<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FRUIT OF THE LOOM, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS
(STATE OR OTHER JURISDICTION OF INCORPORATION)
NONE
(I.R.S. EMPLOYER IDENTIFICATION NO.)
2322
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
P.O. BOX 31311 SMB
SAFEHAVEN CORPORATE CENTER
GRAND CAYMAN, CAYMAN ISLANDS, BWI
(345) 949-6690
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LARRY K. SWITZER
SENIOR EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
FRUIT OF THE LOOM, INC.
5000 SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 876-1724
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
HOWARD S. LANZNAR, ESQ.
KATTEN MUCHIN & ZAVIS
525 WEST MONROE STREET
SUITE 1600
CHICAGO, ILLINOIS 60661
(312) 902-5200
TED S. WAKSMAN, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE NUMBER OF SHARES TO AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION
REGISTERED BE REGISTERED PRICE PER SHARE PRICE FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Ordinary Shares,
par value $.01 per
share.................... 67,592,824(1) Not applicable Not applicable $510,960(2)
=======================================================================================================================
</TABLE>
(1) The maximum number of Class A Ordinary Shares of Fruit of the Loom, Ltd.
that may be offered to the holders of Class A Common Stock of Fruit of the
Loom, Inc. in the Merger.
(2) The registration fee was calculated pursuant to Rule 457(f) as .000295
multiplied by $25.625, the average of the high and low prices per share of
Fruit of the Loom, Inc. Class A Common Stock as quoted on the New York Stock
Exchange Composite Tape on February 5, 1998 multiplied by 67,592,824, the
maximum number of shares of Fruit of the Loom, Inc. Class A Common Stock
which may be exchanged for Class A Ordinary Shares in the Merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
[LETTERHEAD OF FRUIT OF THE LOOM, INC.]
, 1998
Dear Stockholder:
The Board of Directors of Fruit of the Loom, Inc. (the "Company") is
calling a Special Meeting of Stockholders to be held on , 1998 at
10:00 a.m., Chicago time, at , Chicago, Illinois, to consider the
reorganization of the Company. The Board of Directors is proposing that Fruit of
the Loom, Ltd. ("FTL-Cayman"), a Cayman Islands company, become the parent of
the Company. As a result of the reorganization, FTL-Cayman, directly or
indirectly, will carry on the operations currently conducted by the "Company"
and will own all of the outstanding capital stock of the "Company", except for
newly-issued shares of exchangeable participating preferred stock of the
"Company" to be held by the undersigned, William Farley, and my affiliates
(collectively "Farley").
Accompanying this letter is a Notice of Special Meeting of Stockholders
relating to the Special Meeting and a Proxy Statement/Prospectus describing in
more detail the reorganization and related matters.
The Board of Directors believes that the reorganization will enable the
"Company" to create better returns for our stockholders. The use of a Cayman
Islands holding company will allow the Company to organize its international
business activities so that it will be able to benefit from more favorable
business, tax and financing environments than would be available to us if our
parent company were to remain a United States corporation. The use of a Cayman
Islands parent corporation is expected to reduce corporate income taxes because
the Cayman Islands generally imposes no corporate income taxes on foreign
income. By contrast, the United States imposes corporate income tax on the
worldwide income of United States corporations. The United States imposes
significant costs for companies like Fruit of the Loom that conduct a
substantial portion of their operations outside the United States. These costs
are expected to be reduced to the extent that our operations are conducted after
the reorganization by FTL-Cayman or its foreign subsidiaries.
At the effective time of the reorganization the holders of the Company's
Class A Common Stock will become holders of FTL-Cayman's Class A ordinary
shares. The Class A ordinary shares will have substantially the same attributes
as the Company's Class A Common Stock and will be listed on the New York Stock
Exchange under the symbol "FTL." THE EXCHANGE OF CLASS A COMMON STOCK FOR CLASS
A ORDINARY SHARES WILL BE A TAXABLE TRANSACTION IN WHICH GAIN, IF ANY (BUT NOT
LOSS), WILL BE RECOGNIZED BY EXCHANGING STOCKHOLDERS. Farley, who holds all of
the outstanding Class B Common Stock of the Company, will exchange such shares
at the effective time of the reorganization for newly-issued exchangeable
participating preferred stock of the Company, which is exchangeable for
FTL-Cayman Class A ordinary shares and convertible into the common stock of the
Company. In connection with the reorganization, such Class B stockholders will
also own FTL-Cayman Class B redeemable ordinary shares with aggregate voting
rights comparable to the current voting rights of the Class B Common Stock of
the Company. The transaction has been structured with respect to such holders of
Class B Common Stock with the intention that it will not be currently taxable to
them.
The reorganization has been unanimously approved by the Board of Directors
of the Company and a Special Committee comprised of independent directors which
was appointed to analyze the terms and structure of the reorganization, and to
develop, and in the case of Farley, negotiate, the terms of the securities to be
offered to the Class A Common stockholders and Farley in the reorganization. The
Company has also received an opinion from Lehman Brothers Inc. that, from a
financial point of view, the consideration to be offered to the Class A Common
stockholders in the reorganization is fair to such holders.
<PAGE> 3
Please carefully read the accompanying Proxy Statement/Prospectus for
details of the reorganization and related information.
It is important that your shares be represented regardless of whether you
plan to be present at the Special Meeting. Approval of the reorganization
requires the affirmative vote of a majority of the outstanding shares of Class A
and Class B Common Stock voting together as a single class as well as the
affirmative vote of a majority of the outstanding shares of each class voting
separately. Farley has advised the Board that they intend to vote in favor of
the reorganization. Please complete, date and sign the enclosed proxy card and
mail it promptly in the enclosed postage-paid return envelope.
The Board of Directors of the Company unanimously recommends that
stockholders vote in favor of the reorganization, which will be deemed to
constitute a vote in favor of the amendment to FTL-Delaware's Certificate of
Incorporation and the Agreement and Plan of Merger, which are required to
effectuate the reorganization.
Sincerely,
WILLIAM FARLEY
Chairman of the Board and Chief
Executive Officer
<PAGE> 4
Fruit of the Loom logo
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF FRUIT OF THE LOOM, INC.
TO BE HELD ON , 1998
------------------------
To the Stockholders of
FRUIT OF THE LOOM, INC.:
A Special Meeting of Stockholders of Fruit of the Loom, Inc.
("FTL-Delaware") will be held at 10:00 a.m., Chicago time, on
, , 1998 at ,
Chicago, Illinois, for the following purposes:
(1) To approve the proposed reorganization (the "Reorganization")
pursuant to which Fruit of the Loom, Ltd. ("FTL-Cayman"), a Cayman Islands
company, will become the parent holding company of FTL-Delaware through the
merger of a newly-formed Delaware subsidiary of FTL-Cayman with and into
FTL-Delaware, such approval being deemed to include approval of the
Agreement and Plan of Merger to effectuate such merger and the amendment to
FTL-Delaware's Certificate of Incorporation to permit the merger to be
effectuated in accordance with its terms notwithstanding the different
treatment of Class A and Class B Common Stock; and
(2) To transact such other business as may properly be brought before
the meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on ,
1998 as the record date for determining stockholders entitled to notice of, and
to vote at, the Special Meeting.
By order of the Board of Directors,
BURGESS D. RIDGE
Senior Vice President--Administration
and Secretary
, 1998
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE FURNISHED FOR THAT PURPOSE.
<PAGE> 5
THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN
ARE SUBJECT TO COMPLETION, AMENDMENT OR OTHER CHANGE WITHOUT ANY NOTICE.
THESE SECURITIES DESCRIBED HEREIN MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE OFFICIAL STATEMENT IS DELIVERED IN FINAL
FORM. UNDER NO CIRCUMSTANCES SHALL THIS PRELIMINARY OFFICIAL STATEMENT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1998
FRUIT OF THE LOOM, INC.
------------------------
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
------------------------
FRUIT OF THE LOOM, LTD.
PROSPECTUS FOR
67,592,824 CLASS A ORDINARY
SHARES OF FRUIT OF THE LOOM, LTD.
This Proxy Statement/Prospectus ("Proxy Statement/ Prospectus") is being
furnished to stockholders of Fruit of the Loom, Inc., a Delaware corporation
("FTL-Delaware"), in connection with the solicitation of proxies by the Board of
Directors of FTL-Delaware for use at the special meeting of FTL-Delaware
stockholders (the "Special Meeting") to be held at
Chicago, Illinois on , 1998 at
10:00 a.m., Chicago time (or at any adjournments or postponements thereof). This
Proxy Statement/Prospectus relates to the proposed reorganization (the
"Reorganization") pursuant to which Fruit of the Loom, Ltd., a Cayman Islands
company ("FTL-Cayman") and a wholly-owned subsidiary of FTL-Delaware, will
become the parent holding company of FTL-Delaware through the merger (the
"Merger") of FTL Merger Corp. ("Sub"), a Delaware corporation and a newly
formed, wholly-owned subsidiary of FTL-Cayman, with and into FTL-Delaware. The
Reorganization will be effected pursuant to the Agreement and Plan of Merger,
dated as of February 10, 1998 (the "Merger Agreement"), among FTL-Delaware,
FTL-Cayman and Sub. Upon consummation of the Merger, each outstanding share of
Class A common stock, par value $.01 per share ("FTL-Delaware Class A Stock"),
of FTL-Delaware (other than those shares held by FTL-Delaware in its treasury)
will be automatically converted into one Class A ordinary share, par value $.01
per share ("FTL-Cayman Class A Shares"), of FTL-Cayman, and each outstanding
share of Class B common stock, par value $.01 per share ("FTL-Delaware Class B
Stock"), of FTL-Delaware will be automatically converted into one share of
exchangeable participating preferred stock, par value $.01 per share
("FTL-Delaware Preferred Stock"), of FTL-Delaware. The holders of FTL-Delaware
Class B Stock will also own, in the aggregate, four (4) Class B redeemable
ordinary shares, par value $.01 per share (the "FTL-Cayman Class B Shares"), of
FTL-Cayman.
See "Description of Authorized Shares of FTL-Cayman," "Description of
FTL-Delaware Preferred Stock" and "Comparison of Rights of Stockholders."
FTL-Delaware Common Stock is currently listed on the New York Stock
Exchange (the "NYSE") under the symbol "FTL" and, immediately following the
Reorganization, the FTL-Cayman Class A Shares will be listed on the NYSE under
the same symbol. The last reported sale price for the FTL-Delaware Class A Stock
on the NYSE Composite Transactions Tape on , 1998 was $ .
Currently, there is no established public trading market for the FTL-Cayman
Class A Shares.
This Proxy Statement/Prospectus and the form of proxy are first being
mailed to the stockholders of FTL-Delaware on or about , 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 4
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS.................. 5
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN
PERSONS................................................... 5
SUMMARY OF SECURITIES TO BE RECEIVED IN CONNECTION WITH THE
REORGANIZATION............................................ 7
SUMMARY..................................................... 9
Special Meeting........................................... 9
FTL-Delaware.............................................. 9
FTL-Cayman................................................ 10
The Reorganization........................................ 10
Recommendation of the Board of Directors.................. 13
Vote Required for Adoption................................ 13
Comparison of Rights of Stockholders...................... 14
Tax Considerations........................................ 14
Rights of Dissenting Stockholders......................... 15
Accounting Treatment of the Reorganization................ 15
Stock Exchange Listing.................................... 15
Selected Historical Financial Data........................ 16
Summary Pro Forma Financial Information................... 18
THE SPECIAL MEETING......................................... 19
Special Meeting........................................... 19
Record Date............................................... 19
Vote Required for Adoption................................ 19
Proxies................................................... 19
Solicitation of Proxies................................... 20
Proposals of Stockholders................................. 20
FTL-DELAWARE AND FTL-CAYMAN................................. 21
THE REORGANIZATION.......................................... 22
General................................................... 22
Special Committee/Fairness Opinion........................ 22
Background and Reasons for the Reorganization............. 23
The Merger Agreement...................................... 27
Conditions to Consummation of the Reorganization.......... 28
Effective Time............................................ 28
Rights of Dissenting Stockholders......................... 29
Exchange of Share Certificates............................ 29
Stock Compensation Plans.................................. 29
Shareholder Rights Plan................................... 29
Stock Exchange Listing.................................... 30
Accounting Treatment of the Reorganization................ 30
Transfer of Assets........................................ 30
CERTAIN TAX CONSIDERATIONS.................................. 30
United States Federal Income Tax Consequences............. 30
Cayman Islands Tax Consequences........................... 34
DESCRIPTION OF AUTHORIZED SHARES OF FTL-CAYMAN.............. 34
Ordinary Shares; General.................................. 34
Voting.................................................... 34
Dividend Rights........................................... 35
Liquidation of FTL-Cayman................................. 36
Redemption................................................ 36
</TABLE>
2
<PAGE> 7
Restrictions on Transfer.................................. 36
Preference Shares......................................... 36
DESCRIPTION OF FTL-DELAWARE PREFERRED STOCK................. 37
General................................................... 37
Dividends................................................. 37
Liquidation of FTL-Delaware............................... 37
Voting Rights............................................. 38
Optional Redemption....................................... 38
Exchange Rights........................................... 38
Conversion Rights......................................... 39
Alternative Rates and No-Call Periods..................... 39
COMPARISON OF RIGHTS OF STOCKHOLDERS........................ 39
Stockholder Approval of Business Combinations............. 40
Absence of Required Vote for Certain Mergers.............. 40
Appraisal Rights.......................................... 40
Stockholder Consent to Action Without Meeting............. 41
Special Meetings of Stockholders.......................... 41
Distributions and Dividends; Repurchases and
Redemptions............................................ 42
Preferred Stock Purchase Rights........................... 42
Inspection of Books and Records........................... 43
Amendment of Charter...................................... 43
Amendment of Bylaws....................................... 43
Indemnification of Directors and Officers................. 43
Limited Liability of Directors............................ 44
Stockholders' Suits....................................... 44
THIRD PARTY CONSENTS........................................ 44
MANAGEMENT OF FTL-CAYMAN.................................... 45
Committees of the Board of Directors...................... 45
Executive Compensation.................................... 46
LEGAL MATTERS............................................... 46
EXPERTS..................................................... 46
INDEX TO FINANCIAL STATEMENTS............................... F-1
INDEX TO PRO FORMA FINANCIAL STATEMENTS..................... P-1
<TABLE>
<S> <C>
AGREEMENT AND PLAN OF MERGER................................ Annex I
OPINION OF LEHMAN BROTHERS INC.............................. Annex II
Annex
CERTIFICATE OF AMENDMENT.................................... III
CERTIFICATE OF DESIGNATIONS................................. Annex IV
</TABLE>
3
<PAGE> 8
AVAILABLE INFORMATION
FTL-Cayman has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-4 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This Proxy
Statement/Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations of
the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus as to the contents of
any contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission, reference
is made to the copy so filed, and each such statement shall be deemed qualified
in its entirety by such reference.
FTL-Delaware is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Commission. The reports, proxy and information statements, and other
information filed by FTL-Delaware with the Commission, can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
FTL-Delaware Class A Stock is listed on the New York Stock Exchange, and reports
and other information concerning FTL-Delaware may be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Certain
other securities of FTL-Delaware are listed on the American Stock Exchange, and
reports and other information concerning FTL-Delaware may also be inspected at
the offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006. Copies of reports, proxy and information statements and other information
regarding registrants that file electronically (including FTL-Delaware) are
available on the Commission's Web Site at http://www.sec.gov.
Upon completion of the Reorganization, the FTL-Cayman Class A Shares will
be listed on the NYSE. At the time of such listing, the FTL-Delaware Class A
Stock will be delisted and will no longer be registered pursuant to Section 12
of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
FTL-Delaware hereby incorporates by reference in this Proxy
Statement/Prospectus the following documents previously filed by FTL-Delaware
with the Commission pursuant to the Exchange Act: (i) FTL-Delaware's Annual
Report on Form 10-K for the year ended December 31, 1996, (ii) FTL-Delaware's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30,
1997 and September 30, 1997, and (iii) FTL-Delaware's Current Report on Form 8-K
dated October 22, 1997.
Each document filed by FTL-Delaware pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of the offering of the
securities pursuant hereto shall be deemed to be incorporated by reference in
this Proxy Statement/Prospectus and to be a part of this Proxy
Statement/Prospectus from the date of filing of such document. Any statement
contained in this Proxy Statement/ Prospectus or in a document incorporated or
deemed to be incorporated by reference in this Proxy Statement/Prospectus shall
be deemed to be modified or superseded for purposes of the Registration
Statement and this Proxy Statement/Prospectus to the extent that a statement
contained in this Proxy Statement/Prospectus or in any subsequently filed
document that also is or is deemed to be incorporated by reference in this Proxy
Statement/Prospectus modifies or supersedes such
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<PAGE> 9
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Proxy Statement/ Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THE INCORPORATED
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN) WILL BE FURNISHED UPON REQUEST
WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED. WRITTEN OR TELEPHONE REQUESTS SHOULD BE DIRECTED TO FRUIT OF THE
LOOM, INC., 5000 SEARS TOWER, 233 SOUTH WACKER DRIVE, CHICAGO, ILLINOIS 60606,
ATTENTION: SECRETARY (TELEPHONE (312) 876-1724).
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
FTL-CAYMAN IS PROHIBITED FROM MAKING ANY INVITATION TO THE PUBLIC IN THE CAYMAN
ISLANDS TO SUBSCRIBE FOR ANY OF ITS SHARES.
Neither delivery of this Proxy Statement/Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of FTL-Delaware and FTL-Cayman since the date of
this Proxy Statement/Prospectus.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus contains, and the documents incorporated by
reference herein contain or will contain certain statements which describe
FTL-Delaware's beliefs concerning future business conditions and the outlook for
FTL-Delaware and FTL-Cayman, based on currently available information. Wherever
possible, FTL-Delaware has identified these "forward-looking" statements (as
defined in Section 27A of the Securities Act) by words such as "anticipates,"
"believes," "estimates," "expects" and similar expressions. These
forward-looking statements are subject to risks and uncertainties which could
cause FTL-Delaware's and FTL-Cayman's actual results, performance or
achievements to differ materially from those expressed in, or implied by, these
statements. These risks and uncertainties include, but are not limited to, the
following: financial strength of the retail industry (particularly the mass
merchant channel), the level of consumer spending for apparel, the amount of
sales of FTL-Delaware's and FTL-Cayman's activewear screenprint products, the
competitive pricing environment within the basic apparel segment of the apparel
industry, FTL-Delaware's and FTL-Cayman's ability to develop new products,
FTL-Delaware's and FTL-Cayman's effective income tax rate, FTL-Delaware's
ability to successfully move labor-intensive segments of the manufacturing
process outside of the United States, the success of planned advertising,
marketing and promotional campaigns and international activities, and the
resolution of legal proceedings and other contingent liabilities. FTL-Delaware
and FTL-Cayman assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
FTL-Cayman is a Cayman Islands company, certain of its officers and
directors may be residents of various jurisdictions outside the United States
and its Cayman Islands counsel, Truman Bodden & Company, are residents of the
Cayman Islands. All or a substantial portion of the assets
5
<PAGE> 10
of FTL-Cayman and of such persons may be located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to enforce in United States courts
judgments obtained against such persons. FTL-Cayman has irrevocably agreed that
it may be served with process with respect to actions based on offers and sales
of securities made hereby in the United States by serving Larry K. Switzer, c/o
Fruit of the Loom, Inc., 5000 Sears Tower, 233 South Wacker Drive, Chicago,
Illinois 60606, its United States agent appointed for that purpose. FTL-Cayman
has been advised by its Cayman Islands counsel, Truman Bodden & Company, that
there is doubt as to whether Cayman Islands courts would enforce judgments of
United States courts obtained in (a) actions against such persons or FTL-Cayman
that are predicated upon the civil liability provisions of the Securities Act or
(b) original actions brought in the Cayman Islands against FTL-Cayman or such
persons predicated upon the Securities Act. There is no treaty in effect between
the United States and the Cayman Islands providing for such enforcement, and
there are grounds upon which Cayman Islands courts may not enforce judgments of
United States courts. Certain remedies available under the United States federal
securities laws may not be allowed in Cayman Islands courts as contrary to that
nation's policy.
6
<PAGE> 11
SUMMARY OF SECURITIES TO BE RECEIVED
IN CONNECTION WITH THE REORGANIZATION
THE FOLLOWING IS A SUMMARY OF THE SECURITIES TO BE RECEIVED IN THE
REORGANIZATION BY HOLDERS OF FTL-DELAWARE CLASS A STOCK. THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. UNLESS OTHERWISE DEFINED
HEREIN, CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE RESPECTIVE MEANINGS
ASCRIBED TO THEM ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS ARE
URGED TO READ CAREFULLY THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO
IN THEIR ENTIRETY.
SECURITY RECEIVED
IN EXCHANGE FOR
FTL-DELAWARE CLASS A
STOCK IN THE MERGER........... Each share of FTL-Delaware Class A Stock will
be automatically converted into one FTL-Cayman
Class A Share. The stockholders of FTL-Delaware
currently have preferred stock purchase rights
issued pursuant to a shareholder rights plan,
which rights will not be issued in connection
with the FTL-Cayman Class A Shares.
TAX CONSEQUENCES.............. The receipt of FTL-Cayman Class A Shares in
exchange for shares of FTL-Delaware Class A
Stock will be a taxable transaction to the
stockholder in which gain, if any (but not
loss), will be recognized. See "Certain Tax
Considerations."
DIVIDENDS..................... Holders of FTL-Cayman Class A Shares will be
entitled to participate pari passu, on a share
for share basis, with the holders of any other
class of ordinary shares outstanding, including
the four (4) FTL-Cayman Class B Shares, with
respect to any dividends declared by the board
of directors of FTL-Cayman. Holders of
FTL-Cayman Class A Shares will not be entitled
to a cash dividend preference of $1.00 per
share that is currently available to the
holders of FTL-Delaware Class A Stock prior to
the payment of dividends to the holders of
FTL-Delaware Class B Stock. The board of
directors of FTL-Delaware has determined that
the $1.00 preference available to the holders
of FTL-Delaware Class A Stock is not necessary
following the Reorganization since the current
holders of FTL-Delaware Class B Stock will not
be entitled to participate in the dividends, if
any, paid by FTL-Cayman, except on the very
limited basis of their four (4) FTL-Cayman
Class B Shares.
REDEMPTION.................... The FTL-Cayman Class A Shares will not be
subject to redemption.
LIQUIDATION................... Upon the liquidation of FTL-Cayman, holders of
FTL-Cayman Class A Shares will participate in
the assets of FTL-Cayman available for
distribution pari passu, on a share for share
basis, with the holders of any other class of
ordinary shares outstanding, including the four
(4) FTL-Cayman Class B Shares.
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<PAGE> 12
VOTING RIGHTS................. One vote per FTL-Cayman Class A Share with
respect to matters submitted to the
shareholders of FTL-Cayman, voting together as
a single class with the holders of any other
class of ordinary shares, with the FTL-Cayman
Class B Shares being entitled to a number of
votes equal to the aggregate number of votes
held by the holders of FTL-Delaware Class B
Stock on the date the Merger is consummated
(which based on current ownership is 28,421,380
votes or approximately 30% of the aggregate
voting power); provided, however, that the
holders of the FTL-Cayman Class A Shares will
have the right to vote as a separate class to
elect 25% of the Board of Directors of
FTL-Cayman for so long as any FTL-Cayman Class
B Shares are outstanding. See "Description of
Authorized Shares of FTL-Cayman--Redemption."
STOCK EXCHANGE LISTING........ The FTL-Cayman Class A Shares are expected to
be listed on the NYSE under the symbol "FTL."
8
<PAGE> 13
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS, INCLUDING
THE ANNEXES, AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS.
SPECIAL MEETING
Time, Date, Place And Purpose
A Special Meeting of the FTL-Delaware stockholders will be held at 10:00
a.m., Chicago time, on , 1998, at ,
Chicago, Illinois (or any adjournments or postponements thereof) to
consider and vote on the proposal to authorize the Reorganization (including the
Merger Agreement and amendment to the FTL-Delaware Certificate of Incorporation)
and any other matters that may properly come before such meeting. The presence,
in person or by proxy, of stockholders holding a majority of the outstanding
shares of FTL-Delaware entitled to vote at the Special Meeting will constitute a
quorum. See "The Special Meeting."
Record Date
Only FTL-Delaware stockholders of record at the close of business on
, 1998, as shown on FTL-Delaware's records, will be entitled to
vote, or to grant proxies to vote, at the Special Meeting. See "The Special
Meeting--Record Date."
FTL-DELAWARE
FTL-Delaware is a marketing oriented, vertically integrated international
basic apparel company, emphasizing branded products for consumers ranging from
infants to senior citizens. FTL-Delaware is one of the largest domestic
producers of men's, boys', women's and girls' underwear and of activewear for
the imprinted market, selling products principally under the FRUIT OF THE
LOOM(R), BVD(R), SCREEN STARS(R), BEST(TM), MUNSINGWEAR(R), WILSON(R), BOTANY
500(R) and JOHN HENRY(R) brand names. FTL-Delaware also manufacturers and
markets sports licensed apparel bearing the names, tradenames and logos of the
National Football League, the National Basketball Association, Major League
Baseball and the National Hockey League, professional sports teams and many
colleges and universities in the United States, as well as the likenesses of
certain popular professional athletes, under the PRO PLAYER(R) and FANS GEAR(R)
brands. Additionally, FTL-Delaware manufacturers and markets casualwear,
jeanswear under the GITANO(R) brand name, and infants' and toddlers' apparel.
FTL-Delaware is a fully integrated manufacturer, performing most of its own
spinning, knitting, cloth finishing, cutting, sewing and packaging. FTL-Delaware
has established manufacturing operations in Honduras, El Salvador and Jamaica,
in addition to contracting with various third parties in Mexico and the
Caribbean, to assemble fabrics which have been manufactured and cut either in
FTL-Delaware's United States operations or by external sources into finished
goods for sale principally in the United States.
FTL-Delaware extensively markets its activewear and, to a lesser extent,
other products outside the United States, principally in Europe, Canada, Japan
and Mexico. To serve these markets, FTL-Delaware has manufacturing plants in
Canada, the Republic of Ireland and Northern Ireland (United Kingdom), as well
as manufacturing operations in Morocco where cut fabrics from the Republic of
Ireland are sewn and returned to Europe for sale.
FTL-Delaware was incorporated in 1985 under the laws of the State of
Delaware. Its principal executive offices are located at 5000 Sears Tower, 233
South Wacker Drive, Chicago, Illinois 60606, and its telephone number is (312)
876-1724. Unless the context indicated otherwise, references to
9
<PAGE> 14
FTL-Delaware mean Fruit of the Loom, Inc. and its subsidiaries. See
"FTL-Delaware and FTL-Cayman."
FTL-CAYMAN
FTL-Cayman is a Cayman Islands company registered and incorporated under
the laws of the Cayman Islands on January 23, 1998, which was formed to become
the parent holding company of FTL-Delaware. All of the shares of FTL-Cayman are
currently held by FTL-Delaware. Immediately prior to and in connection with the
Reorganization, William Farley and his affiliates (collectively "Farley"), the
holders of the FTL-Delaware Class B Stock, will purchase four (4) FTL-Cayman
Class B Shares from FTL-Cayman. The shares of FTL-Cayman owned by FTL-Delaware
will be repurchased by FTL-Cayman and cancelled pursuant to the terms of the
Merger. After the consummation of the Reorganization, FTL-Delaware will become a
subsidiary of FTL-Cayman, and FTL-Cayman will continue to conduct the businesses
(through direct or indirect subsidiaries, including FTL-Delaware) in which
FTL-Delaware is now engaged. FTL-Cayman's principal offices are located at P.O.
Box 31311 SMB, Safehaven Corporate Center, Grand Cayman, Cayman Islands, BWI.
FTL-Cayman's telephone number is (345) 949-6690. FTL-Cayman has a newly formed,
wholly-owned Delaware subsidiary, Sub, organized specifically to effect the
Reorganization. See "FTL-Delaware and FTL-Cayman."
THE REORGANIZATION
General
The Board of Directors of FTL-Delaware has unanimously approved, and
recommends that the stockholders of FTL-Delaware adopt, a proposed corporate
reorganization pursuant to which FTL-Cayman, a Cayman Islands company, will
become the parent holding company of FTL-Delaware. It is proposed that the
Reorganization be effected pursuant to the Merger Agreement, a copy of which is
attached hereto as Annex I and the terms of which are incorporated herein by
reference. After the consummation of the Reorganization, FTL-Cayman will
continue to conduct the businesses (through direct or indirect subsidiaries,
including FTL-Delaware) in which FTL-Delaware is now engaged and substantially
all of the businesses and subsidiaries of FTL-Delaware located outside of the
United States will be transferred to FTL-Cayman (or direct or indirect foreign
subsidiaries of FTL-Cayman), other than certain interests of FTL-Delaware in
Canada, Germany, Italy and Mexico, along with the beneficial ownership of
certain trademarks. The relative voting rights of FTL-Delaware stockholders as
shareholders of FTL-Cayman will not change as a result of the Reorganization. A
holder of FTL-Delaware Class A Stock will, after the Reorganization, continue to
own, as a holder of FTL-Cayman Class A Shares, an interest in a parent holding
company with subsidiaries that in the aggregate are engaged in the same
businesses as FTL-Delaware and its subsidiaries were engaged in before the
Reorganization. See "The Reorganization," "Description of Authorized Shares of
FTL-Cayman--Voting," "Comparison of Rights of Stockholders" and the Pro Forma
Condensed Consolidated Financial Statements, included elsewhere herein.
Reasons for the Reorganization
The Board of Directors of FTL-Delaware believes that the use of a Cayman
Islands holding company for FTL-Delaware and its subsidiaries will allow
FTL-Delaware to organize its worldwide business activities to avail itself of
certain business, tax and financing advantages that are not available in the
United States. In particular, the Board of Directors of FTL-Delaware is
recommending the Reorganization for the following reasons: (a) the use of a
Cayman Islands parent corporation is expected to reduce corporate income taxes
because, unlike the United States which imposes corporate income tax on the
worldwide income of United States corporations, the Cayman Islands generally
imposes no corporate income taxes on foreign income. Income taxes are
anticipated to be reduced to the extent operations are conducted after the
Reorganization by FTL-Cayman or its foreign subsidiaries; (b) the Reorganization
may, in certain circumstances, have a favorable effect on FTL-Cayman's ability
to sell assets or raise additional capital in the future; and
10
<PAGE> 15
(c) an offshore holding company structure in the form proposed by the
Reorganization may provide a more favorable corporate structure for expansion of
its current business and future acquisitions and diversification opportunities.
No assurances can be given, however, that the anticipated benefits of the
Reorganization will be realized. See "The Reorganization--Background and Reasons
for the Reorganization."
Special Committee/FTL-Delaware Preferred Stock/FTL-Cayman Class B Shares
A Special Committee of the Board of Directors of FTL-Delaware (the "Special
Committee") was appointed by the Board to analyze the Reorganization, including
its structure, and to develop, and in the case of Farley, negotiate, the terms
of the securities to be offered to the FTL-Delaware Class A stockholders and
Farley, as FTL-Delaware Class B stockholders, in the Reorganization. The Special
Committee was aware that Farley's tax basis in the FTL-Delaware Class B Stock is
low as compared to its present market value such that, if the transaction were
currently taxable to Farley, a substantial portion of the FTL-Delaware Class B
Stock would have to be sold by Farley in order to pay the tax. The Special
Committee and the Board concluded that the Reorganization would be in the best
interests of the FTL-Delaware stockholders, but that it would be difficult to
accomplish unless the transaction were structured in such a way that Farley's
taxable gain could be deferred. Accordingly, the Special Committee determined to
offer securities to Farley in exchange for the FTL-Delaware Class B Stock, the
receipt of which is not intended to be currently taxable. Although the exchange
of FTL-Delaware Class A Stock for FTL-Cayman Class A Shares is a taxable
transaction, based on a preliminary review of FTL-Delaware's current list of
stockholders, it is believed that the large majority of stockholders will not
pay tax in connection with the Reorganization because they either are tax-exempt
entities or otherwise have a tax basis in their FTL-Delaware Class A Stock such
that they will not be required to pay taxes in connection with the
Reorganization.
The FTL-Delaware Preferred Stock to be issued to Farley in exchange for
their FTL-Delaware Class B Stock, in the aggregate, will (i) have a liquidation
value equal to the fair market value of the FTL-Delaware Class B Stock based
upon the average closing price of the FTL-Delaware Class A Stock on the NYSE for
the 20 trading days prior to the date of the Special Meeting (the "Stated
Value"), (ii) be entitled to receive cumulative cash dividends of % per
annum of the Stated Value, payable quarterly, (iii) be exchangeable at the
option of the holder, in whole or from time to time in part, at any time for
FTL-Cayman Class A Shares, (iv) be convertible at the option of the
holder, in whole or from time to time in part, at any time for shares
of FTL-Delaware common stock, (v) participate with the holders of FTL-Delaware
common stock in all dividends and liquidation payments in addition to its
preference payments on an as converted basis, (vi) be redeemable by
FTL-Delaware, at its option, after years (the "No-Call Period") at a
redemption price equal to the then fair market value of the FTL-Delaware
Preferred Stock as determined by a nationally recognized investment banking
firm, and (vii) have the right to vote on all matters put to a vote of the
holders of FTL-Delaware common stock, voting together with such holders as a
single class, and be entitled to the number of votes which such holder would
have on an as converted basis. Prior to the mailing of the Proxy
Statement/Prospectus to the stockholders of FTL-Delaware, Farley will select the
dividend rate, exchange rate, conversion rate and No-Call Period from a schedule
of economically equivalent alternative rates and No-Call Periods which are
described under "Description of FTL-Delaware Preferred Stock--Alternative Rates
and No-Call Periods."
The four (4) FTL-Cayman Class B Shares which will be purchased by Farley
immediately prior to the Reorganization have been designed to maintain the
relative voting rights that currently exist between the FTL-Delaware Class A
Stock and Class B Stock. The four (4) FTL-Cayman Class B Shares will (i)
participate pari passu, on a share for share basis, with the holders of any
other class of ordinary shares outstanding (including the FTL-Cayman Class A
Shares) upon the liquidation of FTL-Cayman and with respect to any dividends
declared by the Board of Directors of FTL-Cayman, (ii) vote together with the
FTL-Cayman Class A Shares on all matters (other then as required by Cayman
Islands law with respect to certain extraordinary transactions) having that
number of votes
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<PAGE> 16
which is equal to the aggregate number of votes held by the FTL-Delaware Class B
Stock (i.e., an aggregate of approximately 30% of the aggregate voting power),
(iii) be redeemable proportionately upon the exchange, transfer to a
non-affiliate of Farley or redemption of the FTL-Delaware Preferred Stock, and
(iv) not be transferable except to affiliates of Farley. See "Description of
Authorized Shares of FTL-Cayman" and "Description of FTL-Delaware Preferred
Stock."
The Special Committee, which was comprised of Sir Brian Wolfson, Chairman,
Omar Z. Al Askari and A. Lorne Weil, three independent members of the Board, has
recommended the consummation of the Reorganization and determined that it is
fair to the FTL-Delaware Class A stockholders. The Special Committee retained
Lehman Brothers Inc. ("Lehman Brothers") as its financial adviser, and Lehman
Brothers has rendered an opinion to the Board of Directors stating that, from a
financial point of view, the consideration to be offered to the holders of the
FTL-Delaware Class A Stock in the Reorganization is fair to such holders, a copy
of which is attached hereto as Annex II. See "The Reorganization--Special
Committee/Fairness Opinion."
Farley will receive a preferred dividend from FTL-Delaware following the
Reorganization. In consideration thereof, Farley has agreed and the
Reorganization has been structured to eliminate the conversion ratio of one
share of FTL-Delaware Class A Stock for each share of FTL-Delaware Class B Stock
converted by Farley, and instead provides for the exchange ratio of FTL-
Cayman Class A Shares for each share of FTL-Delaware Preferred Stock exchanged
by Farley.
The Merger
The Reorganization will be accomplished through the merger of Sub with and
into FTL-Delaware, which will be the surviving corporation in the Merger, at
which time (i) each outstanding share of FTL-Delaware Class A Stock (other than
shares of FTL-Delaware Class A Stock held by FTL-Delaware in its treasury) will
be automatically converted into one FTL-Cayman Class A Share, (ii) each
outstanding share of FTL-Delaware Class B Stock will be automatically converted
into one share of FTL-Delaware Preferred Stock, and (iii) all of the shares of
FTL-Cayman owned by FTL-Delaware will be repurchased by FTL-Cayman and cancelled
and the $100 subscription price paid for such shares will be returned to
FTL-Delaware. The holders of the FTL-Delaware Class B Stock will also own four
(4) FTL-Cayman Class B Shares which they will have acquired immediately prior to
the Reorganization. See "The Reorganization--The Merger Agreement," "Description
of Authorized Shares of FTL-Cayman" and "Description of FTL-Delaware Preferred
Stock."
Certificate of Amendment
FTL-Delaware's Certificate of Incorporation provides that in a merger
transaction the FTL-Delaware Class A Stock and Class B Stock must be treated
alike. Since their treatment in the Reorganization will be different, it is
proposed to amend such provision to provide that it may be waived by separate
class vote of the Class A Stock and Class B Stock. Such amendment would become
effective immediately prior to the Merger. See "The Reorganization-Certificate
of Amendment."
Effective Time
If the Merger Agreement is adopted by the stockholders of FTL-Delaware and
not terminated by the Board of Directors of FTL-Delaware, the Reorganization
will become effective (the "Effective Time") at the close of business on the
date that an appropriate certificate of merger is filed with the Delaware
Secretary of State as required by Delaware law or at such later time as is
specified in such certificate of merger. FTL-Delaware anticipates that the
Reorganization will become effective promptly following the Special Meeting. See
"The Reorganization--Effective Time."
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<PAGE> 17
Dividends
Holders of FTL-Cayman Class A Shares will be entitled to participate pari
passu, on a share for share basis, with the holders of any other class of
ordinary shares outstanding, including the four (4) FTL-Cayman Class B Shares,
with respect to any dividends declared by the Board of Directors of FTL-Cayman.
At the time of the Reorganization, FTL-Cayman and FTL-Delaware will be parties
to certain loan agreements and indentures which contain covenants that will
restrict their ability to pay dividends. FTL-Cayman and FTL-Delaware currently
intend to retain earnings for use in their respective businesses and the
financing of their respective capital requirements, except for the payment of
regular quarterly dividends on the FTL-Delaware Preferred Stock. The payment of
any future cash dividends on the FTL-Cayman Class A Shares is necessarily
dependent upon the earnings and financial needs of FTL-Cayman, along with
applicable legal and contractual restrictions. See "Description of Authorized
Shares of FTL-Cayman--Dividend Rights" and "Description of FTL-Delaware
Preferred Stock."
Liquidation
Upon the liquidation of FTL-Cayman the holders of FTL-Cayman Class A Shares
will participate in the assets of FTL-Cayman available for distribution pari
passu, on a share for share basis, with the holders of any other class of
ordinary shares outstanding (including the four (4) FTL-Cayman Class B Shares).
Upon the liquidation of FTL-Delaware, the holders of FTL-Delaware Preferred
Stock are entitled to receive an aggregate liquidation preference equal to the
Stated Value plus accrued and unpaid dividends, and share thereafter in any
other distribution of assets by FTL-Delaware with the holders of the common
stock of FTL-Delaware, on an as converted basis in accordance with the terms of
conversion described herein.
Voting Rights
Each FTL-Cayman Class A Share will be entitled to one vote in the affairs
of FTL-Cayman, voting together as a single class with the holders of FTL-Cayman
Class B Shares. The FTL-Cayman Class B Shares will be entitled to a number of
votes equal to the aggregate number of votes held by the holders of FTL-Delaware
Class B Stock on the date the Merger is consummated (which based on current
ownership is 28,421,380 votes or approximately 30% of the aggregate voting
power). In addition, the holders of the FTL-Cayman Class A Shares will have a
separate class vote to elect 25% of the Board of Directors of FTL-Cayman for so
long as any FTL-Cayman Class B Shares are outstanding. See "Description of
Authorized Shares of FTL-Cayman--Voting and Other Rights."
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF FTL-DELAWARE HAS UNANIMOUSLY APPROVED THE
PROPOSED REORGANIZATION AND THE RELATED MERGER AGREEMENT AND AMENDMENT TO THE
CERTIFICATE OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION, INCLUDING THE MERGER AGREEMENT AND SUCH
AMENDMENT.
VOTE REQUIRED FOR ADOPTION
Approval of the Reorganization requires the affirmative vote of (i) the
holders of a majority of the FTL-Delaware Class A Stock and Class B Stock voting
together as a single class, (ii) the holders of a majority of the outstanding
FTL-Delaware Class A Stock, and (iii) the holders of a majority of the
outstanding FTL-Delaware Class B Stock. Abstentions and broker "non-votes" will
be treated as votes against the proposal to approve the Reorganization. As of
the record date described above, there were shares of FTL-Delaware
Class A Stock and shares of FTL-Delaware Class B Stock outstanding and
entitled to vote, with the Class B Stock entitled to five votes per share. In
addition, as of the record date, the directors and executive officers of FTL-
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<PAGE> 18
Delaware and affiliates of such persons directly owned, in the aggregate,
approximately shares of FTL-Delaware Class A Stock (approximately
% of the outstanding Class A Stock), and Farley owned all of the
FTL-Delaware Class B Stock, and they have indicated their intention to vote such
shares in favor of the proposal to approve the Reorganization. See "The Special
Meeting--Vote Required for Adoption."
Proxies
Each FTL-Delaware Class A stockholder as of the record date will receive a
Proxy Card (the "Proxy Card"). A FTL-Delaware Class A stockholder may grant a
proxy to vote for or against, or to abstain from voting on, the proposal to
approve the Reorganization by marking the Proxy Card appropriately, executing it
in the space provided, and, in the case of holders of FTL-Delaware Class A Stock
appearing on the stock records of FTL-Delaware, returning it to FTL-Delaware.
FTL-Delaware stockholders who hold their FTL-Delaware Class A Stock in the name
of a bank, broker or other nominee should follow the instructions provided by
their bank, broker or nominee on voting their shares. To be effective, a Proxy
Card must be received at or prior to the Special Meeting. Any properly executed
proxy will be voted in accordance with the specification indicated on such Proxy
Card. A properly executed and returned Proxy Card in which no specification is
made will be voted FOR the proposal to approve the Reorganization.
If any other matters are properly presented at the Special Meeting for
consideration, including consideration of a motion to adjourn the Special
Meeting to another time and/or place (including adjournments for the purpose of
soliciting additional proxies), the persons named in the Proxy Card and acting
thereunder will have the discretion to vote on such matters in accordance with
their best judgment. See "The Special Meeting--Proxies."
Revocation
In the case of holders of FTL-Delaware Class A Stock appearing on the stock
records of FTL-Delaware, a Proxy Card may be revoked at any time prior to its
exercise by (a) giving written notice of such revocation to FTL-Delaware, (b)
appearing and voting in person at the Special Meeting, or (c) properly
completing and executing a later-dated proxy and delivering it to FTL-Delaware
at or before the Special Meeting. Presence without voting at the Special Meeting
will not automatically revoke a proxy, and any revocation during the meeting
will not affect votes previously taken. FTL-Delaware stockholders who hold their
FTL-Delaware Class A Stock in the name of a bank, broker or other nominee should
follow the instructions provided by their bank, broker or nominee in revoking
their previously voted shares. See "The Special Meeting--Proxies--Revocation."
COMPARISON OF RIGHTS OF STOCKHOLDERS
The principal attributes of the FTL-Delaware Class A Stock and the
FTL-Cayman Class A Shares will be similar. However, there are certain
differences between the rights of stockholders under Delaware law and Cayman
Islands law. In addition, there are differences between FTL-Delaware's
Certificate of Incorporation and Bylaws and FTL-Cayman's Memorandum of
Association and Articles of Association. See "Comparison of Rights of
Stockholders."
TAX CONSIDERATIONS
The following is a brief summary of the United States federal income tax
consequences of the Reorganization to holders of FTL-Delaware Class A Stock and
is not intended to be, nor should it be construed to be, advice to any
particular stockholder of FTL-Delaware. A more detailed summary of certain tax
consequences of the Reorganization is set out under "Certain Tax
Considerations."
The discussion contained in this Proxy Statement/Prospectus is based on the
law in effect as of the date of this Proxy Statement/Prospectus. STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE REORGANIZATION.
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<PAGE> 19
THE RECEIPT OF FTL-CAYMAN CLASS A SHARES BY U.S. STOCKHOLDERS IN EXCHANGE
FOR FTL-DELAWARE CLASS A STOCK WILL BE A TAXABLE TRANSACTION TO STOCKHOLDERS
THAT HAVE GAIN ON THEIR FTL-DELAWARE CLASS A STOCK. Stockholders will recognize
gain, if any (but not loss), in an amount equal to the excess of the fair market
value of the FTL-Cayman Class A Shares received in the Reorganization over their
tax basis in the FTL-Delaware Class A Stock exchanged therefor. Stockholders
realizing a loss on the exchange will have a basis in the FTL-Cayman Class A
Shares equal to the basis in their FTL-Delaware Class A Stock exchanged
therefor.
RIGHTS OF DISSENTING STOCKHOLDERS
Under applicable Delaware law, the holders of FTL-Delaware Class A Stock
will not have dissenters' appraisal rights in connection with the
Reorganization.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The acquisition by FTL-Cayman of FTL-Delaware in connection with the
Reorganization will be accounted for as a combination of entities under common
control (in a manner similar to a pooling of interests). See "The
Reorganization--Accounting Treatment of the Reorganization."
STOCK EXCHANGE LISTING
There is currently no established public trading market for the FTL-Cayman
Class A Shares. Immediately following the Reorganization, the FTL-Cayman Class A
Shares will be listed on the NYSE under the symbol "FTL," the same symbol under
which the FTL-Delaware Class A Stock is currently listed. See "The
Reorganization--Stock Exchange Listing."
