AGREEMENT AND PLAN OF MERGER dated as of September 25,
1997 among THE WARNACO GROUP, INC., a Delaware corporation
("Parent"), WAC ACQUISITION CORPORATION, a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), and DESIGNER
HOLDINGS LTD., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent,
Sub and the Company have determined that the merger of Sub (or,
at the election of Parent as set forth in Section 1.01, a direct
wholly owned subsidiary of Parent other than Sub) with and into
the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, would be fair to and in
the best interests of their respective stockholders, and such
Boards of Directors have approved such Merger, pursuant to which
(a) each share of Common Stock, each having a par value of one
cent ($0.01) of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time of the Merger
(as defined in Section 1.03) will be converted into the right to
receive shares of Class A Common Stock, par value $0.01 per
share, of Parent ("Parent Class A Common Stock"), other than
shares of Company Common Stock owned, directly or indirectly, by
the Company or any wholly owned subsidiary (as defined in Section
8.03) of the Company or held by the Company as treasury shares or
owned by Parent, Sub or any other wholly owned subsidiary of
Parent.
WHEREAS, the affirmative vote of a majority of the
outstanding shares of the Company Common Stock is required for
the approval and adoption of the Merger and this Merger Agreement
(the "Company Stockholder Approval");
WHEREAS, to the extent required in accordance with
applicable regulations of the New York Stock Exchange (the
"NYSE"), the issuance of shares of Parent Class A Common Stock in
connection with the transactions contemplated hereby requires the
affirmative vote of a majority of shares present in person or
represented by proxy and entitled to vote thereon at a meeting of
the holders of Parent Class A Common Stock;
WHEREAS, as a condition to their willingness to enter
into this Agreement, Parent and Sub have required that New Rio,
L.L.C. (the "Stockholder") and the members of Stockholder
signatory thereto (the "Members") (collectively, the "Sellers")
enter into, and the Sellers have agreed to enter into, the Stock
Exchange Agreement with Parent dated of even date herewith (as
amended from time to time in accordance with its terms, the
"Stock Exchange Agreement") relating to the exchange by the
Stockholder (the "Exchange") of all of the outstanding shares of
Company Common Stock owned by it (the "Stockholder Shares"),
which represent a majority of the outstanding shares of Company
Common Stock, in exchange for shares of Parent Class A Common
Stock on the terms set forth in the Stock Exchange Agreement,
and, in order to induce Parent and Sub to enter into this
Agreement, the Board of the Directors of the Company has approved
the entering into by Parent, the Members and the Stockholder of
the Stock Exchange Agreement and the consummation of the
transactions contemplated thereby;
WHEREAS, Parent, Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is
intended that the Exchange and the Merger qualify as a
reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements contained
in this Agreement, the parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01 The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in accordance
with the Delaware General Corporation Law (the "DGCL"), Sub shall
be merged with and into the Company at the Effective Time of the
Merger. Upon the Effective Time of the Merger, the separate
existence of Sub shall cease, and the Company shall continue as
the surviving corporation (the "Surviving Corporation"). At the
election of Parent, any direct wholly owned subsidiary of Parent
other than Sub may be substituted for Sub as a constituent
corporation in the Merger, and, in the event that Parent notifies
the Company that it desires to substitute such a subsidiary, the
parties agree to amend this Agreement so that such substituted
subsidiary shall become a signatory hereto as "Sub."
SECTION 1.02 Closing. Unless this Agreement shall
have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Section 7.01 and subject to
the satisfaction or waiver of the conditions set forth in Article
VI, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which date shall be no later than the second business day
after satisfaction of the conditions set forth in Article VI, at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 1.03 Effective Time of the Merger. Upon the
Closing, the parties shall file a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State
of Delaware and shall make all other filings or recordings
required under the DGCL. The Merger shall become effective at
such time as the Certificate of Merger shall have been duly filed
with the Secretary of State of the State of Delaware, or at such
later time as is agreed by Parent and the Company and specified
in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time of the Merger").
SECTION 1.04 Effects of the Merger. The Merger shall
have the effects set forth in Section 259 of the DGCL (or any
successor provision).
SECTION 1.05 Certificate of Incorporation; By-Laws.
(a) The certificate of incorporation of the Company, as in
effect immediately prior to the Effective Time of the Merger,
shall be the certificate of incorporation of the Surviving
Corporation, except that at the Effective Time of the Merger such
certificate of incorporation shall be amended as follows: (i)
Article Fourth shall be amended to read in its entirety as
follows: "The total number of shares of stock which the
Corporation shall have the authority to issue is 1,000 shares,
each having a par value of one cent ($0.01)"; (ii) paragraph (6)
of Article Fifth shall be deleted in its entirety; and (iii) the
second paragraph of Article Sixth shall be deleted in its
entirety.
(b) The By-laws of Sub as in effect at the Effective
Time of the Merger shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.06 Directors. The directors of Sub at the
Effective Time of the Merger shall be the directors of the
Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be.
SECTION 1.07 Officers. The officers of Sub at the
Effective Time of the Merger shall be the officers of the
Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01 Effect on Capital Stock. As of the
Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Sub:
(a) Common Stock of Sub. Each share of common stock,
par value $0.01 per share, of Sub issued and outstanding
immediately prior to the Effective Time of the Merger shall be
converted into one share of the common stock of the Surviving
Corporation and shall constitute the only issued and outstanding
capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock. Each share of Company Common Stock that is
owned by the Company or held by the Company as treasury shares or
owned by any direct or indirect wholly owned subsidiary of the
Company, and each share of Company Common Stock that is owned by
Parent, Sub or any other direct or indirect wholly owned
subsidiary of Parent shall automatically be cancelled and retired
and shall cease to exist, and no Parent Class A Common Stock or
other consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of Company Common Stock. Except as
otherwise provided herein, each issued and outstanding share of
Company Common Stock shall be converted into the right to receive
from Parent .324 of a fully paid and nonassessable share of
Parent Class A Common Stock (the "Exchange Ratio"); provided,
however, that, in any event, if between the date of this
Agreement and the Effective Time of the Merger the outstanding
shares of Parent Class A Common Stock shall have been changed
into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the
Exchange Ratio shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(d) Treatment of Trust Preferred Securities;
Convertible Debentures. Prior to or concurrently with the
Closing, Parent and the Company shall take such steps as are
necessary to ensure the resignation of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ as Trustees of Designer Finance Trust. In addition,
Parent and the Company shall take such actions as may be
necessary to ensure compliance by the Company and Parent with
Section 1304 of the Indenture dated as of November 1, 1996 (the
"Indenture"), relating to $123,711,350 of 6% Convertible
Debentures Due 2016 (the "Convertible Debentures"), and shall
take such steps as are necessary to ensure that holders of the
Convertible Debentures shall, after the Effective Time of the
Merger, have the right to convert such securities into shares of
Parent Class A Common Stock on the terms and conditions set forth
in the Indenture.
(e) Cancellation and Retirement of Company Common
Stock. From and after the Effective Time of the Merger, all
shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall no longer be
outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time of the Merger represented
shares of Company Common Stock ("Company Share Certificate")
shall cease to have any rights with respect thereto, except the
right to receive the consideration to be issued to holders of
Company Common Stock in the Merger pursuant to Section 2.01(c)
(the "Merger Consideration"), any cash in lieu of fractional
shares of Parent Class A Common Stock to be paid in consideration
therefor upon surrender of such certificate in accordance with
Section 2.04 and any dividends payable pursuant to Section
2.03(f).
SECTION 1.02 Stock Plans. As soon as practicable
following the date of this Agreement, but in any event prior to
the consummation of the Exchange, the Board of Directors of the
Company (or, if appropriate, any committee administering the
Stock Plans (as defined below)) shall adopt such resolutions or
take such other actions as may be required to effect the
following (it being understood that if the following is not
permitted pursuant to the terms of the Stock Plans, the Company
shall use its reasonable best efforts to obtain any consents or
take any other action necessary in order to effect the
following):
(a) The Company shall adjust the terms of all
outstanding employee or director stock options to purchase shares
of Company Common Stock ("Company Stock Options") granted under
any stock option or stock purchase plan, program or arrangement
of the Company, including the Designer Holdings Ltd. 1996 Stock
Option and Incentive Plan and the 1996 Outside Director Stock
Option Plan (collectively, the "Stock Plans"), whether or not
then exercisable, to provide that, at the Effective Time of the
Merger, each Company Stock Option outstanding immediately prior
to the Effective Time of the Merger shall be cancelled to the
extent that the exercise price of such Company Stock Option
equals or exceeds $11 per share. With respect to any Company
Stock Option not cancelled pursuant to the preceding sentence,
such Company Stock Option shall be deemed to constitute an option
(each, a "Parent Stock Option") to acquire, on the same terms and
conditions as were applicable under such Company Stock Option,
the number of shares of Parent Class A Common Stock equal to the
product of (1) the number of shares of Company Common Stock
issuable upon exercise of such Company Stock Option and (2) the
Exchange Ratio, at a price per share equal to (1) the aggregate
exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (2)
the number of shares of Parent Class A Common Stock issuable per
share of Company Common Stock upon exercise of such Company Stock
Option as set forth above; provided, however, that, after
aggregating all the shares of a holder subject to Company Stock
Options, any fractional share of Parent Class A Common Stock
resulting from such calculation for such holder shall be rounded
down to the nearest whole share; and provided, further, that in
the case of any Company Stock Option to which Sections 422 and
423 of the Code applies by reason of its qualification under any
of Sections 422-424 of the Code ("qualified stock options"),
Parent and the Company shall use their reasonable best efforts to
cause the option price, the number of shares purchasable pursuant
to such option, the terms and conditions of exercise of such
option and such other terms and conditions of such option to be
determined in order to comply with Section 424(a) of the Code;
and
(b) Except as provided herein or as otherwise agreed
to by the parties, the Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any
subsidiary shall terminate as of the Effective Time of the
Merger. After the Merger, each Parent Stock Option shall be
exercisable upon the same terms and conditions (including
conditions relating to vesting and exercisability) as were
applicable to the Company Stock Options immediately prior to the
Merger and the Company shall use its reasonable best efforts to
ensure that following the Effective Time of the Merger no holder
of a Company Stock Option nor any participant in any Stock Plan
shall have any right thereunder to acquire equity securities of
the Company or the Surviving Corporation.
SECTION 2.03 Exchange of Certificates. (a) Prior to
the Effective Time of the Merger, Parent shall appoint an agent
(the "Exchange Agent") for the purpose of exchanging Company
Share Certificates for the Merger Consideration. Immediately
following the Effective Time of the Merger, Parent shall deposit
with the Exchange Agent, for the benefit of the holders of
Company Share Certificates, certificates representing the Parent
Common Stock issuable pursuant to Section 2.01 in exchange for
Company Share Certificates. Promptly after the Effective Time of
the Merger Parent will send, or will cause the Exchange Agent to
send, to each holder of Company Share Certificates at the
Effective Time of the Merger (i) a letter of transmittal for use
in such exchange which shall specify that delivery of the Merger
Consideration shall be effected, and risk of loss and title to
the certificates representing Parent Class A Common Stock and
Company Share Certificates shall pass, only upon proper delivery
of the Company Share Certificates to the Exchange Agent and (ii)
instructions for use in effecting the surrender of such Company
Share Certificates in exchange for the certificates representing
Parent Class A Common Stock.
(b) Each holder of Company Share Certificates that have
been converted into a right to receive the Merger Consideration,
upon surrender to the Exchange Agent of such Company Share
Certificates, together with a properly completed letter of
transmittal covering such Company Share Certificates, will be
entitled to receive the Merger Consideration payable in respect
of such Company Share Certificates and any dividends payable
pursuant to Section 2.03(f). Until so surrendered, each such
Company Share Certificate shall, after the Effective Time,
represent for all purposes only the right to receive the Merger
Consideration, any cash payable in lieu of fractional shares
pursuant to Section 2.04 and any dividends payable pursuant to
Section 2.03(f).
(c) If any portion of the Merger Consideration is to be
paid to a person other than the registered holder of a Company
Share Certificate, it shall be a condition to such payment that
such Company Share Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Exchange Agent
any transfer or other taxes required by reason of the issuance of
shares of Parent Class A Common Stock in exchange for the Company
Share Certificate so surrendered or establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not
applicable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock. If,
after the Effective Time, Company Share Certificates are
presented to the Surviving Corporation, they shall be cancelled
and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this Article II.
(e) Any portion of the Merger Consideration made available
to the Exchange Agent pursuant to Section 2.03(a) that remains
unclaimed by the holders of Company Share Certificates six months
after the Effective Time of the Merger shall be returned to
Parent, upon demand, and any such holder who has not exchanged
his Company Share Certificates for the Merger Consideration in
accordance with this Section 2.03 prior to that time shall
thereafter look only to Parent for payment of the Merger
Consideration, any cash payable in lieu of fractional shares
pursuant to Section 2.04 and any dividends payable pursuant to
Section 2.03(f) in respect of his shares. Notwithstanding the
foregoing, Parent shall not be liable to any holder of Company
Share Certificates for any amount paid to a public official
pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of Company Share Certificates
seven years after the Effective Time of the Merger (or such
earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become
the property of Parent free and clear of any claims or interest
of any person previously entitled thereto.
(f) No dividends or other distributions with respect to
Parent Class A Common Stock issued in the Merger shall be paid to
the holder of any unsurrendered Company Share Certificates until
such certificates are surrendered as provided in this Section
2.03. Subject to the effect of applicable laws, following the
surrender of such certificates, there shall be paid, without
interest, to the record holder of the Parent Class A Common Stock
issued in exchange therefor at the time of such surrender, the
amount of dividends or other distributions with a record date
after the Effective Time of the Merger payable prior to or on the
date of such surrender with respect to such whole shares of
Parent Class A Common Stock and not previously paid, less the
amount of any withholding taxes (if any) which may be required
thereon.
SECTION 2.04 Fractional Shares. (a) No fractional
shares of Parent Class A Common Stock shall be issued in the
Merger, but in lieu thereof each holder of Company Share
Certificates otherwise entitled to a fractional share of Parent
Class A Common Stock will be entitled to receive, from the
Exchange Agent in accordance with the provisions of this Section
2.04, a cash payment in lieu of such fractional shares of Parent
Class A Common Stock representing such holder's proportionate
interest, if any, in the net proceeds from the sale by the
Exchange Agent in one or more transactions of (i) the number of
shares of Parent Class A Common Stock delivered to the Exchange
Agent by Parent pursuant to Section 2.03(a) over (ii) the
aggregate number of whole shares of Parent Class A Common Stock
to be distributed to the holders of the Company Share
Certificates pursuant to Section 2.03(b) (such excess being
herein called the "Excess Shares"). As soon as practicable after
the Effective Time of the Merger, the Exchange Agent, as agent
for the holders of the Company Share Certificates, shall sell the
Excess Shares at then prevailing prices on the NYSE all in the
manner provided in the following paragraph.
