duly
and timely obtained or made, and assuming, with respect to the
consummation of the Merger, the Company Stockholder Approval has been
obtained, result in any Violation of (1) any loan or credit agreement,
note, mortgage, deed of trust, indenture, lease, Company Benefit Plan,
Company Permit, or any other agreement, obligation, instrument,
concession, franchise or license to which the Company or any of its
Subsidiaries is a party or by which any of their respective assets or
properties is bound or affected or (2) any Company Order or Law
applicable to the Company or any of its Subsidiaries or their
respective properties or assets, except in the case of clauses (1) and
(2) for any Violations that, individually or in the aggregate, would
not reasonably be
15
expected to have a Material Adverse Effect on the Company, impair
the ability of the Company to perform its obligations under this
Agreement and/or prevent the consummation of the Merger.
(III) Except as set forth in SCHEDULE 4.2.4(II), no
consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Person or
Governmental Authority is required by or with respect to the Company or
any of its Subsidiaries in connection with the execution and delivery
of this Agreement and the DK Agreement by the Company or the
consummation by the Company of the Merger, except for: (A) the filing
of a pre-merger notification and report form by the Company under the
HSR Act, and the expiration or termination of the applicable waiting
period thereunder, and compliance with any foreign competition,
antitrust or investment laws; (B) the filing with the SEC of (1) with
respect to consummation of the Merger, a proxy statement or information
statement in definitive form for distribution to the stockholders of
the Company in advance of the meeting, if any, of the holders of
Company Common Stock to adopt this Agreement in accordance with
Regulation 14A or Regulation 14C promulgated under the Exchange Act
(such proxy statement or information statement, as amended or
supplemented from time to time, being hereinafter referred to as the
"PROXY STATEMENT"), (2) with respect to consummation of the Merger, a
Rule 13E-3 Transaction Statement on Schedule 13E-3 (as amended or
supplemented from time to time, the "SCHEDULE 13E-3") and (3) such
other reports under and such other compliance with the Exchange Act and
the rules and regulations thereunder as may be required in connection
with this Agreement, the Voting Agreements and the Merger; (C) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company does business; (D)
such filings and approvals as may be required by any applicable state
takeover Law; (E) the Company Stockholder Approval; and (F) such other
consents, approvals, orders, authorizations, registrations,
declarations, filings, notices or permits the failure of which to be
obtained or made would not reasonably be expected to have a Material
Adverse Effect on the Company, impair the ability of the Company to
perform its obligations under this Agreement and/or prevent the
consummation of the Merger.
4.2.5. DISCLOSURE DOCUMENTS; FINANCIAL STATEMENTS.
(I) The Company has filed (i) each of the Forms 10-K
with the SEC as required to be filed for the fiscal years of the
Company ended January 2, 2000 and January 3, 1999 and (ii) since
January 3, 2000, all other required reports, schedules, forms,
statements and other documents (including exhibits and all other
information incorporated therein) with the SEC (those documents
referenced in clauses (i) and (ii) being collectively referred to as
the "COMPANY SEC DOCUMENTS"). No Subsidiary of the Company is required
to file any report, schedule, form, statement or other document with
the SEC. As of their respective filing dates, and, in the case of any
registration statement under the Securities Act, its effective date,
the Company SEC Documents complied as to form 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, and none of the Company SEC Documents contained any untrue
16
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(II) Except for customary year-end audit adjustments
that do not materially affect the financial statements, the
consolidated statement of operations for the year ended December 31,
2000, the consolidated balance sheet at December 31, 2000 and the
consolidated statement of cash flow for the year ended December 31,
2000 attached hereto as SCHEDULE 4.2.5(II) (together, the "UNAUDITED
2000 FINANCIALS") were prepared in accordance with GAAP, except that
they do not include the related consolidated statements of
stockholders' equity and the notes to financial statements. The
Unaudited 2000 Financials fairly present, in all material respects, in
accordance with applicable requirements of GAAP (subject to the
exceptions described in the previous sentence), the consolidated
financial position of the Company and its Subsidiaries as of December
31, 2000 and the consolidated results of operations and the
consolidated cash flow of the Company and its Subsidiaries for the year
ended December 31, 2000.
(III) The financial statements of the Company
included in the Company SEC Documents, which, when filed with the SEC,
complied as to form, as of their respective filing dates with the SEC,
and the audited consolidated financial statements of the Company and
its Subsidiaries for the year ended December 31, 2000, which, when
filed with the SEC, will comply as to form, as of their filing date
with the SEC, in all material respects with the published rules and
regulations of the SEC with respect thereto, were or will be, as the
case may be, prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein
or in the notes thereto or, in the case of unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present or will fairly present, as the case may be, in all material
respects, in accordance with applicable requirements of GAAP applied on
a consistent basis during the periods involved (subject, in the case of
the unaudited statements, to year-end audit adjustments, as permitted
by Rule 10-01 of Regulation S-X of the SEC, and any other adjustments
described therein), the consolidated financial position of the Company
and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of
the Company and its consolidated Subsidiaries for the periods presented
therein.
4.2.6. INFORMATION SUPPLIED. None of the information to be
contained or incorporated by reference in the Proxy Statement, none of the
information supplied or to be supplied in writing (including electronically) by
the Company specifically for inclusion or incorporation by reference in the
Schedule 13E-3, and none of the information to be contained or incorporated by
reference in any other document to be filed by the Company with the SEC,
including annual reports on Form 10-K and quarterly reports on Form 10-Q will,
at the respective times filed with the SEC and, in the case of the Proxy
Statement, on the date it is first mailed to the holders of the Company Common
Stock, and at the date of the related stockholders' meeting (the "MEETING DATE")
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. All documents that the Company is responsible for filing with the
SEC after the date hereof, will
17
comply as to form, in all material respects, with the provisions of the
Securities Act, the Exchange Act or the rules and regulations thereunder, as
applicable. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to the information supplied or to be supplied in
writing (including electronically) by LVMH or Acquisition Sub expressly for
inclusion or incorporation by reference in the Proxy Statement or the Schedule
13E-3.
4.2.7. COMPLIANCE WITH APPLICABLE LAWS. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Authorities necessary for the
lawful conduct of their respective businesses (the "COMPANY PERMITS"), except
where the failure to hold any such Company Permits would not, individually or in
the aggregate, have a Material Adverse Effect on the Company, impair the ability
of the Company to perform its obligations under this Agreement and/or prevent
the consummation of the Merger. The Company and its Subsidiaries are in
compliance with the terms of the Company Permits and all applicable Laws,
including Laws relating to equal employment opportunities, fair employment
practices, occupational health and safety, wages and hours, discrimination,
hazardous materials and the environment, and product labeling and sales, except
where the failure so to comply, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company, impair
the ability of the Company to perform its obligations under this Agreement
and/or prevent the consummation of the Merger. No investigation or review by any
Governmental Authority with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company, has been threatened that would
reasonably be expected to have a Material Adverse Effect on the Company, impair
the ability of the Company to perform its obligations under this Agreement
and/or prevent the consummation of the Merger.
4.2.8. LITIGATION. Except as set forth on SCHEDULE 4.2.8 or
in the Company SEC Documents, there is no suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any of their respective properties ("COMPANY LITIGATION") which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect on the Company, nor is there any material judgment, decree,
unfunded settlement, conciliation agreement, letter of deficiency, award,
temporary restraining order, injunction, rule or order of any Governmental
Authority or arbitrator outstanding against the Company or any of its
Subsidiaries ("COMPANY ORDER") that individually or in the aggregate would have
a Material Adverse Effect on the Company, impair the ability of the Company to
perform its obligations under this Agreement, approve the Voting Agreements
and/or prevent the consummation of the Merger.
4.2.9. TAXES. Except as set forth on SCHEDULE 4.2.9:
(I) All material Tax Returns required to be filed by
the Company and its Subsidiaries on or prior to the Closing Date have
been or shall be (when due) properly completed and filed on a timely
basis; all such Tax Returns are or shall be (when filed) true, accurate
and complete in all material respects; and any and all material Taxes
required to be paid by the Company and its Subsidiaries on or prior to
the Closing Date (whether or not shown on any Tax Return) have been or
shall be paid in full on a timely basis;
18
(II) Each of the Company and its Subsidiaries has in
all material respects complied with all withholding, information
reporting and backup withholding requirements in connection with
amounts paid or owing to any employee, creditor, independent
contractor, or other third party. Neither the Company nor any of its
Subsidiaries has been at any time a member of an affiliated group of
corporations filing consolidated, combined or unitary income or
franchise Tax Returns (other than a group of which the Company was the
common parent) for a period for which the statute of limitations for
any Tax potentially applicable as a result of such membership has not
expired; and
(III) An extension of time within which to file any
Tax Return that has not been filed has not been requested or granted.
No issues have been raised and communicated to the Company (and are
currently pending), and no adjustments have been proposed in writing,
by any taxing authority in connection with any of the Tax Returns. No
Claim has ever been made by a taxing authority in a jurisdiction where
the Company does not file Tax Returns that the Company is or may be
subject to taxation by that jurisdiction. There are no pending or, to
the knowledge of the Company, threatened audits or actions or
proceedings for the assessment or collection of Taxes against the
Company or any of its Subsidiaries the unfavorable resolution of which
would reasonably be expected to materially affect the Taxes payable by
the Company or any Subsidiaries. There are no requests for information
from the IRS or any state, local or foreign taxing authority currently
outstanding that could reasonably be expected to materially affect the
Taxes payable by the Company or any of its Subsidiaries. No waivers of
statutes of limitation with respect to the Tax Returns have been given
by or requested from the Company. Neither the Company nor any of its
Subsidiaries has agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in
accounting methods or otherwise. Neither the Company nor any of its
Subsidiaries is (nor has it ever been) a party to any tax sharing
agreement.
4.2.10. EMPLOYEES.
(I) SCHEDULE 4.2.10 contains a complete list of each
management, employment, consulting or other agreement, contract or
legally binding commitment, whether oral or in writing, to which the
Company or any of its Subsidiaries is a party that provides for (i) the
employment of any individual or the retention of any Person for
management, executive or consulting services involving annual payments
in excess of $250,000, or (ii) the payment or accrual of any
compensation, benefits or severance pay upon (A) a change in control or
ownership or sale of assets of the Company or any of its Subsidiaries
or (B) any modification or termination of such management, employment,
consulting or other relationship, in each of (A) or (B) above involving
annual payments in excess of $250,000. All compensation earned pursuant
to the foregoing, including any amounts payable or to be paid as
deferred compensation, through December 31, 2000, has been fully and
accurately accrued for and reflected in the Unaudited 2000 Financials
to the extent required by GAAP.
