EXHIBIT 2
CONFORMED COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXX XXXXXXXX CORPORATION,
XXXXX XXXXXXXX U.S.A., INC.,
XXXXX XXXXXXXX (EASTERN HEMISPHERE) LIMITED
AND
PEPE JEANS LONDON CORPORATION
DATED AS OF JANUARY 31, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I
Certain Definitions..................................................... 5
ARTICLE II
Purchase and Sale of Stock; Closing..................................... 10
Section 2.1. Purchase and Sale.................................... 10
Section 2.2. Time and Place of Closing............................ 11
ARTICLE III
Representations and Warranties of Seller................................ 11
Section 3.1. Incorporation; Authorization; etc. .................. 11
Section 3.2. Capitalization; Structure............................ 12
Section 3.3. Financial Statements................................. 13
Section 3.4. Properties; Leases................................... 14
Section 3.5. Absence of Certain Changes........................... 14
Section 3.6. Litigation; Orders................................... 14
Licenses, Approvals, Other Authorizations, Consents,
Section 3.7. Reports, etc......................................... 14
Section 3.8. Labor Matters........................................ 14
Section 3.9. Compliance with Laws................................. 15
Section 3.10 Insurance............................................ 15
Section 3.11. Material Contracts................................... 15
Section 3.12. Brokers, Finders, etc. .............................. 15
Section 3.13. Affiliate Transactions............................... 16
Section 3.14. Environmental Compliance............................. 16
Section 3.15. Undisclosed Liabilities.............................. 17
Section 3.16. Proxy Statement...................................... 17
Section 3.17. Acquisition of Shares for Investment................. 17
ARTICLE IV
Representations and Warranties of Parent................................ 18
Section 4.1. Incorporation; Authorization; etc. .................. 18
Section 4.2. Capitalization....................................... 19
Section 4.3. Other Authorizations, Consents, Reports, etc......... 19
Section 4.4. Brokers, Finders, etc. .............................. 19
Section 4.5. Acquisition of Shares for Investment................. 19
Section 4.6. SEC Filings; Financial Statements.................... 20
Section 4.7. Proxy Statement...................................... 20
ARTICLE V
Covenants of Seller and Parent.......................................... 20
Investigation of Business; Access to Properties and
Section 5.1. Records.............................................. 20
Section 5.2. Efforts; Obtaining Consents.......................... 21
Section 5.3. Further Assurances................................... 21
Section 5.4. Conduct of Business by Seller........................ 21
Section 5.5. Conduct of Business by Parent........................ 23
Section 5.6. Preservation of Business............................. 23
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Section 5.7. Non-Solicitation........................................ 23
Section 5.8. Notice of Developments.................................. 23
Section 5.9. License Agreements...................................... 23
Section 5.10. Financial Statements.................................... 23
Section 5.11. Intercompany Accounts; Indebtedness..................... 24
Section 5.12. Proxy Statement......................................... 24
Section 5.13. Stockholders Meeting.................................... 24
Section 5.14. NYSE Listing............................................ 24
Section 5.15. Financing............................................... 24
Section 5.16. Blackwatch Note......................................... 25
Section 5.17. Resignation of Directors................................ 25
ARTICLE VI
Employee Benefits........................................................ 25
Section 6.1. Employee Benefit Plans.................................. 25
Section 6.2. Company Employee Benefit Plans.......................... 26
Section 6.3. Non-U.S. Company Employee Benefit Plans................. 27
Section 6.4. Administration.......................................... 27
Section 6.5. Reportable Event........................................ 27
ARTICLE VII
Tax Matters.............................................................. 27
Section 7.1. Tax Returns of the Companies and the Subsidiaries....... 27
Section 7.2. Allocation of Certain Taxes............................. 28
Section 7.3. Filing Responsibility................................... 28
Section 7.4. Refunds and Carrybacks.................................. 29
Section 7.5. Cooperation and Exchange of Information................. 29
Section 7.6. Tax Indemnification by Seller........................... 30
Section 7.7. Tax Certification....................................... 30
Section 7.8. Definitions............................................. 30
ARTICLE VIII
Conditions to Parent's, TH USA's and THEH's Obligations to Close......... 31
Section 8.1. Representations, Warranties and Covenants of Seller..... 31
Section 8.2. Regulatory Approvals.................................... 31
Section 8.3. No Orders or Injunctions................................ 31
Section 8.4. Opinions of Seller's Counsel............................ 31
Section 8.5. Certain Agreements...................................... 32
Section 8.6. Stockholder Approval.................................... 32
Section 8.7. Canada Purchase......................................... 32
Section 8.8. NYSE Listing............................................ 32
Section 8.9. Parent Financing........................................ 32
Section 8.10. Consents................................................ 32
ARTICLE IX
Conditions to Seller's Obligation to Close............................... 32
Section 9.1. Representations, Warranties and Covenants of Parent..... 32
Section 9.2. Regulatory Approvals.................................... 32
Section 9.3. No Orders or Injunctions................................ 32
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Section 9.4. Opinions of Parent's Counsel........................... 32
Section 9.5. Certain Agreements..................................... 32
Section 9.6. Stockholder Approval................................... 32
Section 9.7. NYSE Listing........................................... 32
Section 9.8. Consents............................................... 32
ARTICLE X
Survival; Indemnification................................................. 33
Section 10.1. Survival............................................... 33
Section 10.2. Indemnification by Seller.............................. 33
Section 10.3. Indemnification Procedures............................. 33
Section 10.4. Limits on Indemnification.............................. 34
Section 10.5. Losses Net of Insurance................................ 34
ARTICLE XI
Termination............................................................... 35
Section 11.1. Termination............................................ 35
Section 11.2. Procedure and Effect of Termination.................... 35
ARTICLE XII
Miscellaneous............................................................. 35
Section 12.1. Counterparts........................................... 35
Section 12.2. Governing Law.......................................... 35
Section 12.3. Jurisdiction; Waiver of Trial by Jury.................. 35
Section 12.4. Entire Agreement....................................... 36
Section 12.5. Expenses............................................... 36
Section 12.6. Notices................................................ 36
Section 12.7. Successors and Assigns................................. 37
Section 12.8. Headings; Definitions.................................. 37
Section 12.9. Amendments and Waivers................................. 37
Section 12.10. Severability........................................... 37
Section 12.11. Interpretation......................................... 37
Signatures............................................................. 38
Schedule 3.1(a) Jurisdictions in Which Companies and Subsidiaries are
Qualified to Do Business
Schedule 3.1(d) Violations and Accelerations
Schedule 3.2(a) Stock Information
Schedule 3.3(a) Pepe Exceptions to Applicable Accounting Principles
Schedule 3.3(b) Tomcan and TH Canada Exceptions to Applicable Accounting
Principles
Schedule 3.4 Real Property and Leases
Schedule 3.5 Absence of Certain Changes
Schedule 3.6 Litigation
Schedule 3.7(b) Consents and Approvals
Schedule 3.8 Labor Agreements, Disputes
Schedule 3.9 Compliance With Law
Schedule 3.10 Insurance Policies
Schedule 3.11 Material Transactions
Schedule 3.13 Affiliate Transactions
Schedule 3.14 Environmental Compliance
Schedule 3.15 Undisclosed Liabilities
Schedule 4.1(b) Violations and Accelerations
Schedule 4.2(b) Rights to Acquire Stock
Schedule 4.3 Authorizations and Consents
Schedule 4.6 SEC Filings
Schedule 5.2 Consents
Schedule 5.4 Conduct of Business by Seller
Schedule 6.1(a) Company of Employee Benefit Agreement
Schedule 6.1(d) Payments Caused by this Agreement
Schedule 6.2(d) Multiemployer Plans
Schedule 7.1(a) Income Tax Returns
Schedule 7.1(b) Contested Taxes; Reserves
Schedule 7.1(c) Tax Extensions and Powers of Attorneys
Schedule 7.1(d) Audits
Schedule 10.2(a) Retained Actions
Exhibit 1.1(a) Terms of Second Amendment to the License Agreement dated
February 1, 1997 by and between Xxxxx Xxxxxxxx Licensing,
Inc. and Seller, as amended
Exhibit 1.1(b) Terms of Non-Competition Agreement
Exhibit 1.1(c) Form of Registration Rights Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of January 31,
1998, is by and among Xxxxx Xxxxxxxx Corporation, a British Virgin Islands
corporation ("Parent"), Xxxxx Xxxxxxxx U.S.A., Inc., a Delaware corporation
and a wholly owned subsidiary of Parent ("TH USA"), Xxxxx Xxxxxxxx (Eastern
Hemisphere) Limited, a British Virgin Islands corporation and a wholly owned
subsidiary of Parent ("THEH"), and Pepe Jeans London Corporation, a British
Virgin Islands corporation ("Seller").
Whereas, Seller owns (a) 100% of the issued and outstanding shares of common
stock of Pepe Jeans USA, Inc., a California corporation ("Pepe USA"), and (b)
100% of the issued and outstanding ordinary shares of TJ Far East Limited, a
British Virgin Islands corporation ("Pepe Far East" and, together with Pepe
USA, the "Companies");
Whereas, TH USA and THEH desire to purchase from Seller, and Seller desires
to sell to TH USA and THEH, 100% of the issued and outstanding shares of
common stock of Pepe USA and 100% of the issued and outstanding ordinary
shares of Pepe Far East, respectively, upon the terms and subject to the
conditions set forth herein (the "Stock Purchases");
Whereas, AIHL Investment Group Limited ("AIHL"), a British Virgin Islands
corporation, has entered into a Guarantee, dated of even date herewith,
pursuant to which AIHL has guaranteed all of the obligations of Seller under
the Stock Purchase Agreement (the "AIHL Guarantee"); and
Whereas, Pepe USA has agreed to purchase (the "Canada Purchase") from
Lawvest Holdings Inc., a British Virgin Islands corporation ("Lawvest"), all
of the issued and outstanding ordinary shares of Tomcan Investments, Inc., a
British Virgin Islands corporation ("Tomcan"), which will be consummated
immediately after the consummation of the Stock Purchases.
Now, Therefore, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
As used in this Agreement the following terms shall have the following
respective meanings:
"Action" shall mean any complaint, claim, prosecution, indictment, action,
suit, arbitration, investigation, inquiry or proceeding by or before any
Governmental Authority.
"Affiliate" shall mean any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with the party specified.
"Agreement" shall have the meaning set forth in the preamble hereof.
"AIHL" shall have the meaning set forth in the recitals hereof.
"AIHL Guarantee" shall have the meaning set forth in the recitals hereof.
"Amended European License Agreement" shall mean the License Agreement dated
as of February 1, 1997 by and between Xxxxx Xxxxxxxx Licensing, Inc. and
Seller, as assigned by Seller to TH Europe and as amended by the First
Amendment thereto, as further amended by the Second Amendment thereto
containing substantially the terms set forth on Exhibit 1.1(a) hereto, to be
entered into between Xxxxx Xxxxxxxx Licensing, Inc., Seller and TH Europe.
"Ancillary Agreements" shall mean, collectively, the Amended European
License Agreement, the Canada Purchase Agreement, the Lock-Up Agreement and
the Registration Rights Agreement.
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"Applicable Return" shall have the meaning set forth in Section 10.1(a)
hereof.
"Assets" shall have the meaning set forth in Section 3.4 hereof.
"Bentley Trust Guarantee" shall mean the Guarantee, dated as of January 26,
1998 made by ATC Trustees (Cayman) Limited in trust for the Bentley Trust, in
favor of Pepe USA.
"Blackwatch" shall mean Blackwatch Investments Limited, a British Virgin
Islands corporation.
"Blackwatch Note" shall have the meaning set forth in Section 5.16 hereof.
"Canada Financial Statements" shall have the meaning set forth in Section
3.3(b) hereof.
"Canadian Liabilities" shall have the meaning set forth in Section 10.2(a).
"Canada Purchase" shall have the meaning set forth in the recitals hereof.
"Canada Purchase Agreement" shall mean the Share Purchase Agreement, dated
as of January 26, 1998, between Pepe USA and Lawvest.
"Canadian Subsidiaries" shall mean Tomcan and TH Canada.
"Closing" shall mean the consummation of the transactions contemplated by
Section 2.1 of this Agreement.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"Companies" shall have the meaning set forth in the recitals hereof.
"Company Employee Benefit Plans" shall have the meaning set forth in Section
6.1(a) hereof.
"Company Group" shall have the meaning set forth in Section 7.3(a) hereof.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 3.5 hereof.
"Company Pension Plan" shall have the meaning set forth in Section 6.1(c)
hereof.
"Continuing Affiliate" shall mean Seller, AIHL, Blackwatch, Lawvest or any
of their respective corporate Affiliates (other than the Companies, Tomcan,
Parent and their respective subsidiaries).
"Controlled Group Liability" shall have the meaning set forth in Section
6.2(f) hereof.
"Covered Losses" shall mean any and all debts, losses, liabilities, claims,
fines, royalties, deficiencies, damages, obligations, payments (including,
without limitation, those arising out of any demand, assessment, settlement,
judgment or compromise relating to any Action), costs and expenses (including,
without limitation, interest and penalties due and payable with respect
thereto and reasonable attorneys' and accountants' fees and any other out-of-
pocket expenses incurred in investigating, preparing, defending, avoiding or
settling any Action or in enforcing another party's obligations hereunder),
including, without limitation, any of the foregoing arising under, out of or
in connection with any Action, order or consent decree of any Governmental
Authority or award of any arbitrator of any kind, or any law, rule,
regulation, contract, commitment or undertaking.
"Determination" shall have the meaning set forth in Section 7.8(a) hereof.
"Encumbrance" shall mean any mortgage, pledge, lien, easement, restrictive
covenant, right of way, lease, purchase agreement, option, security interest
or other encumbrance and agreement.
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"Environmental Law" shall have the meaning set forth in Section 3.14(a)(ii)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 6.2(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expiration Date" shall have the meaning set forth in Section 10.1(a)
hereof.
"Financial Statements" shall have the meaning set forth in Section 3.3(b)
hereof.
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Authority" shall have the meaning set forth in Section 3.1(d)
hereof.
"Hazardous Substance" shall have the meaning set forth in Section 3.14(a)(i)
hereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Income Taxes" shall have the meaning set forth in Section 7.8(c).
"Income Tax Returns" shall have the meaning set forth in Section 7.8(b).
"Indemnification Threshold" shall have the meaning set forth in Section 10.4
hereof.
"Indemnified Parties" shall have the meaning set forth in Section 10.2(a)
hereof.