(b) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of
the NYSE and shall be executed in round lots to the extent
practicable. The proceeds from such sale or sales available for
distribution to the holders of Company Share Certificates shall
be reduced by the compensation payable to the Exchange Agent and
the expenses incurred by the Exchange Agent, in each case, in
connection with such sale or sales of the Excess Shares,
including all related commissions, transfer taxes and other
out-of-pocket transaction costs. Until the net proceeds of such
sale or sales have been distributed to the holders of Company
Share Certificates, the Exchange Agent shall hold such net
proceeds in trust for the holders of Company Share Certificates
(the "Common Shares Trust"). The Exchange Agent shall determine
the portion of the Common Shares Trust to which each holder of
Company Share Certificates shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising
the Common Shares Trust by a fraction, the numerator of which is
the amount of the fractional share interest to which such holder
of Company Share Certificates would otherwise be entitled and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Company Share Certificates
would otherwise be entitled.
(c) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Company Share
Certificates in lieu of any fractional shares of Parent Class A
Common Stock, the Exchange Agent shall pay such amounts without
interest to such holders of Company Share Certificates who have
surrendered their Company Share Certificates to the Exchange
Agent.
ARTICLE III
Representations and Warranties
SECTION 3.01 Representations and Warranties of the
Company. The Company represents and warrants to Parent and Sub
as follows:
(a) Organization, Standing and Corporate Power. Each
of the Company and each of its Subsidiaries (as defined in
Section 3.01(b)) is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority
to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the
aggregate) could not be reasonably expected to have a material
adverse effect (as defined in Section 8.03) with respect to the
Company. Attached as Section 3.01(a) of the disclosure schedule
("Disclosure Schedule") delivered to Parent by the Company at the
time of execution of this Agreement are complete and correct
copies of the Certificate of Incorporation and By-laws of the
Company. The Company has delivered to Parent complete and
correct copies of the articles of organization (or other
organizational documents) and by-laws of each of its
Subsidiaries, in each case as amended to the date of this
Agreement, as well as correct and complete copies of all minutes
of meetings of the Board of Directors and committees thereof of
the Company since March 1995.
(b) Subsidiaries. The only direct or indirect
subsidiaries of the Company (other than subsidiaries of the
Company that would not constitute in the aggregate a "Significant
Subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the Securities and Exchange Commission (the "SEC")) are those
listed in Section 3.01(b) of the Disclosure Schedule (the
"Subsidiaries"). All the outstanding shares of capital stock of
each such Subsidiary have been validly issued and are fully paid
and nonassessable and are owned (of record and beneficially) by
the Company, by another Subsidiary (wholly owned) of the Company
or by the Company and another such Subsidiary (wholly owned),
free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"). Except for the ownership
interests set forth in Section 3.01(b) of the Disclosure
Schedule, the Company does not own, directly or indirectly, any
capital stock or other ownership interest, and does not have any
option or similar right to acquire any assets or equity or other
ownership interest, in any corporation, partnership, business
association, joint venture or other entity.
(c) Capital Structure. As of September 22, 1997, the
authorized capital stock of the Company consists of (i)
75,000,000 shares of Company Common Stock, (ii) 1,300,000 shares
of Non-Voting Common Stock, each having a par value of one cent
($0.01) ("Non-Voting Common Stock"), and (iii) 15,000,000 shares
of preferred stock, each having a par value of one cent ($0.01)
("Preferred Stock"). As of the close of business on September
22, 1997, there were (i) 32,139,334 shares of Company Common
Stock, 0 shares of Non-Voting Common Stock and 0 shares of
Preferred Stock issued and outstanding; (ii) 20,000 shares of
Company Common Stock held in the treasury of the Company; (iii)
784,734 shares of Company Common Stock reserved for issuance upon
exercise of authorized but unissued Company Stock Options
pursuant to the Stock Plans; (iv) 5,102,400 shares of Company
Common Stock reserved for issuance upon the conversion of the
Convertible Debentures; and (v) 1,662,966 shares of Company
Common Stock issuable upon exercise of outstanding Company Stock
Options. Schedule 3.01(c) sets forth the name of each holder of
outstanding options to acquire shares of Company Common Stock,
the number of options held and the exercise prices of such
options. Except as set forth above, no shares of capital stock
or other equity securities of the Company are issued, reserved
for issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Other than the Convertible
Debentures and the Company Stock Options, there are no
outstanding bonds, debentures, notes or other indebtedness or
other securities of the Company having the right to vote (or
convertible into, or exchangeable or exercisable for, securities
having the right to vote) on any matters on which stockholders of
the Company may vote. Except as set forth above, there are no
outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or any of its
subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other
equity or voting securities of the Company or of any of its
subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. As of September 22, 1997, the only outstanding
indebtedness for borrowed money of the Company and its
subsidiaries is set forth on Schedule 3.01(c). Other than the
Convertible Debentures and the Company Stock Options, (i) there
are no outstanding contractual obligations, commitments,
understandings or arrangements of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire or make
any payment in respect of any shares of capital stock of the
Company or any of its subsidiaries and (ii) to the knowledge of
the Company, there are no irrevocable proxies with respect to
shares of capital stock of the Company or any subsidiary of the
Company. Except (i) as set forth above, (ii) for the
Registration Rights Agreement, dated as of May 9, 1996, among the
Company, the Stockholder and ▇▇▇▇▇▇ ▇▇▇▇▇, Inc., the registration
obligations under which will expire upon the issuance to ▇▇▇▇▇▇
▇▇▇▇▇, Inc. of shares of Parent Class A Common Stock in the
Merger, and (iii) Sections 11.2 and 11.3 of the Third Amended and
Restated Limited Liability Company Agreement of New Rio, L.L.C.,
dated as of May 9, 1996, the registration obligations under which
will expire upon the issuance to the Stockholder of shares of
Parent Class A Common Stock in the Exchange, there are no
agreements or arrangements pursuant to which the Company is or
could be required to register shares of Company Common Stock or
other securities under the Securities Act of 1933, as amended
(the "Securities Act"), or other agreements or arrangements with
or among any securityholders of the Company with respect to
securities of the Company.
(d) Authority; Noncontravention. The Company has the
requisite corporate and other power and authority to enter into
this Agreement and, subject to the Company Stockholder Approval
with respect to the consummation of the Merger, to consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to
the Company Stockholder Approval. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms. Except as disclosed in
Section 3.01(d) of the Disclosure Schedule, the execution and
delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with
the provisions hereof will not, conflict with, or result in any
breach or violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its subsidiaries under, (i)
the Certificate of Incorporation or By-laws of the Company or the
comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
Company or any of its subsidiaries or their respective properties
or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to the Company or any of its
subsidiaries or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts,
breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not be reasonably expected
to have a material adverse effect with respect to the Company or
could not reasonably be expected to prevent or materially delay
the ability of the Company to consummate the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, or
notice to, any Federal, state or local government or any court,
administrative agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of
this Agreement by the Company or the consummation by the Company
of the transactions contemplated hereby or thereby, except, with
respect to this Agreement, for (i) the filing of a premerger
notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) the filing with the SEC of (y) a proxy
statement relating to the Company Stockholder Approval (such
proxy statement as amended or supplemented from time to time,
together with the proxy statement, if necessary, for the Parent
Stockholder Approval, if necessary (as defined in Section
3.02(j)), the "Joint Proxy Statement"), and (z) such reports
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement,
(iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, the filing of a certificate of
merger with the appropriate authorities in the necessary
jurisdictions in the event Parent makes an election referred to
in Section 1.01, and the filing of appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or
notices as are set forth in Section 3.01(d) of the Disclosure
Schedule.
(e) SEC Documents; Undisclosed Liabilities. The
Company has filed all material required reports, schedules,
forms, statements and other documents with the SEC since May 9,
1996, and the Company has delivered or made available to Parent
all reports, schedules, forms, statements and other documents
filed by the Company with the SEC since such date (collectively,
and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC
Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the
Securities Act, or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents
(including any and all financial statements included therein) as
of such dates contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Except to the extent set forth in Section 3.01(e) of the
Disclosure Schedule and except to the extent revised or
superseded by a subsequent filing with the SEC (a copy of which
has been provided to Parent prior to the date of this Agreement),
none of the SEC Documents filed by the Company since January 1,
1997 and prior to the date of this Agreement (the "Recent SEC
Documents") contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The consolidated financial statements of the Company included in
all SEC Documents filed since January 1, 1997 (the "SEC Financial
Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles
(except, in the case of unaudited consolidated quarterly
statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments). Except as set
forth in Schedule 3.01(e), at the date of the most recent audited
financial statements of the Company included in the Recent SEC
Documents, neither the Company nor any of its subsidiaries had,
and since such date neither the Company nor any of such
subsidiaries has incurred, any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect with respect to the
Company. To the best of the Company's knowledge, (i) all
historical financial statements supplied to Parent by the Company
for periods subsequent to June 30, 1997 have been prepared in
accordance with generally accepted accounting principles (except
as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject to
normal year-end adjustments) and (ii) all financial data so
supplied for such periods is true and accurate in all material
respects.
(f) Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by Parent in connection with
the issuance of Parent Class A Common Stock in the Merger (the
"Form S-4") will, at the time the Form S-4 is filed with the SEC,
and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Joint Proxy Statement will,
at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholder Meeting (as defined in
Section 5.01(b)), contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, except that no
representation is made by the Company with respect to statements
made or incorporated by reference therein based on information
supplied by Parent or Sub for inclusion or incorporation by
reference in the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except as
disclosed in Section 3.01(g) of the Disclosure Schedule or in the
case of clause (ii), except as included in the Recent SEC
Documents, since the date of the most recent audited financial
statements included in the Recent SEC Documents (or, in the case
of clauses (i) and (iii), since June 30, 1997), the Company has
conducted its business in all material respects only in the
ordinary course consistent with past practice, and there is not
and has not been: (i) any material adverse change with respect to
the Company (except for changes generally applicable to the
economy in general and the specific industry in which the Company
operates); (ii) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to
have a material adverse effect or give rise to a material adverse
change with respect to the Company (except for changes generally
applicable to the economy in general and the specific industry in
which the Company operates); (iii) any event which, if it had
taken place following the execution of this Agreement, would not
have been permitted by Section 4.01 without the prior consent of
Parent; or (iv) any condition, event or occurrence which could
reasonably be expected to prevent or materially delay the ability
of the Company to consummate the transactions contemplated by
this Agreement.
(h) Litigation; Labor Matters; Compliance with Laws.
(i) Schedule 3.01(h) of the Disclosure Schedule set forth, as of
the date of this Agreement, all suits, actions, counterclaims,
proceedings or governmental or internal investigations pending
or, to the knowledge of the Company, threatened in writing
against or affecting the Company or any of its subsidiaries other
than those which could not reasonably be expected to result in
liability to the Company in excess of $150,000 in the aggregate.
None of such suits, actions, counterclaims, proceedings or
investigations (and no other suits, actions, counterclaims,
proceedings or investigations), individually or in the aggregate,
could reasonably be expected to have a material adverse effect
with respect to the Company or prevent or materially delay the
ability of the Company to consummate the transactions
contemplated by this Agreement or exploit all of the Company's
licensed and other intellectual property rights; in addition,
there is not any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries having, or which, insofar as
reasonably could be foreseen by the Company, in the future could
have, any such effect.
(ii) Except as disclosed in Section 3.01(h)(ii) of
the Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it
or any of its subsidiaries the subject of any proceeding
asserting that it or any subsidiary has committed an unfair labor
practice or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment nor is there
any strike, work stoppage or other labor dispute involving it or
any of its subsidiaries pending or, to its knowledge, threatened,
any of which could reasonably be expected to have a material
adverse effect with respect to the Company.
(iii) The conduct of the business of each of the
Company and each of its subsidiaries and, to the knowledge of the
Company, its contractors complies with all statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees or
arbitration awards applicable thereto, including the Foreign
Corrupt Practices Act, except for violations or failures so to
comply, if any, that, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect with
respect to the Company.
(i) Absence of Changes in Employee Benefit Plans.
Except as set forth on Schedule 3.01(i), since January 1, 1997,
there has not been any adoption or amendment by the Company or
any of its subsidiaries of any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other
plan, arrangement or understanding (whether formal or informal,
oral or written) under which the Company or any of its
subsidiaries currently has an obligation to provide benefits to
any current or former employee, officer or director of the
Company or any of its subsidiaries (collectively, "Employee
Benefit Plans"). Except as disclosed in Section 3.01(i) of the
Disclosure Schedule, there exist no written employment,
consulting, severance, change in control, termination or
indemnification agreements or any oral agreement regarding
compensation, benefits and other perquisites with respect to any
employee expected to earn in excess of $100,000 in total
compensation in 1997, between the Company or any of its
subsidiaries and any current or former employee, officer or
director of the Company or any of its subsidiaries ("Employment
Arrangements").
(j) ERISA Plans. (i) Section 3.01(j) of the
Disclosure Schedule contains a list of all "employee pension
benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA,
hereinafter a "Welfare Plan"), stock option, stock purchase,
deferred compensation plans or arrangements, and other material
employee fringe benefit plans or arrangements with respect to
which the Company and its subsidiaries or any other person or
entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each,
including the Company, a "Commonly Controlled Entity") have any
liability on account of any present or former officers,
employees, directors or independent contractors of the Company
(all the foregoing, in addition to Employee Benefit Plans defined
in Section 3.01(i), collectively being herein called "Benefit
Plans"). The Company has made available to Parent true, complete
and correct copies of (1) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (2) the two
most recent annual reports on Form 5500 and attached schedules
filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required by applicable law),
(3) the most recent summary plan description for each Benefit
Plan for which such a summary plan description is required by
applicable law, (4) each trust agreement and material insurance
or annuity contract relating to any Benefit Plan, (5) the most
recent determination letter, if applicable, for any Benefit Plan
and (6) each written Employment Arrangement.