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SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data presented below for the nine month
periods ended September 30, 1997 and 1996 and each of the years in the five-year
period ended December 31, 1996, are derived from the consolidated financial
statements of FTL-Delaware and its subsidiaries. The consolidated financial
statements as of and for the five years ended December 31, 1996 were audited by
Ernst & Young LLP, independent auditors. The consolidated financial statements
as of September 30, 1997 and 1996, December 31, 1996 and 1995, and for each of
the years in the three year period ended December 31, 1996, and the reports of
such auditors on such year-end statements, are included in FTL-Delaware's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (the
"10-Q") and are included in FTL-Delaware's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "10-K"), respectively, and are incorporated by
reference herein. The information as of September 30, 1997 and 1996, and for the
nine month periods then ended is unaudited, but includes all adjustments of a
normal recurring nature which FTL-Delaware considers necessary for a fair
presentation of the financial position and results of operations at those dates
and for those periods. The results of operations for the nine months ended
September 30, 1997, are not necessarily indicative of the results to be expected
for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:(1)
Net sales....................... $1,711.4 $1,866.4 $2,447.4 $2,403.1 $2,297.8 $1,884.4 $1,855.1
Gross earnings.................. 453.9(2) 546.4 730.0 517.4(7) 646.5 647.4 660.3
Operating earnings (loss)....... 126.1(3) 245.9 325.3 (108.1)(8) 235.0(10) 381.5 409.9
Interest expense................ 62.5 79.8 103.6 116.9 95.4 72.7 82.1
Earnings (loss) from continuing
operations before income tax
expense (benefit),
extraordinary items and
cumulative effect of change in
accounting principles......... 21.2(4) 162.8 185.3(5) (246.7)(9) 133.5 367.1 319.9
Earnings (loss) from continuing
operations before
extraordinary items and
cumulative effect of change in
accounting principles......... 6.3 108.1 151.2(6) (227.3) 60.3 212.8(11) 188.5
Earnings (loss) per common
share:
Continuing operations: Before
extraordinary items and
cumulative effect of change
in accounting principles.... .08 1.42 1.98 (2.99) .79 2.80(11) 2.48
Average common shares
outstanding................... 74.9 76.2 76.4 76.0 76.0 76.0 76.0
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------- --------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Total assets............................. $2,710.8 $2,933.5 $2,547.0 $2,919.5 $3,163.5 $2,734.0 $2,281.9
Long-term debt, excluding current
maturities............................. 1,118.4 1,295.8 867.4 1,427.2 1,440.2 1,194.0 756.3
Deferred and noncurrent income taxes..... 18.9 18.1 16.9 -- 43.4 51.0 49.1
Other noncurrent liabilities............. 285.8 282.9 271.2 292.9 222.3 191.5 187.9
Common stockholders' equity.............. 824.6 1,018.6 1,064.8 895.6 1,125.8 1,047.0 855.0
</TABLE>
- ---------------
(1) This information should be read in conjunction with "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
contained in the 10-K and the 10-Q and the Financial Statements and
Supplementary Data contained therein.
(2) Includes a pretax absorption of $21.6 of costs due to reduced work weeks to
balance inventories or shutdowns at manufacturing facilities.
16
<PAGE> 21
(3) During the first quarter of 1997, FTL-Delaware finalized certain of the
estimates recorded in connection with the changes noted in (7), (8) and (9)
following. As a result of finalizing these estimates, earnings before
income tax expense increased by $7.5 in the first quarter of 1997.
(4) Includes a charge of $32.0 (with no recorded tax benefit) related to
FTL-Delaware's evaluation of its exposure under the guarantee of the debt
of Acme Boot.
(5) Includes a pretax charge of $35.0 related to FTL-Delaware's evaluation of
its exposure under the guarantee of the debt of Acme Boot Company, Inc.
("Acme Boot"), an affiliate.
(6) Includes $24.1 related to reversal of excess income tax liabilities for tax
years through December 31, 1991, all of which closed for federal income tax
purposes effective December 31, 1996.
(7) Includes pretax charges of $146.7 related to costs associated with the
closing or disposal of a number of domestic manufacturing facilities and
attendant personnel reductions and charges related to inventory write downs
and valuations and foreign operations.
(8) Includes pretax charges of approximately $158.5 related principally to the
write-off of Salem and Gitano goodwill and $193.7 related to costs
associated with the closing or disposal of a number of domestic
manufacturing facilities and attendant personnel reductions and charges
related to inventory write downs and valuations and foreign operations.
(9) Includes pretax charges of approximately $20.7 related to certain
obligations and other matters related to former subsidiaries and certain
fees related to the modification of certain agreements.
(10) Includes pretax charges of approximately $40.0 to write inventories down to
net realizable value and a pretax charge of $18.0 related to the write-off
of Artex intangibles.
(11) Includes a pretax gain of $67.3 ($.55 per share) from FTL-Delaware's
investment in Acme Boot. Excluding this gain, earnings per share were
$2.25.
17
<PAGE> 22
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following summary pro forma financial information of FTL-Cayman gives
effect to (i) the acquisition of FTL-Delaware in connection with the proposed
Reorganization, whereby FTL-Cayman will become the parent holding company of
FTL-Delaware, and (ii) subsequent to the Reorganization, the transfer to
FTL-Cayman of substantially all of the businesses or subsidiaries of
FTL-Delaware located outside of the United States, other than certain interests
of FTL-Delaware in Canada, Germany, Italy and Mexico. The following summary pro
forma financial information of FTL-Cayman should be read in conjunction with the
Pro Forma Condensed Consolidated Financial Statements included elsewhere herein
and the separate historical financial statements of FTL-Delaware and notes
thereto incorporated by reference in this Proxy Statement/Prospectus. The
summary pro forma financial data of FTL-Cayman are not necessarily indicative of
the operating results that would have been achieved had the transfers described
above been effected during the periods presented or the results that may be
obtained in the future.
The pro forma earnings and per share data were computed using a dividend
rate of 5%, an exchange rate of .8929 and a non call protection period of 4
years. See "Description of FTL-Delaware Preferred Stock -- Alternative Rates and
No-Call Periods."
FTL-CAYMAN
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
NINE MONTHS YEAR
ENDED ENDED
SEPT. 30, 1997 DEC. 31, 1996
-------------- -------------
<S> <C> <C>
Operations Statement Data (1):
Net sales................................................... $1,711,400 $2,447,400
Earnings from continuing operations before income taxes and
minority interest......................................... 21,200 185,300
Earnings from continuing operations......................... 3,400 141,200
Earnings from continuing operations per common share........ .05 2.04
Weighted average number of shares outstanding............... 69,216 69,216
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
Balance Sheet Data :
Working capital........................................ $ 344,800 $ -- $ 344,800
Total Assets........................................... 2,710,800 -- 2,710,800
Long-term debt, excluding current maturities........... 1,118,400 -- 1,118,400
Preferred stock of FTL-Delaware (minority interest).... -- 147,400 147,400
Total stockholders' equity............................. 824,600 (147,400) 677,200
========== ========= ==========
</TABLE>
- -------------------------
(1) Following the Reorganization, FTL-Delaware intends to transfer substantially
all its businesses or subsidiaries located outside the United States, other
than certain interests of FTL-Delaware in Canada, Germany, Italy and Mexico,
to FTL-Cayman (or direct or indirect foreign subsidiaries of FTL-Cayman),
along with the beneficial ownership of certain trademarks.
18
<PAGE> 23
THE SPECIAL MEETING
SPECIAL MEETING
A Special Meeting of the FTL-Delaware stockholders will be held at 10:00
a.m., Chicago time, on , 1998, at , Chicago, Illinois
(or any adjournments or postponements thereof) to consider and vote on the
proposal to authorize the Reorganization (including the Merger Agreement and
amendment to the FTL-Delaware Certificate of Incorporation) and any other
matters that may properly come before such meeting. The presence, in person or
by proxy, of stockholders holding a majority of the outstanding shares of
FTL-Delaware entitled to vote at the Special Meeting will constitute a quorum.
Management of FTL-Delaware knows of no matters other than as described in
the accompanying Notice of Special Meeting which are likely to be brought before
the Special Meeting. However, if any other matters, not now known, properly come
before such meeting, the persons named in the enclosed proxy will vote the proxy
in accordance with their best judgment on such matters.
THE BOARD OF DIRECTORS OF FTL-DELAWARE HAS UNANIMOUSLY APPROVED THE
PROPOSED REORGANIZATION AND THE MERGER AGREEMENT AND AMENDMENT TO THE
CERTIFICATE OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION, INCLUDING THE MERGER AGREEMENT AND SUCH
AMENDMENT.
RECORD DATE
Only FTL-Delaware stockholders of record at the close of business on
, 1998, as shown on FTL-Delaware's records, will be entitled to
vote, or to grant proxies to vote, at the Special Meeting.
The vote of any FTL-Delaware stockholder who is represented at the Special
Meeting by proxy will be cast as specified in the Proxy Card or, if no vote is
specified in the Proxy Card, such vote will be cast FOR the proposal. Any
FTL-Delaware stockholder of record who is present at the Special Meeting in
person will be entitled to vote at the meeting regardless of whether such
stockholder has previously granted a proxy with respect thereto.
VOTE REQUIRED FOR ADOPTION
Approval of the Reorganization requires the affirmative vote of (i) the
holders of a majority of the FTL-Delaware Class A Stock and Class B Stock voting
together as a single class, (ii) the holders of a majority of the outstanding
FTL-Delaware Class A Stock, and (iii) the holders of a majority of the
outstanding FTL-Delaware Class B Stock. Abstentions and broker "non-votes" will
be treated as votes against the proposal to approve the Reorganization. As of
the record date described above, there were shares of FTL-Delaware Class A
Stock and shares of FTL-Delaware Class B Stock outstanding and entitled to
vote, with the Class B Stock entitled to five votes per share. In addition, as
of the record date, the directors and executive officers of FTL-Delaware and
affiliates of such persons directly owned, in the aggregate, approximately
shares of FTL-Delaware Class A Stock (approximately % of the outstanding
Class A Stock), and Farley owned all of the Class B Stock, and they have
indicated their intention to vote such shares in favor of the proposal to
approve the Reorganization.
PROXIES
General
Each FTL-Delaware stockholder as of the record date will receive a Proxy
Card. A stockholder of FTL-Delaware may grant a proxy to vote for or against, or
to abstain from voting on, the proposal to approve the Reorganization by marking
his/her Proxy Card appropriately, executing it in the
19
<PAGE> 24
space provided, and, in the case of holders of FTL-Delaware Class A Stock
appearing on the stock records of FTL-Delaware, returning it to FTL-Delaware.
FTL-Delaware stockholders who hold their FTL-Delaware Class A Stock in the name
of a bank, broker or other nominee should follow the instructions provided by
their bank, broker or nominee on voting their shares.
To be effective, a Proxy Card must be received prior to the Special
Meeting. Any properly executed proxy will be voted in accordance with the
specification indicated on such Proxy Card. A properly executed and returned
Proxy Card in which no specification is made will be voted FOR the proposal to
adopt the Reorganization.
If any other matters are properly presented at the Special Meeting for
consideration, including consideration of a motion to adjourn the meeting to
another time and/or place (including adjournments for the purpose of soliciting
additional proxies), the persons named in the Proxy Card and acting thereunder
will have the discretion to vote on such matters in accordance with their best
judgment.
Revocation
In the case of holders of FTL-Delaware Class A Stock appearing on the stock
records of FTL-Delaware, a Proxy Card may be revoked at any time prior to its
exercise by (a) giving written notice of such revocation to FTL-Delaware, (b)
appearing and voting in person at the Special Meeting, or (c) properly
completing and executing a later-dated proxy and delivering it to FTL-Delaware
at or before the Special Meeting. Presence without voting at the Special Meeting
will not automatically revoke a proxy, and any revocation during the meeting
will not affect votes previously taken. FTL-Delaware stockholders who hold their
FTL-Delaware Class A Stock in the name of a bank, broker or other nominee should
follow the instructions provided by their bank, broker or nominee in revoking
their previously voted shares.
Validity
All questions as to the validity, form, eligibility (including time of
receipt), and acceptance of Proxy Cards will be determined by the inspectors of
election. Any such determination will be final and binding. The Board of
Directors of FTL-Delaware will have the right to waive any irregularities or
conditions as to the manner of voting. FTL-Delaware may accept proxies by any
reasonable form of communication so long as it can reasonably be assured that
the communication is authorized by the FTL-Delaware Class A stockholder.
SOLICITATION OF PROXIES
The accompanying proxy is being solicited on behalf of the Board of
Directors of FTL-Delaware. The expenses of preparing, printing and mailing the
proxy and the materials used in the solicitation thereof will be borne by
FTL-Delaware.
Georgeson & Co. has been retained by FTL-Delaware to aid in the
solicitation of proxies, for a fee of $ and the reimbursement of
out-of-pocket expenses. Proxies may also be solicited by personal interview,
telephone and telegram by directors, officers and employees of FTL-Delaware who
will not receive additional compensation for such services. Arrangements also
may be made with brokerage houses and other custodians, nominees and fiduciaries
for the forwarding of solicitation materials to the beneficial owners of
FTL-Delaware Class A Stock held by such persons, and FTL-Delaware will reimburse
them for reasonable expenses incurred by them in connection therewith.
PROPOSALS OF STOCKHOLDERS
Any stockholder who desired to present proposals to FTL-Delaware's (or, if
the Reorganization is consummated, FTL-Cayman's) 1998 Annual Meeting of
Stockholders and to have such proposals
20
<PAGE> 25
set forth in the proxy statement mailed in conjunction with such Annual Meeting
was required to have submitted such proposals to FTL-Delaware by December 8,
1997. All stockholder proposals are required to comply with Rule 14a-8
promulgated by the Commission pursuant to the Exchange Act. The only stockholder
proposal received by FTL-Delaware requests that the Board of Directors redeem
the preferred stock purchase rights issued to stockholders of FTL-Delaware
pursuant to the Rights Agreement, dated as of March 8, 1996 (the "Shareholder
Rights Plan") between FTL-Delaware and ChaseMellon Shareholder Services, Inc.
The stockholder proposal will be moot if the Reorganization is consummated
because FTL-Cayman will not have a preferred stock purchase rights plan. See
"The Reorganization--Shareholder Rights Plan"
FTL-DELAWARE AND FTL-CAYMAN
FTL-Delaware is a marketing oriented, vertically integrated international
basic apparel company, emphasizing branded products for consumers ranging from
infants to senior citizens. FTL-Delaware is one of the largest domestic
producers of men's, boys', women's and girls' underwear and of activewear for
the imprinted market, selling products principally under the FRUIT OF THE
LOOM(R), BVD(R), SCREEN STARS(R), BEST(TM), MUNSINGWEAR(R), WILSON(R), BOTANY
500(R) and JOHN HENRY(R) brand names. FTL-Delaware also manufacturers and
markets sports licensed apparel bearing the names, tradenames and logos of the
National Football League, the National Basketball Association, Major League
Baseball and the National Hockey League, professional sports teams and many
colleges and universities in the United States, as well as the likenesses of
certain popular professional athletes, under the PRO PLAYER(R) and FANS GEAR(R)
brands. Additionally, FTL-Delaware manufacturers and markets casualwear,
jeanswear under the GITANO(R) brand name, and infants' and toddlers' apparel.
FTL-Delaware is a fully integrated manufacturer, performing most of its own
spinning, knitting, cloth finishing, cutting, sewing and packaging. FTL-Delaware
has established manufacturing operations in Honduras, El Salvador and Jamaica,
in addition to contracting with various third parties in Mexico and the
Caribbean, to assemble fabrics which have been manufactured and cut either in
FTL-Delaware's United States operations or by external sources into finished
goods for sale principally in the United States.
FTL-Delaware extensively markets its activewear and, to a lesser extent,
other products outside the United States, principally in Europe, Canada, Japan
and Mexico. To serve these markets, FTL-Delaware has manufacturing plants in
Canada, the Republic of Ireland and Northern Ireland (United Kingdom), as well
as manufacturing operations in Morocco where cut fabrics from the Republic of
Ireland are sewn and returned to Europe for sale.
FTL-Delaware was incorporated in 1985 under the laws of the State of
Delaware. Its principal executive offices are located at 5000 Sears Tower, 233
South Wacker Drive, Chicago, Illinois 60606, and its telephone number is (312)
876-1724. Unless the context indicated otherwise, references to FTL-Delaware
mean Fruit of the Loom, Inc. and its subsidiaries.
FTL-Cayman is a Cayman Islands company registered and incorporated under
the laws of the Cayman Islands on January 23, 1998, which was formed to become
the parent holding company of FTL-Delaware. All of the shares of FTL-Cayman are
currently held by FTL-Delaware. Immediately prior to and in connection with the
Reorganization, Farley will purchase four (4) FTL-Cayman Class B Shares from
FTL-Cayman. The shares of FTL-Cayman owned by FTL-Delaware will be repurchased
by FTL-Cayman and cancelled pursuant to the terms of the Merger. After the
consummation of the Reorganization, FTL-Delaware will become a subsidiary of
FTL-Cayman, and FTL-Cayman will continue to conduct the businesses (through
direct or indirect subsidiaries, including FTL-Delaware) in which FTL-Delaware
is now engaged. FTL-Cayman's principal offices are located at P.O. Box 31311
SMB, Safehaven Corporate Center, Grand Cayman, Cayman Islands, BWI. FTL-Cayman's
telephone number is (345) 949-6690. FTL-Cayman has a newly formed, wholly-owned
Delaware subsidiary, Sub, organized specifically to effect the Reorganization.
21
<PAGE> 26
Neither FTL-Cayman nor Sub has any significant assets or capitalization nor
has engaged in any business or prior activities other than in connection with
the Reorganization.
THE REORGANIZATION
GENERAL
The Board of Directors of FTL-Delaware has unanimously approved, and
recommends that the stockholders of FTL-Delaware adopt, a proposed corporate
reorganization pursuant to which FTL-Cayman, a Cayman Islands company, will
become the parent holding company of FTL-Delaware. It is proposed that the
Reorganization be effected pursuant to the Merger Agreement, a copy of which is
attached hereto as Annex I and the terms of which are incorporated herein by
reference. After the consummation of the Reorganization, FTL-Cayman will
continue to conduct the businesses (through direct or indirect subsidiaries,
including FTL-Delaware) in which FTL-Delaware is now engaged and substantially
all of the businesses and subsidiaries of FTL-Delaware located outside of the
United States will be transferred to FTL-Cayman (or direct or indirect foreign
subsidiaries of FTL-Cayman), other than certain interests of FTL-Delaware in
Canada, Germany, Italy, and Mexico, along with the beneficial ownership of
certain trademarks. A holder of FTL-Delaware Class A Stock, after the
Reorganization, will continue to own as a holder of FTL-Cayman Class A Shares,
an interest in a parent holding company with subsidiaries that in the aggregate
are engaged in the same businesses as FTL-Delaware and its subsidiaries were
engaged in before the Reorganization. The relative voting rights of FTL-Delaware
stockholders as shareholders of FTL-Cayman will not change as a result of the
Reorganization. See "--Transfer of Assets," "Description of Authorized Shares of
FTL-Cayman--Voting" and "Comparison of Rights of Stockholders."
SPECIAL COMMITTEE/FAIRNESS OPINION
A Special Committee of the Board of Directors of FTL-Delaware was appointed
by the Board to analyze the Reorganization, including its structure, and to
develop, and in the case of Farley, negotiate, the terms of the securities to be
offered to the FTL-Delaware Class A stockholders and Farley, as FTL-Delaware
Class B stockholders, in the Reorganization. The Special Committee was aware
that Farley's tax basis in the FTL-Delaware Class B Stock is low as compared to
its present market value such that, if the transaction were currently taxable to
Farley, a substantial portion of the FTL-Delaware Class B Stock would have to be
sold by Farley in order to pay the tax. The Special Committee and the Board
concluded that the Reorganization would be in the best interests of the
FTL-Delaware stockholders, but that it would be difficult to accomplish unless
the transaction were structured in such a way that Farley's taxable gain could
be deferred. Accordingly, the Special Committee determined to offer securities
to Farley in exchange for the FTL-Delaware Class B Stock, the receipt of which
is not intended to be currently taxable. Although the exchange of FTL-Delaware
Class A Stock for FTL-Cayman Class A Shares is a taxable transaction, based on a
preliminary review of FTL-Delaware's current list of stockholders, it is
believed that the large majority of stockholders will not pay tax in connection
with the Reorganization because they either are tax-exempt entities or otherwise
have a tax basis in their FTL-Delaware Class A Stock such that they will not be
required to pay taxes in connection with the Reorganization.
Farley will receive a preferred dividend from FTL-Delaware following the
Reorganization. All decisions with respect to the payment of dividends, other
than such preferred dividend, and as to the redemption of the FTL-Delaware
Preferred Stock, will be required to be made by a committee of FTL-Delaware
directors who are not affiliates of Farley. In consideration of the preferred
dividend from FTL-Delaware, Farley has agreed and the Reorganization has been
structured to eliminate the conversion ratio of one share of FTL-Delaware Class
A Stock for each share of FTL-Delaware Class B Stock converted by Farley, and
instead provides for the exchange ratio of FTL-Cayman Class A Shares for
each share of FTL-Delaware Preferred Stock exchanged by Farley.
22
<PAGE> 27
The Special Committee was comprised of Sir Brian Wolfson, Chairman, Omar Z.
Al Askari and A. Lorne Weil, three independent members of the Board. The Special
Committee retained Lehman Brothers as its financial advisor. The Special
Committee, with the assistance of its financial and legal advisors, negotiated
the structure of the Reorganization and the terms of the FTL-Delaware Preferred
Stock and the FTL-Cayman Class B Shares with Farley.
At a meeting of the Special Committee held on February 10, 1998, the
Special Committee, after consultation with Lehman Brothers and its legal counsel
and its receipt of Lehman Brothers' opinion that, from a financial point of
view, the consideration to be offered to the holders of the FTL-Delaware Class A
Stock in the Reorganization is fair to such holders, a copy of which is attached
hereto as Annex II, unanimously determined that the Reorganization was fair to
and in the best interests of the FTL-Delaware Class A stockholders and
recommended that the Board of Directors of FTL-Delaware approve the
Reorganization and the transactions contemplated thereby.
The members of the Special Committee (as well as the other directors of
FTL-Delaware) are indemnified by FTL-Delaware under FTL-Delaware's Restated
Certificate of Incorporation and By-Laws and the applicable provisions of
Delaware law with respect to their actions in connection with the
Reorganization.
BACKGROUND AND REASONS FOR THE REORGANIZATION
International activities of FTL-Delaware and its subsidiaries are a
significant part of FTL-Delaware's business activities. As part of its growth
strategy, FTL-Delaware has globally expanded the marketing and manufacturing of
its apparel to target markets outside of the United States. In addition, to
reduce costs and improve production efficiencies, FTL-Delaware has moved certain
of its manufacturing operations outside of the United States. A substantial
portion of FTL-Delaware's income is now, and even without the Reorganization
would be expected to continue to be, derived from activities outside of the
United States.
The Board of Directors of FTL-Delaware believes that the use of a Cayman
Islands holding company for FTL-Delaware and its subsidiaries will allow
FTL-Delaware to organize its worldwide business activities to avail itself of
certain business, tax and financing advantages that would not be available to it
if the parent holding company of the businesses of FTL-Delaware were to remain a
U.S. corporation. Accordingly, the Board of Directors of FTL-Delaware believes
the Reorganization should have a favorable impact on the conduct of
FTL-Delaware's and FTL-Cayman's future business operations. In particular, the
Board of Directors of FTL-Delaware is recommending the Reorganization for the
following reasons:
(a) The Board believes that the use of a Cayman Islands parent
corporation is expected to reduce corporate income taxes because, unlike
the United States which imposes corporate income tax on the worldwide
income of United States corporations, the Cayman Islands generally imposes
no corporate income taxes on foreign income. Income taxes are therefore
anticipated to be reduced to the extent operations are conducted after the
Reorganization by FTL-Cayman or its foreign subsidiaries.
(b) The Board believes that the change of domicile may have a
favorable effect on its ability to sell assets or raise additional capital
in the future. The Internal Revenue Code of 1986, as amended (the "Code"),
currently provides for the payment of certain estate taxes in respect of
the value of shares in a U.S. corporation owned by a non-U.S. investor. In
addition, distributions with respect to stock in a U.S. corporation to
non-resident aliens could be subject to certain withholding taxes under the
Code. The Code currently does not generally provide for estate or
withholding taxes on distributions for non-resident aliens in respect of
stock of a non-U.S. corporation.
(c) The Board believes that an offshore holding company structure in
the form proposed by the Reorganization may provide a more favorable
corporate structure for expansion of its
23
<PAGE> 28
current business and future acquisitions and diversification opportunities.
FTL-Delaware currently has no plans for specific acquisitions or to
diversify its business from the business it is currently conducting.
In determining to recommend the Reorganization, the Special Committee and the
Board consulted with FTL-Delaware's management and its financial and legal
advisors.
Financial Advisors
On September 19, 1997, the Special Committee retained Lehman Brothers as
its financial advisor in connection with the proposed Reorganization. In
connection with such retention Lehman Brothers assisted the Special Committee in
analyzing the Reorganization, including its structure, and in its negotiations
with Farley as to the terms of the securities to be issued to Farley.
On February 10, 1998, Lehman Brothers delivered its written opinion to the
Board of Directors of FTL-Delaware (the "Board") stating that, as of such date,
from a financial point of view, the consideration to be offered to the holders
of the FTL-Delaware Class A Stock in the Reorganization (the "FTL-Delaware Class
A Consideration") is fair to such holders.
The full text of the written opinion of Lehman Brothers is attached as
Annex II hereto and is incorporated herein by reference. FTL-Delaware
stockholders may read the opinion in its entirety for a summary of assumptions
made, matters considered and limitations on the review undertaken by Lehman
Brothers in rendering its opinion. The summary of the opinion of Lehman Brothers
set forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion.
No limitations were imposed by FTL-Delaware on the scope of Lehman
Brothers' investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion, except that FTL-Delaware did not authorize Lehman
Brothers to solicit, and Lehman Brothers did not solicit, any indications of
interest from any third party with respect to a purchase of all or part of
FTL-Delaware's business. In arriving at its opinion, Lehman Brothers did not
ascribe a specific range of values to FTL-Delaware or FTL-Cayman, but made its
determination as to the fairness, from a financial point of view, of the
FTL-Delaware Class A Consideration to the holders of FTL-Delaware Class A Stock
on the basis of the financial and comparative analyses summarized below. The
opinion is for the use and benefit of the Board and is not intended to be and
does not constitute a recommendation to any stockholder of FTL-Delaware as to
how such stockholder should vote with respect to the Reorganization. Lehman
Brothers was not requested to opine as to, and the opinion does not in any
manner address, FTL-Delaware's underlying business decision to proceed with or
effect the Reorganization. In addition, in rendering its opinion, Lehman
Brothers was not able to calculate, and therefore did not consider, the tax
consequences of the Reorganization to any individual stockholder of
FTL-Delaware.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement and the specific terms of the Reorganization, (ii) the Proxy
Statement/Prospectus relating to the Reorganization and such other publicly
available information concerning FTL-Delaware that it believed to be relevant to
its analysis, (iii) financial and operating information with respect to the
business, operations and prospects of FTL-Delaware and FTL-Cayman furnished to
it by FTL-Delaware, (iv) a trading history of FTL-Delaware's common stock from
December 1992 to the present and a comparison of that trading history with those
of other companies that it deemed relevant, (v) a comparison of the historical
financial results and present financial condition of FTL-Delaware with those of
other companies that it deemed relevant, (vi) the terms of the FTL-Delaware
Preferred Stock and a comparison of such terms with those of other securities
that Lehman Brothers deemed relevant, (vii) information from FTL-Delaware and
advice from its legal and tax advisors regarding the tax consequences of the
Reorganization to the holders of FTL-Delaware Class A Stock and holders of
FTL-Delaware Class B Stock, and (viii) the potential pro forma impact of the
Reorganization on FTL-Delaware. In addition, Lehman Brothers discussed
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with management of FTL-Delaware the business, operations, assets, financial
conditions and prospects of FTL-Delaware and FTL-Cayman, and undertook such
other analyses and examinations and considered such other factors as Lehman
Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of FTL-Delaware
that they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of FTL-Delaware and FTL-Cayman, upon advice of the management of FTL-Delaware,
Lehman Brothers assumed that such projections were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
management of FTL-Delaware as to the future financial performance of
FTL-Delaware and FTL-Cayman and that FTL-Delaware and FTL-Cayman would perform
substantially in accordance with such projections. In arriving at its opinion,
Lehman Brothers did not conduct a physical inspection of the properties and
facilities of FTL-Delaware or FTL-Cayman and did not make or obtain any
evaluations or appraisals of the assets or liabilities of FTL-Delaware or
FTL-Cayman. Lehman Brothers' opinion necessarily is based upon market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of its opinion.
In connection with the preparation and delivery of its opinion, Lehman
Brothers performed a variety of financial and comparative analyses, as
summarized below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial and
comparative analysis and the application of those methods to the particular
circumstances, and therefore such an opinion is not readily susceptible to
summary description. Furthermore, in arriving at its opinion, Lehman Brothers
did not attribute any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance and relevance
of each analysis and factor. Accordingly, Lehman Brothers believes that its
analyses must be considered as a whole and that considering any portion of such
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the process underlying its opinion. In its
analysis, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of FTL-Delaware. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. Lehman Brothers expressed no opinion as to the price at which
FTL-Cayman Class A Shares actually will trade following consummation of the
Reorganization and its opinion should not be viewed as providing any assurances
that the market value of the FTL-Cayman Class A Shares to be held by holders of
FTL-Delaware Class A Stock at any time after consummation of the Reorganization
will be in excess of the market value of the FTL-Delaware Class A Stock
previously owned by such holders.
STOCK PRICE TRADING RANGE. Lehman Brothers analyzed the stock price trading
range of FTL-Delaware from December 31, 1992 to February 5, 1998. Lehman
Brothers noted that FTL-Delaware's February 5, 1998 closing stock price of
$25.75, represented a 54% premium to FTL-Delaware's five-year historical low
trading price of $16.75 on November 1, 1995 and a 47% discount to FTL-Delaware's
five-year historical high trading price of $49.00 on February 4, 1993.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARABLE COMPANIES. Using publicly
available information, Lehman Brothers compared selected financial data of
FTL-Delaware with similar data for fifteen companies engaged in businesses
considered by Lehman Brothers to be comparable to FTL-Delaware. Specifically,
Lehman Brothers included in its review Farah Inc.; Hartmarx Corporation Jones
Apparel Group; Kellwood Co.; Liz Claiborne, Inc.; Nautica Enterprises, Inc.;
OshKosh B'Gosh, Inc.; Oxford Industries, Inc.; Phillips-Van Heusen Corporation;
Russell Corporation; St. John Knits, Inc.; Tommy Hilfiger Corporation; Tultex
Corporation; V.F. Corporation; and The
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Warnaco Group, Inc. (the "Comparable Companies"). The median multiples for the
Comparable Companies for the price to estimated 1997 and 1998 earnings per share
("EPS") were 18.5x and 15.0x, respectively. The range of multiples was from
10.6x to 46.9x and 8.6x to 21.5x, respectively. These compared to public market
trading multiples of 41.5x and 14.5x for FTL-Delaware. Lehman Brothers also
calculated the median multiples for the Comparable Companies for the equity
market value plus net indebtedness, preferred stock and minority interests
("Enterprise Value") to latest twelve months ("LTM") revenues, earnings before
interest, taxes, depreciation, amortization and extraordinary items ("EBITDA"),
and earnings before interest, taxes, and extraordinary items ("EBIT"). The
median multiples for the Comparable Companies were 1.06x, 8.5x, and 10.9x,
respectively, and the range of multiples was from 0.40x to 2.61x, 6.5x to 12.7x,
and 8.1x to 18.7x, respectively. These compared to public market trading
multiples of 1.32x, 8.3x, and 14.7x, respectively, for FTL-Delaware. The ratios
for the Comparable Companies and FTL-Delaware are based on the most recent
publicly available financial statements for each company and the most recent EPS
estimates for 1997 and 1998 published by the Institutional Broker Estimate
System ("IBES"), a service company widely used by the investment community to
gather earnings estimates from various research analysts.
Because of the inherent differences between the business, operations and
prospects of FTL-Delaware and the businesses, operations and prospects of the
Comparable Companies, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, and
accordingly also made qualitative judgments concerning differences between the
financial and operating characteristics and prospects of FTL-Delaware and the
Comparable Companies which would affect the public trading values of
FTL-Delaware and such Comparable Companies.
DISCOUNTED CASH FLOW ANALYSIS. Using long-term financial projections for
FTL-Delaware and FTL-Cayman that FTL-Delaware management prepared, Lehman
Brothers conducted an analysis of the cash flow impact the Reorganization would
have on FTL-Delaware. If the parent holding company of the businesses of
FTL-Delaware were to remain a U.S.-incorporated company, Lehman Brothers noted
that management believes that FTL-Delaware would be required to repatriate much
of its future earnings from its Cayman operations unless significant operating
investments could be made at its Cayman operations, and thus would be required
to pay U.S. income taxes on these repatriated earnings. However, under the
proposed Reorganization, this repatriation and the resulting requirement to pay
U.S. income taxes on these earnings would be significantly reduced or
eliminated, creating significant incremental cash flow. Lehman Brothers
conducted a five year discounted cash flow analysis of the incremental earnings
created as a result of the Reorganization utilizing annual discount rates of
10.0% to 11.0% and perpetual growth rates of these incremental earnings of 4.0%
to 5.0%. The range of discount rates selected was based upon the following
factors: (i) the interest rate environment at the time of the opinion, (ii) the
risk associated with an investment in the stock of similar companies, (iii) the
expected probability of achieving projected results, (iv) the weighted average
costs of capital of FTL-Delaware and other similar companies, and (v) Lehman
Brothers' experience in securities valuation generally. The range of perpetual
growth rates was based upon the above factors as well as the expected
sustainable growth prospects beyond the projection period. Lehman Brothers
calculated that the Reorganization would significantly increase the discounted
cash flow value of FTL-Delaware.
PRO FORMA NET INCOME ANALYSIS. Using financial projections for FTL-Delaware
and FTL-Cayman prepared by FTL-Delaware management, Lehman Brothers also
conducted a pro forma analysis on the impact of the Reorganization on
FTL-Cayman's projected net income and compared it to the projected net income of
FTL-Delaware. Due to the tax savings and incremental earnings and cash flow
generated by the Reorganization, Lehman Brothers noted that FTL-Cayman's net
income would increase materially relative to FTL-Delaware's net income during
the projection period.
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Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements, and
valuations for corporate and other purposes. The Special Committee selected
Lehman Brothers to act as its financial advisor because of its experience,
reputation and familiarity with the industry in general and because its
investment banking professionals have substantial experience in transactions
similar to the Reorganization.
As compensation for its services in connection with the Reorganization,
FTL-Delaware has agreed to pay Lehman Brothers a fee of $2,000,000, of which
$250,000 was payable upon its retention and $750,000 was payable upon delivery
of its opinion, with the balance contingent upon consummation of the
Reorganization. FTL-Delaware also has agreed to reimburse Lehman Brothers for
reasonable expenses incurred by Lehman Brothers in performing its services,
including the reasonable fees and expenses of its legal counsel, and to
indemnify Lehman Brothers and related persons against certain liabilities that
might arise out of Lehman Brothers' engagement. Lehman Brothers actively trades
in the equity and debt securities of FTL-Delaware for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
THE BOARD OF DIRECTORS OF FTL-DELAWARE HAS UNANIMOUSLY APPROVED THE
PROPOSED REORGANIZATION AND THE RELATED MERGER AGREEMENT AND AMENDMENT TO THE
CERTIFICATE OF INCORPORATION AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION, INCLUDING THE MERGER AGREEMENT AND SUCH
AMENDMENT.
THE MERGER AGREEMENT
General
It is proposed that the Reorganization be effected pursuant to the Merger
Agreement. Pursuant to the Merger Agreement:
(i) Sub will be merged with and into FTL-Delaware, with FTL-Delaware
being the surviving corporation.
(ii) Each outstanding share of FTL-Delaware Class A Stock (other than
shares of FTL-Delaware Class A Stock held by FTL-Delaware in its treasury)
will be automatically converted into one FTL-Cayman Class A Share and each
outstanding share of FTL-Delaware Class B Stock will be automatically
converted into one share of FTL-Delaware Preferred Stock.
(iii) The outstanding shares of common stock of Sub will be
automatically converted into that number of shares of common stock of
FTL-Delaware which is equal to the number of shares of FTL-Delaware Class A
Stock outstanding on the date of the Merger.
(iv) All of the shares of FTL-Cayman owned by FTL-Delaware will be
repurchased by FTL-Cayman and cancelled and the $100 subscription price
paid for such shares will be returned to FTL-Delaware.
As a result of the foregoing, upon effectiveness of the Merger, FTL-Delaware, as
the surviving corporation in the Merger, will become a subsidiary of FTL-Cayman,
and all the Class A Shares of FTL-Cayman outstanding immediately after the
Merger will be owned by former holders of FTL-Delaware Class A Stock. The four
(4) FTL-Cayman Class B Shares which will be acquired by the holders of the
FTL-Delaware Class B Stock (i.e., Farley) immediately prior to the
Reorganization will remain outstanding and be held by Farley.
The certificate of incorporation of FTL-Delaware shall be the Certificate
of Incorporation of the surviving corporation of the Merger and will be amended
and restated as set forth in Exhibit A to the Merger Agreement.
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Certificate of Amendment/Amended and Restated Certificate of Incorporation
FTL-Delaware's Certificate of Incorporation presently provides that in a
merger transaction the FTL-Delaware Class A Stock and Class B Stock must be
treated alike. Since their treatment in the Reorganization will be different, as
part of the Reorganization and prior to the filing of the Certificate of Merger,
it is proposed to amend such provision to provide that it may be waived by
separate class vote of the FTL-Delaware Class A Stock and Class B Stock. Such
amendment would become effective prior to the Merger. The form of the amendment
is attached hereto as Annex III.
A vote in favor of the Reorganization shall be deemed to include approval
of the amendment to the Certificate of Incorporation of FTL-Delaware and to
permit the Merger to be effectuated in accordance with its terms notwithstanding
the different treatment of FTL-Delaware Class A and Class B Common Stock.
As part of the filing of a certificate of merger to effectuate the Merger,
FTL-Delaware will file an Amended and Restated Certificate of Incorporation
which will authorize a single class of shares of common stock and a single class
of shares of preferred stock. The Amended and Restated Certificate of
Incorporation of FTL-Delaware which will be in effect following the Merger is
included as Exhibit A to the Merger Agreement.
Amendment or Termination
FTL-Delaware, FTL-Cayman and Sub, by action of their respective Boards of
Directors, may amend, modify or supplement the Merger Agreement at any time
before or after its adoption by the stockholders of FTL-Delaware; provided,
however, that after such approval, no amendment, modification or supplement may
be made or effected that by law requires further approval by such stockholders
without the further approval of such stockholders.
The Merger Agreement provides that it may be terminated, and the
Reorganization abandoned, at any time, whether before or after stockholder
approval of the Merger Agreement is obtained, by action of the Board of
Directors of FTL-Delaware.
CONDITIONS TO CONSUMMATION OF THE REORGANIZATION
The Reorganization will not be consummated unless the Reorganization is
approved by the requisite vote of stockholders of FTL-Delaware.
FTL-Delaware and its subsidiaries are currently party to several debt and
other agreements that require the consent of third parties prior to
implementation of the Reorganization. Obtaining such third party consents is a
condition of the Reorganization. Although it is anticipated that such consents
will be obtained, no assurances can be given when or if FTL-Delaware will be
able to obtain the necessary waivers or consents needed to proceed with the
Reorganization. Farley will also have to obtain the consent of certain pledgees
of FTL-Delaware Class B Stock in order to exchange such stock for FTL-Delaware
Preferred Stock. In connection with the Reorganization it is anticipated that
FTL-Cayman will issue guarantees of certain of FTL-Delaware's debt obligations.
See "Third-Party Consents."
EFFECTIVE TIME
If the Reorganization is approved by the stockholders of FTL-Delaware and
not terminated by the Board of Directors of FTL-Delaware, the Reorganization
will become effective (the "Effective Time") at the close of business on the
date that an appropriate certificate of merger is filed with the Delaware
Secretary of State as required by Delaware law or at such later time as is
specified in such certificate of merger. FTL-Delaware anticipates that the
Reorganization will become effective promptly following the Special Meeting.
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Immediately following the Effective Time of the Reorganization, FTL-Cayman
will have the same subsidiaries and affiliates and the same directors and
executive officers as FTL-Delaware had immediately prior to such date.
RIGHTS OF DISSENTING STOCKHOLDERS
Pursuant to Section 262 of the DGCL, the holders of FTL-Delaware Class A
Stock do not have "dissenters appraisal rights" in connection with the
Reorganization because, among other reasons, such shares are listed on a
national securities exchange.
EXCHANGE OF SHARE CERTIFICATES
As of the Effective Time of the Reorganization, the holders of FTL-Delaware
Class A Stock prior to the Effective Time will automatically become the owners
of FTL-Cayman Class A Shares and, as of the Effective Time, will cease to be
owners of FTL-Delaware Class A Stock. Stock certificates representing
FTL-Delaware Class A Stock will, at the Effective Time, automatically represent
FTL-Cayman Class A Shares. Holders of FTL-Delaware Class A Stock will not be
required to exchange their stock certificates as a result of the Reorganization.
Should a stockholder desire to sell some or all of his FTL-Cayman Class A Shares
after the Effective Time, delivery of the stock certificate or certificates
which previously represented shares of FTL-Delaware Class A Stock will be
sufficient.
Following the Reorganization, certificates bearing the name of FTL-Cayman
will be issued in the normal course upon surrender of outstanding FTL-Delaware
Class A Stock certificates for transfer or exchange. If any stockholder
surrenders a certificate representing shares of FTL-Delaware Class A Stock for
exchange or transfer and the new certificate to be issued is to be issued in a
name other than that appearing on the surrendered certificate theretofore
representing the FTL-Delaware Class A Stock, it will be a condition to such
exchange or transfer that the surrendered certificate be properly endorsed and
otherwise be in proper form for transfer and that the person requesting such
exchange or transfer either (i) pay FTL-Cayman or its agents any taxes or other
governmental charges required by reason of the issuance of a certificate
registered in a name other than that appearing on the surrendered certificate or
(ii) establish to the satisfaction of FTL-Cayman or its agents that such taxes
or other governmental charges have been paid.
STOCK COMPENSATION PLANS
If the Reorganization is consummated, FTL-Delaware's stock option plans
will be amended to provide that FTL-Cayman Class A Shares will thereafter be
issued by FTL-Cayman upon exercise of any options issued thereunder. Other
employee benefit plans of FTL-Delaware will be similarly revised or amended, as
necessary.
Stockholder approval of the Reorganization will also constitute stockholder
approval of amendments to the stock option plans and other employee benefit
plans providing for future use of FTL-Cayman Class A Shares in lieu of
FTL-Delaware Class A Stock thereunder.
SHAREHOLDER RIGHTS PLAN
Under the Shareholder Rights Plan, preferred stock purchase rights were
issued to stockholders of FTL-Delaware at the rate of one right for each share
of FTL-Delaware Class A Stock and each share of FTL-Delaware Class B Stock. In
connection with the Reorganization, the Shareholder Rights Plan will be amended
to provide that the existing rights will expire immediately prior to the
Effective Time. FTL-Cayman does not presently intend to adopt a plan similar to
the Shareholder Rights Plan. See "Comparison of Rights of
Stockholders--Preferred Stock Purchase Rights."
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STOCK EXCHANGE LISTING
There is currently no established public trading market for the FTL-Cayman
Class A Shares. Immediately following the Reorganization, the FTL-Cayman Class A
Shares are expected to be listed on the NYSE under the symbol "FTL," the same
symbol under which the FTL-Delaware Class A Stock is currently listed.
ACCOUNTING TREATMENT OF THE REORGANIZATION
The acquisition by FTL-Cayman of FTL-Delaware in connection with the
Reorganization will be accounted for as a combination of entities under common
control (as if it were in a manner similar to a pooling of interests).
TRANSFER OF ASSETS
Following the Reorganization, FTL-Delaware intends to transfer, directly or
indirectly, to FTL-Cayman, or direct or indirect foreign subsidiaries of
FTL-Cayman, substantially all of its businesses and subsidiaries located outside
of the United States, other than certain interests of FTL-Delaware in Canada,
Germany, Italy and Mexico, and the beneficial ownership of certain trademarks.
Such actions will not require the approval of the stockholders of FTL-Delaware.
Prior to the transfer of the businesses and subsidiaries located outside of
the United States by FTL-Delaware, FTL-Delaware and FTL-Cayman will obtain a
valuation of the businesses, subsidiaries and trademarks to be transferred.
FTL-Cayman, or a subsidiary of FTL-Cayman, will pay to FTL-Delaware in cash,
license royalties and/or notes the fair value of the businesses, subsidiaries
and trademarks to be transferred based on such valuations.
CERTAIN TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences generally applicable to holders of FTL-Delaware Class A Stock. The
discussion contained in this Proxy Statement/Prospectus is based on the law in
effect as of the date of this Proxy Statement/ Prospectus. This summary does not
address the tax treatment of the Reorganization under applicable state, local,
foreign or other tax laws and generally does not take account of rules that may
apply to holders that are subject to special treatment, including, without
limitation, (i) insurance companies, dealers in securities, certain retirement
plans, financial institutions, tax exempt organizations, holders of securities
held as part of a "straddle", "hedge" or "conversion transaction" with other
investments and taxpayers whose functional currency is not the United States
dollar or (ii) stockholders owning directly, indirectly or by attribution, 10%
or more of FTL-Delaware Class A Stock or FTL-Cayman Class A Shares or (iii)
stockholders who acquired shares pursuant to the exercise of an employee stock
option or otherwise as compensation or (iv) certain expatriates or former
long-term residents of the United States. Stockholders are urged to consult
their own tax advisors as to the particular tax consequences to them of the
Reorganization. For purposes of this discussion, a "U.S. Holder" is any
stockholder that is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, an estate the income of
which is subject to U.S. federal income taxation regardless of its source, or a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust. A
Non-U.S. Holder is any stockholder other than a U.S. Holder. The discussion
below assumes that the FTL-Delaware Class A Stock exchanged in the
Reorganization is held as a capital asset.