"Intellectual Property" means all United States and foreign (a) patents,
patent applications, patent disclosures and improvements thereto, (b)
trademarks, service marks, logos, trade names and corporate names and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, (c) copyrights and registrations and applications for registration
thereof, (d) computer software, data and documentation, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information) and (f) copies and tangible
embodiments thereof (in whatever form or medium) in which any Company or
Subsidiary has any rights.
"International License Agreement" shall mean the International License
Agreement dated August 28, 1995 between Xxxxx Xxxxxxxx Licensing, Inc. and SEL
International Investments Corp., as ultimately assigned to T.H. International
N.V., as amended.
"IRS" shall have the meaning set forth in Section 7.8(d).
"Lawvest" shall have the meaning set forth in the recitals hereof.
"Licenses" shall have the meaning set forth in Section 3.7(a).
"Lock-Up Agreement" shall mean the Lock-Up Agreement, dated of even date
herewith, among Parent, Seller and certain direct and indirect stockholders of
Seller.
"Memorandum Amendment" shall have the meaning set forth in Section 4.1(a)
hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 6.2(e)
hereof.
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"Multiple Employer Plan" shall have the meaning set forth in Section 6.2(e)
hereof.
"Net After-Tax Basis" shall mean, with respect to the calculation of any
indemnification payment owed to any party pursuant to this Agreement,
calculation thereof in a manner taking into account any Taxes owing by the
indemnified party or its Affiliates as a result of receipt or accrual of the
indemnity payment and any Tax benefit received or accrued by the indemnified
party or its Affiliates as a result of the indemnified liability.
"Non-Competition Agreement" shall mean the Non-Competition Agreement
containing substantially the terms set forth on Exhibit 1.1(b) hereto, to be
entered into between the Company, Silas X.X. Xxxx and Xxxxxxxx X. Stroll.
"Non-U.S. Company Employee Benefit Plans" shall have the meaning set forth
in Section 6.1(a) hereof.
"Notice of Claim" shall have the meaning set forth in Section 10.3(a)
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Other Taxes" shall have the meaning set forth in Section 7.8(e).
"Parent" shall have the meaning set forth in the preamble hereof.
"Parent SEC Reports" shall have the meaning set forth in Section 4.6(a)
hereof.
"Parent Shares" shall mean the Ordinary Shares, $.01 par value per share, of
Parent.
"Parent Stockholders Meeting" shall have the meaning set forth in Section
3.16 hereof.
"Pepe Balance Sheet" shall have the meaning set forth in Section 3.3(a)
hereof.
"Pepe Far East" shall have the meaning set forth in the recitals hereof.
"Pepe Far East Purchase Price" shall have the meaning set forth in Section
2.1(a) hereof.
"Pepe Far East Shares" shall mean the Ordinary Shares, $1.00 par value per
share, of Pepe Far East.
"Pepe Financial Statements" shall have the meaning set forth in Section
3.3(a) hereof.
"Pepe USA" shall have the meaning set forth in the recitals hereof.
"Pepe USA Cash Purchase Price" shall have the meaning set forth in Section
2.1(a) hereof.
"Pepe USA Shares" shall mean the shares of Common Stock, without par value,
of Pepe USA.
"Pepe Year-End Balance Sheet" shall mean the condensed combined balance
sheet of Pepe USA and Pepe Far East and its subsidiaries as of December 31,
1997, previously provided by Seller to TH USA and THEH.
"Permitted Exceptions" shall mean (a) mechanics', materialmen's, carriers',
workmen's, warehousemen's, repairmen's, landlords' or similar liens imposed by
law arising and incurred in the ordinary course of business and securing
obligations that are not delinquent, (b) liens for taxes and other
governmental charges, assessments or fees which (i) are not yet due and
payable or which may be paid without penalty or (ii) are being contested in
good faith through appropriate procedures and in respect of which a Company or
Subsidiary has created adequate reserves or (c) Encumbrances which
individually or in the aggregate do not detract from the value of any of the
property or assets subject thereto or interfere with the present use thereof.
"Person" shall mean any individual, firm, corporation, partnership or other
entity (including Governmental Authorities), and shall include any successor
(by merger or otherwise) of such entity.
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"Price Waterhouse" shall mean Price Waterhouse LLP or one of its
international affiliates.
"Proxy Statement" shall have the meaning set forth in Section 5.12 hereof.
"Purchase Price Cash Amount" shall have the meaning set forth in Section
2.1(a) hereof.
"Purchase Price Shares" shall have the meaning set forth in Section 2.1(a)
hereof.
"RCRA Hazardous Waste" shall have the meaning set forth in Section
3.14(a)(iii) hereof.
"Real Property" shall have the meaning set forth in Section 3.4 hereof.
"Registration Rights Agreement" shall mean the Registration Rights Agreement
in the form attached hereto as Exhibit 1.1(c), to be entered into between the
Company, Seller and certain direct and indirect stockholders of Seller.
"Retained Liabilities" shall have the meaning set forth in Section 10.2(a)
hereof.
"Retained Note" shall have the meaning set forth in Section 2.1(c) hereof.
"Returns" shall have the meaning set forth in Section 7.8(f).
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the preamble hereof.
"Seller Affiliate" shall mean any of Seller, the Companies, the
Subsidiaries, the Canadian Subsidiaries, AIHL, Blackwatch, Anasta Holdings
Limited, Sportswear Holdings Limited, Westleigh Limited and Gadwal Limited.
"Seller's knowledge" or "knowledge of Seller" shall mean the knowledge of
those individuals who as of the date hereof or at anytime thereafter are
officers or directors of Seller, after due inquiry by such officers and
directors of the officers and directors of the Companies and the Subsidiaries.
"Seller Note" shall have the meaning set forth in Section 5.16 hereof.
"Shares" shall have the meaning set forth in Section 2.1(a) hereof.
"Stock Purchases" shall have the meaning set forth in the recitals hereof.
"Subsidiaries" shall mean TJ Clothing (H.K.) Limited, a Hong Kong
corporation, Pepe International Limited, a Hong Kong corporation, THHK
Womenswear Limited, a Hong Kong corporation, and any subsidiary of a Company
formed after the date of this Agreement.
"Taxes" shall have the meaning set forth in Section 7.8(h) hereof.
"Tax Laws" shall have the meaning set forth in Section 7.8(g).
"Taxing Authority" shall have the meaning set forth in Section 7.8(i)
hereof.
"TH Canada" shall mean Xxxxx Xxxxxxxx Canada, Inc., a company incorporated
under the Canada Business Corporations Act.
"THEH" shall have the meaning set forth in the preamble hereof.
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"TH Europe" shall mean Xxxxx Xxxxxxxx Europe B.V., a corporation organized
under the laws of The Netherlands.
"TH Incentive Plans" shall mean, collectively, the Xxxxx Xxxxxxxx (Eastern
Hemisphere) Limited 1992 Stock Incentive Plan, as amended, the Xxxxx Xxxxxxxx
U.S.A., Inc. 1992 Stock Incentive Plan, as amended, and the Xxxxx Xxxxxxxx
Corporation Non-Employee Directors Stock Option Plan.
"T.H. International N.V." shall mean T.H. International N.V., a corporation
organized under the laws of The Netherlands Antilles.
"TH Licenses" shall mean, collectively, the International License Agreement;
the Amended and Restated License Agreement, dated as of May 24, 1995, between
TH Canada and Xxxxx Xxxxxxxx Licensing, Inc., as amended; the Amended and
Restated License Agreement, dated as of May 24, 1995, between TH Canada (d/b/a
Xxxxx Xxxxxxxx Shops Inc.) and Xxxxx Xxxxxxxx Licensing, Inc., as amended; and
the United States License Agreement, dated as of August 28, 1995, between SEL
International Investments Corp. and Xxxxx Xxxxxxxx Licensing, Inc., as
ultimately assigned to Pepe USA, as amended.
"TH USA" shall have the meaning set forth in the preamble hereof.
"Tomcan" shall have the meaning set forth in the recitals hereof.
"Tomcan Balance Sheet" shall have the meaning set forth in Section 3.3(b)
hereof.
"Tomcan Shares" shall mean the shares, par value $1.00 per share, of Tomcan.
"Withdrawal Liability" shall have the meaning set forth in Section 6.2(d)
hereof.
ARTICLE II
Purchase and Sale of Stock; Closing
Section 2.1. Purchase and Sale. (a) On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
(to the extent permitted) of the conditions set forth in Articles VIII and IX,
at the Closing Seller will sell and TH USA and THEH, respectively, will
purchase fifty thousand (50,000) Pepe USA Shares and one thousand (1,000) Pepe
Far East Shares (collectively, the "Shares"), which constitute, and will
constitute as of the Closing, 100% of the issued and outstanding shares of
capital stock or other equity interests of Pepe USA and Pepe Far East,
respectively. In payment for such Pepe Far East Shares, simultaneously with
the delivery by Seller of certificates for such Pepe Far East Shares, with all
appropriate stock powers and requisite tax stamps attached, properly signed,
in form suitable for the transfer of such Pepe Far East Shares to THEH, and
subject to the satisfaction or waiver (to the extent permitted) of the
applicable conditions set forth herein, THEH will wire transfer $25,000,000.00
(the "Pepe Far East Purchase Price") in immediately available funds to the
account or accounts specified by Seller. In payment for such Pepe USA Shares,
simultaneously with the delivery by Seller of certificates for such Pepe USA
Shares, with all appropriate stock powers and requisite tax stamps attached,
properly signed, in form suitable for the transfer of such Pepe USA Shares to
TH USA, and subject to the satisfaction or waiver (to the extent permitted) of
the applicable conditions set forth herein, (i) TH USA will wire transfer
$730,760,000.00 (the "Pepe USA Cash Purchase Price" and, together with the
Pepe Far East Purchase Price, the "Purchase Price Cash Amount") in immediately
available funds to the account or accounts specified by Seller and (ii) Parent
will deliver to TH USA and TH USA will deliver to Seller certificates
representing 9,045,930 Parent Shares (the "Purchase Price Shares").
(b) Certificates for the Purchase Price Shares shall be in definitive form
and registered in the name of Seller and shall be delivered to Seller bearing
a legend or legends referencing restrictions under the Securities Act on
transfer of the Purchase Price Shares and such other legends as the Board of
Directors of Parent determines to be necessary or appropriate, including any
required by the Lock-Up Agreement.
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(c) In addition, at the Closing Parent will purchase from Seller the
$10,000,000.00 Subordinated Promissory Note dated April 1, 1997 from Pepe USA
to Seller (the "Retained Note") for an amount equal to the principal thereof
as of the Closing Date.
Section 2.2. Time and Place of Closing. Subject to satisfaction or waiver of
the conditions to Closing set forth herein, the Closing shall take place at
the offices of Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx, as promptly as practicable after satisfaction or waiver, if
permissible, of the conditions set forth in Articles VIII and IX or at such
other time and date as Parent and Seller may agree (the "Closing Date").
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Parent as follows:
Section 3.1. Incorporation; Authorization; etc. (a) Each of the Companies
and Subsidiaries has been duly organized, is validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Companies and Subsidiaries has full corporate power and authority to own its
properties and assets and to conduct its business as it is now being conducted
and is in good standing and is duly qualified to transact business in each
jurisdiction in which the nature of property owned or leased by it or the
conduct of its business requires it to be so qualified except where the
failure to be in good standing or so qualified would not have a material
adverse effect on the Companies and the Subsidiaries, taken as a whole. Each
jurisdiction in which any of the Companies or Subsidiaries is qualified to do
business is set forth on Schedule 3.1(a).
(b) Seller has been duly organized, is validly existing and in good standing
under the laws of the British Virgin Islands.
(c) Seller has full corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Each Seller Affiliate has full corporate
power and authority to execute each of the Ancillary Agreements to which it is
a party, to perform its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery of this
Agreement, the performance of Seller's obligations hereunder and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate proceedings on the part of
Seller, and no other corporate proceeding or action on the part of Seller or
its Board of Directors and stockholders are necessary therefor. The execution
and delivery of each Ancillary Agreement to which any Seller Affiliate is a
party, the performance of their respective obligations thereunder and the
consummation of the transactions contemplated thereby by each Seller Affiliate
party to such agreements have been duly and validly authorized by all
necessary corporate proceedings on the part of such Seller Affiliate, and no
other corporate proceeding or action on the part of any Seller Affiliate and
their respective Boards of Directors and stockholders are necessary therefor.
(d) The execution, delivery and performance of this Agreement and each of
the Ancillary Agreements by the Seller Affiliates will not (i) violate or
conflict with any provision of the memorandum of association or articles of
association (or similar instruments) of any Seller Affiliate, (ii) except as
set forth on Schedule 3.1(d), conflict with, violate or constitute a default
under any provision of, or be an event that is (or with the giving of notice
or passage of time or both will result in) a violation of or default under, or
result in the acceleration of or entitle any party to accelerate (whether
after the giving of notice or lapse of time or both) any obligation or right
under, or result in the imposition of any lien upon or the creation of a
security interest in any of the Shares or any of the assets or properties of
any of the Companies or of any of the Subsidiaries pursuant to, or require a
consent or create a penalty or increase any Company's or Subsidiary's payment
or performance obligations under, any material mortgage, lien, lease,
instrument, order, arbitration award, judgment or decree, or any material
contract, agreement, license or permit, to which Seller, any Company or any
Subsidiary is a party or by which any of them or any of their property is
bound, or (iii) assuming that all consents, approvals, authorizations and
other actions described in Section 3.7(b) have been obtained and all filings
and obligations set forth in
11
Section 3.7(b) have been made, violate or conflict with in any material
respect, or result in the imposition of any material lien (other than liens
arising from any actions taken or arrangements made by Parent or any of its
subsidiaries) upon any of the Shares, or any of the assets or properties of
any Company or any Subsidiary pursuant to, any provision of law, regulation,
rule, writ, injunction, decree, statute, order, judgment or ruling of any
federal, state, local, foreign, supernational or supranational court or
tribunal (including any court or tribunal dealing with labor matters),
governmental, regulatory or administrative agency, department, bureau,
authority or commission or arbitral panel ("Governmental Authority") or any
other material restriction of any kind or character to which Seller, any
Company or any Subsidiary is or may be subject or by which any of them or any
of their property is or may be bound. This Agreement, the Canada Purchase
Agreement and the Lock-Up Agreement have been, and, at the Closing, the
Registration Rights Agreement and the Amended European License Agreement will
be, duly executed and delivered by each Seller Affiliate that is a party to
such agreements, and, assuming the due execution hereof and thereof by Parent
and any subsidiary of Parent that is a party to such agreements, this
Agreement, the Canada Purchase Agreement and the Lock-Up Agreement constitute,
and at the Closing the Registration Rights Agreement and the Amended European
License Agreement will constitute, the legal, valid and binding obligations of
such Seller Affiliates enforceable against such parties in accordance with
their respective terms except, in each case, as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of
general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
(e) Upon consummation of the Stock Purchases at the Closing, as contemplated
by this Agreement, Seller will deliver to TH USA and THEH good and valid title
to all of the outstanding Pepe USA Shares and Pepe Far East Shares,
respectively, free and clear of any liens, claims, charges, security
interests, options or other legal or equitable encumbrances or other rights of
third parties (except those imposed by the federal securities laws or any
action taken or arrangement made by Parent or any of its subsidiaries).
