Exhibit 99.5
AGREEMENT AS TO
SURRENDER AND CANCELLATION OF OPTIONS
THIS AGREEMENT AS TO SURRENDER AND CANCELLATION OF OPTIONS
("Agreement") is entered into as of the 22nd day of April, 2004 by and among
Xxxxxxxx'x Holdings Inc., a Delaware corporation (the "Company"), and Xxxxxx
X. Xxxxxxxx, an individual resident of the State of New York (the
"Optionholder").
W I T N E S S E T H:
WHEREAS, the Optionholder holds options to purchase (i) 165,000
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock"), at an exercise price equal to $6.125 per share, and (ii) 150,000
shares of Common Stock, at an exercise price equal to $7.75 per share
(collectively, the "Options");
WHEREAS, the Options have been issued under the Company's Amended and
Restated 2001 Stock Option Plan (the "2001 Plan") pursuant to (i) that certain
Incentive Stock Option Contract (the "March Option Contract"), dated March 25,
2002, by and between the Company and the Optionholder, a copy of which is
attached hereto as Exhibit A, and (ii) that certain Incentive Stock Option
Contract (the "May Option Contract" and, together with the March Option
Contract, the "Option Contracts"), dated May 10, 2002, by and between the
Company and the Optionholder, a copy of which is attached hereto as Exhibit B;
WHEREAS, the Company has entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of the date hereof, by and among the
Company, Designer Apparel Holding Company, a Delaware corporation ("Parent"),
and DAH Merger Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will be
merged (the "Merger") with and into the Company with the Company surviving the
Merger as a wholly owned subsidiary of Parent;
WHEREAS, Optionholder is entering into this Agreement as a material
inducement for Parent to enter into such Merger Agreement;
WHEREAS, effective as of the Effective Time (as defined in the Merger
Agreement), the Optionholder desires to surrender and cancel Options to
purchase (i) 165,000 shares of Common Stock, at an exercise price equal to
$6.125 per share, issued pursuant to the March Option Contract (the "March
Cancelled Options") and (ii) 68,033 shares of Common Stock, at an exercise
price equal to $7.75 per share, issued pursuant to the May Option Contract
(the "May Cancelled Options" and, together with the March Cancelled Options,
the "Cancelled Options"), in consideration of a cash payment from the Company;
WHEREAS, at the Closing or as soon as practicable after Closing, the
Company has agreed to pay (i) $16.875 (less appropriate tax withholdings) for
each share of Common Stock underlying the March Cancelled Options (the "March
Cash Consideration") and (ii) $15.25 (less appropriate tax withholdings) for
each share of Common Stock underlying the May Cancelled Options (the "May Cash
Consideration");
WHEREAS, effective as of the Effective Time, the Optionholder desires
to retain Options to purchase 81,967 shares of Common Stock, at an exercise
price equal to $7.75 per share (collectively, the "Retained Options"), under
the same terms and conditions contained in the May Option Contract and the
2001 Plan, including, without limitation, the anti-dilution provisions set
forth in Section 12 of the 2001 Plan, after the Effective Time, except as
modified in Section 4 hereof;
WHEREAS, the Company has agreed that, the Retained Options will
remain outstanding after the Effective Time and will be subject to the terms
and conditions contained in the May Option Contract and the 2001 Plan,
including, without limitation, the anti-dilution provisions set forth in
Section 12 of the 2001 Plan, except as otherwise provided herein; and
WHEREAS, as further inducement to the Parent and Merger Sub to
consummate the Merger, the Optionholder has agreed (i) not to exercise any of
the Options during the Holding Period (as defined below) and (ii) to enter
into a Voting Agreement (as defined below) if it purchases or otherwise
acquires any shares of Common Stock during the Holding Period.
NOW, THEREFORE, in consideration of the premises, the mutual promises
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Ownership. The Optionholder represents and warrants that the
Optionholder is the only legal and beneficial owner of the Options and any
other legal and equitable rights and claims of any kind under the Option
Contracts and that the Optionholder has not assigned, pledged or contracted to
assign or pledge the Options or any other such rights or claims.
2. Surrender and Cancellation of Cancelled Options. As of the
Effective Time and without necessity of any further action or approval by the
Optionholder, all of the Cancelled Options, including, without limitation, the
Option Certificates evidencing the same, whether or not turned over to the
Company, shall be deemed surrendered and cancelled, and such Cancelled Options
will be converted automatically into the right to receive the March Cash
Consideration or the May Cash Consideration, as applicable, for each share of
Common Stock underlying the Cancelled Options and such Optionholder shall be
deemed to have released Parent, Merger Sub and the Company from all claims
arising from the grant or surrender or cancellation of such Optionholder's
Cancelled Options. The Optionholder acknowledges to the extent any Cancelled
Options were incentive stock options ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") when
granted, the cancellation of and payment for such Cancelled Options will not
be subject to ISO treatment.
3. Investment Representation. The Optionholder understands his rights
with respect to the Cancelled Options under the terms of the Option Contracts,
the 2001 Plan, applicable law and otherwise, and the Optionholder agrees that
the March Cash Consideration and the May Cash Consideration, as applicable, is
fair and reasonable and consistent with those rights. The execution and
delivery of this Agreement by the Optionholder will satisfy any consent
obligations required of the Optionholder under the Option Contracts, the 2001
Plan, applicable law or otherwise. The Optionholder has relied solely upon the
advice of his own counsel, accountant and other advisors, with regard to the
legal, investment, tax and other considerations regarding this Agreement and
the transactions contemplated hereby.
