AGREEMENT AND
PLAN OF MERGER
AMONG
KELLWOOD COMPANY,
KELLWOOD ACQUISITION II CORPORATION
AND
KORET, INC.
AND
CERTAIN OF ITS STOCKHOLDERS
DECEMBER 1, 1998
ARTICLE I THE MERGER 2
1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Effective Time . . . . . . . . . . . . . . . . . . . . . 2
1.3. Effects of the Merger . . . . . . . . . . . . . . . . . 2
1.4. Charter and By-laws; Directors and Officers . . . . . . 2
1.5. Conversion of Securities . . . . . . . . . . . . . . . . 3
1.6. Kellwood to Make Certificates Available . . . . . . . . 5
1.7. No Fractional Securities . . . . . . . . . . . . . . . . 7
1.8. Return of Exchange Fund . . . . . . . . . . . . . . . . 7
1.9. Adjustment of the Consideration . . . . . . . . . . . . 7
1.10. No Further Ownership Rights in the
Company Common Stock 7
1.11. Closing of the Company Transfer Books . . . . . . . . . 8
1.12. Lost Certificates . . . . . . . . . . . . . . . . . . . 8
1.13. Further Assurances . . . . . . . . . . . . . . . . . . . 8
1.14. Escrow . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II THE CLOSING OF THE MERGER 9
2.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Deliveries by Kellwood . . . . . . . . . . . . . . . . . 9
2.3. Deliveries by the Company and the Stockholders . . . . . 9
2.4. Closing Agreements . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 10
3.1. Authority . . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Ownership of Stock . . . . . . . . . . . . . . . . . . . 11
3.4. Due Organization . . . . . . . . . . . . . . . . . . . . 11
3.5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Capital Stock . . . . . . . . . . . . . . . . . . . . . 13
3.7. Transactions with Related Parties . . . . . . . . . . . 14
3.8. Financial Statements . . . . . . . . . . . . . . . . . . 14
3.9. Interim Change . . . . . . . . . . . . . . . . . . . . . 15
3.10. Banking Relationships and Investments . . . . . . . . . 15
3.11. Accounts Receivable . . . . . . . . . . . . . . . . . . 15
3.12. Inventory . . . . . . . . . . . . . . . . . . . . . . . 15
3.13. Motor Vehicles . . . . . . . . . . . . . . . . . . . . . 16
3.14. Insurance . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Title to Assets . . . . . . . . . . . . . . . . . . . . 16
3.16. Real Estate . . . . . . . . . . . . . . . . . . . . . . 17
3.17. Real Estate Leases . . . . . . . . . . . . . . . . . . . 17
3.18. Personal Property Leases . . . . . . . . . . . . . . . . 17
3.19. Intellectual Property . . . . . . . . . . . . . . . . . 17
3.20. Software and Information Systems . . . . . . . . . . . . 19
3.21. Customers and Suppliers . . . . . . . . . . . . . . . . 21
3.22. Employees . . . . . . . . . . . . . . . . . . . . . . . 22
3.23. Employee Benefit Plans . . . . . . . . . . . . . . . . . 23
3.24. Licenses and Permits . . . . . . . . . . . . . . . . . . 26
3.25. Material Contracts . . . . . . . . . . . . . . . . . . . 27
3.26. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.27. Product Warranty . . . . . . . . . . . . . . . . . . . . 30
3.28. Product Liability . . . . . . . . . . . . . . . . . . . 31
3.29. Legal Proceedings . . . . . . . . . . . . . . . . . . . 31
3.30. Environmental Matters . . . . . . . . . . . . . . . . . 31
3.31. Compliance with Law . . . . . . . . . . . . . . . . . . 34
3.32. Absence of Undisclosed Liabilities . . . . . . . . . . . 34
3.33. Brokers . . . . . . . . . . . . . . . . . . . . . . . . 34
3.34. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 34
3.35. Pooling of Interests; Reorganizations . . . . . . . . . 34
3.36. Required Vote of the Company Stockholders . . . . . . . 35
3.37. Registration Statement and Joint Proxy Statement . . . . 35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF KELLWOOD AND SUB 35
4.1. Authority . . . . . . . . . . . . . . . . . . . . . . . 36
4.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3. Due Organization . . . . . . . . . . . . . . . . . . . . 36
4.4. Brokers . . . . . . . . . . . . . . . . . . . . . . . . 37
4.5. Registration Statement and Joint Proxy Statement . . . . 37
4.6. Opinion of Financial Advisor . . . . . . . . . . . . . . 37
4.7. Required Vote of Kellwood Stockholders . . . . . . . . . 37
4.8. Capitalization of Kellwood and Sub . . . . . . . . . . . 37
4.9. Kellwood Commission Reports . . . . . . . . . . . . . . 38
4.10. Accounting Matters; Reorganization . . . . . . . . . . . 38
4.11. No Material Adverse Change . . . . . . . . . . . . . . . 38
4.12. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 38
4.13. No Plan or Intention to Reacquire Stock . . . . . . . . 39
4.14. Control . . . . . . . . . . . . . . . . . . . . . . . . 39
4.15. No Plan to Dispose of Company Assets or Stock . . . . . 39
4.16. Continuity of Business Enterprise . . . . . . . . . . . 39
4.17. Substantially all of Sub's Assets Transferred . . . . . 39
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
AND THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS 39
5.1. Interim Conduct of Business . . . . . . . . . . . . . . 39
5.2. Access . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.3. Confidentiality . . . . . . . . . . . . . . . . . . . . 41
5.4. HSR Act Filing and Other Consents . . . . . . . . . . . 42
5.5. Waiver of Recourse . . . . . . . . . . . . . . . . . . . 43
5.6. Notice of Developments . . . . . . . . . . . . . . . . . 43
5.7. Trading in Kellwood . . . . . . . . . . . . . . . . . . 43
5.8. Alternative Proposals . . . . . . . . . . . . . . . . . 43
5.9. Stockholders' Agreements . . . . . . . . . . . . . . . . 44
5.10. Reasonable Best Efforts . . . . . . . . . . . . . . . . 45
5.11. Termination of 401(k) Plans . . . . . . . . . . . . . . 45
ARTICLE VI COVENANTS OF KELLWOOD 45
6.1. HSR Act Filing and Other Consents . . . . . . . . . . . 45
6.2. Best Efforts . . . . . . . . . . . . . . . . . . . . . . 46
6.3. Indemnification; Directors' and Officers' Insurance . . 46
6.4. Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.5. Access . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.6. Notice of Developments . . . . . . . . . . . . . . . . . 46
6.7. Employees and Employee Benefits . . . . . . . . . . . . 47
6.8. Confidentiality . . . . . . . . . . . . . . . . . . . . 48
6.9. Labor Agreement Compliance . . . . . . . . . . . . . . . 48
6.10. Interim Conduct of Business . . . . . . . . . . . . . . 48
ARTICLE VII ADDITIONAL AGREEMENTS 48
7.1. Stockholder Meetings . . . . . . . . . . . . . . . . . . 48
7.2. Pooling of Interests; Reorganization . . . . . . . . . . 49
7.3. Preparation of the Registration Statement and the
Joint Proxy Statement . . . . . . . . . . . . . . . . . 49
ARTICLE VIII CONDITIONS PRECEDENT TO THE MERGER 50
8.1. Conditions to Each Party's Obligation to Effect the
Merger 50
8.2. Conditions to Obligation of the Company to
Effect the Merger . . . . . . . . . . . . . . . . . . . 50
8.3. Conditions to Obligations of Kellwood and Sub
to Effect the Merger . . . . . . . . . . . . . . . . . 52
ARTICLE IX TERMINATION BY PARTIES 53
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . 53
9.2. Termination Fees . . . . . . . . . . . . . . . . . . . . 55
9.3. Effect of Termination . . . . . . . . . . . . . . . . . 55
9.4. Change of Control . . . . . . . . . . . . . . . . . . . 55
ARTICLE X SURVIVAL AND INDEMNIFICATION 56
10.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . 56
10.2. Indemnification . . . . . . . . . . . . . . . . . . . . 56
10.3. Notice of Claims . . . . . . . . . . . . . . . . . . . . 56
10.4. Limitations on Stockholders' Indemnification Obligation 56
10.5. Third Party Claims . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI GENERAL PROVISIONS 57
11.1. Amendments and Waiver . . . . . . . . . . . . . . . . . 57
11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . 57
11.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 58
11.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . 59
11.5. Successors and Assigns . . . . . . . . . . . . . . . . . 59
11.6. Entire Transaction . . . . . . . . . . . . . . . . . . . 59
11.7. Applicable Law . . . . . . . . . . . . . . . . . . . . . 60
11.8. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 60
11.9. Accounting Terms . . . . . . . . . . . . . . . . . . . . 60
11.10. Knowledge . . . . . . . . . . . . . . . . . . . . . . . 60
11.11. Other Rules of Construction . . . . . . . . . . . . . . 60
11.12. Announcements . . . . . . . . . . . . . . . . . . . . . 61
11.13. Partial Invalidity . . . . . . . . . . . . . . . . . . . 61
11.14. Certain Taxes . . . . . . . . . . . . . . . . . . . . . 61
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 1, 1998 (this
"AGREEMENT"), by and among Kellwood Company, a Delaware corporation
("KELLWOOD"), Kellwood Acquisition II Corporation, a Delaware corporation
and a wholly-owned subsidiary of Kellwood ("SUB"), Koret, Inc., a Delaware
corporation (the "COMPANY") (Sub and the Company being hereinafter
collectively referred to as the "CONSTITUENT CORPORATIONS"), and the
stockholders of the Company listed on the signature page hereof (the
"STOCKHOLDERS").
WHEREAS, the Company is engaged in the design, manufacture, marketing
and distribution of apparel (the "BUSINESS");
WHEREAS, the respective Boards of Directors of Kellwood, Sub and the
Company have approved and declared advisable the merger of Sub with and
into the Company (the "MERGER"), upon the terms and subject to the
conditions set forth herein, whereby (a) each issued and outstanding share
of Class A Common Stock, par value $.01 per share, Class B Non-Voting
Common Stock, par value $.01 per share, and Class C Special Common Stock,
par value $.01 per share, of the Company (collectively the "COMPANY COMMON
STOCK") not owned directly or indirectly by the Company will be converted
into shares of Common Stock, par value $.01 per share, of Kellwood
(including associated rights to acquire Kellwood's Series A Junior
Preferred Stock) (the "KELLWOOD COMMON STOCK"), (b) outstanding options
and warrants to acquire Company Common Stock will be converted into
options and warrants to acquire shares of Kellwood Common Stock, and (c)
Kellwood will become the sole stockholder of the Surviving Corporation (as
hereinafter defined);
WHEREAS, the respective Boards of Directors of Kellwood and the
Company have determined that the Merger is in furtherance of and
consistent with the respective long-term business strategies of Kellwood
and the Company and is in the best interest of the respective stockholders
of Kellwood and the Company;
WHEREAS, in order to induce Kellwood and Sub to enter into this
Agreement, concurrently herewith the Stockholders are entering into this
Agreement pursuant to which, among other things, each Stockholder agrees,
subject to the terms and conditions of Section 5.9 hereof, to vote in
favor of this Agreement and the Merger and against any competing
proposals;
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"CODE") by reason of Section 368(a)(2)(E) thereof; and
WHEREAS, it is intended that the Merger will be recorded for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises and promises herein
contained, the parties agree as set forth below:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as
the surviving corporation (the "SURVIVING CORPORATION") and shall succeed
to and assume all the rights and obligations of Sub in accordance with the
DGCL. Notwithstanding anything to the contrary herein, at the election of
Kellwood, any direct wholly-owned Subsidiary (as hereinafter defined) of
Kellwood may be substituted for Sub as a constituent corporation in the
Merger, provided that such substituted corporation is a Delaware
corporation which is formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no other
business activities, and provided further that such substitution would not
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code. In such event, the parties agree
to execute an appropriate amendment to this Agreement, in form and
substance reasonably satisfactory to Kellwood and the Company, in order to
reflect such substitution.
1.2. EFFECTIVE TIME. The Merger shall become effective when a
Certificate of Merger (the "CERTIFICATE OF MERGER"), executed in
accordance with the relevant provisions of the DGCL, is filed with the
Secretary of State of the State of Delaware; provided, however, that, upon
mutual consent of the Constituent Corporations, the Certificate of Merger
may provide for a later date of effectiveness of the Merger not more than
30 days after the date the Certificate of Merger is filed. When used in
this Agreement, the term "EFFECTIVE TIME" shall mean the date and time at
which the Certificate of Merger is accepted for recording or such later
date and time established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made on the Closing Date (as hereinafter
defined).
1.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in Section 259 of the DGCL. From and after
the Effective Time, the Surviving Corporation shall be a wholly-owned
subsidiary of Kellwood.
1.4. CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS.
(a) At the Effective Time, the Certificate of Incorporation, as
amended, of Sub (the "SUB CHARTER"), as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. At the Effective Time, the By-laws of Sub (the "SUB BY-
LAWS"), as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter changed or amended
as provided therein or by the Sub Charter, a copy of which is attached
hereto.
(b) 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. The officers of the 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.
1.5. CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or
the holders of any securities of the Constituent Corporations:
(a) Sub Common Stock. Each issued and outstanding share
of common stock, par value $.01 per share, of Sub shall be
converted into one validly issued, fully paid and non-assessable
share of common stock, par value $.01 per share, of the
Surviving Corporation;
(b) Treasury Stock. All shares, if any, of the Company
Common Stock that are held in the treasury of the Company or by
any wholly-owned Subsidiary of the Company shall be cancelled
and no capital stock of Kellwood or other consideration shall be
delivered in exchange therefor;
(c) Conversion of the Company Common Stock. Subject to
Sections 1.8 and 1.10 hereof, each share of the Company Common
Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be cancelled in accordance with
Section 1.5(b)), shall be converted into and exchanged solely
for that number of shares of Kellwood Common Stock determined by
dividing (i) the total number of shares of Kellwood Common Stock
to be issued (Five Million Two Hundred Forty-One Thousand
(5,241,000) shares of Kellwood Common Stock) by (ii) the total
number of issued and outstanding shares of Company Common Stock
on a fully diluted basis on the date hereof (including the
option and warrants described below) (Eight Million Six Hundred
Ninety-Eight Thousand One Hundred Ninety-One (8,698,191) shares
of Company Common Stock) resulting in an exchange ratio of
0.6025391 (the "EXCHANGE RATIO");
(d) Conversion of Company Option. The option issued to
▇▇▇▇▇▇ ▇▇▇▇▇ to purchase One Hundred Thousand (100,000) shares
of Company Common Stock for One Dollar ($1.00) per share shall
automatically and without any action of the holder thereof be
converted into an option to purchase such number of whole shares
of Kellwood Common Stock as is equal to the product of the
number of shares of Company Common Stock subject to such warrant
multiplied by the Exchange Ratio and then rounded to the nearest
whole share of Kellwood Common Stock, and having an exercise
price per share of Kellwood Common Stock equal to the quotient
determined by dividing the exercise price per share of such
option by the Exchange Ratio rounded to the nearest whole cent,
and with other terms and conditions that are comparable to the
terms and conditions of the option to purchase Company Common
Stock immediately prior to the Effective Time, including,
appropriate documentation thereof, and from and after the
Effective Time Kellwood shall reserve for issuance the number of
shares of Kellwood Common Stock that will become subject to the
option, subject to the terms and conditions applicable thereto
and shall register such shares under the Securities Act on Form
S-8 or other appropriate form. In the event that ▇▇▇▇▇▇ ▇▇▇▇▇
is deemed to be an "AFFILIATE" of Kellwood under the Securities
Act, such Form S-8 or other form shall include appropriate
resale provisions and prospectus enabling ▇▇. ▇▇▇▇▇ to sell
publicly the shares of Kellwood Common Stock obtained upon his
exercise of his option for a period of not less than one year
after the date of such exercise.;
(e) Conversion of Company Warrants. Prior to Closing,
the warrants issued to Bankers Trust New York Corporation
("BTNY") and Bankers Trust Securities Corporation ("BTSC")
pursuant to the Warrant Acquisition Agreement among the Company,
BTNY and BTSC dated June 30, 1992 (as amended) and Registration
Agreement among the Company, BTNY and BTSC, dated as of June 30,
1992 (the "BT WARRANT AGREEMENT") may be exercised and any such
shares of Company Common Stock so acquired shall be converted
into and exchanged solely for Kellwood Common Stock as
contemplated by Section 1.5(c). In the event that the warrants
issued to BTNY and BTSC pursuant to the BT Warrant Agreement are
not exercised prior to Closing, such warrants shall
automatically and without any action of the holder thereof be
converted into warrants to purchase such number of whole shares
of Kellwood Common Stock as is equal to the product of the
number of shares of Company Common Stock subject to such warrant
multiplied by the Exchange Ratio and then rounded to the nearest
whole share of Kellwood Common Stock, and having an exercise
price per share of Kellwood Common Stock equal to the quotient
determined by dividing the exercise price per share of such
warrants by the Exchange Ratio rounded to the nearest whole
cent, and with other terms and conditions that are comparable to
the terms and conditions of the warrants, including appropriate
documentation thereof, and from and after the Effective Time
Kellwood shall reserve for issuance the number of shares of
Kellwood Common Stock that will become subject to such warrants,
subject to the terms and conditions applicable thereto;
(f) Escrow. Such number of shares of Kellwood Common
Stock issued pursuant to Section 1.5(c) with an aggregate value
of Twelve Million Five Hundred Thousand Dollars ($12,500,000)
based upon the Agreed Price (but in no event more than 524,100
shares) shall be placed in escrow pursuant to and in accordance
with the terms of the Escrow Agreement by and among an escrow
agent acceptable to Kellwood and the Company (the "ESCROW
AGENT"), Kellwood, the Company and certain stockholders of the
Company (the "ESCROW AGREEMENT"); and by virtue of the Merger,
each holder of Company Common Stock converted into Kellwood
Common Stock authorizes and agrees to be bound by the terms and
conditions of the Escrow Agreement, including the appointment of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ with full power of
substitution, as an agent and attorney-in-fact, each with full
power and authority to act jointly for and on behalf of such
holder for all purposes of the Escrow Agreement (the
"STOCKHOLDERS REPRESENTATIVE"). Any action taken by
Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ in their capacity as Stockholders
Representative shall require the consent of both ▇▇. ▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇▇▇▇▇; and
(g) Cancellation of Company Common Stock. All shares of
Company Common Stock when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and
each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right
to receive any dividends and other distributions in accordance
with Section 1.6, certificates representing the shares of
Kellwood Common Stock into which such shares are converted, and
any cash, without interest, in lieu of fractional shares to be
issued or paid in consideration therefor upon the surrender of
such certificate in accordance with Section 1.6.
1.6. KELLWOOD TO MAKE CERTIFICATES AVAILABLE.
(a) Exchange of Certificates. Kellwood shall authorize its
transfer agent (or such other person or persons as shall be reasonably
acceptable to Kellwood and the Company) to act as exchange agent hereunder
(the "EXCHANGE AGENT"). As soon as practicable after the Effective Time,
Kellwood shall deposit with the Exchange Agent certificates representing
the shares of Kellwood Common Stock issuable pursuant to Section 1.5(c)
for exchange with outstanding shares of Company Common Stock and cash, as
required to make payments in lieu of any fractional shares pursuant to
Section 1.7 (such cash and shares of Kellwood Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter
referred to as the "EXCHANGE FUND"). The Exchange Agent shall deliver
Kellwood Common Stock contemplated to be issued pursuant to Section 1.5(c)
out of the Exchange Fund to the holders of Company Common Stock or to the
Escrow Agent as provided herein.