(f) Seller has made available to TH USA and THEH complete and correct copies
of the memorandum of association and articles of association (or similar
instruments), as amended to date, of Seller and each of the Companies and
Subsidiaries, and has made available to TH USA and THEH the corporate minute
books containing the records of meetings of the stockholders and boards of
directors, the stock certificate books and the stock record books of the
Companies and the Subsidiaries. The stock record books of the Companies and
the Subsidiaries which Seller has made available to TH USA and THEH are
complete and correct in all respects and accurately reflect the ownership of
all of the outstanding shares of the Companies' and the Subsidiaries'
respective capital stock and all other securities issued by any of the
Companies or Subsidiaries. All material corporate actions taken by the
Companies and the Subsidiaries since their respective organization and
incorporation have been duly authorized and subsequently ratified as
necessary. None of the Companies or the Subsidiaries is in default under or in
violation of any provision of its memorandum of association or articles of
association (or similar instruments).
Section 3.2. Capitalization; Structure. (a) The authorized capital stock of
Pepe USA consists of 100,000 Pepe USA Shares, of which 50,000 shares are
issued and outstanding. The authorized capital stock of Pepe Far East consists
of 10,000 Pepe Far East Shares, of which 1,000 shares are issued and
outstanding. All of the outstanding shares of capital stock of the Companies
are validly issued, fully paid and nonassessable and are owned beneficially
and of record by Seller. All of the outstanding shares of capital stock or
other equity interests of the Subsidiaries, as listed on Schedule 3.2(a), are
validly issued, fully paid and nonassessable. Except as listed on Schedule
3.2(a), all of the outstanding shares of capital stock or other equity
interests (i) of the Subsidiaries (other than Pepe International Limited) are
owned by Pepe Far East, (ii) of Pepe International Limited are owned by TJ
Clothing (H.K.) Limited, (iii) of TH Canada are owned by Tomcan and (iv) of
Tomcan are owned by Lawvest, all in the amounts set forth on Schedule 3.2(a).
Neither the Shares nor the shares of outstanding common stock or other equity
interests of any Subsidiary have been issued in violation of, or are subject
to, any preemptive rights. The shares of capital stock or other equity
interests of the Subsidiaries and the Shares are
12
owned in each case free and clear of any liens, claims, charges, security
interests, options or other legal or equitable encumbrances or restrictions.
Immediately following the consummation of the Canada Purchase pursuant to the
terms of the Canada Purchase Agreement, the Tomcan Shares will be owned
directly or indirectly by Pepe USA and the shares of capital stock or other
equity interests of TH Canada will be owned by Tomcan, in each case free and
clear of any liens, claims, charges, security interests, options or other
legal or equitable encumbrances or restrictions. There are no outstanding
options, warrants, subscriptions or other rights of any kind to acquire, or
obligations to issue, shares of capital stock of any class of, or other equity
interests in, any Company or, except as set forth on Schedule 3.2(a), any
Subsidiary, or any securities convertible into or exchangeable or exercisable
for any shares of capital stock of any class of, or other equity interests in,
any Company or any Subsidiary.
(b) None of the Companies or Subsidiaries directly or indirectly owns or has
the right to acquire any capital stock of or other equity interests,
investment, partnership, joint venture or similar interest in any corporation,
partnership or other entity or other Person except for (i) the ownership of
the outstanding shares or other equity interests of the Subsidiaries, as set
forth on Schedule 3.2(a) and (ii) the right of Pepe USA to purchase the Tomcan
Shares pursuant to the Canada Purchase Agreement. Except for (i) obligations
or liabilities incurred in connection with its incorporation or organization,
(ii) ownership of the equity interests of TH Canada and (iii) as set forth on
the Tomcan Balance Sheet, Tomcan has not and will not have incurred, directly
or indirectly, through any subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
Section 3.3. Financial Statements. (a) Seller has previously furnished to TH
USA true and complete copies of (i) the combined financial statements of Pepe
USA and Pepe Far East and its subsidiaries, including combined balance sheets
as of March 31, 1997 and March 31, 1996, combined statements of operations and
retained earnings (accumulated deficit) and combined statements of cash flows
for the fiscal-year periods ended March 31, 1997, March 31, 1996 and March 31,
1995 (such financial statements being audited and accompanied by the
unqualified opinion of Price Waterhouse) and (ii) unaudited condensed combined
financial statements for Pepe USA and Pepe Far East and its subsidiaries as of
and for the nine-month period ended December 31, 1997 (the "Pepe Financial
Statements"). The audited combined balance sheet as of March 31, 1997 is
referred to in this Agreement as the "Pepe Balance Sheet." The Pepe Financial
Statements (including, in each case, any notes thereto) present fairly in all
material respects the combined financial position and results of operations
and cash flows of Pepe USA and Pepe Far East and its subsidiaries for the
respective periods or as of the respective dates set forth therein, in each
case in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as otherwise indicated therein or on Schedule 3.3(a)
and except, in the case of the unaudited Pepe Financial Statements, for
changes resulting from normal and recurring year-end adjustments). The Pepe
Financial Statements have been prepared from and in accordance with the books
and records of Pepe USA and Pepe Far East and its subsidiaries.
(b) Seller has previously furnished to TH USA true and complete copies of
the financial statements of (i) TH Canada, including balance sheets as of
March 31, 1997, March 31, 1996 and March 31, 1995, the statements of income
and retained earnings and statements of changes in financial position for the
fiscal-year periods ended March 31, 1997, March 31, 1996 and March 31, 1995
and (ii) Tomcan, including a consolidated balance sheet as of December 31,
1997, and statements of income and retained earnings and statements of changes
in financial position for the nine-month period ended December 31, 1997 (such
financial statements as of and for the fiscal-year period ended March 31, 1997
and as of and for the nine-month period ended December 31, 1997 being audited
and accompanied by the unqualified opinion of Price Waterhouse and such
financial statements as of and for the fiscal-year periods ended March 31,
1996 and March 31, 1995 being audited and accompanied by the unqualified
opinions of Xxxxx Xxxxxxxx Basevitz) (the "Canada Financial Statements" and
together with the Pepe Financial Statements, the "Financial Statements"). The
Canada Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as otherwise
indicated therein or on Schedule 3.3(b)). The audited condensed balance sheet
of Tomcan as of December 31, 1997 is referred to in this Agreement as the
"Tomcan Balance Sheet."
13
Section 3.4. Properties; Leases. Except for Permitted Exceptions or as set
forth on Schedule 3.4 hereto, at the Closing a Company or a Subsidiary will
have good and marketable title to, or valid leasehold interests in, as the
case may be, and hold free and clear of all Encumbrances, all of the
properties and assets reflected in the Pepe Balance Sheet or acquired in the
ordinary course of business since the date of the Pepe Balance Sheet (the
"Assets") other than assets sold or fixtures transferred in the ordinary
course of business consistent with past practice. Schedule 3.4 sets forth a
list of all real property used in conducting the businesses of the Companies
and the Subsidiaries (collectively, the "Real Property"). Seller has delivered
to TH USA and THEH or otherwise made available, correct and complete copies of
all leases, subleases and other material agreements or other material
instruments relating to the Real Property to which any of the Companies or
Subsidiaries is a party, all of which are identified on Schedule 3.4 hereto.
There are no pending or, to Seller's knowledge, threatened condemnation
proceedings relating to any of the Real Property. None of the real property
improvements (including leasehold improvements), equipment and other assets
owned or used by the Companies or the Subsidiaries is subject to any
commitment or other arrangement for their sale or use by any Affiliate of any
of the Companies or the Subsidiaries or by third parties.
Section 3.5. Absence of Certain Changes. Except as set forth on Schedule 3.5
hereto and except as contemplated by this Agreement, since March 31, 1997,
there has been no (a) change or development in, or effect on, the business or
businesses of the Companies and the Subsidiaries that is, or could reasonably
be expected to be, materially adverse to the business, assets, liabilities,
condition (financial or otherwise), results of operations or prospects of the
Companies and the Subsidiaries, taken as a whole (a "Company Material Adverse
Effect") or (b) action taken by any Company or any Subsidiary which, if taken
from the date hereof through the Closing, would violate Section 5.4(b) through
(m).
Section 3.6. Litigation; Orders. Except as set forth on Schedule 3.6 hereto,
there are no Actions pending or, to the knowledge of Seller, threatened or
claims asserted against any Company or Subsidiary other than routine Actions
in the ordinary course of business as to which the claims against the
Companies and the Subsidiaries are less than $100,000 individually and
$250,000 in the aggregate. Except as set forth on Schedule 3.6 hereto, there
are no material judgments or material outstanding orders, injunctions,
decrees, stipulations, settlement agreements, citations, investigations, fines
or awards against or binding upon any Company or Subsidiary or any of their
respective properties or businesses.
Section 3.7. Licenses, Approvals, Other Authorizations, Consents, Reports,
etc. (a) The Companies and the Subsidiaries possess or have been granted all
material registrations, filings, applications, certifications, notices,
consents, licenses, permits, approvals, certificates, franchises, orders,
qualifications, authorizations and waivers ("Licenses") of any Governmental
Authority necessary to entitle them to conduct their businesses in the manner
in which they are presently being conducted.
(b) Except (i) as set forth on Schedule 3.7(b) hereto, (ii) for the pre-
merger notification requirements of the HSR Act and any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act and
(iii) those the failure to make, file, give or obtain which would not have a
Company Material Adverse Effect or prevent the consummation of the Stock
Purchases and the other transactions contemplated hereby, there are no
Licenses required to be made, filed, given or obtained by Seller, or any of
the Companies or Subsidiaries with, to or from any Governmental Authority in
connection with the consummation of the Stock Purchases, the Canada Purchase
and the other transactions contemplated under this Agreement or any of the
Ancillary Agreements.
Section 3.8. Labor Matters. Schedule 3.8 hereto sets forth all collective
bargaining or other agreements with labor unions, trade unions, employee
representatives, work committees, guilds or associations representing
employees of any of the Companies or Subsidiaries. As of the date hereof, none
of the Companies or Subsidiaries is involved in or, to Seller's knowledge,
threatened with any labor dispute, arbitration, lawsuit, grievance or
administrative proceeding (other than immaterial grievances), relating to
labor matters involving any current or former employee of any Company or
Subsidiary. Except as set forth on Schedule 3.8, as of the date hereof, no
union or association organizing or election activities involving any nonunion
employees of any Company or Subsidiary are in progress or, to the knowledge of
Seller, have been threatened since April 1, 1995.
14
Section 3.9. Compliance with Laws. Except as may be disclosed in Schedule
3.9, the conduct of the businesses of the Companies and Subsidiaries is in and
has been in compliance in all material respects with all material statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable
thereto. Except as set forth on Schedule 3.9, neither Seller nor any Company
or Subsidiary has received written notice of any alleged violation of any
statute, law, regulation, ordinance, rule, judgment, order or decree from any
Governmental Authority applicable to any of the Companies or Subsidiaries or
to their properties which has not been satisfactorily addressed and which give
rise to material fines or other civil penalties or to any criminal
liabilities. In furtherance and not in limitation of the foregoing, neither
Seller nor any Company or Subsidiary has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property,
however characterized, to any government official or other governmental party,
in the United States or any other country, which is in any manner related to
the businesses or operations of the Companies or the Subsidiaries and which
was illegal under any statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees of any Governmental Authority (including, without
limitation, the U.S. Foreign Corrupt Practices Act).
Section 3.10. Insurance. Each of the Companies and Subsidiaries is covered
by valid and currently effective insurance policies issued in its favor that
are customary in scope and amount of coverage for privately-owned companies of
similar size and financial condition in the industry and locale in which it
operates. Schedule 3.10 lists all insurance policies which are in effect
covering any of the Companies, the Subsidiaries or their employees, or the
Real Property and such Schedule lists each of the parties to such policies.
Except as set forth on Schedule 3.10, all such policies are in full force and
effect, all premiums due thereon have been paid and the Companies and the
Subsidiaries have complied with the provisions of such policies in all
material respects.
Section 3.11. Material Contracts. Except as set forth on Schedule 3.11
hereto, neither any Company nor any Subsidiary is a party to or bound by any
written or oral (a) employment, consulting or non-competition agreement or
contract requiring payments of compensation to any one Person in excess of
$75,000 per year or aggregate payments of compensation to any one Person in
excess of $150,000; (b) joint venture or partnership contract or agreement;
(c) contract or agreement restricting the right of any of the Companies or the
Subsidiaries to compete in any way with any other Person; (d) other than trade
payables in the ordinary course of business, agreement or contract creating,
evidencing or securing, as of the date hereof, obligations of any of the
Companies or the Subsidiaries for (i) borrowed money, (ii) purchase money
indebtedness, (iii) any guarantee or assumption of an obligation for borrowed
money or purchase money indebtedness or other obligations of reimbursement of
any maker of a letter of credit or any guaranty of minimum equity or capital
or any make-whole or similar agreement, (iv) any loan or extension of credit
by any Company or Subsidiary or (v) bankers acceptance; (e) agreement or
contract relating to any outstanding commitment for capital expenditures in
excess of the amount set forth on the capital budget provided to Parent prior
to the date hereof; (f) licenses, whether as licensor or licensee, of any
Intellectual Property; (g) any material lease as lessee or lessor of real or
personal property; (h) capitalized lease or sale-leaseback or material
conditional sale agreement; (i) distributorship or franchise agreement; (j)
material raw material or other supply agreements or any exclusive dealing,
requirements or take-or-pay contracts; (k) other than as identified in Section
3.12, any brokerage or finders fee agreements; or (l) other contract or
agreement, entered into other than in the ordinary course of business,
involving an estimated total future payment or payments in excess of $100,000.