(ii) Except as disclosed in Section 3.01(j) of the
Disclosure Schedule, each Benefit Plan has been established and
administered in all material respects in accordance with its
terms. All the Benefit Plans are in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations. Except as
disclosed in Section 3.01(j) of the Disclosure Schedule, all
reports, returns and similar documents with respect to the
Benefit Plans required to be filed with any governmental agency
or distributed to any Benefit Plan participant have been duly and
timely filed or distributed. Except as disclosed in Section
3.01(j) of the Disclosure Schedule, the Company has not received
notice of any investigations by any governmental agency,
termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Benefit Plans),
suits or proceedings against or involving any Benefit Plan or
asserting any rights or claims to benefits under any Benefit Plan
that could give rise to any material liability, and, to the best
of the Company's knowledge, there are not any facts that could
give rise to any material liability in the event of any such
investigation, claim, suit or proceeding. No event has occurred
and no condition exists that could reasonably be expected to
subject any Commonly Controlled Entity to any material tax, fine
or penalty imposed by ERISA, the Code or other applicable laws,
rules and regulations.
(iii) Except as disclosed in Section 3.01(j) of
the Disclosure Schedule, (1) all contributions to, and payments
from, the Benefit Plans that may have been required to be made in
accordance with the terms of the Benefit Plans, any applicable
collective bargaining agreement and, when applicable, Section 302
of ERISA or Section 412 of the Code, have been timely made.
(iv) Except as disclosed in Schedule 3.01(j), each
Company Benefit Plan intended to qualify under Section 401(a) of
the Code has been the subject of a determination letter from the
Internal Revenue Service to the effect that such Benefit Plan is
qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code or application
therefor has been timely made; no such determination letter has
been revoked, and, to the knowledge of the Company, revocation
has not been threatened nor is it expected.
(v) Schedule 3.01(j) discloses whether: (1) any
"prohibited transaction" (as defined in Section 4975 of the Code
or Section 406 of ERISA) has occurred during the past three years
that involves the assets of any Benefit Plan that could subject
the Company, any of its employees or a Company indemnified
fiduciary under any Benefit Plan to a material tax or penalty on
prohibited transactions imposed by Section 4975 of ERISA or the
sanctions imposed under Title I of ERISA; or (2) any of the
Company Benefit Plans has been terminated.
(vi) Other than the ILGWU National Retirement
Fund, no Commonly Controlled Entity sponsors, maintains,
contributes to or has any liability in respect of any "employee
benefit plan" which is subject to Title IV of ERISA, including
any multiemployer plan, multiple employer plan or single-employer
plan.
(vii) No Commonly Controlled Entity has
incurred any material liability that remains unsatisfied to a
Pension Plan (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for the payment
of premiums not yet due).
(viii) Except as disclosed in Schedule 3.01(j),
no Commonly Controlled Entity has incurred any "withdrawal
liability" (as defined in Section 4201 of ERISA), which liability
has not been fully paid as of the date hereof, or has announced
an intention to withdraw, but has not yet completely withdrawn,
from a "multiemployer plan"; and, to the best of the Company's
knowledge, no action has been taken, and no circumstances exist,
that alone or with the passage of time could result in either a
partial or complete withdrawal from such a Multiemployer Plan by
any Commonly Controlled Entity.
(k) Certain Employee Payments. Except as disclosed in
Section 3.01(k) of the Disclosure Schedule, or as may be
necessary or appropriate to give effect to Section 2.02 no
Benefit Plan or Employment Arrangement provides for the payment
to any current or former director or employee of the Company or
any Commonly Controlled Entity of any money, other property or
rights, or accelerate other rights or benefits to any such
employee or director as a result of the transactions contemplated
by this Agreement, whether or not (i) such payment, acceleration
or provision would constitute a "parachute payment" (within the
meaning of Section 280G of the Code), or (ii) some other
subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered. Except as
disclosed in Section 3.01(k) of the Disclosure Schedule, no
payment, acceleration or provision referred to in the preceding
sentence would constitute or give rise to a "parachute payment"
within the meaning of Section 280G of the Code.
(l) Tax Returns and Tax Payments. The Company and
each of its subsidiaries, and any consolidated, combined, unitary
or aggregate group for Tax purposes of which the Company or any
of its subsidiaries is or has been a member (a "Consolidated
Group") has timely filed all Tax Returns required to be filed by
it and has paid all Taxes shown thereon to be due. The Company
and its subsidiaries have made adequate provision (to the extent
required by, and in accordance with generally accepted accounting
principles ("GAAP")) for all Taxes payable for any periods that
end before the Effective Time of the Merger for which no Tax
Returns have yet been filed and for any periods that begin before
the Effective Time of the Merger and end after the Effective Time
of the Merger to the extent such Taxes are attributable to the
portion of any such period ending at the Effective Time of the
Merger, and the charges, accruals and reserves for Taxes
reflected in the financial statements of the Company and its
subsidiaries are adequate under GAAP to cover the Tax liability
accruing or payable by the Company and its subsidiaries in
respect of periods prior to the date hereof. Except as set forth
in Section 3.01(l) of the Disclosure Schedule: (i) no material
claim for unpaid Taxes has become a lien against the property of
the Company or any of its subsidiaries or is being asserted
against the Company or any of its subsidiaries, (ii) no audit or
other proceeding with respect to any Taxes due from the Company
or any of its subsidiaries or any Tax Return of the Company or
any of its subsidiaries is pending, threatened, to the best of
the Company's knowledge, or being conducted by a Tax authority,
and (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by the Company nor any
of its subsidiaries and is currently in effect, (iv) neither the
Company or any of its subsidiaries (A) has been a member of a
Consolidated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the
Company) or (B) has any liability for the Taxes of any person
(other than the Company and its subsidiaries), including
liability arising from the application of Treasury Regulation
section 1.1502-6 or any analogous provision of state, local or
foreign law, or as a transferee or successor, by contract, or
otherwise, (v) no consent under Section 341(f) of the Code has
been filed with respect to the Company or any of its subsidiaries
and (vi) all Taxes required to be withheld, collected or
deposited by or with respect to the Company and each of its
subsidiaries have been timely withheld, collected or deposited,
as the case may be, and, to the extent required, have been paid
to the relevant taxing authority. As used herein, "Taxes" shall
mean all taxes of any kind, including those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any
return, report or statement required to be filed with any
governmental authority with respect to Taxes.
(m) Section 203 of the DGCL Not Applicable. The Board
of Directors of the Company has, prior to the execution hereof
and prior to the execution of the Stock Exchange Agreement, (i)
approved the execution and delivery by the Company of this
Agreement, and the execution and delivery by the parties thereto
of the Stock Exchange Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement
and the Exchange and the other transactions contemplated by the
Stock Exchange Agreement, and such approval and amendment are
sufficient to render inapplicable to this Agreement, the Merger,
the Exchange, the Stock Exchange Agreement and the other
transactions contemplated hereby and thereby, the restrictions of
Section 203(a) of the DGCL. Other than Section 203 of the DGCL,
(y) no state takeover statute or similar statute or regulation of
the State of Delaware (and, to the knowledge of the Company after
due inquiry, of any other state or jurisdiction) applies or
purports to apply to this Agreement, the Merger, the Exchange,
the Stock Exchange Agreement or any of the other transactions
contemplated hereby or thereby and (z) no provision of the
certificate of incorporation, by-laws or other governing
instruments of the Company or any of its subsidiaries or the
terms of any rights plan or preferred stock of the Company would,
directly or indirectly, restrict or impair the ability of Parent
to vote, or otherwise to exercise the rights of a stockholder
with respect to, securities of the Company and its subsidiaries
that may be acquired or controlled by Parent (including the
Stockholder Shares acquired pursuant to the Exchange) or permit
any stockholder to acquire securities of the Company or the
Surviving Corporation on a basis not available to Parent in the
event that Parent were to acquire securities of the Company
(including the Stockholder Shares acquired pursuant to the
Exchange).
(n) Environmental Matters. (i) Except as disclosed in
Section 3.01(n) of the Disclosure Schedule:
(A) The Company and its subsidiaries including
their predecessors (I) are, and have been at
all times since their formation, in
compliance in all material respects with all
applicable Environmental Laws; (II) hold all
material Environmental Permits (each of which
is in full force and effect) required for any
of their current or intended operations or
for any property owned, leased, or otherwise
operated by any of them; (III) are, and have
been, in compliance in all material respects
with all of their Environmental Permits; and
(IV) reasonably believe that: each of their
Environmental Permits will be timely renewed
and complied with, without material expense;
any additional Environmental Permits that may
be required of any of them will be timely
obtained and complied with, without material
expense; and compliance with any
Environmental Law that is or is expected to
become applicable to any of them will be
timely attained and maintained, without
material expense;
(B) None of the Company or its subsidiaries has
received any Environmental Claim, and none of
the Company or its subsidiaries is aware,
after reasonable inquiry, of any threatened
Environmental Claim or of any circumstances,
conditions or events that could reasonably be
expected to give rise to an Environmental
Claim, against the Company or any of its
subsidiaries, in each case that, individually
or in the aggregate, could reasonably be
expected to have a material adverse effect on
the Company;
(C) None of the Company or its subsidiaries has
entered into or agreed to any consent decree
or order under any Environmental Law, and
none of the Company or its subsidiaries is
subject to any judgment, decree or order of
any governmental authority relating to
compliance with any Environmental Law or to
investigation, cleanup, remediation or
removal of regulated substances under any
Environmental Law;
(D) There are no (I) underground storage tanks,
(II) polychlorinated biphenyls, (III)
asbestos or asbestos-containing materials or
(IV) Hazardous Materials present at any
facility currently or formerly owned, leased
or operated by the Company or any of its
subsidiaries that could reasonably be
expected to give rise to material liability
of the Company or any of its subsidiaries
under any Environmental Laws;
(E) There are no past (including with respect to
assets or businesses formerly owned, leased
or operated by the Company or any of its
subsidiaries) or present actions, activities,
events, conditions or circumstances,
including the release, threatened release,
emission, discharge, generation, treatment,
storage or disposal of Hazardous Materials,
that could reasonably be expected to give
rise to material liability of the Company or
any of its subsidiaries under any
Environmental Laws or any contract or
agreement; and
(F) None of the Company or its subsidiaries has
assumed or retained, by contract or operation
of law, any material liabilities of any kind,
fixed or contingent, under any Environmental
Law or with respect to any Hazardous Material
or Environmental Claim.
(ii) The items on Section 3.01(n) of the Disclosure
Schedule, individually and in the aggregate, could not reasonably
be expected to have a material adverse effect with respect to the
Company.
(iii) The Company has provided or made available to
Parent and Sub true and complete copies of all Environmental
Reports in its possession or control.
(iv) For purposes of this Agreement, the following
terms shall have the following meanings:
"Environmental Claim" means any written
notice, claim, demand, action, suit, complaint, proceeding or
other communication by any person alleging liability or potential
liability (including liability or potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines
or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, whether or
not owned, leased or operated by the Company or any of its
subsidiaries, or Parent or any of its subsidiaries, as the case
may be, or (ii) any Environmental Law or Environmental Permit.
"Environmental Laws" means any and all laws,
rules, orders, regulations, statutes, ordinances, guidelines,
codes, decrees, or other legally enforceable requirement
(including common law) of any foreign government, the United
States, or any state, local, municipal or other governmental
authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or
of human health, or employee health and safety, as has been, is
now, or may at any time hereafter be, in effect.
"Environmental Permits" means any and all
permits, licenses, approvals, registrations, notifications,
exemptions and any other authorization required under any
Environmental Law.
"Environmental Report" means any report,
study, assessment, audit, or other similar document that
addresses any issue of actual or potential noncompliance with, or
actual or potential liability under or cost arising out of, any
Environmental Law that may in any way affect the Company.
"Hazardous Materials" means any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity,
and any other substances or forces of any kind, whether or not
any such substance or force is defined as hazardous or toxic
under any Environmental Law, that is regulated pursuant to or
could give rise to liability under any Environmental Law.
(o) Material Contract Defaults; Non-Competes. (i)
The Company has provided or made available to Parent copies, and
has provided a true and correct list to Parent, of all material
contracts, agreements, commitments, arrangements, leases,
licenses, policies or other instruments to which it or any of its
subsidiaries is a party or by which it or any such subsidiary is
bound ("Material Contracts"). Neither the Company nor any of its
subsidiaries is, or has received any notice or has any knowledge
that any other party is, in default or unable to perform in any
respect under any such Material Contract, including any license
or agreement relating to intellectual property, except for those
defaults which could not reasonably be expected, either
individually or in the aggregate, to have a material adverse
effect with respect to the Company; and there has not occurred
any event that with the lapse of time or the giving of notice or
both would constitute such a material default.
(ii) Except as disclosed in Schedule 3.01(o),
neither the Company nor any of its subsidiaries is a party to any
agreement that expressly limits the ability of the Company or any
of its subsidiaries to compete in or conduct any line of business
or compete with any person in any geographic area or during any
period of time.
(p) Brokers. No broker, investment banker, financial
advisor or other person other ▇▇▇▇ ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇
& ▇▇▇▇▇ Incorporated is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
(q) Opinion of Financial Advisor. The Company has
received the opinion of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, dated the date of this Agreement, to the effect
that, as of the date thereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of the Company Common
Stock (other than the Stockholder and its affiliates and Parent
and its affiliates).
(r) Board Recommendation. The Board of Directors of
the Company, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions contemplated
hereby, including the Merger, and the Stock Exchange Agreement
and the transactions contemplated thereby, including the
Exchange, taken together, are fair to and in the best interests
of the stockholders of the Company (other than the Stockholder
and its affiliates), and (ii) resolved to recommend that the
holders of the shares of Company Common Stock approve and adopt
this Agreement and the transactions contemplated herein,
including the Merger.
(s) Required Company Vote. The Company Stockholder
Approval, being the affirmative vote of a majority of the
outstanding shares of Company Common Stock, is the only vote of
the holders of any class or series of the Company's securities
necessary to approve and adopt the Merger Agreement, the Merger
and the other transactions contemplated hereby. There is no vote
of the holders of any class or series of the Company's securities
necessary to approve the Stock Exchange Agreement or the
transactions contemplated thereby.