(II) SCHEDULE 4.2.10 contains a complete list of
each Company Benefit Plan. All awards or grants made pursuant to the
Company Benefit Plans for the fiscal
19
year ended December 31, 2000, have been either fully paid to the
participants in accordance with the terms of the Company Benefit Plans
or have been fully and accurately accrued for and reflected in the
Unaudited 2000 Financials to the extent required by GAAP. Except as set
forth in SCHEDULE 4.2.10, the execution and delivery of this Agreement
and the consummation of the Merger will not result in or give rise to
any material liability of the Company, any of its Subsidiaries or their
respective successors under or pursuant to any of the Company Benefit
Plans.
(III) Neither the Company nor any ERISA Affiliate or
Subsidiary of the Company has incurred any material liability for any
Tax with respect to any Company Benefit Plan, including Taxes arising
under Section 4971, 4977, 4978, 4978B, 4979, 4980 or 4980B of the Code,
and no event has occurred and no circumstance has existed that could
give rise to any such material liability.
4.2.11. PENSION AND BENEFIT PLANS; ERISA.
(I) Except as set forth on SCHEDULE 4.2.11, neither
the Company nor any trade or business (whether or not incorporated)
that is or has ever been under common control, or that is or has ever
been treated as a single employer, with the Company under Section
414(b), (c), (m) or (o) of the Code (an "ERISA AFFILIATE") maintains,
sponsors or contributes to, nor has the Company or any ERISA Affiliate
maintained, sponsored or been obligated to contribute to, within the
last six years, any Company Benefit Plan which is subject to Title IV
of ERISA and Section 412 of the Code. A favorable IRS determination
letter or opinion letter has been issued for each Company Benefit Plan
which is intended to be tax-qualified. Except with respect to any
obligation to provide continued life or health insurance benefits
following a termination of employment pursuant to the employment
agreements set forth on SCHEDULE 4.2.10, neither the Company nor any
ERISA Affiliate maintains retiree life or retiree health insurance
plans that are "welfare benefit plans" within the meaning of Section
3(1) of ERISA and that provide for continuing benefits or coverage for
any participant or any beneficiary of a participant except as may be
required under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), or at the sole expense of the participant
or any participant's beneficiary. Each of the Company and any ERISA
Affiliate that maintains a "group health plan" within the meaning of
Section 5000(b)(1) of the Code has complied in all material respects
with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the
regulations thereunder.
(II) With respect to the Company Benefit Plans, no
event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the
Company or any ERISA Affiliate could reasonably be expected to be
subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which would have a Material
Adverse Effect on the Company or any ERISA Affiliate.
(III) Except as set forth on SCHEDULE 4.2.11, neither
the Company nor any ERISA Affiliate of the Company has, within the last
six years, maintained,
20
contributed to or otherwise had any obligation with respect to any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(IV) Neither the Company nor any Subsidiary of the
Company is a party to any collective bargaining or other labor union
contract applicable to persons employed by the Company or any
Subsidiary of the Company and no collective bargaining agreement or
other labor union contract is being negotiated by the Company or any
Subsidiary of the Company except as disclosed in the Company SEC
Documents or on SCHEDULE 4.2.11. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against the Company
or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened which would materially interfere with the respective
business activities of the Company or any of its Subsidiaries. As of
the date of this Agreement, to the knowledge of the Company, none of
the Company, any of its Subsidiaries, or their respective
Representatives, has committed any unfair labor practices in connection
with the operation of the respective businesses of the Company or any
of its Subsidiaries, and there is no charge or complaint against the
Company or its Subsidiaries by the National Labor Relations Board or
any comparable state or foreign agency pending or, to the knowledge of
the Company, threatened, except where such unfair labor practice,
charge or complaint would not reasonably be expected to have a Material
Adverse Effect on the Company, impair the ability of the Company to
perform its obligations under this Agreement and/or prevent the
consummation of the Merger.
4.2.12. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 2000, except as disclosed in SCHEDULE 4.2.12 (and except in connection with
the negotiation and execution and delivery of this Agreement and the
consummation of the Merger), (i) each of the Company and its Subsidiaries has
conducted its respective business, in all material respects, only in the
ordinary course and in a manner consistent with past practice, and (ii) there
has not been any event or events (whether or not covered by insurance),
individually or in the aggregate, that have had, or would be reasonably expected
to have, a Material Adverse Effect on the Company, impair the ability of the
Company to perform its obligations under this Agreement and/or prevent the
consummation of the Merger.
4.2.13. NO UNDISCLOSED MATERIAL LIABILITIES. Except as set
forth on SCHEDULE 4.2.13 or disclosed in the Company SEC Documents filed prior
to the date hereof or in the Unaudited 2000 Financials, since January 3, 2000,
the Company and its Subsidiaries have not incurred any liabilities that are of a
nature that would be required to be disclosed on a balance sheet of the Company
and its Subsidiaries or the footnotes thereto prepared in conformity with GAAP,
other than (i) liabilities under this Agreement relating to or in connection
with the Merger, (ii) liabilities incurred in the ordinary course of business or
(iii) liabilities that would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Company.
4.2.14. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Xxxxxxx Xxxxx & Co. (the "FINANCIAL ADVISOR") to the effect that,
as of the date thereof, the Merger Consideration to be received by the holders
of Company Common Stock (other than the DK/SW Stockholders) in the Merger is
fair from a financial point of view to such holders, and such opinion has not
been withdrawn or modified. LVMH and Acquisition Sub acknowledge
21
that such opinion has been rendered for the benefit of the Special Committee (as
hereafter defined) and the Board of Directors of the Company and may not be
relied upon by LVMH, Acquisition Sub or any of their respective Affiliates or
Representatives. True, complete and correct copies of all agreements between the
Company or any of its Affiliates (other than the DK/SW Stockholders) or
Representatives (other than of the DK/SW Stockholders) and the Financial Advisor
relating to the Merger have been provided by the Company to LVMH.
4.2.15. VOTE REQUIRED. The affirmative vote or written consent
of the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon as required by Section 251 of the DGCL is the only vote
or consent of the holders of any class or series of the Company's capital stock
necessary (under applicable Law or otherwise) to approve and adopt this
Agreement and the Merger (the "COMPANY STOCKHOLDER APPROVAL").
4.2.16. INTELLECTUAL PROPERTY. SCHEDULE 4.2.16 sets forth a
complete list and summary description of all registered and pending Trademarks,
copyrights, patents or domain names owned or licensed (as reflected in SCHEDULE
4.2.16) by the Company or one of its Subsidiaries. Except as set forth on
SCHEDULE 4.2.16, the Company or one of its Subsidiaries is the owner (except for
the Intellectual Property licensed under the DKI License Agreement, of which
Gabrielle Studio, Inc. is the owner) of all right, title, and interest in and to
or, in the case of such licensed Intellectual Property, has valid right to use,
all such Intellectual Property, free and clear of all Claims. Except as
disclosed in SCHEDULE 4.2.16, the Company owns, is licensed or otherwise has the
lawful right to use all patents, common law trademarks, trade names,
unregistered copyrights, technology, know-how and processes material to the
Company's and its Subsidiaries' businesses as currently conducted, taken as a
whole. Except as disclosed on SCHEDULES 4.2.16 and 4.2.19, there are no
outstanding, or to the knowledge of the Company threatened, material disputes or
disagreements with respect to any licenses of Intellectual Property.
(I) Except as set forth on SCHEDULE 4.2.16, with
respect to those Trademarks included within the Intellectual Property
and that are material to the Company's and its Subsidiaries' businesses
as currently conducted, (v) all such Trademarks that have been
registered with the United States Patent and Trademark Office are
currently in substantial compliance with all formal legal requirements
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications) and all such Trademarks are
valid and enforceable (except to the extent that any such Trademarks
are not currently being used by the Company or any of its Subsidiaries
or have had gaps in usage in the past, which non-use would not
reasonably be expected to have a Material Adverse Effect on the
Company); (w) no such Trademark has been or is now involved in any
opposition, invalidation, or cancellation proceeding and to the
knowledge of the Company no such action is threatened with respect to
any of such Trademarks, (x) to the knowledge of the Company, there is
no potentially interfering trademark or trademark application of any
Person and (y) no such Trademark is infringed by any Person or, to the
knowledge of the Company, has been challenged or threatened in any way,
and none of such Trademarks used by the Company or its Subsidiaries
infringes or is alleged to infringe any Trademark of any Person, except
where such non-compliance, failure to be valid and enforceable,
proceeding, action, interference, infringement or other event would not
reasonably be expected to have a Material Adverse Effect on the
Company. Except as
22
disclosed on SCHEDULE 4.2.16, the Company and/or the licensees of its
Subsidiaries have the exclusive right to use such Trademarks that are
material to the business of the Company and its Subsidiaries as
currently conducted in those countries where such Trademarks are
registered.
(II) Except as disclosed on SCHEDULE 4.2.16, there
are no outstanding, or to the knowledge of the Company threatened,
material disputes or disagreements (a) that the Company or any of its
Subsidiaries is infringing or otherwise adversely affecting the rights
of any Person with respect to any copyrights or right of publicity
which would reasonably be expected to have a Material Adverse Effect on
the Company, or (2) that any Person is infringing any of the Company's
copyrights which would reasonably be expected to have a Material
Adverse Effect on the Company.
(III) Except as provided under the DKI License
Agreement or disclosed on SCHEDULE 4.2.16, the Company has no
obligation to compensate any Person for any use of the Intellectual
Property. Except as disclosed in SCHEDULE 4.2.16, the Company has not
granted any material licenses or sublicenses or other material rights
of any kind or nature in or to any of the Intellectual Property to any
Person and, except for the DKI License Agreement, no Person has granted
any material licenses or other material rights of any kind or nature to
the Company for any of the Intellectual Property.
4.2.17. REAL PROPERTY.
(I) None of the Company or any of its Subsidiaries
owns any real property.