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The Reorganization
Receipt of FTL-Cayman Class A Shares
Pursuant to Section 367(a) of the Code, and Treasury Regulations
promulgated thereunder, U.S. Holders exchanging their FTL-Delaware Class A Stock
for FTL-Cayman Class A Shares will recognize gain, if any (but not loss) on the
transaction. A U.S. Holder's gain will equal the excess of the fair market value
of the FTL-Cayman Class A Shares received by the holder pursuant to the
Reorganization over the holder's aggregate adjusted basis in the FTL-Delaware
Class A Stock exchanged therefor. Any such gain will be capital gain. Recently
enacted legislation revised the holding period and tax rates applicable to
certain capital gains. Capital gain of non-corporate taxpayers from the exchange
of FTL-Delaware Class A Stock held more than one year is eligible for reduced
rates of taxation depending upon the U.S. Holder's holding period for the
FTL-Delaware Class A Stock. U.S. Holders are advised to consult their own tax
advisers about the new capital gain provisions that may be relevant to their
particular circumstances. The basis of the FTL-Cayman Class A Shares will be
equal to their fair market value on the date of the Reorganization (except in
the case of holders realizing a loss on the exchange whose basis will be the
same as the basis of their FTL-Delaware Class A Stock exchanged therefor) and
the holding period of the FTL-Cayman Class A Shares will commence on the day
after the date of the Reorganization (except in the case of holders realizing a
loss on the exchange whose holding period will include the period such holders
held their FTL-Delaware Class A Stock).
Form 926 Reporting Requirements
Pursuant to Section 6038B of the Code, a U.S. Holder is required to file an
information return on IRS Form 926 along with certain additional information
which must be attached thereto. Form 926 and its required attachments must be
filed with such holder's U.S. federal income tax return for the taxable year
that includes the Reorganization. The information which must be included with
Form 926 is described in temporary Treasury Regulation Section 1.6038B-1T.
FTL-Delaware intends to provide such information to each U.S. Holder so as
to enable each such holder to timely file Form 926.
A U.S. Holder's failure to provide the information required by Section
6038B of the Code will result in, among other things, such holder being subject
to a penalty equal to 25 percent of the amount of gain realized by the holder
pursuant to the Reorganization.
United States Federal Income Taxation of Dividends
For U.S. federal income tax purposes, the gross amount of dividends paid by
FTL-Cayman to U.S. Holders will be treated as foreign source dividend income to
the extent paid out of FTL-Cayman's current or accumulated earnings and profits.
These dividends will not be eligible for the dividends received deduction
generally allowed to U.S. corporate shareholders on dividends from U.S. domestic
corporations. To the extent that an amount received by a U.S. Holder exceeds
such U.S. Holder's allocable share of FTL-Cayman's current and accumulated
earnings and profits, such excess will be applied first to reduce such U.S.
Holder's tax basis in its shares and then, to the extent in excess of such U.S.
Holder's tax basis, such excess will constitute gain from a deemed sale or
exchange of such shares. For U.S. foreign tax credit purposes, dividends on the
shares will generally constitute "passive income", or, in the case of certain
U.S. Holders, "financial services income."
Classification of FTL-Cayman As a Controlled Foreign Corporation
Under Section 951(a) of the Code, each "United States shareholder" of a
"controlled foreign corporation" ("CFC") must include in its gross income for
U.S. federal income tax purposes its pro rata share of the CFC's "subpart F
income," even if the subpart F income is not distributed. In
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addition, gain on the sale of stock in a CFC realized by a United States
shareholder is treated as ordinary dividend income to the extent of its pro rata
share of the CFC's accumulated undistributed earnings and profits. Section
951(b) of the Code defines a United States shareholder ("U.S. Shareholder") as
any U.S. corporation, citizen, resident or other U.S. person who owns (directly
or through certain deemed ownership rules) 10% or more of the total combined
voting power of all classes of stock of a foreign corporation. In general, a
foreign corporation is treated as a CFC only if such U.S. Shareholders
collectively own more than 50% of the total combined voting power or total value
of the corporation's stock. Under these rules FTL-Cayman does not expect to be a
CFC. While it is possible that FTL-Cayman could in the future be treated as a
CFC, so long as a shareholder of FTL-Cayman is not a U.S. Shareholder,
FTL-Cayman's status as a CFC should have no adverse effect on such shareholder.
Passive Foreign Investment Companies
Sections 1291 through 1298 of the Code contain special rules applicable
with respect to foreign corporations that are "passive foreign investment
companies" ("PFICs"). FTL-Cayman will be a PFIC if 75% or more of its gross
income (including the pro rata share of the gross income of any company (United
States or foreign) in which FTL-Cayman is considered to own 25% or more of the
shares by value) in a taxable year is passive income. Alternatively, FTL-Cayman
will be considered to be a PFIC if at least 50% of the assets (averaged over the
year) of FTL-Cayman (including the pro rata share of the assets of any company
of which FTL-Cayman is considered to own 25% or more of the shares by value) in
a taxable year are held for the production of, or produce, passive income. If
FTL-Cayman becomes a PFIC, each shareholder who is a U.S. person, in the absence
of an election by such shareholder to treat FTL-Cayman as a "qualified electing
fund" (a "QEF" election), as discussed below, would, upon certain distributions
by FTL-Cayman and upon disposition of the FTL-Cayman shares at a gain, be liable
to pay tax at the highest tax rate on ordinary income in effect for each period
to which the income is allocated plus interest on the tax, as if the
distribution or gain had been recognized ratably over the taxpayer's holding
period for the FTL-Cayman Class A Shares while FTL-Cayman was a PFIC.
Additionally, were FTL-Cayman to become a PFIC, U.S. Holders who acquire
FTL-Cayman Class A Shares from decedents would be denied the normally available
step-up of the income tax basis for such FTL-Cayman Class A Shares to fair
market value at the date of death and, instead, would have a tax basis equal to
the decedent's basis, if lower.
If a U.S. Holder has made a QEF election for all taxable years that such
holder held the FTL-Cayman Class A Shares and FTL-Cayman was a PFIC,
distributions and gain will not be taxed as if recognized ratably over the
taxpayer's holding period or subject to an interest charge, gain on the sales of
FTL-Cayman Class A Shares will be characterized as capital gain and the denial
of basis step-up at death described above would not apply. Instead, a
stockholder of a qualified electing fund is required for each taxable year to
include in income a pro rata share of the ordinary earnings of the qualified
electing fund as ordinary income and a pro rata share of the net capital gain of
the qualified electing fund as long-term capital gain, subject to a separate
election to defer payment of taxes, which deferral is subject to an interest
charge. FTL-Cayman, at the request of a shareholder electing to have FTL-Cayman
treated as a QEF, will comply with the applicable information reporting
requirements.
For taxable years beginning after 1997, a U.S. Holder of certain publicly
traded PFIC stock could elect to mark the stock to market annually, recognizing
as ordinary income or loss each year an amount equal to the difference as of the
close of the taxable year between the holder's fair market value of the PFIC
stock and the adjusted basis in the PFIC stock. Losses would be allowed only to
the extent of net mark-to-market gain previously included by the U.S. Holder
under the election for prior taxable years. If the mark-to-market election were
made, then the rules set forth above would not apply for periods covered by the
election.
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FTL-Cayman believes that it will not be a PFIC. However, the tests for
determining PFIC status are applied annually and it is difficult to accurately
predict future income and assets, which are relevant to this determination.
Accordingly, there can be no assurance that FTL-Cayman will not become a PFIC.
U.S. Holders who hold FTL-Cayman Class A Shares during a period when FTL-Cayman
is a PFIC will be subject to the foregoing rules, even if FTL-Cayman ceases to
be a PFIC, subject to certain exceptions for U.S. Holders who made a QEF
election.
FTL-Cayman can give no assurance that it will have timely knowledge of any
future status as a PFIC. In this regard, FTL-Cayman does not assume any
obligation to make timely disclosure with respect to such status.
United States Taxation of Non-U.S. Holders
Subject to certain exceptions, Non-U.S. Holders will be subject to U.S.
federal income tax on gain realized, if any, on the exchange of FTL-Delaware
Class A Stock for FTL-Cayman Class A Shares only if such gain is effectively
connected with the conduct of a trade or business or, in the case of a resident
of a country which has a treaty with the United States, such item is
attributable to a permanent establishment (or in the case of an individual, a
fixed place of business) in the United States or, in the case of a Non-U.S.
Holder that is an individual who holds the FTL-Delaware Class A Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year and certain other conditions apply.
Subject to certain exceptions, Non-U.S. Holders will be subject to U.S.
federal income tax on dividend distributions with respect to, and gain realized
from the sale or exchange of, FTL-Cayman Class A Shares only if such dividends
or gains are effectively connected with the conduct of a trade or business or,
in the case of a resident of a country which has a treaty with the United
States, such item is attributable to a permanent establishment (or in the case
of an individual, a fixed place of business) within the United States or in the
case of gains realized by Non-U.S. Holders that are individuals, such holders
are present in the United States for 183 days or more during the taxable year of
the sale and certain other conditions exist. Except as discussed below with
respect to backup withholding, dividends paid by FTL-Cayman will not be subject
to U.S. withholding tax. Nonresident alien individuals will not be subject to
U.S. estate tax with respect to shares of FTL-Cayman.
Backup Withholding and Information Reporting
The exchange of FTL-Delaware Class A Stock for FTL-Cayman Class A Shares
should not be subject to information reporting or backup withholding because
such exchange will not be for cash.
In addition, U.S. Holders generally will be subject to information
reporting requirements and may be subject to backup withholding with respect to
dividends paid on, or cash proceeds of a sale or exchange of, the FTL-Cayman
Class A Shares. Non-U.S. Holders will not be subject to information reporting or
backup withholding with respect to dividends paid on, or cash proceeds of a sale
or exchange of, the FTL-Cayman Class A Shares, unless payment is made through a
paying agent (or office) in the United States. Non-U.S. Holders generally will
be subject to information reporting and backup withholding at 31% with respect
to any such payment within the United States, unless the Holder provides a
taxpayer identification number, certifies to its foreign status, or otherwise
establishes an exemption.
The amount of any backup withholding from a payment to a holder is allowed
as a credit against such holder's federal income tax liability and may entitle
such holder to a refund, provided that the required information is furnished to
the IRS.
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Post-Reorganization Taxation of FTL-Cayman and FTL-Delaware
All of FTL-Delaware's foreign subsidiaries are presently CFCs. As discussed
above, under subpart F of the Code, a CFC is a foreign corporation that is owned
(directly, indirectly or by attribution) more than fifty percent (50%), by vote
or by value, by U.S. Shareholders. In the event that a foreign corporation is a
CFC, a U.S. Shareholder of the CFC must include in income in its taxable year in
which or with which the taxable year of the CFC ends, the total of, among other
things, (i) its pro rata share of the CFC's subpart F income for such taxable
year and (ii) its pro rata share of the CFC's increase in earnings invested in
United States property for such year. Thus, immediately prior to the
Reorganization, FTL-Delaware (or one or more of its domestic subsidiaries) is,
and has been, subject to the deemed income inclusion provisions described above
as the only United States shareholder of FTL-Delaware's foreign subsidiaries.
After the Reorganization, FTL-Delaware will continue to be subject to the deemed
inclusion provisions with respect to any foreign subsidiaries that continue to
be owned by FTL-Delaware, and FTL-Cayman will not be subject to any deemed
income inclusion with respect to its other direct or indirect subsidiaries.
CAYMAN ISLANDS TAX CONSEQUENCES
According to Cayman Islands counsel, Truman Bodden & Company, at the
present time there is no Cayman Islands income or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty or inheritance tax payable
by a Cayman Islands company or its shareholders. FTL-Cayman has applied for and
expects to receive an undertaking from the Governor in Council of the Cayman
Islands under the Tax Concessions Law (Revised) that, for a 20 year period from
the date of the grant of the undertaking in the event that any legislation is
enacted in the Cayman Islands imposing tax computed on profits or income, or
computed on any capital assets, gain or appreciation, or any tax in the nature
of estate duty or inheritance tax, such tax shall not be applicable to
FTL-Cayman or to any of its operations or to the shares, debentures or other
obligations of FTL-Cayman except insofar as such tax applies to persons
ordinarily resident in the Cayman Islands and holding such shares, debentures or
other obligations of FTL-Cayman or any land leased or let to FTL-Cayman.
Therefore, there will be no Cayman Islands tax consequences with respect to the
Reorganization or with respect to subsequent distributions in respect of the
FTL-Cayman Class A Shares.
DESCRIPTION OF AUTHORIZED SHARES OF FTL-CAYMAN
The following statements with respect to FTL-Cayman's share capital are
subject to the detailed provisions of FTL-Cayman's Amended and Restated Articles
of Association (the "Articles of Association") and its Amended and Restated
Memorandum of Association (the "Memorandum of Association") as they will be in
effect on the date of the Merger. These statements do not purport to be complete
and, while FTL-Cayman believes the descriptions of the material provisions of
the Articles of Association and Memorandum of Association contained in this
Proxy Statement/Prospectus are accurate statements with respect to such material
provisions, such statements are subject to the detailed provisions in the
Articles of Association and Memorandum of Association, to which reference is
hereby made for a full description of such provisions.
ORDINARY SHARES; GENERAL
The Memorandum of Association provides that the authorized share capital of
FTL-Cayman is divided into 200,000,000 Class A Shares, 100 Class B Shares and
35,000,000 preference shares.
VOTING
The holders of FTL-Cayman Class A Shares will be entitled to one vote per
share. The voting rights of the four (4) FTL-Cayman Class B Shares to be issued
to Farley will be equal to the aggregate number of votes held by the holders of
FTL-Delaware Class B Stock on the date the
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<PAGE> 39
Merger is consummated (which based on current ownership is 28,421,380 votes or
approximately 30% of the aggregate voting power). All actions submitted to a
vote of shareholders shall be voted on by the holders of FTL-Cayman Class A
Shares and FTL-Cayman Class B Shares, voting together as a single class, except
as otherwise set forth below or as provided by law. The four (4) FTL-Cayman
Class B Shares which will be purchased by Farley immediately prior to the
Reorganization have been designed to maintain the relative voting rights that
currently exist between the FTL-Delaware Class A Stock and Class B Stock.
With respect to the election of directors, holders of FTL-Cayman Class A
Shares, voting as a separate class, will be entitled to elect 25% of the total
number of directors constituting the entire Board of Directors of FTL-Cayman
(the "Class A Directors") for so long as any FTL-Cayman Class B Shares are
outstanding, and, if not a whole number, then the holders of the FTL-Cayman
Class A Shares are entitled to elect the nearest higher whole number of
directors that is at least 25% of the total number of directors.
There are no limitations on the right of nonresident shareholders to hold
or vote their FTL-Cayman Class A Shares imposed by Cayman Islands law or
FTL-Cayman's Articles of Association; provided, however, that, except as
otherwise required by Cayman Islands law, FTL-Cayman shall not be bound to
recognize any equitable, contingent, future or partial interest in any share
except the absolute right in the registered holder. The rights attached to any
separate class of shares (unless otherwise provided by the terms of the shares
of that class) may be varied only with the consent in writing of the holders of
a majority of the shares of that class or by a Special Resolution (as defined
below) passed at a separate general meeting of holders of the shares of that
class. The necessary quorum for such a meeting shall be holders of at least a
majority of the shares of that class and any holder of shares of the class
present in person or by proxy may demand a vote and, on such vote, shall have
one vote for each share of the class of which he is the holder. No additional
FTL-Cayman Class B Shares may be issued without the consent in writing of the
holders of a majority of the then issued FTL-Cayman Class B Shares or by a
Special Resolution of such shareholders. The rights attached to any class of
shares, other than the FTL-Cayman Class B Shares, shall not be deemed to be
varied by the issuance of additional shares that rank pari passu with such
shares.
DIVIDEND RIGHTS
Holders of FTL-Cayman Class A Shares will be entitled to participate pari
passu, on a share for share basis, with the holders of any other class of
ordinary shares outstanding, including the FTL-Cayman Class B Shares, with
respect to any dividends declared by the Board of Directors of FTL-Cayman. At
the time of the Reorganization, FTL-Cayman and FTL-Delaware will be party to
certain loan agreements and indentures which contain covenants that will
restrict their ability to pay dividends. FTL-Cayman and FTL-Delaware currently
intend to retain earnings for use in their respective businesses and the
financing of their respective capital requirements (except for the payment of
regular quarterly dividends on the FTL-Delaware Preferred Stock as discussed
below). The payment of any future cash dividends on the FTL-Cayman Class A
Shares is necessarily dependent upon the earnings and financial needs of
FTL-Cayman, along with applicable legal and contractual restrictions.
Holders of FTL-Cayman Class A Shares will not be entitled to a cash
dividend preference of $1.00 per share that is currently available to the
holders of FTL-Delaware Class A Stock prior to the payment of dividends to the
holders of FTL-Delaware Class B Stock. The Board has determined that the $1.00
preference available to the holders of FTL-Delaware Class A Stock is not
necessary following the Reorganization since the current holders of FTL-Delaware
Class B Stock will not be entitled to participate in the dividends of
FTL-Cayman, except on the very limited basis of their four (4) FTL-Cayman Class
B Shares.
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<PAGE> 40
LIQUIDATION OF FTL-CAYMAN
Upon the liquidation of FTL-Cayman, subject to the rights of any holders of
FTL-Cayman preference shares, the holders of FTL-Cayman Class A Shares will
participate in the assets of FTL-Cayman available for distribution pari passu,
on a share for share basis, with the holders of any other class of ordinary
shares outstanding (including the FTL-Cayman Class B Shares). If FTL-Cayman
shall be wound up, the liquidator, by a Special Resolution and any other
approvals required by Cayman Islands law, may divide among the holders of
FTL-Cayman Class A Shares and FTL-Cayman Class B Shares in kind the whole or any
part of the assets of FTL-Cayman (whether they shall consist of property of the
same kind or not) and may for such purpose set such value as the liquidator
deems fair upon any property to be so divided and the liquidator may determine
how such division shall be carried out as between the holders of the FTL-Cayman
Class A Shares and FTL-Cayman Class B Shares. The liquidator following a Special
Resolution of shareholders may transfer all or any part of the assets of
FTL-Cayman in trust for the benefit of shareholders as the liquidator, with such
approval, shall determine.
A Special Resolution is a resolution passed by two-thirds of such
shareholders as, being entitled to do so, vote in person or, where proxies are
allowed, by proxy at a general meeting of which notice specifying the intention
to propose such resolution has been duly given or which has been approved in
writing by all shareholders of a company entitled to vote at a general meeting
of the company.
REDEMPTION
The FTL-Cayman Class A Shares will not be subject to redemption either by
FTL-Cayman or the holder thereof.
The FTL-Cayman Class B Shares to be held by Farley will be redeemed by
FTL-Cayman in the following instances:
(i) upon exchange by Farley of any FTL-Delaware Preferred Stock held
by Farley for FTL-Cayman Class A Shares pursuant to the terms thereof,
FTL-Cayman shall redeem a proportionate number of whole or fractional
FTL-Cayman Class B Shares equal to the percentage of outstanding shares of
FTL-Delaware Preferred Stock so exchanged by Farley at a redemption price
per FTL-Cayman Class B Share equal to the closing price on the NYSE of an
FTL-Cayman Class A Share on the last trading day prior to the redemption
date (the "Redemption Price").
(ii) upon redemption of all of the FTL-Delaware Preferred Stock held
by Farley by FTL-Delaware pursuant to the terms thereof, FTL-Cayman shall
redeem all of the FTL-Cayman Class B Shares at a price equal to the
Redemption Price.
(iii) upon transfer by Farley to a non-affiliate of Farley of any
shares of FTL-Delaware Preferred Stock or FTL-Delaware common stock
received upon conversion thereof, a proportionate number of whole or
fractional FTL-Cayman Class B Shares equal to the percentage of outstanding
shares of FTL-Delaware Preferred Stock and/or such FTL-Delaware common
stock which are transferred by Farley shall be redeemed by FTL-Cayman at a
price equal to the Redemption Price.
RESTRICTIONS ON TRANSFER
The FTL-Cayman Class B Shares will not be transferrable by the holders
thereof except to affiliates of Farley. The FTL-Cayman Class A Shares contain no
restrictions on transfer.
PREFERENCE SHARES
Under the Memorandum of Association and the Articles of Association,
FTL-Cayman will have the authority to issue 35,000,000 preference shares. There
are currently no preference shares
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outstanding, and FTL-Cayman will not issue any preference shares in connection
with the Reorganization. Under the Articles of Association, subject to the
special rights attaching to any class of shares of FTL-Cayman not being varied,
the Board of Directors of FTL-Cayman may establish one or more classes or series
of preference shares having the number of shares, designations, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations that the Board of Directors fixes without any shareholder approval.
DESCRIPTION OF FTL-DELAWARE PREFERRED STOCK
GENERAL
Under its Certificate of Incorporation, FTL-Delaware has authority to issue
35,000,000 shares of preferred stock. The Board of Directors of FTL-Delaware can
periodically issue any number of series of preferred stock with any rights and
preferences that it so determines by Board action. In connection with the
Reorganization, a Certificate of Designations (the "Certificate of
Designations") will be filed with the Secretary of State of the State of
Delaware setting forth the terms of the FTL-Delaware Preferred Stock. The form
of Certificate of Designations is attached as Annex IV hereto.
The following description of certain provisions of the FTL-Delaware
Preferred Stock is intended as a summary only and does not purport to be
complete. While FTL-Delaware believes the descriptions of the material
provisions of the Certificate of Designations are accurate statements with
respect to such material provisions, such statements are subject to the detailed
provisions in the Certificate of Designations and are qualified in their
entirety by reference to the complete text of the Certificate of Designations.
DIVIDENDS
Holders of FTL-Delaware Preferred Stock shall be entitled to receive
cumulative preferred cash dividends of % per annum of the liquidation
preference of such FTL-Delaware Preferred Stock (the "Preferred Stock
Dividend"). The Preferred Stock Dividend shall be paid to the holders of FTL-
Delaware Preferred Stock on a quarterly basis. In addition to the Preferred
Stock Dividend, holders of FTL-Delaware Preferred Stock will be entitled to
participate with the holders of the common stock of FTL-Delaware following the
Reorganization with respect to all other dividends declared by the Board of
Directors of FTL-Delaware on an as converted basis in accordance with the terms
of conversion described below.
The certificate of incorporation of FTL-Delaware will provide that
dividends, other than the Preferred Stock Dividend, may be declared only by a
committee of the Board of Directors of FTL-Delaware, consisting entirely of
directors who are not affiliates of Farley or employees of FTL-Delaware or its
affiliates.
Under Delaware law, FTL-Delaware may declare and pay dividends on its
shares of capital stock out of its surplus and, if there is no surplus, out of
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. The payment of any future cash dividends is necessarily
dependent upon the earnings and financial needs of FTL-Delaware, along with
applicable legal and contractual restrictions.
LIQUIDATION OF FTL-DELAWARE
In case of the voluntary or involuntary liquidation, dissolution, or
winding up of FTL-Delaware, holders of FTL-Delaware Preferred Stock are entitled
to receive an aggregate liquidation preference equal to the average closing
price of the FTL-Delaware Class A Stock on the NYSE for the 20 trading days
prior to the date of the Special Meeting multiplied by the number of outstanding
shares of FTL-Delaware Class B Stock on such date (the "FTL-Delaware Liquidation
Preference"), plus all
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accrued and unpaid dividends. See "The Reorganization--Background and Reasons
for the Reorganization; Financial Advisors."
The holders of FTL-Delaware Preferred Stock shall also be entitled to
participate with the holders of the common stock of FTL-Delaware following the
Reorganization with respect to all liquidation proceeds on an as converted basis
in accordance with the terms of conversion described below.
Holders of FTL-Delaware Preferred Stock are entitled to the FTL-Delaware
Liquidation Preference before any payment or distribution is made to the holders
of any series or class of FTL-Delaware's stock which ranks junior as to
liquidation rights to the FTL-Delaware Preferred Stock including the common
stock of FTL-Delaware, but the holders of the shares of the FTL-Delaware
Preferred Stock will not be entitled to receive the FTL-Delaware Liquidation
Preference until the liquidation price of any other series or class of
FTL-Delaware's stock hereafter issued which ranks senior as to liquidation
rights to the FTL-Delaware Preferred Stock has been paid in full.
VOTING RIGHTS
The holders of the FTL-Delaware Preferred Stock shall be entitled to vote
on all matters put to a vote of the holders of FTL-Delaware common stock, voting
together with such holders as a single class, and will be entitled to the number
of votes which such holder would have on an as converted basis, provided,
however, that if dividends on the FTL-Delaware Preferred Stock are in arrears
for six or more quarters, then the holders of the FTL-Delaware Preferred Stock
shall have the right, voting separately as a class, to elect one additional
member to the Board of Directors of FTL-Delaware (the "Preferred Stock
Director"). The Preferred Stock Director shall be the sole member of a special
committee of the Board of Directors of FTL-Delaware, the only purpose of which
will be to declare dividends on the FTL-Delaware Preferred Stock. The special
committee, however, will not be permitted to declare dividends on the
FTL-Delaware Preferred Stock if such a payment would be or cause a default or an
event of default under any debt agreement of FTL-Delaware or any of its
affiliates.
OPTIONAL REDEMPTION
FTL-Delaware will not be permitted to redeem the FTL-Delaware Preferred
Stock until the anniversary of the date of original issuance of the
FTL-Delaware Preferred Stock. Thereafter, the FTL-Delaware Preferred Stock will
be subject to redemption, at the option of FTL-Delaware, in whole, at any time,
upon not less than 30 days' or more than 60 days' prior written notice to the
holders of the FTL-Delaware Preferred Stock, at a price equal to the then fair
market value of the FTL-Delaware Preferred Stock as determined by a nationally
recognized investment banking firm.
The certificate of incorporation of FTL-Delaware will provide that all
decisions with respect to the redemption of the FTL-Delaware Preferred Stock
shall be made by a committee of the Board of Directors of FTL-Delaware,
consisting entirely of directors who are not affiliates of Farley or employees
of FTL-Delaware or its affiliates.
EXCHANGE RIGHTS
A holder of FTL-Delaware Preferred Stock will have the right at any time,
at the holder's option, to exchange with FTL-Delaware, in whole or from time to
time in part, FTL-Delaware Preferred Stock for FTL-Cayman Class A Shares at the
exchange rate of FTL-Cayman Class A Shares for each share of FTL-Delaware
Preferred Stock, subject to adjustment (except that in the event that such
FTL-Delaware Preferred Stock is called for redemption such right terminates on
the date determined by FTL-Delaware, which will be no earlier than the close of
business on the fifth business day immediately preceding the specified
redemption date).
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The exchange ratio has been determined taking into account the current
number of shares of FTL-Delaware Class A Stock that would be received upon
conversion of the outstanding FTL-Delaware Class B Stock, less a discount to
compensate the holders of FTL-Cayman Class A Shares for the Preferred Stock
Dividends payable to Farley. See "The Reorganization--Special Committee/Fairness
Opinion and Background and Reasons for the Reorganization; Financial Advisors."
CONVERSION RIGHTS
A holder of FTL-Delaware Preferred Stock will have the right at any time,
at the holder's option, to convert, in whole or from time to time in part,
FTL-Delaware Preferred Stock into FTL-Delaware common stock at the conversion
rate of shares of FTL-Delaware common stock for each share of
FTL-Delaware Preferred Stock, subject to adjustment (except that in the event
that such FTL-Delaware Preferred Stock is called for redemption such right
terminates on the date determined by FTL-Delaware, which will be no earlier than
the close of business on the fifth business day immediately preceding the
specified redemption date).
ALTERNATIVE RATES AND NO-CALL PERIODS
Prior to the mailing of the Proxy Statement/Prospectus to the stockholders
of FTL-Delaware, Farley will select the dividend rate, exchange rate, conversion
rate and No-Call Period, in their discretion, from the following schedule of
economically equivalent alternative rates and No-Call Periods:
<TABLE>
<CAPTION>
DIVIDEND EXCHANGE AND NO-CALL
ALTERNATIVE YIELD CONVERSION RATIO PERIOD
- ----------- -------- ---------------- -------
<C> <S> <C> <C> <C>
1 ........................... 4.50% 0.9524 3-Years
2 ........................... 4.50% 0.9346 4-Years
3 ........................... 4.50% 0.9174 5-Years
4 ........................... 5.00% 0.9174 3-Years
5 ........................... 5.00% 0.8929 4-Years
6 ........................... 5.00% 0.8696 5-Years
7 ........................... 5.50% 0.8850 3-Years
8 ........................... 5.50% 0.8547 4-Years
9 ........................... 5.50% 0.8333 5-Years
10 ........................... 6.00% 0.8475 3-Years
11 ........................... 6.00% 0.8197 4-Years
12 ........................... 6.00% 0.7937 5-Years
</TABLE>
COMPARISON OF RIGHTS OF STOCKHOLDERS
The rights of stockholders of FTL-Delaware are governed by Delaware law and
FTL-Delaware's Certificate of Incorporation and By-Laws. After the
Reorganization, the holders of FTL-Delaware Class A Stock will become holders of
FTL-Cayman Class A Shares, and their rights will be governed by the Companies
Law (1995 Revision) of the Cayman Islands (the "Companies Law"), FTL-Cayman's
Articles of Association and FTL-Cayman's Memorandum of Association.
The principal attributes of the FTL-Delaware Class A Stock and the
FTL-Cayman Class A Shares will be similar; however, there are certain
differences between the rights of stockholders under Delaware law and Cayman
Islands law, which is modeled after that of England and Wales. In addition,
there are certain differences between FTL-Delaware's Certificate of
Incorporation and By-laws and FTL-Cayman's Articles of Association and
Memorandum of Association.
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The following discussion is a summary of certain changes in the rights of
stockholders resulting from the Reorganization described in this Proxy
Statement/Prospectus. This summary does not purport to be complete or to cover
all of the respects in which Cayman Islands law may differ from laws generally
applicable to Delaware corporations and their stockholders and, while FTL-Cayman
and FTL-Delaware believe that this summary is accurate, this summary is subject
to the complete text of the relevant provisions of the Companies Law, the
Delaware General Corporation Law ("DGCL"), FTL-Delaware's Certificate of
Incorporation and By-Laws and FTL-Cayman's Articles of Association and
Memorandum of Association.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
Under the DGCL, there is no statutory restriction on a Delaware
corporation's ability to acquire the business of another corporation. However, a
merger or consolidation, sale, lease, exchange or other disposition of all or
substantially all of the property of the corporation (a "Disposition") not in
the usual and regular course of the corporation's business, or a dissolution of
the corporation, is required under the DGCL to be approved by the holders of a
majority of the shares entitled to vote thereon unless the charter provides
otherwise. In addition, under the DGCL, class voting rights exist with respect
to amendments to the charter that adversely affect the terms of the shares of a
class. See "Amendment of Charter" below. Such class voting rights do not exist
as to other extraordinary matters, unless the charter provides otherwise. The
Certificate of Incorporation of FTL-Delaware does not provide otherwise.
FTL-Cayman may acquire the assets and business of another company and carry
on that business when it is within the purposes of its Memorandum of
Association. A Cayman Islands company may not "merge" with another company.
However, under the Companies Law, FTL-Cayman may (a) consolidate or amalgamate
with another company or (b) reorganize or reconstruct itself pursuant to a plan
approved by:
(i) for each class of shares issued, a majority in the number of the
holders of the shares of that class present in person or by proxy
at a general meeting of that class, provided that such shares
represent at least 75% of the nominal value of the shares of such
class held by such shareholders present in person or by proxy at
such general meeting; and
(ii) the Cayman Islands court, who may, but need not, grant its
approval.
In certain circumstances the Cayman Islands court has refused to grant approval
even if the requisite majority of shareholders approve.
Farley will enter into an agreement with FTL-Cayman that will provide that
in any shareholder vote to consider a consolidation or amalgamation, if the
number of votes cast in favor of such transaction by the FTL-Cayman Class A
Shares and the FTL-Cayman Class B Shares voting together as a single class in a
deemed vote of the two classes, constitutes a majority of the votes cast, and if
the separate vote of the Class A Shares is in favor of such transaction, Farley
will vote in favor of such transaction in the separate class vote of the
FTL-Cayman Class B Shares.
ABSENCE OF REQUIRED VOTE FOR CERTAIN MERGERS
Under the DGCL, no vote of the stockholders of a corporation surviving a
merger is required to approve a merger if (i) the agreement of merger does not
amend the charter of such corporation, (ii) each share of stock of such
corporation outstanding immediately before the merger is to be an identical
outstanding or treasury share of the surviving corporation thereafter and (iii)
the number of shares of common stock of such corporation to be issued in the
merger, if any, does not exceed 20 percent of the number of shares outstanding
immediately before the merger.
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There is no equivalent provision in the Companies Law and therefore the
shareholders of the surviving company in such a situation would be entitled to
vote on the merger as described above. See "Stockholder Approval of Business
Combinations" above.
APPRAISAL RIGHTS
Under the DGCL, a stockholder of a corporation does not have appraisal
rights in connection with a merger or consolidation or, in the case of a
disposition, if (i) the shares of such corporation are listed on a national
securities exchange or held of record by more than 2,000 stockholders, as is
presently the case with FTL-Delaware, or (ii) such corporation will be the
surviving corporation of the merger and no vote of the stockholders of the
surviving corporation is required to approve such merger, provided, however,
that a stockholder is entitled to appraisal rights in the case of a merger or
consolidation if such stockholder is required by the terms of an agreement of
merger or consolidation to accept in exchange for the shares of such stockholder
anything other than (a) shares of stock of the corporation surviving or
resulting from such merger or consolidation, (b) shares of any other corporation
that on the effective date of the merger on consolidation will be either listed
on a national securities exchange or held of record by more than 2,000
stockholders, (c) cash in lieu of fractional shares of the corporation described
in the foregoing clauses (a) and (b), or (d) any combination of the foregoing.
FTL-Delaware's Class A Stock is presently listed on the NYSE and FTL-Cayman's
Class A Shares will be listed or authorized for listing upon official notice of
issuance by the NYSE.
The Companies Law does not provide for appraisal rights. However, in the
case of a court sanctioned reorganization of a Cayman Islands company as
described in "Stockholder Approval of Business Combinations" above, a dissenting
shareholder has the right to express to the court such shareholder's view that
the transaction sought to be approved would not provide the shareholders with
the fair value of their shares. The court of the Cayman Islands has the
discretion to make such order as it may decide, however, (i) FTL-Cayman believes
the court ordinarily would not disapprove the transaction on that ground absent
other evidence of fraud or bad faith, and (ii) if the transaction were approved
and consummated, the dissenting shareholder would have no rights comparable to
the appraisal rights (as here defined, rights to receive payments in cash for
the judicially determined value of their shares) available to dissenting
stockholders of Delaware corporations.
In addition, the Companies Law provides that where an offer is made by a
company for shares of a Cayman Islands company and, within four months of the
offer, the holders of not less than 90 percent of the shares which are the
subject of the offer accept, the offeror may by notice require the dissenting
shareholders to transfer their shares on the terms of the offer. Within one
month of such notice, a dissenting shareholder may apply to the court objecting
to the transfer. The burden is on the dissenting shareholders to show that the
court should exercise its discretion to prevent the requirement of such
transfer. The court of the Cayman Islands has absolute discretion to make such
order as it may decide. FTL-Cayman, however, believes it is unlikely to prevent
the requirement of such transfer unless there is evidence of fraud or bad faith
or collusion as between the offeror and the holders of the shares who have
accepted the offer as a means of unfairly forcing out minority stockholders or
where it is affirmatively established that notwithstanding the views of a very
large majority of the shareholders the transaction is unfair.
STOCKHOLDER CONSENT TO ACTION WITHOUT MEETING
Under the DGCL, unless otherwise provided in the charter, any action that
can be taken at a meeting of the stockholders may be taken without a meeting if
written consent thereto is signed by the holders of outstanding stock having the
minimum number of votes necessary to authorize or take such action at a meeting
of the stockholders. FTL-Delaware's Certificate of Incorporation provides that
whenever the vote of stockholders or any class or classes of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, the meeting and vote of the stockholders or such class or
classes of stockholders may be
41
<PAGE> 46
dispensed with upon the written consent of the stockholders having not less than
such minimum percentage of the total number of votes as may otherwise have been
required for such action.
The Companies Law and the Articles of Association provide that shareholders
may take action requiring an ordinary or a Special Resolution without a meeting
only by unanimous written consent.
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, a special meeting of stockholders may be called only by the
Board of Directors or by persons authorized in the charter or the bylaws. The
Bylaws of FTL-Delaware provide for the call of a special meeting of stockholders
only by the Chairman of the Board, the President, a majority of the Board of
Directors or stockholders representing a majority in amount of capital stock of
FTL-Delaware.
Under the Articles of Association, an extraordinary meeting may be called
only by the Board of Directors or by the Chairman of the Board of Directors or
the President of FTL-Cayman. The Board of Directors, upon the request in writing
of one or more shareholders holding in the aggregate not less than one-half of
the paid-up share capital of FTL-Cayman on the date of such request carrying the
right to vote at general meetings, shall convene an extraordinary general
meeting, failing which those making such request or any of them or any other
member or members holding in the aggregate not less than one-half of the paid-up
share capital of FTL-Cayman on the date of the request carrying the right to
vote at general meetings, may convene an extraordinary general meeting.
DISTRIBUTIONS AND DIVIDENDS; REPURCHASES AND REDEMPTIONS
The Certificate of Incorporation of FTL-Delaware currently provides that
the holders of FTL-Delaware Class A Stock shall be entitled to receive, on a
cumulative basis, the first $1.00 per share of cash dividends declared by the
Board of Directors before FTL-Delaware shall declare, pay or set apart for
payment any cash dividends on FTL-Cayman Class B Shares.
The Articles of Association do not provide the holders of FTL-Cayman Class
A Shares with any similar preference with respect to dividends. The Board has
determined that the $1.00 preference available to the holders of FTL-Delaware
Class A Stock is not necessary following the Reorganization since the current
holders of FTL-Delaware Class B Stock will not be entitled to participate in the
dividends of FTL-Cayman, except on the very limited basis of their four (4)
FTL-Cayman Class B Shares. With respect to the outstanding shares of common
stock of FTL-Delaware after the Reorganization (all of which initially will be
held by FTL-Cayman), dividends will only be paid thereon after the holders of
FTL-Delaware Preferred Stock have been paid all Preferred Stock Dividends and
thereafter the holders of FTL-Delaware Preferred Stock will be entitled to
participate on an as converted basis with the holder of the FTL-Delaware common
stock on all dividends declared by the Board of Directors of FTL-Delaware.
Under the DGCL, a corporation may pay dividends out of surplus and, if
there is no surplus, out of net profits for the current and/or the preceding
fiscal year, unless the net assets of the corporation are less than the capital
represented by issued and outstanding stock having a preference on asset
distributions. Surplus is defined in the DGCL as the excess of the net assets
over capital, as such capital may be adjusted by the board. A Delaware
corporation may purchase or redeem shares of any class except when its capital
is impaired or would be impaired by such purchase or redemption. A corporation
may, however, purchase or redeem out of capital shares that are entitled upon
any distribution of its assets to a preference over another class or series of
its stock if such shares are to be retired and the capital reduced.
Under the Companies Law, the directors may pay to the shareholders such
dividends as appear to the directors to be justified by the profits of
FTL-Cayman or out of the "share premium account"
42
<PAGE> 47
(similar to the concept of additional paid in capital) if FTL-Cayman has the
ability to pay its debts as they become due.
PREFERRED STOCK PURCHASE RIGHTS
In February 1996 the Board of Directors of FTL-Delaware adopted the
Shareholder Rights Plan pursuant to which preferred stock purchase rights were
distributed for each outstanding share of FTL-Delaware Class A Stock and each
outstanding share of FTL-Delaware Class B Stock. The Shareholder Rights Plan was
designed to (i) protect against attempts to acquire FTL-Delaware for an
inadequate or unfair price, (ii) deter abusive tactics which induce stockholders
to tender shares prior to realizing the full value or total potential of their
investment in FTL-Delaware and (iii) create an incentive for a potential
acquirer to negotiate the price and terms of an acquisition transaction in good
faith with the Board so that stockholders are treated equally. The Shareholder
Rights Plan therefore may have certain anti-takeover effects.
FTL-Cayman does not presently intend to adopt a plan similar to the
Shareholder Rights Plan. In addition, in connection with the Reorganization, the
Shareholder Rights Plan will be amended by the Board of Directors of
FTL-Delaware to provide that the existing preferred stock purchase rights will
expire immediately prior to the Merger without FTL-Delaware paying a redemption
price for such rights.
INSPECTION OF BOOKS AND RECORDS
Under the DGCL, any stockholder may inspect the corporation's books and
records for a proper purpose.
Shareholders of a Cayman Islands company have no general rights to inspect
or obtain copies of the list of shareholders or corporate records of a company
(other than the register of mortgages and charges).
AMENDMENT OF CHARTER
Under the DGCL, the certificate of incorporation may be amended if (i) the
board of directors sets forth the proposed amendment in a resolution, declares
the advisability of the amendment and directs that it be submitted to a vote at
the meeting of stockholders and (ii) the holders of at least a majority of
shares of stock entitled to vote thereon approve the amendment, unless the
charter requires the vote of a greater number of shares. If the holders of the
outstanding shares of a class are entitled to vote as a class upon a proposed
amendment, the holders of a majority of the outstanding shares of such class
must also vote in favor of the amendment.
Under the Companies Law, the Memorandum of Association may only be amended
by a Special Resolution of the shareholders.
AMENDMENT OF BYLAWS
Under the DGCL, the board of directors may amend bylaws if so authorized in
the charter. The stockholders of a Delaware corporation also have the power to
amend bylaws. The Certificate of Incorporation of FTL-Delaware authorizes the
Board of Directors to make, alter, amend or repeal the bylaws.
Under the Companies Law, the Articles of Association may only be amended by
a Special Resolution of the shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Companies Law and the DGCL have different provisions and limitations
regarding indemnification by a corporation of its officers, directors, employees
and agents. If the Reorganization is
43
<PAGE> 48
approved, the Companies Law indemnification provisions will not apply to any act
or omission that occurs before the Effective Time. The following is a summary
comparison of Companies Law and DGCL indemnification provisions.
Under the DGCL, indemnification rights are expressly non-exclusive. A
corporation is permitted to provide indemnification or advancement of expenses,
by bylaw provision, agreement or otherwise, against judgments, fines, expenses
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation.
The Certificate of Incorporation of FTL-Delaware makes indemnification
mandatory on the part of FTL-Delaware to the fullest extent permitted by law.
Cayman Islands law does not limit the extent to which a company's Articles
of Association may provide for the indemnification of officers and directors,
except to the extent that such provision may be held by the Cayman Islands
courts to be contrary to public policy (for instance, for purporting to provide
indemnification against the consequences of committing a crime). In addition, an
officer or director may not be indemnified for his own dishonesty or wilful
neglect or default.
The Articles of Association of FTL-Cayman will contain provisions providing
for the indemnity by FTL-Cayman of an officer, director, employee or agent of
FTL-Cayman to the same extent as permitted under the Certificate of
Incorporation of FTL-Delaware.
LIMITED LIABILITY OF DIRECTORS
Section 102(b)(7) ("Section 102") of the DGCL permits the adoption of a
charter provision limiting or eliminating the monetary liability of a director
to a corporation or its stockholders by reason of a director's breach of the
fiduciary duty of care. Section 102 does not permit any limitation of the
liability of a director for (i) breaching the duty of loyalty to the corporation
or its stockholders, (ii) failing to act in good faith, (iii) engaging in
intentional misconduct or a known violation of law, (iv) obtaining an improper
personal benefit from the corporation or (v) paying a dividend or approving a
stock repurchase that was illegal under the DGCL. The Certificate of
Incorporation of FTL-Delaware eliminates the monetary liability of a director to
the fullest extent permitted by the DGCL.
There is no equivalent provision under the Companies Law. However, the
Articles of Association of FTL-Cayman will state that the directors of
FTL-Cayman shall have no personal liability to FTL-Cayman or its shareholders
for monetary damages for breach of fiduciary or other duties as a director,
except (i) for any breach of a director's duty of loyalty to FTL-Cayman or its
shareholders, (ii) for acts or omissions not in good faith which involve
intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which a director derived an improper personal benefit.
STOCKHOLDERS' SUITS
Section 327 of the DGCL requires only that the stockholder bringing a
derivative suit must have been a stockholder at the time of the wrong complained
of or that the stock devolved to him by operation of law from a person who was
such a stockholder. In addition, the stockholder must remain a stockholder
throughout the litigation.
The Cayman Islands courts have recognized derivative suits by shareholders;
however, the consideration of such suits has been limited. In this regard, the
Cayman Islands courts ordinarily would be expected to follow English precedent,
which would permit a minority stockholder to commence an action against or a
derivative action in the name of the company to remedy a wrong done to the
company only where (i) the act complained of is alleged to be beyond the
corporate power of the company or illegal, (ii) the act complained of is alleged
to constitute a fraud against the minority perpetrated by those in control of
the company, (iii) the act requires approval by a greater
44
<PAGE> 49
percentage of the company's shareholders than actually approved it or (iv) there
is a an absolute necessity to waive the general rule that a stockholder may not
bring such an action in order that there not be a denial of justice or a
violation of the company's memorandum of association.