(t) Properties. Except as disclosed in Schedule
3.01(t) hereto, each of the Company and its subsidiaries (i) has
good and marketable title to all the properties and assets
reflected in the latest audited balance sheet included in the
Recent SEC Documents as being owned by the Company or one of its
subsidiaries or acquired after the date thereof which are,
individually or in the aggregate, material to the Company's
business on a consolidated basis (except properties sold or
otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of (A) all Liens except (1)
statutory liens securing payments not yet due and (2) such
imperfections or irregularities of title, or other Liens (other
than real property mortgages or deeds of trust) as do not
materially affect the use of the properties or assets subject
thereto or affected thereby or otherwise materially impair
business operations at such properties, and (B) all real property
mortgages and deeds of trust and (ii) is the lessee of all
leasehold estates reflected in Schedule 3.01(t) hereto or
acquired after the date thereof which are material to its
business on a consolidated basis and is in possession of the
properties purported to be leased thereunder, and each such lease
is in full force and effect and is valid without material default
(and the lessee has not received any notice of default, whether
or not material) thereunder by the lessee or, to the Company's
knowledge, the lessor.
(u) Trademarks and Related Contracts. The Company and
each of its subsidiaries owns the trademarks (including common
law names and marks and federally registered names and marks) set
forth on Schedule 3.01(u) in the United States and throughout the
world, and owns and or is licensed to use (in each case, clear of
any Liens), all patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the
conduct of its business as currently conducted which are material
to the condition (financial and other), business, or operations
of the Company (including all exclusive licensed rights in and to
the names and trademarks "▇▇▇▇▇▇ ▇▇▇▇▇", "CK/▇▇▇▇▇▇ ▇▇▇▇▇",
"▇▇▇▇▇▇ ▇▇▇▇▇ Jeans", "CK/▇▇▇▇▇▇ ▇▇▇▇▇ Jeans", "▇▇▇▇▇▇ ▇▇▇▇▇
Khakis" and "CK/▇▇▇▇▇▇ ▇▇▇▇▇ Khakis" (and variations thereof)
for, on and in connection with certain men's and women's jeans
and jeans-related items, khakis and khaki-related items and boys'
and girls' jeans and jeans-related items in the United States,
its territories and possessions, Mexico, Canada, South America
and Central America (as more fully described in Schedule 3.01(u)
hereto) and any variations or derivatives thereof used by the
Company or its subsidiaries and its licensees, agents and
distributors). To the best knowledge of the Company, (i) the use
of such patents, trademarks, trade names, service marks,
copyrights, technology, know-how and processes by the Company and
its subsidiaries and authorized users does not infringe on the
rights of any person, subject to such claims and infringements as
do not, in the aggregate, give rise to any liability on the part
of the Company and its subsidiaries which could have a material
adverse effect with respect to the Company and (ii) no person is
infringing on any right of the Company or any of its
subsidiaries, licensees or authorized users with respect to any
such patents, trademarks, service marks, trade names, copyrights,
technology, know-how or processes, except in each of cases (i) or
(ii) as set forth on Schedule 3.01(u). The Company and its
subsidiaries, and, to the best of the Company's knowledge,
licensees or authorized users are not in breach or violation in
any material respect of any agreement relating to the use of any
of the intellectual property identified in this provision, and
they have not received any notification written or oral from any
third party that there is any such violation, breach or inability
to perform under any such agreement. There are no agreements,
written or oral, except as set forth in Schedule 3.01(u), which
in any material respect limit or otherwise relate to any rights
by the Company or its shareholders to use any of its intellectual
property.
(v) Transactions with Affiliates. Except as set forth
on Schedule 3.01(v) and in the SEC Documents, from January 1,
1996 through the date of this Agreement, there has been no
transaction, agreement, arrangement or understanding, or any
related series thereof, between the Company or its subsidiaries
or contractors, on the one hand, and the Company's affiliates
(other than wholly-owned (excluding directors' and nominee
shares) subsidiaries of the Company), on the other hand, in which
the amount or value involved exceeded $60,000. As used in the
definition of "affiliate", the term "control" means possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or
otherwise.
SECTION 3.02 Representations and Warranties of Parent
and Sub. Parent and Sub represent and warrant to the Company as
follows:
(a) Organization, Standing and Corporate Power. Each
of Parent, Sub and the other Parent Subsidiaries (as defined in
Section 3.02(b)) is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority
to carry on its business as now being conducted. Each of Parent,
Sub and the other Parent Subsidiaries is duly qualified or
licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to have a material
adverse effect with respect to Parent. Parent has delivered to
the Company complete and correct copies of its Restated
Certificate of Incorporation and By-laws and the certificate of
incorporation (or other organizational documents) and by-laws of
Sub and the Significant Subsidiaries of Parent as listed in
Section 3.02(b) of the disclosure schedule (the "Parent
Disclosure Schedule") delivered to the Company by Parent at the
time of execution of this Agreement, in each case as amended to
the date of this Agreement.
(b) Subsidiaries. The only direct or indirect
subsidiaries of Parent (other than such subsidiaries that would
not constitute in the aggregate a Significant Subsidiary) are
listed in Section 3.02(b) of the Parent Disclosure Schedule
(together with Sub, the "Parent Subsidiaries"). All the
outstanding shares of capital stock of each such Parent
Subsidiary have been validly issued and are fully paid and
nonassessable and are owned (of record and beneficially) by
Parent, by another Parent Subsidiary (wholly owned) or by Parent
and another such Parent Subsidiary (wholly owned), free and clear
of all Liens. Except for the ownership interests set forth in
Section 3.02(b) of the Parent Disclosure Schedule, Parent does
not own, directly or indirectly, any capital stock or other
ownership interest, and does not have any option or other right
to acquire any assets or equity or other ownership interest in
any corporation, partnership, business association, joint venture
or other entity.
(c) Capital Structure. The authorized capital stock
of Parent consists of (i) 130,000,000 shares of Parent Class A
Common Stock and (ii) 10,000,000 shares of preferred stock, par
value $0.01 per share ("Parent Preferred Stock"). As of the
close of business on September 22, 1997, there are (i) 52,097,548
shares of Parent Class A Common Stock and no shares of Parent
Preferred Stock issued and outstanding; (ii) 739,363 shares of
Parent Class A Common Stock held in the treasury of Parent; and
(iii) 8,441,164 shares of Parent Class A Common Stock reserved
for issuance pursuant to the Employee Stock Plan, the 1993 Stock
Plan for Non-Employee Directors, and the Amended and Restated
1993 Stock Plan (the "Parent Stock Plans"). Except as set forth
above, no shares of capital stock or other equity securities of
Parent are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Parent are, and all shares
which may be issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no
outstanding bonds, debentures, notes or other indebtedness or
other securities of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Parent may
vote. Except as set forth above, there are no outstanding
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
Parent or any of its subsidiaries is a party or by which any of
them is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity or voting
securities of Parent or any of its subsidiaries or obligating
Parent or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Other than
pursuant to the Parent Stock Plans and the Citibank Equity
Options Stock Buyback Program, there are no outstanding
contractual obligations, commitments, understandings or
arrangements of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Parent or any of its subsidiaries.
The authorized capital stock of Sub consists of 100 shares of
common stock, par value $0.01 per share, all of which have been
validly issued, are fully paid and nonassessable and are owned by
Parent, free and clear of any Lien.
(d) Authority; Noncontravention. Parent and Sub have
all requisite corporate and other power and authority to enter
into this Agreement and, subject to the Parent Stockholder
Approval, to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by Parent
and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Parent and Sub, subject to the Parent Stockholder Approval. This
Agreement has been duly executed and delivered by each of Parent
and Sub and constitutes a valid and binding obligation of each of
Parent and Sub, enforceable against such party in accordance with
its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement
will not, conflict with, or result in any breach or violation of,
or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of or "put" right with respect to any obligation or
to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Parent or any of
its subsidiaries under, (i) the certificate of incorporation or
by-laws of Parent or Sub or the comparable charter or
organizational documents of any other subsidiary of Parent, (ii)
any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent, Sub or any other
subsidiary of Parent or their respective properties or assets or
(iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule, regulation or arbitration
award applicable to Parent, Sub or any other subsidiary of Parent
or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, breaches,
violations, defaults, rights, losses or Liens that individually
or in the aggregate could not reasonably be expected to have a
material adverse effect with respect to Parent or could not
reasonably be expected to prevent or materially delay the ability
of Parent to consummate the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any
Governmental Entity is required by or with respect to Parent, Sub
or any other subsidiary of Parent in connection with the
execution and delivery of this Agreement by Parent or Sub or the
consummation by Parent or Sub, as the case may be, of any of the
transactions contemplated hereby or thereby, except, with respect
to this Agreement, for (i) the filing of a premerger notification
and report form under the HSR Act, (ii) the filing with the SEC
of (y) the Joint Proxy Statement relating to the Parent
Stockholder Approval and the Form S-4 and (z) such reports under
the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement,
(iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, the filing of a certificate of
merger with the appropriate authorities in the necessary
jurisdictions in the event Parent makes an election referred to
in Section 1.01 and the filing of appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or
notices as may be required under the "takeover" or "blue sky"
laws of various states.
(e) SEC Documents; Undisclosed Liabilities. Parent
has filed all material required reports, schedules, forms,
statements and other documents with the SEC since January 1,
1996, and Parent has delivered or made available to the Company
all reports, schedules, forms, statements and other documents
filed with the SEC since such date (collectively, and in each
case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "Parent SEC Documents").
As of their respective dates, the Parent SEC Documents complied
in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents
(including any and all consolidated financial statements included
therein) as of such date contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Except to the extent set forth in Section
3.02(e) of the Parent Disclosure Schedule and except to the
extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to the Company prior to the
date of this Agreement), none of the Parent SEC Documents filed
by Parent since January 1, 1997 and prior to the date of this
Agreement (the "Recent Parent SEC Documents") contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements of Parent included in such Recent Parent SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the
case of unaudited consolidated quarterly statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position
of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit
adjustments). Except as set forth in Schedule 3.02(e), at the
date of the most recent audited financial statements of Parent
included in the Recent Parent SEC Documents, neither Parent nor
any of its subsidiaries had, and since such date neither Parent
nor any of such subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise) which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect with
respect to Parent.
(f) Information Supplied. None of the information
supplied or to be supplied by Parent or Sub for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 is filed with the SEC, and at any time it is amended
or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and
(ii) the Joint Proxy Statement will, at the date it is first
mailed to Parent's stockholders or at the time of the Parent
Stockholder Meeting (as defined in Section 5.01(c)), if such
meeting is being held, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the
rules and regulations promulgated thereunder, except that no
representation or warranty is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or
incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Except as
disclosed in Section 3.02(g) of the Disclosure Schedule or, in
the case of clause (ii), except as included in the Recent Parent
SEC Documents, since the date of the most recent audited
financial statements included in such Recent Parent SEC Documents
(or, in the case of clauses (i) and (iii), since June 30, 1997),
Parent has conducted its business in all material respects only
in the ordinary course consistent with past practice, and there
is not and has not been (i) any material adverse change with
respect to Parent (except for changes generally applicable to the
economy in general and the specific industry in which Parent
operates); (ii) any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to
have a material adverse effect or give rise to a material adverse
change with respect to Parent; (iii) any event which, if it had
taken place following the execution of this Agreement, would not
have been permitted by Section 4.02 without the prior consent of
the Company; or (iv) any condition, event or occurrence which
could reasonably be expected to prevent or materially delay the
ability of Parent to consummate the transactions contemplated by
this Agreement.
(h) Brokers. No broker, investment banker, financial
advisor or other person other than Lazard Freres & Co. LLC is
entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
(i) Opinion of Financial Advisor. Parent has received
the opinion of Lazard Freres & Co. LLC, dated the date of this
Agreement, to the effect that the Exchange Ratio in connection
with the Exchange and the Merger, taken as a whole, is fair, from
a financial point of view, to Parent and the holders of the
Parent Class A Common Stock.
(j) Required Parent Stockholder Vote. The issuance of
shares in connection with the transactions contemplated hereby
would, to the extent required by the applicable regulations of
the NYSE, require the affirmative vote of the holders of a
majority of the shares of Parent Class A Common Stock present in
person or represented by proxy and entitled to vote at the Parent
Stockholder Meeting. The stockholder action specified above is
collectively referred to as the "Parent Stockholder Approval."
(k) Interim Operations of Sub. Sub was formed on
September 18, 1997 solely for the purpose of engaging in the
transactions contemplated hereby and, in all material respects,
has engaged in no other business activities and has conducted its
operations only as contemplated hereby, except that Sub is
required in accordance with the terms of the existing bank credit
agreement of Warnaco Inc., a wholly owned subsidiary of Parent,
to guarantee Warnaco Inc.'s obligations thereunder.
(l) Board Recommendation. The Board of Directors of
Parent, at a meeting duly called and held, has (i) determined
that this Agreement and the transactions contemplated hereby,
including the issuance of shares of Parent Class A Common Stock
in the Merger and the Exchange, are fair to and in the best
interests of the stockholders of Parent, and (ii) resolved to
recommend that the holders of the shares of Parent Class A Common
Stock approve the issuance of shares of Parent Class A Common
Stock in connection with the Merger and the transactions
contemplated hereby.
(m) Certain Employee Payments. No Benefit Plan or
Employment Arrangement provides for the payment to any current or
former director or employee of Parent of any money or other
property or rights or accelerates or provides any other rights or
benefits to any such employee or director as a result of the
transactions contemplated by this Agreement, whether or not (i)
such payment, acceleration or provision would constitute a
"parachute payment" (within the meaning of Section 280G of the
Code), or (ii) some other subsequent action or event would be
required to cause such payment, acceleration or provision to be
triggered.
(n) Tax Returns and Tax Payments. Parent and each of
its subsidiaries, and any consolidated, combined, unitary or
aggregate group for Tax purposes of which Parent or any of its
subsidiaries is or has been a member has timely filed all Tax
Returns required to be filed by it and has paid all Taxes shown
thereon to be due, except to the extent that any such failure to
file or pay could not reasonably be expected to have a material
adverse effect on Parent.
(o) Litigation, Compliance With Law. (i) There are
no suits, actions, counterclaims, proceedings or investigations
pending or, to the knowledge of Parent, threatened in writing
against Parent or any of its subsidiaries other than those which,
individually or in the aggregate, could not reasonably be
expected to have a material adverse effect with respect to
Parent.
(ii) The conduct of the business of each of Parent
and each of its subsidiaries and, to the knowledge of Parent, its
contractors complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees or arbitration
awards applicable thereto, including the Foreign Corrupt
Practices Act, except for violations or failures so to comply, if
any, that, individually or in the aggregate, could not reasonably
be expected to have a material adverse effect with respect to
Parent.