(II) SCHEDULE 4.2.17 sets forth a complete list of
each lease, sublease or other agreement (collectively, the "REAL
PROPERTY LEASES") under which the Company or any of its Subsidiaries
uses or occupies or has the right to use or occupy, now or in the
future, any real property used in the conduct of the businesses of the
Company and its Subsidiaries. Except to the extent that it would not
have a Material Adverse Effect on the Company, impair the ability of
the Company to perform its obligations under this Agreement and/or
prevent the consummation of the Merger, each Real Property Lease is
valid and binding on the Company or such Subsidiary (and the Company
has no knowledge that it is not valid and binding on the other parties
thereto) and is in full force and effect, all rent and other sums and
charges payable by the Company and its Subsidiaries as tenants
thereunder are current, and no termination event or condition or
uncured default on the part of the Company or any of its Subsidiaries
exists under any Real Property Lease. Each of the Company and its
Subsidiaries has a good and valid leasehold interest in each parcel of
real property leased by it free and clear of all Claims, except
Permitted Encumbrances and those Claims listed on SCHEDULE 4.2.17.
4.2.18. BOARD APPROVAL. The Company's Board of Directors (at a
meeting duly called and held) has (i) determined that this Agreement and the
Merger are advisable and in the best interests of the Company and the holders of
Company Common Stock, (ii) approved the execution, delivery and performance of
this Agreement and the DK Agreement by the Company and the consummation of the
Merger, (iii) approved the Voting Agreements and (iv) resolved to
23
recommend that the holders of the Company Common Stock approve this Agreement
and the Merger. The Company further represents that a special committee of the
Board of Directors composed entirely of non-management and non-employee
independent and disinterested directors (the "SPECIAL COMMITTEE") has
recommended approval of this Agreement, the Merger and the Voting Agreements by
the Company's Board of Directors.
4.2.19. MATERIAL CONTRACTS.
(I) As of the date hereof, except as disclosed in the
Company SEC Documents or SCHEDULE 4.2.19, neither the Company nor any
of its Subsidiaries is a party to, and none of any of its or their
properties or assets is bound by, any contract, agreement or
understanding (written or oral) that is material to the business,
properties or assets of the Company and its Subsidiaries (collectively,
the "MATERIAL CONTRACTS"). For the avoidance of doubt, Material
Contracts shall be deemed to include: (A) any material contracts or
agreements for product design or development; (B) any license
agreements (other than off-the-shelf software licenses), including all
license agreements for the licensing, as licensor or licensee, of any
and all forms of Intellectual Property; (C) any distributorship,
franchise, boutique or material similar contracts or agreements; (D)
any material agreements relating to the manufacture and distribution of
products; (E) any material contracts or agreements to sell products to
third persons; (F) any contract or agreement that provides for
exclusive rights that are material to the Company or that purports to
materially limit, curtail, or restrict the ability of the Company or
any of its Subsidiaries to compete in any geographic area or line of
business or with any Person or to solicit any customers or employees;
and (G) any other contract, agreement, or understanding (written or
oral) requiring aggregate payments greater than $1,000,000 or having a
duration in excess of one year and requiring annual payments of at
least $250,000.
(II) Each of the Material Contracts constitutes the
valid and legally binding obligation of the Company or a Subsidiary of
the Company, enforceable against the Company or such Subsidiary in
accordance with its terms, and is in full force and effect, except to
the extent any Material Contract has previously expired in accordance
with its terms. Except as set forth on SCHEDULE 4.2.19, there is no
Violation under any Material Contract either by the Company, any of its
Subsidiaries, or, to the Company's knowledge, by any other party
thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a Violation thereunder by the
Company, any of its Subsidiaries, or, to the Company's knowledge, any
other party, except in each case for those Violations which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. Except as set forth on SCHEDULE
4.2.19, no party to any such Material Contract has given notice to the
Company or any of its Subsidiaries of or made a claim against the
Company or any of its Subsidiaries with respect to any material breach
or default thereunder which remains uncured.
(III) Except as disclosed in the Company SEC
Documents or as set forth on SCHEDULE 4.2.19, there are no transactions
or arrangements between the Company or any of its Subsidiaries and (i)
any director or officer of the Company or any
24
Subsidiary, or any Affiliate or spouse, ancestor, descendant or sibling
of any such director or officer or (ii) any Affiliate of the Company.
4.2.20. INSURANCE. Each of the Company and its Subsidiaries
has insurance policies in fullforce and effect for such amounts as are
customary for Persons conducting businesses and owning assets similar in nature
and scope to those of the Company.
4.2.21. INTENTIONALLY OMITTED.
4.2.22. TAKEOVER STATUTES. The Board of Directors of the
Company has taken all actions necessary such that neither Section 203 of the
DGCL nor any applicable anti-takeover provision in the governing documents of
the Company (including ARTICLE SEVENTH of the Company Certificate of
Incorporation) (such provisions, "CORPORATE TAKEOVER PROVISIONS") is, or at the
Effective Time will be, applicable to the Company, Acquisition Sub, LVMH, the
shares of Company Common Stock or the Merger. The Company has not entered into
and its Board of Directors has not adopted or authorized the adoption of a
shareholder rights or similar agreement.
4.3. REPRESENTATIONS AND WARRANTIES OF LVMH AND ACQUISITION SUB. LVMH
and Acquisition Sub represent and warrant to the Company as follows:
4.3.1. ORGANIZATION; STANDING AND POWER. Each of LVMH and
Acquisition Sub is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified to do business as a foreign
corporation and in good standing to conduct business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not impair the ability of
LVMH or Acquisition Sub to consummate the Merger. Immediately prior to the
Merger, all of the issued and outstanding capital stock of Acquisition Sub,
other than capital stock held by the DK/SW Stockholders, will be owned directly
by LVMH free and clear of any Claims, other than Permitted Encumbrances. LVMH
and Acquisition Sub have heretofore made available to the Company true, complete
and correct copies of their respective certificates of incorporation and bylaws.
4.3.2. AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
(I) Each of LVMH and Acquisition Sub has all
requisite corporate power and authority to enter into this Agreement
and to consummate the Merger. The execution and delivery of this
Agreement and the Voting Agreements and the consummation of the Merger
have been respectively duly authorized by all necessary corporate
action on the part of LVMH and Acquisition Sub. Each of this Agreement
and the Voting Agreements has been duly executed and delivered by each
of LVMH and Acquisition Sub and, assuming that each of this Agreement
and the Voting Agreements constitutes the valid and binding agreement
of the Company, constitutes a valid and binding obligation of each of
LVMH and Acquisition Sub enforceable against them in accordance with
its terms and conditions except that the enforcement hereof may be
25
limited by (A) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(II) The execution and delivery of this Agreement and
the Voting Agreements and the consummation of the Merger by each of
LVMH and Acquisition Sub will not (A) result in any Violation pursuant
to any provision of the respective certificates of incorporation or
bylaws of LVMH or Acquisition Sub or (B) assuming the consents,
approvals, authorizations or permits and filings or notifications
referred to in paragraph (iii) of this SECTION 4.3.2 are duly and
timely obtained or made, result in any Violation of (1) any loan or
credit agreement, note, mortgage, deed of trust, indenture, lease,
permit or other agreement, obligation, instrument, concession,
franchise or license to which LVMH or Acquisition Sub is a party or by
which any of their respective assets or properties is bound or affected
or (2) any material judgment, decree, unfunded settlement, conciliation
agreement, letter of deficiency, award, temporary restraining order,
injunction, rule or order of any Governmental Authority or arbitrator
outstanding against or Law applicable to LVMH or Acquisition Sub or
their respective properties or assets, except in the case of clauses
(1) and (2) for any Violations that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
LVMH or Acquisition Sub, impair the ability of any of LVMH or
Acquisition Sub to perform its obligations hereunder, and/or prevent
the consummation of the Merger.
(III) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to, or permit
from any Person or Governmental Authority is required by or with
respect to either of LVMH or Acquisition Sub in connection with their
respective execution and delivery of this Agreement and the Voting
Agreements or the consummation by each of LVMH and Acquisition Sub of
the Merger, except for: (A) the filing of a pre-merger notification and
report form by LVMH under the HSR Act, and the expiration or
termination of the applicable waiting period thereunder, and compliance
with any foreign competition, antitrust or investment laws; (B) the
compliance with the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement, the
Voting Agreements and the Merger; (C) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware; and (D)
such other consents, approvals, orders, authorizations, registrations,
declarations, filings, notices or permits the failure of which to be
obtained or made would not reasonably be expected to have a Material
Adverse Effect on LVMH or Acquisition Sub, impair the ability of LVMH
or Acquisition Sub to perform its obligations under this Agreement
and/or prevent the consummation of the Merger.
4.3.3. INFORMATION SUPPLIED. None of the information
supplied or to be supplied in writing (including electronically) by LVMH or
Acquisition Sub specifically for inclusion or incorporation by reference in the
Proxy Statement or any amendment or supplement thereto, the Schedule 13E-3 will
at the respective times filed with the SEC and, in the case of the Proxy
Statement, on the date it or any amendment or supplement is first mailed to the
holders of Company Common Stock and at the Meeting Date, 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
26
the statements therein, in light of the circumstances under which they are made,
not misleading. Notwithstanding the foregoing, LVMH and Acquisition Sub make no
representation or warranty with respect to the information supplied or to be
supplied in writing (including electronically) by the Company for inclusion or
incorporation by reference in the Proxy Statement or the Schedule 13E-3.
4.3.4. BOARD RECOMMENDATION. As of the date hereof, the
respective Boards of Directors of LVMH and Acquisition Sub have determined by
unanimous written consent that this Agreement and the Merger, taken together,
are fair to and in the respective best interests of LVMH and Acquisition Sub and
have approved the execution, delivery and performance of this Agreement and the
Voting Agreements by each of LVMH and Acquisition Sub and the consummation of
the Merger, which approval by LVMH was also in its capacity as sole stockholder
of Acquisition Sub. No vote of the holders of any class of securities of LVMH is
necessary to approve this Agreement or the Merger.
4.3.5. FINANCIAL RESOURCES. As of the date hereof, LVMH has
a consolidated net worth, computed in accordance with GAAP, consistently
applied, of at least U.S.$400 million. LVMH will have sufficient cash available
at the Effective Time to enable it to comply with its obligations under SECTIONS
3.3 and 3.5 and to perform its other obligations hereunder.