Each contract or agreement set forth on Schedule 3.11 hereto is in full force
and effect, and, to Seller's knowledge, is legal, valid and binding and
enforceable against each other Person party thereto. Neither any of the
Companies or Subsidiaries, nor, to Seller's knowledge, any other party to any
such contract or agreement, is in material breach thereof or default
thereunder and there does not exist under any provision thereof, any event
that, with the giving of notice or the lapse of time or both, would constitute
such a breach or default by any Company or Subsidiary or, to Seller's
knowledge, by any other party to any such contract or agreement, except for
such breaches, defaults and events as to which requisite waivers or consents
have been or prior to the Closing will have been obtained. Seller has made
available to TH USA and THEH true and correct copies of each of such written
agreements and contracts or provided written summaries of any such oral
agreements and contracts.
Section 3.12. Brokers, Finders, etc. No Seller Affiliate has employed, or is
subject to any valid claim of, any broker, finder, or other similar
intermediary in connection with the transactions contemplated by this
15
Agreement or the Ancillary Agreements who might be entitled to a fee or
commission in connection with such transactions, other than pursuant to an
engagement letter with each of Xxxxx & Company Incorporated and Xxxxx Xxxxxx
Canada, true and correct copies of which Seller has previously provided to TH
USA and THEH, the fees and expenses of which will be payable by Pepe USA and
TH Canada, respectively.
Section 3.13. Affiliate Transactions. Except as disclosed in the notes to
the Financial Statements or as set forth on Schedule 3.13 hereto, (a) no
Continuing Affiliate or any officer, director or employee of any Continuing
Affiliate provides or causes to be provided to any of the Companies or the
Subsidiaries any assets, loans, advances, services or facilities and (b) none
of the Companies or Subsidiaries provides or causes to be provided to any such
officer, director or employee or Continuing Affiliate any assets, loans,
advances, services or facilities. Except as set forth on Schedule 3.13 hereto,
none of the Companies or the Subsidiaries, jointly with any Continuing
Affiliate, purchases or sells goods or services.
Section 3.14. Environmental Compliance. (a) For purposes of this Section
3.14, (i) "Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance or waste, solid waste, petroleum, petroleum product, by-
product or breakdown product, or any other chemical, substance or material
listed or identified in or regulated by or under any Environmental Law; (ii)
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. (S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the
Clean Air Act, 42 U.S.C. (S) 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. (S) 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. (S) 300f et
seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. (S)
11001 et seq., the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et
seq., the Oil Pollution Act, 33 U.S.C. (S) 2701 et seq., in each case as
amended from time to time, and any other statute, rule, regulation, law, by-
law, ordinance or directive of any Governmental Authority dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety; and (iii) "RCRA
Hazardous Waste" means a solid waste that is listed or classified as a
hazardous waste, as that term is defined in or pursuant to the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. (S) 6901 et seq.
(b) Except as set forth on Schedule 3.14, there are no claims pending or, to
the knowledge of Seller, threatened, and none of Seller, the Companies or
Subsidiaries has received any written notice, alleging, warning or notifying
any Company or Subsidiary that any Company or Subsidiary is, has been or may
be in violation of, or non-compliance with, in any material respect, any
Environmental Law.
(c) Except as set forth on Schedule 3.14, to the knowledge of Seller, no
Hazardous Substances have ever been buried, spilled, leaked, discharged,
emitted, generated, stored, used or released, and no Hazardous Substances are
now present in amounts, concentrations or conditions requiring investigation,
study, removal, remediation or any other response action or corrective action
under, or forms the basis of a claim pursuant to, any Environmental Law, in,
on, from or under the Real Property or any other property with respect to
which any Company or Subsidiary may be identified as a potentially responsible
party or otherwise bear liability, except for immaterial quantities stored or
used by any Company or Subsidiary in the ordinary course of its business and
in accordance, in all material respects, with all applicable Environmental
Laws.
(d) Except as set forth on Schedule 3.14, the Real Property is not being
used and, to the knowledge of Seller, never has been used in connection with
the business of manufacturing, storing or transporting Hazardous Substances,
and, to the knowledge of Seller, no RCRA Hazardous Wastes have been treated,
stored or disposed of there.
(e) Except as set forth on Schedule 3.14, to Seller's knowledge, there are
not now and never have been any underground or above ground storage tanks or
other containment facilities of any kind on the Real Property which contain or
contained any Hazardous Substances.
(f) Except as set forth on Schedule 3.14, none of the Real Property is or
has been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or
16
any similar federal, state, local or foreign list, schedule, log, inventory or
database of sites or facilities with potential, threatened, suspected or
actual releases of Hazardous Substances.
(g) Schedule 3.14 identifies, and Seller has provided to TH USA and THEH
true and correct copies of, all environmental audits or assessments relating
in whole or in part to any of the Companies or the Subsidiaries undertaken by
or on behalf of any of the Seller Affiliates, or, to Seller's knowledge, by
Governmental Authorities or other third parties, and any written
communications by the Companies or the Subsidiaries or, to Seller's knowledge,
relating in whole or in part to any of the Companies or the Subsidiaries with
environmental agencies, within the past six years which describe the status of
any Real Property or the compliance of the owners or lessees thereof with
respect to any Environmental Law.
(h) Except as set forth on Schedule 3.14, no Seller Affiliate has received
any written notice from any Governmental Authority or other third party that
any of the Companies or Subsidiaries or any of their predecessors is or may be
a potentially responsible party or may otherwise bear liability for any actual
or threatened release of Hazardous Substances at or from any site or facility
other than the Real Property.
Section 3.15. Undisclosed Liabilities. Except (a) as disclosed in Schedule
3.15 hereto, (b) obligations to consummate the Canada Purchase pursuant to the
Canada Purchase Agreement, (c) as and to the extent disclosed or reserved
against on the Pepe Balance Sheet or identified in the notes thereto, (d) as
and to the extent disclosed on the face of the Pepe Year-End Balance Sheet or
identified in the notes thereto, (e) as incurred after the date of the Pepe
Balance Sheet in the ordinary course of business consistent with prior
practice and not prohibited by this Agreement or (f) liabilities or
obligations relating to Actions, contracts, agreements or environmental
matters disclosed on or not required to be disclosed on Schedules 3.6, 3.11 or
3.14, respectively, the Companies and Subsidiaries do not have any liabilities
or obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due.
Section 3.16. Proxy Statement. The information supplied by Seller, the
Companies or the Subsidiaries for inclusion in the Proxy Statement (as defined
in Section 5.12) to be sent to the stockholders of Parent in connection with
the meeting of the stockholders of Parent to consider this Agreement (the
"Parent Stockholders Meeting"), will not, on the date the Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to the
stockholders of Parent, at the time of the Parent Stockholders Meeting or on
the Closing Date, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein not false or
misleading. If at any time prior to the Closing Date any event relating to
Seller or any of the Companies or Subsidiaries or any of their respective
Affiliates, officers or directors should be discovered by Seller, any of the
Companies or any of the Subsidiaries which should be set forth in an amendment
or supplement to the Proxy Statement, Seller shall promptly inform Parent.
Section 3.17. Acquisition of Shares for Investment. Seller has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of Seller's acquisition of the Purchase
Price Shares and has been provided access to personnel and books of Parent and
its subsidiaries for purposes of making its evaluation. Seller is acquiring
the Purchase Price Shares for investment and not with a view toward or for
sale in connection with any distribution thereof, or with any present
intention of distributing or selling the Purchase Price Shares. Seller agrees
that the Purchase Price Shares may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without registration under the
Securities Act, except pursuant to an exemption from such registration
available under the Securities Act.
17
ARTICLE IV
Representations and Warranties of Parent
Parent hereby represents and warrants to Seller as follows:
Section 4.1. Incorporation; Authorization; etc. (a) Parent has been duly
incorporated and is validly existing as a company limited by shares in good
standing under the laws of the British Virgin Islands. Each of TH USA and THEH
has been duly incorporated and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Parent has full corporate
power and authority to own its property and to conduct its business as it is
now being conducted and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on Parent and its
subsidiaries, taken as a whole. Parent and each subsidiary of Parent which is
a party to this Agreement or any of the Ancillary Agreements has full
corporate power and authority to execute and deliver this Agreement and each
of the Ancillary Agreements to which Parent or such subsidiary is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each of (i) the execution and
delivery of this Agreement and each of the Ancillary Agreements to which
Parent or any of its subsidiaries is a party, and the performance by Parent or
such subsidiaries of their respective obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and thereby by Parent
or such subsidiaries and (ii) an amendment to the memorandum of association of
Parent to increase the number of authorized Parent Shares to 75,000,000 (the
"Memorandum Amendment") have been duly authorized by the Board of Directors of
Parent and each such subsidiary, as applicable, and no other corporate
proceedings on the part of Parent or its subsidiaries or their respective
Boards of Directors or stockholders are necessary therefor, other than the
approval of this Agreement by a majority of the votes cast at the Parent
Stockholders Meeting. The Board of Directors of Parent has directed that this
Agreement be submitted to Parent's stockholders for approval at the Parent
Stockholders Meeting and has recommended that Parent's stockholders approve
this Agreement.
(b) The execution, delivery and performance by Parent and its subsidiaries
of this Agreement and each of the Ancillary Agreements to which Parent or any
such subsidiary is a party will not (i) (assuming the stockholder approval set
forth in Section 4.1(a) is obtained and the Memorandum Amendment has become
effective) violate or conflict with any provision of the memorandum of
association or articles of association (or similar instruments) of Parent or
such subsidiaries, (ii) except as set forth on Schedule 4.1(b), conflict with,
violate or constitute a default under any provision of, or be an event that is
(or with the giving of notice or passage of time or both will result in) a
violation of or default under, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any obligation or right under, or result in the imposition of any lien
upon or the creation of a security interest in any of the Purchase Price
Shares or any of the assets or properties of Parent or its subsidiaries
pursuant to, or require a consent or create a penalty or increase Parent's or
any of its subsidiary's payment or performance obligations under, any material
mortgage, lien, lease, instrument, order, arbitration award, judgment or
decree, or any material contract, agreement, license or permit, to which
Parent or any of its subsidiaries is a party or by which any of them or any of
their property is bound, or (iii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.3 have been obtained
and all filings and obligations set forth in Section 4.3 have been made,
violate or conflict with in any material respect, or result in the imposition
of any material lien (other than liens arising from any actions taken or
arrangements made by any Seller Affiliate) upon any of the Purchase Price
Shares, or any of the assets or properties of Parent or any of its
subsidiaries pursuant to, any provision of law, regulation, rule, writ,
injunction, decree, statute, order, judgment or ruling of any Governmental
Authority or any other material restriction of any kind or character to which
Parent or any of its subsidiaries is or may be subject or by which any of them
or any of their property is or may be bound. This Agreement and the Lock-Up
Agreement have been, and, as of the Closing, the Registration Rights Agreement
and the Amended European License Agreement will be, duly executed and
delivered by Parent and each of its subsidiaries parties to such agreements
and, assuming the due execution hereof and thereof by Seller and the
subsidiaries of Seller parties to such agreements,
18
this Agreement and the Lock-Up Agreement constitute, and as of the Closing the
Registration Rights Agreement and the Amended European License Agreement will
constitute, the legal, valid and binding obligations of Parent and such
subsidiaries enforceable against such parties in accordance with their
respective terms except, in each case, as such enforceability may be limited
by any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of
general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
(c) Upon consummation of the Stock Purchases at the Closing, as contemplated
by this Agreement, Parent will deliver to TH USA and TH USA will deliver to
Seller good and valid title to the Purchase Price Shares free and clear of any
liens, claims, charges, security interests, options or other legal or
equitable encumbrances or other rights of third parties (except those imposed
by the federal securities laws or any action taken or arrangement made by any
Continuing Affiliate).
Section 4.2. Capitalization. (a) As of January 30, 1998, the authorized
capital stock of Parent consisted of (i) 50,000,000 Ordinary Shares, $.01 par
value per share ("Parent Shares"), of which: 37,436,929 shares were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, no
shares were held in treasury, 2,769,410 shares were reserved for future
issuance upon exercise of outstanding options to purchase Parent Shares under
the TH Incentive Plans, and an additional 775,085 shares were reserved for
issuance under the TH Incentive Plans; and (ii) 5,000,000 Preference Shares,
$.01 par value per share, of which no shares were issued and outstanding.
(b) Except (i) as set forth on Schedule 4.2(b) or in the Parent SEC Reports,
(ii) as contemplated by this Agreement and (iii) for stock options issued
pursuant to the TH Incentive Plans, there are no outstanding options,
warrants, subscriptions or other rights of any kind to acquire, or obligations
to issue, shares of capital stock of any class of, or other equity interests
in, Parent or any securities convertible into or exchangeable or exercisable
for any shares of capital stock of any class of, or other equity interests in,
Parent. The Purchase Price Shares, when issued as contemplated herein, will be
duly authorized, validly issued, fully paid and nonassessable, and will not
have been issued in violation of, or be subject to, any preemptive rights.
Section 4.3. Other Authorizations, Consents, Reports, etc. Except (a) as set
forth on Schedule 4.3 hereto, (b) for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Blue Sky Laws, the pre-merger
notification requirements of the HSR Act, any necessary approvals or filings
under the Competition Act (Canada) or the Investment Canada Act, the filing of
an amendment to Parent's Memorandum of Association evidencing the Memorandum
Amendment and the listing requirements of the NYSE and (c) those the failure
to make, file, give or obtain which would not have a material adverse effect
on Parent and its subsidiaries taken as a whole or prevent the consummation of
the Stock Purchases and the other transactions contemplated hereby, there are
no Licenses required to be made, filed, given or obtained by Parent with, to
or from any Governmental Authority in connection with the consummation of the
Stock Purchases and the transactions contemplated under this Agreement or any
of the Ancillary Agreements.
Section 4.4. Brokers, Finders, etc. Except for the services of Xxxxxx
Xxxxxxx & Co. Incorporated and Xxxxxxxxxxx Xxxxxxx & Co., Inc., Parent has not
employed, nor is Parent subject to any valid claim of, any broker, finder, or
other similar intermediary in connection with the transactions contemplated by
this Agreement who might be entitled to a fee or commission in connection with
such transactions. No Continuing Affiliate has or will have any obligations to
Xxxxxx Xxxxxxx & Co. Incorporated and Xxxxxxxxxxx Xxxxxxx & Co., Inc. with
respect to the transactions contemplated by this Agreement or the Ancillary
Agreements.
