<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)
FARAH INCORPORATED
(Name of Subject Company)
TROPICAL SPORTSWEAR INT'L CORPORATION
FOXFIRE ACQUISITION CORP.
(Bidders)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
307387100
(CUSIP Number)
MICHAEL KAGAN
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TROPICAL SPORTSWEAR INT'L CORPORATION
4902 WEST WATERS AVENUE
TAMPA, FLORIDA 33634-1302
(813) 249-4900
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
Copy to:
STEPHEN A. OPLER
ALSTON & BIRD LLP
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
CALCULATION OF FILING FEE
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TRANSACTION VALUE (1) AMOUNT OF FILING FEE
----------------- --------------------
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$ 96,078,888 $ 19,216
- ------------------------------------------------------------------------------
</TABLE>
(1) For purposes of calculating fee only. This amount assumes the purchase of
10,286,357 outstanding shares of common stock of Farah Incorporated at
$9.00 in cash per share, and the cancellation of 1,016,500 options and
payment therefor of the difference between the exercise price of such
options and $9.00, if any. The amount of the filing fee was calculated in
accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934,
as amended, and equals 1/50 of one percentum of the value of the shares to
be purchased.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the filing by registration statement number, or the form or
schedule and the date of its filing.
Amount previously paid: NOT APPLICABLE Filing party: _____________________
Form or registration no.: NOT APPLICABLE Date filed: _______________________
Page 1 of 7 Pages
<PAGE> 2
CUSIP NO. 307387100 14D-1 PAGE 2 OF 7 PAGES
--------------------- -------- --------
(1) NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 59-3420305
TROPICAL SPORTSWEAR INT'L CORPORATION
---------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ X ]
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(3) SEC USE ONLY
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
00
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f)
---------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
FLORIDA
---------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
40
---------------------------------------------------------------------
(8) CHECK THE BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES* [ ]
---------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
LESS THAN 1%
---------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON*
CO
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Page 2 of 7 Pages
<PAGE> 3
CUSIP NO. 307387100 14D-1 PAGE 3 OF 7 PAGES
--------------------- -------- --------
(1) NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
FOXFIRE ACQUISITION CORP.
---------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ X ]
---------------------------------------------------------------------
(3) SEC USE ONLY
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
AF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f)
---------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
---------------------------------------------------------------------
(7) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
40
---------------------------------------------------------------------
(8) CHECK THE BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES* [ ]
---------------------------------------------------------------------
(9) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Less than 1%
---------------------------------------------------------------------
(10) TYPE OF REPORTING PERSON*
CO
---------------------------------------------------------------------
Page 3 of 7 Pages
<PAGE> 4
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement")
relates to the offer by Foxfire Acquisition Corp., a Texas corporation (the
"Purchaser") and a wholly owned subsidiary of Tropical Sportswear Int'l
Corporation, a Florida corporation ("TSI"), to purchase all of the outstanding
shares (the "Shares") of Common Stock, no par value per share (the "Common
Stock") of Farah Incorporated, a Texas corporation (the "Company"), at $9.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 8, 1998 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(a)(2)(which together constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Farah Incorporated and the
address of its principal executive offices is 4171 North Mesa, Building D,
Suite 500, El Paso, Texas 79902-1433.
(b) The class of securities to which this Statement relates is the
Common Stock, no par value per share, of the Company. As of April 30, 1998,
there were 10,286,357 Shares issued and outstanding and there were outstanding
options to purchase, and restricted stock awards for, an aggregate of 1,016,500
Shares. Purchaser is seeking to purchase all of the outstanding Shares at a
purchase price of $9.00 per Share, net to the seller in cash. All of the
outstanding options will be cancelled and the holders thereof will be paid the
difference between the exercise price of such options and $9.00, if any.
Further, any restrictions on restricted stock awards will lapse.
(c) The information set forth in "Section 6 -- Price Range of the
Shares; Dividends on the Shares" of the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) The information set forth in the "INTRODUCTION" and
"Section 9 -- Certain Information Concerning the Purchaser and TSI" of the
Offer to Purchase is incorporated herein by reference. The name, business
address, present principal occupation or employment, the material occupations,
positions, offices or employments for the past five years and citizenship of
each director and executive officer of the Purchaser and TSI and the name,
principal business and address of any corporation or other organization in
which such occupations, positions, offices and employments are or were carried
on are set forth in Schedule I of the Offer to Purchase and incorporated herein
by reference.