4.3.6. AGREEMENTS WITH DK/SW STOCKHOLDERS. LVMH has provided
to the Company true, correct and complete copies or summaries of all legally
binding, written or oral agreements, arrangements, understandings and
commitments entered into on or prior to the date hereof that provide for the
payment of material consideration to, the satisfaction or assumption of material
liabilities of, or material obligations to be performed by, any of the DK/SW
Stockholders or any of their respective Affiliates, between or among LVMH or any
of its Subsidiaries or Affiliates, on the one hand, and any of the DK/SW
Stockholders or any of their respective Affiliates, on the other hand, whether
or not relating to Gabrielle Studio, Inc., Karma Acquisition, Inc. or the
Surviving Corporation.
4.3.7. NO KNOWLEDGE OF BREACH. Neither LVMH nor
Acquisition Sub knows of any facts, events, omissions or circumstances that
would result in the failure of any of the Company's representations and
warranties to be true and correct in all material respects, which failures, in
the aggregate, would reasonably be expected to have a Material Adverse Effect on
the Company. For the purposes of this SECTION 4.3.7, the "knowledge" of LVMH or
Acquisition Sub means the actual knowledge of Xxxx Xxxxxxxx and Xxxxxxxx
Xxxxxxx.
5. COVENANTS RELATING TO CONDUCT OF BUSINESS.
5.1. AFFIRMATIVE COVENANTS OF THE COMPANY. During the period from
the date of this Agreement and continuing until the Closing Date or the earlier
termination of this Agreement, except as expressly contemplated or permitted by
this Agreement or to the extent that LVMH shall otherwise consent in writing,
(i) the Company shall, and shall cause each of its Subsidiaries to, carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, and (ii) the Company shall, and shall cause each
of its Subsidiaries to, use all reasonable efforts to preserve substantially
intact its present business organization and goodwill, maintain its material
rights and franchises, and retain the services of
27
its current officers and key employees and preserve its relationships with
customers, suppliers and others having material business dealings with it.
5.2. CERTAIN OTHER COVENANTS OF THE COMPANY. During the period from
the date of this Agreement and continuing until the Closing Date or the earlier
termination of this Agreement, except as expressly contemplated or permitted by
this Agreement or to the extent that LVMH shall otherwise consent in writing:
5.2.1. CAPITALIZATION. The Company shall not, and shall not
permit any of its Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock (except that a
wholly-owned Subsidiary of the Company may declare and pay a dividend to its
parent with regard to its capital stock), or set aside funds therefor; (ii)
split, combine or reclassify any of its capital stock, or issue, authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (iii) repurchase or otherwise
acquire any shares of its or any of its Subsidiaries' capital stock, except as
required by the terms of its securities outstanding or any Company Benefit Plan
in effect on the date hereof, or set aside funds therefor.
5.2.2. OPTIONS; SALES OF STOCK. The Company shall not, and
shall not permit any of its Subsidiaries to, (i) grant any options, warrants or
other rights to purchase shares of capital stock, (ii) amend the terms of or
reprice any Option outstanding on the date of this Agreement or (iii) except for
shares issuable pursuant to the exercise of Options outstanding on the date of
this Agreement and except for issuances of capital stock of the Company's
Subsidiaries to the Company or to a wholly-owned Subsidiary of the Company,
issue, deliver or sell, or authorize or propose to issue, deliver or sell, any
shares of its capital stock, or any securities convertible into, or any rights,
warrants or options to acquire, any such shares.
5.2.3. CERTIFICATES OF INCORPORATION; BYLAWS. The Company
shall not, and shall not permit any of its Subsidiaries to, amend or propose to
amend their respective certificates of incorporation or bylaws or other
governing documents.
5.2.4. EXTRAORDINARY TRANSACTIONS. Except as set forth on
SCHEDULE 5.2.4, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) merge or consolidate with, or acquire any equity interest
in, any Person, or enter into an agreement with respect thereto, (ii) acquire or
agree to acquire any material assets, except for the purchase of inventory,
equipment, supplies and other similar items in the ordinary course of business
and except for capital expenditures made in accordance with the capital
expenditure budget attached hereto as part of SCHEDULE 5.2.4 and in the ordinary
course of business consistent with the Company's past practice, (iii) make any
loan or advance to, or otherwise make any investment in, any Person exceeding
$25,000 per payment and $250,000 in the aggregate, other than loans or advances
to, or investments in, a wholly-owned Subsidiary of the Company existing on the
date of this Agreement or loans or advances permitted by clause (vii) of SECTION
5.2.7 and other than customary prepayments made, in the ordinary course of
business and in accordance with past practice, to manufacturers or suppliers or
relating to design, production or advertising materials, not to exceed $100,000
per prepayment and $500,000 outstanding at any time, (iv) create any new
Subsidiary or Affiliate (other than wholly-owned Subsidiaries in the ordinary
course of business), or (v) grant or agree to grant any allowances, credit
memos, discounts, or the like to its customers or agree to accept (in writing or
otherwise) any returns of inventory, other than
28
pursuant to commitments existing on the date hereof and any other commitments
that terminate or expire on or before December 31, 2001, in each case, as
reflected in the 2001 budget for returns and allowances attached hereto as part
of SCHEDULE 5.2.4, which budget LVMH acknowledges represents an estimate of
existing commitments and that actual amounts may exceed budgeted levels. The
Company shall provide to LVMH promptly at the end of each month a status report
setting forth the actual amounts of any such allowances, credit memos or
discounts made or returns of inventory accepted during such month.
5.2.5. SALES AND ENCUMBRANCES. The Company shall not, and
shall not permit any of its Subsidiaries to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease (whether such lease is an operating or
capital lease), encumber or otherwise dispose of, any of its material assets
(including any capital stock or other ownership interest of any Subsidiary of
the Company), other than sales of inventory or sales, returns or dispositions of
obsolete, surplus or worthless equipment in the ordinary course of business
consistent with past practice.
5.2.6. LIQUIDATION. The Company shall not, and shall not
permit any of its Subsidiaries to, authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution.
5.2.7. COMPENSATION AND BENEFITS. The Company shall not, and
shall not permit any of its Subsidiaries to, except as may be required by Law or
pursuant to any of the Company Benefit Plans existing on the date of this
Agreement or any employment agreements listed on SCHEDULE 4.2.10, (i) grant any
increases in the compensation (including salary, bonus and other benefits) of
any of its directors or officers or any of its employees, whose annual base
salary is at least $150,000 or who is a Senior Vice President, a Senior Director
or a holder of a more senior office of the Company; (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit to any director or
officer, whether past or present, or any employee, whether past or present,
whose annual base salary is, or at the time such employee was last employed was,
at least $150,000; (iii) except as set forth on SCHEDULE 5.2.7, enter into any
new, or amend any existing, employment or severance agreement, termination
agreement, change of control or "golden parachute" agreement with any individual
(other than (A) any employment agreement with a new employee providing for
annual base salary of less than $150,000 entered into in the ordinary course of
business consistent with the Company's past practice or (B) any severance or
termination agreement with a former employee whose annual base salary at the
time of such termination was $150,000 or less, entered into in the ordinary
course of business consistent with the Company's past practice, PROVIDED that
payments under such agreements do not exceed $100,000 per employee and $200,000
in the aggregate in any quarter) or hire or otherwise retain any design employee
or any other employee with a proposed annual base salary of $150,000 or more;
(iv) terminate any design employee or any other employee whose annual base
salary is $150,000 or more or who is a Senior Vice President, a Senior Director
or a holder of a more senior office of the Company; (v) become obligated under
any new Company Benefit Plan, which was not in existence on the date hereof, or
amend any such plan or arrangement in existence on the date hereof if such
amendment would have the effect of materially enhancing any benefits thereunder;
(vi) grant any general increase in compensation (including salary, bonus and
other compensation) to employees whose annual base salary is less than $150,000,
except for increases occurring in the ordinary course of business consistent
with past practice; or (vii) extend any loans or advances to any of its
directors, officers, management employees or key
29
employees, except for ordinary course of business advances for business-related
expenses and except for bonus advances of not more than $100,000 per person and
$750,000 in the aggregate, which such advances shall be consistent in amount,
timing and repayment terms with comparable advances made by the Company in 2000.
5.2.8. INDEBTEDNESS. Except as set forth on SCHEDULE 5.2.8,
the Company shall not, and shall not permit any of its Subsidiaries to, (i)
assume or incur any indebtedness for borrowed money (except for drawdowns and
entering into of letters of credit by the Company or any of its Subsidiaries
under existing revolving credit facilities made in the ordinary course of
business consistent with past practice); (ii) guarantee any such indebtedness
(except obligations of wholly owned Subsidiaries of the Company); (iii) issue or
sell any debt securities or warrants or rights to acquire any debt securities;
(iv) guarantee any debt obligations of any other Person (except obligations of
wholly-owned Subsidiaries of the Company); (v) enter into any lease (whether
such lease is an operating or capital lease); (vi) create any Claim (other than
Permitted Encumbrances) on the property of the Company or any of its
Subsidiaries; or (vii) enter into any "keep well" or other agreement or
arrangement to maintain the financial condition of any other Person except
wholly-owned Subsidiaries of the Company.
5.2.9. CONTRACTS. Except as set forth on SCHEDULE 5.2.9, the
Company shall not, and shall not permit any of its Subsidiaries to, (i) enter
into or commit to enter into any license, distributorship, franchise, boutique,
manufacturing or distribution agreements, or any real estate leases; (ii) enter
into or commit to enter into, any contract, agreement or understanding (A)
requiring aggregate payments greater than $500,000 or (B) having a duration in
excess of one year and requiring annual payments greater than $100,000; (iii)
modify, rescind, terminate, waive, release or otherwise amend, in each case in
any material respect, any of the terms or provisions of any Material Contract;
or (iv) renew or extend, or agree to renew or extend, any Material Contract for
a period or term greater than one year, other than any such renewal or extension
that is automatic and not within the discretion of the Company under the terms
of the applicable Material Contract. For the avoidance of doubt, the Company may
document any legally binding oral agreement listed on SCHEDULE 4.2.19, so long
as such documentation reflects terms and conditions substantially similar to
those of such oral agreement as previously disclosed to LVMH.