(p) Material Contract Defaults. Neither Parent nor
any of its subsidiaries is, or has received any notice or has any
knowledge that any other party is, in default or unable to
perform in any respect under any of its Material Contracts,
including any license or agreement relating to intellectual
property, except for those defaults or inabilities to perform
which could not reasonably be expected, either individually or in
the aggregate, to have a material adverse effect with respect to
Parent.
(q) Assets. The assets, properties, rights and
contracts, including (as applicable), title or leaseholds
thereto, of Parent and its subsidiaries, taken as a whole, are
sufficient to permit Parent and its subsidiaries to conduct their
business as currently being conducted with only such exceptions
as could not be reasonably expected to have a material adverse
effect on Parent.
(r) Trademarks and Related Contracts. Parent and each
of its subsidiaries owns and/or is licensed to use (in each case,
clear of any Liens), all patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or
necessary for the conduct of its business as currently conducted
which are material to the condition (financial and other),
business, or operations of the Company, except to the extent any
such failure could not reasonably be expected to have a material
adverse effect on Parent.
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger
SECTION 4.01 Conduct of Business of the Company. (a)
Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time of the Merger
(except as otherwise specifically required by the terms of this
Agreement), the Company shall, and shall cause its subsidiaries
to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past
practice and, to the extent consistent therewith, use its
reasonable best efforts to preserve intact their current business
organizations, keep available the services of their current
officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them to the
end that their goodwill and ongoing businesses shall be
materially unimpaired at the Effective Time of the Merger.
Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time of
the Merger, the Company shall not, and shall not permit any of
its subsidiaries to, without the prior written consent of Parent
(which consent will not be unreasonably withheld and shall be
deemed granted if not denied within 48 hours after written notice
to Parent):
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital
stock, other than dividends and distributions paid by Designer
Preferred Trust on its 6% Convertible Trust Originated Preferred
Securities in accordance with the terms of such securities, by a
direct or indirect wholly owned subsidiary of the Company to its
parent, (y) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries
or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) authorize for issuance, issue, deliver, sell,
transfer, pledge or otherwise encumber any shares of its capital
stock or the capital stock of any of its subsidiaries, any other
voting securities or any securities convertible into or
exercisable or exchangeable for, or any rights, warrants, calls,
commitments or options to acquire, any such shares, voting
securities or convertible securities or any other securities or
equity equivalents (including stock appreciation rights) (other
than the issuance of Company Common Stock upon the exercise of
options to purchase shares of Company Common Stock outstanding on
the date of this Agreement and in accordance with their present
terms);
amend its certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other
business organization or division thereof;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of,
close or shut down its properties or assets, other than
reasonable sales of inventory in the ordinary course of business
and assets having an aggregate value not in excess of $250,000,
except that the foregoing shall not preclude the Company from
entering into a sublease on commercially reasonable terms with
respect to its distribution centers in North Arlington and
Secaucus, New Jersey and the second floor of ▇▇▇▇ ▇▇▇▇▇▇▇▇ in New
York City;
(vi) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell
any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial
statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing,
except for short-term borrowings incurred in the ordinary course
of business consistent with past practice, (y) amend the terms of
any outstanding security in a manner that would increase its
obligations thereunder or (z) make any loans, advances or capital
contributions to, or investments in, any other person, other than
to the Company or any direct or indirect wholly owned subsidiary
of the Company;
(vii) acquire or agree to acquire any assets (other
than inventory not in excess of 105% of the monthly cumulative
budget set forth on Schedule 4.01(vii)) the value of which,
individually or in the aggregate, exceeds $250,000, or make or
agree to make any capital expenditures other than those set forth
on Schedule 4.01(vii);
(viii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction, (x) of liabilities or obligations in
the ordinary course of business consistent with past practice,
(y) liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Recent SEC
Documents or (z) other claims, liabilities or obligations in the
aggregate in an amount (or having a value in an amount) not in
excess of $1,000,000, or waive, release, grant, or transfer any
rights of value or modify or change any existing license, lease,
contract or other document in any manner that would be material
to the Company or enter into any new outlet lease or license, or
any other material lease, contract or other document;
(ix) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring,
recapitalization or reorganization;
(x) enter into any new collective bargaining agreement
or any successor collective bargaining agreement to any
collective bargaining agreement or amend any existing collective
bargaining agreement disclosed in Section 3.01(h)(ii) of the
Disclosure Schedule;
(xi) change any accounting principle used by it, except
for such changes as may be required to be implemented following
the date of this Agreement pursuant to generally accepted
accounting principles or rules and regulations of the SEC
promulgated following the date hereof;
(xii) settle or compromise any litigation (whether or
not commenced prior to the date of this Agreement), other than
litigation not in excess of amounts reserved for in the most
recent consolidated financial statements of the Company included
in the Recent SEC Documents or, if not so reserved for, in an
aggregate amount not in excess of $250,000 (provided in either
case such settlement documents do not involve any material
non-monetary obligations on the part of the Company);
(xiii) close, shut down or otherwise eliminate any of
its facilities;
(xiv) enter into (or commit to enter into) any new
lease or amend or renew any existing lease or purchase or acquire
or enter into any agreement to purchase or acquire any real
estate or terminate any existing lease other than leases for
machinery or equipment requiring an aggregate annual commitment
not in excess of $100,000;
(xv) change any Tax election, change any annual Tax
accounting period, change any method of Tax accounting, file any
amended Tax return, enter into any closing agreement relating to
any material Tax, settle any material Tax claim or assessment,
surrender any right to claim a Tax refund or consent to any
extension or waiver of the limitations period applicable to any
Tax claim or assessment, if such acts, either separately or in
the aggregate, would have the effect of materially increasing the
Tax liability of or materially reducing the Tax assets of the
Company or any of its subsidiaries or of Parent or any of its
subsidiaries;
(xvi) except as contemplated by Section 5.14,
change the composition, fill any vacancies or increase the size
of the Company's Board of Directors; or
(xvii) authorize any of, or commit or agree to take
any of, the foregoing actions.
(b) Changes in Employment Arrangements. Without the
written consent of Parent (which consent will not be unreasonably
withheld), neither the Company nor any of its subsidiaries shall
(except as may be required in order to give effect to the
requirements of Section 2.02) adopt or amend (except as may be
required by law) any bonus, profit sharing, compensation, stock
option (including by accelerating or altering the vesting
thereof) pension, retirement, deferred compensation, severance,
change-in-control, fringe benefits, employment or other employee
benefit plan, agreement, trust, fund or other arrangement
(including any Benefit Plan or Employment Arrangement) for the
benefit or welfare of any employee, director or former director
or employee, increase the compensation, bonus or fringe benefits
of any director, employee or former director or employee or pay
any benefit not required by any existing plan, arrangement or
agreement, except that the Company will be permitted to (i)
provide for the payment of up to $3,500,000 to certain employees
on terms reasonably acceptable to Parent and (ii) grant merit
increases in salaries of employees (other than officers) at
regularly scheduled times in customary amounts consistent with
past practices.
(c) Severance. Neither the Company nor any of its
subsidiaries shall grant any new or modified severance or
termination arrangement or increase or accelerate any benefits
payable under its severance or termination pay policies in effect
on the date hereof.
(d) Transition. In order to facilitate an orderly
transition of the business of the Company to a wholly owned
subsidiary of Parent and to permit the coordination of their
related operations on a timely basis, the Company shall consult
with Parent on all strategic and material operational matters.
The Company shall make available to Parent at the Company's
facilities office space in order to assist it in observing all
operations and reviewing all matters concerning the Company's
affairs. Without in any way limiting the provisions of Section
5.04, Parent, its subsidiaries, officers, employees, counsel,
financial advisors and other representatives shall, upon
reasonable notice to the Company, be entitled to review the
operations and visit the facilities of the Company and its
subsidiaries at all times as may be deemed reasonably necessary
by Parent in order to accomplish the foregoing arrangement.
SECTION 4.02 Conduct of Business of Parent. (a)
During the period from the date of this Agreement to the
Effective Time of the Merger (except as otherwise specifically
required by the terms of this Agreement), Parent shall, to the
extent consistent with Parent's reasonable commercial judgment
and to the extent material, use its reasonable best efforts to
preserve intact its and its subsidiaries' current business
organizations, keep available the services of their current
officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them to the
end that their goodwill and ongoing businesses shall be
materially unimpaired at the Effective Time of the Merger.
(b) Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the
Effective Time of the Merger, Parent shall not, without the prior
written consent of the Company (which consent will not be
unreasonably withheld and shall be deemed granted if not denied
within 48 hours after written notice to the Company), adopt a
plan of complete or partial liquidation or resolutions providing
for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization.
ARTICLE V
Additional Agreements
SECTION 5.01 Preparation of Form S-4 and the Joint
Proxy Statement; Stockholder Meetings. (a) Promptly following
the execution of this Agreement, the Company and Parent shall
prepare and file with the SEC the Joint Proxy Statement, and
Parent shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each
of the Company and Parent shall use its reasonable best efforts
to have the Form S-4 declared effective under the Securities Act
as promptly as practicable after such filing. The Company will
use its reasonable best efforts to cause the Joint Proxy
Statement to be mailed to the Company's stockholders, and Parent
will use its reasonable best efforts to cause the Joint Proxy
Statement to be mailed to Parent's stockholders, in each case as
promptly as practicable after the Form S-4 is declared effective
under the Securities Act. The information provided and to be
provided by Parent, Sub and the Company, respectively, for use in
the Form S-4 shall, at the time the Form S-4 becomes effective
and on the dates of each of the Company Stockholder Meeting and
the Parent Stockholder Meeting, be true and correct in all
material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such
information not misleading, and the Company, Parent and Sub each
agree to correct immediately upon the discovery thereof any
information provided by it for use in the Form S-4 which shall
have become false or misleading.
(b) Unless the Board of Directors of the Company shall
take any action permitted by the fifth sentence of this Section
5.01(b), the Company shall cause a meeting of its stockholders
(the "Company Stockholder Meeting") to be duly called and held as
soon as practicable after the date of this Agreement for the
purpose of voting on the approval and adoption of this Agreement
and the Merger. The Board of Directors of the Company shall set
the record date for the Company Stockholder Meeting to occur
immediately following the consummation of the Exchange so that
(and only if) Parent is the holder of record for purposes of such
Company Stockholder Meeting of the shares of Company Common Stock
acquired in the Exchange, which shares shall constitute in excess
of a majority of the issued and outstanding shares of Company
Common Stock. In the event that it becomes necessary to delay
the date of the Company Stockholder Meeting, the Company shall
use its best efforts to ensure that any such delay does not
frustrate the purpose of the immediately preceding sentence,
including by issuing shares of Company Common Stock in accordance
with Section 5.19 immediately prior to setting any new record
date. The Board of Directors of the Company shall recommend
approval and adoption of this Agreement and the Merger by the
Company's stockholders. The Board of Directors of the Company
shall not be permitted to withdraw, amend or modify in a manner
adverse to Parent such recommendation (or announce publicly its
intention to do so), except that prior to the consummation of the
Exchange, the Board of Directors shall be permitted to withdraw,
amend or modify its recommendation (or publicly announce its
intention to do so) but only if (i) the Company has complied with
Section 5.13, (ii) an Alternative Transaction (as defined in
Section 7.01) shall have been proposed by any person other than
Parent or its affiliates, (iii) the Company shall have notified
Parent of such Alternative Transaction at least five business
days in advance of such withdrawal, amendment or modification and
(iv) the Board of Directors of the Company shall have determined
in its good faith judgment that such Alternative Transaction is
more favorable to the Company's stockholders than this Agreement
and the Merger and, as a result, the Board of Directors of the
Company shall have determined in good faith, based upon the
advice of outside counsel, that it is obligated by its fiduciary
obligations under applicable law to modify, amend or withdraw
such recommendation; provided that no such withdrawal, amendment
or modification shall be made unless the Company shall have
delivered to Parent in accordance with Section 5.13(b) a written
notice advising Parent that the Board of Directors of the Company
has received an Acquisition Proposal and identifying the person
making such Acquisition Proposal.
(c) Unless the Board of Directors of the Company shall
take any action permitted by the fifth sentence of paragraph (b)
above, and only to the extent required by applicable regulations
of the NYSE, Parent shall cause a meeting of its stockholders
(the "Parent Stockholder Meeting") to be called and held as soon
as reasonably practicable after the date of this Agreement for
the purpose of voting on the issuance of shares of Parent Class A
Common Stock in connection with the transactions contemplated
hereby and, at such meeting, the Board of Directors of Parent
shall recommend approval by Parent's stockholders of such
issuance of shares of Parent Class A Common Stock. Nothing
contained in this Section 5.01(c) shall prohibit Parent from
making any disclosure to Parent's stockholders if, in the good
faith judgment of the Board of Directors of Parent, upon the
advice of counsel, failure to make such disclosure would be
inconsistent with applicable laws.
(d) If the Parent Stockholder Meeting is being held,
the recommendations of the Boards of Directors of Parent and the
Company referred to in paragraphs (b) and (c) above, together
with copies of the opinions referred to in Sections 3.01(q) and
3.02(i), shall be included in the Joint Proxy Statement. Parent
and the Company will use reasonable efforts to hold such meetings
on the same day and use their best efforts to hold such meetings
as soon as practicable after the date hereof.
(e) The Company will cause its transfer agent to make
stock transfer records relating to the Company available to the
extent reasonably necessary to effectuate the intent of this
Agreement.
SECTION 5.02 Letter of the Company's Accountants. The
Company shall use its reasonable best efforts to cause to be
delivered to Parent a letter of Coopers & ▇▇▇▇▇▇▇ LLP, the
Company's independent public accountants, dated a date within two
business days before the date on which the Form S-4 shall become
effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants
in connection with registration statements similar to the Form
S-4. In connection with the Company's efforts to obtain such
letter, if requested by Coopers & ▇▇▇▇▇▇▇ LLP, Parent shall
provide a representation letter to Coopers & ▇▇▇▇▇▇▇ LLP
complying with SAS 72, if then required.
SECTION 5.03 Letter of Parent's Accountants. Parent
shall use its reasonable best efforts to cause to be delivered to
the Company a letter of Price Waterhouse LLP, Parent's
independent public accountants, dated a date within two business
days before the date on which the Form S-4 shall become effective
and addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance
for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
In connection with the Parent's efforts to obtain such letter, if
requested by Price Waterhouse LLP, the Company shall provide a
representation letter to Price Waterhouse LLP complying with SAS
72, if then required.
SECTION 5.04 Access to Information; Confidentiality.