(e)-(f) During the last five years neither the Purchaser or
TSI nor, to the best knowledge of the Purchaser and TSI, any of the persons
listed in Schedule I of the Offer to Purchase have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT
COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below,
neither the Purchaser or TSI, nor, to the best knowledge of the Purchaser and
TSI, any of the persons listed in Schedule I of the Offer to Purchase, has
entered into any transaction with the Company, or any of the Company's
affiliates which are corporations, since the commencement of the Company's
third full fiscal year preceding the date of this Statement, the aggregate
amount of which was equal to or greater than one percent of the consolidated
revenues of the Company for (i) the fiscal year in which such transaction
occurred or (ii) the portion of the current fiscal year which has occurred if
the transaction occurred in such year.
Page 4 of 7 Pages
<PAGE> 5
(a)(2) Other than the transactions described in Item 3(b) below,
neither the Purchaser or TSI, nor, to the best knowledge of the Purchaser and
TSI, any of the persons listed in Schedule I of the Offer to Purchase, has
entered into any transaction since the commencement of the Company's third full
fiscal year preceding the date of this Statement, with the executive officers,
directors or affiliates of the Company which are not corporations, in which the
aggregate amount involved in such transaction or in a series of similar
transactions, including all periodic installments in the case of any lease or
other agreement providing for periodic payments or installments, exceeded
$40,000.
(b) The information set forth in the "INTRODUCTION," "Section
9 -- Certain Information Concerning the Purchaser and TSI," "Section 11 --
Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" and "Section 12 -- Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 10 -- Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION", "Section 11
- -- Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" and "Section 12 -- Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in "Section 7 -- Effect of the Offer
on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Section 9 -- Certain Information
Concerning the Purchaser and TSI" of the Offer to Purchase is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," "Section 10 -- Source
and Amount of Funds," "Section 11 -- Background of the Offer; Purpose of the
Offer and the Merger; the Merger Agreement and Certain Other Agreements,"
"Section 12 -- Plans for the Company; Other Matters" and "Section 16 -- Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Section 16 -- Fees and Expenses" of the
Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Section 9 -- Certain Information Concerning
the Purchaser and TSI" of the Offer to Purchase is incorporated
herein by reference.
Page 5 of 7 Pages
<PAGE> 6
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present
or proposed material contracts, arrangements, understandings or relationships
between the Purchaser or TSI, or to the best knowledge of the Purchaser and
TSI, any of the persons listed in Schedule I of the Offer to Purchase, and the
Company, or any of its executive officers, directors, controlling persons or
subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION", "Section 14
- -- Conditions of the Offer" and "Section 15 -- Certain Legal Matters" of the
Offer to Purchase is incorporated herein by reference.
(d) The information set forth in "Section 7 -- Effect of the Offer
on the Market for Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" and "Section 15 -- Certain Legal Matters" of the Offer to Purchase
is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the
Letter of Transmittal, to the extent not otherwise incorporated herein by
reference, is incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase dated May 8, 1998.
(a)(2) Letter of Transmittal with respect to the Shares.
(a)(3) Letter, dated May 8, 1998, from Prudential Securities Incorporated (Dealer Manager) to
Brokers, Dealers, Banks, Trust Companies and Other Nominees.
(a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their
Clients.
(a)(5) Notice of Guaranteed Delivery with respect to the Shares.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Press Release jointly issued by TSI and the Company dated May 4, 1998.
(a)(8) Form of Summary Advertisement dated May 8, 1998.
(a)(9) Press Release issued by TSI dated May 8, 1998.
(b)(1) Commitment Letter (including the related term sheet) dated April 26, 1998, from Prudential
Securities Credit Corp.
(c)(1) Agreement and Plan of Merger, dated as of May 1, 1998, by and among TSI, the
Purchaser and the Company.
(c)(2) Confidentiality Agreement dated March 20, 1998 between the Company and TSI.
(c)(3) Confidentiality Agreement dated March 26, 1998 between the Company and TSI.
(c)(4) Confidentiality Agreement dated March 23, 1998 between TSI and the Company.