5.2.10. TAXES. Except for any Tax election in connection with
the change in the Company's fiscal year end from the last Sunday of the year to
the last Saturday of the year, the Company shall not, and shall not permit any
of its Subsidiaries to, other than as required by the SEC, Law or GAAP applied
on a consistent basis, make any Tax election that is inconsistent with a prior
Tax election or revoke any Tax election, settle or compromise any Tax liability
material to the Company or its Subsidiaries, or make any changes with respect to
Tax or accounting methods, policies, procedures and practices.
5.2.11. TRANSACTIONS. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in, permit, agree to or commit to
any transaction or act that is reasonably likely to render untrue any of the
representations and warranties of the Company contained in this Agreement.
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5.2.12. IMPAIRMENT. The Company shall not, and shall not
permit any of its Subsidiaries to, take, or agree to commit to take, any action
that would or is reasonably likely to result in any of the conditions to the
Merger set forth in SECTION 7 not being satisfied, or that would materially
impair the ability of the Company, LVMH or Acquisition Sub to consummate the
Merger in accordance with the terms hereof or materially delay such
consummation.
5.2.13. REVALUE. The Company shall not, and shall not permit
any of its Subsidiaries to, revalue in any material respect any of its assets,
including writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary and usual course of business consistent
with past practice or as required by GAAP applied on a consistent basis.
5.2.14. LITIGATION. The Company shall not, and shall not
permit any of its Subsidiaries to, settle or compromise any pending or
threatened suit, action or claim relating to the Merger.
5.2.15. LIMIT OF COMPETITION. Except as entered into in the
ordinary course of business and permitted pursuant to SECTION 5.2.9. the Company
shall not, and shall not permit any of its Subsidiaries to, enter into any
agreement or arrangement that would limit or restrict the Surviving Corporation
and its Affiliates (including LVMH) or any successor thereto, from engaging or
competing in any line of business or in any geographic area.
5.3. LVMH CONSENTS. As soon as practicable following the execution
hereof, LVMH shall identify to the Company a person or persons responsible for
reviewing and communicating the approval or disapproval of any actions for which
approval is required pursuant to SECTION 5.2. LVMH shall cause such persons
expeditiously to respond to the Company's requests for approval pursuant to
SECTION 5.2.
6. ADDITIONAL AGREEMENTS.
6.1. ACCESS TO INFORMATION; CONFIDENTIALITY. Between the date
hereof and the Closing Date, upon reasonable notice and subject to the
restrictions contained in this SECTION 6.1, the Company shall, and shall cause
each of its Subsidiaries to, afford reasonable access to the Representatives of
LVMH and Acquisition Sub (including their employees, accountants, counsel and
other Representatives), during normal business hours, to all its properties,
books, contracts, commitments, senior personnel and records, and shall cause
each of its Subsidiaries to furnish promptly to LVMH or its Representatives all
other information concerning its business, properties and personnel as LVMH may
reasonably request, provided no investigation pursuant to this SECTION 6.1 shall
affect or modify any representation or warranty given by the Company or the
conditions to the obligation of LVMH and Acquisition Sub hereunder; provided,
however, that the Company may restrict the foregoing access to the extent that
(x) any Law, or Company Order requires the Company or its Subsidiaries to
restrict or prohibit access to any such properties or information, (y) the
information is subject to confidentiality obligations to a third party or (z)
the information is subject to the attorney-client privilege. Each of LVMH and
Acquisition Sub will, and will cause their respective Representatives to, hold
any such information obtained pursuant to this SECTION 6.1 in confidence in
accordance with, and shall otherwise be subject to, the provisions of the
confidentiality letter, dated February 7, 2001,
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between LVMH and the Company (the "CONFIDENTIALITY AGREEMENT"), which
Confidentiality Agreement shall continue in full force and effect after the date
hereof.
6.2. ACQUISITION PROPOSAL.
6.2.1. NO SOLICITATION. Except as provided in SECTION 6.2.2,
the Company agrees that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, nor shall the Company or
any of its Subsidiaries authorize or permit any of its or their employees or
other Representatives (including any investment banker, financial advisor,
attorney or accountant retained by it or any of its Subsidiaries) to, directly
or indirectly, (i) initiate, solicit, encourage (including by way of furnishing
information which has not been previously publicly disseminated), negotiate, or
take any action to facilitate any inquiries or the making of any proposal or
offer with respect to, or a transaction to effect, any Acquisition Proposal;
(ii) have any discussion with or provide any confidential information or data
to, or otherwise cooperate in any way with, any Person that is seeking to make,
or has made, an Acquisition Proposal, or engage in any negotiations concerning
an Acquisition Proposal, or knowingly facilitate any effort or attempt to make
or implement an Acquisition Proposal; (iii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal; or (iv) approve or
recommend, or propose publicly to approve or recommend, or execute or enter
into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement or propose
publicly or agree to do any of the foregoing related to any Acquisition
Proposal. The Company agrees that it will, and will cause its Subsidiaries and
their respective Representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the date
of this Agreement with any parties conducted heretofore with respect to any
Acquisition Proposal.
6.2.2. SUPERIOR PROPOSAL. Notwithstanding anything in this
Agreement to the contrary, each of the Company, its Board of Directors and the
Special Committee shall be permitted (A) to the extent applicable, to comply
with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to
any Acquisition Proposal, (B) to engage in any discussions or negotiations with,
or provide any information to, any Person in response to an unsolicited bona
fide written Acquisition Proposal by any such Person or (C) to approve or
recommend an unsolicited bona fide written Acquisition Proposal to the
stockholders of the Company or to withdraw, modify or change, in any manner
adverse to LVMH, its approval or recommendation of this Agreement and the
Merger, or to resolve to do any of the foregoing, but if and only to the extent
that, in any such case referred to in clause (B) or (C), (i) the Company
Stockholders' Meeting shall not have occurred, (ii) it has received an
unsolicited bona fide written Acquisition Proposal from a Person and the
Company's Board of Directors or the Special Committee concludes in good faith
that such Acquisition Proposal, in the case of clause (B), is reasonably likely
to result in a Superior Proposal (as defined below) or, in the case of clause
(C), constitutes a Superior Proposal, (iii) the Company's Board of Directors or
the Special Committee, after consultation with outside legal counsel, determines
in good faith that the failure to take such action would be inconsistent with
its fiduciary duties under applicable Law, and (iv) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person in connection with an Acquisition Proposal by any such Person,
the Company's Board of Directors or the Special Committee receives from such
Person an executed confidentiality agreement having provisions that are
customary in such agreements, as advised
32
by counsel. The Company shall notify LVMH and Acquisition Sub promptly of any
such inquiries, proposals or offers received by, any such information requested
from, or any such discussions or negotiations sought to be initiated or
continued with, any of its Representatives indicating, in connection with such
notice, the name of such Person and the material terms and conditions of any
inquiries, proposals or offers. The Company agrees that it will promptly keep
LVMH informed of the status and terms of any such proposals or offers and the
status and terms of any such discussions or negotiations. The Company agrees
that it will use reasonable best efforts to promptly inform its Representatives
of the obligations undertaken in this SECTION 6.2. Nothing in this SECTION 6.2
shall affect the obligation of the Company to hold the Company Stockholders'
Meeting to obtain the Company Stockholder Approval in accordance with SECTION
6.11.4. The Company shall not submit to the vote of its stockholders any
Acquisition Proposal other than the Merger. "SUPERIOR PROPOSAL" means a bona
fide unsolicited written Acquisition Proposal made by a Person other than LVMH
for at least a majority of the outstanding shares of Company Common Stock on
terms which the Board of Directors of the Company or the Special Committee in
good faith concludes by majority vote (following receipt of the advice of its
financial advisors and outside legal counsel), taking into account, among other
things, all terms and conditions of the proposal (including break-up fees,
expense reimbursement provisions and conditions to consummation) and all legal,
financial, regulatory and other aspects of the proposal and the Person making
the proposal, (x) would, if consummated, result in a transaction that is more
favorable and provide greater value to the stockholders of the Company (in their
capacities as stockholders), from a financial point of view, than the Merger and
(y) is reasonably likely to be completed.
6.3. FEES AND EXPENSES. Except as otherwise provided in SECTION 8.2
and except with respect to claims for damages incurred as a result of a material
breach of this Agreement, all costs and expenses incurred in connection with
this Agreement, the Voting Agreements and the Merger shall be paid by the party
incurring such cost or expense.
6.4. BROKERS OR FINDERS.
6.4.1. THE COMPANY. The Company represents, as to itself,
its Subsidiaries and its Affiliates (other than the DK/SW Stockholders), that no
agent, broker, investment banker, financial advisor or other Person is or will
be entitled to any broker's or finders fee or any other commission or similar
fee in connection with the Merger, except the Financial Advisor, whose fees and
expenses will be paid by the Company in accordance with the Company's agreements
with such firm.
6.4.2. LVMH AND ACQUISITION SUB. Each of LVMH and
Acquisition Sub represents, as to itself, its Subsidiaries and its Affiliates,
that no agent, broker, investment banker, financial advisor or other Person
engaged by any of them is or will be entitled to receive from the Company any
broker's or finders fee or any other commission or similar fee in connection
with the Merger.
6.5. INDEMNIFICATION AND INSURANCE.
6.5.1. INDEMNIFICATION. The Surviving Corporation shall, and
LVMH shall cause the Surviving Corporation to, (i) indemnify and hold harmless,
and provide advancement
33
of expenses to, all past, present and future directors, officers and employees
of the Company and its Subsidiaries (in all of their capacities) (x) at least to
the same extent such persons are indemnified or have the right to advancement of
expenses or to conduct the defense of any claims as of the date hereof by the
Company and its Subsidiaries pursuant to their respective certificates of
incorporation, bylaws (or comparable organizational documents) and
indemnification agreements, if any, in existence on the date hereof with any
directors, officers and employees of the Company and its Subsidiaries, and (y)
without limitation to clause (x), to the fullest extent permitted by Law, in
each case for acts or omissions occurring at or prior to the Effective Time
(including for acts or omissions occurring in connection with the approval of
this Agreement, the Voting Agreements, the Merger or the consummation of any
transactions between or among any of the DK/SW Stockholders or any of their
respective Affiliates, on the one hand, and LVMH or any of its Subsidiaries or
Affiliates, on the other hand), and (ii) to the extent permitted by Law, include
and cause to be maintained in effect in the Surviving Corporation's (or any
successor's) certificate of incorporation and bylaws after the Effective Time
provisions regarding elimination of liability of directors, indemnification of
officers, directors and employees and advancement of expenses which are, in the
aggregate, no less advantageous to the intended beneficiaries than the
corresponding provisions contained in the current Company Certificate of
Incorporation and bylaws.