Section 4.5. Acquisition of Shares for Investment. Each of TH USA and THEH
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the Shares and
has been provided access to personnel and books of the Companies and the
Subsidiaries for purposes of making its evaluation. Each of TH USA and THEH is
acquiring the Shares for investment and not with a view toward or for sale in
connection with any distribution thereof, or with any present intention of
19
distributing or selling the Shares. Each of TH USA and THEH agrees that the
Shares may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration available under the Securities
Act.
Section 4.6. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports, statements and other documents required to be filed by it with
the SEC since March 31, 1996 (such forms, reports, statements and other
documents are hereinafter referred to as the "Parent SEC Reports"). Except as
disclosed in Schedule 4.6 hereto, the Parent SEC Reports (i) were prepared in
all material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including, in each case, any
notes thereto) contained in the Parent SEC Reports were prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position,
results of operations and cash flows of Parent and its consolidated
subsidiaries as at the respective dates thereof, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments.
Section 4.7. Proxy Statement. The information supplied by Parent for
inclusion in the Proxy Statement to be sent to the stockholders of Parent in
connection with the Parent Stockholders Meeting, will not, on the date the
Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to the stockholders of Parent, at the time of the Parent Stockholders
Meeting or on the Closing Date, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not false
or misleading. Notwithstanding the foregoing, Parent makes no representation
or warranty with respect to any information supplied by Seller which is
contained or incorporated by reference in the Proxy Statement or any amendment
or supplement thereto.
ARTICLE V
Covenants of Seller and Parent
Section 5.1. Investigation of Business; Access to Properties and
Records. (a) Prior to the Closing Date, Seller shall and shall cause the
Companies and the Subsidiaries to, and Parent shall, afford to representatives
of the other party full access to their respective personnel, offices, plants,
properties, books and records during normal business hours, in order that
Seller and Parent may have full opportunity to make such investigations as
such party desires of the affairs and assets of Parent, on the one hand, or
the Companies and Subsidiaries on the other hand; provided, however, that such
investigation by Seller and Parent shall not unreasonably disrupt the
personnel and operations of Parent, on the one hand, or the Companies or
Subsidiaries, on the other hand.
(b) At the Closing or as soon thereafter as practicable, Seller will deliver
or cause to be delivered to TH USA and THEH all corporate records of the
Companies and Subsidiaries, and all other original (or copies thereof, if
originals are not immediately available) agreements, documents, books and
records relating to the businesses of the Companies and the Subsidiaries.
(c) Except as required by law and except to the extent such information
becomes publicly available other than as a result of any action taken by any
Continuing Affiliate, from and after the Closing Date, the Continuing
Affiliates shall maintain the confidentiality of non-public information with
respect to the Companies and Subsidiaries. In the event that any of the
Continuing Affiliates after the Closing Date is requested, or becomes
20
required by law, to disclose any confidential information relating to the
Companies and the Subsidiaries, Seller will provide Parent with prompt notice
thereof (before such information is disclosed if practicable) so that Parent
may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Section 5.1(c).
Section 5.2. Efforts; Obtaining Consents. (a) Subject to the terms and
conditions herein provided, each of Seller and Parent agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement and to cooperate with the other in connection with the
foregoing, including using its reasonable efforts (i) to obtain all waivers,
consents and approvals from other parties to loan agreements, leases,
mortgages and other contracts necessary for the consummation of the
transactions contemplated hereby including, without limitation, the credit
agreements listed on Schedule 5.2 hereto, (ii) to make all filings with, and
to obtain all consents, approvals and authorizations that are required to be
obtained from, Governmental Authorities, including without limitation the
filing by or on behalf of Parent with the Registrar of Companies of the
British Virgin Islands of a notice of amendment to the Memorandum of
Association of Parent to reflect the Memorandum Amendment, (iii) to lift or
rescind any injunction, restraining order, decree or other order adversely
affecting the ability of the parties hereto to consummate the transactions
contemplated hereby, (iv) to effect all necessary registrations and filings
and submissions of information requested by Governmental Authorities, and (v)
to fulfill all conditions to this Agreement. Each of Seller and Parent shall
use all reasonable efforts to prevent the entry, enactment or promulgation of
any threatened or pending preliminary or permanent injunction or other order,
decree or ruling or statute, rule, regulation or executive order that would
adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby.
(b) Seller and Parent shall promptly file or cause to be filed with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission pursuant to the HSR Act all requisite documents and
notifications in connection with the transactions contemplated by this
Agreement. Parent shall pay the filing fee incurred in connection with such
filings under the HSR Act. Each party hereto shall promptly inform the other
of any material communication from the Federal Trade Commission, the
Department of Justice or any other Governmental Authority regarding any of the
transactions contemplated hereby. If either Parent or Seller or any Affiliate
thereof receives a request for additional information or documentary material
from any such government or Governmental Authority with respect to the
transactions contemplated hereby, then such party shall endeavor in good faith
to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. Each of Parent and Seller will advise the other promptly in
respect of any understandings, undertakings or agreements (oral or written)
which it proposes to make or enter into with the Federal Trade Commission, the
Department of Justice or any other Governmental Authority in connection with
the transactions contemplated hereby.
Section 5.3. Further Assurances. Seller, Parent, TH USA and THEH agree that,
from time to time, whether before, at or after the Closing Date, each of them
will take such other action (including, on the part of Seller, using its best
efforts to cause the Continuing Affiliates to take such action and, on the
part of Parent, using its best efforts to cause its subsidiaries to take such
action) as may be necessary to carry out the purposes and intents of this
Agreement and the Ancillary Agreements including, without limitation, Parent
and TH USA taking such actions as may be necessary to enable TH USA to deliver
to Seller the Purchase Price Shares.
Section 5.4. Conduct of Business by Seller. From the date hereof through the
Closing, except as disclosed on Schedule 5.4 hereto or otherwise provided for
in this Agreement, and, except as consented to or approved by Parent in
writing, Seller covenants and agrees that:
(a) each of the Companies and the Subsidiaries shall operate its business in
the ordinary and usual course in accordance with past practices;
(b) neither any Company nor any Subsidiary shall issue, sell or agree to
issue or sell (i) any shares of its capital stock, or (ii) any securities
convertible into, or options with respect to, or warrants to purchase or
rights
21
to subscribe for, any shares of its capital stock or make any change in its
issued and outstanding capital stock or redeem, purchase or otherwise acquire
any of its capital stock;
(c) neither any Company nor any Subsidiary shall (i) increase in any manner
the compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of its directors, officers or other employees other than
increases in compensation in the ordinary course of business and consistent
with past practice and which are not material in the aggregate; (ii) pay or
agree to pay any pension, retirement allowance or other employee benefit to
any director, officer or employee, whether past or present, other than as
required by applicable law, contracts or plan documents in effect on the date
of this Agreement; (iii) enter into any new employment, severance, consulting,
or other compensation agreement with any director, officer or employee or
other person other than in connection with any new hires or promotions in the
ordinary course and consistent with past practice; or (iv) commit itself to
any additional pension, profit-sharing, deferred compensation, group
insurance, severance pay, retirement or other employee benefit plan, fund or
similar arrangement or adopt or amend or commit itself to adopt or amend any
of such plans, funds or similar arrangements in existence on the date hereof;
(d) neither any Company nor any Subsidiary shall (i) amend its memorandum or
articles of association (or similar instruments), (ii) declare any dividend or
make any distribution with respect to its capital stock, (iii) assume, incur
or guarantee any obligation for borrowed money other than trade payables in
the ordinary course of business consistent with past practice, (iv) cancel or
compromise, except for compromises of current or former short-term trade
receivables or other current assets in the ordinary course of business
consistent with past practice, any debts owed to it, or (v) waive or release
any rights of material value;
(e) neither any Company nor any Subsidiary shall (i) sell, transfer, lease
or otherwise dispose of any of its assets other than inventory, accounts
receivable or fixtures in the ordinary course of business consistent with
prior practice, (ii) create or permit to exist any new security interest, lien
or encumbrance on any of its properties or assets, other than Permitted
Exceptions, (iii) enter into any joint venture, partnership or other similar
arrangement, (iv) make any investment in or purchase any securities of any
Person other than in connection with (A) the cash management activities of the
Companies and the Subsidiaries in the ordinary course of business consistent
with past practice or (B) the formation of a wholly owned subsidiary or (v)
purchase any assets of any Person other than in the ordinary course of
business consistent with past practice;
(f) neither any Company nor any Subsidiary shall permit a change in its
methods of maintaining its books, accounts or business records or, except as
required by GAAP (in which event prior notice shall be given to Parent),
change any of its accounting principles or the methods by which such
principles are applied for tax or financial reporting purposes;
(g) the Companies and the Subsidiaries together shall incur capital
expenditures only in the ordinary course of business consistent with prior
practice and not in excess of the capital budget provided to Parent prior to
the date hereof;
(h) neither any of the Companies nor any of the Subsidiaries shall (i) enter
into or terminate any material lease, contract or agreement, or make any
change in any of their material leases, contracts and agreements, (ii) enter
into any transaction with any Continuing Affiliate or any director, officer or
shareholder of any Continuing Affiliate other than as contemplated by Sections
5.11 and 5.16, (iii) reclassify any assets or liabilities, or (iv) do any
other act that (A) would cause any representation or warranty of Seller in
this Agreement to be or become untrue in any material respect or (B) could
reasonably be expected to have a Company Material Adverse Effect;
(i) the Companies and Subsidiaries will comply in all material respects with
all material laws and regulations applicable to them;
(j) the Canada Purchase Agreement and the Bentley Trust Guarantee shall not
be amended nor shall any obligations of the parties thereunder be waived;
22
(k) neither any of the Companies nor any of the Subsidiaries will make any
payment of interest on or principal of any intercompany indebtedness to any
Continuing Affiliate, other than payment of accrued interest on the Retained
Note;
(l) neither any of the Companies nor any of the Subsidiaries shall make any
election with respect to Taxes, consent to any waiver or extension of time to
assess or collect any Taxes without the consent of Parent (which consent shall
not be unreasonably withheld) or file any Return other than a Return filed in
the ordinary course of business and prepared in a manner consistent with past
practice; and
(m) neither any of the Companies nor any of the Subsidiaries shall agree to
take any action prohibited by this Section 5.4.
Section 5.5. Conduct of Business by Parent. From the date hereof through the
Closing, except as otherwise contemplated in this Agreement and except as
consented to or approved by Seller in writing, Parent covenants and agrees
that it shall not (a) except for issuances of Parent Shares upon exercise of
outstanding stock options under the TH Incentive Plans and grants of stock
options pursuant to the TH Incentive Plans, issue, sell or agree to issue or
sell (i) any shares of its capital stock or (ii) any securities convertible
into, or options with respect to, or warrants to purchase or rights to
subscribe for, any shares of its capital stock or make any change in its
issued and outstanding capital stock or redeem, purchase or otherwise acquire
any of its capital stock; (b) except pursuant to the Memorandum Amendment,
amend its memorandum or articles of association; (c) declare any dividend or
make any distribution with respect to its capital stock; or (d) purchase any
Parent Shares other than in open market transactions.
Section 5.6. Preservation of Business. From the date hereof until the
Closing, subject to the terms and conditions of this Agreement, Seller and
Parent shall, and shall cause each of their respective subsidiaries to, use
all reasonable efforts to preserve the business of the Companies and
Subsidiaries intact, to preserve the good will of customers, suppliers,
employees and others having business relations with the Companies and
Subsidiaries, to retain its key employees, and to maintain insurance in full
force and effect.
Section 5.7. Non-Solicitation. Except with respect to the Canada Purchase or
as otherwise contemplated in this Agreement, the Continuing Affiliates shall
not, and shall not permit the Companies or Subsidiaries to, directly or
indirectly, (a) solicit any inquiries or proposals for, or enter into or
continue or resume any discussions with respect to or enter into any
negotiations or agreements relating to the sale or exchange of any Shares, any
shares of capital stock of any Subsidiary or all, or a substantial part, of
the assets of any of the Companies or Subsidiaries or (b) furnish or cause to
be furnished any non-public information concerning the business and operations
of the Companies or Subsidiaries to any Person (other than to or at the
request of Parent and its representatives) other than in the ordinary course
of business consistent with past practice.
Section 5.8. Notice of Developments. Each party shall promptly notify the
other party in writing of any events, facts and occurrences which would result
in any breach of any representation or warranty or breach of any covenant by
such party contained in this Agreement.
Section 5.9. License Agreements. (a) At the Closing, Parent shall cause
Xxxxx Xxxxxxxx Licensing, Inc. to, and Seller shall and shall cause TH Europe
to, execute and deliver the Amended European License Agreement.
(b) Effective as of the consummation of the Stock Purchases and the
execution and delivery of the Amended European License Agreement, Seller shall
and shall cause T.H. International N.V. to, and Parent shall cause Xxxxx
Xxxxxxxx Licensing, Inc. to, cancel the International License Agreement and
any sublicenses thereunder.
Section 5.10. Financial Statements. Prior to the Closing, Seller shall
deliver to Parent promptly after they are prepared such monthly or other
financial statements or financial reports of the Companies and the
Subsidiaries as are prepared by or relating to the Companies, the Subsidiaries
and the Canadian Subsidiaries in the ordinary course of business and such
other financial information as Parent may reasonably request, promptly
23
after such request. Seller shall use its reasonable efforts to have Price
Waterhouse's and Xxxxx Xxxxxxxx Basevitz's consent to Parent's use of and
reliance on the Financial Statements and such other financial statements of
the Companies, the Subsidiaries and the Canadian Subsidiaries as may be
required in connection with filings under the federal securities laws.
Section 5.11. Intercompany Accounts; Indebtedness. Except for the Retained
Note and the Blackwatch Note, all intercompany and intracompany payables and
receivables (other than payables and receivables for goods and services,
including buying office commissions, in the ordinary course) and loans between
the Companies and the Subsidiaries, on the one hand, and the Continuing
Affiliates, on the other hand, shall be eliminated, released or forgiven,
without the transfer of any cash and without the need for any further
documentation, by dividends or capital contributions, as appropriate,
immediately prior to the Closing. The note outstanding from AIHL to Xxxxx
Xxxxxxxx Licensing, Inc. dated August 28, 1995 in the face amount of $5
million shall be cancelled as of the Closing without the transfer of any cash
and without the need for any further documentation.