THIRD-PARTY CONSENTS
FTL-Delaware and its subsidiaries are currently party to several debt and
other agreements that require the consent of third parties prior to the
Reorganization. Obtaining such third-party consents is a condition to
consummation of the Reorganization. In connection with the Reorganization it is
anticipated that FTL-Cayman will issue guarantees of certain of FTL-Delaware's
debt obligations.
In addition, Farley, pursuant to agreements with certain third parties have
pledged certain of their FTL-Delaware Class B Stock as security for obligations
owed to those third parties. In connection with the Reorganization, Farley is
required to obtain the consent of such third parties in order to exchange
FTL-Delaware Preferred Stock for the FTL-Delaware Class B Stock currently
pledged to those third parties.
Although it is anticipated that such consents will be obtained, no
assurances can be given as to when or if FTL-Delaware or Farley will be able to
obtain the necessary waivers or consents needed to proceed with the
Reorganization.
Pursuant to the terms of the indenture governing the 7 7/8 Senior Notes Due
1999 of FTL-Delaware (the "7 7/8 Senior Notes"), an offer shall be made in
connection with the Reorganization to the holders of all outstanding 7 7/8
Senior Notes to purchase the holder's 7 7/8 Senior Notes at a price equal to
101% of the principal amount thereof plus accrued and unpaid interest because
the Reorganization will constitute a "Change in Control" (as defined in the
indenture). FTL-Delaware will commence the offer within 30 days following
consummation of the Reorganization. If all holders of the 7 7/8 Senior Notes
accept the purchase offer, the aggregate purchase price will be $252,500,000
plus accrued and unpaid interest. If FTL-Delaware does have to pay such purchase
price it believes that it will have sufficient funds under its credit agreements
and other available sources.
MANAGEMENT OF FTL-CAYMAN
The Board of Directors of FTL-Cayman, upon the effectiveness of the
Reorganization, is to consist of those persons who, at the Effective Time, are
serving as directors of FTL-Delaware, each to have the term of office for which
he or she was elected or appointed, except as set forth below. FTL-Cayman's
executive officers are now, and upon the effectiveness of the Reorganization are
expected to be, the same as those persons who are presently employed as
executive officers of FTL-Delaware, except that John L. Clark (age 56) will be
appointed a Senior Vice President of FTL-Cayman. Mr. Clark has been Managing
Director, President and Chief Executive Officer of Fruit of the Loom Operating
Ltd. since July 1996. Prior to that time, Mr. Clark was Vice Chairman and Chief
Financial Officer of Johnson International, Inc., a financial holding company,
from 1994 to 1996. Prior to 1994, Mr. Clark was Resident Chairman and Chief
Executive Officer of Banque Franck S.A., a Switzerland bank.
Since the date of the last Annual Meeting, Lee W. Jennings, a former
director of FTL-Delaware, has passed away, and Mark H. McCormack was elected a
director of FTL-Delaware on September 18, 1997. In addition, Richard C. Lappin
has resigned as the President and Chief Operating Officer of FTL-Delaware and
will not be a director of FTL-Cayman. Mr. McCormack (age 67) has been President
and Chief Executive Officer of International Management Company ("IMG") for more
than the past five years. IMG is an athlete representation firm and promoter,
manager and owner of worldwide sporting and classical music events. In addition,
IMG and its affiliated companies produce televised sports programming and
distribute sports television rights. Mr. McCormack is also a Director of
Gulfstream Aerospace and Planet Hollywood.
45
<PAGE> 50
COMMITTEES OF THE BOARD OF DIRECTORS
FTL-Cayman will establish committees of the Board of Directors which will
have identical members and functions as the committees of the Board of Directors
of FTL-Delaware immediately prior to the Merger.
EXECUTIVE COMPENSATION
FTL-Cayman has not paid compensation to any person before the date of this
Proxy Statement/Prospectus and is not expected to do so prior to the Effective
Time.
LEGAL MATTERS
Certain legal matters in connection with the FTL-Cayman Class A Shares have
been passed upon for FTL-Cayman by its Cayman Islands counsel, Truman Bodden &
Company, Cayman Islands. Truman Bodden & Company has also rendered an opinion
regarding the Cayman Islands tax consequences of the Reorganization referred to
in "Certain Tax Considerations." Weil, Gotshal & Manges LLP, New York, New York,
has rendered an opinion regarding the United States federal tax consequences of
the Reorganization referred to in "Certain Tax Considerations."
EXPERTS
The consolidated financial statements and schedule of FTL-Delaware
appearing in FTL-Delaware's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon (which contains an explanatory paragraph
with respect to an accounting change in 1995 mentioned in the notes to
consolidated financial statements) included therein and incorporated herein by
reference. Such consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The balance sheet of FTL-Cayman as of January 31, 1998 included in this
Proxy Statement/ Prospectus has been audited by Ernst & Young LLP as set forth
in their report thereon which has been included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
46
<PAGE> 51
FRUIT OF THE LOOM, LTD.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Fruit of the Loom, Ltd.
Report of Independent Accountants......................... F-2
Balance Sheet as of January 31, 1998...................... F-3
Notes to Balance Sheet.................................... F-4
</TABLE>
F-1
<PAGE> 52
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and
Shareholder of Fruit of the Loom, Ltd.
We have audited the accompanying balance sheet of Fruit of the Loom, Ltd.
as of January 31, 1998. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Fruit of the Loom, Ltd. at January
31, 1998 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 9, 1998
F-2
<PAGE> 53
FRUIT OF THE LOOM, LTD.
BALANCE SHEET
JANUARY 31, 1998
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<S> <C>
Shareholder's equity
Ordinary Shares, par value $.01, authorized 100 shares;
issued 4.................................................. $ 100
Subscription receivable..................................... (100)
-----
Total shareholder's equity............................. $ --
=====
</TABLE>
F-3
<PAGE> 54
FRUIT OF THE LOOM, LTD.
NOTES TO BALANCE SHEET
1. GENERAL
Fruit of the Loom, Ltd. (FTL-Cayman) was incorporated on January 23, 1998
under the laws of the Cayman Islands. FTL-Cayman was formed to become the
holding company of Fruit of the Loom, Inc., a Delaware corporation
(FTL-Delaware), if the Board of Directors of FTL-Delaware and the stockholders
of FTL-Delaware approve such transaction. FTL-Delaware is a marketing oriented,
vertically integrated international basic apparel company, emphasizing branded
products for consumers ranging from infants to senior citizens.
FTL-Cayman had no operations from the date of incorporation on January 23,
1998 to January 31, 1998.
F-4
<PAGE> 55
FRUIT OF THE LOOM, LTD
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Basis of Presentation....................................... P-2
Pro Forma Condensed Consolidated Balance Sheet--
September 30, 1997........................................ P-3
Pro Forma Condensed Consolidated Statement of Operations--
Nine months ended September 30, 1997...................... P-4
Pro Forma Condensed Consolidated Statement of Operations--
Year ended December 31, 1996.............................. P-5
Notes to Pro Forma Condensed Consolidated Financial
Statements................................................ P-6
</TABLE>
P-1
<PAGE> 56
FRUIT OF THE LOOM, LTD. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(NOT COVERED BY INDEPENDENT ACCOUNTANTS' REPORT)
BASIS OF PRESENTATION
The accompanying unaudited Pro Forma Condensed Consolidated financial
statements of Fruit of the Loom, Ltd. ("FTL-Cayman"), a Cayman Islands company,
gives effect to (i) the acquisition of Fruit of the Loom, Inc. ("FTL-Delaware")
in connection with the proposed Reorganization, whereby FTL-Cayman will become
the parent holding company of FTL-Delaware, and (ii) subsequent to the
Reorganization, the transfer to FTL-Cayman (or direct or indirect foreign
subsidiaries of FTL-Cayman) of substantially all of the businesses or
subsidiaries of FTL-Delaware located outside the United States, other than
certain interests of FTL-Delaware in Canada, Germany, Italy and Mexico, along
with the beneficial ownership of certain trademarks. The unaudited Pro Forma
Condensed Consolidated Balance Sheet adjusts the September 30, 1997 consolidated
condensed balance sheet as though such transactions occurred on September 30,
1997. The Pro Forma Condensed Consolidated Statements of Operations adjusts the
condensed consolidated statements of operations for the nine months ended
September 30, 1997 and year ended December 31, 1996 as though such transactions
occurred on January 1, 1996. The Reorganization will be accounted for as a
combination of entities under common control (as if it were a pooling of
interests). The FTL-Delaware historical unaudited condensed consolidated balance
sheet at September 30, 1997 and the historical unaudited condensed consolidated
statement of operations for the nine months then ended are derived from the
FTL-Delaware Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, incorporated herein by reference. The historical consolidated condensed
statements of operations for the year ended December 31, 1996 are derived from
FTL-Delaware's Annual Report on Form 10-K, incorporated herein by reference.
Upon consummation of the Merger, each outstanding share of Class A common
stock, par value $.01 per share ("FTL-Delaware Class A Stock"), of FTL-Delaware
(other than those shares held by FTL-Delaware in its treasury) will be
automatically converted into one Class A ordinary share, par value of $.01
("FTL-Cayman Class A Shares"), of FTL-Cayman, and the outstanding shares of
Class B common stock, par value $.01 per share ("FTL-Delaware Class B Stock"),
of FTL-Delaware will be automatically converted into one share of exchangeable
participating preferred stock, par value $.01 per share ("FTL-Delaware Preferred
Stock"), of FTL-Delaware. The holders of FTL-Delaware Class B Stock will also
own, in the aggregate, four Class B redeemable ordinary shares, par value $.01
per share (the "FTL-Cayman Class B Shares"), of FTL-Cayman.
The pro forma condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the related notes
included in FTL-Delaware's Annual Report on Form 10-K for the year ended
December 31, 1996 and FTL-Delaware's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997. The pro forma financial information is not
indicative of FTL-Cayman's financial position that might have occurred had such
transaction actually occurred on the date indicated above.
P-2
<PAGE> 57
FRUIT OF THE LOOM, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FRUIT OF THE PRO FORMA
FTL-CAYMAN(1) LOOM, INC.2(A) ADJUSTMENTS PRO FORMA
------------- -------------- ----------- ---------
(IN THOUSANDS OF DOLLARS)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents..................... $ $ 18,200 $ $ 18,200
Notes and accounts receivable (less
allowance for possible losses of
$19,500)............................... 262,600 262,600
Inventories
Finished goods......................... 492,800 492,800
Work in process........................ 197,300 197,300
Materials and supplies................. 60,900 60,900
---------- ---------- ---------- ----------
Total inventories................... 751,000 751,000
Other.................................... 43,900 43,900
---------- ---------- ---------- ----------
Total current assets.............. 1,075,700 1,075,700
---------- ---------- ---------- ----------
Property, Plant and Equipment.............. 1,546,200 1,546,200
Less accumulated depreciation............ 719,000 719,000
---------- ---------- ---------- ----------
Net property, plant, and
equipment....................... 827,200 827,200
---------- ---------- ---------- ----------
Other Assets
Goodwill (less accumulated amortization
of $304,600)........................... 724,200 724,200
Other.................................... 83,700 83,700
---------- ---------- ---------- ----------
Total other assets................ 807,900 807,900
---------- ---------- ---------- ----------
$ $2,710,800 $ $2,710,800
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long term debt..... $ $ 33,200 $ $ 33,200
Trade accounts payable................... 135,400 135,400
Other accounts payable and accrued
expenses............................... 294,500 294,500
---------- ---------- ---------- ----------
Total current liabilities......... 463,100 463,100
---------- ---------- ---------- ----------
Noncurrent Liabilities
Long-term debt........................... 1,118,400 1,118,400
Deferred income taxes.................... 18,900 18,900
Other.................................... 285,800 285,800
---------- ---------- ---------- ----------
Total noncurrent liabilities...... 1,423,100 1,423,100
---------- ---------- ---------- ----------
Minority interest in subsidiary.......... 0 147,400(d) 147,400
COMMON STOCKHOLDERS' EQUITY
Common stock and capital in excess
of par value
Common A............................... 349,800 349,800
Common B............................... 3,700 (3,700)(d) --
Retained earnings........................ 504,500 (143,700)(d) 360,800
Currency translation, pension and
investment adjustments................. (33,400) (33,400)
---------- ---------- ----------
Total common stockholders'
equity.......................... 824,600 (147,400) 677,200
---------- ---------- ---------- ----------
$ $2,710,800 $ $2,710,800
========== ========== ========== ==========
</TABLE>
See accompanying notes.
P-3
<PAGE> 58
FRUIT OF THE LOOM, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
FRUIT OF THE ADJUSTMENTS
FTL-CAYMAN(1) LOOM, INC.2(A) 2(B) PRO FORMA
------------- -------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales.............................. $ $1,711,400 $ $1,711,400
Cost of sales.......................... 1,257,500 1,257,500
---------- ---------- ------- ----------
Gross earnings....................... 453,900 453,900
Selling, general and administrative
expenses............................. 307,700 307,700
Goodwill amortization.................. 20,100 20,100
---------- ---------- ------- ----------
Operating earnings................... 126,100 126,100
Interest expense....................... (62,500) (62,500)
Other expense--net..................... (42,400)(3) (42,400)
---------- ---------- ------- ----------
Earnings before income tax expense
and minority interest in
consolidated subsidiaries......... 21,200 21,200
Income tax expense..................... 14,900 14,900
Minority interest in net earnings of
subsidiaries......................... 0 2,900(e) 2,900
---------- ---------- ------- ----------
Earnings from continuing
operations........................ $ $ 6,300 $ 2,900 $ 3,400
========== ========== ======= ==========
Earnings per common share from
continuing operations................ $ $ 0.08 $ $ 0.05
========== ========== ======= ==========
Average common shares outstanding...... 74,900 (5,684) 69,216
========== ========== ======= ==========
</TABLE>
See accompanying notes.
P-4
<PAGE> 59
FRUIT OF THE LOOM, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FRUIT OF THE PRO FORMA
FTL - CAYMAN(1) LOOM, INC.2(A) ADJUSTMENTS2(B) PRO FORMA
--------------- -------------- --------------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales......................... $ $2,447,400 $ $2,447,400
Cost of sales..................... 1,717,400 1,717,400
---------- ---------- ------- ----------
Gross earnings.................. 730,000 730,000
Selling, general and
administrative expenses......... 378,000 378,000
Goodwill amortization............. 26,700 26,700
---------- ---------- ------- ----------
Operating earnings.............. 325,300 325,300
Interest expense.................. (103,600) (103,600)
Other expense--net................ (36,400)(3) (36,400)
---------- ---------- ------- ----------
Earnings before income tax expense
and minority interest in
consolidated subsidiaries....... 185,300 185,300
Income tax expense................ 34,100 34,100
Minority interest in net earnings
of subsidiaries................. 0 10,000(e) 10,000
---------- ---------- ------- ----------
Net earnings.................... $ $ 151,200 $10,000 $ 141,200
========== ========== ======= ==========
Earnings per common share:........ $ $ 2.02 $ $ 2.04
========== ========== ======= ==========
Average common shares
outstanding..................... 74,900 (5,684) 69,216
========== ========== ======= ==========
</TABLE>
See accompanying notes.
P-5
<PAGE> 60
FRUIT OF THE LOOM, LTD AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION OF FTL-CAYMAN
FTL-Cayman was incorporated on January 23, 1998 to become the parent
holding company of FTL-Delaware. The balances of FTL-Cayman reported in the
unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997 reflect the initial capitalization of FTL-Cayman.
2. PLAN OF REORGANIZATION
Pro forma adjustments are made to reflect:
(a) the unaudited Pro Forma Condensed Consolidated Balance Sheet
adjusts the September 30, 1997 condensed consolidated balance sheet as if
the acquisition occurred on September 30, 1997. The Pro Forma Condensed
Consolidated Statements of Operations adjusts the condensed consolidated
statements of operations for the nine months ended September 30, 1997 and
year ended December 31, 1996 as if the acquisition occurred on January 1,
1996. The acquisition will be accounted for as a combination of entities
under common control (as if it were a pooling of interests);
(b) Prior to the mailing of the Proxy Statement/Prospectus to the
stockholders of FTL-Delaware, Farley will select the dividend rate,
exchange rate, conversion rate and No-Call Period, in their discretion,
from the following schedule of alternative rates and No-Call Periods:
<TABLE>
<CAPTION>
EXCHANGE AND
DIVIDEND CONVERSION NO-CALL
ALTERNATIVE YIELD RATIO PERIOD
- ----------- -------- ------------ -------
<C> <C> <C> <C>
1 4.50% 0.9524 3-Years
2 4.50% 0.9346 4-Years
3 4.50% 0.9174 5-Years
4 5.00% 0.9174 3-Years
5 5.00% 0.8929 4-Years
6 5.00% 0.8696 5-Years
7 5.50% 0.8850 3-Years
8 5.50% 0.8547 4-Years
9 5.50% 0.8333 5-Years
10 6.00% 0.8475 3-Years
11 6.00% 0.8197 4-Years
12 6.00% 0.7937 5-Years
</TABLE>
The Pro Forma Condensed Consolidated financial statements assume a 5%
cumulative cash dividend, 4-year No-Call Period and an exchange ratio of .8929
of FTL-Cayman Class A for each share of FTL-Delaware Preferred Stock.
The alternative assumptions would result in varying levels of cash
dividends, minority interest in the earnings of FTL-Delaware, and earnings per
share. The following chart illustrates the impact of assuming 4.5% and 6%
cumulative cash dividends, 3-year and 5-year No-Call periods and exchange ratios
of .9524 and .7937 at both September 30, 1997 and December 31, 1996.
P-6
<PAGE> 61
FRUIT OF THE LOOM, LTD AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
September 30, 1997
<TABLE>
<CAPTION>
4.5% DIVIDEND 6.0% DIVIDEND
3-YEAR NO-CALL 5-YEAR NO-CALL
.9524 EXCHANGE RATIO .7937 EXCHANGE RATIO
-------------------- --------------------
<S> <C> <C>
9 month cash dividends................................ $ 5,000 $ 6,600
Minority interest in loss of subsidiary............... $ 2,700 $ 2,500
Earnings per common share from continuing operations.. $ .06 $ .03
</TABLE>
December 31, 1996
<TABLE>
<CAPTION>
4.5% DIVIDEND 6.0% DIVIDEND
3-YEAR NO-CALL 5-YEAR NO-CALL
.9524 EXCHANGE RATIO .7937 EXCHANGE RATIO
-------------------- --------------------
<S> <C> <C>
Annual cash dividends................................. $ 6,600 $ 8,800
Minority interest in earnings of subsidiary........... $ 2,700 $ 2,500
Earnings per common share............................. $ 2.03 $ 2.02
</TABLE>
Footnotes (c) through (e) assume a liquidation preference of $147,000
calculated based upon FTL-Delaware's closing stock price of 25 15/16 on February
6, 1998. The actual liquidation preference may differ and will be based on the
average closing price of the FTL-Delaware Class A Stock on the NYSE for the 20
trading days prior to the date of the Special Meeting of the FTL-Delaware
stockholders to approve the reorganization.
(c) payment of 5% cumulative cash dividend on an assumed liquidation
preference of $147,000.
(d) exchange of FTL-Delaware Class B Stock for FTL-Delaware Preferred
Stock. Minority interest in FTL-Delaware based upon an assumed liquidation
preference of $147,000.
(e)
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
<S> <C> <C>
FTL-Delaware earnings (loss) from continuing operations..... $(80,400) $41,600
Dividends................................................... 5,500 7,400
-------- -------
Earnings attributable to Common and Preferred
Shareholders.............................................. $(85,900) $34,200
======== =======
Dividends................................................... $ 5,500 $ 7,400
Interest of Preferred Shareholders in earnings (loss)
attributable to Common and Preferred Shareholders......... (2,600) 2,600
-------- -------
Total interest of Preferred Shareholders.................. $ 2,900 $10,000
======== =======
</TABLE>
(f) For the year ended December 31, 1996, assumption of conversion of
FTL-Delaware Preferred Stock into FTL-Cayman A Common Stock has no impact
on the earnings per common share and the impact of conversions on the
earnings per common share from continuing operations for the 9 month period
ended September 30, 1997 would be anti-dilutive.
3. OTHER EXPENSE -- NET
Includes pre-tax charges of $32,000 and $35,000 for the 9 months ended
September 30, 1997 and year-ended December 31, 1996 respectively, related to
FTL-Delaware's evaluation of its exposure under the guarantee of the debt of
Acme Boot, an affiliate.
P-7
<PAGE> 62
FRUIT OF THE LOOM, LTD AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. FTL-DELAWARE PREFERRED STOCK/FTL-CAYMAN CLASS B SHARES
The FTL-Delaware Preferred Stock to be issued to Farley in exchange for
their FTL-Delaware Class B Stock, in the aggregate, will (i) have a liquidation
value equal to the fair market value of the FTL-Delaware Class B Stock based
upon the average closing price of the FTL-Delaware Class A Stock on the New York
Stock Exchange for the 20 trading days prior to the date of the Special Meeting,
(ii) be entitled to receive cumulative cash dividends of % per annum of the
liquidation value, payable quarterly, (iii) be exchangeable at the option of the
holder, in whole or from time to time in part, at any time for FTL-Cayman
Class A Shares, (iv) be convertible at the option of the holder, in whole or
from time to time in part, at any time for shares of FTL-Delaware common
stock, (v) participate with the holders of FTL-Delaware common stock in all
dividends and liquidation payments in addition to its preference payments on an
as converted basis, (vi) be redeemable by FTL-Delaware, at its option, after
years at a redemption price equal to the then fair market value of the
FTL-Delaware Preferred Stock as determined by a nationally recognized investment
banking firm, and (vii) have the right to vote on all matters put to a vote of
the holders of FTL-Delaware common stock, voting together with such holders as a
single class, and be entitled to the number of votes which such holder would
have on an as converted basis.
The Four (4) FTL-Cayman Class B Shares which will be purchased by Farley
immediately prior to the Reorganiation have been designed to maintain the
relative voting rights that currently exist between the FTL-Delaware Class A
Stock and Class B Stock. The four (4) FTL-Cayman Class B Shares will (i)
participate pari passu, on a share for share basis, with the holders of any
other class of ordinary shares outstanding (including the FTL-Cayman Class A
Shares) upon the liquidation of FTL-Cayman and with respect to any dividends
declared by the Board of Directors of FTL-Cayman, (ii) vote together with the
FTL-Cayman Class A Shares on all matters (other then as required by Cayman
Islands law with respect to certain extraordinary transactions) having that
number of votes which is equal to the aggregate number of votes held by the
FTL-Delaware Class B Stock (i.e., an aggregate of approximately 30% of the
aggregate voting power), (iii) be redeemable proportionately upon the exchange,
transfer to a non-affiliate of Farley or redemption of the FTL-Delaware
Preferred Stock, and (iv) not be transferable except to affiliates of Farley.
5. ORDINARY SHARES
The authorized share capital of FTL-Cayman will be divided into 200,000,000
Class A Shares, 100 Class B Shares and 35,000,000 preference shares. The holders
of FTL-Cayman Class A Shares will be entitled to one vote per share. The voting
rights of the four FTL-Cayman Class B Shares to be issued to Farley will be
equal to the aggregate number of votes held by the holders of FTL-Delaware Class
B Stock on the date the Merger is consummated. All actions submitted to a vote
of shareholders shall be voted on by the holders of FTL-Cayman Class A Shares
and FTL-Cayman Class B Shares, voting together as a single class, except as
otherwise set forth below or as provided by law.
With respect to the election of directors, holders of FTL-Cayman Class A
Shares, voting as a separate class, will be entitled to elect 25% of the total
number of directors constituting the entire Board of Directors of FTL-Cayman for
so long as any FTL-Cayman Class B Shares are outstanding.
Holders of FTL-Cayman Class A Shares will be entitled to participate pari
passu, on a share for share basis, with the holders of any other class of
ordinary shares outstanding, including the FTL-Cayman Class B Shares, with
respect to any dividends declared by the Board of Directors of FTL-Cayman. At
the time of the Reorganization, FTL-Cayman and FTL-Delaware will be party to
certain
P-8
<PAGE> 63
FRUIT OF THE LOOM, LTD AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
loan agreements and indentures which contain covenants that will restrict their
ability to pay dividends.
P-9
<PAGE> 64
ANNEX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 10, 1998 among FRUIT OF
THE LOOM, INC., a Delaware corporation ("FTL-Delaware"), FRUIT OF THE LOOM,
LTD., a Cayman Islands company ("FTL-Cayman"), and FTL MERGER CORP., a Delaware
corporation and a wholly-owned subsidiary of FTL-Cayman ("Sub").
WHEREAS, the respective Boards of Directors of FTL-Delaware, FTL-Cayman and
Sub have determined that it is in the best interests of their respective
stockholders to reorganize (the "Reorganization") so that FTL-Cayman becomes the
parent holding company for FTL-Delaware;
WHEREAS, the respective Boards of Directors of FTL-Delaware, Sub and
FTL-Cayman have approved the merger of Sub with and into FTL-Delaware (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each outstanding share of class A common stock, par value
$0.01 per share ("FTL-Delaware Class A Stock"), of FTL-Delaware (other than
those shares held by FTL-Delaware in its treasury), will be automatically
converted into one class A ordinary share, par value $.01 per share ("FTL-Cayman
Class A Share"), of FTL-Cayman; and each outstanding share of class B common
stock, par value $0.01 per share ("FTL-Delaware Class B Stock" and collectively
with the FTL-Delaware Class A Common Stock, the "FTL-Delaware Common Stock"), of
FTL-Delaware (other than those shares held by FTL-Delaware in its treasury),
will be automatically converted into one share of exchangeable participating
preferred stock, par value $0.01 per share ("FTL-Delaware Preferred Stock"), of
FTL-Delaware.
WHEREAS, the Merger requires the affirmative vote of (i) the holders of a
majority of the FTL-Delaware Class A Stock and Class B Stock voting together as
a single class, (ii) the holders of a majority of the outstanding FTL-Delaware
Class A Stock, and (iii) the holders of a majority of the outstanding
FTL-Delaware Class B Stock (the "FTL-Delaware Stockholder Approval");
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
MERGER
1.1 MERGER
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Sub shall be merged with and into FTL-Delaware at the Effective Time of
the Merger (as defined in Section 1.2). Following the Effective Time of the
Merger, the separate corporate existence of Sub shall cease and FTL-Delaware
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL.
1.2 EFFECTIVE TIME
Subject to the provisions of this Agreement, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Section 5.1,
the parties shall file a certificate of merger or other appropriate documents
(in any case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and shall make all other filings or recordings
required under the DGCL. The Merger shall become effective at the close of
business on the date that an appropriate Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such later time as
Sub and FTL-Delaware shall agree should be specified in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time of the Merger").
I-1
<PAGE> 65
1.3 EFFECTS OF THE MERGER
The Merger shall have the effects set forth in Section 259 of the DGCL.
ARTICLE II
NAME, CERTIFICATE OF INCORPORATION,
BY-LAWS, DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION
2.1 NAME OF SURVIVING CORPORATION
The name of the surviving corporation shall be "Fruit of the Loom, Inc.".
2.2 CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of FTL-Delaware shall be the Certificate
of Incorporation of the Surviving Corporation after the Effective Time of the
Merger until amended thereafter as provided therein or by law except that the
Certificate of Incorporation of FTL-Delaware shall be amended in its entirety by
virtue of the Merger to read in full as set forth in Exhibit A hereto.
2.3 BY-LAWS
The by-laws of FTL-Delaware as in effect at the Effective Time of the
Merger shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
2.4 DIRECTORS
The directors of FTL-Delaware at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
2.5 OFFICERS
The officers of FTL-Delaware at the Effective Time of the Merger shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE III
CONVERSION, ELECTION AND EXCHANGE OF STOCK
3.1 CONVERSION
At the Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holder of any shares:
(a) Common Stock of Sub. The issued and outstanding shares of common
stock of Sub shall be converted into and become that number of shares of
fully paid and nonassessable shares of FTL-Delaware Common Stock, par value
$.01 per share, which is equal to the number of shares of FTL-Delaware
Class A Stock outstanding at the Effective Time of the Merger.
(b) Cancellation of FTL-Delaware-Owned Stock. Each outstanding share
of FTL-Delaware Common Stock that is owned by FTL-Delaware prior to the
Effective Time of the Merger shall automatically be cancelled and retired
and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange for such shares of FTL-Delaware Common Stock.
I-2
<PAGE> 66
(c) Conversion of FTL-Delaware Common Stock. (i) Each issued and
outstanding share of FTL-Delaware Class A Common Stock (other than shares
to be cancelled in accordance with Section 3.1(b)) shall be automatically
converted into and shall become one validly issued, fully paid and
non-assessable FTL-Cayman Class A Share and (ii) each issued and
outstanding share of FTL-Delaware Class B Common Stock shall be
automatically converted into and shall become one validly issued, fully
paid and non-assessable share of FTL-Delaware Preferred Stock. Prior to the
Effective Time of the Merger, FTL-Cayman will amend and restate its
Articles of Association and Memorandum of Association substantially in
accordance with the terms set forth on Schedule I hereto and FTL-Delaware
will file with the Secretary of State of the State of Delaware a
Certificate of Designations for the FTL-Delaware Preferred Stock
substantially in accordance with the terms set forth on Schedule II hereto.
(d) Cancellation of FTL-Cayman Shares Owned by FTL- Delaware. Each
issued share of FTL-Cayman that is owned by FTL-Delaware prior to the
Effective Time of the Merger shall automatically be repurchased by
FTL-Cayman and cancelled and retired and shall cease to exist, and the $100
subscription price paid by FTL-Delaware for such shares will be returned to
FTL-Delaware.
(e) Stock Option Plans. FTL-Cayman shall assume all the rights and
obligations of FTL-Delaware under the 1996 Incentive Compensation Plan, the
Amended and Restated 1995 Executive Incentive Compensation Plan, the 1995
Non-Employee Directors' Stock Plan, the 1992 Executive Stock Option Plan,
the 1994 Executive Incentive Compensation Plan, the 1992 Directors' Stock
Option Plan, and The Supplemental Executive Retirement Plan as Amended and
Restated, as each such plan has been or may be amended to the Effective
Time of the Merger (collectively, the "Plans"). The outstanding options
assumed by FTL-Cayman shall be exercisable upon the same terms and
conditions as under the Plans and the agreements relating thereto
immediately prior to the Effective Time of the Merger, except that upon the
exercise of such options, FTL-Cayman Class A Shares shall be issuable in
lieu of shares of FTL-Delaware Class A Stock. The number FTL-Cayman Class A
Shares issuable upon the exercise of an option immediately prior to the
Effective Time of the Merger and the option price of each such option shall
be the same number of shares and price as in effect immediately prior to
the Effective Time of the Merger. All options issued pursuant to the Plans
after the Effective Time of the Merger shall entitle the holder thereof to
purchase FTL-Cayman Class A Shares in accordance with the terms of the
Plans.
3.3 EXCHANGE OF STOCK
(a) Exchange Procedures for FTL-Delaware Class A Stock. Following the
Effective Time of the Merger, each holder of an outstanding certificate or
certificates theretofore representing shares of FTL-Delaware Class A Stock
may, but shall not be required to, surrender the same to FTL-Cayman for
cancellation or transfer, and each such holder or transferee will be
entitled to receive certificates representing the same number of FTL-Cayman
Class A Shares as the shares of FTL-Delaware Class A Stock previously
represented by the stock certificates surrendered. If any certificate
representing FTL-Cayman Class A Shares is to be issued in a name other than
that in which the certificate theretofore representing FTL-Delaware Class A
Stock surrendered is registered, it shall be a condition to such issuance
that the certificate surrendered shall be properly endorsed and otherwise
in proper form for transfer and that the person requesting such issuance
shall either: (i) pay FTL-Cayman or its agents any taxes or other
governmental charges required by reason of the issuance of certificates
representing FTL-Cayman Class A Shares in a name other than that of the
registered holder of the certificate so surrendered; or (ii) establish to
the satisfaction of FTL-Cayman or its agents that such taxes or
governmental charges have been paid. Until so surrendered or presented for
transfer each outstanding certificate which, prior to the Effective Time of
the Merger, represented FTL-Delaware Class A Stock shall be deemed and
treated for all corporate purposes to
I-3
<PAGE> 67
represent the ownership of the same number of FTL-Cayman Class A Shares as
though such surrender or transfer and exchange had taken place.
(b) No Further Ownership Rights in FTL-Delaware Class A Stock. All
FTL-Cayman Class A Shares issued upon the surrender for exchange of
certificates in accordance with the terms of this Article III shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of FTL-Delaware Class A Stock theretofore
represented by such certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time of the Merger
which may have been declared or made by FTL-Delaware on such shares of
FTL-Delaware Class A Stock in accordance with the terms of this Agreement
or prior to the date of this Agreement and which remain unpaid at the
Effective Time of the Merger, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of FTL-Delaware Class A Stock which were outstanding immediately
prior to the Effective Time of the Merger. If, after the Effective Time of
the Merger, certificates are presented to the Surviving Corporation they
shall be cancelled and exchanged as provided in this Article III, except as
otherwise provided by law.
(c) Exchange Procedures for FTL-Delaware Class B Stock. Following the
Effective Time of the Merger, each holder of an outstanding certificate or
certificates theretofore representing shares of FTL-Delaware Class B Stock
may, but shall not be required to, surrender the same to FTL-Delaware for
cancellation or transfer, and each such holder or transferee will be
entitled to receive certificates representing one share of FTL-Delaware
Preferred Stock for every share of FTL-Delaware Class B Stock surrendered.
If any certificate representing FTL-Delaware Preferred Stock is to be
issued in a name other than that in which the certificate theretofore
representing FTL-Delaware Class B Stock surrendered is registered, it shall
be a condition to such issuance that the certificate surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such issuance shall either: (i) pay FTL-Delaware or its
agents any taxes or other governmental charges required by reason of the
issuance of certificates representing FTL-Delaware Preferred Stock in a
name other than that of the registered holder of the certificate so
surrendered; or (ii) establish to the satisfaction of FTL-Delaware or its
agents that such taxes or governmental charges have been paid. Until so
surrendered or presented for transfer each outstanding certificate which,
prior to the Effective Time of the Merger, represented FTL-Delaware Class B
Stock shall be deemed and treated for all corporate purposes to represent
the ownership of FTL-Delaware Preferred Stock in such amount and as though
such surrender or transfer and exchange had taken place.
(d) No Further Ownership Rights in FTL-Delaware Class B Stock. All
FTL-Delaware Preferred Stock issued upon the surrender for exchange of
certificates in accordance with the terms of this Article III shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of FTL-Delaware Class B Stock theretofore
represented by such certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time of the Merger
which may have been declared or made by FTL-Delaware on such shares of
FTL-Delaware Class B Stock in accordance with the terms of this Agreement
or prior to the date of this Agreement and which remain unpaid at the
Effective Time of the Merger, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of FTL-Delaware Class B Stock which were outstanding immediately
prior to the Effective Time of the Merger. If, after the Effective Time of
the Merger, certificates are presented to the Surviving Corporation they
shall be cancelled and exchanged as provided in this Article III, except as
otherwise provided by law.
I-4
<PAGE> 68
ARTICLE IV
EMPLOYEE BENEFIT AND COMPENSATION PLANS
At the Effective Time of the Merger, each employee benefit plan and
incentive compensation plan to which FTL-Delaware is then a party shall be
assumed by, and continue to be the plan of, the Surviving Corporation. To the
extent any employee benefit or incentive compensation plan of FTL-Delaware
provides for the issuance or purchase of, or otherwise relates to, FTL-Delaware
Class A Common Stock after the Effective Time of the Merger, such plan shall be
deemed to be assumed by FTL-Cayman and provide for the issuance or purchase of,
or otherwise relate to, FTL-Cayman Class A Shares.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER
The respective obligation of each party to effect the Merger is subject to
the satisfaction or waiver of the following conditions:
(a) Stockholder Approval. The FTL-Delaware Stockholder Approval shall
have been obtained.
(b) Form S-4. The registration statement on Form S-4 filed with the
Securities and Exchange Commission by FTL-Cayman in connection with the
issuance of the FTL-Cayman Class A Shares in the Merger shall have become
effective under the Securities Act of 1933, as amended, and shall not be
the subject of any stop order or proceedings seeking a stop order.
(c) Third Party Consents. All requisite third party consents shall
have been obtained.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 TERMINATION
This Agreement may be terminated at any time prior to the Effective Time of
the Merger, whether before or after approval by the stockholders of FTL-Delaware
of matters presented in connection with the Merger, by action of the Board of
Directors of FTL-Delaware.
6.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section 6.1,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of FTL-Delaware, Sub or FTL-Cayman, other
than the provisions of this Section 6.2 and Article VII.
6.3 AMENDMENT
This Agreement may be amended by the parties at any time before or after
any required approval of matters presented in connection with the Merger by the
stockholders of FTL-Delaware provided, however, that after any such approval,
there shall be made no amendment that by law requires further approval by such
stockholders without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties.
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<PAGE> 69
6.4 WAIVER
At any time prior to the Effective Time of the Merger, the parties may
waive compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party of this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
6.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER
A termination of this Agreement pursuant to Section 6.1, an amendment of
this Agreement pursuant to Section 6.3 or a waiver pursuant to Section 6.4
shall, in order to be effective, require in the case of FTL-Delaware, Sub or
FTL-Cayman, action by its Board of Directors or the duly authorized designee of
its Board of Directors.
ARTICLE VII
GENERAL PROVISIONS
7.1 NOTICES
All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to FTL-Delaware,
Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attn: Larry K. Switzer
(b) if to FTL-Cayman,
Fruit of the Loom, Ltd.
P.O. Box 31311 SMB
Safehaven Corporate Center
Grand Cayman, Cayman Islands, BWI
Attn: John L. Clark
(c) if to Sub,
c/o Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
Attn: Larry K. Switzer
7.2 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
III, are not intended to confer upon any person other than the parties any
rights or remedies.
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7.3 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflict of laws thereof.
IN WITNESS WHEREOF, FTL-Delaware, Sub and FTL-Cayman have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
Fruit of the Loom, Inc.
By: /s/ LARRY K. SWITZER
------------------------------------
Name: Larry K. Switzer
Title: Senior Executive Vice
President and Chief
Financial Officer
Fruit of the Loom, Ltd.
By: /s/ LARRY K. SWITZER
------------------------------------
Name: Larry K. Switzer
Title: Senior Executive Vice
President and Chief
Financial Officer
FTL Merger Corp.
By: /s/ LARRY K. SWITZER
------------------------------------
Name: Larry K. Switzer
Title: Vice President and
Chief Financial Officer
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EXHIBIT A
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF FRUIT OF THE LOOM, INC.
FRUIT OF THE LOOM, INC., a corporation duly incorporated on March 28, 1985
under the name Factani Corporation and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby certify as
follows:
FIRST: That the Board of Directors of said corporation adopted a resolution
proposing and declaring advisable the following amendments to and restatement of
the Restated Certificate of Incorporation of said corporation; and
SECOND: That this Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 242, 245 and 222 of
the General Corporation Law of the State of Delaware and that, effective upon
the filing of this Amended and Restated Certificate of Incorporation, the
Restated Certificate of Incorporation of the corporation shall be amended and
restated as follows:
ARTICLE I
The name of the corporation is Fruit of the Loom, Inc.
ARTICLE II
The address of its registered office in the State of Delaware is 32
Loockerman Square, Dover, County of Kent. The name of its registered agent is
United States Corporation Company.
ARTICLE III
The nature of the business to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
The amount of total authorized capital stock of the corporation is
81,000,000 shares which are divided into two classes as follows:
A Class of 6,000,000 shares of Preferred Stock having a par value of
$0.01 each (the "Preferred Stock").
A Class of 75,000,000 shares of Common Stock having a par value of
$0.01 each (the "Common Stock").
The designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, of each of such classes of stock, and the express grant of authority
to the Board of Directors to fix by resolution the designations, preferences and
relative, participating, optional or other special rights, and the
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qualifications, limitations or restrictions thereof, in respect of each series
of the Preferred Stock, are as follows:
PART A
PREFERRED STOCK
The Board of Directors is expressly authorized, from time to time, (1) to
fix the number of shares of one or more series of the Preferred Stock; (2) to
determine the designation of any such shares; (3) to determine or alter, without
limitation or restrictions, the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of the Preferred Stock;
and (4) within the limits or restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares then outstanding) the number of shares of any such
series subsequent to the issue of shares of that series.
PART B
COMMON STOCK
Except as otherwise provided by law, the shares of Common Stock of the
Corporation may be issued by the Corporation from time to time in such amounts,
for such consideration, and for such corporate purposes as the Board of
Directors may from time to time determine.
Subject to the provisions of applicable law or of the By-laws with respect
to the closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote, and except as otherwise provided
by law or by the resolution or resolutions providing for the issue of any series
of Preferred Stock, the holders of outstanding shares of Common Stock shall
exclusively possess the voting power for the election of directors and for all
other purposes, each holder of record of shares of Common Stock being entitled
to one vote for each share of Common Stock standing in his name on the books of
the Corporation.
PART C
GENERAL PROVISIONS
(a) Quorum at Stockholders' Meetings. Except as otherwise provided by law
or this Amended and Restated Certificate of Incorporation, at any meeting of
stockholders, the presence in person or by proxy of the holders of record of
outstanding shares of stock of the corporation entitled to vote a majority of
the votes entitled to be voted at such meeting shall constitute a quorum for all
purposes.
(b) No Preemptive Rights, Etc. No holder of shares of stock of the
corporation of any class shall have any preemptive rights and no stockholder
shall have any other preferential or right of first refusal to purchase or
subscribe for any shares of stock, whether now or hereafter authorized, of the
corporation of any class, or any obligations convertible into, or any options or
warrants to purchase, any share of stock, whether now or hereafter authorized,
of the corporation of any class, other than such, if any, as the Board of
Directors may from time to time determine, and at such price as the Board of
Directors may from time to time fix; and any share of stock or any obligations,
options or warrants which the Board of Directors may determine to offer for
subscription to holders of any shares of stock of the corporation may, as the
Board of Directors shall determine, be offered to holders of the shares of stock
of the corporation of any class or classes or series, and if offered to holders
of shares of stock of more than one class or series, in such proportion as
between such classes and series as the Board of Directors may determine.
(c) Consents in Lieu of Voting. Whenever the vote of stockholders or any
class or classes of stockholders at a meeting thereof is required or permitted
to be taken for or in connection with any
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corporation action, the meeting and vote of the stockholders or such class or
classes of stockholders may be dispensed with upon the written consent of the
stockholders having not less than such minimum percentage of the total number of
votes as may otherwise have been required for such action. A notice of the
obtaining of any consent provided for in this paragraph (c) hall be mailed by
the corporation, promptly after such consent is obtained, to the stockholders at
their respective addresses then appearing on the records of the corporation.
ARTICLE V
(a) Non-Affiliate Directors. So long as any Cumulative Exchangeable
Preferred Stock is outstanding, the Board of Directors of the Corporation shall
consist of one or more directors who are not affiliates of William F. Farley or
Farley, Inc. and who are not employed by the corporation or any of its
affiliates.
(b) Decisions made by Committee. All decisions with respect to the payment
of dividends on the Common Stock and all decisions with respect to the
redemption of Cumulative Exchangeable Preferred Stock shall be made by a
committee of the Board of Directors consisting entirely of directors who are not
affiliates of William F. Farley or Farley, Inc. and who are not employed by the
corporation or any of its affiliates.
ARTICLE VI
Any and all right, title and claim in or to any dividends declared by the
corporation which are unclaimed by the stockholder entitled thereto for a period
of six years after the close of business on the payment date, shall be and is
deemed to be extinguished and abandoned, and such unclaimed dividends in the
possession of the corporation, its transfer agents or other agents or
depositories shall at such time become the absolute property of the corporation,
free and clear of any and all claims of any persons whatsoever.
ARTICLE VII
In furtherance and not in limitation of the power conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal the
bylaws of the corporation.
ARTICLE VIII
A director of the corporation shall not in the absence of fraud be
disqualified by his office from dealing or contracting with the corporation
either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a
director of the corporation be liable to account to the corporation for any
profit realized by him from or through any transaction or contract of the
corporation by reason of the fact that he, or any firm of which he is a member
or any corporation of which he is an officer, director or stockholder, was
interested in such transaction or contract if such transaction or contract has
been authorized, approved or ratified in the manner provided in the General
Corporation Law of the State of Delaware for authorization, approval or
ratification of transactions or contracts between the corporation and one or
more of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest.
ARTICLE IX
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way
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of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ARTICLE X
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware hereafter is amended to
authorize the further elimination or limitation of the personal liability of
directors, then the personal liability of a director of the corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended General Corporation Law
of the State of Delaware. Any repeal or modification of this Article IX by the
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
ARTICLE XI
Elections of directors need not be by written ballot unless the bylaws of
the corporation so provide.
ARTICLE XII
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE XIII
The duty of the corporation to indemnify its directors and officers and the
power of the corporation to indemnify its agents and employees shall be as
provided in this Article XIII.
1. RIGHT TO INDEMNIFICATION.
Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or of a partnership,
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joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (2) of this Article XIII, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the corporation.
The right to indemnification conferred in this Article XIII shall be a
contract right and shall include the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the General Corporation Law of the
State of Delaware requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article XII or otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
2. RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under paragraph (1) of this Article XIII is not paid in full by
the corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
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3. NON-EXCLUSIVITY OF RIGHTS.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article XIII shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of this Amended and Restated
Certificate of Incorporation, by-law or agreement of the corporation or vote of
stockholders or Board of Directors or otherwise.
4. INSURANCE.
The corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this Amended and Restated Certificate of
Incorporation this day of , 1998.
--------------------------------------
Name:
Title:
Attest:
- ---------------------------------------------------------
Secretary or Assistant Secretary
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ANNEX II
LEHMAN BROTHERS
February 10, 1998
Board of Directors
Fruit of the Loom, Inc.
5000 Sears Tower
233 South Wacker Drive
Chicago, IL 60606
Members of the Board:
We understand that a U.S. subsidiary ("Sub") of Fruit of the Loom, Ltd.