6.5.2. INSURANCE. For six years after the Effective Time,
the Surviving Corporation shall, and LVMH shall cause the Surviving Corporation
to, maintain in effect the Company's current directors' and officers' liability
insurance covering acts or omissions occurring at or prior to the Effective Time
with respect to those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms with respect to
such coverage and amount no less favorable than those of such policy in effect
on the date hereof; provided that the Surviving Corporation may substitute
therefor policies containing terms with respect to coverage and amount no less
favorable to such directors or officers; PROVIDED, FURTHER, that in no event
shall the Surviving Corporation be required to pay aggregate annual premiums for
insurance under this SECTION 6.5.2 in excess of 200% of the aggregate premiums
paid by the Company in fiscal 2000 for such purpose; provided, further, that if
the annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount. LVMH agrees, and will cause the
Surviving Corporation, not to take any action that would have the effect of
limiting the aggregate amount of insurance coverage required to be maintained
for the individuals referred to in this SECTION 6.5.2.
6.5.3. ENFORCEABILITY. The provisions of this SECTION 6.5
are intended to be for the benefit of, and will be enforceable by, each
indemnified party, his or her heirs and his or her Representatives and are in
addition to, and not in substitution for, any other rights to indemnification or
contribution that any such individuals may have by contract or otherwise. The
obligations of the Surviving Corporation under this SECTION 6.5 shall not be
terminated or modified in such a manner as to adversely affect any indemnitees
to whom this SECTION 6.5 applies without the consent of such affected
indemnitee.
6.5.4. SUCCESSORS. In the event that after the Effective
Time the Surviving Corporation (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or
34
substantially all of its assets to any Person, then, and in each such case,
proper provision shall be made so that any successor or assign of the Surviving
Corporation shall assume the obligations set forth in this SECTION 6.5.
6.6.REASONABLE BEST EFFORTS; COOPERATION.
6.6.1. REASONABLE BEST EFFORTS. Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
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, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Authorities and the making of all necessary
registrations and filings with, and the taking of all steps as may be necessary
to obtain a necessary approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties (including, without
limitation, the consents listed on SCHEDULE 6.6.1(II)), (iii) the defending of
any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Voting Agreements or the consummation of the
Merger, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the Merger and to fully carry out the purposes of this Agreement.
Each party hereto agrees to furnish the others with such necessary information
and reasonable assistance as such other parties and their respective Affiliates
may reasonably request in connection with their preparation of necessary
filings, registrations or submissions of information to any Governmental
Authorities, including any filings necessary under the provisions of the HSR
Act.
6.6.2. HSR. Each party hereto shall file or cause to be
filed with the FTC and the Antitrust Division any notification required to be
filed by their respective "ultimate parent entities" under the HSR Act and the
rules and regulations promulgated thereunder with respect to the Merger. Such
parties will use all reasonable efforts to make such filings promptly and to
respond on a timely basis to any requests for additional information made by
either of such agencies. Each of the parties hereto agrees to furnish the other
with copies of all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and its Affiliates (in the case
of the Company, other than the DK/SW Stockholders) and their respective
Representatives (in the case of the Company, other than the DK/SW Stockholders),
on the one hand, and the FTC, the Antitrust Division or any other Governmental
Authority or members or their respective staffs, on the other hand, with respect
to this Agreement, the Voting Agreements and the Merger, other than confidential
financial information filed therewith.
6.6.3. DEFENSE OF LITIGATION. In furtherance and not in
limitation of any of the covenants of the parties contained in this SECTION 6.6,
if any administrative or judicial action or proceeding, including any proceeding
by a private Person, is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any Regulatory
Law (as hereafter defined) or if any Law, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental Authority
35
which would make the Merger illegal or would otherwise prohibit or materially
impair or delay the consummation of the Merger, each of the Company and LVMH
shall cooperate in all respects with each other and use its reasonable best
efforts, to contest and resist any such action or proceeding and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the Merger.
Notwithstanding the foregoing or any other provisions of this Agreement, in no
event shall LVMH, Acquisition Sub or the Company or any of their respective
Affiliates be required to divest itself of any assets, conduct its business in a
specified manner, amend any license agreement to which it is a party or take any
other action that would render untrue any of the representations and warranties
of such party contained in this Agreement or otherwise have a Material Adverse
Effect on such party in connection therewith. Further, notwithstanding the
foregoing or any other provision of this Agreement, nothing in this SECTION 6.6
shall limit a party's right to terminate this Agreement pursuant to SECTION
8.1.2 or 8.1.3 so long as such party has up to then complied with its
obligations under this SECTION 6.6. For purposes of this Agreement, "REGULATORY
LAW" means the Xxxxxxx Anti-Trust Act, as amended, the EC Merger Regulation, the
Xxxxxxx Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other Laws, orders, decrees, administrative and judicial
doctrines that are designed or intended to prohibit, restrict or regulate (i)
mergers, acquisitions or other business combinations or (ii) actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition.
6.6.4. STATE TAKEOVER STATUTES. Without limiting the
foregoing, the Company and its Board of Directors shall (i) take all actions
necessary or otherwise reasonably requested by LVMH to exempt the Merger and the
Voting Agreements from the provisions of any applicable Takeover Statutes or
Corporate Takeover Provisions and (ii) if any Takeover Statute or similar
statute or regulation or Corporate Takeover Provision becomes applicable to the
Merger or this Agreement, take all action reasonably necessary to ensure that
the Merger may be consummated as promptly as practicable on the terms
contemplated herein and otherwise to minimize the effect of such Takeover
Statute or other statute or regulation or Corporate Takeover Provision on the
Merger.
6.7. PUBLICITY. The parties will consult with each other upon any
press release or public announcement pertaining to the Merger and shall not
issue any such press release or make any such public announcement prior to such
consultation, except as may be required by applicable Law (or stock exchange
rules), in which case the party proposing to issue such press release or make
such public announcement shall use reasonable efforts to consult in good faith
with the other party before issuing any such press release or making any such
public announcement.
6.8. INTENTIONALLY OMITTED.
6.9. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
written notice to the others of (i) the occurrence, or failure to occur, of any
event of which it becomes aware that has caused or that would be likely to cause
any representation or warranty of such party contained in this Agreement to be
untrue or inaccurate at any time from the date hereof until the Closing Date and
(ii) the failure of such party to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder.
36
6.10. TRUSTEES. The Company will use its reasonable best efforts to
obtain from each officer or director of the Company or any of its Subsidiaries
who is serving as a trustee of any Company Benefit Plan a duly executed
resignation letter resigning from such position effective as of the Effective
Time.
6.11. PREPARATION AND FILING OF PROXY STATEMENT AND SCHEDULE 13E-3;
STOCKHOLDERS' MEETING.
6.11.1. PROXY STATEMENT. As promptly as practicable following
the date of this Agreement, and in any event within 45 days, the Company shall
prepare, in consultation with LVMH, and file with the SEC the Proxy Statement.
The Company shall, as promptly as practicable after receipt thereof, provide
true, complete and correct copies of any written comments received from the SEC
with respect to the Proxy Statement to LVMH and shall advise LVMH of any oral
comments with respect to the Proxy Statement received from the SEC. The Company
shall provide LVMH with a reasonable opportunity to review and comment on the
Proxy Statement and any amendment or supplement to the Proxy Statement prior to
filing such with the SEC, and shall provide LVMH with a copy of all such filings
made with the SEC.
6.11.2. SCHEDULE 13E-3. As promptly as practicable following
the date of this Agreement, LVMH, Acquisition Sub and the Company shall file
with the SEC, and shall use all reasonable best efforts to cause any of their
respective Affiliates engaging in this transaction to file with the SEC, the
Schedule 13E-3 with respect to the Merger.
6.11.3. PROVISION OF INFORMATION; COOPERATION. Each of the
parties hereto agrees to use all reasonable best efforts to cooperate and to
provide each other with such information as any of such parties may reasonably
request in connection with the preparation of the Proxy Statement and the
Schedule 13E-3. The Schedule 13E-3 shall be filed with the SEC concurrently with
the filing of the Proxy Statement. Each party hereto agrees promptly to
supplement, update and correct any information provided by it for use in the
Proxy Statement or the Schedule 13E-3 if and to the extent that such information
is or shall have become incomplete, false or misleading.
6.11.4. STOCKHOLDERS' MEETING. The Company shall, as promptly
as practicable following the date of this Agreement and the completion of any
SEC review of the Proxy Statement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "COMPANY STOCKHOLDERS' MEETING") for the
purpose of considering and voting upon the approval of this Agreement and the
Merger. Subject to the fiduciary duties of the Board of Directors of the
Company, as described in the following proviso, the Proxy Statement shall
include the recommendation of the Board of Directors of the Company to the
stockholders of the Company in favor of approval of the Merger and this
Agreement; PROVIDED, HOWEVER, that the Board of Directors of the Company may, at
any time prior to the date of the Company Stockholders' Meeting, withdraw,
modify or change any such recommendation in accordance with SECTION 6.2;
PROVIDED, FURTHER, however, that such withdrawal, modification or change shall
not affect the Company's obligation to hold the Company Stockholders' Meeting
for the purpose of seeking the Company Stockholder Approval.
6.12. INTENTIONALLY OMITTED.
37
6.13. EMPLOYMENT MATTERS. For not less than one year following the
Effective Time, the Surviving Corporation shall, and LVMH shall cause the
Surviving Corporation to, maintain compensation and employee benefits plans and
arrangements and perquisites for employees and former employees of the Company
and its Subsidiaries that, in the aggregate, are reasonably comparable to those
provided pursuant to their compensation and employee benefit plans and
arrangements and perquisites in effect as of the date hereof (other than the
Xxxxx Karan International Inc. Wealth Accumulation Plan and the Equity Incentive
Plans). In addition, the Surviving Corporation shall, and LVMH shall cause the
Surviving Corporation to, comply with the terms of any employment agreement
(including, without limitation, with respect to any payments due upon
termination of any such agreement), severance agreement, termination agreement,
change of control agreement or "golden parachute" agreement to which the Company
or any of its Subsidiaries is a party on the date hereof.