(b) Exchange Procedures. Kellwood shall instruct the Exchange
Agent, as soon as practicable after the Effective Time, to mail to each
record holder of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
converted in the Merger (the "CERTIFICATES") a letter of transmittal (the
"LETTER OF TRANSMITTAL"). The Letter of Transmittal shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to the Exchange
Agent, and shall contain instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of
Kellwood Common Stock and cash in lieu of fractional shares. The Letter
of Transmittal shall also authorize the Escrow Agreement and the
appointment of the Stockholders Representative. Such Stockholders'
Representative shall be the agent and attorney-in-fact for such
stockholder with full power and authority to authorize the payment of
indemnification and settlement of claims as contemplated by Article X
hereof. Upon surrender for cancellation to the Exchange Agent of all
Certificates held by any record holder of a Certificate, together with a
duly executed Letter of Transmittal, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Kellwood Common Stock into which the shares
represented by the surrendered Certificate shall have been converted at
the Effective Time less the shares to be delivered to the Escrow Agent
pursuant to this Article I, cash in lieu of any fractional share in
accordance with Section 1.7 and certain dividends and other distributions
in accordance with this Section 1.6, and any Certificate so surrendered
shall forthwith be cancelled.
(c) Dividends, Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Kellwood
Common Stock, or are payable to the holders of record thereof on or after
the Effective Time, will be paid to any person entitled by reason of the
Merger to receive a certificate representing Kellwood Common Stock until
such person surrenders the related Certificate or Certificates, together
with a duly executed Letter of Transmittal, as provided in Section 1.6,
and no cash payment in lieu of fractional shares will be paid to any such
person pursuant to Section 1.7 until such person shall so surrender the
related Certificate or Certificates and a duly executed Letter of
Transmittal. Subject to the effect of applicable law, there shall be paid
to each record holder of a new certificate representing such Kellwood
Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of Kellwood Common Stock
represented by such new certificate and having a record date on or after
the Effective Time and a payment date prior to such surrender; provided,
however, that no dividends declared prior to Closing shall be paid with
respect to such shares; (ii) at the appropriate payment date or as
promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Kellwood Common Stock
declared on or after the Effective Time but prior to such surrender and
having a payment date on or subsequent to such surrender; and (iii) at the
time of such surrender or as promptly as practicable thereafter, the
amount of any cash payable with respect to a fractional share of Kellwood
Common Stock to which such holder is entitled pursuant to Section 1.7. In
no event shall the person entitled to receive such dividends or other
distributions or cash in lieu of fractional shares be entitled to receive
interest on such dividends or other distributions or cash in lieu of
fractional shares. If any cash or certificate representing shares of
Kellwood Common Stock is to be paid to or issued in a name other than that
in which the Certificate surrendered in exchange therefor is registered,
it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange shall pay to
Kellwood any transfer or other taxes required by reason of the issuance of
certificates for such shares of Kellwood Common Stock in a name other than
that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of Kellwood that such tax has been paid or
is not applicable. Kellwood shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
holder of shares of the Company Common Stock such amounts as Kellwood is
required to deduct and withhold with respect to the making of such payment
under the Code or under any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Kellwood, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of the Company Common Stock in respect of
which such deduction and withholding was made by Kellwood.
1.7. NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of Kellwood Common Stock shall be issued
upon the surrender for exchange of Certificates pursuant to this Article
I, and no Kellwood dividend or other distribution or stock split shall
relate to any fractional share, and no fractional share shall entitle the
owner thereof to vote or to any other rights of a security holder of
Kellwood. In lieu of any such fractional share, each holder of the
Company Common Stock who would otherwise have been entitled to a fraction
of a share of Kellwood Common Stock upon surrender of Certificates for
exchange pursuant to this Article I (after aggregating all fractional
shares of Kellwood Common Stock to be received by such holder) will be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (i) the Agreed Price per share of Kellwood
Common Stock by (ii) the fractional interest to which such holder would
otherwise be entitled. As promptly as practicable after the determination
of the amount of cash, if any, to be paid to holders of fractional share
interests, Kellwood shall forward payments to such holders of fractional
share interests subject to and in accordance with the terms of this
Section 1.7.
1.8. RETURN OF EXCHANGE FUND. Any portion of the Kellwood Common
Stock and any cash payment in lieu of factional shares which remains
undistributed to the former stockholders of the Company for six months
after the Effective Time shall be returned to Kellwood, and any such
former stockholders who have not theretofore complied with this Article I
shall thereafter look only to Kellwood for payment of their claim for
Kellwood Common Stock, any cash in lieu of fractional shares of Kellwood
Common Stocks and any dividends or distributions with respect to Kellwood
Common Stock. Neither Kellwood nor the Surviving Corporation shall be
liable to any former holder of the Company Common Stock for any such
shares of Kellwood Common Stock, cash and dividends and distributions held
in the Exchange Fund which is delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
1.9. ADJUSTMENT OF THE CONSIDERATION. In the event of any
reclassification, stock split, stock dividend, reorganization,
recapitalization or like change with respect to Kellwood Common Stock or
any change or conversion of Kellwood Common Stock into other securities
(or if a record date with respect to any of the foregoing should occur)
prior to the Effective Time, appropriate and proportionate adjustments, if
any, shall be made to the amount of Kellwood Common Stock to be issued
pursuant to Section 1.5(c) and the options to be issued pursuant to
Section 1.5(d) and the warrants which may be issued pursuant to Section
1.5(e).
1.10. NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK. All
shares of Kellwood Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.7) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of the Company Common
Stock represented by such Certificates.
1.11. CLOSING OF THE COMPANY TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company shall be closed and no
transfer of shares of the Company Common Stock shall thereafter be made on
the records of the Company. If, after the Effective Time, Certificates
are presented to the Surviving Corporation or Kellwood, such Certificates
shall be cancelled and exchanged as provided in this Article I.
1.12. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Kellwood, the posting by such person of a bond, in such
reasonable amount as Kellwood may direct as indemnity against any claim
that may be made against them with respect to such Certificate, Kellwood
will issue in exchange for such lost, stolen or destroyed Certificate the
shares of Kellwood Common Stock, any cash in lieu of fractional shares of
Kellwood Common Stock to which the holders thereof are entitled pursuant
to Section 1.7 and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 1.6.
1.13. FURTHER ASSURANCES. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper in furtherance of the provisions of this
Agreement (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either
of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to execute
and deliver, in the name and on behalf of either of the Constituent
Corporations, all such deeds, bills of sale, assignments and assurances
and to do, in the name and on behalf of either Constituent Corporation,
all such other acts and things as may be necessary, desirable or proper to
vest, perfect or confirm the Surviving Corporation's right, title or
interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and
otherwise to carry out the purposes of this Agreement.
1.14. ESCROW. The shares of Kellwood Common Stock deposited in
Escrow pursuant to the Escrow Agreement shall be available to fund and
satisfy indemnification payments, if any, due to Kellwood hereunder,
together with any other claim of Kellwood or Sub hereunder. Following the
Effective Time, the Escrow shall be the sole and exclusive recourse of
Kellwood and Sub for breaches by the Company or the Stockholders of the
representations, warranties and covenants contained herein, absent fraud.
The value of a share of Kellwood Common Stock used to fund indemnification
payments shall be the closing price per share on The New York Stock
Exchange on the trading day immediately preceding the Closing Date (the
"AGREED PRICE").
ARTICLE II
THE CLOSING OF THE MERGER
2.1. Closing. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall occur at the offices of ▇▇▇▇▇▇▇▇▇, Will &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 A.M. on the
third business day following the satisfaction of the conditions precedent
in Article VIII hereof or at such other time or place as may be mutually
agreed upon by the parties (the "CLOSING DATE"). Upon consummation, the
Closing shall be deemed to take place as of the Effective Time.
2.2. DELIVERIES BY KELLWOOD. At the Closing, Kellwood and Sub
shall deliver the following:
(a) upon surrender of Certificates properly endorsed for
transfer or accompanied by duly executed stock powers in either
case executed in blank or in favor of Kellwood and duly executed
Transmittal Letters, the Exchange Agent shall deliver or cause
to be delivered to the holders of Company Common Stock or any of
their representatives surrendering such Certificates, (i)
certificates evidencing the number of shares of Kellwood Common
Stock to be received by each such holder under Section 1.5(c)
hereof, which certificates will be duly issued and registered in
the name of each such holder, and (ii) cash to be paid in lieu
of delivery of a fraction of a share of Kellwood Common Stock
which shall be paid by delivery of a check, in each case less
the number of shares to be delivered to the Escrow Agent;
(b) Kellwood shall cause the Exchange Agent to deliver to
the Escrow Agent certificates evidencing the number of shares of
Kellwood Common Stock to be held in escrow pursuant to
Section 1.5(f) hereof, which certificates will be duly issued
and registered in the respective names of the Company
stockholders evidencing the number of shares of Kellwood Common
Stock of each Company stockholder held in escrow hereunder, plus
cash to be paid in lieu of delivery of a fraction of a share of
Kellwood Common Stock;
(c) opinion of counsel in a form customary in
transactions such as the Merger and reasonably acceptable to the
Company; and
(d) such other instruments or documents as may be
necessary or appropriate to carry out the transactions
contemplated hereby.
2.3. DELIVERIES BY THE COMPANY AND THE STOCKHOLDERS. At the
Closing, the Company and the Stockholders shall deliver the following:
(a) the Certificates;
(b) a non-foreign affidavit for each Stockholder within
the meaning of Section 1445(b) of the Code exempting each such
Stockholder from withholding under Section 1445 of the Code;
(c) all other previously undelivered documents required
to be delivered by the Company to Kellwood at or prior to the
Closing pursuant to the term of this Agreement;
(d) opinion of counsel in a form customary in
transactions such as the Merger and reasonably acceptable to
Kellwood; and
(e) such other endorsements, instruments or documents as
may be necessary or appropriate to carry out the transactions
contemplated hereby.
2.4. CLOSING AGREEMENTS. At the Closing, the parties shall
execute, acknowledge and deliver the following:
(a) the Escrow Agreement;
(b) Non-competition Agreements between Sub and each of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ containing
restrictions comparable to those contained in each such
individual's current employment agreement with the Company to
extend for a period of two (2) years following the Closing Date.
(c) such other instruments or documents as may be
necessary or appropriate to carry out the transactions
contemplated by this Agreement and to comply with the terms
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Kellwood and Sub as of the
date hereof and as of the Closing Date, as set forth below:
3.1. AUTHORITY. Subject to the approval of the Merger and this
Agreement by the stockholders of the Company in accordance with the
provisions of the Company's Amended and Restated Certificate of
Incorporation ("REQUIRED COMPANY STOCKHOLDER APPROVAL") and compliance
with the provisions of the Stockholders Agreement dated as of July 1, 1994
by and among Koret, Inc. and certain stockholders named therein (the
"COMPANY STOCKHOLDERS AGREEMENT"), the Company and each Stockholder have
full right, power and authority, without the consent of any other person,
to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. Subject to the Required Company Stockholder
Approval, and compliance with the applicable provisions of the Company
Stockholders Agreement, all acts or proceedings required to be taken by
the Company or any Stockholder to authorize the execution, delivery and
performance of this Agreement, the documents to be delivered at Closing
and all transactions contemplated hereby and thereby have been duly and
properly taken.
3.2. VALIDITY. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute
lawful, valid and legally binding obligations of the Company and each
Stockholder, enforceable in accordance with their respective terms,
subject to obtaining Required Company Stockholder Approval and compliance
with the Company Stockholders Agreement. Except as set forth in Schedule
3.2, and except for compliance with the applicable provisions of the
Company Stockholders Agreement, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
will not result in the creation of any lien, charge or encumbrance of any
kind or the termination or acceleration of any indebtedness or other
obligation of the Company, and are not prohibited by, do not violate or
conflict with any provision of, and do not constitute a default under or a
breach of (a) the charter or By-laws of the Company or any Stockholder,
(b) any material note, bond, indenture, contract, agreement, permit,
license or other instrument to which the Company is a party or by which
the Company or any of its assets is bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d)
any law, rule or regulation applicable to the Company or any Stockholder.
No approval, authorization, registration, consent, order or other action
of or filing with any person, including any court, administrative agency
or other governmental authority, is required for the execution and
delivery by the Company or any Stockholder of this Agreement, the
documents to be delivered at Closing or the consummation by the Company or
any Stockholder of the transactions contemplated hereby and thereby,
except for filings or consents required pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR ACT").
3.3. OWNERSHIP OF STOCK. Each Stockholder has good and marketable
title to all of the Company Common Stock registered in his or its name as
set forth on Schedule 3.3 and, subject to compliance with the provisions
of the Company Stockholders Agreement, which will be terminated as of the
Closing Date, the absolute right, power and capacity to sell, assign,
transfer and deliver all right, title and interest both legal and
equitable, in and to the Company Common Stock registered in its name as
set forth in Schedule 3.3, in connection with the transactions
contemplated hereby, free and clear of all claims, security interests,
liens, pledges, charges, escrows, options, proxies, rights of first
refusal, preemptive rights, mortgages, hypothecations, prior assignments,
title retention agreements, indentures, security agreements or any other
limitation, encumbrance or restriction of any kind, except as disclosed on
Schedule 3.3 with respect to certain liens to be discharged as of Closing.
3.4. DUE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has full power and authority and all
requisite rights, licenses, permits and franchises to own, lease and
operate its assets and to carry on the business in which it is engaged.
The Company is duly licensed, registered and qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in which
the ownership, leasing or operation of its assets or the conduct of its
business requires qualification and in which the failure to so qualify to
do business would have a material adverse effect on the business, assets
(including intangible assets), financial condition, results of operations
or liabilities of the Company and its Subsidiaries taken as a whole
(hereinafter referred to as a "COMPANY MATERIAL ADVERSE EFFECT").
Schedule 3.4 sets forth each state or other jurisdiction in which the
Company is licensed or qualified to do business. The Company has
delivered to Kellwood an accurate and complete copy of its charter and by-
laws and each agreement, trust, proxy or other arrangement among its
Stockholders to which the Company is a party or by which the Company is
bound.
The books of account and other financial records of the Company are
accurate and complete in all material respects and have been maintained in
accordance with good business practices. The minute books of the Company
in all material respects contain accurate and complete records of all
meetings and accurately reflect all other material corporate action of the
stockholders and directors and any committees of the Board of Directors of
the Company and the stock record books of the Company accurately reflect
the ownership of the Company.
3.5. SUBSIDIARIES.
(a) Except as set forth in Schedule 3.5, the Company does not own
stock or have any material equity investment or other material interest
in, does not have the right to acquire any material interest, and does not
control, directly or indirectly, any corporation, association,
partnership, joint venture or other entity (individually, a "SUBSIDIARY"
and collectively the "SUBSIDIARIES"). Schedule 3.5 sets forth the state
or other jurisdiction of incorporation or organization of each Subsidiary,
and each state or other jurisdiction in which such Subsidiary is licensed
or qualified to do business. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Subsidiary has full power and
authority and all requisite rights, licenses, permits and franchises to
own, lease and operate its assets and to carry on the business in which it
is engaged. Each Subsidiary is duly licensed and qualified to do business
as a foreign corporation and is in good standing in all jurisdictions in
which the ownership, leasing or operation of its assets or the conduct of
its business requires qualification and in which the failure to so qualify
would have a Company Material Adverse Effect.
(b) The capitalization, including debt and equity, of each
Subsidiary is accurately set forth in Schedule 3.5. All outstanding
shares of capital stock of each Subsidiary (the "SHARES") are duly
authorized, validly issued, fully paid and non-assessable, were not issued
in violation of any preemptive subscription or other right of any person
to acquire securities of any Subsidiary and constitute in the aggregate
all the issued and outstanding capital stock of all classes of the
Subsidiaries. There is no outstanding subscription, option, convertible
or exchangeable security, preemptive right, warrant, call or agreement
(other than this Agreement) relating to the Shares or other obligation or
commitment of any Subsidiary to issue any shares of capital stock. There
are no voting trusts or other agreements, arrangements or understandings
applicable to the exercise of voting or any other rights with respect to
any Shares. The Company has, either directly or indirectly through one or
more Subsidiaries, good and marketable title to all of the Shares and the
absolute right to sell, assign, transfer and deliver the Shares, free and
clear of all claims, security interests, liens, pledges, charges, escrows,
options, proxies, rights of first refusal, preemptive rights, mortgages,
hypothecations, prior assignments, title retention agreements, indentures,
security agreements or any other limitation, encumbrance or restriction of
any kind.
3.6. CAPITAL STOCK. The Company's entire equity capital consists
of 20,000,000 authorized shares of Class A Common Stock, $.01 par value
per share, of which 4,903,719 shares are issued and outstanding, 1,000,000
authorized shares of Class B non-voting common stock, $.01 par value
("COMPANY CLASS B COMMON STOCK"), of which no shares are issued or
outstanding on the date hereof, and 3,200,000 authorized shares of Class C
Special Common Stock, par value $.01 per share, of which 3,091,190 shares
are issued and outstanding and all of which are owned of record by the
stockholders listed on Schedule 3.6. Prior to Closing, BTNY and BTSC may
exercise their warrants to purchase shares of Company Class B Common Stock
pursuant to the BT Warrant Agreement, conditioned upon the consummation of
the Merger, which, if exercised, in full, will result in the issuance
immediately prior to the Effective Time to BTNY and BTSC of up to 553,282
and 50,000 shares, respectively, of Company Class B Common Stock. Prior
to Closing, the option issued to ▇▇▇▇▇▇ ▇▇▇▇▇ to purchase 100,000 shares
of Company Common Stock may be exercised by him, which, if exercised in
full, will result in the issuance to ▇▇. ▇▇▇▇▇ of 100,000 shares of
Company Class A Common Stock. The capitalization, including debt and
equity, of the Company is accurately described in the financial statements
set forth in Schedule 3.9. All outstanding shares of the Company Common
Stock are duly authorized, validly issued, fully paid and nonassessable,
and were not issued in violation of any preemptive, subscription or other
right of any person to acquire securities. The Company Common Stock
constitutes in the aggregate all the issued and outstanding capital stock
of all classes of the Company on the date hereof. Schedule 3.6 lists all
outstanding options and warrants to purchase Company Common Stock or any
other capital stock or securities of the Company to which the Company is a
party or by which the Company is bound. Except as set forth on
Schedule 3.6, there are no outstanding subscriptions, options, convertible
or exchangeable security, preemptive right, warrants, call or agreement
(other than this Agreement) relating to the Company Common Stock or any
capital stock or other obligation or commitment (contingent or otherwise)
to issue, repurchase or otherwise acquire or retire any shares of capital
stock of the Company to which the Company is a party or by which the
Company is bound. All shares of the Company's capital stock, whether or
not currently outstanding, were issued in compliance (and if reacquired or
cancelled by the Company, reacquired or cancelled in compliance) with all
laws, applicable laws, rules and regulations of any foreign, federal,
state or local governmental authority (collectively, "LAWS"), including
securities Laws. Except as set forth on Schedule 3.6, there are no voting
trusts or other agreements, arrangements or understandings applicable to
the exercise of voting or any other rights with respect to any the Company
Common Stock to which the Company is a party or by which the Company is
bound. Except as set forth on Schedule 3.6, there are no restrictions
affecting the transferability of the Company Common Stock to which the
Company is a party or by which the Company is bound. Except as listed on
Schedule 3.6, the Company has not lent or advanced any money to, or
borrowed any money from, or guaranteed or otherwise become liable for any
indebtedness or other obligations of, or acquired any capital stock,
obligations or securities of, any stockholder or any other person in each
case in an amount of or value greater than $10,000.