Section 5.12. Proxy Statement. (a) As promptly as practicable after the
execution of this Agreement, Parent shall prepare and file with the SEC (with
appropriate requests for confidential treatment) under the Exchange Act a
proxy statement and a form of proxy (such proxy statement, together with any
amendments thereof or supplements thereto, in the form delivered to the
stockholders of Parent, the "Proxy Statement") relating to Parent Stockholders
Meeting and the vote of the stockholders of Parent with respect to this
Agreement and the transactions contemplated hereby. Parent will cause the
Proxy Statement to comply as to form in all material respects with the
Exchange Act and the rules and regulations thereunder. Parent shall use all
reasonable efforts to cause the Proxy Statement to be cleared with the SEC as
promptly as reasonably practicable thereafter, and shall take any and all
actions required under any applicable federal or state securities or Blue Sky
Laws in connection with the issuance of the Purchase Price Shares. Parent
shall provide Seller an opportunity to review and comment upon the Proxy
Statement prior to any filing with the SEC. Seller shall use all reasonable
efforts to cooperate with Parent in connection with the preparation and
clearance of the Proxy Statement. Without limiting the generality of the
foregoing, Parent and Seller shall each notify the other as promptly as
practicable upon becoming aware of any event or circumstance which should be
described in an amendment of, or a supplement to, the Proxy Statement. To the
extent required to comply with the federal securities laws, upon notification
by Seller to Parent pursuant to the preceding sentence and prior to the Parent
Stockholders Meeting, Parent shall use all reasonable efforts to prepare and
file with the SEC an amendment or supplement to the Proxy Statement reflecting
such event or circumstance.
(b) The Proxy Statement shall include the recommendation of the Board of
Directors of Parent in favor of this Agreement.
Section 5.13. Stockholders Meeting. Parent shall cause the Parent
Stockholders Meeting to be held as promptly as reasonably practicable and in
accordance with applicable laws for the purpose of voting upon the approval of
this Agreement. Parent shall use all reasonable efforts to hold such
stockholders meeting as soon as reasonably practicable after the date on which
the Proxy Statement is cleared by the SEC.
Section 5.14. NYSE Listing. Parent shall promptly prepare and submit to the
NYSE a supplemental listing application covering the Purchase Price Shares,
and shall use all reasonable efforts to cause such shares to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
consummation of the Stock Purchases.
Section 5.15. Financing. (a) Parent shall, and shall cause its subsidiaries
to, use all reasonable efforts to obtain the financing for the Purchase Price
Cash Amount and to enter into appropriate documentation with respect thereto.
(b) Parent and Seller shall, and shall cause their respective subsidiaries
to, cooperate with each other to arrange the financing for the Purchase Price
Cash Amount and to provide such information as Parent's financing sources
shall reasonably request or that Parent shall reasonably request in connection
with such financing.
24
Section 5.16. Blackwatch Note. Immediately prior to the transaction
contemplated by the next sentence, Blackwatch shall deliver to Seller an
interest-bearing demand note of Blackwatch to Seller in the principal amount
of the Purchase Price (as defined in the Canada Purchase Agreement) (the
"Blackwatch Note") in exchange for a demand note of Seller in the principal
amount and with the interest rate of the Blackwatch Note (the "Seller Note").
Immediately prior to the Closing, Seller shall make a capital contribution to
Pepe USA of the Blackwatch Note. Immediately after the Closing, Seller shall
repay the Seller Note in full and Blackwatch shall repay the Blackwatch Note
in full.
Section 5.17. Resignation of Directors. At the Closing, Seller shall cause
to be delivered to Parent duly signed resignations, effective as of the
Closing, of all directors and officers of all of the Companies and
Subsidiaries designated in writing by Parent to Seller at least five business
days prior to the Closing Date, or shall take such other action as is
necessary to ensure that such persons are not directors or officers of the
Companies or Subsidiaries after the Closing.
ARTICLE VI
Employee Benefits
Section 6.1. Employee Benefit Plans. Seller hereby represents and warrants
to Parent as follows:
(a) Schedule 6.1(a) includes a complete list of all employee benefit plans,
programs, policies, practices, and other arrangements providing benefits to
any employee or former employee primarily employed in the United States or
subject to the laws of the United States or any state or jurisdiction thereof
or any beneficiary or dependent thereof, whether covering one person or more
than one person, sponsored or maintained by any of the Companies or the
Subsidiaries or to which any of the Companies or the Subsidiaries contribute
or are obligated to contribute, other than solely by reason of being an ERISA
Affiliate of another entity (collectively, "Company Employee Benefit Plans").
Without limiting the generality of the foregoing, the term "Company Employee
Benefit Plans" includes all employee welfare benefit plans within the meaning
of Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA. Schedule 6.1(a) also includes a complete
list of all employee benefit plans, programs, policies, retirement schemes,
practices, and other arrangements for any employee or former employee
(including arrangements for the payment to employees or their retirement or
death or on the occurrence of any permanent or temporary disability) primarily
employed in countries other than the United States or subject to the laws of
countries other than the United States or any beneficiary or dependent
thereof, whether covering one person or more than one person, sponsored or
maintained by any of the Companies or the Subsidiaries or to which any of the
Companies or the Subsidiaries contribute or are obligated to contribute
(collectively, "Non-U.S. Company Employee Benefit Plans").
(b) With respect to each Company Employee Benefit Plan and Non-U.S. Company
Employee Benefit Plan, Seller has delivered or made available to Parent a
true, correct and complete copy of (i) each writing constituting a part of
such Company Employee Benefit Plan and Non-U.S. Company Employee Benefit Plan,
including without limitation all plan documents, benefit schedules,
participant agreements, trust agreements, and insurance contracts and other
funding vehicles; (ii) the three most recent Annual Reports (Form 5500 Series
where applicable) and accompanying schedules, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial
report, if any; and (v) the most recent determination letter from the IRS or
other relevant Taxing Authority, if any. Except as specifically provided in
the foregoing documents delivered or made available to Parent, there are no
amendments to any Company Employee Benefit Plan or Non-U.S. Company Employee
Benefit Plan that have been adopted or approved nor has Seller or any Company
or Subsidiary taken any formal steps to make any such amendments.
(c) Schedule 6.1(a) identifies each Company Employee Benefit Plan that is
intended to be a "qualified plan" satisfying the requirements of Section
401(a) of the Code (a "Company Pension Plan").
(d) Except as otherwise set forth in Schedule 6.1(d) hereto, none of the
execution and delivery of this Agreement, the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby
25
will (either alone or in conjunction with any related event, including without
limitation, termination of employment) (i) result in any payment (including,
without limitation, severance, unemployment compensation, an "excess parachute
payment" (as defined in Section 280G of the Code) or otherwise) becoming due
from the Companies or the Subsidiaries under any Company Employee Benefit Plan
or Non-U.S. Company Employee Benefit Plan or any collective bargaining
agreement, (ii) increase any compensation or benefits otherwise payable under
any such Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
Plan or collective bargaining agreement or (iii) accelerate any liability
under any Company Employee Benefit Plan or Non-U.S. Company Employee Benefit
Plan because of an acceleration of the time of payment or vesting of any
rights or benefits to which employees may be entitled thereunder.
Section 6.2. Company Employee Benefit Plans. Seller hereby represents and
warrants to Parent as follows: (a) All Company Employee Benefit Plans which
are "employee benefit plans," as defined in Section 3(3) of ERISA, are in
compliance with and have been administered in all material respects in
compliance with their terms and with all applicable requirements of law,
including but not limited to the Code and ERISA, and all contributions
required to be made to each such plan under the terms of such plan, ERISA or
the Code for all periods of time prior to the Closing Date will by the Closing
Date be timely made or paid in full or, to the extent not required to be made
or paid to each such Plan on or before the Closing Date, have been fully
reflected on the Pepe Balance Sheet or the balance sheets of the Companies and
the Subsidiaries as of the Closing Date.
(b) A favorable determination letter as to the qualification of each Company
Pension Plan under Section 401(a) of the Code has been issued and remains in
effect and the related trust has been determined to be exempt from taxation
under Section 501(a) of the Code and any amendment made or event relating to
such Company Pension Plan subsequent to the date of such determination letter
has not adversely affected the qualified status of such Company Pension Plan.
No issue concerning qualification of any Company Pension Plan is pending
before or, to the best knowledge and belief of Seller, threatened by, the IRS.
None of Seller, the Companies or the Subsidiaries or any other "disqualified
person" (as defined in Section 4975 of the Code) or "party-in-interest" (as
defined in Section 3(14) of ERISA) has engaged in any nonexempt "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section
406 of ERISA), which could subject any Company Employee Benefit Plan (or its
related trust), the Companies or the Subsidiaries or any officer, director or
employee of the Companies or the Subsidiaries to tax or penalty imposed under
Section 4975 of the Code. The Companies and the Subsidiaries have not
incurred, and do not reasonably expect to incur, any material liability to the
Pension Benefit Guaranty Corporation (except for required premium payments and
contributions, which payments and contributions have been made when due).
(c) No Company Employee Benefit Plan is subject to Title IV or Section 302
of ERISA or Section 412 or 4971 of the Code (including any Multiemployer
Plan).
(d) There does not now exist, nor do any circumstances exist that could
result in, any Controlled Group Liability that would be a material liability
of the Companies or the Subsidiaries following the Closing. "Controlled Group
Liability" means any and all liabilities under (i) Title IV of ERISA, (ii)
section 302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of section 601 et seq. of ERISA and section
4980B of the Code, and (v) corresponding or similar provisions of foreign laws
or regulations, other than such liabilities that arise solely out of, or
relate solely to, the Company Employee Benefit Plans. For purposes of this
Section 6.2, "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a
member of the same "controlled group" as the first entity, trade or business
pursuant to Section 4001(a)(14) of ERISA.
(e) There are no pending or, to Seller's knowledge, threatened claims (other
than claims for benefits in the ordinary course), lawsuits, audits,
investigations or arbitrations which have been threatened, asserted or
instituted against the Company Employee Benefit Plans, any fiduciaries thereof
with respect to their duties to the Company Employee Benefit Plans or the
assets of any of the trusts under any of the Company Employee Benefit Plans
which could reasonably be expected to result in any material liability of the
Companies or the Subsidiaries to the
26
Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
Section 6.3. Non-U.S. Company Employee Benefit Plans. Seller hereby
represents and warrants to Parent as follows:
(a) The Non-U.S. Company Employee Benefit Plans comply in all material
respects with, and have been managed in accordance with, their terms and all
applicable laws, regulations and requirements.
(b) Where Non-U.S. Company Employee Benefit Plans are funded or insured, all
contributions and other amounts due to or in respect of them or any state
pension arrangements by the Companies and the Subsidiaries have been fully
paid at Closing. Where such Non-U.S. Company Employee Benefit Plans are
unfunded or underfunded, appropriate reserves are established therefor in the
Financial Statements. The Companies and the Subsidiaries have not by any act
or omission, direct or indirect, materially increased their liabilities or
obligations to the Non-U.S. Company Employee Benefit Plans since the date of
the last actuary's report described in Section 6.3(c) below.
(c) Seller has given or made available to Parent the actuary's report on the
latest actuarial valuation of each of the Non-U.S. Company Employee Benefit
Plans or such other information which accurately describes the financial
position of each of the Non-U.S. Company Employee Benefit Plans. Nothing has
happened since the date of that information which would adversely affect the
funding position of the Non-U.S. Company Employee Benefit Plans in a material
way.
(d) There is no material dispute about the entitlements or benefits payable
under any of the Non-U.S. Company Employee Benefit Plans, no material claim by
or against the managers or administrators of the Non-U.S. Company Employee
Benefit Plans or any of the Companies or the Subsidiaries has been made or
threatened, and there are no circumstances which would reasonably be expected
to give rise to any such claim.
Section 6.4. Administration. Seller and Parent shall each make their
appropriate employees available to the other at such reasonable times as may
be necessary for the proper administration by the other of any and all matters
relating to employee benefits affecting employees of the Companies and the
Subsidiaries, including benefits to which such employees may become entitled
after the Closing Date under any tax-qualified retirement plan maintained by
the Continuing Affiliates.
Section 6.5. Reportable Event. Seller represents and warrants that the
consummation of the transactions contemplated hereby will not result in a
reportable event within the meaning of Section 4043 of ERISA with respect to
either (a) a Company Employee Benefit Plan, or (b) any other employee benefit
plan sponsored by or maintained by Seller, the Companies, the Subsidiaries or
any of their respective ERISA Affiliates to which Section 4043(b) of ERISA is
applicable. Seller shall not give any notice of a reportable event pursuant to
Section 4043 of ERISA before the Closing.
ARTICLE VII
Tax Matters
Section 7.1. Tax Returns of the Companies and the Subsidiaries. Seller
represents and warrants to Parent that:
(a) Except as set forth in Schedule 7.1(a) (i) all Income Tax Returns
required to be filed for taxable periods ending on or prior to the Closing
Date by the Companies or the Subsidiaries have been or will be timely filed
and all Taxes shown to be due on such Income Tax Returns have been or will be
paid and (ii) all other material Returns required to be filed before the
Closing Date by the Companies or the Subsidiaries have been or will be timely
filed and all Taxes shown as due on such Returns have been or will be paid.
27
(b) Except as set forth on Schedule 7.1(b), (i) to the knowledge of Seller,
no claim has been made by any authority in a jurisdiction where the Companies
or the Subsidiaries do not file Returns that any of the Companies or the
Subsidiaries are or may be subject to taxation by that jurisdiction; (ii)
except for Taxes being contested in good faith and by appropriate proceedings
and for which appropriate reserves are established on the Pepe Year-End
Balance Sheet, all Taxes owed by any of the Companies and the Subsidiaries
with respect to any taxable period (or portion thereof) ending on or prior to
December 31, 1997 (whether or not shown on any Return) have (or by the Closing
Date will have) been duly and timely paid; and (iii) all material Taxes
required to be withheld from employee salaries, wages and other compensation
and from royalty payments by or on behalf of each of the Companies and the
Subsidiaries with respect to periods for which the statute of limitations has
not expired have been withheld, and such withheld Taxes have been duly and
timely paid to the proper Taxing Authorities.
(c) Except as set forth on Schedule 7.1(c), no agreement or other document
extending, or having the effect of extending, the period of assessment,
payment or collection of any material Taxes for which any of the Companies or
the Subsidiaries or any of their predecessors may be held liable and no power
of attorney with respect to any such material Taxes have been executed or
filed with the IRS or any other Taxing Authority.
(d) Seller has provided to Parent copies of all federal, state and local
Income Tax Returns that have been filed for all taxable periods for which the
statute of limitations has not expired, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Companies or the
Subsidiaries. Except as set forth on Schedule 7.1(d), (i) no lien exists with
respect to any asset of any of the Companies or the Subsidiaries that arose in
connection with any failure to pay Taxes (other than for Taxes not yet due and
payable); (ii) there are no material Taxes for which any of the Companies or
the Subsidiaries could be held liable which have been asserted in writing by
any Taxing Authority to be due; and (iii) there are no pending audits,
examinations, or investigations with respect to any material Taxes of any of
the Companies or the Subsidiaries.