6.14. COVENANTS OF LVMH.
6.14.1. LVMH shall cause Gabrielle Studio, Inc. to exercise
its rights and perform its obligations under the DKI License Agreement in good
faith and in accordance with its judgment, which shall be exercised in a
commercially reasonable manner.
6.14.2. LVMH shall cause Gabrielle Studio, Inc. to comply
with its confidentiality obligations under any license agreement to which the
Company or any Subsidiary is a party.
6.14.3. Each of LVMH and Acquisition Sub agrees that it will,
at the Company Stockholders' Meeting, vote (or cause to be voted) any shares of
Company Common Stock then owned beneficially or of record by it (i) in favor of
this Agreement and the Merger and (ii) against any matters submitted to the
stockholders of the Company inconsistent with the Merger.
6.15. OBLIGATIONS OF LVMH AND ACQUISITION SUB. LVMH Moet Xxxxxxxx
Xxxxx Vuitton S.A. ("LVMH S.A.") shall cause each of LVMH, Acquisition Sub and
the Surviving Corporation to comply with all of its respective obligations
under this Agreement (including indemnification obligations set
forth in SECTION 6.5).
7. CONDITIONS PRECEDENT.
7.1. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the
Company to consummate the Merger is subject to the fulfillment of all of the
following conditions on or prior to the Closing Date (unless satisfaction of any
such condition is expressly waived in writing by the Company, or unless the
Company causes such condition not to be satisfied).
7.1.1. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of LVMH and Acquisition Sub contained in this
Agreement that is qualified by a reference to materiality or Material Adverse
Effect shall be true and correct in all respects when made and on and as of the
Closing Date as if made on and as of the Closing Date (except for those
representations and warranties that are so qualified and relate to a particular
date, which representations
38
and warranties shall be true and correct in all respects as of such date), and
each of the representations and warranties of LVMH and Acquisition Sub contained
in this Agreement that is not so qualified shall be true and correct in all
material respects when made and on and as of the Closing Date as if made on and
as of the Closing Date (except for those representations and warranties that are
not so qualified and relate to a particular date, which representations and
warranties shall be true and correct in all material respects as of such date)
and the Company shall have received a certificate of a senior executive officer
of each of LVMH and Acquisition Sub to such effect.
7.1.2. COVENANTS. Each of LVMH and Acquisition Sub shall
have performed or complied with, in all material respects, all agreements and
covenants required to be performed or complied with by it under this Agreement
at or prior to the Closing Date and the Company shall have received a
certificate of a senior executive officer of each of LVMH and Acquisition Sub to
such effect.
7.2. CONDITIONS TO LVMH'S AND ACQUISITION SUB'S OBLIGATIONS. The
obligation of LVMH and Acquisition Sub to consummate the Merger is subject to
the fulfillment of all of the following conditions on or prior to the Closing
Date (unless satisfaction of any such condition is expressly waived in writing
by LVMH, or unless LVMH or Acquisition Sub causes such condition not to be
satisfied).
7.2.1. REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Company contained in this Agreement
(disregarding all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect) shall be true and correct when made and
on and as of the Closing Date as if made on and as of the Closing Date (except
for those representations and warranties that relate to a particular date, which
representations and warranties shall be true and correct as of such date),
provided that this SECTION 7.2.1 shall be deemed satisfied so long as all
failures of such representations and warranties to be true and correct
(disregarding all such qualifications as aforesaid), taken together, would not
reasonably be expected to have a Material Adverse Effect on the Company and LVMH
shall have received a certificate of a senior executive officer of the Company
to such effect.
7.2.2. COVENANTS. The Company shall have performed or
complied with, in all material respects, all agreements and covenants required
to be performed or complied with by it under this Agreement at or prior to the
Closing Date, provided that this SECTION 7.2.2 shall be deemed satisfied so long
as all failures by the Company to perform or comply with such agreements and
covenants, taken together, would not reasonably be expected to (i) have a
Material Adverse Effect on the Company or (ii) materially impair or delay the
ability of the Company, LVMH or Acquisition Sub to consummate the Merger in
accordance with the terms hereof, and LVMH shall have received a certificate of
a senior executive officer of the Company to such effect.
7.3. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
7.3.1. APPROVAL. The Company Stockholder Approval shall
have been obtained.
39
7.3.2. WAITING PERIOD. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act and any applicable foreign
competition, antitrust or investment laws shall have been terminated or shall
have expired.
7.3.3. NO INJUNCTION. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "INJUNCTION")
preventing the consummation of the Merger shall be in effect.
7.3.4. NO LAW. No Law shall have been enacted, promulgated
or otherwise issued by any Governmental Authority that prohibits the
consummation of the Merger.
8. TERMINATION AND AMENDMENT.
8.1. TERMINATION. Subject to SECTION 8.5, this Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after adoption of this Agreement by the stockholders of
the Company:
8.1.1. By mutual written consent of the Company and LVMH;
8.1.2. By either the Company or LVMH, if the Effective Time
shall not have occurred on or before December 31, 2001 (the "TERMINATION DATE");
PROVIDED, HOWEVER, that the right to terminate this Agreement under this SECTION
8.1.2 shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, or
primarily contributed to, the failure of the Effective Time to occur on or
before the Termination Date;
8.1.3. By either the Company or LVMH, if any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
(which the parties shall have used their reasonable best efforts to resist,
resolve or lift, as applicable, in accordance with SECTION 6.6) permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
8.1.4. By LVMH or the Company, if the Company Stockholder
Approval shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or of any adjournment
thereof at which the vote was taken;
8.1.5. By LVMH, if (i) the Board of Directors of the Company
(whether or not under circumstances permitted by this Agreement) shall have
failed to make the recommendation contemplated by SECTION 4.2.18 and SECTION
6.11.4 or shall have withdrawn or modified, in any manner which is adverse to
LVMH, its recommendation or approval of the Merger or this Agreement or shall
have resolved to do so or (ii) the Board of Directors of the Company shall have
approved or recommended to the stockholders of the Company any Acquisition
Proposal (other than the Merger) or shall have resolved to do so; PROVIDED THAT
LVMH may condition the effectiveness of such termination pursuant to this
SECTION 8.1.5 upon receipt by LVMH or its designee of the amounts that are
payable to LVMH or its designee under SECTION 8.2;
8.1.6. By LVMH, if there has been any inaccuracy in or
breach of any of the Company's representations or warranties, or the Company
shall have breached or failed to
40
perform any of its covenants or other agreements contained in this Agreement, in
each case such that the conditions set forth in SECTION 7.2 are not capable of
being satisfied on or before the Termination Date; provided, however, that
before LVMH may terminate this Agreement under this SECTION 8.1.6, it shall
deliver written notice to the Company specifying such breach in reasonable
detail and shall give the Company a period of thirty (30) days following receipt
of such notice in which to cure such breach, regardless of whether such 30-day
period extends beyond the Termination Date; and
8.1.7. By the Company, if there has been any inaccuracy in
or breach of any of LVMH's or Acquisition Sub's representations or warranties,
or LVMH or Acquisition Sub shall have breached or failed to perform any of its
covenants or other agreements contained in this Agreement, in each case such
that the conditions set forth in SECTION 7.1 are not capable of being satisfied
on or before the Termination Date; provided, however, that before the Company
may terminate this Agreement under this SECTION 8.1.7, it shall deliver written
notice to LVMH specifying such breach in reasonable detail and shall give LVMH a
period of thirty (30) days following receipt of such notice in which to cure
such breach, regardless of whether such 30-day period extends beyond the
Termination Date.
8.2. EFFECT OF TERMINATION.
8.2.1. In the event of termination of this Agreement by
either the Company or LVMH as provided in SECTION 8.1, this Agreement shall
forthwith become void and there shall be no liability or obligation hereunder on
the part of LVMH, Acquisition Sub or the Company or their respective Affiliates,
officers, directors, or stockholders or other Representatives, except (a)
SECTION 6.1 (with respect to the confidentiality obligations of LVMH and
Acquisition Sub thereunder), SECTION 6.3, SECTION 8.2 and SECTION 9 shall
survive such termination, and (b) no such termination shall relieve any party
from liability for a breach of any term or provision hereof.
8.2.2. If (i) LVMH shall terminate this Agreement pursuant to
SECTION 8.1.2, (without the Company Stockholders' Meeting having occurred); (ii)
LVMH shall terminate this Agreement pursuant to SECTION 8.1.5; (iii) this
Agreement shall be terminated pursuant to SECTION 8.1.4 and, prior to the
Meeting Date, an Acquisition Proposal shall have been publicly disclosed or
announced; or (iv) this Agreement shall be terminated pursuant to SECTION 8.1.4
and, within twelve months of the date of such termination, the Company shall
have entered into, or shall have resolved to enter into, a definitive agreement
with respect to any Acquisition Proposal, then the Company shall promptly, but
in no event later than five days after the date of such termination (or, in the
case of clause (iv), five days after the date the Company enters into, or
resolves to enter into, such definitive agreement), pay LVMH an amount equal to
$5,000,000; PROVIDED, however, that, notwithstanding the foregoing, such amount
shall not be payable if: (A) the reason for the termination pursuant to SECTION
8.1.2 is not attributable to the breach of this Agreement by the Company; or (B)
in the case of termination pursuant to SECTION 8.1.4 OR 8.1.5, LVMH or
Acquisition Sub is then in material breach of this Agreement, or (C) in the case
of termination pursuant to SECTION 8.1.4, any of the DK/SW Stockholders shall
have failed to vote in favor of the Merger as required by the DK Agreement and
as a result of such failure the Company Stockholder Approval shall not be
obtained.
41
8.2.3. If LVMH shall terminate this Agreement pursuant to
SECTION 8.1.4 or SECTION 8.1.6, the Company shall promptly pay, or reimburse
LVMH for, the amount of all out-of-pocket costs, fees and expenses reasonably
incurred by LVMH or Acquisition Sub or on their behalf arising out of, in
connection with, or related to this Agreement, the Voting Agreements and the
Merger (including HSR Act and other filing fees, fees and expenses of printers,
accountants, financial advisors, attorneys, consultants and appraisers), as well
as commitment and other fees, charges and expenses of any such Person; PROVIDED,
that, the Company's aggregate payments and reimbursements pursuant to this
SECTION 8.2.3 shall in no event exceed $2,500,000; PROVIDED, however, that,
notwithstanding the foregoing, such amounts shall not be payable if the reason
for the termination pursuant to SECTION 8.1.4 OR 8.1.6 is primarily attributable
to a material breach of this Agreement by LVMH or Acquisition Sub or, in the
case of termination pursuant to SECTION 8.1.4, any of the DK/SW Stockholders
shall have failed to vote in favor of the Merger as required by the DK Agreement
and as a result of such failure the Company Stockholder Approval shall not be
obtained.