3.7. TRANSACTIONS WITH RELATED PARTIES. Since November 30, 1997,
there has not been any dividend or other distribution of assets by the
Company. Except as set forth in Schedule 3.7, no Related Party:
(a) owns or controls, directly or indirectly, a twenty-
five (25%) or greater voting or equity interest in any
corporation, association or other entity which is a competitor,
lessor, lessee, customer, supplier, distribution sales agent or
advertiser of the Business;
(b) has any cause of action or other claim whatsoever
against or owes any material amount to, or is owed any material
amount by, the Company;
(c) has any interest in or owns any material property or
right used in the conduct of the Business;
(d) is a party to any contract, lease or agreement with
the Company; or
(e) except in the case of Related Parties who are
executive officers and/or directors of the Company and who
performed services for the Company and received compensation
from the Company in the ordinary course of the Business
consistent with past practices, received from or furnished to
the Company any goods or services (with or without
consideration) since November 30, 1997.
The term "RELATED PARTY" shall mean: (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇. ▇▇▇▇▇▇▇"); (ii) any member of ▇▇. ▇▇▇▇▇▇▇'▇ immediate family (i.e.,
spouse, brother, sister or child); (iii) any executive officer or director
of the Company (except ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇); and (iv)
any corporation, partnership, trust or other entity in which any of the
persons set forth in subsections (i) through (iii) of this paragraph holds
twenty-five (25%) or greater voting interest or equity interest. The
executive officers and directors of the Company are set forth in Schedule
3.7.
3.8. FINANCIAL STATEMENTS. The financial statements of the Company
for the three (3) year period ended November 30, 1997 and the nine months
ended August 31, 1997 and August 31, 1998 attached hereto as Schedule 3.8
(the "FINANCIAL STATEMENTS") are, (a) accurate and complete in all
material respects, (b) in accordance with the books of account and records
of the Company, (c) present fairly the financial condition and results of
operations of the Company as of the dates and for the periods indicated
and (d) prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis throughout the periods covered
thereby ("GAAP"), except that the unaudited financial statements of the
Company as of and for the nine-month periods ended August 31, 1997 and
1998, do not contain all of the footnotes required by GAAP, are condensed
and are subject to year-end adjustments consistent with past practice.
Such financial statements for interim periods reflect all adjustments
necessary for a fair presentation of financial position and, to the extent
presented, changes in financial position and results of operations for the
periods presented.
3.9. INTERIM CHANGE. Except as set forth in Schedule 3.9, since
November 30, 1997, there has not been (a) any change in the financial
condition, assets, liabilities, personnel or business of the Company or in
its relationships with suppliers, customers, distributors, lenders,
lessors or others, except changes in the ordinary course of the Business;
(b) any damage, destruction or loss, whether or not covered by insurance
which has had a Company Material Adverse Effect; (c) any forgiveness or
cancellation of debts or claims, waiver of any rights or any discharge or
satisfaction of any lien, charge or encumbrance or payment of any
liability or obligation, other than current liabilities in the ordinary
course of the Business; (d) any event or condition of any character which
has had a Company Material Adverse Effect; (e) any decrease in the net
book value of the Company; or (f) any material change in the credit
practices of the Company or in the methods or accounting principles used
in maintaining their books, accounts or business records. Since
November 30, 1997, the Company has not incurred or become subject to, or
agreed to incur or become subject to, any liability or obligation,
contingent or otherwise, except current liabilities and contractual
obligations in the ordinary course of the Business in amounts consistent
with past practices except as set forth in Schedule 3.9. Except as set
forth in Schedule 3.9, since November 30, 1997, there have not been any
material special sales of any products or services or any material changes
in the prices charged for any products or services other than in the
ordinary course of the Business, consistent with past practices.
3.10. BANKING RELATIONSHIPS AND INVESTMENTS. Schedule 3.10 sets
forth an accurate and complete list of all banks and financial
institutions in which the Company has an account, deposit, safe-deposit
box, lock box or line of credit or other loan facility or relationship,
including the names of all persons authorized to draw on those accounts or
deposits, or to borrow under such lines of credit or other loan
facilities, or to obtain access to such boxes. Schedule 3.10 sets forth
an accurate and complete list of all certificates of deposit, debt or
equity securities and other investments owned, beneficially or of record,
by the Company (the "INVESTMENTS"). The Company has good and marketable
title to all of the Investments. The Investments reflected on the
Company's financial statements are, (a) properly valued at the lower of
cost or market, (b) readily marketable, and (c) fully paid and not subject
to assessment or other claims upon the Company thereof.
3.11. ACCOUNTS RECEIVABLE. Schedule 3.11 sets forth an accurate
and complete list of all factoring or similar agreements governing the
disposition, sale and collection of its accounts and notes receivable (the
"FACTORING AGREEMENTS").
3.12. INVENTORY. All inventories reflected on the financial
statements delivered to Kellwood are (a) properly recorded at the lower of
standard cost (which approximates average cost) or market (net realizable
value) in accordance with GAAP as consistently applied in prior annual
financial statements; (b) of good and merchantable quality and contain no
material amounts that are not salable and usable for the purposes intended
in the ordinary course of the Business and meet the current standards and
specifications of the Business; (c) in conformity with warranties
customarily given to buyers of like products; and (d) at levels adequate
and not excessive in relation to the circumstances of the Business and in
accordance with past inventory stocking practices. Except as set forth on
Schedule 3.12, all inventories disposed of subsequent to November 30,
1997, have been disposed of only in the ordinary course of business and at
prices and under terms that are normal and consistent with past practice.
No inventory is held by the Company on consignment. The Company does not
hold title to any inventory held by others.
3.13. MOTOR VEHICLES. Schedule 3.13 sets forth an accurate and
complete list of all motor vehicles used by the Company, whether owned or
leased. All such vehicles are (a) properly licensed and registered in
accordance with applicable law; (b) insured as set forth in Schedule 3.13;
(c) in good operating condition and repair (reasonable wear and tear
excepted) and (d) not subject to any lien or other encumbrance, except
with respect to leased motor vehicles, in accordance with the leases
therefor.
3.14. INSURANCE. Schedule 3.14 sets forth an accurate and complete
list (including the name of the insurer, coverage, premium and expiration
date) of all binders, policies of insurance, self insurance programs or
fidelity bonds ("INSURANCE") maintained by the Company in which the
Company is a named insured. To the knowledge of the Company, without
inquiry, all Insurance has been issued by financially sound insurance
companies under valid and enforceable policies or binders for the benefit
of the Company, and all such policies or binders are in full force and
effect. There are no pending or asserted claims against any Insurance as
to which any insurer has denied liability, and since November 30, 1997,
there have been no new claims under any Insurance that have been
disallowed or improperly filed. Since November 30, 1997, the Company has
received, no notice of cancellation or non-renewal with respect to, or
material increase of premium for, any insurance has been received by the
Company. The Company has no knowledge of any facts or the occurrence of
any event with respect to the Company, which (i) reasonably might form the
basis of any claim against the Company relating to the conduct or
operations of the Business which will materially increase the insurance
premiums payable under any insurance, or (ii) otherwise will materially
increase the insurance premiums payable under any insurance.
3.15. TITLE TO ASSETS. The Company and the Subsidiaries have good
and valid title to, or in the case of leased properties and assets, valid
leasehold interests in, all of their respective material tangible
properties and assets, real, personal and mixed, used or held for use in
the Business, free and clear of liens or other encumbrances, except as
stated in the Financial Statements or in Schedule 3.15 and except for
liens for taxes not yet due and payable and such imperfections of title
and encumbrances, which do not materially detract from the value, or
materially interfere with the present use, of the property subject thereto
or affected thereby. Schedule 3.15 sets forth an accurate and complete
list of all depreciable assets. The material assets owned and leased or
licensed by the Company and the Subsidiaries and used in the conduct of
the Business are in good operating condition and repair (reasonable wear
and tear excepted), are suitable for the purposes for which they are
presently being used, and are adequate to meet all present and reasonably
anticipated requirements of the Business as presently conducted. The
assets owned and leased or licensed by the Company and used in the conduct
of the Business will furnish Kellwood with all of the capacity and rights
to design, manufacture, produce, develop, use, sell, market and distribute
the products and to perform the same services in the same manner as
presently conducted by the Company and the Subsidiaries and to meet all
reasonably anticipated requirements of the Business.
3.16. REAL ESTATE. The Company does not own any real property.
3.17. REAL ESTATE LEASES. Schedule 3.17 sets forth an accurate and
complete list of all real property leased or subleased by the Company and
the Subsidiaries, setting forth the location (including street address) of
each leased or subleased premises, the lessor (or sublessor) thereof, the
lessee (or sublessee) thereof, the current use by lessee or sublessee of
such premises, the term of the lease or sublease therefor (the "REAL
ESTATE LEASES") and any renewal options held by the lessee or sublessee.
The Company and the Subsidiaries are in peaceable possession,
respectively, of the premises covered by each Real Estate Lease. The
Company has delivered to Kellwood accurate and complete copies of each
Real Estate Lease. At the Closing, the Company shall deliver to Kellwood
any consents or approvals of any parties with respect to those Real Estate
Leases set forth on Schedule 8.3(d), or alternatively, prior to Closing,
cooperate with Kellwood in commercially reasonable efforts to provide
Kellwood with the commercial benefit of such Real Estate Leases.
3.18. PERSONAL PROPERTY LEASES. Schedule 3.18 sets forth an
accurate and complete list of each lease or bailment of personal property
used in the Business for which the Company's annual lease payment or other
payment obligation is $25,000 or more (the "PERSONAL PROPERTY LEASES").
The Company and the Subsidiaries are in peaceable possession,
respectively, of the property covered by each Personal Property Lease.
The Company has delivered to Kellwood an accurate and complete copy of
each Personal Property Lease. At the Closing, the Company shall use
commercially reasonable efforts to deliver to Kellwood any consents or
approvals of any parties with respect to the Personal Property Leases
required in connection with the transactions contemplated hereby.
3.19. INTELLECTUAL PROPERTY. Schedule 3.19 sets forth an accurate
and complete list (showing in each case any product, device, process and
service covered thereby, the registered or other owner, registration
number, and registration status) of all material Patents Rights,
Trademarks, and Copyrights owned by the Company and its Subsidiaries or
licensed to the Company and its Subsidiaries for its business as it is
currently conducted (the "INTELLECTUAL PROPERTY"). With respect to the
Intellectual Property:
(a) Except as set forth on Schedule 3.19 (which
Schedule sets forth with specificity the nature of the Company's
and the Subsidiaries' rights (or grant of rights), any
limitations thereon, the owner of such rights (or the licensee
or grantee of such rights and the nature of such grant), and
attaches a copy of the relevant agreement(s) pursuant to which
the Company or the Subsidiaries obtained (or granted) such
rights), the Company or the Subsidiaries are the sole and
exclusive owner of the Intellectual Property and have the sole
and exclusive right to use the Intellectual Property;
(b) Except as set forth on Schedule 3.19, with respect to
the Intellectual Property, (i) no action, suit, proceeding or
investigation is pending nor has the Company received any notice
of a threatened action or suit; (ii) the Company has received no
notice that the Intellectual Property owned by the Company or
the Subsidiaries or the Intellectual Property owned by third
parties and licensed to the Company or the Subsidiaries,
interferes with, infringes upon, conflicts with or otherwise
violates the rights of others or is being interfered with or
infringed upon by others or is subject to any outstanding order,
decree, judgment, stipulation or charge; (iii) the Company and
the Subsidiaries have received no notice of any patent,
invention or application therefor which would infringe upon any
of the Intellectual Property or render obsolete or adversely
affect the manufacture, processing, distribution or sale of
products or services of the Company; and (iv) all items of
Intellectual Property owned by the Company are registered under
applicable law and all such registrations are valid and in
force, and in the case of applications, all patent applications
with respect to Patent Rights and all applications to register
any unregistered Copyrights and Trademarks are pending and in
good standing, all without challenge of any kind;
(c) Except as set forth on Schedule 3.19, all rights of
the Company and the Subsidiaries in and to the Intellectual
Property are transferable to Kellwood as contemplated herein
without any consent, approval or payment which has not already
been obtained or made by the Company;
(d) Except as set forth on Schedule 3.19, the Company and
the Subsidiaries are not subject to any judgment, order, writ,
injunction or decree of any court or any Federal, state, local
or other governmental agency or instrumentality, domestic or
foreign, or any arbitrator, nor are a party to any contract
which restricts or impairs the Company's and the use of any
Intellectual Property owned by the Company;
(e) To the knowledge of the Company, the operation of the
Company after the Closing in the manner and geographic areas in
which the Business is currently conducted by the Company will
not interfere with or infringe upon any third party Patent
Right, Trademark or Copyright or any asserted rights of others,
including without limitation, with respect to the current
labels, logos, product designation, trade dress or packaging of
any products; and
(f) Except as set forth on Schedule 3.19, during the
preceding five (5) years, the Company has not been known by or
done business under any other name not listed on Schedule 3.19.
(g) For purposes of this Agreement and the provisions of
this Section 3.19, the following terms shall have the following
meanings:
(I) "COPYRIGHTS" means United States and foreign
copyrights, copyrightable works, and mask works, whether
registered or unregistered, and pending applications to
register the same, and all material agreements, contracts,
licenses, sublicenses, assignments and indemnities that
relate or pertain to any of the forgoing to which the
Company or a Subsidiary is a party or by which any of them
is bound;
(II) "PATENT RIGHTS" means United States and foreign
patents, patent applications, continuations, continuations-
in-part, divisions, reissues, patent disclosures,
inventions (whether or not patented) or improvements
thereto, and all material agreements, contracts, licenses,
sublicenses, assignments and indemnities that relate or
pertain to any of the forgoing to which the Company or a
Subsidiary is a party or by which any of them is bound; and
(III) "TRADEMARKS" means United States, state and
foreign trademarks, service marks, logos, trade dress,
trade styles, trade names (including all assumed or
fictitious names under which the party is conducting
business or has within the past five years conducted
business), product designations, labels, logos, designer
designations, brands, and any other source-identifying
devices or symbols, and any combination or variations
thereof, whether registered or unregistered, and pending
applications to register the foregoing and all
registrations thereof, and all material agreements,
contracts, licenses, sublicenses, assignments and
indemnities that relate or pertain to any of the forgoing
to which the Company is a party or by which any of them may
be bound.
Copies of all Intellectual Property applications, registration
renewals, and all correspondence with respect thereto, shall be delivered
to Kellwood at Closing.
3.20. SOFTWARE AND INFORMATION SYSTEMS. The Company and its
Subsidiaries have a possessory interest in the computer software programs
and related information platform systems, in any media, including, without
limitation, all program specifications, input data, databases,
compilations, routines, compilers, higher level or "PROPRIETARY"
languages, report layouts and formats, record file layouts, functional
specifications and narrative descriptions, whether in source code, object
code or human readable form, used by the Company and its Subsidiaries for
their businesses as they are currently conducted (collectively, the
"SOFTWARE"). With respect to the Software:
(a) To the knowledge of the Company, Schedule 3.20(a)
sets forth an accurate and complete list of the Software and
identifies (i) Software that is owned by the Company and its
Subsidiaries; (ii) any other Software in which the Company and
its Subsidiaries have any use, possessory or proprietary rights;
and (iii) all pending Software development projects, together
with a description of such projects and the stage of their
development, an identification of the persons undertaking the
projects, and a description of any Software licensed for use in
the projects.
(b) Schedule 3.20(b) sets forth an accurate and complete
list of the Software that is licensed to the Company and its
Subsidiaries, the licensor of the Software and, if different,
the owner thereof.
(c) Except as set forth on Schedule 3.20(c), the Software
is not subject to any material transfer, assignment, source code
escrow agreement, reversion, site, equipment, or other
operational limitations.
(d) All Software documentation is sufficient in detail
and content to identify and explain the nature thereof, and to
allow its full and proper use by the Company and its
Subsidiaries, as well as pertinent commentary and explanation
used for the development, implementation, maintenance and use
thereof.
(e) The Company and its Subsidiaries have received no
notice of any violation of patent, trade secret rights,
copyright or other proprietary rights with respect to the
Software.
(f) Except as set forth on Schedule 3.20(f) as non-Year
2000 Compliant Software ("NON-Y2K COMPLIANT SOFTWARE"), the
Software and related systems in their current form are Year 2000
Compliant. The Company and its Subsidiaries shall have no
obligation as of Closing to render as Year 2000 Compliant any
Non-Y2K Compliant Software. "YEAR 2000 COMPLIANT" means that
the Software and the hardware platform systems used or relied on
in the Business is designed to be used prior to, during and
after the calendar year 2000 A.D., and the Software will
accurately receive, provide and process date/time data from,
into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap year calculations, and will not
malfunction, cease to function, or provide invalid or incorrect
results as a result of date/time data, which is detected prior
to March 31, 2001, to the extent that other information
technology used in combination with the Software properly
exchanges date/time data with it.
(g) The Software owned by the Company and its
Subsidiaries contains no timer, virus, copy protection device,
disabling code, clock, counter or other limiting design or
routine that causes the Software (or any operation thereof) to
become erased, inoperable, impaired or otherwise incapable of
being used in the full manner for which it was contemplated for
use under this Agreement.
(h) The Software owned by the Company and its
Subsidiaries complies with all applicable requirements relating
to export or re-export and the Software may be exported and re-
exported to all countries, other than to those countries
specified as prohibited destinations pursuant to applicable
regulations of the United States Department of Commerce or the
United States State Department.
Copies of Software owned by the Company and its Subsidiaries and
copies of licenses and other agreements available to the Company and
its Subsidiaries with respect to the Software shall be delivered to
Kellwood prior to Closing.
3.21. CUSTOMERS AND SUPPLIERS.
(a) Except as set forth on Schedule 3.21, all sales contracts and
orders with customers and suppliers which have been entered into by or on
behalf of the Company since November 30, 1997 were entered into in the
ordinary course of the Business consistent with past practices and require
full performance within six (6) months after the respective dates thereof.