(c)(5) Employment Agreement dated May 1, 1998.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
Page 6 of 7 Pages
<PAGE> 7
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: May 8, 1998
FOXFIRE ACQUISITION CORP.
By: /s/ Michael Kagan
----------------------------------------
Michael Kagan
Chief Financial Officer
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: May 8, 1998
TROPICAL SPORTSWEAR INT'L CORPORATION
By: /s/ Michael Kagan
----------------------------------------
Michael Kagan
Executive Vice President and
Chief Financial Officer
Page 7 of 7 Pages
<PAGE> 8
INDEX TO EXHIBITS
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(a)(1) Offer to Purchase dated May 8, 1998.
(a)(2) Letter of Transmittal with respect to the Shares.
(a)(3) Letter, dated May 8, 1998, from Prudential Securities Incorporated (Dealer Manager) to Brokers, Dealers, Banks,
Trust Companies and Other Nominees.
(a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients.
(a)(5) Notice of Guaranteed Delivery with respect to the Shares.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Press Release jointly issued by TSI and the Company dated May 4, 1998.
(a)(8) Form of Summary Advertisement dated May 8, 1998.
(a)(9) Press Release issued by TSI dated May 8, 1998.
(b)(1) Commitment Letter (including the related term sheet) dated April 26, 1998, from Prudential Securities Credit Corp.
(c)(1) Agreement and Plan of Merger, dated as of May 1, 1998, by and among TSI, the Purchaser and the Company.
(c)(2) Confidentiality Agreement dated March 20, 1998 between the Company and TSI.
(c)(3) Confidentiality Agreement dated March 26, 1998 between the Company and TSI.
(c)(4) Confidentiality Agreement dated March 23, 1998 between TSI and the Company.
(c)(5) Employment Agreement dated May 1, 1998.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
AT
$9.00 NET PER SHARE
BY
FOXFIRE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
TROPICAL SPORTSWEAR INT'L CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE").
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED
AS OF MAY 1, 1998, AMONG TROPICAL SPORTSWEAR INT'L CORPORATION, FOXFIRE
ACQUISITION CORP. AND FARAH INCORPORATED. THE BOARD OF DIRECTORS OF FARAH
INCORPORATED HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE
MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF FARAH INCORPORATED, AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THE NUMBER OF
SHARES THAT REPRESENTS AT LEAST SIXTY-SIX AND TWO-THIRDS PERCENT (66 2/3%) OF
THE SHARES OF COMMON STOCK OUTSTANDING ON THE EXPIRATION DATE, AND (II) CERTAIN
OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14.
---------------------
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
May 8, 1998
<PAGE> 2
IMPORTANT
Any shareholder who desires to tender all or any portion of such
shareholder's Shares (as defined herein) should either (i) complete and sign the
Letter of Transmittal (or a manually signed facsimile thereof) in accordance
with the instructions in the Letter of Transmittal, mail or deliver it and any
other required documents to the Depositary and either deliver the certificates
for such Shares to the Depositary or tender such Shares pursuant to the
procedures for book-entry transfer set forth in Section 3 or (ii) request such
shareholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such shareholder. Any shareholder whose Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective locations and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may be directed to the Information Agent, the Depositary, or
to brokers, dealers, commercial banks or trust companies. A shareholder also may
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
ii
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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INTRODUCTION................................................ 1
THE OFFER
1. Terms of the Offer.................................... 2
2. Acceptance for Payment and Payment for Shares......... 4
3. Procedure for Tendering Shares........................ 5
4. Withdrawal Rights..................................... 7
5. Certain Federal Income Tax Consequences............... 8
6. Price Range of the Shares; Dividends on the Shares.... 9
7. Effect of the Offer on the Market for the Shares;
Stock Listing; Exchange Act Registration; Margin
Regulations........................................... 9
8. Certain Information Concerning the Company............ 11
9. Certain Information Concerning the Purchaser and
TSI................................................... 13
10. Source and Amount of Funds............................ 15
11. Background of the Offer; Purpose of the Offer and the
Merger; The Merger Agreement and Certain Other
Agreements............................................ 16
12. Plans for the Company; Other Matters.................. 27