("FTL Cayman"), a Cayman Islands company which is a subsidiary of Fruit of the
Loom, Inc., a Delaware corporation ("FTL Delaware" or the "Company"), intends to
merge with FTL Delaware, with FTL Delaware being the surviving corporation (the
"Reorganization"). Pursuant to such merger, all of the outstanding common stock
of FTL Delaware will be owned by FTL Cayman . Upon the effectiveness of the
Reorganization, (i) each outstanding share of Class A Common Stock, par value
$.01 per share, of FTL Delaware (each, a "Class A Delaware Share") will be
converted automatically into one Class A ordinary share, par value $.01 per
share, of FTL Cayman (each, a "Class A Cayman Share") and (ii) each outstanding
share of Class B Common Stock, par value $.01 per share of FTL, Delaware (each,
a "Class B Delaware Share") will be converted automatically into one share of
exchangeable participating preferred stock of FTL Delaware (the "FTL Delaware
Preferred Stock"). In addition, William F. Farley and Farley, Inc.
(collectively, "Farley") will own four (4) Class B redeemable shares of
FTL-Cayman (each, a "Class B Cayman Share"), which will entitle Farley to the
same voting rights to which Farley currently is entitled as a result of its
holding of Class B Delaware Shares. The terms and conditions of the
Reorganization are set forth in more detail in the Agreement and Plan of Merger
among FTL Delaware, FTL Cayman and Sub (the "Agreement").
We have been requested by the Board of Directors of FTL-Delaware to render
our opinion as to the fairness, from a financial point of view, to the holders
of the Class A Delaware Shares of the consideration to be offered to such
holders in the Reorganization. We have not been requested to opine as to, and
our opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Reorganization. In addition, in rendering
our opinion, we were not able to calculate, and therefore did not consider, the
tax consequences of the Reorganization to any individual stockholder of the
Company.
In arriving at our opinion, we reviewed and analyzed: (i) the Agreement and
the specific terms of the Reorganization, (ii) the proxy statement/prospectus
relating to the Reorganization and such other publicly available information
concerning FTL Delaware that we believe to be relevant to our analysis, (iii)
financial and operating information with respect to the business, operations and
prospects of FTL Delaware and FTL Cayman furnished to us by FTL Delaware, (iv) a
trading history of FTL Delaware's common stock from December 1992 to the present
and a comparison of that trading history with those of other companies that we
deemed relevant, (v) a comparison of the historical financial results and
present financial condition of FTL Delaware with those of other companies that
we deemed relevant, (vi) the terms of the FTL Delaware Preferred Stock and a
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comparison of such terms with those of other securities that we deemed relevant,
(vii) information from the Company and advice from its legal and tax advisors
regarding the tax consequences of the Reorganization to the holders of Class A
Delaware Shares and Class B Delaware Shares, and (viii) the potential pro forma
impact of the Reorganization on FTL Delaware. In addition, we have had
discussions with the management of FTL Delaware concerning the business,
operations, assets, financial condition and prospects of FTL Delaware and FTL
Cayman and have undertaken such other studies, analyses and investigations as we
deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of FTL Delaware that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of FTL
Delaware and FTL Cayman, upon advice of FTL Delaware we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of FTL Delaware as
to the future financial performance of FTL Delaware and FTL Cayman and that FTL
Delaware and FTL Cayman will perform substantially in accordance with such
projections. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of FTL Delaware or FTL Cayman and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of FTL Delaware or FTL Cayman. In addition, you have not authorized
us to solicit, and we have not solicited, any indications of interest from any
third party with respect to the purchase of all or a part of the business of FTL
Delaware or FTL Cayman Our opinion necessarily is based upon market, economic
and other conditions as they exist on, and can be evaluated as of, the date of
this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the holders of the Class A Delaware Shares in the Reorganization is
fair to such holders.
We express no opinion as to the price at which Class A Cayman Shares
actually will trade following consummation of the Reorganization and our opinion
should not be viewed as providing any assurances that the market value of the
Class A Cayman Shares to be held by holders of the Class A Delaware Shares at
any time after consummation of the Reorganization will be in excess of the
market value of the Class A Delaware Shares previously owned by such holders.
We have acted as financial advisor to FTL Delaware in connection with the
Reorganization and will receive a fee for our services, a portion of which is
contingent upon the consummation of the Reorganization. In addition, FTL
Delaware has agreed to indemnify us for certain liabilities that may arise out
of the rendering of this opinion. In the ordinary course of our business, we
actively trade in the debt and equity securities of FTL Delaware for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of FTL
Delaware and is rendered to the Board of Directors in connection with its
consideration of the Reorganization. This opinion is not intended to be and does
not constitute a recommendation to any stockholder of FTL Delaware as to how the
stockholders of FTL Delaware should vote with respect to the Reorganization.
Very truly yours,
LEHMAN BROTHERS
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ANNEX III
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
FRUIT OF THE LOOM, INC.,
A DELAWARE CORPORATION
THE UNDERSIGNED, , being the
of Fruit of the Loom, Inc., hereby certifies that:
FIRST: The name of the Corporation is Fruit of the Loom, Inc. (the
"Corporation").
SECOND: The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on March 28, 1985 under the name
Factani Corporation. The Restated Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on July 20, 1992.
THIRD: Article 4, Part B, Section 6 of said Certificate of Incorporation is
hereby amended to read in its entirety as follows:
"6. Reclassification, Etc.
Neither the Class A Common Stock nor the Class B Common Stock may be
subdivided, consolidated, reclassified or otherwise changed unless
contemporaneously therewith the other class of Common Stock is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and
in the same manner, or unless otherwise consented to by the holders of a
majority of each class of Common Stock."
FOURTH: A resolution setting forth the foregoing proposed amendment has
been adopted by the Board of Directors of the Corporation in accordance with the
provisions of Subchapter VIII, Section 242 of the General Corporation Law of the
State of Delaware.
FIFTH: The foregoing amendment of the Certificate of Incorporation has been
duly adopted by the necessary stockholders in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have signed this Certificate of Amendment this
day of , 1998.
--------------------------------------
Name:
Title:
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<PAGE> 80
ANNEX IV
FORM OF
FRUIT OF THE LOOM, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF CUMULATIVE
EXCHANGEABLE PARTICIPATING PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
-------------------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
-------------------------
Fruit of the Loom, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies that pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, its Board of Directors, at a meeting
held on February 10, 1998, adopted the following resolution, which resolution
remains in full force and effect as of the date hereof:
WHEREAS, the Board of Directors of the Company is authorized, within the
limitations and restrictions stated in the Certificate of Incorporation, to fix
by resolution or resolutions the designation of each series of Preferred Stock
(the "Preferred Stock") and the powers, preferences and relative participating,
optional or other special rights and qualifications, limitations or restrictions
thereof, including, without limiting the generality of the foregoing, such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors under the General Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of preferred stock to be designated the Cumulative Exchangeable
Participating Preferred Stock of the Company and the number of shares
constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series
of Preferred Stock on the terms and with the provisions herein set forth:
TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
Cumulative Exchangeable Participating Preferred Stock
of
Fruit of the Loom, Inc.
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Cumulative Exchangeable
Participating Preferred Stock or the holders thereof are as follows:
1. Definitions. For purposes of this Designation, the following definitions
shall apply:
"Average Market Price" per FTL-Cayman Class A Share at any date of
determination shall mean the average of the daily closing prices for the ten
consecutive Trading Days ending on the third Business Day preceding such date of
determination, appropriately adjusted to take into account the actual
occurrence, during the period following the first of such ten consecutive
Trading Days and ending on the Business Day immediately preceding the date of
determination, of any event of a type described in subparagraph 6(b).
"Board" shall mean the Board of Directors of the Company.
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"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of Illinois are authorized or obligated
by law or executive order to close.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall mean Fruit of the Loom, Inc.
"Conversion Rate" shall initially mean (1) shares of Common
Stock for each share of Cumulative Exchangeable Participating Preferred Stock
converted, subject to adjustment as set forth in subparagraph 7(b).
"Cumulative Exchangeable Participating Preferred Stock" shall refer to
shares of Cumulative Exchangeable Participating Preferred Stock, par value $.01
per share, of the Company.
"Dividend Period" shall mean the period from the Original Issue Date to but
excluding the first Dividend Payment Date and, thereafter, each quarterly period
from and including a Dividend Payment Date to but excluding the next Dividend
Payment Date.
"Dividend Rate" shall mean %(1) per annum, calculated on the basis of a
360 day year, based on the actual number of days elapsed.
"Exchange Rate" shall initially mean (1) FTL-Cayman Class A Shares
for each share of Cumulative Exchangeable Participating Preferred Stock
exchanged, subject to adjustment as set forth in subparagraph 6(b).
"Fair Market Value" shall mean the fair saleable value of the Cumulative
Exchangeable Participating Preferred Stock in an arms-length transaction between
a willing buyer and a willing seller with neither being under any compulsion to
buy or sell, as determined by a nationally recognized investment banking firm
selected by the Company.
"FTL-Cayman" shall mean Fruit of the Loom, Ltd., a Cayman Islands company.
"FTL-Cayman Class A Shares" shall mean the Class A Ordinary Shares, par
value $.01 per share, of FTL-Cayman.
"Liquidation Preference" shall mean $ (2) per share.
"Original Issue Date" shall mean the date of the original issuance of
shares of Cumulative Exchangeable Participating Preferred Stock.
"Record Date" for the dividends payable on any Dividend Payment Date shall
mean the 15th day of the month immediately preceding the month during which such
Dividend Payment Date shall occur, as and if designated by the Board of
Directors of the Company.
"Redemption Date" shall mean the date on which the shares of Cumulative
Exchangeable Participating Preferred Stock are redeemed by the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, or any successor statute, and the rules and regulations
promulgated thereunder.
"Trading Day" shall mean so long as the FTL-Cayman Class A Shares are
listed or admitted to trading on the New York Stock Exchange, a day on which the
New York Stock Exchange is open for the transaction of business, or, if the
FTL-Cayman Class A Shares are not listed or admitted to trading on the New York
Stock Exchange, a day on which the securities exchange on which the FTL-Cayman
Class A Shares are listed and which has been designated by the Board of
Directors is open for the transaction of business, or, if the FTL-Cayman Class A
Shares are not listed or
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1 See Schedule A attached hereto.
2 To be determined based on the average closing price of the Class A common
stock of the Company on the New York Stock Exchange for the 20 trading days
prior to the date of the special meeting to approve the merger of a subsidiary
of FTL-Cayman with and into the Company.
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admitted for trading on any securities exchange, a day on which the New York
Stock Exchange is open for the transaction of business.
"Wholly Owned Subsidiary" means (i) a corporation all of the capital stock
of which, having voting power under ordinary circumstances to elect directors,
is at the time, directly or indirectly, owned by the Company and/or one or more
Wholly Owned Subsidiaries and (ii) any other entity (other than a corporation)
in which the Company and/or one or more Wholly Owned Subsidiaries, directly or
indirectly, has the power to elect or direct the election of all of the members
of the governing body of such entity.
2. Designation: Number of Shares. The designation of the Preferred Stock
authorized by this resolution shall be "Cumulative Exchangeable Participating
Preferred Stock" and the number of shares of Cumulative Exchangeable
Participating Preferred Stock authorized hereby shall be (3) shares.
3. Dividends.
(a) So long as any shares of Cumulative Exchangeable Participating
Preferred Stock shall be outstanding, the holders of such Cumulative
Exchangeable Participating Preferred Stock shall be entitled to receive out of
any funds legally available therefor, cumulative preferential dividends in cash,
at the Dividend Rate on the Liquidation Preference hereunder, payable quarterly
in arrears on the first Business Day of each January, April, July and October
(each such date being called a "Dividend Payment Date"). In the event that
sufficient funds for any such dividend shall not at any time be otherwise
legally available, the Company shall use its best efforts to cause such
availability to come into existence. Dividends on the Cumulative Exchangeable
Participating Preferred Stock shall be cumulative from the Original Issue Date
(whether or not declared and whether or not in any dividend period or dividend
periods there shall be net profits or net assets of the Company legally
available for the payment of those dividends). Each dividend on the shares of
Cumulative Exchangeable Participating Preferred Stock shall be payable to
holders of record as they appear on the stock register of the Company on the
Record Date for such dividend. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the
Cumulative Exchangeable Participating Preferred Stock which may be in arrears.
(b) So long as any shares of Cumulative Exchangeable Participating
Preferred Stock shall remain outstanding, the Company may not declare or pay any
dividend, make a distribution, or purchase, acquire, redeem, pay monies to the
holders of, or set aside or make monies available for a sinking fund for the
purchase or redemption of, any shares of common stock or any share of any other
class or series of the Company's preferred stock ranking junior to the
Cumulative Exchangeable Participating Preferred Stock with respect to the
payment of dividends or the distribution of assets on liquidation, dissolution
or winding up of the Company unless all dividends in respect of the Cumulative
Exchangeable Participating Preferred Stock for all past dividend periods have
been paid and such dividends for the current dividend period have been paid or
declared and duly provided for.
(c) In addition to the cumulative preferential dividends provided for
above, holders of Cumulative Exchangeable Participating Preferred Stock shall be
entitled to participate with the common stock on any additional dividends
declared by the Board of Directors of the Company on an as converted basis.
4. Liquidation Rights of Cumulative Exchangeable Participating Preferred
Stock.
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of Cumulative
Exchangeable Participating Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
- ---------------
3 To be equal to the number of shares of Class B Common stock, par value $.01
per share, of the Company outstanding on the date of the merger of a
subsidiary of FTL-Cayman with and into the Company.
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<PAGE> 83
stockholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any shares of common stock or any share of any other class or
series of the Company's preferred stock ranking junior to the Cumulative
Exchangeable Participating Preferred Stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or winding up of
the Company, an amount equal to the Liquidation Preference plus all accumulated
and unpaid dividends (including a prorated quarterly dividend from the last
Dividend Payment Date to the date of such payment) in respect of any
liquidation, dissolution or winding up consummated.
(b) If upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed among the holders
of Cumulative Exchangeable Participating Preferred Stock shall be insufficient
to permit the payment to such stockholders of the full preferential amounts
aforesaid, then the entire assets of the Company to be distributed shall be
distributed ratably among the holders of Cumulative Exchangeable Participating
Preferred Stock, based on the full preferential amounts for the number of shares
of Cumulative Exchangeable Participating Preferred Stock held by each holder.
(c) In addition to the preferential amounts aforesaid, holders of
Cumulative Exchangeable Participating Preferred Stock shall be entitled to
participate with the common stock with respect to all additional liquidation
proceeds on an as converted basis.
(d) A consolidation or merger of the Company with or into any other
corporation or corporations in which the stockholders of the Company receive
solely capital stock of the acquiring corporation (or of the direct or indirect
parent corporation of the acquiring corporation), except for cash in lieu of
fractional shares, shall not be deemed to be a liquidation, dissolution, or
winding up of the Company as those terms are used in this paragraph 4.
5. Redemption of Cumulative Exchangeable Participating Preferred Stock.
(i) At any time on or after the (4) anniversary of the Original Issue
Date, the Company, at the option of the Board, may redeem, from any source of
funds legally available therefor, in whole, but not in part, in the manner
provided for below, all shares of Cumulative Exchangeable Participating
Preferred Stock at a redemption price equal to the then Fair Market Value (the
"Redemption Price").
(ii) At least thirty (30) days and not more than sixty (60) days prior to
the Redemption Date, written notice thereof (the "Redemption Notice") shall be
mailed, postage prepaid, to each holder of record of the Cumulative Exchangeable
Participating Preferred Stock at the last address as it shall appear in the
register of the Company. Prior to mailing the Redemption Notice, the Company
shall engage an investment banking firm to determine the Fair Market Value of
the Cumulative Exchangeable Participating Preferred Stock as of a date not more
than seventy-five (75) days prior to the Redemption Date. The Redemption Notice
shall state:
(A) that the Company intends to redeem all outstanding shares of
Cumulative Exchangeable Participating Preferred Stock;
(B) the Redemption Date and the Redemption Price;
(C) that dividends on the shares of Cumulative Exchangeable
Participating Preferred Stock to be redeemed shall cease to accrue on the
Redemption Date;
(D) the then current Exchange Rate and the place or places where
certificates for Cumulative Exchangeable Participating Preferred Stock may
be surrendered for exchange pursuant to paragraph (6), and shall further
state the date that the exchange privilege will terminate; and
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4 See Schedule A attached hereto.
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<PAGE> 84
(E) that the holder is to surrender to the Company, in the manner and
at the place designated, his certificate or certificates representing the
shares of Cumulative Exchangeable Participating Preferred Stock.
(iii) On or before the date fixed for redemption, each holder of Cumulative
Exchangeable Participating Preferred Stock shall surrender the certificate or
certificates representing such shares of Cumulative Exchangeable Participating
Preferred Stock to the Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price for such shares shall be
payable in cash on the Redemption Date to the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired.
(iv) Unless the Company defaults in the payment in full of the Redemption
Price, dividends on the Cumulative Exchangeable Participating Preferred Stock
shall cease to accumulate on the Redemption Date, and all rights of the holders
of such shares redeemed shall cease to have any further rights with respect
thereto on the Redemption Date, other than to receive the Redemption Price
without interest.
6. Exchange at Option of Holder.
(a) Subject to the provisions of this paragraph 6, shares (or fractions
thereof) of Cumulative Exchangeable Participating Preferred Stock are
exchangeable, in whole or from time to time in part, at the option of the
holders thereof, at any time from and after the Original Issue Date, unless
previously redeemed, into FTL-Cayman Class A Shares at the Exchange Rate. The
right to exchange shares of Cumulative Exchangeable Participating Preferred
Stock called for redemption shall terminate on a date to be determined by the
Board of Directors of the Company, which will be no earlier than the close of
business on the fifth Business Day immediately preceding the specified
Redemption Date.
An exchange of shares of Cumulative Exchangeable Participating Preferred
Stock at the option of the holder may be effected by delivering certificates
evidencing such shares, together with (i) written notice of exchange specifying
the number of shares of Cumulative Exchangeable Participating Preferred Stock to
be exchanged and specifying the name or names (with addresses) in which the
certificate or certificates representing the FTL-Cayman Class A Shares
deliverable on such exchange are to be registered and (ii) a proper assignment
to the Company (or in blank) of the certificate(s) for the shares of Cumulative
Exchangeable Participating Preferred Stock surrendered for exchange, to the
office or agency to be maintained by the Company for that purpose and otherwise
in accordance with exchange procedures established by the Company. Each notice
of exchange shall be irrevocable, and each exchange shall be deemed to have been
effected immediately prior to the close of business on the date (the "Exchange
Date") on which all of the requirements for such exchange shall have been
satisfied. The exchange shall be at the Exchange Rate in effect immediately
prior to the close of business on the Exchange Date.
As promptly as practicable after the surrender of certificates for shares
of Cumulative Exchangeable Participating Preferred Stock by a holder as
aforesaid, the Company, in accordance with the provisions of this paragraph 6,
shall deliver at said office or agency to such holder, or on his or her written
order, a certificate or certificates for the number of full FTL-Cayman Class A
Shares issuable upon exchange of such shares in accordance with the provision of
this paragraph 6, and any fractional interest shall be settled by the Company in
accordance with subparagraph (c) of this paragraph 6.
Upon any exchange of shares of Cumulative Exchangeable Participating
Preferred Stock pursuant to this paragraph 6, the Company shall make no payment
or allowance for unpaid dividends, whether or not in arrears, on exchanged
shares of Cumulative Exchangeable Participating Preferred Stock or for
previously declared dividends or distributions on the FTL-Cayman Class A
IV-5
<PAGE> 85
Shares issued upon such exchange, other than for previously declared but unpaid
dividends on the Cumulative Exchangeable Participating Preferred Stock.
If the shares of Cumulative Exchangeable Participating Preferred Stock
represented by a certificate surrendered for exchange are exchanged in part
only, the Company shall cause to be delivered to the holder, without charge
therefor, a new certificate or certificates representing in the aggregate the
number of unexchanged shares.
(b) Exchange Rate Adjustments. The Exchange Rate shall be subject to
adjustment from time to time as provided below in this subparagraph 6(b).
(i) If FTL-Cayman shall, after the Original Issue Date:
(A) pay a stock dividend on the outstanding FTL-Cayman Class A
Shares,
(B) subdivide or split the outstanding FTL-Cayman Class A Shares
into a greater number of shares,
(C) combine the outstanding FTL-Cayman Class A Shares into a
smaller number of shares, or
(D) issue by reclassification of its outstanding FTL-Cayman Class A
Shares any other ordinary or common shares,
then, in any such event, the Exchange Rate in effect immediately prior to
the opening of business on the record date for determination of
stockholders entitled to receive such dividend or the effective date of
such subdivision, split, combination or reclassification, as the case may
be, shall be adjusted so that the holder of shares of Cumulative
Exchangeable Participating Preferred Stock shall thereafter be entitled to
receive, upon exchange at the option of such holder, the number of
FTL-Cayman Class A Shares or other common shares of FTL-Cayman which such
holder would have owned or been entitled to receive immediately following
such action if such holder had exchanged his shares of Cumulative
Exchangeable Participating Preferred Stock immediately prior to the record
date for, or effective date of, as the case may be, such event. Such
adjustment shall be made successively whenever any event listed above shall
occur.
For a dividend or distribution, the adjustment shall become effective
at the opening of business on the Business Day next following the record
date for such dividend or distribution. For a subdivision, split,
combination or reclassification, the adjustment shall become effective
immediately after the effectiveness of such subdivision, split, combination
or reclassification.
(ii) If FTL-Cayman shall, after the Original Issue Date, issue rights,
warrants or options to all holders of its outstanding FTL-Cayman Class A
Shares entitling them (for a period not exceeding forty-five days from the
record date referred to below) to subscribe for or purchase FTL-Cayman
Class A Shares at a price per share less than the Average Market Price per
share of the FTL-Cayman Class A Shares (determined as of the record date
for the determination of stockholders entitled to receive such rights,
warrants or options), then, in any such event, the Exchange Rate shall be
adjusted by multiplying the Exchange Rate in effect immediately prior to
the opening of business on such record date by a fraction, of which the
numerator shall be the number of FTL-Cayman Class A Shares outstanding on
such record date plus the maximum number of additional FTL-Cayman Class A
Shares offered for subscription or purchase pursuant to such rights,
warrants or options, and of which the denominator shall be the number of
FTL-Cayman Class A Shares outstanding on such record date plus the maximum
number of additional FTL-Cayman Class A Shares which the aggregate offering
price of the maximum number of FTL-Cayman Class A Shares so offered for
subscription or purchase pursuant to such rights, warrants or options would
purchase at such Average Market Price (determined by multiplying such
maximum number of shares by the exercise price of such rights, warrants or
options (plus any other consideration received by FTL-Cayman upon the
issuance or exercise
IV-6
<PAGE> 86
of such rights, warrants or options) and dividing the product so obtained
by such Average Market Price). Such adjustment shall become effective at
the opening of business on the Business Day next following the record date
for the determination of shareholders entitled to receive such rights,
warrants or options. To the extent that FTL-Cayman Class A Shares are not
delivered after the expiration of such rights, warrants or options, the
Exchange Rate shall be readjusted to the Exchange Rate which would then be
in effect had the adjustments made upon the record date for the
determination of shareholders entitled to receive such rights, warrants or
options been made upon the basis of delivery of only the number of
FTL-Cayman Class A Shares actually delivered and the amount actually paid
therefor. Such adjustment shall be made successively whenever any such
rights, warrants or options are issued. In determining whether any rights,
warrants or options entitle the holders to subscribe for or purchase
FTL-Cayman Class A Shares at a price per share less than such Average
Market Price, there shall be taken into account any consideration received
by FTL-Cayman upon issuance and upon exercise of such rights, warrants or
options. The value of such consideration, if other than cash, shall be
determined by the Board of Directors, whose determination shall be
conclusive.
(iii) If FTL-Cayman shall, after the Original Issue Date, pay a
dividend or make a distribution to all holders of its outstanding
FTL-Cayman Class A Shares of evidences of its indebtedness or other assets
of FTL-Cayman, but excluding (x) any cash dividends or distributions and
(y) dividends or distributions referred to in subparagraph 6(b)(i) above,
or shall issue to all holders of its outstanding FTL-Cayman Class A Shares
rights, warrants or options to subscribe for or purchase any securities
(other than those referred to in subparagraph 6(b)(ii) above), then, in any
such event, the Exchange Rate shall be adjusted by multiplying the Exchange
Rate in effect immediately prior to the opening of business on the record
date for the determination of stockholders entitled to receive such
dividend or distribution or such rights, warrants or options by a fraction,
of which the numerator shall be the Average Market Price per share of the
FTL-Cayman Class A Shares (determined as of such record date), and of which
the denominator shall be such Average Market Price less the fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive), as of such record date, of the portion of the capital
stock, assets or evidences of indebtedness to be so distributed, or of such
rights, warrants or options to be so issued, applicable to one FTL-Cayman
Class A Share. The adjustment pursuant to the foregoing provisions of this
subparagraph 6(b)(iii) shall be made successively whenever any dividend or
distribution or issuance of rights, warrants or options to which this
subparagraph 6(b)(iii) applies is made, and shall become effective at the
opening of business on the Business Day next following the record date for
the determination of shareholders entitled to receive such dividend or
distribution or such rights, warrants or options.
(iv) Any FTL-Cayman Class A Shares issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of
business on the record date for such dividend for purposes of calculating
the number of outstanding FTL-Cayman Class A Shares under this subparagraph
6(b). FTL-Cayman Class A Shares owned by or held for the account of
FTL-Cayman or any of its Wholly Owned Subsidiaries shall not be deemed
outstanding for the purposes of this subparagraph 6(b).
(v) In any case in which this subparagraph 6(b) shall require that an
adjustment be made in the Exchange Rate, the Company may, in its sole
discretion, elect to defer the following until after the occurrence of the
event which requires such adjustment: (A) delivering to the holder of any
Cumulative Exchangeable Participating Preferred Stock surrendered for
exchange the additional FTL-Cayman Class A Shares issuable upon such
exchange over the FTL-Cayman Class A Shares issuable before giving effect
to such adjustment and (B) paying to such holder any amount in cash in lieu
of a fractional FTL-Cayman Class A Share.
(vi) All adjustments to the Exchange Rate shall be calculated to the
nearest 1/100th of a FTL-Cayman Class A Share. No adjustment in the
Exchange Rate shall be required unless such
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<PAGE> 87
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustment which by reason of this
subparagraph is not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(c) Fractional Shares. No fractional shares or scrip representing fractions
of FTL-Cayman Class A Shares shall be issued upon exchange of the Cumulative
Exchangeable Participating Preferred Stock. Instead of any fractional interest
in a FTL-Cayman Class A Share which would otherwise be deliverable upon the
exchange of a share of Cumulative Exchangeable Participating Preferred Stock,
the Company shall pay to the holder of such share an amount in cash (computed to
the nearest cent) based upon the Average Market Price of a FTL-Cayman Class A
Share. If more than one share of Cumulative Exchangeable Participating Preferred
Stock shall be surrendered for exchange at one time by the same holder, the
number of full FTL-Cayman Class A Shares issuable upon exchange thereof shall be
computed on the basis of the aggregate number of shares of Cumulative
Exchangeable Participating Preferred Stock so surrendered.
(d) Adjustment for Consolidation or Merger of FTL-Cayman. In case of any
consolidation, amalgamation, reconstruction or merger to which FTL-Cayman is a
party, or in the case of any sale or transfer to another corporation of the
property of FTL-Cayman as an entirety or substantially as an entirety, or in
case of any statutory exchange of securities with another corporation (other
than in connection with a merger or acquisition) (each of the foregoing being
referred to herein as a "Transaction"), in each case as a result of which
FTL-Cayman Class A Shares shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), proper
provision shall be made so that each share of Cumulative Exchangeable
Participating Preferred Stock shall, after consummation of such Transaction, be
subject to exchange at the option of the holder into the kind and amount of
stock, securities or other property receivable upon consummation of such
Transaction by a holder of the number of FTL-Cayman Class A Shares into which
such share of Cumulative Exchangeable Participating Preferred Stock might have
been exchanged immediately prior to consummation of such Transaction. The kind
and amount of stock or securities into which the shares of Cumulative
Exchangeable Participating Preferred Stock shall be exchangeable after
consummation of such Transaction shall be subject to adjustment, as nearly as
may be practicable, as described in subparagraph 6(b) following the date of
consummation of such Transaction.
(e) Notice of Adjustments. Whenever the Exchange Rate is adjusted as herein
provided, the Company shall forthwith compute the adjusted Exchange Rate in
accordance herewith and prepare a certificate signed by an officer of the
Company setting forth the adjusted Exchange Rate, the method of calculation
thereof in reasonable detail and the facts requiring such adjustment and upon
which such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment (absent manifest error),
and mail a copy of such certificate to the holders of the outstanding shares of
Cumulative Exchangeable Participating Preferred Stock.
7. Conversion at Option of Holder.
(a) Subject to the provisions of this paragraph 7, shares of Cumulative
Exchangeable Participating Preferred Stock are convertible, in whole or from
time to time in part, at the option of the holders thereof, at any time from and
after the Original Issue Date, unless previously redeemed, into Common Stock at
the Conversion Rate. The right to convert shares of Cumulative Exchangeable
Participating Preferred Stock called for redemption shall terminate on a date to
be determined by the Board of Directors of the Company, which will be no earlier
than the close of business on the fifth Business Day immediately preceding the
specified Redemption Date.
A conversion of shares of Cumulative Exchangeable Participating Preferred
Stock at the option of the holder may be effected by delivering certificates
evidencing such shares, together (i) with written notice of conversion
specifying the number of shares of Cumulative Exchangeable Participating
Preferred Stock to be converted and specifying the name or names (with
addresses) in which the certificate or certificates representing the
FTL-Delaware Common Stock deliverable on
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<PAGE> 88
such conversion are to be registered and (ii) a proper assignment to the Company
(or in blank) of the certificate(s) for the shares of Cumulative Exchangeable
Participating Preferred Stock surrendered for conversion, to the office or
agency to be maintained by the Company for that purpose and otherwise in
accordance with conversion procedures established by the Company. Each notice of
conversion shall be irrevocable, and each conversion shall be deemed to have
been effected immediately prior to the close of business on the date (the
"Conversion Date") on which all of the requirements for such conversion shall
have been satisfied. The conversion shall be at the Conversion Rate in effect
immediately prior to the close of business on the Conversion Date.
As promptly as practicable after the surrender of certificates for shares
of Cumulative Exchangeable Participating Preferred Stock by a holder as
aforesaid, the Company, in accordance with the provisions of this paragraph 7,
shall deliver at said office or agency to such holder, or on his or her written
order, a certificate or certificates for the number of full or fractional shares
of FTL-Delaware Common Stock issuable upon conversion of such shares in
accordance with the provision of this paragraph 7.
Upon any conversion of shares of Cumulative Exchangeable Participating
Preferred Stock pursuant to this paragraph 7, the Company shall make no payment
or allowance for unpaid dividends, whether or not in arrears, on converted
shares of Cumulative Exchangeable Participating Preferred Stock or for
previously declared dividends or distributions on the FTL-Delaware Common Stock
issued upon such conversion, other than for previously declared but unpaid
dividends on the Cumulative Exchangeable Participating Preferred Stock.
If the shares of Cumulative Exchangeable Participating Preferred Stock
represented by a certificate surrendered for conversion are converted in part
only, the Company shall cause to be delivered to the holder, without charge
therefor, a new certificate or certificates representing in the aggregate the
number of unconverted shares.
(b) Conversion Rate Adjustments. The Conversion Rate shall be subject to
adjustment from time to time as provided below in this subparagraph 7(b).
(i) If the Company shall, after the Original Issue Date:
(A) subdivide or split (other than pursuant to a dividend or
distribution in which holders of the Cumulative Exchangeable
Participating Preferred Stock participate pursuant to Section 3(c)
hereof) the outstanding FTL-Delaware Common Stock into a greater number
of shares,
(B) combine the outstanding FTL-Delaware Common Stock into a
smaller number of shares, or
(C) issue by reclassification of its outstanding FTL-Delaware
Common Stock any shares of its common stock,
then, in any such event, the Conversion Rate in effect immediately prior to
the opening of business on the effective date of such subdivision, split,
combination or reclassification, as the case may be, shall be adjusted so
that the holder of shares of Cumulative Exchangeable Participating
Preferred Stock shall thereafter be entitled to receive, upon conversion at
the option of such holder, the number of shares of FTL-Delaware Common
Stock or other common stock of the Company which such holder would have
owned or been entitled to receive immediately following such action if such
holder had converted his shares of Cumulative Exchangeable Participating
Preferred Stock immediately prior to the record date for, or effective date
of, as the case may be, such event. Such adjustment shall be made
successively whenever any event listed above shall occur.
For a subdivision, split, combination or reclassification, the
adjustment shall become effective immediately after the effectiveness of
such subdivision, split, combination or reclassification.
IV-9
<PAGE> 89
(ii) In any case in which this subparagraph 7(b) shall require that an
adjustment be made in the Conversion Rate, the Company may, in its sole
discretion, elect to defer the following until after the occurrence of the
event which requires such adjustment: (A) issuing to the holder of any
Cumulative Exchangeable Participating Preferred Stock surrendered for
conversion the additional shares of FTL-Delaware Common Stock issuable upon
such conversion over the shares of FTL-Delaware Common Stock issuable
before giving effect to such adjustment and (B) paying to such holder any
amount in cash in lieu of a fractional share of FTL-Delaware Common Stock.
(iii) All adjustments to the Conversion Rate shall be calculated to
the nearest 1/100th of a share of FTL-Delaware Common Stock. No adjustment
in the Conversion Rate shall be required unless such adjustment would
require an increase or decrease of at least one percent therein; provided,
however, that any adjustment which by reason of this subparagraph is not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(c) Fractional Shares. Fractional shares representing fractions of
FTL-Delaware Common Stock shall be issuable upon conversion of the Cumulative
Exchangeable Participating Preferred Stock.
(d) Adjustment for Consolidation or Merger of the Company. In case of any
consolidation or merger to which the Company is a party, or in the case of any
sale or transfer to another corporation of the property of the Company as an
entirety or substantially as an entirety, or in case of any statutory conversion
of securities with another corporation (other than in connection with a merger
or acquisition) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of FTL-Delaware Common
Stock shall be converted into the right to receive stock, securities or other
property (including cash or any combination thereof), proper provision shall be
made so that each share of Cumulative Exchangeable Participating Preferred Stock
shall, after consummation of such Transaction, be subject to conversion at the
option of the holder into the kind and amount of stock, securities or other
property receivable upon consummation of such Transaction by a holder of the
number of shares of FTL-Delaware Common Stock into which such share of
Cumulative Exchangeable Participating Preferred Stock might have been converted
immediately prior to consummation of such Transaction. The kind and amount of
stock or securities into which the shares of Cumulative Exchangeable
Participating Preferred Stock shall be convertible after consummation of such
Transaction shall be subject to adjustment, as nearly as may be practicable, as
described in subparagraph 7(b) following the date of consummation of such
Transaction.
(e) Notice of Adjustments. Whenever the Conversion Rate is adjusted as
herein provided, the Company shall forthwith compute the adjusted Conversion
Rate in accordance herewith and prepare a certificate signed by an officer of
the Company setting forth the adjusted Conversion Rate, the method of
calculation thereof in reasonable detail and the facts requiring such adjustment
and upon which such adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the adjustment (absent manifest
error), and mail a copy of such certificate to the holders of the outstanding
shares of Cumulative Exchangeable Participating Preferred Stock.
8. Voting Rights.
(a) The holders of Cumulative Exchangeable Participating Preferred Stock,
except as otherwise provided hereunder or under Delaware law, shall be entitled
to vote on all matters put to a vote of the holders of Common Stock, voting
together with such holders as a single class, and will be entitled to the number
of votes which such holder would have had if such holder had converted his
shares of Cumulative Exchangeable Participating Preferred Stock into shares of
FTL-Delaware Common Stock, in accordance with paragraph 7, immediately prior to
the record date for the determination of stockholders entitled to vote thereon.
IV-10
<PAGE> 90
(b) So long as any shares of Cumulative Exchangeable Participating
Preferred Stock shall remain outstanding, the Company will not, without the
affirmative vote at a meeting or the written consent with or without a meeting
of the holders of at least a majority of the outstanding shares of Cumulative
Exchangeable Participating Preferred Stock, (i) amend, alter or repeal any of
the provisions of the Company's Certificate of Incorporation or By-Laws so as to
affect adversely the preferences, special rights or powers of the Cumulative
Exchangeable Participating Preferred Stock or (ii) create any class or series of
stock ranking prior to the Cumulative Exchangeable Participating Preferred Stock
either as to dividends or upon liquidation.
(c) (i) If at any time accrued dividends payable on the shares of
Cumulative Exchangeable Participating Preferred Stock are in arrears and unpaid
in an aggregate amount equal to or exceeding the aggregate amount of dividends
payable thereon for six quarterly dividend periods, the holders of the shares of
Cumulative Exchangeable Participating Preferred Stock, voting separately as a
class, shall have the right to vote for the election of one additional director
(the "Preferred Stock Director") to the Board of Directors of the Company, such
director to be in addition to the number of directors constituting the Board of
Directors immediately prior to the accrual of such right. Such right of the
holders of shares of Cumulative Exchangeable Participating Preferred Stock to
vote for the election of the Preferred Stock Director shall, when vested,
continue until all dividends in arrears on the shares of Cumulative Exchangeable
Participating Preferred Stock shall have been paid in full, and when so paid,
such right shall cease, subject always to the same provisions for the vesting of
such right of the holders of the shares of Cumulative Exchangeable Participating
Preferred Stock to elect the Preferred Stock Director in the case of future
dividend defaults. The Preferred Stock Director shall be elected by a plurality
of the votes cast by the holders of Cumulative Exchangeable Participating
Preferred Stock.
(ii) The Preferred Stock Director shall be the sole member of a special
committee of the Board of Directors of the Company, the only purpose of which
will be to declare dividends on the Cumulative Exchangeable Participating
Preferred Stock. The special committee, will have full authority to declare such
dividends on behalf of the Board of Directors, provided, however, that the
special committee will not be permitted to declare dividends on the Cumulative
Exchangeable Participating Preferred Stock if such a payment would be or cause a
default or an event of default under any debt agreement of the Company or any of
its affiliates.
(iii) At any time when the holders of shares of the Cumulative Exchangeable
Participating Preferred Stock are entitled to elect the Preferred Stock
Director, the Company shall, upon the written request (a "Request") of the
holders of record of not less than 10% of the outstanding shares of Cumulative
Exchangeable Participating Preferred Stock entitled to vote for such Preferred
Stock Director, call a special meeting of holders of the Cumulative Exchangeable
Participating Preferred Stock for the election of the Preferred Stock Director.
Notice of the special meeting shall be given in accordance with the requirements
of Delaware law, and such meeting shall be held not more than 60 days after the
Company's receipt of the Request. The Preferred Stock Director shall be
nominated by the persons who submit the Request.
(iv) The term of office of the Preferred Stock Director shall terminate on
the earlier of (i) the next annual meeting of stockholders of the Company at
which a successor shall have been elected and qualified or (ii) the termination
of the right of the holders of shares of Cumulative Exchangeable Participating
Preferred Stock to vote for the Preferred Stock Director. If, prior to the end
of the term of the Preferred Stock Director elected as aforesaid, a vacancy in
the office of such director shall occur, the holders of the shares of Cumulative
Exchangeable Participating Preferred Stock may, at a special meeting of the
holders called as provided above, nominate and elect a successor to hold office
for the unexpired term of the Preferred Stock Director.
9. No Reissuance of Preferred Stock. No Cumulative Exchangeable
Participating Preferred Stock acquired by the Company by reason of redemption,
purchase, or otherwise shall be reissued,
IV-11
<PAGE> 91
and all such shares shall be cancelled, retired and eliminated from the shares
which the Company shall be authorized to issue.
10. Notices. All notices to the Company permitted hereunder shall be
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 5000 Sears Tower, 233 South Wacker Drive,
Chicago, Illinois 60606, Attention: Secretary, or to such other address at which
its principal office is located and as to which notice thereof is similarly
given to the holders of the Cumulative Exchangeable Participating Preferred
Stock at their addresses appearing on the books of the Company.
IN WITNESS WHEREOF Fruit of the Loom, Inc., has caused this Certificate to
be signed by its President and Secretary respectively, on this day of
, 1998.
--------------------------------------
Name:
--------------------------------------
Title:
IV-12
<PAGE> 92
SCHEDULE A
The Conversion Rate, Dividend Rate, Exchange Rate and no-call period shall
be selected by William Farley and Farley, Inc., in their discretion, prior to
the filing of the Certificate of Designations, from the following schedule of
economically equivalent alternative rates and no-call periods:
<TABLE>
<CAPTION>
DIVIDEND EXCHANGE AND NO-CALL
ALTERNATIVE YIELD CONVERSION RATIO PERIOD
- ----------- -------- ---------------- -------
<C> <S> <C> <C> <C>
1 ........................... 4.50% 0.9524 3-Years
2 ........................... 4.50% 0.9346 4-Years
3 ........................... 4.50% 0.9174 5-Years
4 ........................... 5.00% 0.9174 3-Years
5 ........................... 5.00% 0.8929 4-Years
6 ........................... 5.00% 0.8696 5-Years
7 ........................... 5.50% 0.8850 3-Years
8 ........................... 5.50% 0.8547 4-Years
9 ........................... 5.50% 0.8333 5-Years
10 ........................... 6.00% 0.8475 3-Years
11 ........................... 6.00% 0.8197 4-Years
12 ........................... 6.00% 0.7937 5-Years
</TABLE>
IV-13
<PAGE> 93
PART II. INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
FTL-Cayman is a Cayman Islands company. Article 118 of FTL-Cayman's Amended
and Restated Articles of Association, filed as Exhibit 3.3 to this Registration
Statement, contains provisions with respect to indemnification of FTL-Cayman's
officers and directors. Such provisions provide that FTL-Cayman shall indemnify,
in accordance with and to the full extent now or hereafter permitted by law, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, an
action by or in the right of FTL-Cayman), by reason of his acting as a director,
officer, employee or agent of, or his acting in any other capacity for or on
behalf of, FTL-Cayman, against any liability or expense actually and reasonably
incurred by such person in respect thereof. FTL-Cayman shall also advance the
expenses of defending any such act, suit or proceeding in accordance with and to
the full extent now or hereafter permitted by law. Such indemnification and
advancement of expenses are not exclusive of any other right to indemnification
or advancement of expenses provided by law or otherwise. The Articles of
Association also provide that except under certain circumstances, directors of
FTL-Cayman shall not be personally liable to FTL-Cayman or its shareholders for
monetary damages for breach of fiduciary duties as a director.
The Companies Law (1995 Revision) of the Cayman Islands does not set out
any specific restrictions on the ability of a company to indemnify officers or
directors. However, the application of basic principles and certain Commonwealth
case law which is likely to be persuasive in the Cayman Islands would indicate
that indemnification is generally permissible except in the event that there had
been fraud or wilful default on the part of the officer or director or reckless
disregard of his duties and obligations to FTL-Cayman.
FTL-Cayman has purchased directors' and officers' liability insurance
covering certain liabilities incurred by its officers and directors and those of
its subsidiaries and affiliates in connection with the performance of their
duties.
<PAGE> 94
ITEM 21. EXHIBITS.
<TABLE>
<C> <C> <S>
2.1 -- Agreement and Plan of Merger, dated as of February 10, 1998,
by and among FTL- Delaware, FTL-Cayman and Sub (included as
Annex I to the Proxy Statement/ Prospectus).
3.1 -- Articles of Association of FTL-Cayman.
3.2 -- Memorandum of Association of FTL-Cayman.
3.3 -- Form of Amended and Restated Articles of Association of
FTL-Cayman.
3.4 -- Form of Amended Restated Memorandum of Association of FTL
Cayman.
3.5 -- Restated Certificate of Incorporation of FTL-Delaware and
Certificate of Amendment of the Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3 of
FTL-Delaware's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
3.6 -- Form of Certificate of Amendment of the Restated Certificate
of Incorporation (included as Annex III to the Proxy
Statement/Prospectus).
3.7 -- By-Laws of FTL-Delaware (incorporated by reference to
Exhibit 4(b) of FTL-Delaware's Registration Statement on
Form S-2, Reg. No. 33-8303).
3.8 -- Form of Amended and Restated Certificate of Incorporation of
FTL-Delaware (included as Exhibit A to Annex I to the Proxy
Statement/Prospectus).
4.1 -- Form of Certificate of Designations for FTL-Delaware
Preferred Stock (included as Annex IV to the Proxy
Statement/Prospectus).
4.2 -- Form of Certificate for the Class A Shares of FTL-Cayman.*
5.1 -- Opinion of Truman Bodden & Company, as to the validity of
the FTL-Cayman Class A Shares.*
8.1 -- Opinion of Weil, Gotshal & Manges LLP as to certain tax
matters.*
8.2 -- Opinion of Truman Bodden & Company as to certain tax
matters.*
12.1 -- Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
23.1 -- Consent of Ernst & Young LLP (relating to FTL-Delaware and
FTL-Cayman).
23.2 -- Consent of Truman Bodden & Company (included in Exhibits 5.1
and 8.2).*
23.3 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibit
8.1).*
23.4 -- Consent of Lehman Brothers Inc.
24.1 -- Powers of Attorney (included on the signature pages of this
Registration Statement).
99.1 -- Opinion of Lehman Brothers Inc. (included as Annex II to the
Proxy Statement/Prospectus).
99.2 -- Form of Proxy
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
II-2
<PAGE> 95
(ii) To reflect in the prospectus any facts or events arising after
the Effective Date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through the use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding paragraph or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the
II-3
<PAGE> 96
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 97
SIGNATURES OF FRUIT OF THE LOOM, LTD.
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fruit of the Loom, Ltd. has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Chicago, State of Illinois, on this 10th day of February, 1998.