Schedule 3.21 sets forth an accurate and complete list of the 25 largest
customers and 25 largest suppliers of the Company, determined on the basis
of revenues from items sold (with respect to customers) or costs of items
purchased (with respect to suppliers) for the fiscal year ended
November 30, 1997 and the eleven-months ended October 31, 1998. To the
knowledge of the Company, without inquiry, no customer or supplier will
cease to do business with the Company after, or as a result of, the
consummation of any transactions contemplated hereby and no customer or
supplier is threatened with bankruptcy or insolvency, except as set forth
in Schedule 3.21. The Company has no knowledge, without inquiry, of any
fact, condition or event which would materially adversely affect its
relationship with any customer or supplier, except as set forth in
Schedule 3.21. Since November 30, 1997, there has been no cancellation of
backlogged orders in excess of the average rate of cancellation prior to
such date.
(b) Neither the Company, nor, to the knowledge of the Company, any
of its officers or employees, has, directly or indirectly, given or agreed
to give any rebate, gift or similar benefit to any supplier, customer,
distributor, broker, governmental employee or other person, who was, is or
may be in a position to help or hinder the business (or assist in
connection with any actual or proposed transaction) which could subject
the Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or which would have a Company
Material Adverse Effect.
(c) Except as set forth on Schedule 3.21, (i) no Person listed on
Schedule 3.21 within the last twelve months has threatened the Company in
writing to cancel or otherwise terminate, or to the Company's knowledge,
has threatened orally to cancel or otherwise terminate, the relationship
of such Person with the Company, and (ii) no such Person during the last
twelve months has decreased materially or threatened the Company in
writing to decrease or limit materially, or, to the Company's knowledge,
without inquiry, intends to decrease or limit materially, its supplies to
the Company or its purchase of the Company's services or the Company's
products. Except as set forth on Schedule 3.21, there is no purchase
commitment which provides that any supplier will be the exclusive supplier
of the Company. There is no material purchase commitment requiring the
Company to purchase the entire output of a supplier.
(d) None of the Company's customers is a "FRANCHISEE" of the
Company under any applicable federal or state law or any rules or
regulations promulgated thereunder.
3.22. EMPLOYEES.
(a) Contracts. Schedule 3.22 sets forth an accurate and complete
list of all agreements, arrangements or understandings, written or oral,
with any officer or director of the Company whose annual salary (excluding
bonus) as of the end of the most recent fiscal year was in excess of
$100,000 (a "KEY EMPLOYEE"), regarding services to be rendered, terms and
conditions of employment, and compensation of such individual (the
"EMPLOYMENT CONTRACTS").
(b) Compensation. Schedule 3.22 sets forth an accurate and
complete list of all employees of the Company, including name, title or
position, the present annual compensation (including bonuses, commissions
and deferred compensation), years of service and any interests in any
incentive compensation plan. Schedule 3.22 sets forth an accurate and
complete list of each employee who will become entitled to receive
supplementary retirement benefits or allowances, whether pursuant to a
contractual obligation or otherwise, and the estimated amounts of such
payments. Except as set forth in Schedule 3.22, since November 30, 1997,
except as provided in the collective bargaining agreements set forth in
Schedule 3.23, the Company has not (i) paid, or made any accrual or
arrangement for the payment of, bonuses or special compensation of any
kind, including any severance or termination pay, to any present or former
officer or employee, (ii) made any general wage or salary increases or
(iii) increased or altered any employee welfare or pension benefits or
insurance provided to any employee.
(c) Disputes. Except as set forth on Schedule 3.22, there are no
grievances pending or, to the knowledge of the Company, threatened between
the Company and any labor organization representing a bargaining unit of
Company employees, except individual grievances under any collective
bargaining agreement which, in the aggregate, are not material. Since
November 30, 1997, the Company has not suffered or sustained any strike or
other work stoppage, and, to the knowledge of the Company, no such work
stoppage is threatened. Except as set forth on Schedule 3.22, the Company
has not been informed orally or in writing that any petition concerning
representation has been filed with the National Labor Relations Board
since November 30, 1997 or that any union organizing or election
activities involving any nonunion employees of the Company are in progress
or threatened.
(d) Compliance. The Company has complied with all laws, rules and
regulations relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, record keeping, occupational
health and safety, severance, collective bargaining and the payment of
social security and other taxes, and all contracts of employment with any
individual employed by the Company after November 30, 1997, except where
such noncompliance, individually or in the aggregate, would not result in
a Company Material Adverse Effect.
(e) WARN Act. Schedule 3.22 sets forth an accurate and complete
list of all employees (excluding part-time employees) terminated (except
for cause, voluntary departure or normal retirement), laid off or
subjected to a reduction of more than 50% in hours or work during the two
full months and the partial month preceding the date of this Agreement.
For purposes of this Section 3.23(e) only, "PART-TIME EMPLOYEE" means an
employee who is employed for an average of fewer than 20 hours per week or
who has been employed for fewer than 6 of the 12 months preceding the date
of this Agreement.
(f) Officers, Directors and Key Employees. (i) Schedule 3.22 sets
forth (i) all wage and salary increases, bonuses and increases in any
other direct or indirect compensation received by officers, directors or
Key Employees since November 30, 1997, (ii) any payments or commitments of
the Company to pay any severance or termination pay to any such persons
since November 30, 1997, (iii) any accrual for, or any commitment or
agreement by the Company to pay, such increases, bonuses or pay since
November 30, 1997 and (iv) any bonuses or payment that would be payable to
any employee, consultant, agent or other representative of the Company (A)
as an inducement for such person to not terminate his or her relationship
with the Business or (B) as a result of the transactions contemplated
hereby. None of such persons has, as of the date of this Agreement,
indicated that he or she will cancel or otherwise terminate such person's
relationship with the Company.
3.23. EMPLOYEE BENEFIT PLANS.
(a) Benefit Plans. As used herein, the term "BENEFIT PLANS"
includes "WELFARE BENEFIT PLANS" (as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
"EMPLOYEE PENSION BENEFIT PLANS" (as defined in Section 3(2) of ERISA),
bonus, profit sharing, deferred compensation, incentive, bonus, stock
option, employee stock purchase or other compensation plans or
arrangements, and other employee fringe benefit plans whether funded or
unfunded, qualified or unqualified, exclusive of multiemployer plans (as
defined in Section 3(37) of ERISA), and exclusive of Canadian Plans (as
hereafter defined) maintained or contributed to by the Company or any
other organization ("COMMON CONTROL ENTITY") which is a member of a
controlled group of organizations (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code) for the benefit of any of its officers,
employees or other persons. Schedules 3.22 and 3.23 set forth an accurate
and complete list of each Benefit Plan maintained or contributed to by the
Company or any other Common Control Entity, since January 1, 1993
exclusive of benefits provided pursuant to a collective bargaining
agreement (each such plan referred to as a "SCHEDULED BENEFIT PLAN").
Except as set forth in Schedule 3.23, the Company has delivered to
Kellwood accurate and complete copies of (i) each Scheduled Benefit Plan
(or, in the case of any unwritten Scheduled Benefit Plans, descriptions
thereof) and any amendments thereto exclusive of terminated employment and
consulting agreements, (ii) the three most recent annual report on Form
5500 and attached Schedule B (including any related actuarial valuation
report), if any, filed with the Internal Revenue Service with respect to
any Benefit Plan, (if any such report was required), (iii) each trust
agreement and group annuity contract relating to any Scheduled Benefit
Plan, (iv) certified financial statements for each Scheduled Benefit Plan,
(v) attorney's response to an auditor's request for information, with
respect to Scheduled Benefit Plans (vi) collective bargaining agreements
or other such contracts, (vii) Form S-8, including any amendments thereto,
if any, (viii) each ruling letter or any outstanding ruling request on the
tax exempt status of any voluntary employees' beneficiary association
("VEBA") implementing a Scheduled Benefit Plan, if any, (ix) each
determination letter from the Internal Revenue Service, and each
outstanding request for such a letter, on the tax qualified status of any
employee pension benefit plan that is intended to be qualified under
Section 401(a) of the Code for each Scheduled Benefit Plan, and (x) each
general notification to employees of their rights to continuation coverage
under Sections 601 through 608 of ERISA for each Scheduled Benefit Plan.
The Company has never sponsored, contributed to, nor been obligated to
contribute to, an employee pension benefit plan that is subject to
Title I, Subtitle B, Part 3 of ERISA (relating to "FUNDING") exclusive of
multiemployer plans (as defined in Section 3(37) of ERISA).
(b) Funding. All contributions to, and payments from, the Benefit
Plans that may have been required to be made in accordance with the
Benefit Plans and, when applicable, Section 302 of ERISA or Section 412 of
the Code, have been timely made. All such contributions to, and payments
from, the Benefit Plans, except those payments to be made from a trust
qualified under Section 401(a) of the Code, for any period ending before
the Closing Date that are not yet, but will be, required to be made, will
be properly accrued and reflected in the Financial Statements.
(c) Compliance With the Code and ERISA. Except as set forth in
Schedule 3.23, the Company and each Benefit Plan (and any related trust
agreement or annuity contract, if any, or any other funding instrument)
comply currently, and have complied in the past, both as to form and
operation, with the terms of each Benefit Plan and with the provisions of
the Code (where required in order to be tax-qualified under Section 401(a)
of the Code) and ERISA and all other applicable laws, rules and
regulations in all material respects; and all necessary governmental
approvals for the Benefit Plans have been obtained. Except as set forth
in Schedule 3.23, the Benefit Plans that are pension benefit plans have
received determination letters from the Internal Revenue Service to the
effect that such Benefit Plans are qualified and exempt from Federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code,
and no such determination letter has been revoked nor, to the knowledge of
the Company, has revocation been threatened, nor has any such Benefit Plan
been amended since the date of its most recent determination letter or
application therefor in any respect which would adversely affect its
qualification or materially increase its cost.
(d) Administration. Except as set forth in Schedule 3.23, each
Benefit Plan has been administered to date in compliance with its terms
and the requirements of the Code and ERISA in all material respects.
Except as set forth in Schedule 3.23, all reports, returns and similar
documents with respect to the Benefit Plans required to be filed with any
government agency or distributed to any Benefit Plan participant have been
duly and timely filed or distributed. Except as set forth in
Schedule 3.23, there are no 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, nor, to the knowledge of the Company, are there any
facts that could give rise to any material liability in the event of any
such investigation, claim, suit or proceeding. Except as set forth in
Schedule 3.23, future compliance with the requirements of ERISA as in
effect on the Closing Date or any collective bargaining agreements to
which the Company is a party will not result in any increase in the rate
of benefit accrual under any Benefit Plan. The Company's financial
statements reflect all of the Company's employee benefit liabilities in a
manner satisfying the requirements of FAS 35, 87, 88, 112 and 132. No
event has occurred and no condition exists under any Benefit Plan that
would subject the Company to any tax under Code Sections 4971, 4972, 4976,
4977, 4978, 4979, 4979A, 4980, 4980B, 4980C, 4980D and 4980E or to a fine
under ERISA Section 502(c). All forms, documents and other materials, if
any, have been filed with the Securities and Exchange Commission or
otherwise distributed as required by the Securities Act of 1933, as
amended in connection with Benefit Plans. Except as set forth in
Schedule 3.23, there are no leased employees (as defined in Section 414(l)
of the Code) that must be taken into account under any Benefit Plan.
(e) Prohibited Transactions. No "PROHIBITED TRANSACTION" (as
defined in Section 4975 of the Code or Section 406 of ERISA) has occurred
which involves the assets of any Benefit Plan and which could subject the
Company or any of its employees, or a trustee, administrator or other
fiduciary of any trusts created under any Benefit Plan to the tax or
penalty on prohibited transactions imposed by Section 4975 of the Code or
the sanctions imposed under Title I of ERISA. Except as set forth in
Schedule 3.23, no Benefit Plan has been terminated within the last five
years. Neither the Company nor any trustee, administrator or other
fiduciary of any Benefit Plan nor any agent of any of the foregoing has
engaged in any transaction or acted or failed to act in a manner which
could subject the Company to any liability for breach of fiduciary duty
under ERISA or any other applicable law.
(f) Multiemployer Plans. Except as set forth in Schedule 3.23, at
no time since January 1, 1992, has the Company been required to contribute
to any "MULTIEMPLOYER PENSION PLAN" (as defined in Section 3(37) of ERISA)
or incurred any withdrawal liability, within the meaning of Section 4201
of ERISA, or announced an intention to withdraw, but not yet completed
such withdrawal, from any multiemployer pension plan. Prior to January 1,
1992, the Company did not incur any withdrawal liability under Section
4201 of ERISA.
(g) Canadian Plans. The term "CANADIAN PLAN" includes all employee
benefit plans, bonus, profit sharing, deferred compensation, incentive,
stock option, employee stock purchase or other compensation plans or
arrangements and other employee fringe benefit plans whether funded or
unfunded, qualified or unqualified maintained or contributed to by the
Company or any other Common Control Entity for the benefit of any of its
officers, employees or other persons in Canada. Schedule 3.23 sets out an
accurate and complete list of each Canadian Plan maintained by or
contributed to by the Company or any other Common Control Entity since
January 1, 1993 (each such plan referred to as a "SCHEDULED CANADIAN
PLAN") exclusive of benefits provided pursuant to a collective bargaining
agreement. Since January 1, 1992, except as set forth in Schedule 3.23,
the Company has delivered to Kellwood accurate and complete copies of (i)
each Scheduled Canadian Plan (or, in the case of the unwritten Scheduled
Canadian Plan, descriptions thereof) and any amendments thereto, (ii) all
financial statements and accounting statements and reports and investment
reports for each of the last three years and the two most recent actuarial
reports with respect to each Scheduled Canadian Plan; (iii) all reports,
returns, filings and material correspondence with any regulatory authority
in the last three (3) years with respect to each Scheduled Canadian Plan;
(iv) each trust agreement and group annuity contract relating to any
Scheduled Canadian Plan; (v) collective bargaining agreements or other
such contracts.
Except as set forth in Schedule 3.23, all contributions to, and
payments from, the Canadian Plans that may have been required to be made
in accordance with the Canadian Plans and, when applicable, have been
timely made. There are no going concern unfunded actuarial liabilities,
past service unfunded liabilities or solvency deficiencies respecting any
of the Pension Plans.
Except as set forth in Schedule 3.23, the Company and each Canadian
Plan (and any related trust agreement or annuity contract or any other
funding instrument) comply currently, and have complied in the past, both
as to form and operation, in all material respects with the terms of each
Canadian Plan.
Each Canadian Plan has been administered to date in compliance in all
material respects with its terms and the requirements of applicable laws,
rules and regulations. All reports, returns and similar documents with
respect to the Canadian Plans required to be filed with any government
agency or distributed to any Canadian Plan participant have been duly and
timely filed or distributed. Except as set forth in Schedule 3.23, there
are no investigations by any governmental agency, termination proceedings
or other claims (except claims for benefits payable in the normal
operation of the Canadian Plans), suits or proceedings against or
involving any Canadian Plan or asserting any rights or claims to benefits
under any Canadian Plan that could give rise to any material liability,
nor, to the knowledge of the Company, are there any facts that could give
rise to any material liability, nor, to the knowledge of the Company, are
there any facts that could give rise to any material liability in the
event of any such investigation, claim, suit or proceeding.
(h) Validity and Enforceability. All Welfare Benefit Plans,
Pension Benefit Plans, Canadian Plans, related trust agreements or annuity
contracts (or any other funding instruments) and all plans, agreements,
arrangements and commitments referred to in this Section are legally valid
and binding and in full force and effect.
3.24. LICENSES AND PERMITS. Schedule 3.24 contains an accurate and
complete list of each material license, permit, certificate, approval,
exemption, franchise, registration, variance, accreditation or
authorization issued to the Company by a foreign, federal, state or local
governmental agency (collectively, the "LICENSES AND PERMITS"). The
Licenses and Permits are valid and in full force and effect and there are
not pending, or, to the knowledge of the Company without inquiry,
threatened, any proceedings which could result in the termination,
revocation, limitation or impairment of any License or Permit. The
Company has all licenses, permits, certificates, approvals, franchises,
registrations, accreditations and other authorizations as are necessary or
appropriate in all material respects in order to enable it to own and
conduct the Business and to occupy and lease its real property. No
violations have been recorded in respect of any Licenses and Permits, and
the Company knows of no meritorious basis therefor. No fines or penalties
are due and payable in respect of any License or Permit or any violation
thereof.
3.25. MATERIAL CONTRACTS. Schedule 3.25 sets forth an accurate and
complete list (or where disclosed on another Schedule to this Agreement, a
cross-reference to such Schedule) of all instruments, commitments,
agreements, arrangements and understandings related to the Business to
which the Company is a party or bound, or by which any of its assets are
subject or bound, or pursuant to which the Company is a beneficiary,
meeting any of the descriptions set forth below (the "MATERIAL
CONTRACTS"):
(a) Factoring Agreements, Real Estate Leases, Personal
Property Leases, Insurance, licenses of Intellectual Property,
Software, Employment Contracts, Benefit Plans and Licenses and
Permits;
(b) Any uncompleted contract for capital expenditures or
for the purchase of goods or services in excess of $50,000;
(c) Any uncompleted purchase order, agreement or
commitment in an amount in excess of $50,000 entered into other
than in the ordinary course of business obligating the Company
to sell or deliver any product or service at a price which does
not cover the cost (including labor, materials and production
overhead) plus the customary profit margin associated with such
product or service;
(d) Any outstanding financing agreement or other
agreement for borrowing money, any instrument evidencing
indebtedness, any liability for borrowed money, any obligation
for the deferred purchase price of property, in each case in
excess of $50,000 (excluding normal trade payables), or any
instrument guaranteeing any indebtedness, obligation or
liability in an amount in excess of $50,000;
(e) Any outstanding joint venture, partnership,
cooperative arrangement or any other agreement involving a
sharing of profits;
(f) Any outstanding advertising contract not terminable
without payment or penalty on sixty (60) days (or less) notice;
(g) Any outstanding contract with any government or any
agency or instrumentality thereof;
(h) Any outstanding contract with respect to the
discharge, storage or removal of effluent, waste or pollutants,
other than ordinary nonhazardous waste removal;
(i) Any outstanding contract, license or royalty
agreement related to the use of Intellectual Property requiring
payments by the Company in amounts aggregating in excess of
$50,000;
(j) Any power of attorney, proxy or similar instrument;
(k) The Charter, By-laws and other organizational or
constitutive documents of the Company and any agreement among
stockholders of the Company;
(l) Any outstanding contract for the manufacture of any
product of the Business which has a term of one year or more;
(m) Any outstanding contract for the purchase or sale of
any of its assets, other than in the ordinary course or granting
an option or preferential rights to purchase or sell any assets;
(n) Any outstanding contract to indemnify any party or to
share in or contribute to the liability of any party;
(o) Any outstanding contract for the purchase or sale of
foreign currency or otherwise involving foreign exchange
transactions;
(p) Any outstanding contract containing covenants not to
compete in any line of business or with any person in any
geographical area;
(q) Any outstanding contract relating to the acquisition
of a business or the equity of any other person;
(r) Any outstanding contract relating to the purchase or
sale of a portion of its requirements or output;
(s) Any outstanding contract entered into outside the
ordinary course of the Business in an amount in excess of
$100,000; and
(t) Any other contract, commitment, agreement,
arrangement or understanding related to the Business (other than
those excluded by an express exception from the descriptions set
forth in subsections (a) through (r) above) which (i) provides
for payment or performance by either party thereto having an
aggregate value of $100,000 or more, or (ii) is between a
Related Party and the Company.