(a) The Company shall, and shall cause its subsidiaries,
officers, employees, counsel, financial advisors and other
representatives to, afford to Parent and its representatives
reasonable access during normal business hours during the period
prior to the Effective Time of the Merger to its properties,
books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause its subsidiaries,
officers, employees and representatives to, furnish promptly to
Parent (i) a copy of each report, schedule, registration
statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws
and (ii) all other information concerning its business,
properties, financial condition, operations and personnel as such
other party may from time to time reasonably request. During the
period prior to the Effective Time of the Merger, Parent shall
provide the Company and its representatives with reasonable
access during normal business hours to its properties, books,
contracts, commitments, personnel and records as may be necessary
to enable the Company to confirm the accuracy of the
representations and warranties of Parent set forth herein and
compliance by Parent and Sub of their obligations hereunder, and,
during such period, Parent shall, and shall cause its
subsidiaries, officers, employees and representatives to, furnish
promptly to the Company (i) a copy of each report, schedule,
registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state
securities laws and (ii) all other information concerning its
business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably
request. The foregoing shall not require Parent or the Company
to share any information with respect to legal proceedings that
could reasonably be expected to give rise to a breach of
attorney-client privilege. Parent will hold, and will cause its
directors, officers, employees, accountants, counsel, financial
advisors and other representatives to hold, any nonpublic
information of the Company in confidence to the extent required
by, and in accordance with, the provisions of the letter dated
September 11, 1997, between Parent and the Company (the
"Confidentiality Agreement"). The Company will hold, and will
cause its directors, officers, employees, accountants, counsel,
financial advisors and other representatives to hold, any
nonpublic information of Parent in confidence to the same extent
Parent is required to hold nonpublic information of the Company
in confidence pursuant to the Confidentiality Agreement.
(b) No investigation pursuant to this Section 5.04
shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties
hereto.
SECTION 5.5 Reasonable Best Efforts. Upon the terms
and subject to the conditions set forth in this Agreement, each
of the parties agrees to use its reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this
Agreement. Parent, Sub and the Company will use their reasonable
best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or
consents, approvals, waivers, permits or authorizations are
required to be obtained (or, which if not obtained, would result
in an event of default, termination or acceleration of any
agreement or any put right under any agreement) under any
applicable law or regulation or from any governmental authorities
or third parties, including parties to loan agreements or other
debt instruments and including such consents, approvals, waivers,
permits or authorizations as may be required or necessary to
transfer any assets and related liabilities of the Company to the
Surviving Corporation in the Merger, in connection with the
transactions contemplated by this Agreement, including the Merger
and the Stock Exchange Agreement and (ii) in promptly making any
such filings, in furnishing information required in connection
therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. Parent and the Company
shall mutually cooperate in order to facilitate the achievement
of the benefits reasonably anticipated from the Merger. In
connection with the legal opinions referred to in Sections
6.02(c) and 6.03(c), Parent, Sub and the Company agree to deliver
letters of representation reasonable under the circumstances as
to their present intention and present knowledge.
SECTION 5.6 Benefit Plans. (a) Effective as of the
Closing, Parent shall provide that all retained employees of the
Company and its subsidiaries, who are not subject to collective
bargaining agreements, shall participate in the Company's
existing employee benefit plans or, at the option of the Parent,
to participate in the employee benefit plans and arrangements of
Parent (other than those plans that are the subject of collective
bargaining) on a basis no less favorable in the aggregate than
similarly situated employees of Parent and its subsidiaries and,
with respect to employees who are the subject of collective
bargaining agreements, all benefits and other terms and
conditions of employment shall be provided in accordance with the
applicable collective bargaining agreement; provided, however,
that for purposes of the foregoing, no Stock Plan or other plan,
program or arrangement related to the stock of the Company or its
subsidiaries shall be considered nor shall Parent or any
affiliate thereof have any obligation to issue or provide any
benefits related to the stock of the Company or its subsidiaries,
other than as provided in Section 2.02. In the event that any
employee of the Company or its affiliates is transferred to the
Parent or any affiliate of Parent or becomes a participant in an
employee benefit plan, program or arrangement maintained by or
contributed by the Surviving Corporation or its affiliates,
Parent shall cause such plan, program or arrangement to treat the
prior service of such employee with the Company or its
affiliates, to the extent such prior service is recognized under
the comparable plan, program or arrangement of the Company, as
service rendered to the Surviving Corporation or its affiliate,
as the case may be; provided, however, that Parent may cause a
reduction of benefits under any such plans, programs or
arrangements to the extent necessary to avoid duplication of
benefits with respect to the same covered matter or years of
service and with respect to any defined benefit pension plan of
Parent or any affiliate of Parent, no such prior service shall be
recognized for any purposes other than eligibility to participate
or vesting of benefits.
(b) To the extent that retained employees of the
Company and its subsidiaries become eligible to participate in
plans sponsored by Parent and its subsidiaries (other than
Company Benefit Plans), Parent shall (i) waive all limitations as
to preexisting condition exclusions and waiting periods with
respect to participation and coverage requirements applicable to
such employees and their respective dependents under any welfare
benefit plans that such employees and dependents may be eligible
to participate in, effective on or after the Closing Date, but
only to the extent that such exclusions and waiting periods were
inapplicable or satisfied under the analogous Company Benefit
Plan; and (ii) provide each such employee or dependent with
credit for any co-payments and deductibles paid prior to the
Closing Date in respect of the plan year in progress at the time
such participation begins in satisfying any applicable
co-payment, deductible or out-of-pocket requirement under any
analogous welfare plans that such employees or dependents are
eligible to participate in on or after the Closing Date, but only
to the extent such co-payment, deductible or out-of-pocket
requirements would be deemed satisfied under the analogous
Company Benefit Plan.
SECTION 5.07 Indemnification. (a) Commencing at the
Effective Time of the Merger and for six years thereafter, the
Surviving Corporation shall indemnify all present and former
directors or officers of the Company and its subsidiaries for
acts or omissions occurring prior to the Effective Time of the
Merger to the fullest extent now provided in their respective
certificate of incorporation or by-laws, provided such
indemnification is consistent with applicable law, to the extent
such acts or omissions are uninsured (provided, that to the
extent that during any period insurance does not fully indemnify
any person contemplated to be indemnified in accordance with the
first sentence of this Section 5.07, the Surviving Corporation
shall indemnify such person in accordance with such terms; and,
provided further, that to the extent that the Surviving
Corporation's insurance is not sufficient to fully indemnify any
such person, Parent shall, during such period, provided such
indemnification is consistent with applicable law, indemnify such
person to the same extent as provided in the Company's current
certificate of incorporation and by-laws). For six years after
the Effective Time of the Merger, Parent shall also indemnify the
Sellers (together with all present and former directors of the
Company and its subsidiaries, the "indemnified parties") for all
claims asserted by other stockholders of the Company, including
derivative lawsuits, costs of defense, settlement, judgment and
other amounts, in connection with the transactions contemplated
by this Agreement and the Stock Exchange Agreement alleging any
breach of fiduciary duty on the part of the Stockholder as a
result of the transactions contemplated by the Exchange
Agreement, to the extent such indemnification is consistent with
applicable law.
(b) Parent will cause to be maintained for a period of
not less than six years from the Effective Time of the Merger the
Company's current directors' and officers' insurance and
indemnification policy (or at Parent's option a replacement
policy having terms no less advantageous than the Company's
current policy) to the extent that it provides coverage for
events occurring prior to the Effective Time of the Merger for
all persons who are or were directors and officers of the Company
on the date of this Agreement, so long as the annual premium
therefor would not be in excess of 150% of the last annual
premium paid prior to the date of this Agreement (150% of such
premium, the "Maximum Premium"). If the existing D&O Insurance
expires, is terminated or cancelled during such six-year period,
Parent will use reasonable efforts to cause to be obtained as
much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum
Premium, on terms and conditions no less advantageous than the
existing D&O Insurance. The Company represents to Parent that
the Maximum Premium is $567,400.
(c) Each indemnified party shall, promptly after
receipt of notice of a claim or action against such indemnified
party in respect of which indemnity may be sought thereunder,
notify the Surviving Corporation or the Parent, as the case may
be (each an "indemnifying party") in writing of the claim or
action. If any such claim or action shall be brought against an
indemnified party, and it shall have notified the indemnifying
party thereof, unless based on the written advice of counsel to
such indemnified party, a conflict of interest between such
indemnified party and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to
participate therein, and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume
the defense thereof. After notice from the indemnifying party to
the indemnified party of its election to assume the defense of
such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 5.07 for any legal or
other expenses subsequently incurred by the indemnified party in
connection with defense thereof. Any indemnifying party against
whom indemnity may be sought under this Section 5.07 shall not be
liable to indemnify an indemnified party if such indemnified
party settles such claim or action without the consent of the
indemnifying party. The indemnifying party may not agree to any
settlement of any such claim or action, other than solely for
monetary damages for which the indemnifying party shall be
responsible hereunder, as a result of which any remedy or relief
shall be applied to or against the indemnified party, without the
prior written consent of the indemnified party, which consent
shall not be unreasonably withheld. In any action hereunder as
to which the indemnifying party has assumed the defense thereof,
the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own
choice, but the indemnifying party shall not be obligated
hereunder to reimburse the indemnified party of the costs
thereof.
SECTION 5.08 Expenses.
(a) Except as set forth in this Section 5.08, all fees
and expenses incurred in connection with this Agreement, the
Stock Exchange Agreement and the transactions contemplated hereby
and thereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses,
other than accountants' and attorneys' fees, incurred in
connection with the printing and filing of the Joint Proxy
Statement (including any preliminary materials related thereto)
and the Form S-4 (including financial statements and exhibits)
and any amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $12,500,000
(the "Fee"), plus actual, documented and reasonable out-of-pocket
expenses of Parent relating to the transactions contemplated by
this Agreement not in excess of $3,000,000 in the aggregate
(including reasonable fees and expenses of Parent's counsel,
accountants and financial advisers) ("Expenses"), upon the
termination of this Agreement pursuant to Section 7.01(f) or (g).
(c) The Company shall pay Parent the Fee plus the
Expenses if and when all of the following events have occurred:
(i) an Alternative Transaction (as defined in Section
7.01) is publicly commenced, publicly disclosed, publicly
proposed or publicly communicated to the Company at any time on
or after the date of this Agreement and on or prior to the date
of the Company Stockholder Meeting (including the last date on
which any adjourned session thereof is reconvened);
(ii) either Parent or the Company terminates this
Agreement pursuant to Section 7.01(c) or Parent terminates this
Agreement pursuant to Section 7.01(d) if, in the case of
termination under either such Section, the requisite vote for
approval and adoption of the Merger Agreement by the stockholders
of the Company shall not have been obtained by June 30, 1998; and
(iii) thereafter on or prior to the second anniversary
of the date of termination, (A) such Alternative Transaction is
consummated or (B) there is consummated any other Alternative
Transaction, whether or not commenced, publicly disclosed,
publicly proposed or communicated to the Company prior to such
termination.
(d) The Company shall pay Parent the Fee plus the
Expenses if and when both of the following events have occurred:
(i) Parent terminates this Agreement pursuant to
Section 7.01(i) prior to the closing of the Exchange; and
(ii) thereafter on or prior to the second anniversary
of the date of termination, there is consummated any Alternative
Transaction, whether or not commenced, publicly disclosed,
publicly proposed or communicated to the Company prior to such
termination.
(e) The Fee and Expenses payable pursuant to Section
5.08(b) shall be paid (i) with respect to a termination pursuant
to Section 7.01(f), within one business day after such
termination and (ii) with respect to a termination pursuant to
Section 7.01(g), simultaneously with and as a condition to such
termination. The Fee and Expenses payable pursuant to Section
5.08(c) or 5.08(d) shall be paid within one business day
following the consummation of the Alternative Transaction
referred to in such Section.
(f) All transfer, documentary, sales, use,
registration, stock transfer Taxes and other such Taxes
(including all applicable real estate transfer or gains Taxes)
and related fees (including any penalties, interest and additions
to Tax) incurred in connection with this Agreement and the
transactions contemplated hereby, including the Exchange, shall
be paid by the Company and the Company shall timely make all
filings, returns, reports and forms as may be required to comply
with the provisions of such Tax laws.
SECTION 5.09 Public Announcements. Parent and Sub, on
the one hand, and the Company, on the other hand, will consult
with each other before holding any press conferences or analyst
calls and before issuing any press releases. The parties will
provide each other the opportunity to review and comment upon any
press release with respect to the transactions contemplated by
this Agreement and the Stock Exchange Agreement, including the
Merger, and shall not issue any such press release prior to such
consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with
any national securities exchange. The parties agree that the
initial press release or releases to be issued with respect to
the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.10. Affiliates. Prior to the Closing Date,
the Company shall deliver to Parent a letter identifying all
persons who are, at the time this Agreement is submitted for
approval to the stockholders of the Company, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The
Company shall deliver to Parent with respect to each such
"affiliate" on or prior to the Closing a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 5.11. Stock Exchange Listing. Parent shall
use its reasonable best efforts to cause the shares of Parent
Class A Common Stock to be issued in the Merger and under the
Stock Plans to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
SECTION 5.12. Certain Provisions. The Company shall
not take, and shall not permit any of its affiliates to take, any
action which would require or permit, or could reasonably be
expected to require or permit, the Company or any other person or
entity to treat Parent or Sub, in acting pursuant to and as
permitted by this Agreement or the Stock Exchange Agreement, as
an "interested stockholder" with whom the Company is prevented
for any period pursuant to Section 203 of the DGCL from engaging
in any "business combination" (as defined in Section 203 of the
DGCL) or take any action (including any charter or by-law
amendment) that has the effect of rendering Section 203 of the
DGCL applicable to Parent or any of its subsidiaries. The
Company shall not, and shall not permit any of its affiliates to,
announce or disclose the Company's or such affiliate's intention
to take any such action or to treat Parent or Sub as such an
"interested stockholder". In the event that there shall be
instituted or pending any action or proceeding before any
Governmental Entity to which the Company is a party claiming or
seeking a determination, directly or indirectly, that the Company
is prevented for any period pursuant to Section 203 of the DGCL
from engaging in any "business combination" with Parent or Sub,
the Company shall take the position that the Company is not so
prevented. The Company shall, upon the request of Parent, take
all reasonable steps to assist in any challenge by Parent or Sub
to the validity or applicability to the transactions contemplated
by this Agreement, including the Merger, the Stock Exchange
Agreement or the transactions contemplated by any of the
foregoing, of any state law.