FRUIT OF THE LOOM, LTD.
By: /s/ LARRY K. SWITZER
-----------------------------------
Larry K. Switzer, Senior
Executive Vice President and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Larry K. Switzer, Howard S. Lanznar and
Brian J. Hanigan, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and
in such person's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement with respect to Fruit of the Loom, Ltd., and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 10th day of February, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM FARLEY Chairman of the Board and Chief Executive
- --------------------------------------------- Officer (principal executive officer) and
William Farley Director
/s/ LARRY K. SWITZER Senior Executive Vice President and Chief
- --------------------------------------------- Financial Officer (principal financial and
Larry K. Switzer accounting officer) and Director
/s/ OMAR Z. AL ASKARI Director
- ---------------------------------------------
Omar Z. Al Askari
/s/ DENNIS S. BOOKSHESTER Director
- ---------------------------------------------
Dennis S. Bookshester
/s/ HENRY A. JOHNSON Director
- ---------------------------------------------
Henry A. Johnson
/s/ MARK H. MCCORMICK Director
- ---------------------------------------------
Mark H. McCormack
/s/ A. LORNE WEIL Director
- ---------------------------------------------
A. Lorne Weil
/s/ SIR BRIAN WOLFSON Director
- ---------------------------------------------
Sir Brian Wolfson
</TABLE>
II-5
<PAGE> 98
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of February 10, 1998,
by and among FTL-Delaware, FTL-Cayman and Sub (included as
Annex I to the Proxy Statement/ Prospectus).
3.1 Articles of Association of FTL-Cayman.
3.2 Memorandum of Association of FTL-Cayman.
3.3 Form of Amended and Restated Articles of Association of
FTL-Cayman.
3.4 Form of Amended Restated Memorandum of Association of FTL
Cayman.
3.5 Restated Certificate of Incorporation of FTL-Delaware and
Certificate of Amendment of the Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3 of
FTL-Delaware's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
3.6 Form of Certificate of Amendment of the Restated Certificate
of Incorporation (included as Annex III to the Proxy
Statement/Prospectus).
3.7 By-Laws of FTL-Delaware (incorporated by reference to
Exhibit 4(b) of FTL-Delaware's Registration Statement on
Form S-2, Reg. No. 33-8303).
3.8 Form of Amended and Restated Certificate of Incorporation of
FTL-Delaware (included as Exhibit A to Annex I to the Proxy
Statement/Prospectus).
4.1 Form of Certificate of Designations for FTL-Delaware
Preferred Stock (included as Annex IV to the Proxy
Statement/Prospectus).
4.2 Form of Certificate for the Class A Shares of FTL-Cayman.*
5.1 Opinion of Truman Bodden & Company, as to the validity of
the FTL-Cayman Class A Shares.*
8.1 Opinion of Weil, Gotshal & Manges LLP as to certain tax
matters.*
8.2 Opinion of Truman Bodden & Company as to certain tax
matters.*
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
23.1 Consent of Ernst & Young LLP (relating to FTL-Delaware and
FTL-Cayman).
23.2 Consent of Truman Bodden & Company (included in Exhibits 5.1
and 8.2).*
23.3 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
8.1).*
23.4 Consent of Lehman Brothers Inc.
24.1 Powers of Attorney (included on the signature pages of this
Registration Statement).
99.1 Opinion of Lehman Brothers Inc. (included as Annex II to the
Proxy Statement/Prospectus).
99.2 Form of Proxy.
</TABLE>
- ---------------
*To be filed by amendment.
2
<PAGE> 1
EXHIBIT 3.1
INDEX TO ARTICLES OF ASSOCIATION
PRELIMINARY - Article 1
INTERPRETATION - Article 2
SHARES - Articles 3 to 9
LIEN - Articles 10 to 13
CALLS ON SHARES - Articles 14 to 21
TRANSFER AND TRANSMISSION OF SHARES - Articles 22 to 27
FORFEITURE OF SHARES - Articles 28 to 34
CONVERSION OF SHARES INTO STOCK - Articles 35 to 38
PRE-EMPTIVE AND SHARE RIGHTS - Article 39
ALTERATION OF CAPITAL - Articles 40 to 43
STATUTORY MEETINGS - Articles 44 to 45
GENERAL MEETINGS - Articles 46 to 48
PROCEEDINGS AT GENERAL MEETINGS - Articles 49 to 56
VOTES OF MEMBERS - Articles 57 to 66
RESOLUTIONS IN WRITING - Article 67
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS - Article 68
DIRECTORS AND OFFICERS - Articles 69 to 79
POWERS AND DUTIES OF DIRECTORS - Articles 80 to 84
DISQUALIFICATION AND PROCEEDINGS OF DIRECTORS - Articles 85 to 93
TENURE OF OFFICE OF DIRECTORS - Articles 94 to 95
PRESUMPTION OF ASSENT - Article 96
SEAL - Articles 97 to 98
DIVIDENDS AND RESERVES - Articles 99 to 105
1
<PAGE> 2
CAPITALISATION OF PROFITS - Articles 106 to 107
ACCOUNTS AND AUDIT - Articles 108 to 112
NOTICES - Articles 113 to 117
WINDING UP - Articles 118 to 119
INDEMNITY - Article 120
AMENDMENT OF ARTICLES - Article 121
TRANSFER BY WAY OF CONTINUATION - Article 122
2
<PAGE> 3
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
FRUIT OF THE LOOM, LTD.
PRELIMINARY
1. The regulations in Table "A" in the Schedule to the Law shall not apply
to the Company except insofar as they are repeated or contained in
these Articles.
INTERPRETATION
2. In these Articles if not inconsistent with the subject or context:-
2.1 "Articles" means the articles of association of the
Company for the time being in force.
the "Company" means the above named company.
"Directors" means the directors for the time being
of the Company.
the "Law" means the Companies Law (1995 Revision)
and every statutory modification or
re-enactment thereof for the time being
in force.
"member" has the meaning assigned to it in the
Law.
"Memorandum of
Association" means the memorandum of association of
the Company for the time being in force.
"Secretary" means any person appointed to perform the
duties of secretary of the Company and
shall include an assistant secretary.
"Special Resolution" has the meaning assigned to it in the
Law.
2.2 expressions defined in the Law, or any statutory modification
or re-enactment thereof in force at the date on which these
Articles become binding on the Company, shall have the
meanings so defined.
3
<PAGE> 4
2.3 words importing the singular number shall include the plural
number and vice versa.
2.4 words importing the masculine gender shall include the feminine
and neuter genders.
2.5 persons shall include corporations.
SHARES
3. Subject to the provisions, if any, in that behalf in the Memorandum of
Association, and without prejudice to any special rights previously
conferred on the holders of existing shares, any share may be issued
with such preferred, deferred or other special rights, or such
restrictions, whether in regard to dividend, voting, return of share
capital or otherwise, as the Company may from time to time by Special
Resolution determine and, subject to the provisions of the Law, any
preference share may, with the sanction of a Special Resolution, be
issued on the terms that it is, or at the option of the Company is
liable, to be redeemed.
4. If at any time the share capital is divided into different classes of
shares the rights attached to any class (unless otherwise provided by
the terms of issue of the shares of that class) may be varied with the
consent in writing of the holders of three-fourths of the issued shares
of that class or with the sanction of a Special Resolution passed at a
separate general meeting of the holders of the shares of the class. To
every such separate general meeting the provisions of these Articles
relating to general meetings shall apply, but so that the necessary
quorum shall be one person holding or representing by proxy at least
one-third of the issued shares of the class (but so that if, at any
adjourned meeting of such holders, a quorum as defined above is not
present, those members who are present shall be a quorum) and that any
holder of shares of the class present in person or by proxy may demand
a poll and, on a poll, shall have one vote for each share of the class
of which he is the holder.
5. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed
not to be varied by the creation or issue of further shares ranking
pari passu therewith.
6. Except as required by law, no person shall be recognised by the Company
as holding any share upon any trust, and the Company shall not be bound
by or be compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any
share or any interest in any fractional part of a share (except only as
is otherwise provided by these Articles, by law or under an order of a
court of competent jurisdiction) any other rights in respect of any
share except an absolute right to the entirety thereof in the
registered holder.
4
<PAGE> 5
7. Subject to Article 39 and to the provisions of these Articles relating
to shares, the shares shall be at the disposal of the Directors and
they may (subject to the provisions of the Law) allot, grant options
over, or otherwise dispose of them to such persons, on such terms and
conditions and at such times as they think fit but so that no share
shall be issued at a discount, except in accordance with the provisions
of the Law, and so that in the case of shares offered to the public for
subscription the amount payable on application on each share shall not
be less than such percentage of the nominal amount of the share as
shall be determined by the Directors.
8. Every person whose name is entered as a member in the register of
members shall, without payment, be entitled to a certificate under the
seal of the Company specifying the share or shares held by him and the
amount paid up thereon provided that, in respect of a share or shares
held jointly by several persons, the Company shall not be bound to
issue more than one certificate and delivery of a certificate for a
share to one of several joint holders shall be sufficient delivery to
all.
9. If a share certificate is worn out, defaced, lost or destroyed, it may
be renewed on payment of such fee, if any, not exceeding one United
States dollar and on such terms, if any, as to evidence and indemnity,
as the Directors think fit.
LIEN
10. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys (whether presently payable or
not) called or payable at a fixed time in respect of that share and the
Company shall also have a lien on all shares (other than fully paid-up
shares) standing registered in the name of a single person for all
moneys presently payable by him or his estate to the Company but the
Directors may at any time declare any share to be wholly or partly
exempt from the provisions of this Article. The Company's lien, if any,
on a share shall extend to all dividends payable thereon.
11. The Company may sell, in such manner as the Directors think fit, any
shares on which the Company has a lien, but no sale shall be made
unless some sum in respect of which the lien exists is presently
payable nor until the expiration of fourteen days after a notice in
writing, stating and demanding payment of such part of the amount in
respect of which the lien exists as is presently payable, has been
given to the registered holder for the time being of the share, or the
persons entitled thereto by reason of his death or bankruptcy.
12. For giving effect to any such sale the Directors may authorise some
person to transfer the shares sold to the purchaser thereof. The
Purchaser shall be registered as the holder of the shares comprised in
any such transfer and he shall not be bound to see to the application
of the purchase money, nor shall his title to the shares be affected by
any irregularity or invalidity in the proceedings in relation to the
sale.
13. The proceeds of the sale shall be received by the Company and applied
in payment of such part of the amount in respect of which the lien
exists as is presently payable and the residue shall (subject to a
5
<PAGE> 6
like lien for sums not presently payable as existed upon the shares
prior to the sale) be paid to the person entitled to the shares at the
date of the sale.
CALLS ON SHARES
14. The Directors may from time to time make calls upon the members in
respect of any moneys unpaid on their shares (whether on account of the
nominal value of the shares or by way of premium or otherwise) and not
by the conditions of allotment thereof made payable at fixed times
provided that no call shall exceed one-half of the nominal value of the
share or be payable earlier than one month from the date fixed for the
payment of the previous call and each member shall (subject to
receiving at least fourteen days' notice specifying the time or times
and place of payment) pay to the Company at the time or times and place
so specified the amount called on his shares. A call may be revoked or
postponed at the determination of the Directors.
15. A call shall be deemed to have been made at the time when the
resolution of the Directors authorising the call was passed and may be
required to be paid by installments.
16. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
17. If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due
shall pay interest on the sum from such day appointed for payment to
the time of actual payment at such rate not exceeding six per cent. per
annum as the Directors may determine but the Directors shall be at
liberty to waive payment of such interest wholly or partly.
18. Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date (whether on account of the nominal value
of the share or by way of premium or otherwise) shall for the purposes
of these Articles be deemed to be a call duly made, notified and
payable on the date on which by the terms of issue the same becomes
payable, and in case of non-payment all the relevant provisions of
these Articles as to payment of interest and expenses, forfeiture or
otherwise shall apply as if such sum had become payable by virtue of a
call duly made and notified.
19. The provisions of these Articles as to the liability of joint holders
and as to payment of interest shall apply in the case of non-payment of
any sum which, by the terms of issue of a share, becomes payable at a
fixed time (whether on account of the nominal value of the share or by
way of premium or otherwise) as if the same had become payable by
virtue of a call duly made and notified.
20. The Directors may make arrangements on the issue of shares for a
difference between the holders in the amount of calls to be paid and in
the times of payment.
21. The Directors may, if they think fit, receive from any member willing
to advance the same all or any part of the moneys uncalled and unpaid
upon any shares held by him and upon all or any of the moneys so
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advanced may (until the same would, but for such advance, become
presently payable) pay interest at such rate, not exceeding (without
the sanction of the Company in general meeting) six per cent. per
annum, as may be agreed upon between the member paying the sum in
advance and the Directors.
TRANSFER AND TRANSMISSION OF SHARES
22. The instrument of transfer of any share shall be executed by or on
behalf of the transferor and transferee and the transferor shall be
deemed to remain a holder of the share until the name of the transferee
is entered in the register of members in respect thereof provided that
the Directors may waive execution by the transferee of the instrument
of transfer but shall, as soon as possible thereafter, inform the
transferee of such waiver of execution.
23. Subject to such of the restrictions of these Articles (if any) as may
be applicable, shares shall be transferred by instrument in writing in
the following form or in any usual or common form approved by the
Directors:-
SHARE TRANSFER
I, ______________, of _______________(hereinafter called the
"Transferor") in consideration of the sum of _____________ paid to me
by _____________, of ____________ (hereinafter called the
"Transferee") do HEREBY TRANSFER to the Transferee the share or shares
numbered ___________ in the Company.
Dated the _________ day of ___________
Signed by the Transferor:-___________________
WITNESS to the signature of the Transferor:-
___________________
Signed by the Transferee:- ________________
WITNESS to the signature of the Transferee:-
______________________
24. The Directors may, in their absolute discretion and without assigning
any reason therefore, decline to register any transfer of any share,
whether or not it is a fully paid share. The registration of transfers
may be suspended at such times and for such periods as the Directors
may from time to time determine provided always that such registration
shall not be suspended for more than thirty days in any year.
The Directors may also decline to recognise any instrument of transfer
unless:-
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24.1 a fee of not exceeding one United States dollar is paid to the
Company in respect thereof; and
24.2 the instrument of transfer is accompanied by the share
certificate to which it relates and such other evidence as the
Directors may reasonably require to show the right of the
transferor to make the transfer.
If the Directors refuse to register a transfer of any shares they
shall, within two months after the date on which the transfer was
lodged with the Company, send to the transferee notice of the refusal.
25. In the case of the death of a member, the legal personal representative
of a deceased sole shareholder shall be the only person recognised by
the Company as having any title to the share. In the case of a share
registered in the names of two or more holders, the survivors or
survivor, or the legal personal representatives of the deceased
shareholder, shall be the only persons recognised by the Company as
having any title to the share.
26. Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon such evidence being produced as may
from time to time be properly required by the Directors, have the right
either to be registered as a member in respect of the share or, instead
of being registered himself, to make such transfer of the share as the
deceased or bankrupt person could have made but the Directors shall, in
either case, have the same right to decline or suspend registration as
they would have had in the case of a transfer of the share by the
deceased or bankrupt member before his death or bankruptcy (as the case
may be).
27. A person becoming entitled to a share by reason of the death or
bankruptcy of the shareholder shall be entitled to the same dividends
and other advantages to which he would be entitled if he were the
registered shareholder except that he shall not, before being
registered as a member in respect of the share, be entitled in respect
of it to exercise any right conferred by membership in relation to
meetings of the Company provided always that the Directors may at any
time give notice requiring any such person to elect either to be
registered himself or to transfer the share and, if the notice is not
complied with within ninety days, the Directors may thereafter withhold
payment of all dividends, bonus or other moneys payable in respect of
the share until the requirements of the notice have been complied with.
FORFEITURE OF SHARES
28. If a member fails to pay any call or instalment of a call on the day
appointed for payment thereof, the Directors may, at any time
thereafter during such time as any part of such call or instalment
remains unpaid, serve a notice on him requiring payment of so much of
the call or instalment as is unpaid, together with any interest which
may have accrued and all expenses incurred by the Company by reason of
such non-payment.
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<PAGE> 9
29. The notice shall name a day (not earlier than the expiration of
fourteen days from the date of the notice) on or before which the
payment required by the notice is to be made and shall state that, in
the event of non-payment at or before the time appointed, the shares in
respect of which the call was made will be liable to be forfeited.
30. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which the notice has been given may, at
any time thereafter before the payment required by the notice has been
made, be forfeited by a resolution of the Directors to that effect.
31. A forfeited share may be sold or otherwise disposed of on such terms
and in such manner as the Directors think fit and, at any time before a
sale or disposition, the forfeiture may be cancelled on such terms as
the Directors think fit.
32. A person whose shares have been forfeited shall cease to be a member in
respect of the forfeited shares but shall, notwithstanding, remain
liable to pay the Company all moneys which, at the date of forfeiture,
were payable by him to the Company in respect of the shares, but his
liability shall cease if and when the Company receives payment in full
of the nominal amount of the shares.
33. A voluntary declaration in writing that the declarant is a Director or
the Secretary and that a share in the Company has been duly sold,
forfeited or otherwise disposed of on a date stated in the declaration
shall be conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share. The Company may receive
the consideration, if any, given for the share on any sale, forfeiture
or disposition thereof and may execute a transfer of the share in
favour of the person to whom the share is sold, forfeited or otherwise
disposed and he shall thereupon be registered as the holder of the
share and shall not be bound to see to the application of the purchase
money, if any, nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings in relation to the sale,
forfeiture or disposal of the share.
34. The provisions of these Articles as to forfeiture shall apply in the
case of non-payment of any sum, which by the terms of issue of a share,
becomes payable at a fixed time (whether on account of the nominal
value of the share or by way of premium or otherwise) as if the same
had been payable by virtue of a call duly made and notified.
CONVERSION OF SHARES INTO STOCK
35. The Company may by ordinary resolution convert any paid-up shares into
stock, and reconvert any stock into paid-up shares of any denomination.
36. The holders of stock may transfer the same, or any part thereof, in the
same manner, and subject to the same Articles as and subject to which
the shares from which the stock arose might prior to conversion have
been transferred, or as near thereto as circumstances admit but the
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<PAGE> 10
Directors may from time to time fix the minimum amount of stock
transferable and restrict or forbid the transfer of fractions of that
minimum but the minimum shall not exceed the nominal amount of the
shares from which the stock arose.
37. The holders of stock shall, according to the amount of the stock held
by them, have the same rights, privileges and advantages as regards
dividends, voting at meetings of the Company and other matters as if
they held the shares from which the stock arose but no such privilege
or advantage (except participation in the dividends and profits of the
Company) shall be conferred by any such aliquot part of stock as would
not, if existing shares, have conferred that privilege or advantage.
38. Such of the Articles as are applicable to paid-up shares shall apply to
stock and the words "share" and "shareholder" therein shall include
"stock" and "stockholder".
PRE-EMPTIVE AND SHARE RIGHTS
39. The Company may by ordinary resolution, before the issue of any shares
(whether such shares be of the original, increased or altered capital)
determine that the same, or any of them, shall be offered in the first
instance, and either at par or at a premium, to all existing holders of
any class of shares, in proportion as nearly as may be to the number of
shares of such class held by them respectively, or make any other
provisions as to the issue of such shares.
ALTERATION OF CAPITAL
40. The Company may from time to time by ordinary resolution increase its
share capital by such sum, to be divided into shares of such amount or,
if an exempted company, without nominal or par value, as the resolution
shall prescribe and with such rights, priorities and privileges annexed
thereto as the Company in general meeting may determine provided that
the Company, if an exempted company, shall not divide its share capital
into both shares of a fixed amount and shares without nominal or par
value.
41. Except so far as otherwise provided by the conditions of issue, or by
these Articles, any capital raised by the creation of new shares shall
be considered part of the original capital and shall be subject to the
provisions herein contained with reference to the payment of calls and
instalments, transfer and transmission, forfeiture, lien, surrender and
otherwise.
42. The Company may by ordinary resolution:-
42.1 consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
42.2 sub-divide its existing shares, or any of them, into shares of
smaller amount than is fixed by the Memorandum of Association
subject nevertheless to the provisions of the Law; and
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<PAGE> 11
42.3 cancel any shares which, at the date of the passing of the
ordinary resolution, have not been taken or agreed to be taken
by any person and diminish the amount of its share capital by
the amount of the shares so cancelled.
43. The Company may:-
43.1 by Special Resolution, with the confirmation of the Grand
Court of the Cayman Islands, reduce its share capital and any
capital redemption reserve fund or share premium account in
any manner and with, and subject to, any consent required by
the Law;
43.2 by resolution of its Directors purchase its own shares
(including any redeemable shares and fractions of a share) in
any manner whatsoever; and
43.3 make a payment in respect of the redemption or purchase of its
own shares otherwise than out of profits or the proceeds of a
fresh issue of shares.
STATUTORY MEETINGS
44. The Company, if registered as an ordinary non-resident company or an
ordinary company under the Law, shall hold a general meeting once in
every calendar year at such time and place as may be resolved by the
Company in general meeting or, in default, at such time and place as
the Directors may determine or, in default, at such time in the third
month following that in which the anniversary of the Company's
incorporation occurs, and at such place as the Directors shall appoint.
In default of a general meeting being so held, a general meeting shall
be held in the month next following and may be convened by any two
members in the same manner as nearly as possible as that in which
meetings are to be convened by the Directors. The above mentioned
general meetings shall be called ordinary general meetings; all other
general meetings shall be called extraordinary general meetings.
45. The Company if registered as an exempted company under the Law shall
hold at least one Directors meeting in the Cayman Islands in each
calendar year.
GENERAL MEETINGS
46. The Directors may, whenever they think fit, convene an extraordinary
general meeting. If, at any time, there are not in the Cayman Islands
sufficient Directors capable of acting to form a quorum, any Director
or any one member of the Company may convene an extraordinary general
meeting in the same manner as nearly as possible as that in which
meetings may be convened by the Directors. The Directors shall, upon
the requisition in writing of one or more members holding in the
aggregate not less than one-tenth of such paid-up capital of the
Company as at the date of the requisition carries the right of voting
at general meetings, convene an extraordinary general meeting. Any such
requisition shall express the object of the meeting proposed to be
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called and shall be left at the registered office of the Company. If
the Directors do not proceed to convene a general meeting within
twenty-one days from the date of such requisition being left as
aforesaid, the requisitionists or any or either of them or any other
member or members holding in the aggregate not less than one-tenth of
such paid-up capital of the Company as at the date of the requisition
carries the right of voting at general meetings, may convene an
extraordinary general meeting to be held at the registered office of
the Company or at some convenient place within the Cayman Islands at
such time, subject to the Company's Articles as to notice, as the
persons convening the meeting fix.
47. 47.1 Subject to the provisions of the Law relating to Special
Resolutions, seven days notice at the least (exclusive of the
day on which the notice is served or deemed to be served but
inclusive of the day for which the notice is given) specifying
the place, the day and the hour of the general meeting and, in
case of special business, the general nature of that business
shall be given in the manner hereinafter provided, or in such
other manner (if any) as may be prescribed by the Company in
general meeting, to such persons as are, under the Articles,
entitled to receive such notices from the Company but with the
consent of all the members entitled to receive notice of some
particular meeting, that meeting may be convened by such
shorter notice and in such manner as those members may think
fit.
47.2 For the purpose of determining members entitled to notice of
or to vote at any meeting of members or any adjournment
thereof, or members entitled to receive payment of any
dividend, or in order to make a determination of members for
any other proper purpose, the Directors may provide that the
register of members shall be closed for transfers for a stated
period but not to exceed in any case forty days. If the
register of members shall be so closed for the purpose of
determining members entitled to notice of or to vote at a
meeting of members, such register shall be so closed for at
least ten days immediately preceding such meeting and the
record date (the "Record Date") for such determination shall
be the date of the closure of the register of members.
47.3 In lieu of or apart from closing the register of members, the
Directors may fix in advance a date as the Record Date for any
such determination of members entitled to notice of or to vote
at a meeting of members and for the purpose of determining the
members entitled to receive payment of any dividend the
Directors may, at or within ninety days prior to the date of
declaration of such dividend, fix a subsequent date no later
than the date of declaration as the Record Date for such
determination.
47.4 If the register of members is not so closed and no Record Date
is fixed for the determination of members entitled to notice
of or to vote at a meeting of members or members entitled to
receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the
Directors declaring such dividend is adopted, as the case may
be, shall be the Record Date for such determination of
members. When a determination of members entitled to vote at
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any meeting of members has been made as provided in this
section, such determination shall apply to any adjournment
thereof.
48. The accidental omission to give notice of a meeting to, or the
non-receipt of a notice of a meeting by, any member entitled to receive
notice shall not invalidate the proceedings at any meeting.
PROCEEDINGS AT GENERAL MEETINGS
49. All business that is transacted at an extraordinary general meeting,
and all that is transacted at an ordinary general meeting (with the
exception of sanctioning a dividend, the consideration of the accounts,
balance sheets, and the ordinary report of the Directors and auditors,
the election of Directors and other officers in place of those retiring
and the fixing of the remuneration of the auditors) shall be deemed
special business.
50. No business shall be transacted at any general meeting unless a quorum
of members is present at the time when the meeting proceeds to
business; two members present in person or by proxy and entitled to
vote shall be a quorum provided always that, if there is only one
member of record entitled to attend and vote at general meetings, that
one member present in person or by proxy shall be a quorum and such
member may transact business by written resolution as if a meeting were
being held under the provisions of these Articles.
51. If, within half an hour from the time appointed for the meeting, a
quorum is not present, the meeting, if convened upon the requisition of
members, shall be dissolved. In any other case, it shall stand
adjourned to the same day in the next week, at the same time and place
and if, at the adjourned meeting, a quorum is not present within half
an hour from the time appointed for the meeting the members present
shall be a quorum and may transact the business for which the meeting
was called.
52. The Chairman, if any, of the board of Directors shall preside as
Chairman at every general meeting of the Company. If there is no such
Chairman, or if at any meeting he is not present within fifteen minutes
after the time appointed for holding the meeting or is unwilling to act
as Chairman, the members present shall choose one of their number to be
Chairman of the meeting.
53. The Chairman may, with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn the meeting
from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When a
meeting is adjourned for ten days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. Save as
aforesaid, it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned
meeting.
54. At any general meeting a resolution put to the vote of the meeting
shall be decided on a show of hands unless a poll is (before or on the
declaration of the result of the show of hands) demanded by the
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Chairman of the meeting or any member present in person or by proxy
entitled to vote and, unless a poll is so demanded, a declaration by
the Chairman of the meeting that a resolution has, on a show of hands,
been carried, or carried unanimously, or by a particular majority, or
lost, and an entry to that effect in the book of the proceedings of
the Company shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of, or
against, that resolution.
55. If a poll is duly demanded it shall be taken in such manner as the
Chairman of the meeting directs and the result of the poll shall be
deemed to be the resolution of the meeting at which the poll was
demanded. A poll demanded on the election of the Chairman of the
meeting or on a question of adjournment shall be taken forthwith. A
poll demanded on any other question shall be taken at such time as the
Chairman of the meeting directs and any business other than that upon
which a poll has been demanded may be proceeded with pending the taking
of the poll. The demand for a poll may be withdrawn.
56. In the case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the meeting at which the show of hands takes
place or at which the poll is demanded shall be entitled to a second or
casting vote.
VOTES OF MEMBERS
57. Subject to any rights or restrictions for the time being attached to
any class or classes of shares, on a show of hands every member present
in person, and entitled to vote, shall have one vote. On a poll every
member entitled to vote shall have one vote for each share of which he
is the holder. On a poll a member entitled to more than one vote need
not, if he votes, use all his votes or cast all the votes he uses in
the same way.
58. In the case of joint holders the vote of the senior holder who tenders
a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders and, for this
purpose, seniority shall be determined by the order in which the names
stand in the register of members.
59. A member of unsound mind, or in respect of whom an order has been made
by any court having jurisdiction in lunacy, may vote, whether on a show
of hands or on a poll, by his committee, receiver, or other person in
the nature of a committee appointed by that court and any such
committee, receiver or other person may, on a poll, vote by proxy.
60. 60.1 Subject to the Law, the Company in general meeting may
determine (and may revoke, alter or amend such determination)
that no member shall be entitled to vote at any general
meeting unless all calls or other sums presently payable by
him in respect of shares in the Company have been paid.
60.2 No member shall be entitled to vote at any general meeting
unless he is registered as a shareholder of the Company on the
Record Date for such meeting.
61. No objection shall be raised to the qualification of any voter except
at the meeting or adjourned meeting at which the vote objected to is
given or tendered, and every vote not disallowed at such meeting shall
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be valid for all purposes. Any such objection made in due time shall
be referred to the Chairman of the meeting whose decision shall be
final and conclusive.
62. On a poll or on a show of hands votes may be given either personally or
by proxy.
63. The instrument appointing a proxy shall be in writing under the hand of
the appointor or his attorney duly authorised in writing or, if the
appointor is a corporation, either under seal or under the hand of an
officer or attorney duly authorised. A proxy need not be a member of
the Company.
64. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed, or a notarially certified
copy of that power of attorney or other authority, shall be deposited
at the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting at such
time (if any) as the notice may specify before the time for holding the
meeting or adjourned meeting at which the person named in the
instrument proposed to vote and, in default, the instrument of proxy
may, at the option of the Company not be treated as valid. The
instrument appointing a proxy shall be deemed to confer authority to
demand or join in demanding a poll.
65. An instrument appointing a proxy may afford members an opportunity of
voting for or against a resolution and may be in the following form or
a form as near thereto as circumstances admit or any other form
approved by the Directors:-
Fruit of the Loom, Ltd.
I, _______________ of ________________ being a member of the Company,
hereby appoint ____________________ of _______________ as my proxy, to
vote for me and on my behalf at the (ordinary or extraordinary, as the
case may be) general meeting of the Company to be held on the
______________ day of ____________ and at any adjournment thereof.
Signed by:- ____________ this _________ day of ____________
66. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the
principal or revocation of the proxy or of the authority under which
the proxy was executed, or the transfer of the share in respect of
which the proxy is given, provided that no intimation in writing of
such death, insanity, revocation or transfer as aforesaid shall have
been received by the Company at its registered office before the
commencement of the meeting or adjourned meeting at which the proxy is
used.
RESOLUTIONS IN WRITING
67. A resolution in writing (whether ordinary or special and whether in one
or more counterparts) signed by all the members for the time being
entitled to receive notice of and to attend and vote at general
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meetings (or, being corporations, by their duly authorised
representatives) shall be as valid and effective as if the same had
been passed at a general meeting of the Company duly convened and
held.
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS
68. Any corporation which is a member of the Company may, in accordance
with its articles of Association or, in the absence of such provision,
by resolution of its directors or other governing body, authorise such
person as it thinks fit to act as its representative at any meeting of
the Company or of any class of members of the Company and the person so
authorised shall be entitled to exercise the same powers on behalf of
the corporation which he represents as that corporation could exercise
if it were an individual member of the Company.
DIRECTORS AND OFFICERS
69. Until otherwise determined by the Company in general meeting, the
number of Directors shall not be less than one nor more than ten and
the names of the first Directors shall be determined in writing by a
majority of the subscribers to the Memorandum of Association.
70. Thereafter, and subject as otherwise provided in these Articles,
Directors shall be appointed by a resolution of the Company. At a
general meeting a motion for the appointment of two or more persons as
Directors may be made by a single resolution.
71. The remuneration of the Directors shall, from time to time, be
determined by the Company in general meeting. The Directors may also be
paid all travelling, hotel and other expenses properly incurred by them
in connection with the business of the Company. Any Director who serves
on any committee or who devotes special attention to the business of
the Company, or who otherwise performs services which, in the opinion
of the Directors, are outside the scope of the ordinary duties of a
Director, may be paid such extra remuneration by way of salary,
percentage of profits or otherwise as the Directors may determine.
72. The Directors may, on behalf of the Company, pay a gratuity or pension
or allowance on retirement to any Director who has held any other
salaried office or place of profit with the Company or to his widow or
dependents and may make contributions to any fund and pay premiums for
the purchase or provision of any such gratuity, pension or allowance.
73. 73.1 A Director or officer of the Company may be or become a
director or other officer of, or otherwise interested in, any
company promoted by the Company or in which the Company may be
interested as shareholder or otherwise and no such Director or
officer shall be accountable to the Company for any
remuneration or other benefits received by him as a director
or officer of, or from his interest in, such other company.
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73.2 A Director or officer of the Company may hold any other office
or place of profit under the Company (other than the office of
auditor) in conjunction with his office of Director or officer
for such period and on such terms (as to remuneration and
otherwise) as the Directors may determine.
73.3 No Director or officer of the Company shall be disqualified by
his office from holding any office or place of profit under
the Company or under any company in which the Company shall be
a shareholder or otherwise interested, or from contracting or
dealing with the Company either as vendor, purchaser, or
otherwise, nor shall any such contract, or any contract or
arrangement entered into by or on behalf of the Company in
which any Director or officer shall be in any way interested,
be avoided, nor shall any Director or officer be liable to
account to the Company for any profit arising from any such
office or place of profit or realised by any such contract or
arrangement by reason only of such Director or officer holding
that office or of the fiduciary relations thereby established,
but it is declared that the nature of his interest must be
disclosed by him at the meeting of the Directors at which the
contract or arrangement is taken into consideration if his
interest then exists, or in any other case at the first
meeting of the Directors after the acquisition of his
interest. A general notice that a Director or officer is a
member of any specified firm or company, and is to be regarded
as interested in all transactions with that firm or company,
shall be a sufficient disclosure under this Article as regards
such Director or officer and the said transactions, and after
such general notice it shall not be necessary for such
Director or officer to give a special notice relating to any
particular transaction with that firm or company.
73.4 A Director or officer of the Company may, notwithstanding his
interest, be counted in the quorum present at any meeting at
which he or any other Director or officer is appointed to hold
any such office or place of profit under the Company or at
which the terms of any such appointment are arranged and he
may vote on any such appointment or arrangement other than his
own appointment or the arrangement of the terms thereof.
73.5 Any Director or officer of the Company may act by himself or
his firm in a professional capacity for the Company and he or
his firm shall be entitled to remuneration for professional
services as if he were not a Director or officer provided that
nothing herein contained shall authorise a Director or officer
or his firm to act as auditor of the Company.
74. The share qualification for a Director may be fixed by the Company in
general meeting and, unless and until so fixed, no qualification shall
be required.
75. The Directors may entrust to and confer upon a Managing Director,
President, Vice-President, Manager, Secretary, Assistant Secretary,
Treasurer or any other officer of the Company any of the powers
exercisable by them upon such terms and conditions and with such
restrictions as they may think fit, and either collaterally with or to
the exclusion of their own powers, and may from time to time revoke,
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<PAGE> 18
withdraw, alter or vary all or any of such powers.
76. The Directors may, from time to time, appoint one or more of their body
to the office of Managing Director, or any other office, on such terms
and at such remuneration (whether by way of salary or commission or
participation in profits or partly in one way and partly in another) as
they may think fit but his appointment shall be subject to
determination ipso facto if he ceases from any cause to be Director, or
if the Company in general meeting resolves that his tenure of the
office of Managing Director or such other office be determined.
77. The Company in general meeting or the Directors may appoint Presidents,
Vice-Presidents, Treasurers, Secretary-Treasurers, Secretaries,
Managers and such other officers of the Company for such term and at
such remuneration and upon such conditions as the members or Directors
think fit and any President, Vice-President, Treasurer,
Secretary-Treasurer, Secretary, Manager or other officer so appointed
may be removed by the members in general meeting or by the Directors.
78. Any Director may in writing appoint any person, of whom a majority of
the Directors do not object, to be his alternate to act in his place at
any meeting of the Directors at which he is unable to be present. Every
such alternate shall be entitled to notice of meetings of the Directors
and to attend and vote at such meeting as a Director when the person
appointing him is not personally present and, where he is a Director,
to have a separate vote on behalf of the Director he is representing in
addition to his own vote. A Director may at any time in writing revoke
the appointment of an alternate appointed by him. Every such alternate
shall be an officer of the Company and shall not be deemed to be the
agent of the Director appointing him. The remuneration of such an
alternate shall be payable out of the remuneration payable to the
Director appointing him and the proportion thereof shall be agreed
between them. An alternate need not hold any share qualification.
79. A Director may appoint any person to act as his proxy at meetings of
the Directors. Such appointment must be made in writing under the hand
of the appointor and may at any time be revoked in like manner, and may
be general or for a specified period, or for specified meetings, or for
specified resolutions, and may authorise and direct the appointee to be
Chairman if the appointor would, if present, be entitled to preside,
and notice of every such appointment or revocation must be given to the
Company, and the appointee need not be a Director or member of the
Company, but he must furnish the Company with his address.
POWERS AND DUTIES OF DIRECTORS
80. The business of the Company shall be managed by the Directors, who may
pay all expenses incurred in setting-up and registering the Company and
may exercise all such powers of the Company as are not, by the Law or
these Articles, required to be exercised by the Company in general
meeting subject, nevertheless, to any regulations of these Articles, to
the provisions of the Law, and to such regulations, being not
inconsistent with the aforesaid regulations or provisions, as may be
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<PAGE> 19
prescribed by the Company in general meeting but no regulations made
by the Company in general meeting shall invalidate any prior act of
the Directors which would have been valid if that regulation had not
been made.
81. The Directors may exercise all the powers of the Company to borrow
money and to mortgage or charge its undertaking, property and uncalled
capital, or any part thereof, and to issue debentures, debenture stock,
bonds and other securities whether outright or as security for any
debt, liability or obligation of the Company or of any third party.
Debentures, debenture stock, bonds and other securities may be made
assignable free from any equities between the Company and the person to
whom the same may be issued.
82. The Directors may from time to time and at any time by power of
attorney appoint any company, firm or person or body of persons,
whether nominated directly or indirectly by the Directors, to be the
attorney or attorneys of the Company for such purposes and with such
powers, authorities and discretions (not exceeding those vested in or
exercisable by the Directors under these Articles) and for such period
and subject to such conditions as they may think fit and any such
powers of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney as the Directors
may think fit and may also authorise any such attorney to delegate all
or any of the powers, authorities and discretions vested in him.
83. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments, and all receipts for moneys paid to the
Company, shall be signed, drawn, accepted, endorsed, or otherwise
executed, as the case may be, in such manner as the Directors shall
from time to time by resolution determine.
84. The Directors shall cause minutes to be made in books provided for the
purpose:-
84.1 of all appointments of officers of the Company made by the
Directors;
84.2 of the names of the Directors present at each meeting of the
Directors and of any committee of the Directors; and
84.3 of all resolutions and proceedings at each meeting of the
Company and of the Directors and of any committee of the
Directors.
DISQUALIFICATION AND PROCEEDINGS OF DIRECTORS
85. The office of Director shall, ipso facto, be vacated if the Director:-
85.1 dies;
85.2 becomes bankrupt or makes any arrangement or composition with
his creditors generally; or
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<PAGE> 20
85.3 is found to be or becomes of unsound mind; or
85.4 resigns his office by notice in writing to the Company; or
85.5 is removed from office by a resolution of the Company.
86. The Directors may meet together either within or without the Cayman
Islands for the dispatch of business, adjourn, and otherwise regulate
their meetings and proceedings, as they think fit. Except as otherwise
determined by the Directors, it shall not be necessary to give written
notice of a meeting of Directors. The Directors or any committee
thereof may participate in a meeting of the board of Directors or of
such committee by means of conference telephone, or similar
communications equipment by means of which all persons participating
can hear each other, and participation in a meeting pursuant to this
provision shall constitute presence in person at such meeting.
Questions arising at any meeting shall be decided by a majority of
votes. In case of an equality of votes the Chairman shall have a second
or casting vote. A Director may, and the Secretary on the requisition
of a Director shall, at any time summon a meeting of the Directors.
87. The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and, unless so fixed shall be
two provided always that if there is only a sole Director, that
Director shall be a quorum and such Director may transact business by
written resolution as if a meeting were being held under the provisions
of these Articles.
88. A meeting of the Directors at which a quorum is present shall be
competent to exercise all or any of the authorities, powers and
discretions by or under the Articles for the time being vested in or
exercisable by the Directors generally.
89. A resolution in writing signed by all the Directors in office
(including any duly appointed alternate Director) shall be as valid and
effectual as if it had been passed at a meeting of the Directors duly
convened and held.
90. The continuing Directors or sole continuing Director may act
notwithstanding any vacancy in their body, but, if and so long as their
number is reduced below the number fixed by or pursuant to the Articles
as the necessary quorum of Directors, the continuing Directors or
Director may act for the purpose of increasing the number of Directors
to that number, or of summoning a general meeting of the Company, but
for no other purpose.
91. The Directors may elect a Chairman of their meetings and determine the
period for which he is to hold office but if no such Chairman is
elected, or if at any meeting the Chairman is not present within five
minutes after the time appointed for holding the same, the Directors
present may choose one of their number to be Chairman of the meeting.
92. The Directors may delegate any of their powers to committees consisting
of such member or members of their body as they think fit. Any
committee so formed shall, in the exercise of the powers so delegated,
conform to any regulations that may be imposed on it by the Directors.
Save as aforesaid the meetings and proceedings of a committee
consisting of more than one member shall be governed by the provisions
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<PAGE> 21
of these Articles regulating the proceedings and meetings of Directors.
93. All acts done by any meeting of the Directors or of a committee of
Directors or by any person acting as a Director shall, notwithstanding
that it be afterwards discovered that there was some defect in the
appointment or continuance in office of any such Director or person
acting as aforesaid, or that they or any of them were disqualified or
had vacated office, or were not entitled to vote, be as valid as if
every such person had been duly appointed or had duly continued on in
office and was qualified or had continued to be a Director and had been
entitled to be a Director.
TENURE OF OFFICE OF DIRECTORS
94. The Company may, by ordinary resolution, appoint any person to be a
Director and may, in like manner, remove any Director and may, in like
manner, appoint another person in his stead.
95. The Directors shall have the power at any time, and from time to time,
to appoint any person to be a Director, either to fill a casual vacancy
or as an addition to the existing Directors, but so that the total
number of Directors (exclusive of alternate Directors) shall not at any
time exceed the number fixed in accordance with these Articles.
PRESUMPTION OF ASSENT
96. A Director who is present at a meeting of the board of Directors at
which action on any Company matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent from
such action with the person acting as the Secretary of the meeting
before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of
the meeting. Such right of dissent shall not apply to a Director who
voted in favour of such action.
SEAL
97. Any seal shall only be used by the authority of the Directors or of a
committee of the Directors authorised by the Directors in that behalf
and every instrument to which the Seal has been affixed shall be signed
by one person who shall be either a Director or the Secretary or
Secretary-Treasurer or Assistant Secretary or some person appointed by
the Directors for the purpose
provided that a Director, Secretary or other officer of the Company or
representative or attorney may, without further authority of the
Directors, affix any seal of the Company over his signature alone to
any document of the Company required to be authenticated by him under
seal or to be filed with the Registrar of Companies in the Cayman
Islands or elsewhere wheresoever and provided further that share
certificates representing shares in the capital of the Company shall
be under seal signed by a Director and countersigned by the Secretary
or another Director or other authorised person and that the Directors
may authorise certificates to be issued with the seal and authorised
signatures affixed by some method or system of mechanical process.
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<PAGE> 22
98. The Company may have for use in any territory, district or place not
situate in the Cayman Islands, one or more official seal or seals each
of which shall be a facsimile of the Seal of the Company and each of
which such seal or seals may bear the addition on its face of the name
of the territory, district or place where it is to be used.
DIVIDENDS AND RESERVES
99. Subject to the Law the Directors may declare dividends on the shares of
the Company outstanding and authorise payment of the same out of the
funds of the Company and may from time to time pay to the members such
interim dividends as appear to the Directors to be justified by the
profits of the Company. No dividend shall be paid otherwise than out of
profits or out of the share premium account or otherwise as permitted
by the Law.
100. Subject to the rights of persons, if any, entitled to shares with
special rights as to dividend, all dividends shall be declared and paid
according to the amounts paid or credited as paid on the shares in
respect whereof the dividend is paid but no amount paid or credited as
paid on a share in advance of calls shall be treated for the purposes
of this Article as paid on the share. All dividends shall be
apportioned and paid proportionately to the amounts paid or credited as
paid on the shares during any portion or portions of the period in
respect of which the dividend is paid but if any share is issued on
terms providing that it shall rank for dividend as from a particular
date such share shall rank for dividend accordingly.
101. The Directors may, before recommending any dividend, set aside out of
the profits of the Company such sums as they think proper as a reserve
or reserves which shall, at the discretion of the Directors, be
applicable for meeting contingencies or for equalizing dividends, or
for any other purpose to which the profits of the Company may be
properly applied, and pending such application may, at the like
discretion, either be employed in the business of the Company or be
invested in such investments (other than shares of the Company) as the
Directors may from time to time think fit. The Directors may also,
without placing the same to reserve, carry forward any profits which
they may think prudent not to divide.
102. If several persons are registered as joint holders of any share, any of
them may give effectual receipts for any dividends, bonuses or other
moneys payable on or in respect of the share.
103. With the sanction of a general meeting, any dividend may be paid wholly
or partly by the distribution of specific assets and, in particular,
of paid-up shares or debentures of any other company or in any one or
more of such ways. Where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think
expedient and, in particular, may issue fractional certificates and
fix the value for distribution of such specific assets or any part
thereof and may determine that cash payments shall be made to any
members upon the footing of the value so fixed, in order to adjust the
rights of all members, and may vest any such specific assets in
trustees upon trust for the members entitled to the dividend as may
seem expedient to the Directors.
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<PAGE> 23
104. Any dividend, interest or other monies payable in cash in respect of
shares may be paid by cheque or warrant sent through the post directed
to the registered address of the member or person entitled thereto or,
in the case of joint holders, to any one of such joint holders at his
registered address or to such person and such address as the member or
person entitled or such joint holders, as the case may be, may direct.