Accurate and complete copies of each Material Contract have been
delivered to Kellwood. Each Material Contract is in full force and effect
and is valid, binding and enforceable in accordance with its terms. The
Company and, to the knowledge of the Company, each other party (except as
set forth on Schedule 3.25) has complied with all material commitments and
obligations on its part to be performed or observed under each Material
Contract. To the knowledge of the Company, no event has occurred which is
or, after the giving of notice or passage of time, or both, would
constitute, a default under or a breach of any Material Contract by the
Company, or, to the knowledge of the Company, by any other party (except
as set forth on Schedule 3.25). To the knowledge of the Company, the
Company has not received or given notice of an intention to cancel or
terminate a Material Contract or, as the result of the breach of such
Material Contract by another party thereto, to exercise or not exercise
options or rights under a Material Contract. The Company has not received
any notice of a default, offset or counterclaim under any Material
Contract, or any other communication calling upon the Company to comply
with any provision of any Material Contract or ascertaining noncompliance.
Except as set forth on Schedule 3.25, the consummation of the transactions
contemplated hereby, without notice to or consent or approval of any
party, will not constitute a default under or a breach of any provision of
a Material Contract, and the Company will have and may enjoy and enforce
all rights and benefits under each Material Contract.
3.26. TAXES. Each of the representations and warranties set forth
in this Section 3.26 are subject to the exceptions set forth on
Schedule 3.26.
(a) Filings. The Company, and the Subsidiaries (collectively, the
"TAXPAYERS") have timely filed, been included in or sent, or will file, be
included in or send, all returns, declarations and reports and all
information returns and statements (collectively, "RETURNS") required to
be filed or sent with respect to all foreign, federal, state, county,
local and other taxes of every kind and however measured, including
income, gross receipts, profits, excise, franchise, property, value added,
import duties, employment, payroll, sales and use taxes and any additions
to tax and any interest or penalties thereon (collectively, "TAXES") for
any period ending on or before the Closing Date. As of the time of
filing, the Returns correctly reflected, and Returns not yet filed as of
the date hereof will correctly reflect, the income, business, assets,
operations, activities and status of the relevant Taxpayers and any other
information required to be shown thereon. Each Taxpayer has timely paid
or made provision for all Taxes shown as due and payable on its Returns
required to be filed or sent prior to the date hereof and will timely pay
all Taxes that will be shown as due and payable on its Returns required to
be filed or sent after the date hereof. All required Tax estimates,
deposits, prepayments and similar reports or payments for current periods
have been properly made. No Taxpayer is delinquent in the filing of any
Return or the payment of any Tax or has requested any extension of time
within which to file any Return. The Company has delivered to Kellwood
accurate and complete copies of all federal and state income tax Returns
for the last three (3) fiscal years. No amended Returns or refund claims
have been or are scheduled to be filed by or on behalf of Taxpayer.
(b) Compliance. The Company has obtained all appropriate sales Tax
exemption certificates for all sales made without charging or remitting a
sales Tax. Each Taxpayer has withheld amounts from employees and others
working for the Company, as required under applicable law, has filed all
Returns with respect to employee income Tax withholding and social
security and unemployment Taxes in compliance with the tax withholding
provisions of the Code and other applicable Laws, and has timely paid all
amounts shown as due and payable on such Returns.
(c) Disputes. There are no Tax liens (other than for Taxes not yet
due and payable) on any assets of any Taxpayer and, to the knowledge of
the Company, no basis exists for the imposition of any such liens. No
adjustment of or deficiency for any Tax or claim for additional Taxes has
been proposed, asserted or assessed or, to the knowledge of the Company,
threatened against any Taxpayer or any member of any affiliated or
combined group of which any Taxpayer is or was a member for which the
Company could be liable. No Taxpayer has any dispute with any taxing
authority as to Taxes of any nature. There are no audit examinations
being conducted or, to the knowledge of the Company, threatened, and there
is no deficiency or refund litigation or controversy in progress or
threatened, with respect to any Taxes previously paid by any Taxpayer or
with respect to any Returns previously filed by or on behalf of any
Taxpayer. No Taxpayer has any extension or waiver of any statute of
limitations relating to the assessment or collection of Taxes. There are
in effect no powers of attorney or other authorizations to any persons to
represent any Taxpayer with respect to any Tax. No consent, agreement or
other undertaking has been filed by any Taxpayer to have the provisions of
Section 341(f) of the Code apply. No notice or claim has ever been made
by a governmental authority in a jurisdiction where Taxpayer does not file
Returns that it is or may be subject to Taxes in that jurisdiction.
Taxpayer is not a party to any contractual obligation requiring the
indemnification or reimbursement of any person with respect to the payment
of any Taxes. Taxpayer is not a party to or a beneficiary of any
financing, the interest on which is tax exempt under the Code, and none of
the assets of Taxpayer is "TAX-EXEMPT USE PROPERTY." As of the Closing
Date, Taxpayer is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in
the payment of any "EXCESS PARACHUTE PAYMENTS" within the meaning of
Section 280G of the Code.
(d) Adequacy of Reserves. The Company has, or will have on the
Closing Date adequate accruals for all Taxes for all periods ending on or
prior to the Closing Date and for any period beginning before the Closing
Date and ending after the Closing Date in respect of the portion of such
period up to the Closing Date. Following the Closing, the Company shall
have no liability for Taxes of any kind for such periods in excess of the
provisions or reserves for such Taxes shown on the Financial Statements
or, with respect to periods ending after August 31, 1998, incurred in the
ordinary course of the Business.
3.27. PRODUCT WARRANTY. All products manufactured, marketed,
distributed, shipped or sold by the Company have been in conformity in all
material respects with all applicable contractual commitments and all
expressed or implied warranties. No material liability exists or will
arise for repair, replacement or damage in connection with such sales or
deliveries. Schedule 3.27 sets forth an accurate and complete statement
of all written warranties, warranty policies, service and maintenance
agreements of the Company. No products heretofore manufactured, marketed,
distributed, shipped or sold by the Company are now subject to any
guarantee, warranty, claim for product liability, or patent or other
indemnity, other than those set forth in Schedule 3.27. All warranties
are in conformity with the labeling and other requirements of the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act and other applicable laws. The product
warranty and return experience for the three (3) years ended November 30,
1997 and the interim period through the date hereof is set forth in
Schedule 3.27. The product warranty reserves, if any, on the Company's
financial statements were prepared in accordance with GAAP and are
adequate in light of the circumstances of which the Company is aware.
3.28. PRODUCT LIABILITY. Schedule 3.28 sets forth an accurate and
complete list of all existing and unresolved claims, duties,
responsibilities, liabilities or obligations arising from or alleged to
arise from any injury to person or property or economic damage as a result
of the ownership, possession or use of any product manufactured, marketed,
distributed, shipped or sold by the Company prior to the Closing Date.
Except as set forth in Schedule 3.28, the Company will not be subject to
any claim, expense, liability or obligation arising from any injury to
person or property or economic damage as a result of ownership, possession
or use of any product manufactured, marketed, distributed, shipped or sold
by the Company prior to the Closing Date. All existing claims are fully
covered by product liability insurance or otherwise provided for. There
have been no recalls, and none are threatened or pending, and no report
has been filed or is required to have been filed with respect to any
products of the Business under the Consumer Products Safety Act, as
amended, or under any other law, rule or regulation. To the knowledge of
the Company, no circumstances exist involving the safety aspects of the
Business' products which would cause any obligation to report to any
Federal, state or local agency. Except as set forth on Schedule 3.28,
there are no, and within the last 12 months there have not been any,
actions or claims relating to product liability against or involving the
Company or any of its products and no actions or claims have been settled,
adjudicated or otherwise disposed of within the last 12 months.
3.29. LEGAL PROCEEDINGS. Except as set forth in Schedule 3.29, the
Company is not engaged in or a party to or threatened with any action,
suit, proceeding, complaint, charge, hearing, investigation or arbitration
or other method of settling disputes or disagreements; and, upon due
inquiry, the Company does not know, anticipate or have notice of any basis
for any such action. Except as set forth on Schedule 3.29, the Company
has not received notice of any investigation threatened or contemplated by
any Laws, including those involving the safety of products, the working
conditions of employees, the Company's employment practices or policies,
or compliance with environmental regulations. Neither the Company, nor
any of its assets is subject to any judgment, order, writ, injunction,
stipulation or decree of any court or any governmental agency or any
arbitrator. The Company has not received any demand letters from an
attorney or other legal representative of a claimant, which, individually
or in the aggregate, would (if adversely determined) have a Company
Material Adverse Effect. Except as set forth on Schedule 3.29, no
insurance company has asserted in writing that such action is not covered
by the applicable policy relating thereto.
3.30. ENVIRONMENTAL MATTERS.
(a) The ownership, use and operation by the Company and its
predecessors of all real property and each facility on site used by the
Company has been and on the Closing Date will be in compliance with all
federal, state and local environmental and anti-pollution statutes,
statutes, laws, ordinances, rules, standards, orders, moratoria and
regulations, including the Resource Conservation and Recovery Act, as
amended ("RCRA"), the Clean Air Act, as amended, the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Emergency Planning and Community Right-to-
Know Act, as amended, the Hazardous Material Transportation Act, as
amended, the Federal Insecticide, Fungicide and Rodenticide Act, as
amended, the Oil Pollution Control Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended,
("CERCLA") and the Occupational Safety and Health Act, as amended, any
state or local counterpart thereof and all rules and regulations
implementing any of the foregoing (collectively referred to as
"ENVIRONMENTAL LAWS").
(b) No action, suit, claim, demand, proceeding, investigation,
complaint, arbitration or charge alleging failure to comply with,
violation of or liability under any Environmental Laws (collectively, an
"ENVIRONMENTAL CLAIM") has been made and the Company has not received any
notice alleging an Environmental Claim and. to the knowledge of the
Company, there is no meritorious basis therefore. The Company has not
received a request for information pursuant to an Environmental Law. The
Company has no duty, responsibility, liability or obligation under any
Environmental Law, to effect compliance with or discharge any duty,
responsibility, liability or obligation under any Environmental Laws.
Except as set forth in Schedule 3.30, there has not been, and is not
occurring, at any facility or site operated, or previously owned or
operated, by the Company or any Subsidiary, any Release or threatened
Release of any Hazardous Substance or petroleum, including crude oil or
any fraction thereof, nor, to the knowledge of the Company, has such a
Release occurred. The Company has not applied or disposed of any
Hazardous Substance or petroleum, including crude oil or any fraction
thereof, in any manner which may form the basis for any present or future
Environmental Claim at any facility, site, location or body of water,
surface or subsurface nor, to the knowledge of the Company, has such an
application or disposal occurred.
(c) To the knowledge of the Company, the Company has never sent,
arranged for disposal or treatment, arranged with a transporter for
transport for disposal or treatment, transported, or accepted for
transport any Hazardous Substance, Solid Waste or petroleum, including
crude oil or any fraction thereof, to a facility, site or location, which,
pursuant to the CERCLA or any similar state or local law, (i) has been
placed, or is proposed to be placed, on the National Priorities List or
its state equivalent or (ii) is subject to a claim, administrative order
or other request to effect Removal or take Remedial Action.
(d) The Company does not store, generate or produce any Hazardous
Substance or Hazardous Waste.
(e) Except as set forth in Schedule 3.30, there has not been any
contamination of groundwaters, surface waters, soils or sediments, as a
result of the manufacture, storage, processing, loss, leak, escape,
spillage, disposal or other handling or disposition by or on behalf of the
Company of any product or substance on or prior to the Closing Date in
violation of Environmental Laws.
(f) Schedule 3.30 sets forth an accurate and complete list of all
environmental audits or assessments or occupational health studies
undertaken by or on behalf of the Company, a governmental agency with
respect to the Company or its assets, employees, facilities, sites or
other properties, the results of groundwater and soil testing, the results
of underground fuel, water or waste tank tests and soil samples, written
communications with Federal, state or local governments on environmental
matters, and OSHA citations in each case since November 30, 1995.
(g) To the knowledge of the Company, except as set forth in
Schedule 3.30, there are no Hazardous Substances, Hazardous Wastes, Solid
Wastes, tanks, containers, cylinders, drums or cans buried, stored or
deposited in or on any real property facility or site currently or
formerly owned or operated by the Company. To the knowledge of the
Company, there has not been located on or disposed of on any facility or
site owned or operated by the Company during any period of such ownerships
or operations, or, to the knowledge of the Company, at any other time: any
polychlorinated biphenyl; any compound or material containing any
polychlorinated biphenyl; or any equipment, article or item using,
containing, or made up in whole or in part of any polychlorinated
biphenyl.
(h) Schedule 3.24 lists all permits, certificates, approvals,
authorizations, licenses and registrations required to own or operate the
Company and the Business or any facility or site under any Environmental
Law ("ENVIRONMENTAL PERMITS"). The Company has all Environmental Permits
and is in compliance with all terms and conditions thereof. All
Environmental Permits are in full force and effect, and the Company has
not received any notice alleging an Environmental Claim with respect
thereto. The Company has not breached, defaulted under or violated any of
the Environmental Permits.
(i) To the knowledge of the Company, except as set forth in
Schedule 3.30, no underground storage tanks, as defined in RCRA or under
applicable state law, are present on any property operated by or on behalf
of the Company at any location, and, to the Company's knowledge, no such
tanks were previously abandoned or removed.
(j) To the knowledge of the Company, there is no environmental
substance or other condition or use of any property at which the Company
operates the Business, whether natural or manmade, which poses a present
or potential threat of damage to the health of persons, to property, to
natural resources, or to the environment in violation of Environmental
Laws.
The Company expressly warrants that the representations and warranties
contained in this Section 3.31 apply not only to the present locations of
its business, but all prior locations as well. As used in this Agreement,
the terms "REMOVAL," "REMEDIAL ACTION," "FACILITY," "RELEASE," "HAZARDOUS
SUBSTANCE," "HAZARDOUS MATERIALS," "NATIONAL PRIORITIES LIST," "HAZARDOUS
WASTE" and "SOLID WASTE" shall have the same meaning as those terms are
given in Environmental Laws.
3.31. COMPLIANCE WITH LAW. The Company is in compliance in all
material respects with all applicable statutes, codes, ordinances,
licensing requirements, laws, rules and regulations, except as otherwise
provided in this Agreement and except for such violations as do not
materially impair or interfere with the use of the Company's assets. No
notice from any governmental body or other person of any violation of any
statute, code, ordinance, law, rule or regulation or requiring or calling
attention to the necessity of any repairs, installation or alteration in
connection with the Company has been served, and the Company knows of no
meritorious basis therefor. Neither the Company, nor, to the knowledge of
the Company, any officer or employee of the Company, nor, to the knowledge
of the Company any other person acting on behalf of the Company, (a) has
made any unlawful domestic or foreign political contributions, (b) has
made any payment or provided services which were not legal to make or
provide or which the Company or any officer, employee or other person
should have known were not legal for the payee or the recipient of the
services to receive, (c) has received any payments, services or gratuities
which were not legal to receive or which the Company or such person should
have known were not legal for the payor or the provider to make or
provide, (d) has had any transactions or payments which are not recorded
in its accounting books and records or disclosed in its financial
statements, (e) has had any off-book bank or cash accounts, (f) has made
any payments to governmental officials in their individual capacities for
the purpose of affecting their action or the action of the government they
represent to obtain special concessions, or (g) has made illegal payments
to obtain or retain business.
3.32. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected on the Financial Statements, or another Schedule attached
hereto, the Company does not and will not have any material indebtedness,
duty, responsibility, liability or obligation of any nature, whether
absolute, accrued, contingent or otherwise, related to or arising from the
operation of the Company or the ownership, possession or use of its assets
through the Closing Date, other than in the ordinary course of the
Business on terms and conditions and in amounts consistent with past
practices pursuant to the agreements and other documents referred to
herein.
3.33. BROKERS. The Company has not retained any broker, finder or
agent or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the
transactions contemplated hereby.
3.34. DISCLOSURE. The representations and warranties of the
Company and the Stockholders contained in this Agreement are accurate and
complete in all material respects, and do not contain any untrue statement
of a material fact or, considered in the context in which presented, omit
to state a material fact necessary in order to make the statements and
information contained herein or therein not misleading.
3.35. POOLING OF INTERESTS; REORGANIZATIONS. To the knowledge of
the Company, the Company has not (a) taken any action (or failed to take
any action) that would prevent the treatment of the transactions
contemplated hereby as a pooling of interest for accounting purposes or
(b) take any action (or failed to take any action) which would prevent the
qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
3.36. REQUIRED VOTE OF THE COMPANY STOCKHOLDERS. The affirmative
vote of the holders of at least seventy percent (70%) of the voting power
of all outstanding shares of Common Stock of the Company is required to
approve this Agreement and to effect the Merger. No other vote of the
securityholders of the Company is required by law, the Company Charter or
By-laws or otherwise in order for the Company to consummate the Merger and
the transactions contemplated hereby.
3.37. REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of
the information to be supplied by the Company or the Stockholders for
inclusion or incorporation by reference in the Registration Statement on
Form S-4 (the "REGISTRATION STATEMENT") and the Joint Proxy Statement and
Prospectus included therein (together with any amendments and supplements
thereto, the "JOINT PROXY STATEMENT") will (i) in the case of the
Registration Statement, at the time it becomes effective, 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 not misleading or (ii) in the case of the Joint Proxy Statement,
at the time of the mailing of the Joint Proxy Statement, at the time of
each of the Stockholder Meetings and at the Effective Time, 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. If at any time prior to the Effective Time any event with
respect to the Company, its officers and directors or the Stockholders
shall occur which is required to be described in the Joint Proxy Statement
or the Registration Statement, such event shall be so described, and an
appropriate amendment or supplement shall be promptly filed with the
Securities and Exchange Commission (the "SEC") and, as required by law,
disseminated to the stockholders of the Company and Kellwood. The
Registration Statement will comply (with respect to the Company) as to
form in all material respects with the provisions of the Securities Act of
1933, as amended (the "SECURITIES ACT"), and the Joint Proxy Statement
will comply (with respect to the Company) as to form in all material
respects with the provisions of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
KELLWOOD AND SUB
Each of Kellwood and Sub hereby represents and warrants to the
Company and the Stockholders as of the date hereof, and as of the Closing
Date, as follows:
4.1. AUTHORITY. Each of Kellwood and Sub has full right, power and
authority, without the consent of any other person, to execute and deliver
this Agreement and to carry out the transactions contemplated hereby. All
corporate and other acts or proceedings required to be taken by Kellwood
and Sub to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby have been duly and
properly taken. The Kellwood Common Stock delivered at Closing will be
duly authorized by all necessary corporate action of Kellwood and when
issued at Closing, will be validly issued, fully paid, non-assessable and
free of preemptive rights and will be free and clear of all liens and
encumbrances, except as may arise from any action taken by the
stockholders of the Company.