SECTION 5.13. No Solicitation.
(a) The Company shall not, directly or indirectly,
through any officer, director, employee, representative or agent
of the Company or any of its subsidiaries or otherwise, (i)
solicit, initiate or encourage any inquiries, offers or
proposals, or any indications of interest, regarding any merger,
sale of substantial assets, sale of shares of capital stock
(including by way of a tender offer) or similar transactions
involving the Company or any significant subsidiary of the
Company other than the Merger (any of the foregoing inquiries or
proposals being referred to herein as an "Acquisition Proposal")
or (ii) participate in negotiations or discussions concerning, or
provide any nonpublic information to any person relating to, any
Acquisition Proposal; provided, however, that, prior to the
consummation of the Exchange, the Company may participate in
negotiations or discussions with, and provide nonpublic
information to, any person concerning an Acquisition Proposal
submitted in writing by such person to the Board of Directors of
the Company after the date of this Agreement if (A) such
Acquisition Proposal was not solicited, initiated or encouraged
in violation of this Agreement, (B) the Board of Directors of the
Company, in its good faith judgment, believes that such
Acquisition Proposal is reasonably likely to result in an
Alternative Transaction that would be more favorable to the
Company's stockholders than the Merger or this Agreement and (C)
failing to take such action would constitute a breach of the
Board's fiduciary duties under applicable law. Nothing contained
in this Section 5.13 shall prohibit the Board of Directors of the
Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer; provided
that the Board shall not recommend that the stockholders of the
Company tender or exchange any shares of Company Common Stock in
connection with such tender or exchange offer unless failing to
take such action would constitute a breach of the Board's
fiduciary duties under applicable law.
(b) The Company shall notify Parent as promptly as
practicable if any Acquisition Proposal is made and shall in such
notice indicate in reasonable detail the identity of the person
making such Acquisition Proposal and the terms and conditions of
such Acquisition Proposal and shall keep Parent promptly advised
of all developments which could reasonably be expected to
culminate in the Board of Directors withdrawing, modifying or
amending its recommendation of the Merger and the other
transactions contemplated by this Agreement.
(c) If, pursuant to the proviso to Section
5.13(a)(ii), the Company provides nonpublic information to any
person who makes an Acquisition Proposal, the Company shall
require such person to enter into a confidentiality agreement
substantially similar to the Confidentiality Agreement as a
condition to and before providing any such information.
(d) The Company shall immediately cease and cause to
be terminated any existing discussions or negotiations with any
persons (other than Parent and Sub) conducted heretofore with
respect to any Acquisition Proposal. The Company agrees not to
release (by waiver or otherwise) any third party from the
provisions of any confidentiality or standstill agreement to
which the Company is a party.
(e) The Company shall ensure that the officers,
directors and employees of the Company and its subsidiaries and
any investment banker or other advisor or representative retained
by the Company are aware of the restrictions described in this
Section 5.13.
SECTION 5.14 Board of Directors. In the event the
Exchange is consummated pursuant to the Stock Exchange Agreement
prior to the Effective Time of the Merger, Parent shall from and
after such closing of the Exchange, be entitled to designate, at
its option, upon notice to the Company, up to that number of
directors, rounded up to the nearest whole number, of the
Company's Board of Directors, subject to compliance with Section
14(f) of the Exchange Act, as will make the percentage of the
Company's directors designated by Parent equal to the greater of
(i) the majority of the Company's Board of Directors and (ii) the
aggregate voting power of the shares of Company Common Stock held
by Parent or any of its subsidiaries as a percentage of the total
voting power outstanding. Parent shall determine for the
approval of the Board of Directors the classes into which such
directors are placed, so long as such placement does not violate
or conflict with the Company's Certificate of Incorporation or
By-laws or the DGCL and the Company shall cause Parent's
designees to be so placed. In the event that Parent's designees
are elected or appointed to the Board of Directors of the
Company, such Board of Directors shall have, until the Effective
Time of the Merger, at least one director who is a director of
the Company prior to the closing of the Exchange (the "Continuing
Director"); provided, however, that if no Continuing Director
remains, the other directors shall designate an individual to
fill such vacancy who shall not be an officer, director, employee
or affiliate of Parent or any of its affiliates and shall
otherwise be an "independent director" under the rules of the
NYSE (such designee to be deemed to be a Continuing Director for
purposes of this Agreement). To the fullest extent permitted by
applicable law, the Company shall take all actions requested by
Parent which are reasonably necessary to effect the appointment
or election of the designees of Parent to the Board of Directors,
including mailing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder promptly
following the date hereof in order to permit designees of Parent
to serve on the Board of Directors of the Company immediately
upon consummation of the Exchange (provided that Parent shall
have provided to the Company on a timely basis all information
required to be included with respect to Parent designees). In
connection with the foregoing, the Company will promptly either
increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as
is necessary to enable Parent's designees to be elected or
appointed to the Company's Board of Directors as provided above
and shall cause the appointment of Parent's designees to fill
such vacancies or newly created directorships effective upon the
closing of the Exchange. Following the election or appointment
of Parent's designees pursuant to this Section 5.14(a) and prior
to the Effective Time, any termination or amendment of this
Agreement by the Company, any extension by the Company of the
time for the performance of any of the obligations or other acts
of Parent or waiver or assertion of any of the Company's rights
hereunder, or any other consents or actions by the Board of
Directors with respect to this Agreement, will require the
concurrence of a majority of the Continuing Directors.
SECTION 5.15. Certain Agreements. Neither the Company
nor any subsidiary of the Company will waive or fail to enforce
any provision of any confidentiality or standstill or similar
agreement to which it is a party without the prior written
consent of Parent.
SECTION 5.16. Stop Transfer. The Company acknowledges
and agrees to be bound by and comply with the provisions of
Section 12 of the Stock Exchange Agreement as if a party thereto
with respect to transfers of record ownership of shares of
Company Common Stock, and agrees to notify the transfer agent for
any shares of Company Common Stock or voting rights certificates
and provide such documentation and do such other things as may be
necessary to effectuate the provisions of such agreement.
SECTION 5.17. Officer's Certificate. The Company, at
the request of Parent, shall deliver a certificate to Parent
executed by the chief executive officer and the chief financial
officer of the Company in the form and with respect to the
matters referred to in Section 6.4 of the Stock Exchange
Agreement dated as of the date of the closing of the Exchange,
or, alternatively, inform Parent that it is unable to give such
certificate because of the inaccuracy of the matters that would
otherwise be set forth therein.
SECTION 5.18. Parent to Vote in Favor of Merger.
Parent agrees that it will vote (or cause to be voted) all shares
of Company Common Stock owned by it or its subsidiaries at the
time of the Company Stockholder Meeting in favor of the approval
and adoption of the Merger Agreement.
SECTION 5.19. Anti-Dilution. The Company will as
promptly as practicable notify Parent if it issues any shares of
Company Common Stock, whether upon the exercise, exchange or
conversion of securities exercisable or exchangeable for or
convertible into shares of Company Common Stock, or otherwise.
If the Exchange is consummated, the Company agrees that if, at
the time of closing of the Exchange or at any time thereafter
until the later of (a) the Effective Time of the Merger and (b)
two years from the closing of the Exchange, the number of
Stockholder Shares held by Parent and its subsidiaries shall not
represent a majority of the outstanding shares of Company Common
Stock as a result of the issuance of shares of Company Common
Stock by the Company, whether upon the exercise, exchange or
conversion of securities exercisable or exchangeable for or
convertible into shares of Company Common Stock, or otherwise, it
will sell to Parent, upon notice from Parent, at a price per
share equal to the product of (i) the Exchange Ratio and (ii) the
average of the closing sales prices of Parent Class A Common
Stock on the New York Stock Exchange Composite Transactions Tape
on each of the five consecutive trading days immediately
preceding the date of such notice, in cash, such number of fully
paid and non-assessable shares of Company Common Stock, which
shares shall be approved for listing on the NYSE, as may be
necessary so that the percentage of outstanding shares of Company
Common Stock held by Parent (including the Stockholder Shares)
represents a majority of such outstanding shares.
ARTICLE VI
Conditions Precedent
SECTION 6.01 Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party to
effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company
Stockholder Approval shall have been obtained;
(b) Parent Stockholder Approval. If the Parent
Stockholder Approval is required in accordance with the
applicable regulations of the NYSE, the Parent Stockholder
Approval shall have been obtained;
(c) NYSE Listing. The shares of Parent Class A Common
Stock issuable to the Company's stockholders pursuant to this
Agreement (including upon the exercise of options and upon the
conversion of the Convertible Subordinated Debentures) shall have
been approved for listing on the NYSE, subject to official notice
of issuance;
(d) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired;
(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other
legal restraint or prohibition enjoining or preventing the
consummation of the Merger shall be in effect;
(f) Form S-4. The Form S-4 shall have become
effective under the Securities Act and no stop order suspending
the effectiveness thereof shall be in effect and no procedures
for such purpose shall be pending before or threatened by the
SEC.
SECTION 6.02 Conditions to Obligations of Parent and
Sub. The obligations of Parent and Sub to effect the Merger are
further subject to the satisfaction (or waiver by Parent) of the
following conditions; provided, however, upon the closing of the
Exchange pursuant to the terms of the Stock Exchange Agreement,
the conditions set forth in clauses (a), (b), (d) and (e) of this
Section 6.02 shall no longer be applicable.
(a) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except for
those representations and warranties which address matters only
as of a particular date (which shall have been true and correct
in all material respects as of such date). Parent shall have
received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the
Company to the effect set forth in this paragraph.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects the
obligations required to be performed by it under this Agreement
at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company
to such effect.
(c) Tax Opinion. The opinion, which, in the event the
Parent Stockholder Approval is required, will be dated on or
about the date of and referred to in the Joint Proxy Statement,
based on appropriate representations of the Company and Parent,
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to Parent, to the effect
that (i) the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code and (ii) Parent, Sub and Company will each be a party
to the reorganization within the meaning of Section 368(b) of the
Code shall have been rendered and shall not have been withdrawn
or modified in any material respect.
(d) Consents, etc. Parent shall have received
evidence, in form and substance reasonably satisfactory to it,
that such licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other
third parties as are necessary in connection with the
transactions contemplated hereby have been obtained, except such
licenses, permits, consents, approvals, authorizations,
qualifications and orders which are not, individually or in the
aggregate, material to Parent or the Company or the failure of
which to have received would not materially dilute the aggregate
benefits to Parent of the transactions reasonably contemplated
hereby; provided that the receipt of all required consents of the
holders of Company Stock Options as contemplated by Section 2.02
shall be considered material.
(e) No Litigation. There shall not be pending or
threatened by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or proceeding
which has a reasonable likelihood of success), (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or
the Exchange or any of the other transactions contemplated by
this Agreement or the Stock Exchange Agreement or seeking to
obtain from Parent or any of its subsidiaries any damages that
are material in relation to Parent and its subsidiaries taken as
a whole, (ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective
subsidiaries of any material portion of the business or assets of
the Company, Parent or any of their respective subsidiaries, to
dispose of or hold separate any material portion of the business
or assets of the Company, Parent or any of their respective
subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement or the Stock Exchange
Agreement, (iii) seeking to impose limitations on the ability of
Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock or Common Stock
of the Surviving Corporation, including the right to vote the
Company Common Stock or Common Stock of the Surviving Corporation
on all matters properly presented to the stockholders of the
Company or the Surviving Corporation, respectively, or (iv)
seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect the business or
operations of the Company or its subsidiaries.
SECTION 6.03 Conditions to Obligation of the Company.
The obligation of the Company to effect the Merger is further
subject to the satisfaction (or waiver by the Company) of the
following conditions; provided, however, upon the closing of the
Exchange pursuant to the provisions of the Stock Exchange
Agreement, the conditions set forth in clauses (a), (b) and (d)
of this Section 6.03 shall no longer be applicable.
(a) Representations and Warranties. The
representations and warranties of Parent and Sub set forth in
this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date,
except for those representations and warranties which address
matters only as of a particular date (which shall have been true
and correct in all material respects as of such date). The
Company shall have received a certificate signed on behalf of
Parent by the chief executive officer and the chief financial
officer of Parent to the effect set forth in this paragraph.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material respects the
obligations required to be performed by them under this Agreement
at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Parent by the chief
executive officer and the chief financial officer of Parent to
such effect.
(c) Tax Opinion. The opinion, dated on or about the
date of and referred to in the Joint Proxy Statement as first
mailed to stockholders of the Company, based on appropriate
representations of the Company and Parent, of Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, counsel to the Company, to the effect that
(i) the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code
and (ii) Parent, Sub and Company will each be a party to the
reorganization within the meaning of Section 368(b) of the Code,
shall not have been withdrawn or modified in any material
respect.