Every such cheque or warrant shall be made payable to the order of the
person to whom it is sent or to the order of such other person as the
member or person entitled or such joint holders, as the case may be,
may direct.
105. No dividend shall bear interest against the Company. All dividends
unclaimed for one year after having been declared may be invested or
otherwise made use of by the Directors for the benefit of the Company
until claimed and the Company shall not be constituted a trustee in
respect thereof. All dividends unclaimed for a period of twelve years
after having been declared shall be forfeited and shall revert to the
Company.
CAPITALISATION OF PROFITS
106. The Company in general meeting may, upon the recommendation of the
Directors, resolve that it is desirable to capitalise any part of the
amount for the time being standing to the credit of any of the
Company's reserve accounts or to the credit of the profit and loss
account or otherwise available for distribution and not required for
the payment or provision of the fixed dividend on any shares entitled
to fixed preferential dividends and accordingly that such sums be set
free for distribution amongst the members who would have been entitled
thereto if distributed by way of dividend and in the same proportions
on condition that the same be not paid in cash but be applied either in
or towards paying up any amounts for the time being unpaid on any
shares held by such members respectively or paying up in full unissued
shares or debentures of the Company to be allotted and distributed
credited as fully paid-up to and amongst such members in the proportion
aforesaid, or partly in the one way and partly in the other, and the
Directors shall give effect to such resolution provided that a share
premium account and a capital redemption reserve fund may, for the
purposes of this Article, only be applied in the paying up of unissued
shares to be issued to members of the Company as fully paid bonus
shares.
107. Whenever such a resolution as aforesaid has been passed the Directors
shall make all appropriations and applications of the undivided profits
resolved to be capitalised thereby and all allotments and issues of
fully paid shares or debentures, if any, and generally shall do all
acts and things required to give effect thereto, with full power to the
Directors to make such provision by the issue of fractional
certificates or by payment in cash or otherwise as they think fit for
the case of shares or debentures becoming distributable in fractions,
and also to authorise any person to enter on behalf of all members
entitled thereto into an agreement with the Company providing for the
allotment to them respectively, credited as fully paid-up, of any
further shares or debentures to which they may be entitled upon such
capitalisation, or as the case may require, for the payment up by the
Company on their behalf, by the application thereto of their
respective proportions of the profits resolved to be capitalised, of
the amounts or any part of the amounts remaining unpaid on their
existing shares, and any agreement made under such authority shall be
effective and binding on all such members.
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<PAGE> 24
ACCOUNTS AND AUDIT
108. The Directors shall cause proper books of account to be kept with
respect to:-
108.1 all sums of money received and expended by the Company and the
matters in respect of which the receipt and expenditure takes
place;
108.2 all sales and purchases of goods by the Company; and
108.3 the assets and liabilities of the Company.
Proper books of account shall not be deemed to be kept with respect to
the matters aforesaid if there are not kept such books of account as
are necessary to give a true and fair view of the state of the
Company's affairs and to explain its transactions.
109. The books of account shall be kept at the registered office of the
Company, or at such other place or places as the Directors think fit,
and shall always be open to the inspection of the Directors as a board
and individually.
110. The Directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them shall
be open to the inspection of members not being Directors and no member
(not being a Director) shall have any right of inspecting any account
or book or document of the Company except as conferred by law or
authorised by the Directors or by the Company in general meeting.
111. The Company in general meeting may determine or, failing such
determination, the Directors may determine: -
111.1 that there be prepared and/or laid before the Company a profit
and loss account, a balance sheet, group accounts and/or
reports for such period and on such terms as the Company or
Directors may determine;
111.2 that there be laid before the Company in general meeting a
copy of every balance sheet together with a copy of the
auditor's report which, not less than seven days
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<PAGE> 25
before the date of the meeting, shall be sent to all
persons entitled to receive notices of general
meetings of the Company; and
111.3 that the accounts relating to the Company's affairs may be
audited in such manner as may be determined from time to time.
112. The Company in general meeting may revoke, alter or amend any such
determination under the preceding Article and the Directors may revoke,
alter or amend any determination made by the Directors under the
preceding Article.
NOTICES
113. A notice may be given by the Company to any member either personally or
by sending it by post to him at his registered address or, if he has no
registered address in the Cayman Islands, to the address, if any,
supplied to the Company by him for the giving of notices to him. Where
a notice is sent by post, service of the notice shall be deemed to be
effected by properly addressing, prepaying and posting a letter
containing the notice and to have been effected, in the case of a
notice of a meeting, at the expiration of twenty four hours after the
letter containing the same is posted and, in any other case, at the
time at which the letter would be delivered in the ordinary course of
post. A notice may also be sent by cable, telex or telefax and service
of the notice shall be deemed to be effected by properly addressing,
prepaying and sending the notice through a transmitting or
communications organisation and to have been effected at the expiration
of twenty four hours after the same is sent as aforesaid.
114. Subject to Article 117 which shall prevail, if a member has no
registered address and has not supplied to the Company an address for
the giving of notices to him, a notice addressed to him or to
shareholders in general meeting and advertised in a newspaper
circulating in the Cayman Islands or the official gazette shall be
deemed to be duly given to him at noon on the day following the day on
which the newspaper or official gazette is circulated and the
advertisement appeared therein.
115. A notice may be given by the Company to the joint holders of a share by
giving the notice to the joint holder named first in the register of
members in respect of the share.
116. A notice may be given by the Company to the persons entitled to a share
in consequence of the death or bankruptcy of a member by sending it
through the post in a prepaid letter addressed to them by name, or by
the title of representatives of the deceased, or trustee of the
bankruptcy, or by any like description at the address, if any, supplied
for the purpose by the persons claiming to be so entitled or (until
such an address has been so supplied) by giving the notice in any
manner in which the same might have been given if the death or
bankruptcy had not occurred.
117. Notice of every general meeting shall be given in any manner
hereinbefore authorised to:-
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117.1 every member except those members who (having no registered
address in the Cayman Islands) have not supplied to the
Company an address for the giving of notices to them; and
117.2 every person entitled to a share in consequence of the death
or bankruptcy of a member who, but for his death or
bankruptcy, would be entitled to receive notice of the
meeting.
No other person shall be entitled to receive notices of general
meetings.
WINDING UP
118. If the Company shall be wound up the liquidator may, with the sanction
of a Special Resolution and any other sanction required by the Law,
divide amongst the members in specie or kind the whole or any part of
the assets of the Company (whether they shall consist of property of
the same kind or not) and may for such purpose set such value as he
deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between members or
different classes of members. The liquidator may with the like sanction
vest the whole or any part of the assets in trustees upon such trusts
for the benefit of contributories as the liquidator, with the like
sanction shall think fit but so that no member shall be compelled to
accept any shares or other securities whereon there is a liability.
119. If the Company shall be wound up, and the assets available for
distribution amongst the members shall be insufficient to repay the
whole of the paid-up share capital, such assets shall be distributed so
that, as nearly as may be, the losses shall be borne by the members in
proportion to the capital paid-up at the commencement of the winding up
on the shares held by them respectively. If, on a winding up, the
assets available for distribution amongst the members shall be more
than sufficient to repay the whole of the capital paid-up at the
commencement of the winding up, the excess shall be distributed amongst
the members in proportion to the capital at the commencement of the
winding up paid on the shares held by them respectively. This Article
is to be without prejudice to the rights of holders of shares issued
upon special terms and conditions.
INDEMNITY
120. Every Director, Managing Director, President, Vice-President, Manager,
Secretary, Assistant Secretary, Treasurer or other officer of the
Company and their heirs and personal representatives shall be entitled
to be indemnified and held harmless out of the assets of the Company
against all actions, proceedings, costs, damages, expenses, claims,
losses or liabilities which he may sustain or incur in or about the
execution of the duties of his office or otherwise in relation thereto,
including any liability incurred by him in defending any proceedings,
whether civil or criminal, in which judgment is given in his favour or
in which he is acquitted, and no Director or person as aforementioned
shall be liable for any loss, damage or misfortune which may happen to
or be incurred by the Company in the execution of the duties of his
office or in relation thereto.
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AMENDMENT OF MEMORANDUM AND ARTICLES
121. Subject to the provisions of the Law, the Company may by Special
Resolution change its name, amend its objects or alter or amend these
Articles either in whole or in part.
TRANSFER BY WAY OF CONTINUATION
122. If the Company is exempted as defined in the Law, it shall, subject to
the provisions of the Law, and with the sanction of a Special
Resolution, have the power to register by way of continuation as a body
corporate under the laws of any jurisdiction outside the Cayman Islands
and to be deregistered in the Cayman Islands.
NAME, ADDRESS & DESCRIPTION OF SUBSCRIBER/S
FOR: TRULAW CORPORATE SERVICES LTD.
OF P.O. BOX 866,
GEORGE TOWN, GRAND CAYMAN
HOLDING COMPANY
/s/ ANDREW G. KIDD
- -------------------------------
(AUTHORISED SIGNATORY)
TRULAW DIRECTORS LTD.
DIRECTOR
DATED THIS 23RD DAY OF JANUARY, 1998
WITNESS TO THE ABOVE SIGNATURE:-
/s/ SUSANNA GIULIANI
- ----------------------------
NAME
P.O. BOX 866, GEORGE TOWN,
GRAND CAYMAN
I, , Registrar of Companies in and for the Cayman Islands
DO HEREBY CERTIFY that this is a true and correct copy of the Articles of
Association of this Company duly incorporated on the day of
REGISTRAR OF COMPANIES
27
<PAGE> 1
EXHIBIT 3.2
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
FRUIT OF THE LOOM, LTD.
1. The NAME of the Company is FRUIT OF THE LOOM, LTD.
2. The REGISTERED OFFICE of the Company is situate at the offices of
Truman Bodden & Company, P.O. Box 866, Anderson Square Building (3rd
Floor), George Town, Grand Cayman, Cayman Islands, British West Indies
or at such other place as the Directors may determine.
3. The OBJECTS for which the Company is established are NOT restricted
but, without limiting the generality of the foregoing, the Company
shall have full power and authority to do and carry out any and all
acts exercisable by a natural person or body corporate or any other
legal entity in any part of the world in any capacity whatsoever
including whether as principal, agent, contractor, broker,
representative, attorney or otherwise and whether alone or jointly with
others and the Company shall have full power and authority to carry out
any object not prohibited by the Companies Law (1995 Revision) or any
other law of the Cayman Islands or any modifications or re-enactments
thereof.
4. Pursuant to the Companies Law (1995 Revision), the Company shall have,
and be capable of exercising, all of the functions of a natural person
of full capacity irrespective of any question of corporate benefit.
5. The Company is registered as an exempted company and accordingly:-
5.1 it shall have the power to apply to the Registrar of Companies
for, and to be, registered by way of continuation as a body
corporate limited by shares under the laws of any jurisdiction
outside the Cayman Islands and to be deregistered in the
Cayman Islands with full power to carry out all or any matters
required by Section 223 of the Companies Law (1995 Revision)
or any statutory modifications or re-enactments thereof; and
5.2 it shall not trade in the Cayman Islands with any person, firm
or corporation except in furtherance of the business of the
Company carried on outside the Cayman Islands provided that
nothing in this clause shall be construed so as to prevent the
Company effecting and concluding contracts in the Cayman
Islands and exercising in the Cayman Islands all of its powers
necessary for the carrying on of its business outside the
Cayman Islands.
1-
<PAGE> 2
6. Nothing in the preceding clauses shall be deemed to permit the Company
to carry on such business as requires a licence under applicable Cayman
Islands law including, without limitation:-
6.1 the business of a bank or trust company unless licensed
therefore under The Banks and Trust Companies Law (1995
Revision);
6.2 the business of an insurance company, manager, agent,
sub-agent or broker unless licensed therefore under The
Insurance Law (1995 Revision); or
6.3 the business of company management unless licensed therefore
under The Companies Management Law (1996 Revision)
or any statutory modification or re-enactment of any of the same for
the time being in force.
7. THE LIABILITY of the members is limited.
8. THE AUTHORISED SHARE CAPITAL of the Company is one United States dollar
(US$1.00) divided into one hundred shares each with a par value of one
United States cent (US$0.01), with the power for the Company insofar as
is permitted by law, to redeem any of its shares, increase or reduce
such capital, and to issue all, or any part of, its capital (whether
original, redeemed, increased or reduced) with or without any
preference, priority or special privilege, or subject to any
postponement of rights, or to any conditions or restrictions whatsoever
and so that, unless the conditions of issue shall otherwise expressly
provide, every issue of shares, whether stated to be preference or
otherwise, shall be subject to the powers on the part of the Company
hereinbefore contained.
I/We, the person or persons who have subscribed our names and addresses, are
desirous of being formed into a company, in pursuance of this Memorandum of
Association, and I/We respectively agree to take the number of shares in the
capital of the Company set opposite my/our respective name/s.
NAME, ADDRESS & DESCRIPTION NUMBER OF SHARES TAKEN
OF SUBSCRIBER/S BY EACH SUBSCRIBER
TRULAW CORPORATE SERVICES LTD. 4
OF P.O. BOX 866, GEORGE TOWN, GRAND CAYMAN
HOLDING COMPANY
/s/ ANDREW G. KIDD
- -------------------------
(Authorised signatory)
Trulaw Directors Ltd., Director
TOTAL SHARES TAKEN 4
2-
<PAGE> 3
DATED THIS 23RD DAY OF JANUARY, 1998
WITNESS TO THE ABOVE SIGNATURE:
/s/ SUSANNA GIULIANI
- -------------------------
NAME
P.O. BOX 866, GEORGE TOWN,
GRAND CAYMAN
I, ,Registrar of Companies in and for the Cayman Islands DO
HEREBY CERTIFY that this is a true and correct copy of the Memorandum of
Association of this Company duly incorporated on the day of
REGISTRAR OF COMPANIES
3-
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EXHIBIT 3.3
INDEX TO ARTICLES OF ASSOCIATION
PRELIMINARY - Article 1
INTERPRETATION - Article 2
SHARES - Articles 3 to 12
LIEN - Articles 13 to 16
CALLS ON SHARES - Articles 17 to 24
TRANSFER AND TRANSMISSION OF SHARES - Articles 25 to 30
FORFEITURE OF SHARES - Articles 31 to 37
PRE-EMPTIVE AND SHARE RIGHTS - Article 38
ALTERATION OF CAPITAL - Articles 39 to 42
STATUTORY MEETINGS - Articles 43 to 44
GENERAL MEETINGS - Articles 45 to 47
PROCEEDINGS AT GENERAL MEETINGS - Articles 48 to 55
VOTES OF MEMBERS - Articles 56 to 65
RESOLUTIONS IN WRITING - Article 66
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS - Article 67
DIRECTORS AND OFFICERS - Articles 68 to 77
POWERS AND DUTIES OF DIRECTORS - Articles 78 to 82
DISQUALIFICATION AND PROCEEDINGS OF DIRECTORS - Articles 83 to 91
TENURE OF OFFICE OF DIRECTORS - Articles 92 to 93
PRESUMPTION OF ASSENT - Article 94
SEAL - Articles 95 to 96
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DIVIDENDS AND RESERVES - Articles 97 to 103
CAPITALISATION OF PROFITS - Articles 104 to 105
ACCOUNTS AND AUDIT - Articles 106 to 110
NOTICES - Articles 111 to 115
WINDING UP - Articles 116 to 117
INDEMNITY - Article 118
AMENDMENT OF ARTICLES - Article 119
TRANSFER BY WAY OF CONTINUATION - Article 120
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THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED ARTICLES OF ASSOCIATION*
OF
FRUIT OF THE LOOM, LTD.
PRELIMINARY
1. The regulations in Table "A" in the Schedule to the Law shall not apply
to the Company except insofar as they are repeated or contained in these
Articles.
INTERPRETATION
2. In these Articles if not inconsistent with the subject or context:-
2.1 "Articles" means the articles of association of the Company
for the time being in force.
the "Company" means the above named company.
"Class A Shares" means the Class A ordinary shares of par value
US$0.01 each in the capital of the Company
having the rights set out in these Articles.
"Class B Shares" means the Class B redeemable ordinary shares of
par value US$0.01 each in the capital of the
Company having the rights set out in these
Articles.
"Directors" means the directors for the time being of the
Company.
"Farley Affiliate" means William Farley or any company,
corporation, partnership, joint venture, trust
or other person or entity the Voting Control
of which is held directly or indirectly by
William Farley.
"FTL-Delaware" means Fruit of the Loom, Inc., a Delaware
corporation.
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"FTL-Delaware
Preferred Stock" means the shares of cumulative exchangeable
preferred stock of par value US$0.01 each
issued by FTL-Delaware.
"FTL-Delaware
Common Stock" means the shares of common stock of par value
US$0.01 each issued by FTL-Delaware.
the "Law" means the Companies Law (1995 Revision) and
every statutory modification or re-enactment
thereof for the time being in force.
"member" has the meaning assigned to it in the Law.
"Memorandum of
Association" means the memorandum of association of the
Company for the time being in force.
"Preference Shares" means the preference shares of par value
US$0.01 each in the capital of the Company
which may be issued from time to time in
accordance with the terms of these Articles.
"Secretary" means any person appointed to perform the
duties of secretary of the Company and shall
include an assistant secretary.
"share" includes a fraction of a share.
"Special
Resolution" has the meaning assigned to it in the Law.
"Voting Control" means either (i) the beneficial ownership,
direct or indirect, of more than 50 per cent.
of the outstanding voting securities of a
company or corporation or, in the case of
unincorporated persons or entities, of the
similar power to control the affairs of such
persons or entities, or (ii) the contractual
power to elect or designate a majority of the
directors of a company or corporation or, in
the case of unincorporated persons or entities,
of individuals exercising similar functions.
"William Farley" means William F. Farley.
2.2 expressions defined in the Law, or any statutory modification
or re-enactment thereof in force at the date on which these Articles
become binding on the Company, shall have the meanings so defined.
2.3 words importing the singular number shall include the plural
number and vice versa.
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2.4 words importing the masculine gender shall include the feminine
and neuter genders.
2.5 persons shall include corporations.
SHARES
3. Subject to Article 7.2 of these Articles and to the provisions, if any,
in that behalf in the Memorandum of Association, and without prejudice to
any special rights previously conferred on the holders of existing shares,
any share may be issued with such preferred, deferred or other special
rights, or such restrictions, whether in regard to dividend, voting,
return of share capital or otherwise, as the Company may from time to time
by Special Resolution determine and, subject to the provisions of the Law,
any preference share may, with the sanction of a Special Resolution, be
issued on the terms that it is, or at the option of the Company is liable,
to be redeemed.
4. If at any time the share capital is divided into different classes of
shares the rights attached to any class (unless otherwise provided by the
terms of issue of the shares of that class) may be varied with the consent
in writing of the holders of a majority of the issued shares of that class
or with the sanction of a Special Resolution passed at a separate general
meeting of the holders of the shares of the class. To every such separate
general meeting the provisions of these Articles relating to general
meetings shall apply, but so that the necessary quorum shall be one or
more persons holding or representing by proxy at least a majority of the
issued shares of the class (but so that if, at any adjourned meeting of
such holders, a quorum as defined above is not present, those members who
are present shall be a quorum) and that any holder of shares of the class
present in person or by proxy may demand a poll and, on a poll, shall have
one vote for each share of the class of which he is the holder.
5. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall, unless otherwise expressly provided
by the terms of issue of the shares of that class, be deemed not to be
varied by the creation or issue of further shares ranking pari passu
therewith provided that the rights attaching to the Class B Shares shall
be deemed to be so varied upon any such creation or issuance.
6. Except as required by law, no person shall be recognised by the Company
as holding any share upon any trust, and the Company shall not be bound by
or be compelled in any way to recognise (even when having notice thereof)
any equitable, contingent, future or partial interest in any share or
(except only as is otherwise provided by these Articles, by law or under
an order of a court of competent jurisdiction) any other rights in respect
of any share except an absolute right to the entirety thereof in the
registered holder.
7. 7.1 Subject to Article 38 and to the provisions of these Articles
relating to shares, the shares shall be at the disposal of the
Directors and they may (subject to the provisions of the Law)
allot, grant options over, or otherwise dispose of them to such
persons, on such terms and conditions and at such times as they
think fit but
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so that no share shall be issued at a discount, except in
accordance with the provisions of the Law, and so that in the case
of shares offered to the public for subscription the amount payable
on application on each share shall not be less than such percentage
of the nominal amount of the share as shall be determined by the
Directors.
7.2 Without prejudice to the generality of Article 7.1, subject as
provided in Article 4 of these Articles, the board of Directors
is expressly authorised, from time to time:-
7.2.1 to fix the number of shares in one or more
classes or series of the Preference Shares;
7.2.2 to determine the designation of any such class
or series;
7.2.3 to determine or alter, without limitation or
restrictions, the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly
unissued class or series of the Preference Shares; and
7.2.4 within the limits or restrictions stated in any
resolution or resolutions of the board of Directors
originally fixing the number of shares constituting
any class or series of the Preference Shares, to
increase or decrease (but not below the number of
shares then issued) the number of shares in any such
class or series subsequent to issue of shares of that
class or series.
8. At the date of adoption of these Articles the authorised share capital
of the Company is two million three hundred and fifty thousand and one
United States dollars (US$2,350,001) divided into two hundred million
Class A Shares, thirty-five million Preference Shares and one hundred
Class B Shares.
9. The rights attaching to the Class A Shares and the Class B Shares are as
follows:-
9.1 As to voting:
9.1.1 Save as provided in Articles 9.1.2, 9.1.3 and
9.1.4, and subject to Article 4 above, the holders of
the Class A Shares and the holders of the Class B
Shares shall have the right to receive notice of, attend
at and vote at a general meeting of the members as if
the same constituted one class of shares;
9.1.2 Save as provided in Articles 9.1.3 and 9.1.4, at
all general meetings of the Company every holder of
Class A Shares present in person or by proxy and
entitled to vote shall have one vote for each Class A
Share of which he is the holder. Again, save as
provided in Article 9.1.3 and 9.1.4, at a general
meeting of the Company every holder of Class B Shares
present in person or by proxy and entitled to vote
shall have [*] votes for each Class B Share of which he
is the holder and, for the purposes of these Articles,
at any
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general meeting a poll shall, in all cases, be deemed
to have been demanded;
[* number to be inserted calculated as the number of outstanding Class B Stock
of FTL-Delaware held by William Farley and Farley Affiliates at the time of
merger, multiplied by five and then divided by the number of Class B Shares
held by such persons at the time of the merger]
9.1.3 The holders of the Class A Shares, as a Class,
shall be entitled to elect and/or remove twenty five
per cent. (25%) of the total number of Directors
constituting the whole board of Directors from time to
time (the "Class A Directors") and if such twenty five
per cent. is not a whole number, then the holders of
the Class A Shares, as a class, shall be entitled to
elect and/or remove the nearest higher whole number of
Directors that is at least twenty five per cent. of the
total number of Directors. The holders of the Class A
Shares and the Class B Shares voting together shall be
entitled to elect and/or remove the remaining Directors
and in such case the holders of the Class A Shares and
the holders of the Class B Shares shall be entitled to
cast the respective number of votes set out in Article
9.1.2;
9.1.4 Any vacancy in the office of a Director elected
by the holders of the Class A Shares, voting as a
separate Class, may be filled by a vote of such
holders, voting as a separate Class, and any vacancy in
the office of a Director elected by the holders of the
Class A and Class B Shares, voting together may be
filled by a vote of such holders or, in the absence of
any such election, in the case of a vacancy in the
office of a Director elected by either the Class A
Shares or the Class B Shares, such vacancy may be
filled by the vote of all the remaining Directors. Any
Director elected by the board of Directors to fill a
vacancy shall serve until the next ordinary general
meeting of the Company and until his or her successor
has been elected and has qualified. If the number of
the board of Directors is increased then any vacancy so
created may be filled by the board of Directors
provided that the board of Directors may be so enlarged
by the Directors only to the extent that at least
twenty five per cent. of the enlarged board of
Directors consists of Directors elected by the holders
of the Class A Shares or of persons appointed to fill
vacancies created by the death, resignation or removal
of persons elected by the holders of the Class A
Shares;
9.1.5 Notwithstanding anything in this Article 9 to
the contrary, subject to the voting rights of the
holders of any class or series of the Preference
Shares, the holders of the Class A Shares shall have
the exclusive voting power on all matters upon which,
pursuant to the Law, the Memorandum of Association or
these Articles, the holders of the Class A Shares and
Class B Shares are entitled to vote, at any time when
no Class B Shares are issued and outstanding.
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9.2 As to dividend:
Subject to the rights of persons, if any, entitled to shares with
special rights as to dividend, the Class A Shares and the Class B
Shares shall confer upon the holder thereof an entitlement to
participate pari passu, on a share for share basis with the holders
of any other class of ordinary shares in such dividends as may, in
accordance with these Articles, be declared from time to time by
the Company as if the same constituted one class of shares.
9.3 As to capital:
Without prejudice to the rights of holders of shares issued upon
special terms and conditions, the Class A Shares and the Class B
Shares shall confer upon the holder thereof an entitlement to
participate in the surplus assets of the Company available for
distribution pari passu on a share for share basis with the holders
of any other class of ordinary shares as if the same constituted
one class of shares.
9.4 As to redemption:
9.4.1 The Class A Shares or any of them are not subject to
redemption either by the Company or the holder or
holders thereof.
9.4.2 Subject to the Law, a Class B Share shall be
redeemed by the Company, and shall be taken to have
been redeemed without the need for any further action
upon the part of the Company, upon any actual or
purported sale, gift, assignment, distribution,
conveyance, hypothecation or other disposition or
transfer, whether by operation of law or otherwise
(collectively a "Transfer"), of such Class B Share by
William Farley or any Farley Affiliate, other than a
Permitted Transfer (as defined in Article 9.5.3) of
such Class B Share at a redemption price per Class B
Share equal to the closing price on the New York Stock
Exchange of a Class A Share on the last trading day
prior to the date of redemption (the "Redemption
Price").
9.4.3 Subject to the Law, all Class B Shares held by a
shareholder shall be redeemed by the Company and shall
be taken to have been redeemed without the need for any
further action upon the part of the Company upon a
Transfer of all the FTL-Delaware Preferred Stock (or
FTL-Delaware Common Stock received upon conversion
thereof) by William Farley or any Farley Affiliate
other than a Permitted Transfer (as defined in Article
9.5.3) of such FTL-Delaware Preferred Stock or
FTL-Delaware Common Stock (as applicable) provided that
if less than all the FTL-Delaware Preferred Stock or
FTL-Delaware Common Stock (as applicable) is subject to
any such Transfer (other than a Permitted Transfer) a
proportionate number of the Class B Shares equal to the
percentage of the FTL-Delaware
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Preferred Stock or FTL-Delaware Common Stock (as
applicable) held by such Class B shareholder subject to
such Transfer shall be and shall be taken to have been
so redeemed, in each case at a price per Class B Share
equal to the Redemption Price.
9.4.4 Upon a redemption of any of the FTL Delaware
Preferred Stock by FTL-Delaware then, subject to the
Law, the Company shall redeem, and shall be taken to
have redeemed without the need for any further action
upon the part of the Company, a proportionate number of
the Class B Shares held by a holder of Class B Shares
equal to the percentage of the FTL Delaware Preferred
Stock held by such Class B shareholder so redeemed at a
price per Class B Share equal to the Redemption Price.
9.4.5 Upon the exchange of any of the FTL-Delaware
Preferred Stock by a holder pursuant to the terms
thereof for Class A Shares then, subject to the Law,
the Company shall redeem and shall be taken to have
redeemed, without the need for any further action upon
the part of the Company, a proportionate number of the
Class B Shares held by a holder of Class B Shares equal
to the percentage of the outstanding FTL-Delaware
Preferred Stock held by such Class B shareholder so
exchanged at a price per Class B Share equal to the
Redemption Price.
9.5 As to transfer:
9.5.1 The Class A Shares, or any of them, shall be
freely transferable by the holder or holders thereof.
9.5.2 Save as provided in Article 9.5.3, a Class B
Share shall not be and shall not be capable of being
Transferred and any purported Transfer of any Class B
Share shall be null and void against the Company and
the provisions of Article 9.4.2 shall apply with
respect to such Class B Share.
9.5.3 A Class B Share and/or, subject to the terms of
issue of the same by FTL-Delaware, a share of
FTL-Delaware Preferred Stock (or a share of
FTL-Delaware Common Stock received upon conversion
thereof) may be freely Transferred by a Farley
Affiliate to another Farley Affiliate (a "Permitted
Transfer") and no such Transfer shall give rise to a
redemption of the Class B Shares under the provisions
of Article 9.4.2. A majority of the Directors shall
have the power and the duty to determine for the
purposes of these Articles, on the basis of the
information known to them after reasonable enquiry,
whether (a) a person or entity is a Farley Affiliate or
shall have ceased to be a Farley Affiliate, (b) a
Transfer or a Permitted Transfer shall have occurred
and (c) William Farley holds the Voting Control of any
entity. The holders of the Class B Shares shall upon
demand disclose to the Directors in writing such
information with respect to the direct and indirect
beneficial ownership of the Class B Shares as the
Directors deem
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necessary to make determinations required of them
pursuant to these Articles.
9.6 As to consolidation, etc.:
Without prejudice to Article 4 of these Articles, neither the Class
A Shares nor the Class B Shares may be subdivided, consolidated,
reclassified, or otherwise changed unless contemporaneously
therewith the other class of ordinary shares (Class A Shares or
Class B Shares as applicable) is subdivided, consolidated,
reclassified or otherwise changed in the same proportion and in the
same manner unless consented to by the holders of a majority of
each class of ordinary shares (Class A Shares and Class B Shares).
9.7 As to Amalgamations, Mergers, etc.:
Without prejudice to Article 4 of these Articles and subject always
to the Law and to the discretion of the court of the Cayman Islands
under the Law to grant such orders as it thinks fit, unless
consented to by the holders of a majority of each class of ordinary
shares (Class A Shares and Class B Shares), in any amalgamation,
reconstruction, merger, consolidation or other business combination
of the Company with or into another company or corporation, whether
or not the Company is the surviving company or corporation, the
consideration per share to be received by the holders of either the
Class A Shares or the Class B Shares in such amalgamation,
reconstruction, merger, consolidation or other business combination
must be identical to that received by holders of the other class of
shares (Class A Shares or Class B Shares as applicable). Without
prejudice to Article 4 of these Articles and subject always to the
Law and to the discretion of the court of the Cayman Islands under
the Law to grant such orders as it thinks fit, in any such
amalgamation, reconstruction, merger, consolidation or other
business combination of the Company in which shares are issued or
distributed, unless consented to by the holders of a majority of
each class of ordinary shares (Class A Shares and Class B Shares)
such shares may differ as to voting rights to the extent and only
to the extent that the voting rights attaching to the Class A
Shares and the Class B Shares differ as provided in these Articles.
10. Subject to the terms of any prospectus issued from time to time by the
Company, every person whose name is entered as a member in the register of
members shall, without payment, be entitled to a certificate under the
seal of the Company specifying the share or shares held by him and the
amount paid up thereon provided that, in respect of a share or shares held
jointly by several persons, the Company shall not be bound to issue more
than one certificate and delivery of a certificate for a share to one of
several joint holders shall be sufficient delivery to all.
11. Where a share certificate is countersigned:-
11.1 by a transfer agent, other than the Company, or its officers
or employees; or
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11.2 by a registrar, other than the Company, or its officers or
employees;
any other signature on the certificate may be facsimile. In case
any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Company with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
12. Subject as otherwise provided in these Articles, if a share certificate is
worn out, defaced, lost or destroyed, it may be renewed on payment of such
fee, if any, not exceeding one United States dollar and on such terms, if
any, as to evidence and indemnity, as the Directors think fit.
LIEN
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys (whether presently payable or
not) called or payable at a fixed time in respect of that share and the
Company shall also have a lien on all shares (other than fully paid-up
shares) standing registered in the name of a single person for all moneys
presently payable by him or his estate to the Company but the Directors
may at any time declare any share to be wholly or partly exempt from the
provisions of this Article. The Company's lien, if any, on a share shall
extend to all dividends payable thereon.
14. The Company may sell, in such manner as the Directors think fit, any
shares on which the Company has a lien, but no sale shall be made unless
some sum in respect of which the lien exists is presently payable nor
until the expiration of fourteen days after a notice in writing, stating
and demanding payment of such part of the amount in respect of which the
lien exists as is presently payable, has been given to the registered
holder for the time being of the share, or the persons entitled thereto by
reason of his death or bankruptcy.
15. For giving effect to any such sale the Directors may authorise some
person to transfer the shares sold to the purchaser thereof. The Purchaser
shall be registered as the holder of the shares comprised in any such
transfer and he shall not be bound to see to the application of the
purchase money, nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings in relation to the sale.
16. The proceeds of the sale shall be received by the Company and applied in
payment of such part of the amount in respect of which the lien exists as
is presently payable and the residue shall (subject to a like lien for
sums not presently payable as existed upon the shares prior to the sale)
be paid to the person entitled to the shares at the date of the sale.
CALLS ON SHARES
17. The Directors may from time to time make calls upon the members in
respect of any moneys unpaid on their shares (whether on account of the
nominal value of the shares or
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by way of premium or otherwise) and not by the conditions of allotment
thereof made payable at fixed times provided that no call shall exceed
one-half of the nominal value of the share or be payable earlier than one
month from the date fixed for the payment of the previous call and each
member shall (subject to receiving at least fourteen days' notice
specifying the time or times and place of payment) pay to the Company at
the time or times and place so specified the amount called on his shares.
A call may be revoked or postponed at the determination of the
Directors.
18. A call shall be deemed to have been made at the time when the resolution
of the Directors authorising the call was passed and may be required to
be paid by instalments.
19. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
20. If a sum called in respect of a share is not paid before or on the
day appointed for payment thereof, the person from whom the sum is due
shall pay interest on the sum from such day appointed for payment to the
time of actual payment at such rate not exceeding six per cent. per annum
as the Directors may determine but the Directors shall be at liberty to
waive payment of such interest wholly or partly.
21. Any sum which by the terms of issue of a share becomes payable
on allotment or at any fixed date (whether on account of the nominal
value of the share or by way of premium or otherwise) shall for the
purposes of these Articles be deemed to be a call duly made, notified and
payable on the date on which by the terms of issue the same becomes
payable, and in case of non-payment all the relevant provisions of these
Articles as to payment of interest and expenses, forfeiture or otherwise
shall apply as if such sum had become payable by virtue of a call duly
made and notified.
22. The provisions of these Articles as to the liability of joint holders
and as to payment of interest shall apply in the case of non-payment of
any sum which, by the terms of issue of a share, becomes payable at a
fixed time (whether on account of the nominal value of the share or by
way of premium or otherwise) as if the same had become payable by virtue
of a call duly made and notified.
23. The Directors may make arrangements on the issue of shares for a
difference between the holders in the amount of calls to be paid and in
the times of payment.
24. The Directors may, if they think fit, receive from any member willing
to advance the same all or any part of the moneys uncalled and unpaid
upon any shares held by him and upon all or any of the moneys so advanced
may (until the same would, but for such advance, become presently
payable) pay interest at such rate, not exceeding (without the sanction
of the Company in general meeting) six per cent. per annum, as may be
agreed upon between the member paying the sum in advance and the
Directors.
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TRANSFER AND TRANSMISSION OF SHARES
25. The instrument of transfer of any share shall be executed by or on
behalf of the transferor and transferee and the transferor shall be
deemed to remain a holder of the share until the name of the transferee
is entered in the register of members in respect thereof provided that
the Directors may waive execution by the transferee of the instrument of
transfer but shall, as soon as possible thereafter, inform the transferee
of such waiver of execution.
26. Subject to such of the restrictions of these Articles (if any) as may
be applicable, including, without limitation, Article 9.5, shares shall
be transferred by instrument in writing in the following form or in any
usual or common form approved by the Directors:-
SHARE TRANSFER
I, , of (hereinafter called the "Transferor") in
consideration of the sum of paid to me by , of
(hereinafter called the "Transferee") do HEREBY TRANSFER to the
Transferee the share or shares numbered in the Company.
Dated the day of
Signed by the Transferor:-
WITNESS to the signature of the Transferor:-
Signed by the Transferee:-
WITNESS to the signature of the Transferee:-
27. Subject to Article 9.5, the Directors may, in their absolute
discretion and without assigning any reason therefore, decline to
register any transfer of any share, whether or not it is a fully paid
share. The registration of transfers may be suspended at such times and
for such periods as the Directors may from time to time determine
provided always that such registration shall not be suspended for more
than thirty days in any year.
The Directors may also decline to recognise any instrument of
transfer unless:-
27.1 a fee of not exceeding one United States dollar is paid to the
Company in respect thereof; and
27.2 the instrument of transfer is accompanied by the share or
stock certificate to which it relates and such other evidence as
the Directors may reasonably require to show the right of the
transferor to make the transfer.
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If the Directors refuse to register a transfer of any shares they
shall, within two months after the date on which the transfer was lodged
with the Company, send to the transferee notice of the refusal.
28. Subject to Article 9.4, in the case of the death of a member, the
legal personal representative of a deceased sole shareholder shall be the
only person recognised by the Company as having any title to the share.
In the case of a share registered in the names of two or more holders,
the survivors or survivor, or, again, subject to Article 9.4, the legal
personal representatives of the deceased shareholder, shall be the only
persons recognised by the Company as having any title to the share.
29. Subject to Article 9.4, any person becoming entitled to a share in
consequence of the death or bankruptcy of a member shall, upon such
evidence being produced as may from time to time be properly required by
the Directors, have the right either to be registered as a member in
respect of the share or, instead of being registered himself, to make
such transfer of the share as the deceased or bankrupt person could have
made but the Directors shall, in either case, have the same right to
decline or suspend registration as they would have had in the case of a
transfer of the share by the deceased or bankrupt member before his death
or bankruptcy (as the case may be).
30. A person becoming entitled to a share by reason of the death or
bankruptcy of the shareholder shall, subject to Article 9.4, be entitled
to the same dividends and other advantages to which he would be entitled
if he were the registered shareholder except that he shall not, before
being registered as a member in respect of the share, be entitled in
respect of it to exercise any right conferred by membership in relation
to meetings of the Company provided always that the Directors may,
subject to Article 9.4, at any time give notice requiring any such person
to elect either to be registered himself or to transfer the share and, if
the notice is not complied with within ninety days, the Directors may
thereafter withhold payment of all dividends, bonus or other moneys
payable in respect of the share until the requirements of the notice have
been complied with.
FORFEITURE OF SHARES
31. If a member fails to pay any call or instalment of a call on the day
appointed for payment thereof, the Directors may, at any time thereafter
during such time as any part of such call or instalment remains unpaid,
serve a notice on him requiring payment of so much of the call or
instalment as is unpaid, together with any interest which may have
accrued and all expenses incurred by the Company by reason of such
non-payment.
32. The notice shall name a day (not earlier than the expiration of
fourteen days from the date of the notice) on or before which the payment
required by the notice is to be made and shall state that, in the event
of non-payment at or before the time appointed, the shares in respect of
which the call was made will be liable to be forfeited.
33. If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which the notice has been given
may, at any time thereafter before the payment
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required by the notice has been made, be forfeited by a resolution of the
Directors to that effect.
34. A forfeited share may be sold or otherwise disposed of on such terms
and in such manner as the Directors think fit and, at any time before a
sale or disposition, the forfeiture may be cancelled on such terms as the
Directors think fit.
35. A person whose shares have been forfeited shall cease to be a member
in respect of the forfeited shares but shall, notwithstanding, remain
liable to pay the Company all moneys which, at the date of forfeiture,
were payable by him to the Company in respect of the shares, but his
liability shall cease if and when the Company receives payment in full of
the nominal amount of the shares.
36. A voluntary declaration in writing that the declarant is a Director or
the Secretary and that a share in the Company has been duly sold,
forfeited or otherwise disposed of on a date stated in the declaration
shall be conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share. The Company may receive
the consideration, if any, given for the share on any sale, forfeiture or
disposition thereof and may execute a transfer of the share in favour of
the person to whom the share is sold, forfeited or otherwise disposed and
he shall thereupon be registered as the holder of the share and shall not
be bound to see to the application of the purchase money, if any, nor
shall his title to the share be affected by any irregularity or
invalidity in the proceedings in relation to the sale, forfeiture or
disposal of the share.
37. The provisions of these Articles as to forfeiture shall apply in the
case of non-payment of any sum, which by the terms of issue of a share,
becomes payable at a fixed time (whether on account of the nominal value
of the share or by way of premium or otherwise) as if the same had been
payable by virtue of a call duly made and notified.
PRE-EMPTIVE AND SHARE RIGHTS
38. No holder of shares of any class shall have any preemptive right and no
holder of shares shall have any other preferential right of first refusal
to purchase or subscribe for any share (whether such shares be of the
original, increased or altered capital) or any obligations convertible
into, or any options or warrants to purchase any shares (again, whether
such shares be of the original, increased or altered capital) of any
class, other than such, if any, as the Directors may from time to time
determine, and at such price as the Directors shall from time to time
fix. Any share or any obligations, options or warrants which the
Directors may determine to offer for subscription to holders of any
shares may, as the Directors shall determine, be offered to holders of
shares of any class or classes or series, and if offered to holders of
shares of more than one class or series, in such proportions as between
such classes and series as the Directors may determine.
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ALTERATION OF CAPITAL
39. The Company may from time to time by ordinary resolution increase its
share capital by such sum, to be divided into shares of such amount or
without nominal or par value, as the resolution shall prescribe and with
such rights, priorities and privileges annexed thereto as the Company in
general meeting may determine provided that the Company shall not divide
its share capital into both shares of a fixed amount and shares without
nominal or par value.
40. Except so far as otherwise provided by the conditions of issue, or by
these Articles, any capital raised by the creation of new shares shall be
considered part of the original capital and shall be subject to the
provisions herein contained with reference to the payment of calls and
instalments, transfer and transmission, forfeiture, lien, surrender and
otherwise.
41. The Company may by ordinary resolution:-
41.1 subject to Article 9.6, consolidate and divide all or any of
its share capital into shares of larger amount than its existing
shares;
41.2 subject to Article 9.6, sub-divide its existing shares, or
any of them, into shares of smaller amount than is fixed by the
Memorandum of Association subject nevertheless to the provisions of
the Law; and
41.3 cancel any shares which, at the date of the passing of the
ordinary resolution, have not been taken or agreed to be taken by
any person and diminish the amount of its share capital by the
amount of the shares so cancelled.
42. The Company may:-
42.1 by Special Resolution, with the confirmation of the Grand
Court of the Cayman Islands, reduce its share capital and any
capital redemption reserve fund or share premium account in any
manner and with, and subject to, any consent required by the Law;
42.2 subject to Article 9.4, by resolution of its Directors
purchase its own shares (including any redeemable shares and
fractions of a share) in any manner whatsoever; and
42.3 make a payment in respect of the redemption or purchase of
its own shares otherwise than out of profits or the proceeds of a
fresh issue of shares.
STATUTORY MEETINGS
43. The Company shall hold a general meeting once in every calendar year on
the 15th May, if not a legal holiday in the Cayman Islands or the United
States of America, and if a legal holiday then on the next secular day
following, at 10:00 a.m. at such place or at such other date, time and
place as the Directors may determine. The above mentioned general
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meetings shall be called ordinary general meetings; all other general
meetings shall be called extraordinary general meetings.
44. The Company shall hold at least one Directors meeting in the Cayman
Islands in each calendar year.
GENERAL MEETINGS
45. The Directors may, whenever they think fit or the Chairman of the board
of Directors or the President of the Company, if any, may, whenever he or
she may think fit, convene an extraordinary general meeting. The
Directors shall, upon the requisition in writing of one or more members
holding in the aggregate not less than one-half of such paid-up capital
of the Company as at the date of the requisition carries the right of
voting at general meetings, convene an extraordinary general meeting.
Any such requisition shall express the object of the meeting proposed to
be called and shall be left at the registered office of the Company. If
the Directors do not proceed to convene a general meeting within
twenty-one days from the date of such requisition being left as
aforesaid, the requisitionists or any or either of them or any other
member or members holding in the aggregate not less than one-half of such
paid-up capital of the Company as at the date of the requisition carries
the right of voting at general meetings, may convene an extraordinary
general meeting to be held at the registered office of the Company or at
some convenient place within, or without, the Cayman Islands at such
time, subject to the Company's Articles as to notice, as the persons
convening the meeting fix.
46. 46.1 Subject to the provisions of the Law relating to Special
Resolutions, ten days notice at the least (exclusive of the
day on which the notice is served or deemed to be served but
inclusive of the day for which the notice is given) specifying the
place, the day and the hour of the general meeting and, in case of
special business, the general nature of that business shall be
given in the manner hereinafter provided, or in such other manner
(if any) as may be prescribed by the Company in general meeting, to
such persons as are, under the Articles, entitled to receive such
notices from the Company but with the consent of all the members
entitled to receive notice of some particular meeting, that meeting
may be convened by such shorter notice and in such manner as those
members may think fit.
46.2 For the purpose of determining members entitled to notice of
or to vote at any meeting of members or any adjournment thereof, or
members entitled to receive payment of any dividend, or in order to
make a determination of members for any other proper purpose, the
Directors may provide that the register of members shall be closed
for transfers for a stated period but not to exceed in any case
forty days. If the register of members shall be so closed for the
purpose of determining members entitled to notice of or to vote at
a meeting of members, such register shall be so closed for at least
ten days immediately preceding such meeting and the record date
(the "Record Date") for such determination shall be the date of the
closure of the register of members.
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46.3 In lieu of or apart from closing the register of members, the
Directors may fix in advance a date as the Record Date for any such
determination of members entitled to notice of or to vote at a
meeting of members and for the purpose of determining the members
entitled to receive payment of any dividend the Directors may, at
or within ninety days prior to the date of declaration of such
dividend, fix a subsequent date no later than the date of
declaration as the Record Date for such determination.