4.2. VALIDITY. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered by each of
Kellwood and Sub and constitute lawful, valid and legally binding
obligations of Kellwood and Sub, enforceable in accordance with their
respective terms. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
the creation of any lien, charge or encumbrance or the acceleration of any
indebtedness or other obligation of Kellwood or Sub and are not prohibited
by, do not violate or conflict with any provision of, and do not result in
a default under or a breach of (a) the charter or By-laws of Kellwood or
Sub, (b) any contract, agreement, permit, license or other instrument to
which Kellwood or Sub is a party or by which either of them is bound, (c)
any order, writ, injunction, decree or judgment of any court or
governmental agency, or (d) any law, rule or regulation applicable to
Kellwood or Sub. No approval, authorization, consent or other order or
action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by
Kellwood or Sub of this Agreement or the consummation by Kellwood or Sub
of the transactions contemplated hereby, except for (a) filings or
consents required pursuant to the HSR Act, (b) filing the Certificate of
Merger by the Delaware Secretary of State, (c) filing of the Registration
Statement and Joint Proxy Statement with the SEC and the declaration of
effectiveness thereof by the SEC or other action by the SEC in connection
therewith and (d) filings to authorize listing and trading of the Kellwood
Common Stock on The New York Stock Exchange (the "NYSE").
4.3. DUE ORGANIZATION. Each of Kellwood and Sub is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, with full power and authority and all requisite
licenses, permits and franchises to own, lease and operate its assets and
to carry on the business in which it is engaged. Each of Kellwood and Sub
is duly qualified to do business and good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns,
leases or operates, makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
business, assets (including intangible assets), financial condition,
results of operations or liabilities of Kellwood and its consolidated
subsidiaries taken as a whole (a "KELLWOOD MATERIAL ADVERSE EFFECT").
4.4. BROKERS. Kellwood has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions
or finders fees with respect to this Agreement or the transactions
contemplated hereby.
4.5. REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information to be supplied by Kellwood or Sub for inclusion or
incorporation by reference in the Registration Statement or the Joint
Proxy Statement will (i) in the case of the Registration Statement, at the
time it becomes effective, 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 not misleading or (ii)
in the case of the Joint Proxy Statement, at the time of the mailing of
the Joint Proxy Statement, at the time of each of the Stockholder Meetings
and at the Effective Time, 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. If at any time
prior to the Effective Time any event with respect to Kellwood, its
officers and directors, the Company or the Stockholders shall occur which
is required to be described in the Joint Proxy Statement or the
Registration Statement, such event shall be so described, and an
appropriate amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of Kellwood and
the Company. The Registration Statement will comply (with respect to
Kellwood) as to form in all material respects with the provisions of the
Securities Act, and the Joint Proxy Statement will comply (with respect to
Kellwood) as to form in all material respects with the provisions of the
Exchange Act.
4.6. OPINION OF FINANCIAL ADVISOR. Kellwood has received the
written opinion of Credit Suisse First Boston Corporation, dated the date
hereof, to the effect that, as of the date hereof, the amount of shares of
Kellwood Common Stock to be issued in the transaction is fair to Kellwood
from a financial point of view (the "KELLWOOD FAIRNESS OPINION").
4.7. REQUIRED VOTE OF KELLWOOD STOCKHOLDERS. The affirmative vote
of a majority of the shares present in person or by proxy at Kellwood
Stockholder Meeting (as hereinafter defined) and entitled to vote on the
Share Issuance is required to approve the Share Issuance. No other vote
of the securityholders of Kellwood is required by law, Kellwood charter or
Kellwood By-laws or otherwise in order for Kellwood to consummate the
Merger and the transactions contemplated hereby.
4.8. CAPITALIZATION OF KELLWOOD AND SUB. The authorized capital
stock of Kellwood consists of 50,000,000 authorized shares of common
stock, par value $.01 per share and 500,000 shares of preferred stock.
Nonvoting share purchase rights, exercisable upon satisfaction of certain
conditions, entitle the holder to purchase Series A Junior Preferred
Stock, or under certain circumstances, common stock at prices specified in
the Rights Agreement between Kellwood and New York Trust Company, as
successor to Centerre Trust Company of St. Louis, dated June 24, 1986, as
amended (the "KELLWOOD POISON PILL"). The consummation of the Merger in
accordance with this Agreement will not trigger the Kellwood Poison Pill.
4.9. KELLWOOD COMMISSION REPORTS. Kellwood has timely filed with
the SEC and furnished or made available to the Company all periodic
reports, registration statements, annual reports to stockholders, proxy
statements and other information required to be filed by it since May 1,
1995 under the Securities Act and Exchange Act (such registration
statements, periodic reports and other documents, together with any
amendments thereto, are sometimes collectively referred to as the
"KELLWOOD SEC FILINGS"). The Kellwood SEC Filings (a) did not contain any
untrue statements of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
as of their respective dates, and (b) complied as of their respective
dates in all material respects with the applicable requirements of the
Securities Act and Exchange Act and the applicable rules and regulations
of the SEC thereunder. The consolidated financial statements of Kellwood,
including the notes thereto, included in the Kellwood SEC Filings (the
"KELLWOOD FINANCIAL STATEMENTS") comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with GAAP consistently applied (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted
by Form 10-Q under the Exchange Act) and present fairly the consolidated
financial position of Kellwood at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year end, audit
adjustments). Since April 30, 1998, neither Kellwood nor any of its
Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) of any nature, except
liabilities, obligations or contingencies which (a) are reflected on the
audited consolidated balance sheet of Kellwood and its Subsidiaries as at
April 30, 1998 (including the notes there) or (b) which (i) were incurred
in the ordinary course of Kellwood's business after April 30, 1998 and
consistent with past practices, (ii) are disclosed in the Kellwood SEC
Filings filed after April 30, 1998 and (iii) would not, individually or in
the aggregate, have a Kellwood Material Adverse Effect. Since April 30,
1998, there has been no change in Kellwood's accounting (including tax
accounting) policies, practices or procedures of Kellwood or any of its
subsidiaries, except as described in the notes to the Kellwood Financial
Statements.
4.10. ACCOUNTING MATTERS; REORGANIZATION. Neither Kellwood nor any
of its affiliates has taken or agreed to take any action that would (a)
prevent Kellwood from accounting for the business combination to be
effected by the Merger as a pooling-of-interests for financial reporting
purposes or (b) prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
4.11. NO MATERIAL ADVERSE CHANGE. Since April 30, 1998, except as
otherwise disclosed in the Kellwood SEC Filings, there has been no change
in the business or financial condition of Kellwood which would reasonably
be expected to have a Kellwood Material Adverse Effect or a material
adverse effect on Kellwood's ability to consummate the Merger.
4.12. DISCLOSURE. The representations and warranties of Kellwood
and Sub contained in this Agreement and each Schedule, certificate or
other written statement delivered pursuant to this Agreement or in
connection with the transactions contemplated herein are accurate and
complete in all material respects, and do not contain any untrue statement
of a material fact or, considered in the context in which presented, omit
to state a material fact necessary in order to make the statements and
information contained herein or therein not misleading.
4.13. NO PLAN OR INTENTION TO REACQUIRE STOCK. Kellwood has no
present plan or intention to reacquire any of its stock issued in the
Merger.
4.14. CONTROL. Kellwood has no present plan or intention to cause
the Company to issue additional shares of its stock that would result in
Kellwood losing control of the Company within the meaning of
Section 368(c) of the Code.
4.15. NO PLAN TO DISPOSE OF COMPANY ASSETS OR STOCK. Kellwood has
no present plan or intention to liquidate the Company, to merge the
Company with or into another corporation, to sell or otherwise dispose of
the stock of the Company except for transfers of stock to corporations
controlled by Kellwood, or to cause the Company to sell or otherwise
dispose of any of its assets except for dispositions made in the ordinary
course of business and transfers of assets to a corporation controlled by
the Company.
4.16. CONTINUITY OF BUSINESS ENTERPRISE. Kellwood has no present
plan or intention to take any action that would discontinue the Company's
historic business or discontinue the use of a significant portion of the
Company's historic business assets in a business for purposes of Treasury
Regulations Section 1.368-1(d).
4.17. SUBSTANTIALLY ALL OF SUB'S ASSETS TRANSFERRED. Following the
Merger, the Company will hold at least 90% of the fair market value of the
net assets of Sub and 70% of the fair market value of the gross assets of
Sub.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS AND
THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The Company and each of the Stockholders hereby agree to keep,
perform and fully discharge the following covenants and agreements.
5.1. INTERIM CONDUCT OF BUSINESS. From the date hereof until the
Closing, the Company shall, and the Stockholders shall use their
reasonable best efforts to cause the Company to, use its reasonable best
efforts to preserve, protect and maintain the Company and its assets, and
operate the Company consistent with prior practice and in the ordinary
course of the Business. Without limiting the generality of the foregoing,
from the date hereof until the Closing, except for transactions expressly
approved in writing by Kellwood or as set forth on Schedule 5.1, the
Company shall, and the Stockholders shall use their reasonable best
efforts to cause the Company to:
(a) maintain inventories at levels adequate for the
Business and in accordance with past inventory practices of the
Company, and maintain the properties of the Business and the
Company's assets in good repair, order and condition, reasonable
wear and tear excepted;
(b) maintain and keep in full force and effect all
insurance on assets and property or for the benefit of employees
of the Business, all liability and other casualty insurance, and
all bonds on personnel, presently carried;
(c) preserve intact the organization and reputation of
the Company and keep available the services of the present
executives, employees and agents of the Company and preserve the
good will of suppliers, customers and others having business
relationships with the Company;
(d) maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with
prior years;
(e) except in the ordinary course the Business in
accordance with past practice, and except as provided in Section
5.11, not enter into, amend or terminate any employment, bonus,
severance or retirement contract or arrangement, nor increase
any salary or other form of compensation payable or to become
payable to any executives or employees of the Business;
(f) not enter into, amend or terminate, or agree to enter
into, amend or terminate, any Material Contract;
(g) not extend credit in the sale of products, collection
of receivables or otherwise, other than in the ordinary and
regular course of the Business;
(h) not declare, set aside or pay any dividend or make
any other distribution with respect to the capital stock of the
Company;
(i) not merge or consolidate with or agree to merge or
consolidate with, nor purchase or agree to purchase all or
substantially all of the assets of, nor otherwise acquire, any
corporation, partnership, or other business organization or
division thereof;
(j) not sell, lease or otherwise dispose of or agree to
sell, lease or otherwise dispose of, any of its assets,
properties, rights or claims, except in the ordinary course of
the Business;
(k) not authorize for issuance, issue, sell or deliver
any additional shares of its capital stock of any class or any
securities or obligations convertible into shares of its capital
stock of any class or issue or grant any option, warrant or
other right to purchase any shares of its capital stock of any
class; provided, however, the Company may issue additional
shares of its capital stock upon the exercise of options and
warrants outstanding on the date of this Agreement;
(l) not redeem or otherwise acquire any capital stock of
the Company;
(m) not take any action or fail to take any reasonable
action which would prevent Kellwood from accounting for the
transactions contemplated hereby as a pooling of interests; or
(n) not incur or become subject to, nor agree to incur or
become subject to, any debt, obligation or liability, contingent
or otherwise, except current liabilities and contractual and
other obligations incurred in the ordinary course of business.
From the date hereof through the Closing, representatives of the
Company shall confer on a regular and frequent basis with one or more
designated representatives of Kellwood to report material operational
matters and the general status of on-going operations of the Business.
The Company shall promptly notify Kellwood of any material change in the
financial condition, results of operations, properties, business or
prospects of the Business and shall keep Kellwood fully informed of such
events and permit Kellwood's representatives to participate in all
discussions relating thereto.
5.2. ACCESS. From the date hereof through the Closing Date, the
Company shall, and the Stockholders shall cause the Company to, give
Kellwood and its representatives reasonable access to all properties,
facilities, personnel, books, contracts, leases, commitments and records,
and during this period the Company shall furnish Kellwood with all
financial and operating data and other information as to the Business and
its assets, properties, rights and claims, as Kellwood may from time to
time request. In particular, the Company shall (a) afford to the
officers, employees, attorneys, accountants, appraisers, environmental
engineers and other authorized representatives of Kellwood reasonable
access, during normal business hours, to the offices, plants, properties,
books and records of the Company in order that Kellwood may have full
opportunity to make such engineering, environmental, legal, financial,
accounting and other reviews or investigations of the Company, the
Business and the products as Kellwood shall desire to make, (b) request
its independent public accountants to permit Kellwood's independent public
accountants to inspect their work papers and other records relating to the
Company, the Business, its assets and the products, and (c) furnish, and
cause the officers and employees of the Company to furnish, to Kellwood
and its authorized representatives all additional financial and operating
data and other information regarding their assets, properties, rights,
claims, contracts, goodwill and business as Kellwood shall from time to
time request.
5.3. CONFIDENTIALITY. After the Closing Date, no Stockholder shall
(a) retain any document, databases or other media embodying any
confidential or proprietary know-how which constitutes a part of the
Company or its assets or use, publish or disclose to any third person any
confidential or proprietary know-how or (b) use, publish or disclose any
confidential or proprietary information concerning Kellwood or the
Company. In the event of any termination of this Agreement, (i) the
Company and the Stockholders shall treat as confidential and proprietary
and shall not disclose or use, directly or indirectly, in any manner
whatsoever, or permit others under its control to disclose or to use, any
information concerning Kellwood or its business or products obtained
pursuant to or in connection with the transactions which are the subject
matter of this Agreement, unless the information is or becomes a matter of
public knowledge through no fault of the Company or any Stockholder or can
be shown to have been in the possession of the Company or any Stockholder
prior to disclosure by Kellwood, and (ii) the Company and the Stockholders
shall promptly return to Kellwood, upon written request, all written
information and documents regarding Kellwood received from any other
party, its affiliates, accountants or counsel, in connection with such
transactions, including all copies thereof. Notwithstanding the
foregoing, GS Capital Partners, L.P., Stone Street Fund 1994, L.P. and
Bridge Street Funds 1994 (collectively, the "GS FUND STOCKHOLDERS") may
retain information and documents concerning the Company and its
Subsidiaries, Kellwood and the transactions contemplated hereunder and may
disseminate to their partners and fund participants such information and
documents in accordance with general practice or to the extent required by
applicable law. The provisions of this Section 5.3 shall survive any
termination of this Agreement.
5.4. HSR ACT FILING AND OTHER CONSENTS.
(a) As promptly as possible, but in any event not later than ten
(10) business days after the execution hereof, the Company (and, to the
extent necessary, stockholders) shall file with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "ANTITRUST DIVISION") a premerger notification
in accordance with the HSR Act with respect to the transactions
contemplated pursuant to this Agreement. The Company shall furnish
promptly to the FTC and the Antitrust Division any additional information
requested by either of them pursuant to the HSR Act in connection with
such filings and shall diligently take, or cooperate in the taking of, all
steps that are necessary or desirable and proper to expedite the
termination of the waiting period under the HSR Act.
(b) Prior to the Closing Date, the Company shall use its reasonable
best efforts to, and the Stockholders shall use their reasonable best
efforts to cause the Company to, obtain at the earliest practicable date
and in any event before the Closing all other governmental consents,
governmental authorizations, approvals, estoppel certificates and filings
required to be obtained by them or which may be reasonably necessary to
the consummation of the transactions contemplated by this Agreement or
which are reasonably requested by Kellwood.
(c) On or prior to the Closing Date, the Company shall , with the
advice, cooperation and consent of Kellwood, develop and use commercially
reasonable efforts to implement a strategy to obtain all such waivers and
consents under any indenture, loan agreement or security agreement to
which the Company or any Subsidiary is a party as are necessary to prevent
a breach or violation of, or default under, any such indenture, loan
agreement or security agreement as a result of the consummation of the
transactions contemplated hereby.
5.5. WAIVER OF RECOURSE. The Stockholders undertake (if any claim
is made against them in connection with the transactions contemplated
hereby) not to make any claim against the Company or any past or present
director or employee of the Company on whom Stockholders may have relied
before agreeing to any of the terms of this Agreement.
5.6. NOTICE OF DEVELOPMENTS. Prior to the Closing Date, the
Company will give prompt written notice to Kellwood of (i) any breach of
any of the Company's representations and warranties in Article III and
(ii) any material failure of the Company or a Stockholder to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder. No disclosure by any party pursuant to the
preceding sentence, however, shall be deemed to amend or supplement the
Schedules or to prevent or cure any misrepresentation, breach of warranty,
or breach of covenant or to limit or otherwise affect the remedies
available hereunder to Kellwood. Notwithstanding the foregoing, between
the date hereof and a date three (3) business days prior to the Closing,
the Company may update and supplement the Schedules hereto to reflect
changes and developments which occur between the date hereof and such
date. Kellwood, in the reasonable exercise of its discretion, may deem
any such update or supplement to constitute a breach of the applicable
representation, warranty or covenant of the Company or any Stockholder
hereunder (entitling Kellwood to indemnification under Article X hereof
following Closing) or, if it reflects the occurrence of a Company Material
Adverse Effect or jeopardizes the treatment of the Merger as a pooling of
interests for accounting purposes, a cause for termination under
Section 9.1.
5.7. TRADING IN KELLWOOD. Except as otherwise expressly consented
to by Kellwood in writing, from the date of this Agreement until the
Closing neither the Company, nor the Stockholders, nor the Related Parties
will, directly or indirectly, purchase or sell (including short sales) any
shares of Kellwood Common Stock in any transactions effected on The New
York Stock Exchange, the Nasdaq Stock Market or otherwise.
5.8. ALTERNATIVE PROPOSALS. The Company and the Stockholders hereby
agree as set forth below:
(a) After the date hereof and prior to the Closing Date or
earlier termination of this Agreement, the Company and the
Stockholders shall not, and the Company shall not permit any of the
Related Parties to, and the Company and the Stockholders shall cause
each officer, director and employee of such party, and each attorney,
accountant, investment banker, financial advisor and other agent
retained by them, not to, directly or indirectly, initiate, solicit
or encourage or take any other action to knowingly facilitate or
intentionally engage in any discussion in relation to, any inquiries
or the submission of any proposal or offer to acquire or operate all
or any material part of the Company or the Business or to acquire any
person, whether by merger, share exchange, purchase of stock,
purchase of assets, tender offer, joint venture or otherwise, and
whether for cash, securities or any other consideration or
combination thereof, if such transaction would be materially
inconsistent with or preclusive of the transactions contemplated
hereby (any such inconsistent or preclusive transaction being
referred to herein as an "ALTERNATIVE TRANSACTION"). The Company and
the Stockholders will immediately cease and cause to be terminated
any existing initiation, solicitation, encouragement, discussions or
negotiations with parties other than Kellwood or the Sub with respect
to Alternative Transactions.
(b) Notwithstanding the provisions of Section 5.8(a), in
response to a proposal for an Alternative Transaction (an
"ALTERNATIVE PROPOSAL") that is unsolicited and made after the date
hereof, the Company and the Stockholders may furnish information to,
or enter into discussions or negotiations with (x) any person or
entity that makes an Alternative Proposal that the Board of Directors
of the Company concludes in good faith (i) is reasonably capable of
being completed, taking into account all known legal, financial,
regulatory and other aspects of the Alternative Proposal and the
person making the Alternative Proposal, and (ii) would, if
consummated, result in a transaction more favorable to the
stockholders of the Company from a financial point of view than the
transactions contemplated hereby (any such more favorable Alternative
Proposal being referred to herein as a "SUPERIOR PROPOSAL") if, and
only to the extent that, prior to taking such action, the Company
provides reasonable notice to Kellwood to the effect that it is
taking such action, or (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form.