(e) No consent or election has been made to have the provisions of Section
341(f) of the Code apply to any of the Companies or the Subsidiaries.
(f) None of the Companies or the Subsidiaries is party to or bound by any
closing agreement, gain recognition agreement, tax sharing, tax indemnity, tax
allocation or similar agreement or arrangement.
Section 7.2. Allocation of Certain Taxes. Each of Parent and Seller agrees
that if any of the Companies are permitted but not required under applicable
state or local Income Tax laws to treat the Closing Date as the last day of a
taxable period, Parent and Seller shall treat such day as the last day of a
taxable period.
Section 7.3. Filing Responsibility. (a) Seller shall prepare and file or
shall cause each of the Companies and the Subsidiaries to prepare and file all
Returns with respect to each of the Companies and the Subsidiaries required to
be filed (taking into account any extension of time within which to file) on
or before the Closing Date. Seller shall prepare and file or shall cause to be
filed any consolidated, combined, unitary or group relief system Returns
(other than any consolidated, combined, unitary or group relief system Returns
of an affiliated group (within the meaning of Section 1504(a) of the Code
without regard to the limitations of Section 1504(b) of the Code) of which any
of the Companies or the Subsidiaries is the common parent (each, a "Company
Group")).
(b) Parent, the Companies and the Subsidiaries shall file all other Returns
with respect to the Companies and the Subsidiaries.
(c) With respect to any state, local or foreign Income Tax Return for
taxable periods beginning before the Closing Date and ending after the Closing
Date, Parent shall cause each of the Companies and the Subsidiaries to consult
with Seller concerning such Return. Each of the Companies and the Subsidiaries
shall provide Seller a copy of its proposed Return to review and comment upon
at least 30 days prior to the filing of such Return, and Seller may provide
comments to each of the Companies and the Subsidiaries, which comments shall
be delivered to each of the Companies and the Subsidiaries within 10 days of
receiving such copies from each of the
28
Companies and the Subsidiaries. The Companies and the Subsidiaries shall make
such revisions to such Tax Returns as are reasonably requested by Seller.
Section 7.4. Refunds and Carrybacks. (a) Seller shall be entitled to any
refunds or amounts credited against Taxes for which Seller is liable (except
for refunds or credits accrued on the Pepe Year-End Balance Sheet) pursuant to
Section 7.6.
(b) Parent, the Companies or the Subsidiaries, as the case may be, shall be
entitled to all other refunds or credits of Taxes other than refunds or
credits of consolidated, combined, unitary or group relief system Taxes for a
Tax year in which the Companies or the Subsidiaries were included in a
consolidated, combined, unitary or group relief system Return, unless such
Return is a Return of a Company Group.
(c) Parent shall cause each of the Companies and the Subsidiaries promptly
to forward to Seller or to reimburse Seller for any refunds or credits due
Seller (pursuant to the terms of this Article VII) after receipt thereof, and
Seller shall promptly forward to Parent or reimburse Parent for any refunds or
credits due Parent (pursuant to the terms of this Article VII) after receipt
thereof.
(d) Except (i) as required by a Determination, (ii) as otherwise required by
applicable law, or (iii) in connection with a matter described in the second
sentence of Section 7.5(d), none of Parent, the Companies nor the Subsidiaries
will, after the Closing Date, amend any tax return relating to a period ending
on or before the Closing Date without the prior written consent of Seller,
which consent will not unreasonably be withheld.
Section 7.5. Cooperation and Exchange of Information. (a) Seller shall
prepare and submit to Parent no later than three months after the Closing
Date, 1997 blank tax return workpaper packages for Tax Returns for which
Parent has responsibility to prepare pursuant to Section 7.3. Parent shall and
shall cause each of the Companies and the Subsidiaries to prepare completely
and accurately and to submit to Seller within three months of receipt all
information as Seller shall reasonably request in such tax return workpaper
packages.
(b) As soon as practicable, but in any event within 30 days after Seller's
request, from and after the Closing Date, Parent shall provide Seller with
such cooperation and shall deliver to Seller such information and data
concerning the pre-Closing operations of each of the Companies and the
Subsidiaries and make available such knowledgeable employees of the Companies
and the Subsidiaries as Seller may reasonably request, including providing the
information and data required by Seller's customary tax and accounting
questionnaires, in order to enable Seller to complete and file all Returns
which it may be required to file with respect to the operations and business
of each of the Companies and the Subsidiaries through the Closing Date or to
respond to audits by any Taxing Authorities with respect to such operations
and to otherwise enable Seller to satisfy its internal accounting, tax and
other legitimate requirements. Such cooperation and information shall include
without limitation provision of powers of attorney for the purpose of signing
Returns and defending audits and promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any Taxing
Authority which relate to each of the Companies and the Subsidiaries, and
providing copies of all relevant Returns, together with accompanying schedules
and related workpapers, documents relating to rulings or other determinations
by any Taxing Authority and records concerning the ownership and tax basis of
property, which Parent, the Companies and the Subsidiaries may possess.
Parent, the Companies and the Subsidiaries shall make their employees and
facilities available on a mutually convenient basis to provide explanation of
any documents or information provided hereunder.
(c) Parent and Seller and their respective Affiliates shall cooperate in the
preparation of all Returns relating in whole or in part to taxable periods
ending on or before or including the Closing Date that are required to be
filed after such date. Such cooperation shall include, but not be limited to,
furnishing prior years' Returns or return preparation packages illustrating
previous reporting practices or containing historical information relevant to
the preparation of such Returns, and furnishing such other information within
such party's possession requested by the party filing such Returns as is
relevant to their preparation. In the case of any state, local or foreign
joint, consolidated, combined, unitary or group relief system Returns, such
cooperation shall also relate to any other taxable periods in which one party
could reasonably require the assistance of the other party in obtaining any
necessary information.
29
(d) Seller shall have the right, at its own expense, to control any audit or
examination by any Taxing Authority ("Tax Audit"), initiate any claim for
refund, contest, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment which in any such case
relates to Taxes for which Seller is liable pursuant to Section 7.6, with
respect to each of the Companies and the Subsidiaries; provided, however, that
no claim, contest or settlement shall be resolved by Seller if such claim,
contest, or settlement could reasonably be expected to have a material adverse
effect on such Companies or Subsidiaries after the Closing. Parent shall have
the right, at its own expense, to control any other Tax Audit, initiate any
other claim for refund, and contest, resolve and defend against any other
assessment, notice of deficiency, or other adjustment or proposed adjustment;
provided, however, any such resolution shall not have a material adverse
effect on the Seller. Seller shall furnish Parent and each of the Companies
and the Subsidiaries with its cooperation in a manner comparable to that
described in Section 7.5(b) hereof to effect the purposes of this Section
7.5(d).
Section 7.6. Tax Indemnification by Seller. Seller shall be liable for, and
shall hold Parent and each of the Companies and the Subsidiaries and any
successor corporations thereto or Affiliates thereof harmless from and
against, on a Net After-Tax Basis, the following Taxes:
(a) any and all Taxes imposed upon, or with respect to the income or
operations of, any of the Companies or the Subsidiaries (i) with respect to
any taxable period ending on or before December 31, 1997 and (ii) in the case
of any taxable period beginning before and ending after December 31, 1997,
allocable to the portion of such period beginning before and ending on
December 31, 1997, in each case to the extent such Taxes are not reflected in
the reserve for Tax liabilities (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown
on the Pepe Year-End Balance Sheet; and
(b) any and all Taxes attributable to the operations of an entity (other
than the Companies and the Subsidiaries or any of their predecessors) for
which the Companies or the Subsidiaries may be held liable by virtue of a
relationship to or affiliation with such entity under Treasury Regulation
Section 1.1502-6 (relating to several liability) or any comparable or similar
provision providing for joint and/or several liability under state, local or
foreign Tax Laws.
Section 7.7. Tax Certification. On or before the Closing Date, Seller shall
provide Parent a copy of a statement, dated not more than 30 days prior to the
Closing Date, issued by Pepe USA, meeting the requirements of Treasury
Regulation Sections 1.897-2(h) and 1.1445-2(c)(3), substantially in the form
of the sample certification set forth therein.
Section 7.8. Definitions. For purposes of this Article VII, the following
terms shall have the meanings ascribed to them below:
(a) "Determination" means a determination as defined by Section 1313(a) of
the Code.
(b) "Income Tax Returns" means federal, state, local or foreign Returns
relating to Income Taxes required to be filed with any Taxing Authority that
include any of the Companies or the Subsidiaries.
(c) "Income Taxes" means federal, state, local or foreign income, profits,
capital gains, franchise taxes or other taxes measured by reference to income,
profits, capital gains and all other taxes reported on any Returns, together
with any interest, penalties, charges or fees imposed with respect thereto.
(d) "IRS" means the United States Internal Revenue Service.
(e) "Other Taxes" means all Taxes which are not Income Taxes.
(f) "Returns" means returns, reports and forms required to be filed with any
Taxing Authority.
(g) "Tax Laws" means the Code, federal, state, county, local, or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
30
(h) "Taxes" means all taxes (whether federal, state, local or foreign) based
upon or measured by income and any other tax whatsoever, including, without
limitation, gross receipts, profits, sales, levies, imposts, deductions,
charges, rates, duties, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll and social security, employment, excise, stamp
duty or property taxes, together with any interest, penalties, charges or fees
imposed with respect thereto.
(i) "Taxing Authority" means any Governmental Authority including social
security administration, domestic or foreign, having responsibility for or
jurisdiction over the assessment, determination, collection, or other
imposition of Tax.
ARTICLE VIII
Conditions to Parent's, TH USA's and THEH's
Obligations to Close
The respective obligations of Parent, TH USA and THEH to consummate the
Stock Purchases shall be subject to the satisfaction on or prior to the
Closing Date of all of the following conditions:
Section 8.1. Representations, Warranties and Covenants of Seller. The
representations and warranties of Seller contained in this Agreement shall be
true and correct when made and, except for representations and warranties that
speak as of a specific date or time (which need only be true and correct as of
such date or time), on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date, except for such inaccuracies or breaches as would not, individually or
in the aggregate, have a Company Material Adverse Effect, and the covenants
and agreements of Seller contained in this Agreement to be performed on or
before the Closing Date in accordance with this Agreement shall have been duly
performed in all material respects, and Parent shall have received at the
Closing a certificate to the effect of the foregoing dated the Closing Date
and validly executed by the President or a Vice President of Seller.
Section 8.2. Regulatory Approvals. (a) All applicable waiting periods under
the HSR Act shall have expired or been terminated, (b) a notice of amendment
to the Memorandum of Association of Parent to reflect the Memorandum Amendment
shall have been filed by or on behalf of Parent with the Registrar of
Companies of the British Virgin Islands and (c) any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act shall
have been obtained or made.
Section 8.3. No Orders or Injunctions. No order or injunction shall have
been issued by any Governmental Authority which prevents or prohibits the
consummation of the Stock Purchases or any other transaction contemplated by
this Agreement.
Section 8.4. Opinions of Seller's Counsel. Parent shall have received at
Closing opinions addressed to Parent and dated the Closing Date from counsel
to Seller in form and substance reasonably satisfactory to Parent with respect
to certain corporate matters in Sections 3.1 and 3.2.
Section 8.5. Certain Agreements. The International License and any
sublicenses thereunder shall have been cancelled, the Amended European License
Agreement shall have been executed and delivered by TH Europe and Seller, the
Non-Competition Agreement shall have been executed and delivered by the
parties thereto other than Parent, and the Bentley Trust Guarantee and the
AIHL Guarantee shall be in full force and effect.
Section 8.6. Stockholder Approval. This Agreement shall have been approved
by a majority of the votes cast at the Parent Stockholders Meeting.
Section 8.7. Canada Purchase. All of the conditions to Pepe USA's and
Lawvest's respective obligations to consummate the transactions contemplated
by the Canada Purchase Agreement, other than the delivery by Lawvest of the
Tomcan Shares and the delivery by Pepe USA of the Purchase Price (as defined
in the Canada Purchase Agreement) pursuant to Article II thereof, shall have
been satisfied, without any waiver
31
thereof and Parent shall have received at the Closing a certificate to such
effect dated the Closing Date and validly executed by the President, a Vice
President or other senior officer of each of Lawvest and Seller.
Section 8.8. NYSE Listing. The Purchase Price Shares shall have been
approved for listing on the NYSE, subject to official notice of issuance.
Section 8.9. Parent Financing. Parent and/or its subsidiaries shall have
received the financing for the Purchase Price Cash Amount on terms and
conditions reasonably satisfactory to Parent.
Section 8.10. Consents. All consents or waivers of the parties to (i) the
credit agreements set forth on Schedule 5.2 hereto shall have been obtained or
such credit agreements shall have been renegotiated on terms reasonably
satisfactory to Parent and (ii) the agreements listed on Schedule 3.1(d)
reasonably requested by Parent shall have been obtained.
ARTICLE IX
Conditions to Seller's Obligation to Close
Seller's obligation to consummate the Stock Purchases shall be subject to
the satisfaction on or prior to the Closing Date of all of the following
conditions:
Section 9.1. Representations, Warranties and Covenants of Parent. The
representations and warranties of Parent contained in this Agreement shall be
true and correct when made and, except for representations and warranties that
speak as of a specific date or time (which need only be true and correct as of
such date or time), on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date, except for such inaccuracies or breaches as would not, individually or
in the aggregate, have a material adverse effect on Parent and its
subsidiaries taken as a whole, and the covenants and agreements of Parent
contained in this Agreement to be performed on or before the Closing Date in
accordance with this Agreement shall have been duly performed in all material
respects, and Seller shall have received at the Closing a certificate to the
effect of the foregoing dated the Closing Date and validly executed by the
President, a Vice President or other senior officer of Parent.
Section 9.2. Regulatory Approvals. (a) All applicable waiting periods under
the HSR Act shall have expired or been terminated, (b) a notice of amendment
to the Memorandum of Association of Parent to reflect the Memorandum Amendment
shall have been filed by or on behalf of Parent with the Registrar of
Companies of the British Virgin Islands and (c) any necessary approvals or
filings under the Competition Act (Canada) or the Investment Canada Act shall
have been obtained or made.
Section 9.3. No Orders or Injunctions. No order or injunction shall have
been issued by any Governmental Authority which prevents or prohibits the
consummation of the Stock Purchases or any other transaction contemplated by
this Agreement.