46.4 If the register of members is not so closed and no Record
Date is fixed for the determination of members entitled to notice of
or to vote at a meeting of members or members entitled to receive
payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Directors
declaring such dividend is adopted, as the case may be, shall be the
Record Date for such determination of members. When a determination
of members entitled to vote at any meeting of members has been made
as provided in this section, such determination shall apply to any
adjournment thereof.
47. The accidental omission to give notice of a meeting to, or the
non-receipt of a notice of a meeting by, any member entitled to receive
notice shall not invalidate the proceedings at any meeting.
PROCEEDINGS AT GENERAL MEETINGS
48. All business that is transacted at an extraordinary general meeting, and
all that is transacted at an ordinary general meeting (with the exception
of sanctioning a dividend, the consideration of the accounts, balance
sheets, and the ordinary report of the Directors and auditors, the
election of Directors and other officers in place of those retiring and
the fixing of the remuneration of the auditors) shall be deemed special
business.
49. No business shall be transacted at any general meeting unless a quorum of
members is present at the time when the meeting proceeds to business; the
presence in person or by proxy of the holders of record of shares
entitled, on a poll, to vote a majority of the votes entitled to be voted
at such meeting shall be a quorum for all purposes provided always that,
if there is only one member of record entitled to attend and vote at
general meetings, that one member present in person or by proxy shall be a
quorum and such member may transact business by written resolution as if a
meeting were being held under the provisions of these Articles.
50. If, within half an hour from the time appointed for the meeting, a quorum
is not present, the meeting, if convened upon the requisition of members,
shall be dissolved. In any other case, it shall stand adjourned to the
same day in the next week, at the same time and place and if, at the
adjourned meeting, a quorum is not present within half an hour from the
time appointed for the meeting the members present shall be a quorum and
may transact the business for which the meeting was called.
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51. The Chairman, if any, of the board of Directors shall preside as
Chairman at every general meeting of the Company. If there is no such
Chairman, or if at any meeting he is not present within fifteen minutes
after the time appointed for holding the meeting or is unwilling to act
as Chairman, the members present shall choose one of their number to be
Chairman of the meeting.
52. The Chairman may, with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn the meeting from
time to time and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place. When a meeting is
adjourned for thirty days or more, notice of the adjourned meeting shall
be given as in the case of an original meeting. Save as aforesaid, it
shall not be necessary to give any notice of an adjournment or of the
business to be transacted at an adjourned meeting.
53. Subject to Article 9.1, at any general meeting a resolution put to the
vote of the meeting shall be decided on a show of hands unless a poll is
(before or on the declaration of the result of the show of hands) demanded
by the Chairman of the meeting or any member present in person or by proxy
entitled to vote and, unless a poll is so demanded, a declaration by the
Chairman of the meeting that a resolution has, on a show of hands, been
carried, or carried unanimously, or by a particular majority, or lost, and
an entry to that effect in the book of the proceedings of the Company
shall be conclusive evidence of the fact without proof of the number or
proportion of the votes recorded in favour of, or against, that
resolution. At any general meeting of the Company, whether ordinary or
extraordinary, a poll shall, in all cases, be deemed to have been
demanded.
54. Subject to Article 9.1.2, if a poll is duly demanded it shall be taken in
such manner as the Chairman of the meeting directs and the result of the
poll shall be deemed to be the resolution of the meeting at which the poll
was demanded. A poll demanded on the election of the Chairman of the
meeting or on a question of adjournment shall be taken forthwith. Again,
subject to Article 9.1.2, a poll demanded on any other question shall be
taken at such time as the Chairman of the meeting directs and any business
other than that upon which a poll has been demanded may be proceeded with
pending the taking of the poll. Subject to Article 9.1.2, the demand for
a poll may be withdrawn.
55. In the case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the meeting at which the show of hands takes place
or at which the poll is demanded shall not be entitled to a second or
casting vote.
VOTES OF MEMBERS
56. Subject to any rights or restrictions for the time being attached to any
class or classes of shares, including, without limitation, the provisions
of Article 9.1 of these Articles, on a show of hands every member present
in person, and entitled to vote, shall have one vote. On a poll, subject
to the provisions of Article 9.1 of these Articles, every member entitled
to vote shall have one vote for each share of which he is the holder. On
a poll a member
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entitled to more than one vote need not, if he votes, use all his votes
or cast all the votes he uses in the same way.
57. In the case of joint holders the vote of the senior holder who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of
the votes of the other joint holders and, for this purpose, seniority
shall be determined by the order in which the names stand in the register
of members.
58. A member of unsound mind, or in respect of whom an order has been made by
any court having jurisdiction in lunacy, may vote, whether on a show of
hands or on a poll, by his committee, receiver, or other person in the
nature of a committee appointed by that court and any such committee,
receiver or other person may, on a show of hands or on a poll, vote by
proxy.
59. 59.1 Subject to the Law, the Company in general meeting may determine
(and may revoke, alter or amend such determination) that no member
shall be entitled to vote at any general meeting unless all calls or
other sums presently payable by him in respect of shares in the
Company have been paid.
59.2 No member shall be entitled to vote at any general meeting unless he
is registered as a shareholder of the Company on the Record Date for
such meeting.
60. No objection shall be raised to the qualification of any voter except at
the meeting or adjourned meeting at which the vote objected to is given or
tendered, and every vote not disallowed at such meeting shall be valid for
all purposes. Any such objection made in due time shall be referred to
the Chairman of the meeting whose decision shall be final and conclusive.
61. On a poll or on a show of hands votes may be given either personally or
by proxy.
62. The instrument appointing a proxy shall be in writing under the hand of
the appointor or his attorney duly authorised in writing or, if the
appointor is a corporation, either under seal or under the hand of an
officer or attorney duly authorised. A proxy need not be a member of the
Company.
63. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed, or a notarially certified
copy of that power of attorney or other authority, shall be deposited at
the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting at such
time (if any) as the notice may specify before the time for holding the
meeting or adjourned meeting at which the person named in the instrument
proposed to vote and, in default, the instrument of proxy may, at the
option of the Company not be treated as valid. The instrument appointing
a proxy shall be deemed to confer authority to demand or join in demanding
a poll.
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64. An instrument appointing a proxy may afford members an opportunity of
voting for or against a resolution and may be in the following form or a
form as near thereto as circumstances admit or any other form approved by
the Directors:-
Fruit of the Loom, Ltd.
I, of being a member of the Company, hereby appoint
of as my proxy, to vote for me and on my behalf at the
(ordinary or extraordinary, as the case may be) general meeting of the
Company to be held on the day of and at any adjournment thereof.
Signed by:- this day of
65. A vote given in accordance with the terms of an instrument of proxy shall
be valid notwithstanding the previous death or insanity of the principal
or revocation of the proxy or of the authority under which the proxy was
executed, or the transfer of the share in respect of which the proxy is
given, provided that no intimation in writing of such death, insanity,
revocation or transfer as aforesaid shall have been received by the
Company at its registered office before the commencement of the meeting or
adjourned meeting at which the proxy is used.
RESOLUTIONS IN WRITING
66. A resolution in writing (whether ordinary or special and whether in one
or more counterparts) signed by all the members for the time being
entitled to receive notice of and to attend and vote at general meetings
(or, being corporations, by their duly authorised representatives) shall
be as valid and effective as if the same had been passed at a general
meeting of the Company duly convened and held.
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS
67. Any corporation which is a member of the Company may, in accordance with
its articles of association or, in the absence of such provision, by
resolution of its directors or other governing body, authorise such person
as it thinks fit to act as its representative at any meeting of the
Company or of any class of members of the Company and the person so
authorised shall be entitled to exercise the same powers on behalf of the
corporation which he represents as that corporation could exercise if it
were an individual member of the Company.
DIRECTORS AND OFFICERS
68. The number of Directors shall not be less than three nor more than
fifteen and the names of the first Directors shall be determined in
writing by a majority of the subscribers to the Memorandum of Association.
Within the limits above specified, the number of Directors shall be
determined by resolution of the board of Directors or by the members at
the ordinary general meeting.
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69. Thereafter, and subject as otherwise provided in these Articles,
including, without limitation, to the provisions of Article 9.1, Directors
shall be appointed by a resolution of the Company. At a general meeting,
subject to Article 9.1, a motion for the appointment of two or more
persons as Directors may be made by a single resolution.
70. The remuneration of the Directors shall, from time to time, be determined
by the board of Directors. The Directors may also be paid all travelling,
hotel and other expenses properly incurred by them in connection with the
business of the Company. Any Director who serves on any committee or who
devotes special attention to the business of the Company, or who otherwise
performs services which, in the opinion of the Directors, are outside the
scope of the ordinary duties of a Director, may be paid such extra
remuneration by way of salary, percentage of profits or otherwise as the
Directors may determine.
71. The Directors may, on behalf of the Company, pay a gratuity or pension or
allowance on retirement to any Director who has held any other salaried
office or place of profit with the Company or to his widow or dependents
and may make contributions to any fund and pay premiums for the purchase
or provision of any such gratuity, pension or allowance.
72. 72.1 A Director or officer of the Company may be or become a director or
other officer of, or otherwise interested in, any company promoted
by the Company or in which the Company may be interested as
shareholder or otherwise and no such Director or officer shall be
accountable to the Company for any remuneration or other benefits
received by him as a director or officer of, or from his interest
in, such other company.
72.2 A Director or officer of the Company may hold any other office or
place of profit under the Company (other than the office of
auditor) in conjunction with his office of Director or officer
for such period and on such terms (as to remuneration and
otherwise) as the Directors may determine.
72.3 No Director or officer of the Company shall be disqualified
by his office from holding any office or place of profit under the
Company or under any company in which the Company shall be a
shareholder or otherwise interested, or from contracting or dealing
with the Company either as vendor, purchaser, or otherwise, nor
shall any such contract, or any contract or arrangement entered
into by or on behalf of the Company in which any Director or
officer shall be in any way interested, be avoided, nor shall any
Director or officer be liable to account to the Company for any
profit arising from any such office or place of profit or realised
by any such contract or arrangement by reason only of such Director
or officer holding that office or of the fiduciary relations
thereby established, but it is declared that the nature of his
interest must be disclosed by him at the meeting of the Directors
at which the contract or arrangement is taken into consideration if
his interest then exists, or in any other case at the first meeting
of the Directors after the acquisition of his interest. A general
notice that a Director or officer is a member of any specified firm
or company, and is to be regarded as interested in all
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transactions with that firm or company, shall be a sufficient
disclosure under this Article as regards such Director or officer
and the said transactions, and after such general notice it shall
not be necessary for such Director or officer to give a special
notice relating to any particular transaction with that firm or
company.
72.4 A Director or officer of the Company may, notwithstanding his
interest, be counted in the quorum present at any meeting at which
he or any other Director or officer is appointed to hold any such
office or place of profit under the Company or at which the terms of
any such appointment are arranged and he may vote on any such
appointment or arrangement.
72.5 Any Director or officer of the Company may act by himself or
his firm in a professional capacity for the Company and he or his
firm shall be entitled to remuneration for professional services as
if he were not a Director or officer provided that nothing herein
contained shall authorise a Director or officer or his firm to act
as auditor of the Company.
73. The share qualification for a Director may be fixed by the Company in
general meeting and, unless and until so fixed, no qualification shall be
required.
74. 74.1 The Directors may entrust to and confer upon a Managing Director,
President, Chief Executive Officer, Chairman of the Board, Vice
Chairman of the Board, Vice-President, Manager, Secretary,
Assistant Secretary, Treasurer or any other officer of the Company
any of the powers exercisable by them upon such terms and
conditions and with such restrictions as they may think fit, and
either collaterally with or to the exclusion of their own powers,
and may from time to time revoke, withdraw, alter or vary all or
any of such powers.The board of Directors may designate whether the
Chairman of the board, if one shall have been chosen, or the
President shall be the Chief Executive Officer of the Company. If
a Chairman of the board has not been chosen, or if one has been
chosen but not designated Chief Executive Officer, then the
President shall be the Chief Executive Officer of the Company. The
Chief Executive Officer shall be the principal executive officer of
the Company and shall in general supervise and control all the
business and affairs of the Company, unless otherwise provided by
the board of Directors. Subject as otherwise provided in these
Articles, she or he shall preside at all meetings of the members
and of the board of Directors and shall see that orders and
resolutions of the board of Directors are carried into effect. She
or he may sign bonds, mortgages, certificates for shares and all
other contracts and documents whether or not under the seal of the
Company except in cases where the signing and execution thereof
shall be expressly delegated by law, by the board of Directors or
by these Articles to some other officer or agent of the Company.
She or he shall have general powers of supervision and shall be the
final arbiter of all differences between officers of the Company
and his or her decision as to any matter affecting the Company
shall be final and binding as between the officers of the Company
subject only to its board of Directors.
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74.2 In the absence of the Chief Executive Officer or in the event
of his inability or refusal to act, if the Chairman of the board
has been designated Chief Executive Officer, the President shall
perform the duties of the Chief Executive Officer, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer. At all other times
the President shall have the active management of the business of
the Company under the general supervision of the Chief Executive
Officer. She or he shall have concurrent power with the Chief
Executive Officer to sign bonds, mortgages, certificates for shares
and other contracts and documents, whether or not under the seal of
the Company except in cases where the signing and execution thereof
shall be expressly delegated by law, by the board of Directors, or
by these Articles to some other officer or agent of the Company.
In general, she or he shall perform all duties incident to the
office of President and such other duties as the Chief Executive
Officer or the board of Directors may from time to time prescribe.
74.3 If the Chairman of the board has not been designated Chief
Executive Officer, she or he shall perform such duties as may be
assigned to him or her by the Chief Executive Officer or by the
board of Directors.
74.4 The Vice Chairman of the board shall, in the absence of the
Chairman of the board or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the
Chairman of the board and shall perform such other duties and have
such other powers as the Chief Executive Officer or the board of
Directors may from time to time prescribe.
74.5 In the absence of the President or in the event of his or her
inability or refusal to act, the Vice President (or in the event
there be more than one Vice President, the Executive Vice President
and then the other Vice President or Vice Presidents in the order
designated, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all
the restrictions upon the President. The Vice Presidents shall
perform such other duties and have such other powers as the Chief
Executive Officer or the board of Directors may from time to time
prescribe.
74.6 The Secretary shall attend all meetings of the board of
Directors and all meetings of the members and record all the
proceedings of the meetings of the Company and of the board of
Directors in a book to be kept for that purpose and shall perform
like duties for any standing committees when required. She or he
shall give, or cause to be given, notice of all meetings of the
members and special meetings of the board of Directors, and shall
perform such other duties as may be prescribed by the board of
Directors or the Chief Executive Officer, under whose supervision he
or she shall be.
74.7 The Treasurer shall have the custody of the Company funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books
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belonging to the Company and shall deposit all monies and other
valuable effects in the name and to the credit of the Company in
such depositories as may be designated by the board of Directors.
She or he shall disburse the funds of the Company as may be ordered
by the board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the board of
Directors at its regular meetings, or when the board of Directors
so requires, an account of all his or her transactions as Treasurer
and of the financial condition of the Company.
74.8 The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the board of
Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Treasurer or in the
event of his or her inability or refusal to act, perform the duties
and exercise the powers of the Treasurer and shall perform such
other duties and have such other powers as the Chief Executive
Officer or the board of Directors may from time to time prescribe.
75. The Directors may, from time to time, appoint one or more of their body
to the office of Managing Director, or any other office, on such terms and
at such remuneration (whether by way of salary or commission or
participation in profits or partly in one way and partly in another) as
they may think fit but his appointment shall be subject to determination
ipso facto if he ceases from any cause to be Director, or if the Company
in general meeting resolves that his tenure of the office of Managing
Director or such other office be determined.
76. The Company in general meeting or the Directors may appoint Presidents,
Chief Executive Officers, Vice-Presidents, Treasurers,
Secretary-Treasurers, Secretaries, Managers and such other officers of the
Company for such term and at such remuneration and upon such conditions as
the members or Directors think fit and any President, Chief Executive
Officer, Vice-President, Treasurer, Secretary-Treasurer, Secretary,
Manager or other officer so appointed may be removed by the members in
general meeting or by the Directors.
77. A Director may appoint any person to act as his proxy only in respect of
the annual meeting of the Directors required to be held in the Cayman
Islands in each year pursuant to the Law. Such appointment must be made in
writing under the hand of the appointor and may at any time be revoked in
like manner, and notice of every such appointment or revocation must be
given to the Company, and the appointee need not be a Director or member
of the Company, but he must furnish the Company with his address.
POWERS AND DUTIES OF DIRECTORS
78. The business of the Company shall be managed by the Directors, who may
pay all expenses incurred in setting-up and registering the Company and
may exercise all such powers of the Company as are not, by the Law or
these Articles, required to be exercised by the Company in general meeting
subject, nevertheless, to any regulations of these Articles, to the
provisions of the Law, and to such regulations, being not inconsistent
with
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the aforesaid regulations or provisions, as may be prescribed by the
Company in general meeting but no regulations made by the Company in
general meeting shall invalidate any prior act of the Directors which
would have been valid if that regulation had not been made.
79. The Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property and uncalled capital,
or any part thereof, and to issue debentures, debenture stock, bonds and
other securities whether outright or as security for any debt, liability
or obligation of the Company or of any third party. Debentures, debenture
stock, bonds and other securities may be made assignable free from any
equities between the Company and the person to whom the same may be
issued.
80. The Directors may from time to time and at any time by power of attorney
appoint any company, firm or person or body of persons, whether nominated
directly or indirectly by the Directors, to be the attorney or attorneys
of the Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Directors
under these Articles) and for such period and subject to such conditions
as they may think fit and any such powers of attorney may contain such
provisions for the protection and convenience of persons dealing with any
such attorney as the Directors may think fit and may also authorise any
such attorney to delegate all or any of the powers, authorities and
discretions vested in him.
81. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments, and all receipts for moneys paid to the Company,
shall be signed, drawn, accepted, endorsed, or otherwise executed, as the
case may be, in such manner as the Directors shall from time to time by
resolution determine.
82. The Directors shall cause minutes to be made in books provided for the
purpose:-
82.1 of all appointments of officers of the Company made by the
Directors;
82.2 of the names of the Directors present at each meeting of the
Directors and of any committee of the Directors; and
82.3 of all resolutions and proceedings at each meeting of the
Company and of the Directors and of any committee of the Directors.
DISQUALIFICATION AND PROCEEDINGS OF DIRECTORS
83. The office of Director shall, ipso facto, be vacated if the Director:-
83.1 dies;
83.2 becomes bankrupt or makes any arrangement or composition with
his creditors generally; or
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83.3 is found to be or becomes of unsound mind; or
83.4 resigns his office by notice in writing to the Company; or
83.5 subject to Article 9.1, is removed from office by a
resolution of the Company or as provided in Article 9.1.
84. The Directors may meet together either within or without the Cayman
Islands for the dispatch of business, adjourn, and otherwise regulate
their meetings and proceedings, as they think fit. Except as otherwise
determined by the Directors, it shall not be necessary to give written
notice of a meeting of Directors. The Directors or any committee thereof
may participate in a meeting of the board of Directors or of such
committee by means of conference telephone, or similar communications
equipment by means of which all persons participating can hear each other,
and participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. Questions arising at any meeting
shall be decided by a majority of votes. In case of an equality of votes
the Chairman shall not have a second or casting vote. A Director may, and
the Secretary on the requisition of a Director shall, at any time summon a
meeting of the Directors.
85. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors and, unless so fixed shall be a majority of
the Directors from time to time provided always that if there is only a
sole Director then, subject as otherwise provided in these Articles, that
Director shall be a quorum and such Director may transact business by
written resolution as if a meeting were being held under the provisions of
these Articles.
86. A meeting of the Directors at which a quorum is present shall be
competent to exercise all or any of the authorities, powers and
discretions by or under the Articles for the time being vested in or
exercisable by the Directors generally.
87. A resolution in writing signed by all the Directors in office (including
any duly appointed alternate Director) shall be as valid and effectual as
if it had been passed at a meeting of the Directors duly convened and
held.
88. The continuing Directors or sole continuing Director may act
notwithstanding any vacancy in their body, but, if and so long as their
number is reduced below the number fixed by or pursuant to the Articles as
the necessary quorum of Directors, subject to article 9.1, the continuing
Directors or Director may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of the
Company, but for no other purpose.
89. Subject to Article 74, the Directors may elect a Chairman of their
meetings and determine the period for which he is to hold office but if no
such Chairman is elected, or if at any meeting the Chairman is not present
within five minutes after the time appointed for holding the same, the
Directors present may choose one of their number to be Chairman of the
meeting.
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90. The Directors may, by a resolution passed by a majority of the whole,
delegate any of their powers to committees consisting of such member or
members of their body as they think fit. Any committee so formed shall, in
the exercise of the powers so delegated, conform to any regulations that
may be imposed on it by the Directors. Save as aforesaid the meetings and
proceedings of a committee consisting of more than one member shall be
governed by the provisions of these Articles regulating the proceedings
and meetings of Directors. Save as aforesaid the Directors may designate
one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of Directors to act at the meeting in
the place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the board of Directors shall
have and may exercise all the powers and authority of the board of
Directors in the management of the business and affairs of the Company,
and may authorise the seal of the Company to be affixed to all papers
which may require it but no such committee shall have the power or
authority in reference to recommending to the members the sale, lease, or
exchange of all or substantially all of the Company's property and assets
or recommending to the members a winding-up and dissolution of the Company
and, unless the delegating resolution so provides, no such committee shall
have the power or authority to declare a dividend or to authorise the
issuance of shares. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the
board of Directors.
91. All acts done by any meeting of the Directors or of a committee of
Directors or by any person acting as a Director shall, notwithstanding
that it be afterwards discovered that there was some defect in the
appointment or continuance in office of any such Director or person acting
as aforesaid, or that they or any of them were disqualified or had vacated
office, or were not entitled to vote, be as valid as if every such person
had been duly appointed or had duly continued on in office and was
qualified or had continued to be a Director and had been entitled to be a
Director.
TENURE OF OFFICE OF DIRECTORS
92. Subject to Article 9.1, the Company may, by ordinary resolution, appoint
any person to be a Director and may, again, subject to Article 9.1, in
like manner, remove any Director and may, again, subject to Article 9.1,
in like manner, appoint another person in his stead.
93. Subject to Article 9.1, the Directors shall have the power at any time,
and from time to time, to appoint any person to be a Director, either to
fill a casual vacancy or as an addition to the existing Directors, but so
that the total number of Directors (exclusive of alternate Directors)
shall not at any time exceed the number fixed in accordance with these
Articles and so that any Director so appointed shall hold office until the
next ordinary general meeting of the Company.
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PRESUMPTION OF ASSENT
94. A Director who is present at a meeting of the board of Directors or a
committee thereof at which action on any Company matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent from such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of the
meeting. Such right of dissent shall not apply to a Director who voted in
favour of such action.
SEAL
95. Any seal shall only be used by the authority of the Directors or of a
committee of the Directors authorised by the Directors in that behalf and
every instrument to which the Seal has been affixed shall be signed by one
person who shall be either a Director or the Secretary or
Secretary-Treasurer or Assistant Secretary or some person appointed by the
Directors for the purpose provided that a Director, Secretary or other
officer of the Company or representative (including, without limitation, a
registrar or transfer agent) or attorney may, without further authority of
the Directors, affix any seal of the Company over his signature alone to
any document of the Company required to be authenticated by him under seal
or to be filed with the Registrar of Companies in the Cayman Islands or
elsewhere wheresoever and provided further that share certificates
representing shares in the capital of the Company shall, subject to
Article 11, be under seal signed by a Director and countersigned by the
Secretary or another Director or other authorised person and that the
Directors may authorise certificates to be issued with the seal and
authorised signatures affixed by some method or system of mechanical
process.
96. The Company may have for use in any territory, district or place not
situate in the Cayman Islands, one or more official seal or seals each of
which shall be a facsimile of the Seal of the Company and each of which
such seal or seals may bear the addition on its face of the name of the
territory, district or place where it is to be used.
DIVIDENDS AND RESERVES
97. Subject to the Law and as otherwise provided in these Articles,
including, without limitation, Article 9.2, the Directors may declare
dividends on the shares of the Company outstanding and authorise payment
of the same out of the funds of the Company and may, subject to Article
9.2, from time to time pay to the members such interim dividends as appear
to the Directors to be justified by the profits of the Company. No
dividend shall be paid otherwise than out of profits or out of the share
premium account or otherwise as permitted by the Law.
98. Subject to the rights of persons, if any, entitled to shares with special
rights as to dividend, including, without limitation, the rights set out
in Article 9.2, all dividends shall be declared and paid according to the
amounts paid or credited as paid on the shares in respect whereof the
dividend is paid but no amount paid or credited as paid on a share in
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<PAGE> 30
advance of calls shall be treated for the purposes of this Article as
paid on the share. Subject to Article 9.2, all dividends shall be
apportioned and paid proportionately to the amounts paid or credited as
paid on the shares during any portion or portions of the period in
respect of which the dividend is paid but if any share is issued on terms
providing that it shall rank for dividend as from a particular date such
share shall rank for dividend accordingly.
99. The Directors may, before recommending any dividend, set aside out of the
profits of the Company such sums as they think proper as a reserve or
reserves which shall, at the discretion of the Directors, be applicable
for meeting contingencies or for equalizing dividends, or for any other
purpose to which the profits of the Company may be properly applied, and
pending such application may, at the like discretion, either be employed
in the business of the Company or be invested in such investments (other
than shares of the Company) as the Directors may from time to time think
fit. The Directors may also, without placing the same to reserve, carry
forward any profits which they may think prudent not to divide.
100. If several persons are registered as joint holders of any share, any of
them may give effectual receipts for any dividends, bonuses or other
moneys payable on or in respect of the share.
101. With the sanction of a general meeting, any dividend may be paid wholly
or partly by the distribution of specific assets and, in particular, of
paid-up shares or debentures of any other company or in any one or more of
such ways. Where any difficulty arises in regard to such distribution,
the Directors may settle the same as they think expedient and, in
particular, may issue fractional certificates and fix the value for
distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any members upon the footing of the
value so fixed, in order to adjust the rights of all members, and may vest
any such specific assets in trustees upon trust for the members entitled
to the dividend as may seem expedient to the Directors.
102. Any dividend, interest or other monies payable in cash in respect of
shares may be paid by cheque or warrant sent through the post directed to
the registered address of the member or person entitled thereto or, in the
case of joint holders, to any one of such joint holders at his registered
address or to such person and such address as the member or person
entitled or such joint holders, as the case may be, may direct. Every
such cheque or warrant shall be made payable to the order of the person to
whom it is sent or to the order of such other person as the member or
person entitled or such joint holders, as the case may be, may direct.
103. No dividend shall bear interest against the Company. All dividends
unclaimed for one year after having been declared may be invested or
otherwise made use of by the Directors for the benefit of the Company
until claimed and the Company shall not be constituted a trustee in
respect thereof. All dividends unclaimed for a period of six years after
having been declared shall be forfeited and shall revert to the Company.
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CAPITALISATION OF PROFITS
104. Subject as otherwise provided in these Articles, the Company in general
meeting may, upon the recommendation of the Directors, resolve that it is
desirable to capitalise any part of the amount for the time being standing
to the credit of any of the Company's reserve accounts or to the credit of
the profit and loss account or otherwise available for distribution and
not required for the payment or provision of the fixed dividend on any
shares entitled to fixed preferential dividends and accordingly that such
sums be set free for distribution amongst the members who would have been
entitled thereto if distributed by way of dividend and in the same
proportions on condition that the same be not paid in cash but be applied
either in or towards paying up any amounts for the time being unpaid on
any shares held by such members respectively or paying up in full unissued
shares or debentures of the Company to be allotted and distributed
credited as fully paid-up to and amongst such members in the proportion
aforesaid, or partly in the one way and partly in the other, and the
Directors shall give effect to such resolution provided that a share
premium account and a capital redemption reserve fund may, for the
purposes of this Article, only be applied in the paying up of unissued
shares to be issued to members of the Company as fully paid bonus shares.
105. Whenever such a resolution as aforesaid has been passed the Directors
shall make all appropriations and applications of the undivided profits
resolved to be capitalised thereby and all allotments and issues of fully
paid shares or debentures, if any, and generally shall do all acts and
things required to give effect thereto, with full power to the Directors
to make such provision by the issue of fractional certificates or by
payment in cash or otherwise as they think fit for the case of shares or
debentures becoming distributable in fractions, and also to authorise any
person to enter on behalf of all members entitled thereto into an
agreement with the Company providing for the allotment to them
respectively, credited as fully paid-up, of any further shares or
debentures to which they may be entitled upon such capitalisation, or as
the case may require, for the payment up by the Company on their behalf,
by the application thereto of their respective proportions of the profits
resolved to be capitalised, of the amounts or any part of the amounts
remaining unpaid on their existing shares, and any agreement made under
such authority shall be effective and binding on all such members.
ACCOUNTS AND AUDIT
106. The Directors shall cause proper books of account to be kept with respect
to:-
106.1 all sums of money received and expended by the Company and
the matters in respect of which the receipt and expenditure takes
place;
106.2 all sales and purchases of goods by the Company; and
106.3 the assets and liabilities of the Company.
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Proper books of account shall not be deemed to be kept with respect to
the matters aforesaid if there are not kept such books of account as are
necessary to give a true and fair view of the state of the Company's
affairs and to explain its transactions.
107. The books of account shall be kept at the registered office of the
Company, or at such other place or places as the Directors think fit, and
shall always be open to the inspection of the Directors as a board and
individually.
108. The Directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them shall be
open to the inspection of members not being Directors and no member (not
being a Director) shall have any right of inspecting any account or book
or document of the Company except as conferred by law or authorized by
the Directors or the Company in general meeting.
109. The Company in general meeting may determine or, failing such
determination, the Directors may determine: -
109.1 that there be prepared and/or laid before the Company a
profit and loss account, a balance sheet, group accounts and/or
reports for such period and on such terms as the Company or
Directors may determine;
109.2 that there be laid before the Company in general meeting a
copy of every balance sheet together with a copy of the auditor's
report which, not less than seven days before the date of the
meeting, shall be sent to all persons entitled to receive notices
of general meetings of the Company; and
109.3 that the accounts relating to the Company's affairs may be
audited in such manner as may be determined from time to time.
110. The Company in general meeting may revoke, alter or amend any such
determination under the preceding Article and the Directors may revoke,
alter or amend any determination made by the Directors under the preceding
Article.
NOTICES
111. A notice may be given by the Company to any member either personally or
by sending it by post to him at his registered address or, if he has no
registered address in the Cayman Islands, to the address, if any, supplied
to the Company by him for the giving of notices to him. Where a notice is
sent by post, service of the notice shall be deemed to be effected by
properly addressing, prepaying and posting a letter containing the notice
and to have been effected, in the case of a notice of a meeting, at the
expiration of twenty four hours after the letter containing the same is
posted and, in any other case, at the time at which the letter would be
delivered in the ordinary course of post. A notice may also be sent by
cable, telex or telefax and service of the notice shall be deemed to be
effected by properly addressing, prepaying and sending the notice through
a transmitting or communications
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organisation and to have been effected at the expiration of twenty four
hours after the same is sent as aforesaid.
112. Subject to Article 115 which shall prevail, if a member has no registered
address and has not supplied to the Company an address for the giving of
notices to him, a notice addressed to him or to shareholders in general
meeting and advertised in a newspaper circulating in the Cayman Islands or
the official gazette shall be deemed to be duly given to him at noon on
the day following the day on which the newspaper or official gazette is
circulated and the advertisement appeared therein.
113. A notice may be given by the Company to the joint holders of a share by
giving the notice to the joint holder named first in the register of
members in respect of the share.
114. A notice may be given by the Company to the persons entitled to a share
in consequence of the death or bankruptcy of a member by sending it
through the post in a prepaid letter addressed to them by name, or by the
title of representatives of the deceased, or trustee of the bankruptcy, or
by any like description at the address, if any, supplied for the purpose
by the persons claiming to be so entitled or (until such an address has
been so supplied) by giving the notice in any manner in which the same
might have been given if the death or bankruptcy had not occurred.
115. Notice of every general meeting shall be given in any manner hereinbefore
authorised to:-
115.1 every member except those members who (having no registered
address in the Cayman Islands) have not supplied to the Company an
address for the giving of notices to them; and
115.2 every person entitled to a share in consequence of the death
or bankruptcy of a member who, but for his death or bankruptcy,
would be entitled to receive notice of the meeting.
No other person shall be entitled to receive notices of general meetings.
WINDING UP
116. If the Company shall be wound up the liquidator may, with the sanction of
a Special Resolution and any other sanction required by the Law, divide
amongst the members in specie or kind the whole or any part of the assets
of the Company (whether they shall consist of property of the same kind or
not) and may for such purpose set such value as he deems fair upon any
property to be divided as aforesaid and may determine how such division
shall be carried out as between members or different classes of members.
The liquidator may with the like sanction vest the whole or any part of
the assets in trustees upon such trusts for the benefit of contributories
as the liquidator, with the like sanction shall think fit but so that no
member shall be compelled to accept any shares or other securities whereon
there is a liability.
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117. If the Company shall be wound up, and the assets available for
distribution amongst the members shall be insufficient to repay the whole
of the paid-up share capital, such assets shall be distributed so that, as
nearly as may be, the losses shall be borne by the members in proportion
to the capital paid-up at the commencement of the winding up on the shares
held by them respectively. If, on a winding up, the assets available for
distribution amongst the members shall be more than sufficient to repay
the whole of the capital paid-up at the commencement of the winding up,
the excess shall be distributed amongst the members in proportion to the
capital at the commencement of the winding up paid on the shares held by
them respectively. This Article is to be without prejudice to the rights
of holders of shares issued upon special terms and conditions.
INDEMNITY
118. 118.1 To the fullest extent now or hereafter permitted by applicable
laws, no Director, Managing Director, President, Vice-President,
Manager, Secretary, Assistant Secretary, Treasurer or other
officer of the Company or his or their heirs and personal
representatives shall be personally liable to the Company or its
members for monetary damages for breach of fiduciary or other
duties as a Director or officer, if applicable, except (i) for any
breach of a Director's duty of loyalty to the Company or its
members, (ii) for acts or omissions not in good faith which
involve intentional misconduct or knowing violation of law, or
(iii) for any transaction from which a Director derived an
improper personal benefit.
118.2 Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the legal
representative, is or was a Director or officer of the Company or
is or was serving at the request of the Company as a director,
officer, employee or agent of another company or a partnership,
joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
Proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and
held harmless by the Company to the fullest extent authorised by
the laws of the Cayman Islands, as the same exist or may hereafter
be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than such laws permitted the Company to
provide prior to such amendment), against all expense, liability
and loss (including, without limitation, attorneys` fees,
judgements, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure for the benefit of his or her
heirs, executors and administrators provided, however, that, except
as provided in Article 118.3 the Company shall indemnify any such
person seeking indemnification in connection with the Proceeding
(or part thereof) initiated by
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such person only if such Proceeding (or part thereof) was
authorised by the board of Directors. The right to
indemnification conferred by this Article 118 shall be a contract
right and shall include the right to be paid by the Company the
expenses incurred in defending any such Proceeding in advance of
its final disposition provided, however, that, if the laws of the
Cayman Islands require, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a Proceeding, shall be made
only upon delivery to the Company of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Article
118 or otherwise. The Company may, by action of its board of
Directors, provide indemnification to employees and agents of the
Company with the same scope and effect as the foregoing
indemnification of directors and officers.
118.3 If a claim under Article 118.2 is not paid in full by the Company
within thirty days after a written claim has been received by the
Company, the claimant may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall
be a defence to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any Proceeding
in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Company)
that the claimant has not met the standards of conduct, if any,
which make it permissible under the laws of the Cayman Islands or
these Articles for the Company to indemnify the claimant for the
amount claimed, but the burden of proving such defence shall be on
the Company. Neither the failure of the Company (including its
board of Directors, independent legal counsel, or its members) to
have made a determination prior to the commencement of such action
that indemnification of the claimant is proper under the
circumstances because he or she has met the applicable standard of
conduct, if any, under the laws of the Cayman Islands or these
Articles nor an actual determination by the Company (including its
board of Directors, independent legal counsel, or its members)
that the claimant has not met such applicable standard of conduct,
if any, shall be a defence to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
118.4 The right to indemnification and the payment of expenses incurred
in defending a Proceeding in advance of its final disposition
conferred in this Article 118 shall not be exclusive of any other
right which any person may have or hereafter acquire under any
statute or other applicable law, provisions of the Memorandum of
Association, these Articles or agreement of the Company or vote
of the members or board of Directors or otherwise.
118.5 The Company may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Company
or another company,
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partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Company would
have the power to indemnify such person against such expense,
liability or loss under the laws of the Cayman Islands.
AMENDMENT OF MEMORANDUM AND ARTICLES
119. Subject to the provisions of the Law, the Company may by Special
Resolution change its name, amend its objects or alter or amend these
Articles either in whole or in part.
TRANSFER BY WAY OF CONTINUATION
120. The Company shall, subject to the provisions of the Law, and with the
sanction of a Special Resolution, have the power to register by way of
continuation as a body corporate under the laws of any jurisdiction
outside the Cayman Islands and to be deregistered in the Cayman Islands.
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I, , Registrar
of Companies in and for the Cayman Islands DO HEREBY CERTIFY that this is a
true and correct copy of the Articles of Association of this Company duly
incorporated on the 23rd day of January, 1998.
______________________
REGISTRAR OF COMPANIES
* The Company was incorporated on the 23rd day of January, 1998. These amended
and restated Articles of Association was adopted by a special resolution of the
members of the Company passed on the , 1998.
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<PAGE> 1
EXHIBIT 3.4
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION*
OF
FRUIT OF THE LOOM, LTD.
1. The NAME of the Company is FRUIT OF THE LOOM, LTD.
2. The REGISTERED OFFICE of the Company is situate at the offices of Truman
Bodden & Company, P.O. Box 866, Anderson Square Building (3rd Floor),
George Town, Grand Cayman, Cayman Islands, British West Indies or at such
other place as the Directors may determine.
3. The OBJECTS for which the Company is established are NOT restricted but,
without limiting the generality of the foregoing, the Company shall have
full power and authority to do and carry out any and all acts exercisable
by a natural person or body corporate or any other legal entity in any
part of the world in any capacity whatsoever including whether as
principal, agent, contractor, broker, representative, attorney or
otherwise and whether alone or jointly with others and the Company shall
have full power and authority to carry out any object not prohibited by
the Companies Law (1995 Revision) or any other law of the Cayman Islands
or any modifications or re-enactments thereof.
4. Pursuant to the Companies Law (1995 Revision), the Company shall have,
and be capable of exercising, all of the functions of a natural person of
full capacity irrespective of any question of corporate benefit.
5. The Company is registered as an exempted company and accordingly:-
5.1 it shall have the power to apply to the Registrar of
Companies to be registered by way of continuation as a body
corporate limited by shares under the laws of any jurisdiction
outside the Cayman Islands and to be deregistered in the Cayman
Islands with full power to carry out all or any matters required by
Section 223 of the Companies Law (1995 Revision) or any statutory
modifications or re-enactments thereof; and
5.2 it shall not trade in the Cayman Islands with any person,
firm or corporation except in furtherance of the business of the
Company carried on outside the Cayman Islands provided that nothing
in this clause shall be construed so as to prevent the Company
effecting and concluding contracts in the Cayman Islands and
exercising in the Cayman Islands all of its powers necessary for the
carrying on of its business outside the Cayman Islands.
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6. Nothing in the preceding clauses shall be deemed to permit the
Company to carry on such business as requires a licence under
applicable Cayman Islands law including, without limitation:-
6.1 the business of a bank or trust company unless licensed
therefore under The Banks and Trust Companies Law (1995
Revision);
6.2 the business of an insurance company, manager, agent, sub-agent
or broker unless licensed therefore under The Insurance Law
(1995 Revision); or
6.3 the business of company management unless licensed therefore
under The Companies Management Law (1996 Revision)
or any statutory modification or re-enactment of any of the same
for the time being in force.
7. THE LIABILITY of the members is limited.
8. THE AUTHORISED SHARE CAPITAL of the Company is two million three hundred
and fifty thousand and one United States dollars (US$2,350,001) divided
into two hundred million class A ordinary shares each with a par value of
one United States cent (US$0.01), thirty-five million preference shares
each with a par value of one United States cent (US$0.01) and one hundred
class B redeemable ordinary shares each with a par value of one United
States cent (US$0.01), with the power for the Company insofar as is
permitted by law, to redeem any of its shares, increase or reduce such
capital, and to issue all, or any part of, its capital (whether original,
redeemed, increased or reduced) with or without any preference, priority
or special privilege, or subject to any postponement of rights, or to any
conditions or restrictions whatsoever and so that, unless the conditions
of issue shall otherwise expressly provide, every issue of shares, whether
stated to be preference or otherwise, shall be subject to the powers on
the part of the Company hereinbefore contained.
2
<PAGE> 3
I, ,Registrar
of Companies in and for the Cayman Islands DO HEREBY CERTIFY that this is a
true and correct copy of the Memorandum of Association of this Company duly
incorporated on the 23rd day of January, 1998.
REGISTRAR OF COMPANIES
* The Company was incorporated on the 23rd day of January, 1998. This amended
and restated Memorandum of Association was adopted by a special resolution of
the members of the Company passed on the , 1998.
3
<PAGE> 1
EXHIBIT 12.1
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges
and earnings to combined fixed charges and preferred stock dividends for Fruit
of the Loom, Inc. (the "Company") and its consolidated subsidiaries for the
periods indicated.
<TABLE>
<CAPTION>
Nine months
ended
September Year ended December 31,
30,
-------------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1) 1.3x 2.5x * 2.2x 5.3x 4.4x
Ratio of earnings to combined fixed charges and
preferred stock dividends (2) 1.3x 2.5x * 2.2x 5.3x 4.4x
</TABLE>
- --------------------------
* Earnings were insufficient to cover fixed charges for the year ended
December 31, 1995 by $247.2
(1) The ratio of earnings to fixed charges is calculated by dividing (i) fixed
charges plus pretax earnings from continuing operations by (ii) fixed
charges. Fixed charges consist of interest expense, the interest component
of rent expense, amortization of deferred financing costs and guarantor
debt charges. Guarantor debt charges are the estimated interest related to
the Company's evaluation of its exposure under its guarantee of debt
incurred by Acme Boot Company, Inc., and affiliate of the Company.
Approximately $0.6 million and $2.3 million of guarantor debt charges are
included in fixed charges for the year ended December 31, 1996 and the
nine months ended September 30, 1997, respectively.
(2) The ratio of earnings to combined fixed charges and preferred stock
dividends is calculated by dividing (i) fixed charges plus pretax earnings
from continuing operations by (ii) fixed charges plus preferred stock
dividends. The Company had no shares of preferred stock outstanding, and
no dividends were declared or paid, during any of the periods indicated.
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Fruit of the Loom,
Ltd. relating to the reorganization of Fruit of the Loom, Inc. and the
registration of Fruit of the Loom, Ltd. Class A ordinary shares and to the
incorporation by reference therein of our report dated February 12, 1997, with
respect to the consolidated financial statements and schedules of Fruit of the
Loom, Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission, and to
the inclusion in the Registration Statement of our report dated February 9,
1998 with respect to the financial statements of Fruit of the Loom, Ltd.
/s/ Ernst & Young LLP
Chicago, Illinois
February 9, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF LEHMAN BROTHERS INC.
We hereby consent to the use of our opinion to the Board of Directors of Fruit
of the Loom, Inc. dated February 10, 1998, which is included as an Exhibit to
this Registration Statement and as an Annex to the Proxy Statement/Prospectus
and all references to our firm and such opinion included in such Proxy
Statement/Prospectus forming a part of this Registration Statement. In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 and the rules
and regulations promulgated thereunder (the "Securities Act"), and we do not
thereby admit that we are experts with respect to any part of this Registration
Statement under the meaning of the term "expert" as used in the Securities Act.
LEHMAN BROTHERS INC.
By: /s/ Glenn R. Tilles
Managing Director
New York, New York
February 10, 1998
<PAGE> 1
EXHIBIT 99.2
FRUIT OF THE LOOM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON ____________, 1998
The undersigned hereby appoints William Farley and Larry K. Switzer as
proxies, each with power to act without the other and with full power of
substitution, as Proxies to represent and to vote, as designated on the reverse
side, all stock of Fruit of the Loom, Inc. held of record by the undersigned at
the Special Meeting of Stockholders to be held at ____________________,
Chicago, Illinois on ___________, 1998 at 10:00 a.m., and at any adjournments
thereof, upon the matters set forth in the Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus, receipt of which is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SPECIFIC DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED TO APPROVE THE PROPOSED REORGANIZATION (AS DESCRIBED ON THE
REVERSE SIDE) AND AT THE DISCRETION OF THE PROXY HOLDERS WITH REGARD TO ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT
THEREOF.
(Continued, and to be signed and dated, on reverse side)
Please mark your vote
as indicated in this example [X]
The Board of Directors of Fruit of the Loom, Inc. unanimously recommends that
stockholders vote FOR the proposal to approve the Reorganization.
1. Approval of the reorganization (the "Reorganization") pursuant
to which Fruit of the Loom, Ltd. ("FTL-Cayman"), a Cayman Islands company, will
become the parent holding company of Fruit of the Loom, Inc. ("FTL-Delaware")
through the merger of a newly-formed Delaware subsidiary of FTL-Cayman with and
into FTL-Delaware, including approval of the Agreement and Plan of Merger to
effectuate such merger and the amendment to FTL-Delaware's Certificate of
Incorporation to permit the merger to be effectuated in accordance with its
terms notwithstanding the different treatment of Class A and Class B Common
Stock, as more fully described in the accompanying Proxy Statement/Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxies are authorized to vote upon
such other business as may properly be brought before the meeting and any
adjournment thereof.
Signature _______________ Signature ____________________ Date ___________, 1998
NOTE: please date your proxy and sign exactly as the name or names appear on
your stock certificate. All joint owners of stock should sign above. Sign your
full title when signing as an executor, administrator, personal representative,
trustee, etc. Please return your proxy in the enclosed postage paid envelope.