4. Continuation of Retained Options. The Optionholder and the Company
hereby acknowledge and agree that the Retained Options will remain outstanding
as of the Effective Time and that such Retained Options will continue to be
governed by the terms and conditions contained in the May Option Contract and
the 2001 Plan; provided that the Retained Options will not be incentive stock
options within the meaning of Section 422 of the Code, and further provided
that, (i) the option term for the Retained Options shall be extended to the
date that is ten (10) years from the date of the Effective Time, (ii) the
Retained Options shall be nonforfeitable and fully exercisable during such
option term, and (iii) the Retained Options shall also be subject to a
cancellation payment in the event of a Change of Control as defined in and
described in Section 15 of the employment agreement between Optionholder and
the Company which becomes effective at the Effective Time. The Company agrees
to take any action necessary to make appropriate adjustments to the Retained
Options as of or as soon as practicable after the Effective Time as provided
in Section 12 of the 2001 Plan, and to reflect the changes in the terms of the
Retained Options as described in the immediately preceding sentence.
5. Holding Period.
(a) The Optionholder hereby further agrees not to exercise
any of the Options from the period beginning on the date of this Agreement and
ending as of the Effective Time or the earlier termination of the Merger
Agreement (the "Holding Period).
(b) In the event that the Optionholder purchases or
otherwise acquires shares of Common Stock during the Holding Period, the
Optionholder hereby agrees (i) to enter into a voting agreement (the "Voting
Agreement"), in a form reasonably satisfactory to Parent, pursuant to which
the Optionholder will agree to vote or consent, or at the request of Parent,
to grant Parent a proxy to vote, all of his shares of Common Stock in favor of
approval of the Merger and adoption of the Merger Agreement and against any
Acquisition Proposal (as defined in the Merger Agreement), or other
acquisition proposal or agreement submitted to the stockholders of the Company
that would reasonably be expected to result in a breach of a provision of the
Merger Agreement or to impede with, discourage or adversely effect the Merger
and (ii) to execute and deliver any additional documents deemed by Parent to
be reasonably necessary or desirable to effect the foregoing.
6. Notices. All notices to any party hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or by
courier, or if sent by registered or certified mail, postage prepaid, or by
telecopy, as follows:
If to the Company: 0000 Xxxxxx Xxxxxx
Xxxxx, Xxx Xxxx 00000
Attn: Co Chairman of the Board
If to the Optionholder: Xxxxxx X. Xxxxxxxx
c/x Xxxxxxxx'x Holdings Inc.
0000 Xxxxxx Xxxxxx
Xxxxx, Xxx Xxxx 00000
7. Termination. This Agreement shall not be terminated without the
prior written consent of Parent. Notwithstanding the immediately preceding
sentence, this Agreement and all obligations of the parties hereunder
immediately shall terminate and be without further force and effect upon the
termination of the Merger Agreement pursuant to the terms thereof.
8. Amendments and Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
(i) signed by the parties hereto, and (ii) consented to in writing by Parent.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
10. Further Assurances. The Optionholder agrees to furnish upon
request of the Company (or Parent after the Merger) such further information,
to execute and deliver to the Company (or to Parent after the Merger) such
other documents, and to do such other acts and things, all as the Company (or
Parent after the Merger) may reasonably request (and at the expense of the
Company or Parent) for the purpose of carrying out the intent of this
Agreement.
11. Binding Nature. This Agreement shall be binding upon and shall
inure to the benefit of each of the parties hereto that have executed this
Agreement as set forth below and, in the case of Optionholder, shall be
binding upon and shall inure to the benefit of Optionholder's heirs, legatees,
beneficiaries and personal representatives. THE OPTIONHOLDER INTENDS FOR THE
AUTHORIZATIONS AND AGREEMENTS IN THIS AGREEMENT TO REMAIN IN FORCE AND NOT BE
AFFECTED IF THE OPTIONHOLDER SUBSEQUENTLY DIES OR BECOMES MENTALLY OR
PHYSICALLY DISABLED, INCAPACITATED OR INCOMPETENT, AND DOES HEREBY DIRECT THAT
NO FILING OF AN INVENTORY NOR POSTING OF A SURETY BOND BE REQUIRED.
12. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements (whether written or oral and whether express
or implied) among or between the parties hereto to the extent related to the
subject matter of this Agreement.
13. Governing Law. This Agreement shall be governed by the laws of
the State of New York, excluding choice of law principles.
14. Third-Party Beneficiary. Parent is a third-party beneficiary of
this Agreement and shall be entitled to enforce this Agreement against the
Optionholder in the same manner as if Parent were a party hereto.
IN WITNESS WHEREOF, the undersigned parties have set their hands and
seals as of the day and year first written above.
[SIGNATURES ON FOLLOWING PAGE]
[SIGNATURE PAGE TO XXXXXXXX SURRENDER AND CANCELLATION OF OPTIONS]
XXXXXXXX'X HOLDINGS INC.
By: /s/ Xxxxxxx X. Xxx
--------------------
Name: Xxxxxxx X. Xxx
Title: Co-Chairman
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