5.9. STOCKHOLDERS' AGREEMENTS. Each Stockholder hereby agrees that
unless and until this Agreement is terminated pursuant to the provisions
of Section 9.1 hereof (a) at the Company Stockholder Meeting (as
hereinafter defined) (or any adjournment thereof) or any other
circumstances upon which a vote , consent or any other approval with
respect to the Merger or this Agreement is sought, the Stockholder will
vote (or cause to be voted) those shares of Company Common Stock owned by
such Stockholder as of the date hereof and any other shares of capital
stock of the Company acquired by such Stockholder after the date hereof
("SUBJECT SHARES") in favor of the Merger, the adoption of this Agreement
and the approval of the terms hereof and any other transactions
contemplated hereby; (b) at any Company Stockholder Meeting or at any
adjournment thereof or in any circumstances upon which the Stockholder's
vote, consent, or other approval is sought, the Stockholder will vote (or
cause to be voted) the Subject Shares against any amendment of the Amended
and Restated Certificate of Incorporation or the By-laws of the Company,
which amendment would in any manner impede, frustrate, prevent or nullify
the Merger, or this Agreement or the transactions contemplated hereby or
change in any manner the voting rights of any class of capital stock of
the Company; (c) the Stockholder will not (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively,
"TRANSFER"), or enter into any contract, option or other agreement
(including in profit-sharing arrangement) with respect to the Transfer of
the Subject Shares to any person or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, in relation
to the Subject Shares, will not commit or agree to take any of the
foregoing actions; and (d) each Stockholder will take all steps necessary
under the Company Stockholder Agreement to carry out the foregoing,
including amending, terminating and otherwise modifying such Agreement.
The foregoing agreement is not intended to limit the action that the
Stockholder may take to discharge the Stockholder's fiduciary duties as a
director of the Company or otherwise under applicable law.
5.10. REASONABLE BEST EFFORTS. The Company and the Stockholders
(subject to the fulfillment of their fiduciary duties to the Company and
its stockholders) shall use their reasonable best efforts to consummate
the transactions contemplated by this Agreement and shall not take any
other action inconsistent with their obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby.
From the date hereof through the Closing Date, the Company and the
Stockholders (subject to the fulfillment of their fiduciary duties to the
Company and its stockholders) shall use their reasonable best efforts to
fulfill the conditions to their obligations hereunder and to cause their
representations and warranties to remain true and correct in all material
respects as of the Closing Date.
5.11. TERMINATION OF 401(K) PLANS. Prior to the Closing Date, the
Stockholders shall cause (a) the Directors of the Company to adopt a
resolution that is customary and that is mutually agreed upon that
terminates the Koret Employees' Profit Sharing Plan effective immediately
prior to the Closing Date, and the Company shall notify plan participants
of such termination by letter that is customary and that is mutually
agreed upon (with such changes as Kellwood may reasonably request), and
(b) the Directors of New Campaign, Inc. to adopt a resolution that is
customary and that is mutually agreed upon that terminates the New
Campaign, Inc. Employee Profit Sharing Plan effective immediately prior to
the Closing Date, and Campaign, Inc. shall notify plan participants of
such termination by letter that is customary and that is mutually agreed
upon (with such changes as Kellwood may reasonably request).
ARTICLE VI
COVENANTS OF KELLWOOD
Kellwood hereby agrees to keep, perform and fully discharge the
following covenants and agreements.
6.1. HSR ACT FILING AND OTHER CONSENTS.
(a) As promptly as possible, but in any event not later than ten
(10) business days after the execution hereof, Kellwood shall file with
the FTC and the Antitrust Division a pre-merger notification in accordance
with the HSR Act with respect to the transactions contemplated hereby.
Kellwood shall furnish promptly to the FTC and the Antitrust Division any
additional information requested by either of them pursuant to the HSR Act
in connection with such filings and shall diligently take, or cooperate in
the taking of, all steps that are necessary or desirable and proper to
expedite the termination of the waiting period under the HSR Act.
Kellwood shall pay its HSR filing fee.
(b) Kellwood shall use its reasonable best efforts to, and shall
use its reasonable best efforts to cause its appropriate affiliates to,
obtain or make at the earliest practicable date and in any event before
the Closing all other consents, governmental authorizations, approvals,
estoppel certificates and filings required to be obtained by it or which
may be reasonably necessary to the consummation of the transactions
contemplated by this Agreement or which are reasonably requested by the
Company.
6.2. BEST EFFORTS. Kellwood shall use its reasonable best efforts
to consummate the transactions contemplated by this Agreement and shall
not take any other action inconsistent with its obligations hereunder or
which could hinder or delay the consummation of the transactions
contemplated hereby. From the date hereof through the Closing Date,
Kellwood shall use its reasonable best efforts to fulfill the conditions
to its own and any affiliate's obligations hereunder and to cause its
representations and warranties to remain true and correct in all material
respects as of the Closing Date.
6.3. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Kellwood shall indemnify,
defend and hold harmless the present and former officers and directors of
the Company in respect to acts or omissions occurring prior to the
Effective Time to the fullest extent permitted by Delaware law, including
with respect to taking all actions necessary to advance expenses to the
extent permitted by Delaware law.
(b) Kellwood shall use all reasonable efforts to cause the
Surviving Corporation or Kellwood to obtain and maintain in effect for a
period of six years after the Effective Time policies or directors' and
officers' liability insurance at no cost to the beneficiaries thereof with
respect to acts or omissions occurring prior to the Effective Time with
substantially the same coverage and containing substantially similar terms
and conditions as existing policies for the benefit of Kellwood's officers
and directors.
6.4. SUB. Prior to the Effective Time, Sub shall not conduct any
business or make any investments, other than as specifically contemplated
by this Agreement, and will not have any assets (other than a de minimis
of cash paid to Sub for the issuance of its stock to Kellwood) or any
material liabilities.
6.5. ACCESS. From the date hereof until the earliest to occur of
the Closing or the termination of this Agreement, Kellwood shall permit
representatives of the Company to have appropriate access at all
reasonable times to Kellwood's premises, properties, books, records,
contracts and documents. No investigation conducted pursuant to this
Section 6.5 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
6.6. NOTICE OF DEVELOPMENTS. Kellwood shall give prompt written
notice to the Company and the Stockholders of (i) any breach of any
Kellwood representation or warranty contained in Article IV and (ii) any
material failure of Kellwood to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
No disclosure by Kellwood pursuant to the preceding sentence, however,
shall be deemed to amend or supplement the Schedules or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant or to
limit or otherwise affect the remedies available hereunder to the Company.
Notwithstanding the foregoing, between the date hereof and a date three
(3) business days prior to the Closing, Kellwood may update and supplement
the Kellwood SEC filings to reflect changes and developments which occur
between the date hereof and such date. The Company and/or the
Stockholders, in the reasonable exercise of their discretion, may deem any
such update or supplement to constitute a breach of the applicable
representation, warranty or covenant of Kellwood hereunder (entitling the
Company and/or the Stockholders to indemnification under Article X hereof
following Closing) or, if it reflects the occurrence of a Kellwood
Material Adverse Effect, a cause for termination under Section 9.1.
6.7. EMPLOYEES AND EMPLOYEE BENEFITS.
(a) For the period beginning on the Effective Time and ending on
the earlier of December 31, 1999 or the date that is one year from the
Effective Time, Kellwood and its affiliates shall provide Company
Employees (as defined below) with Kellwood's 401(k) Plan and (i) health
and medical benefits, and (ii) other employee benefits that are, in the
case of each such category of benefits, substantially similar to the
current benefits provided. From and after the Effective Time, Kellwood
and its affiliates shall honor, in accordance with their terms and except
to the extent amended or terminated in accordance with such terms, all
plans and all contracts, plans, and programs providing for compensation or
benefits for Company Employees.
(b) From and after the Effective Time, Kellwood shall treat all
service by the Company Employees with the Company and its affiliates and
their respective predecessors prior to the Effective Time for all purposes
as service with Kellwood (except to the extent such treatment would result
in benefit accruals under a defined benefit pension plan (as such term is
defined under ERISA) for periods prior to the Closing Date), and, with
respect to any medical or dental benefit plan in which Company Employees
participate after the Effective Time, Kellwood shall waive or cause to be
waived any pre-existing condition exclusions and actively-at-work
requirements (provided, however, that no such waiver shall apply to a pre-
existing condition of any Company Employee who was, as of the Effective
Time, excluded from participation in a Company benefit plan by virtue of
such pre-existing condition), and shall provide that any covered expenses
incurred on or before the Effective Time by a Company Employee or a
Company Employee's covered dependent shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum out-
of-pocket provisions after the Effective Time to the same extent as such
expenses are taken into account for the benefit of similarly situated
employees of Kellwood and subsidiaries.
(c) Nothing in this Section 6.7 shall be construed to impose upon
Kellwood and its affiliates any obligation to continue the employment of
any Company Employee following the Effective Time (other than pursuant to
the terms of an agreement between a Company Employee and the Company or a
Subsidiary thereof in effect on the date of the Effective Time). For
purposes of this Section 6.7, "COMPANY EMPLOYEES" shall mean persons who
are, as of the Effective Time, employees of the Company or any of its
Subsidiaries, other than employees whose terms and conditions of
employment are covered by a collective bargaining agreement.
6.8. CONFIDENTIALITY. In the event that for any reason this
Agreement is terminated and the Merger does not occur, neither Kellwood
nor any of its affiliates shall (a) retain any document, databases or
other media embodying any confidential or proprietary know-how which
constitutes a part of the Company or its assets or use, publish or
disclose to any third person any confidential or proprietary know-how or
(b) use, publish or disclose any information concerning the Company or its
Subsidiaries. In the event of any termination of this Agreement, (i)
Kellwood shall treat as confidential and proprietary and shall not
disclose or use, directly or indirectly, in any manner whatsoever, or
permit others under its control to disclose or to use, any confidential or
proprietary information concerning the Company or its business or products
obtained pursuant to or in connection with the transactions which are the
subject matter of this Agreement, unless the information is or becomes a
mater of public knowledge through no fault of Kellwood or can be shown to
have been in the possession of Kellwood prior to disclosure by Kellwood,
and (ii) Kellwood shall promptly return to the Company, upon written
request, all written information and documents received from any other
party, its affiliates, accountants or counsel, in connection with such
transactions, including all copies thereof. The provisions of this
Section 6.8 shall survive any termination of this Agreement.
6.9. LABOR AGREEMENT COMPLIANCE. After the Closing Date, Kellwood
shall cause the Company (or a Subsidiary thereof, as applicable) to honor
and abide by each collective bargaining agreement then existing between
the Company or a Subsidiary thereof, as applicable) and a labor
organization until the expiration of the term of such agreement and, to
the extent required by applicable Law, thereafter.
6.10. INTERIM CONDUCT OF BUSINESS. From the date hereof until the
Closing, Kellwood shall use its reasonable best efforts to preserve,
protect and maintain Kellwood and its assets, and operate Kellwood
consistent with prior practice and in the ordinary course of its business.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. Stockholder Meetings.
(a) The Company and Kellwood will each, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene
and hold a meeting of stockholders (respectively, the "COMPANY STOCKHOLDER
MEETING" and the "KELLWOOD STOCKHOLDER MEETING" and, collectively, the
"STOCKHOLDER MEETINGS") for the purpose of considering the approval of
this Agreement and the Merger (in the case of the Company) and the
issuance of the shares of the Kellwood Common Stock pursuant to this
Agreement (the "SHARE ISSUANCE") (in the case of Kellwood). The Company
and Kellwood shall coordinate and cooperate with respect to the timing of
such meetings and shall use their reasonable best efforts to hold such
meetings on the same day.
(b) Kellwood shall, through its Board of Directors, recommend to
its stockholders approval of the Share Issuance, subject to applicable
fiduciary duties, and use its reasonable best efforts to obtain such
approval by its stockholders and shall not withdraw or modify, or propose
to withdraw or modify in a manner adverse to the Company, such
recommendation, except if in the reasonable good faith judgment of
Kellwood's Board of Directors, on the basis of the advice of outside legal
counsel of Kellwood, or the failure to withdraw or modify, such
recommendation would violate the fiduciary duties of such Board of
Directors to Kellwood's stockholders under applicable law. The Company
shall, through its Board of Directors, recommend to its stockholders
approval of this Agreement and the Merger, subject to applicable fiduciary
duties, and use its reasonable best efforts to obtain such approval by its
stockholders and shall not withdraw or modify, or propose to withdraw or
modify in a manner adverse to Kellwood, such recommendation.
7.2. POOLING OF INTERESTS; REORGANIZATION. From the date hereof
through the Effective Time, unless the other party shall otherwise agree
in writing, none of the Stockholders, Kellwood, the Company or any of
their respective Subsidiaries shall (a) knowingly take or fail to take any
action which action or failure would prevent the treatment of the Merger
as a pooling of interests for accounting purposes or (b) knowingly take or
fail to take any action which action or failure would prevent the
qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code. Between the date of this Agreement and the
Closing, the Stockholders, Kellwood and the Company each shall take, or
cause to be taken, all actions reasonably necessary in order for the
Merger to be treated as a pooling-of-interests for accounting purposes,
including providing appropriate and customary representation letters from
each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act and for purposes of
qualifying the Merger for pooling-of-interests accounting treatment) to
the accountants of the Company or Kellwood, as appropriate, so as to
enable Kellwood to obtain a letter, in form and substance reasonably
satisfactory to Kellwood and the Company, from Pricewaterhouse Coopers LLP
dated the Closing Date stating that they concur with Kellwood management's
conclusion that the Merger will qualify as a transaction to be accounted
for by Kellwood in accordance with the pooling-of-interests method of
accounting. After the Closing Date, Kellwood shall not take or fail to
take any action which action or failure would jeopardize the treatment of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
7.3. PREPARATION OF THE REGISTRATION STATEMENT AND THE JOINT PROXY
STATEMENT. The Company and Kellwood shall promptly prepare and file with
the SEC the Joint Proxy Statement and Kellwood shall prepare and file with
the SEC the Registration Statement, in which the Joint Proxy Statement
will be included as a prospectus. Kellwood shall, with the cooperation of
the Company, prepare and include in the Registration Statement appropriate
provisions (including a resale prospectus) under the Securities Act such
that persons who receive shares of Kellwood Common Stock in the Merger and
who are "AFFILIATES" of the Company and/or Kellwood under the Securities
Act may utilize the Registration Statement to resell publicly such shares
of Kellwood Common Stock in compliance with the Securities Act. Each of
Kellwood and the Company shall use its reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. As promptly as practicable
after the Registration Statement shall have become effective, each of
Kellwood and the Company shall mail the Joint Proxy Statement to its
respective stockholders. Kellwood shall also take any action reasonably
required to be taken under any applicable state securities laws in
connection with the issuance of Kellwood Common Stock in the Merger and
the resale of shares of Kellwood Common Stock by selling security holders
pursuant to the resale provisions of the Registration Statement, and the
Company shall furnish all information concerning the Company and the
holders of the Company Common Stock as may be reasonably requested in
connection with any such action and in the case of Company stockholders
whose shares of Kellwood Common Stock are registered for resale
thereunder, information typically provided by selling security holders.
Kellwood shall take all action necessary to list on the New York Stock
Exchange the shares of Kellwood Common Stock issuable in the Merger.
Kellwood shall take all action necessary to maintain and supplement the
Joint Proxy and Registration Statement to enable stockholders issued
Kellwood Common Stock to freely resell such shares and to fulfill any
prospectus delivery requirement under the Securities Act in connection
therewith, in each case, for so long as such stockholder may not freely
resell his Kellwood Common Stock without an effective Registration
Statement under the Securities Act (without giving effect to sales under
Rules 144 or 145 under the Securities Act).
ARTICLE VIII
CONDITIONS PRECEDENT TO THE MERGER
8.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
duly approved by the requisite vote of stockholders of the
Company in accordance with applicable law and the Company's
charter and the Company's By-laws and the Company Stockholder
Agreement, and the Share Issuance shall have been approved by
the requisite vote of the stockholders of Kellwood in accordance
with applicable rules of the NYSE, applicable Law and the
Kellwood charter and the Kellwood By-laws; and
(b) Registration Statement. The Registration Statement
shall have become effective in accordance with the provisions of
the Securities Act. No stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated
or, to the knowledge of Kellwood or the Company, threatened by
the SEC.
8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Accuracy of Warranties and Performance of Covenants.
The representations and warranties of Kellwood contained herein
shall be true and correct as if made on and as of the Closing
Date, except for changes in the ordinary course of Kellwood's
business or contemplated by this Agreement and except for such
breaches, inaccuracies or omissions of such representations and
warranties which (i) have neither had nor reasonably would be
expected to have a Kellwood Material Adverse Effect and/or (ii)
would not jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 358(a) of the Code.
Kellwood shall have performed all of the obligations and
complied in all material respects with all of the covenants,
agreements and conditions required to be performed or complied
with on or prior to the Closing;
(b) No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or other
governmental authority shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying
out of this Agreement or any of the transactions contemplated
hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded;
(c) Regulatory Approvals. All regulatory agencies shall
have taken such action as may be required to permit the
consummation of the transactions contemplated hereby and such
actions shall remain in full force and effect and shall be
reasonably satisfactory in form and substance to the Company and
its counsel;
(d) Tax Opinion. The Company and the Stockholders shall
have received an opinion of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, in form and
substance reasonably satisfactory to the Company, dated the
Closing Date, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as of the
Closing Date, for federal income tax purposes:
(i) the Merger will constitute a "REORGANIZATION"
within the meaning of Section 368 (a) of the Code, and the
Company, Sub and Kellwood will each be a party to that
reorganization within the meaning of Section 368 (b) of the
Code;
(ii) no gain or loss will be recognized by Kellwood,
Sub or the Company as a result of the Merger; and
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the conversion of their
shares of the Company Common Stock into shares of Kellwood
Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares of
Kellwood Common Stock.
In rendering such opinion, ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ may rely upon the
representations contained herein and may receive and rely upon
representations from Kellwood, the Company, and others; and
(e) Condition of Kellwood. There shall not have occurred
a Kellwood Material Adverse Effect since April 30, 1998.
8.3. CONDITIONS TO OBLIGATIONS OF KELLWOOD AND SUB TO EFFECT THE
MERGER. The obligations of Kellwood and Sub to effect the Merger shall be
subject to, the fulfillment or waiver at or prior to the Effective Time of
the following additional conditions:
(a) Accuracy of Warranties and Performance of Covenants.