Section 9.4. Opinions of Parent's Counsel. Seller shall have received at
Closing opinions from counsel to Parent in form and substance reasonably
satisfactory to Seller with respect to certain corporate matters in Sections
4.1 and 4.2.
Section 9.5. Certain Agreements. Xxxxx Xxxxxxxx Licensing, Inc. shall have
executed and delivered the Amended European License Agreement and Parent shall
have executed and delivered the Registration Rights Agreement.
Section 9.6. Stockholder Approval. This Agreement shall have been approved
by a majority of the votes cast at the Parent Stockholders Meeting.
Section 9.7. NYSE Listing. The Purchase Price Shares shall have been
approved for listing on the NYSE, subject to official notice of issuance.
Section 9.8. Consents. All consents or waivers of the parties to the credit
agreements set forth on Schedule 5.2 hereto to which any of the Companies or
Subsidiaries is a party shall have been obtained or such credit agreements
shall have been renegotiated on terms reasonably satisfactory to Seller.
32
ARTICLE X
Survival; Indemnification
Section 10.1. Survival. (a) The representations and warranties of Seller
contained in this Agreement shall survive the Closing until September 30,
1999, except the representations and warranties set forth (i) in Sections
3.1(e) and 3.2(a) which shall survive the Closing indefinitely, (ii) in
Section 3.14 which shall survive the Closing until the third anniversary of
the Closing Date and (iii) in Article VII which shall survive the Closing
until expiration of the relevant statute of limitations (including any
extensions thereof) or, if later, until resolution of any disputes arising
during such period applicable to the income tax return (the "Applicable
Return") of each of the Companies and Subsidiaries for the period ending on
the Closing Date (such later date being the "Expiration Date").
(b) The covenants and agreements contained in this Agreement which by their
terms do not contemplate performance after the Closing Date shall survive the
Closing until September 30, 1999. The covenants and agreements contained in
this Agreement which by their terms contemplate performance after the Closing
Date (including but not limited to the indemnities) shall survive the
completion of the transactions contemplated herein.
Section 10.2. Indemnification by Seller. (a) Subject to Section 10.4 hereof,
from and after the Closing Date, Seller shall indemnify and hold harmless
Parent and its subsidiaries and their respective officers and directors
(collectively, the "Indemnified Parties"), on a Net After-Tax Basis, from and
against any and all Covered Losses suffered by such Indemnified Parties
resulting from or arising out of (i) any inaccuracy in or breach of any of the
representations or warranties of Seller when made, and, except for
representations and warranties that speak of a specific date or time (which
need only be true and correct as of such date and time), on and as of the
Closing Date, (ii) any breach or nonfulfillment of any covenants or agreements
made by any Seller Affiliate herein, (iii) any liability or obligation of the
Companies or Subsidiaries arising from or relating to any business other than
the business of the Companies, the Subsidiaries, Tomcan and TH Canada
conducted under the TH Licenses, including without limitation all liabilities
and obligations of the Companies and Subsidiaries, if any, under the Actions
set forth on Schedule 10.2(a) hereto (collectively, "Retained Liabilities")
and (iv) the failure by Lawvest or the Guarantor (as defined in the Bentley
Trust Guarantee) to timely satisfy upon demand therefor its liabilities and
obligations to Pepe USA pursuant to the indemnification provisions of the
Canada Purchase Agreement or the Bentley Trust Guarantee, as applicable
("Canadian Liabilities"). The indemnity by Seller under this Section 10.2
shall not affect or limit the indemnification provided by Seller under Section
7.6.
(b) The Indemnified Parties shall not be entitled to assert any
indemnification pursuant to clause (i) or (ii) (in the case of covenants and
agreements which by their terms do not contemplate performance after the
Closing Date) of Section 10.2(a): (i) after the Expiration Date, with respect
to inaccuracies in or breaches of the representations and warranties by Seller
contained in Article VII, (ii) after the third anniversary of the Closing
Date, with respect to such covenant breaches or inaccuracies in or breaches of
the representations and warranties by Seller contained in Section 3.14 or
(iii) after September 30, 1999, with respect to all other inaccuracies in or
breaches of the representations and warranties by Seller contained in any
other Section hereof (other than Sections 3.1(e) and 3.2(a), which shall have
no such limitation) or any breach or nonfulfillment of any covenants or
agreements made by Seller herein which by their terms were required to be
performed prior to the Closing Date; provided that if on or prior to such
Expiration Date, third anniversary of the Closing Date or September 30, 1999,
as the case may be, a Notice of Claim shall have been given to Seller pursuant
to Section 10.3 hereof for such indemnification, the Indemnified Parties shall
continue to have the right to be indemnified on a Net After-Tax Basis with
respect to such indemnification claim until such claim for indemnification has
been satisfied or otherwise resolved as provided in this Article X.
Section 10.3. Indemnification Procedures. (a) Upon obtaining knowledge of
any claim or demand which has given rise to, or is expected to give rise to, a
claim for indemnification hereunder, Parent shall give written notice ("Notice
of Claim") of such claim or demand to Seller. Parent shall furnish to Seller
in reasonable detail
33
such information as the Indemnified Parties may have with respect to such
indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). Subject
to the limitations set forth in Section 10.2(b) hereof, no failure or delay by
Parent in the performance of the foregoing shall reduce or otherwise affect
the obligation of Seller to indemnify and hold the Indemnified Parties
harmless on a Net After-Tax Basis, except to the extent that such failure or
delay shall have actually adversely affected Seller's ability to defend
against, settle or satisfy any Losses for which the Indemnified Parties are
entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice of Claim given by Parent
pursuant to Section 10.3(a) hereof is a claim or demand asserted by a third
party, Seller shall have 15 days after the date on which Notice of Claim is
given to notify Parent in writing of its election to defend such third party
claim or demand on behalf of the Indemnified Party. If Seller elects to defend
such third party claim or demand, Parent shall make available to Seller and
its agents and representatives all records and other materials which are
reasonably required in the defense of such third party claim or demand and
shall otherwise cooperate with, and assist Seller in the defense of, such
third party claim or demand, and so long as Seller is defending such third
party claim in good faith, the Indemnified Parties shall not pay, settle or
compromise such third party claim or demand. If Seller elects to defend such
third party claim or demand, the Indemnified Party shall have the right to
participate in the defense of such third party claim or demand, at such
Indemnified Party's own expense. In the event, however, that such Indemnified
Party reasonably determines that representation by counsel to Seller of both
Seller and such Indemnified Party could reasonably be expected to present such
counsel with a conflict of interest, then the Indemnified Party may employ
separate counsel to represent or defend it in any such action or proceeding
and Seller will pay the fees and expenses of such counsel; provided, that
Seller shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to local counsel) at any time for all
Indemnified Parties. If Seller does not elect to defend such third party claim
or demand or does not defend such third party claim or demand in good faith,
the Indemnified Party shall have the right, in addition to any other right or
remedy it may have hereunder, at Seller's expense, to defend such third party
claim or demand; provided, however, that (i) such Indemnified Party shall not
have any obligation to participate in the defense of, or defend, any such
third party claim or demand; (ii) such Indemnified Party's defense of or its
participation in the defense of any such third party claim or demand shall not
in any way diminish or lessen the obligations of Seller under the agreements
of indemnification set forth in this Article X; and (iii) such Indemnified
Party may not settle any claim without the consent of Seller (which consent
shall not be unreasonably withheld or delayed).
(c) Seller and Parent shall cooperate in the defense of any claim or
litigation subject to this Article X and the records of each shall be
available to the other with respect to such defense.
(d) Except for third party claims being defended in good faith, Seller shall
satisfy its obligations under this Article X in respect of a valid claim for
indemnification hereunder which is not contested by Seller in good faith in
cash within 30 days after the date on which Notice of Claim is given.
Section 10.4. Limits on Indemnification. Seller shall have no liability for
indemnification pursuant to this Article X with respect to Covered Losses
unless such Covered Losses exceed in the aggregate $500,000 (the
"Indemnification Threshold"); provided, however, that in the event that
Covered Losses shall exceed in the aggregate the Indemnification Threshold,
Seller shall be liable hereunder for all such Covered Losses; and provided,
further, that Covered Losses with respect to Retained Liabilities or the
Canadian Liabilities shall not be subject to the Indemnification Threshold.
Notwithstanding anything herein to the contrary, in no event shall Seller be
required to indemnify Parent and its subsidiaries pursuant to this Article X
for Covered Losses in excess of $1,128,000,000.00; provided, however, that
Seller shall be entitled to satisfy in full its obligations under this Article
X by delivery to the Indemnified Parties of the Purchase Price Cash Amount and
the Purchase Price Shares.
Section 10.5. Losses Net of Insurance. The amount of any Covered Loss for
which indemnification is provided under this Article X shall be net of any
amounts recovered by the Indemnified Parties under insurance
34
policies with respect to such Covered Loss. In the event that the Indemnified
Parties shall later collect any such amounts recovered under insurance
policies with respect to any Covered Loss for which any of them has previously
received payments under this Article X from Seller, such Indemnified Party
shall promptly repay to Seller such amount recovered.
ARTICLE XI
Termination
Section 11.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of Seller and Parent;
(b) by either Seller or Parent, if any Governmental Authority of competent
jurisdiction shall have issued an injunction, restraining order or decree that
restrains or prohibits the consummation of the Stock Purchases or the
performance by the parties hereto of the other obligations hereunder, and such
injunction, restraining order or decree shall have become final and
nonappealable;
(c) by either Seller or Parent, if the Closing has not occurred by the close
of business on September 30, 1998, unless the failure of the Closing to occur
by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe in all material respects the covenants
and agreements of such party set forth herein; or
(d) by either Seller or Parent if this Agreement shall not have been
approved by a majority of the votes cast at the Parent Stockholders Meeting.
Section 11.2. Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of Seller and Parent pursuant
to Section 11.1, written notice thereof shall forthwith be given by the
terminating party or parties to the other party or parties hereto, and this
Agreement shall thereupon terminate and become void and have no effect, and
the transactions contemplated hereby shall be abandoned without further action
by the parties hereto, except that the provisions of Section 12.5 shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any wilful
breach of this Agreement (other than a breach of a representation, as to which
no party shall be liable hereunder). If this Agreement is terminated as
provided herein all filings, applications and other submissions contemplated
by Sections 3.7 and 4.3 and Article V shall, to the extent practicable, be
withdrawn from the agency or other persons to which they were made.
ARTICLE XII
Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party.
Section 12.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
contracts to be performed in New York.
Section 12.3. Jurisdiction; Waiver of Trial by Jury. The parties hereby
consent to the jurisdiction of the United States District Court for the
Southern District of New York and any of the courts of the state of New York
in any dispute arising under this Agreement and agree further that service of
process or notice in any such action, suit or proceeding shall be effective if
in writing and delivered in person or sent as provided in Section 12.6 hereof.
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF
THIS AGREEMENT OR IN CONNECTION HEREWITH IS HEREBY WAIVED.
35
Section 12.4. Entire Agreement. This Agreement (including the Ancillary
Agreements) and the Schedules and Exhibits hereto contain the entire agreement
between the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties between the parties
other than those set forth or referred to herein. Except for the provisions of
Article X, which are intended to benefit, and to be enforceable by, any of the
Indemnified Parties, this Agreement is not intended to confer and shall not
confer upon any Person not a party hereto any rights or remedies hereunder.
Section 12.5. Expenses. Except as otherwise set forth in this Agreement, if
the transactions contemplated hereby are not consummated, all legal and other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses. If the transactions contemplated hereby are consummated,
the legal and other expenses incurred in connection with this Agreement shall
be paid by Pepe USA and TH USA.
Section 12.6. Notices. All notices hereunder shall be sufficiently given for
all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as set forth below. Notices to Seller shall be addressed to:
Pepe Jeans London Corporation
00 Xxxxx Xxxxxx
Xxx Xxxxxxxxx
Xxxxxxxxx
Xxxxxx Xxxxxxx
Attn: Sydney R. Neil
Telecopier No.: 00-000-000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
or at such other address and to the attention of such other person as Seller
may designate by written notice to Parent.
Notices to Parent, TH USA or THEH shall be made to Parent and shall be
addressed to:
Xxxxx Xxxxxxxx Corporation
c/o Xxxxx Xxxxxxxx U.S.A., Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000,
Attn: Xxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Telecopier No: (000) 000-0000
or at such other address and to the attention of such other person as Parent
may designate by written notice to Seller.
36
Section 12.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior
written consent of each other party hereto. Notwithstanding the foregoing,
Parent may assign its rights under this Agreement to any wholly-owned
subsidiary of Parent; provided that no such assignment by Parent of its rights
hereunder to any wholly-owned subsidiary shall in any way affect Parent's
obligations or liabilities under this Agreement.
Section 12.8. Headings; Definitions. The Section and Article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles
of this Agreement unless otherwise stated. All capitalized terms defined
herein are equally applicable to both the singular and plural forms of such
terms.
Section 12.9. Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing waive compliance by the
other parties hereto with any term or provision of this Agreement on the part
of such other parties hereto to be performed or complied with. The waiver by
any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
Section 12.10. Severability. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now or hereafter in effect, the parties
shall be excused from performance of such portions of this Agreement as shall
be found to be illegal or unenforceable under the applicable laws or
regulations without affecting the validity of the remaining provisions of the
Agreement; provided that (i) the remaining provisions of the Agreement shall
in their totality constitute a commercially reasonable agreement, and (ii)
should any method of termination of this Agreement or a portion thereof be
found to be illegal or unenforceable, such method shall be reformed to comply
with the requirements of applicable law so as, to the greatest extent
possible, to allow termination by that method. Nothing herein shall be
construed as a waiver of any party's right to challenge the validity of such
law.
Section 12.11. Interpretation. For the purposes of this Agreement, (i) a
"subsidiary" of an entity means any entity more than 50% of the voting power
of whose outstanding voting securities or equity interests are directly or
indirectly owned by such other entity, and (ii) "including" shall mean
"including without limitation."
37
In Witness Whereof, this Agreement has been signed by or on behalf of each
of the parties as of the day first above written.
XXXXX XXXXXXXX CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer and
President
XXXXX XXXXXXXX U.S.A., INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer
XXXXX XXXXXXXX (EASTERN HEMISPHERE) LIMITED
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer and
President
PEPE JEANS LONDON CORPORATION
By: /s/ Xxxxxxxx X. Stroll
-------------------------------------------
Name: Xxxxxxxx X. Stroll
Title: Group CEO
38