13. Dividends and Distributions........................... 29
14. Conditions of the Offer............................... 30
15. Certain Legal Matters................................. 31
16. Fees and Expenses..................................... 33
17. Miscellaneous......................................... 33
Schedule I -- Directors and Executive Officers of Tropical
Sportswear Int'l Corporation and Foxfire Acquisition
Corp...................................................... I-1
</TABLE>
iii
<PAGE> 4
To the Holders of Common Stock of Farah Incorporated:
INTRODUCTION
Foxfire Acquisition Corp., a Texas corporation (the "Purchaser") and a
wholly owned subsidiary of Tropical Sportswear Int'l Corporation, a Florida
corporation ("TSI"), hereby offers to purchase all of the outstanding shares
(the "Shares") of common stock, no par value per share (the "Common Stock"), of
Farah Incorporated, a Texas corporation (the "Company"), at $9.00 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
this Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements hereto or thereto, collectively constitute
the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Prudential Securities Incorporated
("Prudential Securities"), which is acting as the Dealer Manager (the "Dealer
Manager"), The Bank of New York, which is acting as the Depositary (the
"Depositary"), and MacKenzie Partners, Inc., which is acting as the Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THE NUMBER OF
SHARES THAT REPRESENTS AT LEAST SIXTY-SIX AND TWO-THIRDS PERCENT (66 2/3%) OF
THE SHARES OUTSTANDING ON THE EXPIRATION DATE (THE "MINIMUM CONDITION"). SEE
SECTION 14. The Company has informed the Purchaser that, as of April 30, 1998,
there were 10,286,357 Shares issued and outstanding. Based on the foregoing, the
Purchaser believes that the Minimum Condition will be satisfied if 6,857,572
Shares are validly tendered and not withdrawn prior to the expiration of the
Offer.
The purpose of the Offer is for TSI, through the Purchaser, to acquire a
controlling equity interest in the Company as the first step in a business
combination of TSI and the Company. The Offer is being made pursuant to an
Agreement and Plan of Merger, dated as of May 1, 1998 (the "Merger Agreement"),
by and among TSI, the Purchaser and the Company pursuant to which, as soon as
practicable after the completion of the Offer and satisfaction or waiver, if
permissible, of all conditions to the Merger (as defined below), the Purchaser
will be merged with and into the Company (the "Merger") and the separate
corporate existence of the Purchaser will cease. Following the consummation of
the Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and will be a wholly owned subsidiary of TSI. At the
effective time of the Merger (the "Effective Time"), each Share then outstanding
(other than Shares held by TSI, the Purchaser or any other wholly owned
subsidiary of TSI and Shares, if any, held by shareholders who perfect their
dissenters' rights under Texas law) will be converted into the right to receive
$9.00 in cash. The Merger Agreement is more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S
SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES.
The Company has advised TSI that Financo, Inc., the Company's financial
advisor ("Financo"), has delivered to the Company's Board of Directors its
written opinion dated May 1, 1998 to the effect that the consideration to be
received by the shareholders of the Company in the Offer and the Merger is fair
to such shareholders from a financial point of view as of the date of delivery
of that opinion. Such opinion is set forth in full as an exhibit to the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") that is being mailed to shareholders of the Company concurrently with
this Offer to Purchase. Shareholders of the Company are urged to read the
opinion in its entirety for a description of the assumptions made, factors
considered and procedures followed by Financo, as well as certain information
concerning Financo.
<PAGE> 5
The Merger Agreement provides that, except as otherwise provided therein,
following satisfaction or waiver, if permissible, of the conditions to the Offer
and subject to the terms and conditions thereof, the Purchaser will accept for
payment, in accordance with the terms of the Offer, all Shares validly tendered
and not withdrawn pursuant to the Offer, and pay for such Shares as soon as
practicable pursuant to applicable law. The Offer will not remain open following
the time Shares are accepted for payment.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of shareholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See Section 12. Under the Texas Business Corporation Act ("TBCA"),
except as otherwise provided below, the affirmative vote of two-thirds of the
outstanding shares of Common Stock is required to approve the Merger Agreement
and the Merger.