8.2.4. The parties acknowledge that the agreements contained
in this SECTION 8.2 are an integral part of this Agreement and that, without
these agreements, none of the parties would enter into this Agreement;
accordingly, if the Company fails promptly to pay any amount due pursuant to
this SECTION 8.2, and, in order to obtain such payment, LVMH commences a suit
which results in a judgment against the Company for the fee set forth in this
SECTION 8.2, the Company shall pay to LVMH its reasonable and documented costs
and expenses (including reasonable and documented attorneys' fees and expenses)
in connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made plus 1%, notwithstanding the provisions of SECTION 6.3. The parties
agree that any remedy or amount payable pursuant to this SECTION 8.2 shall be an
exclusive remedy, except for fraud, any willful breach of any representation,
warranty, covenant or agreement contained in this Agreement or any action
seeking specific performance.
8.3. AMENDMENT. Subject to SECTION 8.5, this Agreement may be amended,
modified or supplemented, before or after the Company Stockholder Approval, only
by written agreement of LVMH, Acquisition Sub and the Company authorized by
their respective Boards of Directors at any time prior to the Effective Time
with respect to any of the terms contained herein; PROVIDED, HOWEVER, that,
after the Company Stockholder Approval, no term or condition contained in this
Agreement shall be amended or modified in any manner that by Law requires
further approval by the stockholders of the Company without so obtaining such
further stockholder approval.
8.4. EXTENSION; WAIVER. Subject to SECTION 8.5, at any time prior to
the Effective Time, any party hereto, by action taken or authorized by its Board
of Directors, may, to the extent legally allowed, with respect to any party that
is not an Affiliate of such first party (i) extend the time for the performance
of any of the obligations or other acts of any of the other non-Affiliate
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
42
8.5. SPECIAL COMMITTEE. No (i) termination of this Agreement by the
Company under SECTION 8.1 may be effected, (ii) amendment of this Agreement
under SECTION 8.3 may be made or (iii) extension or waiver by the Company under
SECTION 8.4 may be granted, in each case, without the prior approval of the
Special Committee.
9. MISCELLANEOUS
9.1. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection herewith shall be given in
writing and directed to the parties hereto as follows:
If to the Company: Xxxxx Karan International Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000, XXX
Attention: Xxxx X. Idol, Chief Executive Officer,
and Xxxx X. Xxxxx, General Counsel
Fax: (000) 000-0000
and with a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000, XXX
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
and with a copy to: The Special Committee of the Board of
Directors of Xxxxx Karan International Inc.
c/o Xxxxx Karan International Inc.
000 Xxxxxxx Xxxxxx - 9th Floor
New York, New York 10018, USA
Attention: M. Xxxxxxx Xxxxxxxxx, Chairperson
Fax: (000) 000-0000
and with a copy to: Xxxxx Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000, XXX
Attention: Xxxxxx Xxxxx Xxxxxxxx, Esq
Fax: (000) 000-0000
43
If to LVMH or Acquisition Sub: LVMH Moet Xxxxxxxx Xxxxx Vuitton Inc.
00 Xxxx 00xx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000, XXX
Attention: General Counsel
Fax: (000)000-0000
and with a copy to: LVMH Moet Xxxxxxxx Xxxxx Vuitton
00, xxxxxx Xxxxx
Xxxxx, XXXXXX
Attention: Xxxx Xxxxxxxx, President, Fashion Group
Fax: 011-33-1-44-13-24-68
and with a copy to: Barack Xxxxxxxxxx Xxxxxxxxxx
Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000, XXX
Attention: Xxxxx X. Barack, Esq.
Fax: (000) 000-0000
and with a copy to: Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000, XXX
Attention: Xxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
Notices shall be deemed properly delivered and received (i) if personally
delivered, upon receipt or refusal to accept delivery, (ii) if sent via
facsimile, upon mechanical confirmation of successful transmission thereof
generated by the sending telecopy machine, (iii) if sent by a commercial
overnight courier for delivery on the next business day, on the first business
day after deposit with such courier service, or (iv) if sent by registered or
certified mail (postage prepaid, return receipt requested), five days after
deposit thereof in the U.S. mail. Any party may change its address for delivery
of notices by properly notifying the others pursuant to this SECTION 9.1.
9.2. NONSURVIVAL OF COVENANTS AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the covenants and agreements contained in SECTION 3, SECTION
6.5, SECTION 6.13 and SECTION 6.15 and any other covenant or agreement that
contemplates performance after the Effective Time.
9.3. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
the Confidentiality Agreement, any other documents and instruments referred to
herein and the Exhibits and Schedules hereto, constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the
44
subject matter hereof. This Agreement and the Exhibits and Schedules hereto
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any other right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than SECTION 6.5 and
SECTION 6.13, which are intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons.
9.4. ASSIGNMENT Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Acquisition Sub may assign, in its sole discretion, all of
its rights, interests and obligations hereunder to any newly-formed direct
wholly-owned Subsidiary of LVMH or Acquisition Sub. 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.
9.5. DIRECTOR, OFFICER AND STOCKHOLDER LIABILITY. The directors,
officers and stockholders of LVMH and its Affiliates shall not have any personal
liability or obligation arising under this Agreement (including any claims that
the Company may assert). The directors, officers, and stockholders of the
Company and its Affiliates shall not have any personal liability or obligation
arising under this Agreement (including any claims that LVMH or Acquisition Sub
may assert).
9.6. SPECIFIC PERFORMANCE. The parties recognize that in the event the
Company should refuse to perform under the provisions of this Agreement,
monetary damages alone will not be adequate. LVMH and Acquisition Sub shall
therefore be entitled, in addition to any other remedies which may be available,
to obtain specific performance of the terms of this Agreement. In the event of
any action to enforce this Agreement specifically, the Company hereby waives the
defense that there is an adequate remedy at law.
9.7. EFFECTIVENESS. This Agreement shall not become effective
until such time as this Agreement (or counterparts hereof) as been executed
and delivered by each of the parties hereto.
9.8. LEGAL HOLIDAY. If any date herein set forth for the performance of
any obligations or for the delivery of any instrument or notice as herein
provided should be on a Saturday, Sunday or legal holiday, the compliance with
such obligations or delivery shall be deemed acceptable on the next business day
following such Saturday, Sunday or legal holiday. As used herein, the term
"legal holiday" means any city, state or federal holiday for which financial
institutions or post offices are generally closed in New York City or the State
of New York for observance thereof.
9.9. CONSTRUCTION. Whenever used in this Agreement, the singular shall
include the plural and vice versa (where applicable), the use of the masculine,
feminine or neuter gender shall include the other genders (unless the context
otherwise requires), the words "hereof," "herein," "hereto," "hereby,"
"hereunder" and other words of similar import refer to this Agreement as a whole
(including all schedules and exhibits), and the words "include", "includes" and
"including" shall mean "include, without
45
limitation", "includes, without limitation" and "including, without limitation",
respectively. This Agreement shall not be construed more strictly against one
party than against the other merely by virtue of the fact that it may have been
prepared by counsel for one of the parties, it being recognized that LVMH,
Acquisition Sub and the Company have all contributed substantially and
materially to the preparation of this Agreement. The headings of various
Sections in this Agreement are for convenience only, and are not to be utilized
in construing the content or meaning of the substantive provisions hereof.
9.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to its
conflict of laws rules.
9.11. REMEDIES CUMULATIVE. Except as otherwise provided herein, all
remedies of any party hereunder are cumulative and not alternative, and are in
addition to any other remedies available at law, in equity or otherwise.
9.12. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any of which may contain the signatures of less than
all parties, and all of which together shall constitute a single agreement.
9.13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law. The provisions hereof shall be deemed independent and severable,
and the invalidity or partial invalidity or enforceability of any one provision
shall not affect the validity or enforceability of any other provision hereof.
9.14. SUBMISSION TO JURISDICTION; WAIVERS. Each of the parties to this
Agreement irrevocably agrees that any legal action or proceeding with respect to
this Agreement, or for recognition and enforcement of any judgment in respect
hereof, brought by any other party hereto or its successors or assigns may be
brought and determined in the Chancery or other Courts of the State of Delaware,
and each party hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
party hereby irrevocably waives, and agrees not to assert, by way of motion, as
a defense, counterclaim or otherwise, in any action or proceeding with respect
to this Agreement (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from the
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
(c) to the fullest extent permitted by applicable Law, that (i) the suit, action
or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts, and (d)
any right to a trial by jury.
9.15. DEFINITION OF KNOWLEDGE. As used herein, the word "knowledge"
shall, with respect to the Company, mean the actual knowledge of those
people listed on SCHEDULE 9.15.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
46
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PARENT:
LVMH MOET XXXXXXXX XXXXX VUITTON INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
-------------------------------
Title: Senior Vice President
--------------------------
ACQUISITION SUB:
DKI ACQUISITION, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
-------------------------------
Title: President
--------------------------
THE COMPANY:
XXXXX KARAN INTERNATIONAL INC.
By: /s/ Xxxx X. Idol
--------------------------------
Name: Xxxx X. Idol
-------------------------------
Title: Chief Executive Officer
-------------------------------
47
LVMH S.A. hereby accepts and agrees to Sections 6.15 and 9.14 of this Agreement
and acknowledges that the Company (and, if any breach of Section 6.15 relates to
Section 6.5 or Section 6.13 of this Agreement, any Person who may enforce
Section 6.5 or Section 6.13, as the case may be, pursuant to Section 9.3 of this
Agreement) may proceed directly against LVMH S.A. in the event of any breach of
Section 6.15.
LVMH MOET XXXXXXXX XXXXX VUITTON S.A.
By: /s/ Xxxx Xxxxxxxx
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Name: / Xxxx Xxxxxxxx
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Title:
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48