The representations and warranties of the Company contained
herein shall be true and correct in all material respects as if
made on and as of the Closing Date, except for changes occurring
in the ordinary course of the Business or contemplated by this
Agreement and except for such breaches, inaccuracies or
omissions of such representations and warranties which have
neither had nor would be reasonably expected to have a Company
Material Adverse Effect and the Company and Stockholders shall
have performed all of the obligations and complied in all
material respects with all of the covenants, agreements and
conditions required to be performed or complied with by them on
or prior to the Closing;
(b) No Pending Action. No action, suit, proceeding or
investigation before any court, administrative agency or other
governmental authority shall be pending or threatened wherein an
unfavorable judgment, decree or order would prevent the carrying
out of this Agreement or any of the transactions contemplated
hereby, declare unlawful the transactions contemplated hereby,
cause such transactions to be rescinded, or which might affect
the right of the Company to own, operate or control the Business
or its assets;
(c) Regulatory Approvals. All regulatory agencies shall
have taken such action as may be required to permit the
consummation of the transactions contemplated hereby and such
actions shall remain in full force and effect and shall be
reasonably satisfactory in form and substance to Kellwood and
its counsel;
(d) Consents. Kellwood shall have been furnished with
the third party consents set forth in Schedule 8.3(d);
(e) Condition of Business and Assets. The Business and
its assets shall not have been adversely affected in any way by
any act of God, fire, flood, accident, war, labor disturbance,
legislation (proposed or enacted), or other event or occurrence,
whether or not covered by insurance, which has resulted in a
Company Material Adverse Effect and there shall have been no
change in the assets or the Business or its financial condition
which has resulted in a Company Material Adverse Effect;
(f) Multi-Year License. The Company shall have entered
into a multi-year license with ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ with terms
reasonably acceptable to Kellwood;
(g) Collective Bargaining Agreement. The Company shall
have used commercially reasonable efforts to enter into a
collective bargaining agreement for its operations in Florida
and Canada with terms reasonably acceptable to Kellwood; and
(h) Accounting. Kellwood shall have received a letter
from Pricewaterhouse Coopers LLP (or any successor thereto), in
form and substance reasonably satisfactory to Kellwood, that the
Merger will qualify for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16, as
amended by Statements of Financial Accounting Standards Board
("FASB"), and the related interpretations of the American
Institute of Certified Public Accountants, the FASB, the
Emerging Issues Task Force and the rules and regulations of the
U.S. Securities and Exchange Commission (collectively, "APB
OPINION NO. 16 AND ITS INTERPRETATIONS") if closed and
consummated in accordance with this Agreement (which opinion
shall be based, as to the financial statements of the Company,
on a customary "POOLING" letter of KPMG Peat Marwick LLP).
ARTICLE IX
TERMINATION BY PARTIES
9.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of the parties hereto;
(b) by either Kellwood or the Company in the event that
the Closing does not occur for any reason on or before
February 28, 1999 (the "TERMINATION DATE"); provided, however,
that if the Closing does not occur on or prior to the
Termination Date due to the act or omission of one of the
parties, that party may not terminate this Agreement pursuant to
the provisions of this Section;
(c) by the Company, upon approval of the Company Board of
Directors, if prior to stockholder approval (i) without
violation of Section 5.8, the Company shall have received after
the date hereof an Alternative Proposal, (ii) the Company's
Board of Directors shall have determined, in the exercise of its
good faith judgment that such Alternative Proposal constitutes a
Superior Proposal, and (iii) the Company shall have given
Kellwood at least four (4) business days' prior written notice
of the material terms and conditions of such Superior Proposal
and of its intention to terminate this Agreement pursuant to
this provision, in order to enter into an agreement with respect
to such Superior Proposal; provided, however, that such
termination under this clause (c) shall not be effective, and
the Company shall not be entitled to enter into a definitive
agreement providing for such Superior Proposal, until the
Company has made payment to Kellwood of the fee required to be
paid pursuant to Section 9.2(a);
(d) by Kellwood, if the Company's Board of Directors or
committee thereof shall have resolved to accept or recommend to
the Company's stockholders a definitive agreement with respect
to a Superior Proposal or shall have withdrawn or adversely
modified or taken a public position materially inconsistent with
its approval or recommendation to the stockholders of the
Company of the transactions contemplated hereby or shall not
have submitted this Agreement and the transactions contemplated
hereby for the approval of its stockholders at a meeting of
stockholders or used its reasonable best efforts to obtain such
stockholder approval;
(e) by Kellwood, if (i) a Change of Control of the
Company shall have occurred, (ii) the Company shall have entered
into a definitive agreement providing for, or publicly announced
its intention to effect, any transaction involving a Change of
Control of the Company or (iii) a tender offer or exchange offer
shall have been commenced or publicly announced that, if
consummated, would have the effect of a Change of Control of the
Company;
(f) by either Kellwood or the Company, if the approval of
the stockholders of such party or the other party contemplated
by Section 7.1 is not obtained at the applicable stockholders
meeting, including adjournments thereof.
(g) by either Kellwood or the Company, if the other shall
have breached, or failed to comply with, in any material respect
any of its obligations under this Agreement, or any
representation or warranty made in this Agreement by such other
party shall have been incorrect in any material respect when
made or shall have since ceased to be true and correct in any
material respect, and such breach, failure or misrepresentations
is not cured within ten (10) days after written notice thereof
and such breaches, failures or misrepresentations, individually
or in the aggregate and without regard to materiality qualifiers
contained therein, result or would be reasonably likely to
result in a Company Material Adverse Effect or a Kellwood
Material Adverse Effect, as applicable; or
(h) by the Company, if Kellwood's Board of Directors or
committee thereof shall have withdrawn or adversely modified its
approval of, or recommendation to the stockholders of Kellwood
to approve, the Share Issuance or shall not have submitted the
Share Issuance to the stockholders of Kellwood for their
approval at a meeting of stockholders or used its reasonable
best efforts to obtain such stockholder approval.
Any right of termination set forth above shall be exercised by written
notice from the terminating party to the other party.
9.2. TERMINATION FEES.
(a) If this Agreement is terminated by the Company pursuant to
Section 9.1(c), or by Kellwood pursuant to Section 9.1(d) or (e), or by
Kellwood due to the failure of the Company to obtain stockholder approval
as set forth in Section 9.1(f), then the Company shall pay Kellwood a fee
of Five Million Dollars ($5,000,000); provided, however, that no fee shall
be payable following a termination of this Agreement pursuant to
Section 9.1(e)(iii), unless and until the relevant tender offer or
exchange offer has been consummated and a Change of Control of the Company
has occurred. Such amount shall be paid in cash by wire transfer in
immediately available funds not later than five (5) business days after
the obligation to make such payment arises.
(b) If (i) this Agreement is terminated prior to the occurrence
of the Closing pursuant to Section 9.1(b) (except if such termination
occurs as a result of the failure of Kellwood to satisfy the conditions
set forth in Section 8.2 hereof) or Section 9.1(g) due to the breach or
non-compliance by the Company, (ii) prior to such date as is one hundred
eighty (180) days after such termination the Company shall enter into a
definitive agreement providing for, or shall publicly announce its
intention to effect any transaction involving the sale of all or
substantially all of the Company's assets (whether by merger or sale of
stock or assets) to or with an unaffiliated person, and (iii) no fee has
previously been paid pursuant to Section 9.2(a), then the Company shall
pay Kellwood the fee set forth in Section 9.2(a).
9.3. EFFECT OF TERMINATION. In the event of any termination of
this Agreement as provided above, this Agreement shall forthwith become
wholly void and of no further force and effect and there shall be no
liability on the part of any party, their affiliates or their respective
officers or directors; provided, however, that upon any such termination
the obligations of the parties with respect to this Article IX (including
Section 9.2), Section 5.3, Section 11.3 and the Confidentiality Agreement
previously entered into by and between the Company and Kellwood shall
remain in full force and effect; and provided further, that nothing herein
will relieve any party from liability for damages for any breach of
covenants or representations and warranties of this Agreement prior to
Closing.
9.4. CHANGE OF CONTROL. For purposes of this Agreement, "CHANGE OF
CONTROL" shall mean with respect to the Company the occurrence of any of
the following events: (i) an acquisition (whether directly from such party
or otherwise) of any voting securities of the Company (the "VOTING
SECURITIES") by any "PERSON" (as the term is used for purposes of
Section 13(d) or 14(d) of the Exchange Act) not a stockholder of the
Company as of the date hereof, immediately after which such Person has or
would have "BENEFICIAL OWNERSHIP" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of forty percent (40%) or more of the
combined voting power of the Company's then outstanding Voting Securities;
(ii) the consummation of, or agreement to consummate: (A) a merger,
consolidation, share exchange or reorganization of the Company in which
the present stockholders of the Company, as a group, cease to hold a
majority equity interest in the surviving entity; (B) a liquidation or
dissolution of or appointment of a receiver, rehabilitator, conservator or
similar person for the Company; or (C) the sale or other disposition of
all or substantially all of the assets of the Company to any Person (other
than a transfer to a subsidiary).
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1. SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered
pursuant hereto shall be deemed to be material and to have been relied
upon by the parties hereto, and shall survive the Closing and shall be
fully effective and enforceable for a period of one (1) year following the
Closing Date (unless a different period is specifically assigned thereto),
but shall thereafter be of no further force or effect, except as they
relate to claims for indemnification timely made pursuant to this Article
or claims alleging fraud on the part of a party hereto.
10.2. INDEMNIFICATION. (a) Kellwood shall indemnify and hold
harmless the Company and the Stockholders and (b) the Company and the
Stockholders shall indemnify and hold harmless Kellwood, in each case,
from and against any and all loss, damage, expense (including court costs,
amounts paid in settlement, judgments, reasonable attorneys' fees or other
expenses for investigating and defending, but after giving effect to any
tax benefits related thereto), suit, action, claim, liability or
obligation related to, caused by or arising from any misrepresentation,
breach of warranty by such party or failure by such party to fulfill any
covenant or agreement contained herein.
10.3. NOTICE OF CLAIMS. Kellwood, the Company or the Stockholders'
Representative, as applicable, shall give prompt written notice to the
other of the facts and circumstances giving rise to any claim for
indemnification hereunder (the "NOTICE") for which such indemnified party
intends to assert a right to indemnification under this Agreement
(collectively, "CLAIMS"). The party receiving the Notice shall have the
option to protest any Claim, at such party's own cost and expense. Such
option shall be exercised by the giving of notice by the exercising party
to the other parties within ten (10) days of receipt of a Notice.
10.4. LIMITATIONS ON STOCKHOLDERS' INDEMNIFICATION OBLIGATION.
From and after the Effective Time, subject to the terms and conditions of
the Escrow Agreement, Kellwood shall be entitled to be indemnified from
the Escrow for any and all Claims, regardless of the record or beneficial
ownership of the shares of Kellwood Common Stock or other assets held
pursuant to the Escrow Agreement. Kellwood and Sub shall not be entitled
to indemnification under this Agreement until the aggregate amount of all
such Claims exceeds Seven Hundred Fifty Thousand Dollars ($750,000) (the
"THRESHOLD AMOUNT"), and then Kellwood shall be entitled to recover only
the amount of such Claims in excess of the Threshold Amount. Kellwood
shall provide the Escrow Agent and the Stockholder Representative named
pursuant to the Escrow Agreement with Notice of all Claims included in the
Threshold Amount. The value of Kellwood Common Stock used to fulfill the
indemnification obligation hereunder shall be the Agreed Price. The
Kellwood Common Stock held pursuant to the Escrow Agreement shall
constitute the sole and exclusive fund from which any Claims of Kellwood
or Sub and costs and expenses incurred in connection therewith hereunder
may be satisfied (other than claims based upon fraud) and the sole and
exclusive recourse for breaches by the Company or the Stockholders of the
representations, warranties and covenants contained herein, absent fraud.
In the event that the Kellwood Common Stock held pursuant to the Escrow
Agreement is insufficient to satisfy any claim of Kellwood hereunder,
Kellwood and Sub shall be barred from taking any other action against the
Company, the Stockholders or any stockholder of the Company.
10.5. THIRD PARTY CLAIMS . The Stockholders' Representative
appointed pursuant to the Escrow Agreement shall have the right, at its
own expense to participate in the defense of any third party claim
asserted against the Company for which Kellwood would be entitled to
indemnification hereunder; provided, however, that such Stockholders'
Representative shall have no right to control the defense or settlement of
any such claim. Kellwood shall not settle any claim of a third party for
which it is entitled to indemnification hereunder without the prior
written consent of the Stockholders' Representative, which consent shall
not be unreasonably withheld.
ARTICLE XI
GENERAL PROVISIONS
11.1. AMENDMENTS AND WAIVER. Except as otherwise required by
applicable Law after the Company Stockholder Meeting to approve this
Agreement and the Merger and/or the Kellwood Stockholder Meeting to
approve the Share Issuance, this Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed by or
on behalf of each of the parties hereto. No amendment, waiver or consent
with respect to any provision of this Agreement shall in any event be
effective, unless the same shall be in writing and signed by the parties
hereto, and then such amendment, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
The failure of any party at any time or times to require performance of
any provisions hereof shall in no manner affect that party's right at a
later time to enforce the same. No waiver by any party of the breach of
any term or covenant contained in this Agreement in any one or more
instances shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in this Agreement. Waivers may be made in advance or
after the right occurred has arisen or the breach or default waived has
occurred. Any waiver may be conditional.
11.2. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be, personally
delivered or sent by facsimile transmission with confirming copy sent by
overnight courier (such as Express Mail, Federal Express, etc.) and a
delivery receipt obtained and addressed to the intended recipient as
follows:
(a) if to Kellwood or Sub, to
Kellwood Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company or the Stockholders, to
Koret of California, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Squadron, Ellenoff, Plesent & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for receiving notice by written notice
given to the others named above.
11.3. EXPENSES. Except as otherwise expressly provided herein, all
fees and expenses incurred in connection with this Agreement and the
Merger, including, without limitation, all legal, accounting, financial
advisory, printing, consulting and filing and other fees and expenses of
third parties ("THIRD PARTY EXPENSES") incurred by a party in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, including the Joint
Proxy Statement and Registration Statement, shall be in the case of Third
Party Expenses incurred by Kellwood and Sub, the obligation of Kellwood,
and in the case of the Company and the Stockholders, the obligation of the
Company. If this Agreement is terminated by the Company pursuant to
Section 9.1(g), 9.1(h) or 9.1(f) due to the failure of Kellwood
stockholders to approve the Share Issuance, Kellwood shall pay the Third
Party Expenses of the Company and the Stockholders, without prejudice to
any other remedies they may have to assert. If any action is brought by
either party to enforce any provision of this Agreement, the prevailing
party shall be entitled to recover court costs, arbitration expenses and
reasonable attorneys' fees. The provisions of this Section shall survive
any termination of this Agreement.
11.4. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
11.5. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective successors
and permitted assigns. At the election of Kellwood, any direct wholly-
owned Subsidiary of Kellwood may be substituted for Sub as a constituent
corporation in the Merger, provided that such substituted corporation is a
Delaware corporation which is formed solely for the purpose of engaging in
the transactions contemplated by this Agreement and has engaged in no
other business activities and provided further that such substitution
would not jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code. Except as provided in
the foregoing sentence, this Agreement shall not be assigned by either
party hereto without the express prior written consent of the other party
and any attempted assignment, without such consents, shall be null and
void. This Agreement does not create any rights, claims or benefits
inuring to any person that is not a party hereto nor create or establish
any third-party beneficiary hereto; notwithstanding the foregoing, in the
event of any breach by Kellwood of its covenants set forth in Sections
6.3(a) and/or (b) or 7.3, each director and officer of the Company or
selling security holder, as the case may be, shall be entitled to commence
and maintain appropriate legal action to compel Kellwood to comply with
such covenants or to obtain monetary damages for the breach thereof.
11.6. ENTIRE TRANSACTION. This Agreement and the documents
referred to herein contain the entire understanding among the parties with
respect to the transactions contemplated hereby and supersedes all other
agreements, understandings and undertakings among the parties on the
subject matter hereof; provided, however, that the provisions contained in
the Confidentiality Agreement dated July 9, 1998 as modified by paragraph
17 of the Letter of Intent among the parties dated as of September 18,
1998 shall survive any termination of this Agreement and shall remain in
full force and effect until the Closing contemplated hereby is
consummated. All exhibits, attachments and schedules hereto are hereby
incorporated by reference and made a part of this Agreement.
11.7. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless
of the law that might otherwise govern under applicable principles of
conflicts of laws thereof.
11.8. JURISDICTION.
(a) The parties to this Agreement agree that any suit, action or
proceeding arising out of, or with respect to, this Agreement or any
judgment entered by any court in respect thereof shall be brought in the
courts of the State of Delaware or in the U.S. District Court for
Delaware, and Kellwood, the Company and the Stockholders hereby
irrevocably accept the exclusive personal jurisdiction of those courts for
the purpose of any suit, action or proceeding.
(b) In addition, Kellwood, the Company and the Stockholders each
hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the venue of any suit,
action or proceeding arising out of or relating to this Agreement or any
judgment entered by any court in respect thereof brought in the State of
Delaware or the U.S. District Court for Delaware, and hereby further
irrevocably waives any claim that any suit, action or proceedings brought
in any such court has been brought in any inconvenient forum.
11.9. ACCOUNTING TERMS. Any accounting terms used in this
Agreement shall, unless otherwise specifically provided, have the meanings
customarily given them in accordance with GAAP, and all financial
computations hereunder shall, unless otherwise specifically provided, be
computed in accordance with GAAP consistently applied.
11.10. KNOWLEDGE. For purposes of this Agreement, any reference to
"THE KNOWLEDGE OF" or "THE BEST KNOWLEDGE OF" a party hereto when
modifying any representation and warranty shall mean, with respect to
Kellwood, to the actual knowledge (upon due inquiry) of all officers of
such party with title of vice president or higher; with respect to the
Company, to the actual knowledge (upon due inquiry) of ▇▇▇▇▇▇ ▇▇▇▇▇
(President/COO of the Company), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(CFO/VP/Secretary/Treasurer) of the Company, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇. The representations and warranties contained in this Agreement
shall not be affected by any investigation, verification or examination by
any party hereto or by anyone on behalf of any such party, or any
knowledge of facts determined or determinable pursuant to such
investigation, except as specifically set forth herein or in a Schedule or
document delivered pursuant to this Agreement.
11.11. OTHER RULES OF CONSTRUCTION. References in this Agreement
to sections, schedules, attachments and exhibits are to sections of, and
schedules, attachments and exhibits to, this Agreement, unless otherwise
indicated. Words in the singular include the plural and in the plural
include the singular. The word "OR" means "IN THE ALTERNATIVE" and is not
exclusive. The word "INCLUDING" shall mean including, without limitation.
The Section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Each party hereto acknowledges that this
Agreement has been negotiated at arms-length by the parties and their
respective counsel and that neither party shall be deemed the author or
drafter of this Agreement for purposes of construction of the terms hereof
or for any other purpose. All parties hereto have participated
substantially in the negotiation and drafting of this Agreement and each
party hereby disclaims any defense or assertion that any ambiguity herein
should be construed against the drafter.
11.12. ANNOUNCEMENTS. No announcement of this Agreement or any
transaction contemplated hereby shall be made by any party without the
written approval of the other parties hereto (which approval shall not be
unreasonable withheld), except as required by law or the regulations of
any securities exchange.
11.13. PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable
any other provision hereof.
11.14. CERTAIN TAXES. Kellwood shall pay all stamp or other similar
transfer taxes arising as a result of the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed as of the date first written above.
KORET, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman
STOCKHOLDERS:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
GS CAPITAL PARTNERS, L.P.
By:
Title:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇.▇.
By:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
By:
Title:
KELLWOOD COMPANY
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, President
KELLWOOD ACQUISITION II CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, President