(d) No Litigation. There shall not be pending or
threatened by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or proceeding
which has a reasonable likelihood of success), which could
reasonably be expected, if adversely determined, to result in
criminal or material uninsured and unindemnified or
unindemnifiable personal liability on the part of one or more
directors of the Company, (i) challenging or seeking to restrain
or prohibit the consummation of the Merger or the Exchange or any
of the other transactions contemplated by this Agreement or (ii)
seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective subsidiaries of any
material portion of the business or assets of the Company, Parent
or any of their respective subsidiaries, or to dispose of or hold
separate any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries, as a
result of the Merger or any of the other transactions
contemplated by this Agreement or the Stock Exchange Agreement.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01 Termination. This Agreement may be
terminated and abandoned at any time prior to the Effective Time
of the Merger, whether before or after approval of matters
presented in connection with the Merger by the stockholders of
the Company or Parent:
(a) by mutual written consent of Parent and the
Company; or
(b) by either Parent or the Company if any
Governmental Entity within the United States or any country or
other jurisdiction in which either the Company or Parent,
directly or indirectly, has material assets or operations shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have
become final and nonappealable; or
(c) by either Parent or the Company if the Exchange
and the Merger shall not have been consummated on or before June
30, 1998 (other than due to the failure of the party seeking to
terminate this Agreement to perform its obligations under this
Agreement required to be performed at or prior to the Effective
Time of the Merger); or
(d) by Parent, if any required approval of the
stockholders of the Company shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or at any adjournment
thereof; or
(e) by the Company, if any required approval of the
stockholders of Parent shall not have been obtained by reason of
the failure to obtain the required vote upon a vote held at a
duly held meeting of stockholders or at any adjournment thereof;
or
(f) by Parent, if prior to the closing of the
Exchange, the Board of Directors of the Company shall have (i)
withdrawn, modified or amended in any respect adverse to Parent
or Sub its approval or recommendation of this Agreement, the
Merger or any of the other transactions contemplated herein or
resolved to do so or (ii) recommended an Alternative Transaction
from a person other than Parent or any of its affiliates or
resolved to do so; or
(g) by the Company, prior to the closing of the
Exchange, if any person (other than Parent or any of its
affiliates) shall have proposed an Alternative Transaction (A)
that the Board of Directors of the Company determines in its good
faith judgment is more favorable to the Company's stockholders
than this Agreement and the Merger and (B) as a result of which
the Board of Directors of the Company determines in good faith,
based upon the advice of outside counsel, that it is obligated by
its fiduciary obligations under applicable law to terminate this
Agreement, provided that such termination under this Section
7.01(g) shall not be effective until the Company has made payment
of the Fee and the Expenses required by Section 5.08; or
(h) by the Company, if, prior to the closing of the
Exchange, there shall have been a material breach of any covenant
or agreement on the part of Parent or Sub contained in this
Agreement which materially adversely affects Parent's or Sub's
ability to consummate the Merger or any of the other transactions
contemplated herein and which shall not have been cured prior to
the date 10 business days following notice of such breach; or
(i) by Parent, if, prior to the closing of the
Exchange, there shall have been a breach of any covenant or
agreement on the part of the Company contained in this Agreement
which is reasonably likely to have a material adverse effect with
respect to the Company or which materially adversely affects (or
materially delays) the consummation of the Merger or any of the
other transactions contemplated herein and which shall not have
been cured prior to the date 10 business days following notice of
such breach; or
(j) by the Company, if the Board of Directors of
Parent shall withdraw, modify or change its approval or
recommendation of this Agreement or the transactions contemplated
hereby in a manner adverse to the Company or shall have resolved
to do so.
As used herein, "Alternative Transaction" means any of
(i) a transaction or series of transactions pursuant to which any
person (or group of persons) other than Parent or its
subsidiaries (a "Third Party") acquires or would acquire more
than 15% of the then outstanding shares of Company Common Stock,
whether from the Company, the Stockholder or pursuant to a tender
offer or exchange offer or otherwise, (ii) any direct or indirect
acquisition or proposed acquisition of the Company or any of its
significant subsidiaries by means of a merger or other business
combination transaction (including any so-called "merger of
equals" and whether or not the Company or any of its significant
subsidiaries is the entity surviving any such merger or business
combination transaction) or (iii) any other transaction pursuant
to which any Third Party acquires or would acquire control of
assets (including for this purpose the outstanding equity
securities of subsidiaries of the Company and any entity
surviving any merger or business combination including any of
them) of the Company or any of its subsidiaries having a fair
market value equal to more than 15% of the fair market value of
all the assets of the Company and its subsidiaries, taken as a
whole, immediately prior to such transaction.
SECTION 7.02 Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as
provided in Section 7.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than the last two
sentences of Section 5.04(a), Section 5.08, Section 5.12, Section
5.14, Section 5.16, Section 5.19 and this Section 7.02. Nothing
contained in this Section shall relieve any party for any breach
of the representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 7.03 Amendment. Subject to Section 5.14, any
provision of this Agreement may be amended or waived prior to the
Effective Time of the Merger (whether before or after approval of
matters presented in connection with the Merger by the
stockholders of the Company or Parent) if, and only if, such
amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and Parent or, in the case of a waiver,
by the party against whom the waiver is to be effective; provided
that after the adoption of this Agreement by the stockholders of
(i) the Company, there shall be made no amendment that by law
requires further approval by the stockholders of the Company
without the further approval of such stockholders and (ii)
Parent, there shall be made no amendment that by law requires
further approval by the stockholders of Parent without the
further approval of such stockholders.
SECTION 7.04 Extension; Waiver. Subject to Section
5.14, at any time prior to the Effective Time of the Merger, the
parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.03, waive
compliance with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
SECTION 7.05 Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant to
Section 7.01, an amendment of this Agreement pursuant to Section
7.03 or an extension or waiver pursuant to Section 7.04 shall, in
order to be effective, comply with Section 5.14 and require in
the case of Parent, Sub or the Company, action by its Board of
Directors or the duly authorized designee of its Board of
Directors.
ARTICLE VIII
General Provisions
SECTION 8.01 Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time of the Merger. This
Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 8.02 Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in
writing and shall be deemed given if delivered personally or sent
by overnight courier (providing proof of delivery) to the parties
at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to
The Warnaco Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
The Warnaco Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) if to the Company, to
Designer Holdings Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
Designer Holdings Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
SECTION 8.03 Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
first person;
(b) "material adverse change" or "material adverse
effect" means, when used in connection with the Company or
Parent, any change or effect that either individually or in the
aggregate with all other such changes or effects is materially
adverse to the business, assets, properties, condition (financial
or otherwise) or results of operations of such party and its
subsidiaries taken as a whole (after giving effect in the case of
Parent to the consummation of the Merger);
(c) "person" means an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity; and
(d) a "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing
body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by
such first person.
SECTION 8.04 Interpretation. When a reference is made
in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation".
SECTION 8.05 Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
SECTION 8.06 Entire Agreement; No Third-Party
Beneficiaries. This Agreement and the other agreements referred
to herein constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement.
This Agreement, other than Section 5.07, is not intended to
confer upon any person other than the parties any rights or
remedies.
SECTION 8.07 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
state of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 8.08 Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent
of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations
under this Agreement to Parent or to any direct wholly owned
subsidiary of Parent pursuant to Section 1.01, but no such
assignment shall relieve Sub of any of its obligations under this
Agreement. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 8.09 Enforcement; Jurisdiction. The parties
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware
or any Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. Any suit,
action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated by this Agreement may
be brought against any of the parties in any Federal court
located in the State of Delaware or any Delaware state court, and
each of the parties hereto hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and
waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the State of Delaware.
Without limiting the generality of the foregoing, each party
hereto agrees that service of process upon such party at the
address referred to in Section 8.02, together with written notice
of such service to such party, shall be deemed effective service
of process upon such party.
SECTION 8.10. Severability. Whenever possible, each
provision or portion of any provision of this Agreement will be
interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision
had never been contained herein.
IN WITNESS WHEREOF, Parent, Sub and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written
above.
THE WARNACO GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
WAC ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
DESIGNER HOLDINGS LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief
Executive Officer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board
EXHIBIT A
Form of Company Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of Common Stock,
par value $.01 per share ("Company Common Stock"), of Designer
Holdings Ltd., a Delaware corporation (the "Company"), is
entitled to receive in connection with the merger (the "Merger")
of the Company with WAC Acquisition Corporation, a Delaware
corporation, securities (the "Parent Securities") of The Warnaco
Group, Inc. ("Parent"). The undersigned acknowledges that the
undersigned may be deemed an "affiliate" of the Company within
the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Act"), although nothing
contained herein should be construed as an admission of such
fact.
If in fact the undersigned were an affiliate under the
Act, the undersigned's ability to sell, assign or transfer the
Parent Securities received by the undersigned in exchange for any
shares of Company Stock pursuant to the Merger may be restricted
unless such transaction is registered under the Act or an
exemption from such registration is available. The undersigned
understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of
such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and
145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with
the Company that the undersigned will not sell, assign or
transfer any of the Parent Securities received by the undersigned
in exchange for shares of Company Stock pursuant to the Merger
except (i) pursuant to an effective registration statement under
the Act, (ii) in conformity with the volume and other limitations
of Rule 145 or (iii) in a transaction which, in the opinion of
independent counsel reasonably satisfactory to Parent or as
described in a "no-action" or interpretive letter from the Staff
of the Securities and Exchange Commission (the "SEC"), is not
required to be registered under the Act.
In the event of a sale or other disposition by the
undersigned of Parent Securities pursuant to Rule 145, the
undersigned will supply Parent with evidence of compliance with
such Rule, in the form of a letter in the form of Annex I hereto.
The undersigned understands that Parent may instruct its transfer
agent to withhold the transfer of any Parent Securities disposed
of by the undersigned, but that upon receipt of such evidence of
compliance the transfer agent shall effectuate the transfer of
the Parent Securities sold as indicated in the letter.
The undersigned acknowledges and agrees that
appropriate legends will be placed on certificates representing
Parent Securities received by the undersigned in the Merger or
held by a transferee thereof, which legends will be removed by
delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent to the
effect that such legends are no longer required for purposes of
the Act.
The undersigned acknowledges that (i) the undersigned
has carefully read this letter and understands the requirements
hereof and the limitations imposed upon the distribution, sale,
transfer or other disposition of Parent Securities and (ii) the
receipt by Parent of this letter is an inducement and a condition
to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT A
[Name] [Date]
On __________________ the undersigned sold the
securities ("Securities") of The Warnaco Group, Inc. (the
"Company") described below in the space provided for that purpose
(the "Securities"). The Securities were received by the
undersigned in connection with the merger of WAC Acquisition
Corporation with and into Designer Holdings Ltd.
Based upon the most recent report or statement filed by
the Company with the Securities and Exchange Commission, the
Securities sold by the undersigned were within the prescribed
limitations set forth in paragraph (e) of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities
were sold in "brokers' transactions" within the meaning of
Section 4(4) of the Act or in transactions directly with a
"market maker" as that term is defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities,
and that the undersigned has not made any payment in connection
with the offer or sale of the Securities to any person other than
to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
[Conformed Copy]
================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of September 25, 1997
Among
THE WARNACO GROUP, INC.,
WAC ACQUISITION CORPORATION
and
DESIGNER HOLDINGS LTD.
================================================================
TABLE OF CONTENTS
Page
ARTICLE I
The Merger . . . . . . . . . . . . . . . . .2
SECTION 1.01 The Merger . . . . . . . . . . . . . . . . .. . .2
SECTION 1.02 Closing . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.03 Effective Time of the Merger . . . . . . . . . .2
SECTION 1.04 Effects of the Merger. . . . . . . . . . . . . . 2
SECTION 1.05 Certificate of Incorporation; By-Laws. . . . . . 3
SECTION 1.06 Directors. . . . . . . . . . . . . . . . . . . . 3
SECTION 1.07 Officers . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations. . . . . . . . . ..3
SECTION 2.01 Effect on Capital Stock . . . . . . . . . . . . .3
SECTION 2.02 Stock Plans . . . . . . . . . . . . . . . . . . .4
SECTION 2.03 Exchange of Certificates . . . . . . . . . . . . 5
SECTION 2.04 Fractional Shares. . . . . . . . . . . . . . . . 7
ARTICLE III
Representations and Warranties . . . . . . .8
SECTION 3.01 Representations and Warranties of the Company. ..8
SECTION 3.02 Representations and Warranties of Parent
and Sub . . . . . . . . . . . . . . . . . . . ..22
ARTICLE IV
Covenants Relating to Conduct of Business
Prior to Merger . . . . . . . . . . .28
SECTION 4.01 Conduct of Business of the Company . . . . . . .28
SECTION 4.02 Conduct of Business of Parent. . . . . . . . . .32
ARTICLE V
Additional Agreements . . . . . . . . . . 32
SECTION 5.01 Preparation of Form S-4 and the Joint Proxy
Statement; Stockholder Meetings. . . . . . . . 32
SECTION 5.02 Letter of the Company's Accountants. . . . . . .34
SECTION 5.03 Letter of Parent's Accountants . . . . . . . . .34
SECTION 5.04 Access to Information; Confidentiality . . . . .34
SECTION 5.05 Reasonable Best Efforts. . . . . . . . . . . . .35
SECTION 5.06 Benefit Plans. . . . . . . . . . . . . . . . . .36
SECTION 5.07 Indemnification. . . . . . . . . . . . . . . . .37
SECTION 5.08 Expenses . . . . . . . . . . . . . . . . . . . .38
SECTION 5.09 Public Announcements . . . . . . . . . . . . . 39
SECTION 5.10. Affiliates. . . . . . . . . . . . . . . . . . . 40
SECTION 5.11. Stock Exchange Listing. . . . . . . . . . . . . 40
SECTION 5.12. Certain Provisions. . . . . . . . . . . . . . . 40
SECTION 5.13. No Solicitation.. . . . . . . . . . . . . . . . 40
SECTION 5.14 Board of Directors . . . . . . . . . . . . . . .41
SECTION 5.15. Certain Agreements. . . . . . . . . . . . . . . 42
SECTION 5.16. Stop Transfer . . . . . . . . . . . . . . . . .42
SECTION 5.17. Officer's Certificate . . . . . . . . . . . . . 43
SECTION 5.18. Parent to Vote in Favor of Merger . . . . . . ..43
SECTION 5.19. Anti-Dilution . . . . . . . . . . . . . . . . ..43
ARTICLE VI
Conditions Precedent . . . . . . . . . . . 43
SECTION 6.01 Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . . . 43
SECTION 6.02 Conditions to Obligations of Parent and Sub. . .44
SECTION 6.03 Conditions to Obligation of the Company. . . . .45
ARTICLE VII
Termination, Amendment and Waiver . . . . .46
SECTION 7.01 Termination. . . . . . . . . . . . . . . . . . .46
SECTION 7.02 Effect of Termination. . . . . . . . . . . . . .48
SECTION 7.03 Amendment. . . . . . . . . . . . . . . . . . . .48
SECTION 7.04 Extension; Waiver. . . . . . . . . . . . . . . .49
SECTION 7.05 Procedure for Termination, Amendment, Extension
or Waiver . . .. . . . . . . . . . . . . . . . 49
ARTICLE VIII
General Provisions . . . . . . . . . . . . 49
SECTION 8.01 Nonsurvival of Representations and Warranties . 49
SECTION 8.02 Notices. . . . . . . . . . . . . . . . . . . . .49
SECTION 8.03 Definitions. . . . . . . . . . . . . . . . . . 50
SECTION 8.04 Interpretation . . . . . . . . . . . . . . . . .51
SECTION 8.05 Counterparts . . . . . . . . . . . . . . . . . .51
SECTION 8.06 Entire Agreement; No Third-Party Beneficiaries 51
SECTION 8.07 Governing Law. . . . . . . . . . . . . . . . . .51
SECTION 8.08 Assignment . . . . . . . . . . . . . . . . . . .51
SECTION 8.09 Enforcement; Jurisdiction. . . . . . . . . . . .52
SECTION 8.10. Severability. . . . . . . . . . . . . . . . . .52
EXHIBIT
Exhibit A Form of Affiliate Letter