Under Article 5.16 of the TBCA, if a corporation owns at least 90% of the
outstanding shares of each class of another corporation, the corporation holding
such stock may merge itself into such other corporation without any action or
vote on the part of the shareholders of such other corporation (a "short-form
merger"). In the event that the Purchaser acquires in the aggregate at least 90%
of the Shares pursuant to the Offer or otherwise, then TSI intends to cause the
Purchaser to effect a short-form merger without any vote of the shareholders of
the Company, subject to compliance with the provisions of Article 5.16 of the
TBCA.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not withdrawn as provided in Section 4 of this Offer to
Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City
time, on Friday, June 5, 1998, unless and until the Purchaser, in accordance
with the terms of the Merger Agreement, shall have extended the period of time
for which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the regulations thereunder (the "HSR Act"). See Section 14. If such
conditions are not satisfied prior to the Expiration Date, subject to the terms
of the Merger Agreement, the Purchaser reserves the right (but shall not be
obligated) to (i) decline to purchase and return any of the Shares tendered and
terminate the Offer, (ii) waive any of the conditions to the Offer, to the
extent permitted by applicable law, and, subject to complying with applicable
rules and regulations of the Securities and Exchange Commission (the
"Commission"), purchase all Shares validly tendered or (iii) extend the Offer
and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares that will have been tendered during the
period or periods for which the Offer is extended.
Subject to the terms of the Merger Agreement as described below, the
Purchaser expressly reserves the right, in its sole discretion, at any time or
from time to time, (i) to extend the period of time during which the Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Shares, by giving oral or written notice of such extension to the Depositary and
(ii) to amend the Offer in any respect by giving oral or written notice of such
amendment to the Depositary. The rights reserved by the Purchaser in this
paragraph are in addition to the Purchaser's rights to terminate the Offer as
described in Section 11. Any extension, amendment or termination will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of
applicable law, including Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without
limiting the obligation of the
2
<PAGE> 6
Purchaser under such Rules or the manner in which the Purchaser may choose to
make any public announcement, the Purchaser currently intends to make
announcements by issuing a press release to The Financial Relations Board, Inc.
The Merger Agreement provides that the Purchaser will not amend or waive
the Minimum Condition and will not decrease the consideration offered in the
Offer (the "Offer Price") or decrease the number of Shares sought, impose any
further conditions to the Offer or amend any other term or condition of the
Offer in any manner materially adverse to the holders of the Shares.
Notwithstanding the foregoing, the Merger Agreement provides that the Purchaser
may extend the Offer (i) if at the scheduled Expiration Date any of the
conditions to the Offer have not been satisfied, including but not limited to
any legal or regulatory requirements under the HSR Act, (ii) from time to time
for a maximum of an aggregate of ten business days beyond the initial Expiration
Date (which initial Expiration Date shall be twenty business days following the
commencement of the Offer), and (iii) for any period required by any rule,
regulation, interpretation or position of the Commission or the staff of the
Commission, applicable to the Offer. The Merger Agreement further provides,
however, that in no event may the Offer be extended beyond the date of
termination of the Merger Agreement, and either party has the right to terminate
the Merger Agreement if the Offer is not completed by August 31, 1998.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability of
the Purchaser to delay the payment for Shares that the Purchaser has accepted
for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated that in its view an offer must remain open
for a minimum period of time following a material change in the terms of the
Offer and that waiver of a material condition, such as the Minimum Condition, is
a material change in the terms of the Offer. The release states than an offer
should remain open for a minimum of five business days from the date a material
change is first published, sent or given to security holders and that, if
material changes are made with respect to terms of the Offer that are not
materially less significant than a change in the offer price or the number of
shares being sought, a minimum of ten business days may be required to allow
adequate dissemination and investor response. The requirement to extend the
Offer will not apply to the extent that the number of business days remaining
between the occurrence of the change and the then-scheduled Expiration Date
equals or exceeds the minimum extension period that would be required because of
such amendment. As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed by the Purchaser to record holders of Shares and will be
furnished by the Purchaser to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
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<PAGE> 7
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), promptly after the Expiration Date the Purchaser will accept for
payment and will pay for all Shares validly tendered prior to the Expiration
Date and not properly withdrawn in accordance with Section 4. All determinations
concerning the satisfaction of such terms and conditions will be within the
Purchaser's discretion, which determinations will be final and binding. See
Sections 1 and 4. The Purchaser expressly reserves the right, in its sole
discretion, to delay acceptance for payment of, or payment for, Shares in order
to comply in whole or in part with any applicable law, including, without
limitation, the HSR Act. Any such delays will be effected in compliance with
Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay
the consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of such
bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or a timely Book-Entry Confirmation (as defined below) with respect
to such Shares), (ii) a Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as
defined below), and (iii) any other documents required by the Letter of
Transmittal. If, prior to the Expiration Date, the Purchaser increases the Offer
Price, the Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer, whether or not such Shares were tendered prior
to such increase in the Offer Price.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering shareholders, the Purchaser's obligation to make such
payment shall be satisfied and tendering shareholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay
any stock transfer tax incident to the transfer to it of validly tendered
Shares, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility (as defined below) pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
Subject to the terms of the Merger Agreement, the Purchaser reserves the
right to transfer or assign, in whole or in part, to TSI or to one or more
direct or indirect wholly owned subsidiaries of TSI, the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve the Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering shareholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
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<PAGE> 8
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender
For Shares to be validly tendered pursuant to the Offer, either (i) a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either certificates for tendered Shares must be received by the Depositary at
one of such addresses or such Shares must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation received by the Depositary), in each case, prior to the Expiration
Date or (ii) the tendering shareholder must comply with the guaranteed delivery
procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedure for such
transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the tendering shareholder must comply with the guaranteed delivery procedures
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." The term "Agent's Message" means a
message transmitted by the Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that the Purchaser may enforce such agreement against the
participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees
No signature guarantee is required on the Letter of Transmittal (i) if the
Letter of Transmittal is signed by the registered holder(s) (which term, for
purposes of this Section, includes any participant in the Book Entry Transfer
Facility's systems whose name appears on a security position listing as the
owner of the Shares) of Shares tendered therewith and such registered holder has
not completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if
such Shares are tendered for the account of a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agent's Medallion Program, the New
York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution" and, collectively,
5
<PAGE> 9
"Eligible Institutions"). In all other cases, all signatures on Letters of
Transmittal must be guaranteed by an Eligible Institution. If the certificates
for Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made, or certificates for Shares
not tendered or not accepted for payment are to be returned, to a person other
than the registered holder or holders of the certificates surrendered, then the
tendered certificates for such Shares must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name or names of
the registered holders or owners appear on the certificates, with the signatures
on the certificates or stock powers guaranteed as aforesaid. See Instructions 1
and 5 to the Letter of Transmittal.
Guaranteed Delivery
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered if all the following
conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates (or a Book-Entry Confirmation) evidencing such
Shares, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents are received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the New York Stock
Exchange, Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
Appointment
By executing the Letter of Transmittal as set forth above, the tendering
shareholder irrevocably appoints designees of the Purchaser, and each of them,
as such shareholder's attorneys-in-fact and proxies in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after May 1, 1998, the date of the Merger Agreement. All such
proxies will be considered coupled with an interest in the tendered Shares. Such
appointment will be effective when, and only to the extent that, the Purchaser
accepts for payment Shares tendered by such shareholder as provided herein. Upon
such appointment, all prior powers of attorney, proxies and consents given by
such shareholder with respect to such Shares or other securities will, without
further action, be revoked and no subsequent powers of attorney, proxies,
consents or revocations may be given by such shareholder (and, if given, will
not be deemed effective). The designees of the Purchaser will thereby be
empowered to exercise all voting and other rights with respect to such Shares
and other securities, including, without limitation, in respect of any annual,
special or adjourned meeting of the Company's shareholders, actions by written
consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of
6
<PAGE> 10
such Shares, the Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares and other related securities, including
voting at any meeting of shareholders.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tender of Shares will be determined by the
Purchaser, in its sole discretion, which determination will be final and
binding. The Purchaser reserves the absolute right to reject any or all tenders
of any Shares determined by it not to be in proper form or the acceptance for
payment of, or payment for which may, in the opinion of the Purchaser's counsel,
be unlawful. The Purchaser also reserves the absolute right, in its sole
discretion, subject to the provisions of the Merger Agreement, to waive any of
the conditions of the Offer or any defect or irregularity in the tender of any
Shares of any particular shareholder, whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of the Purchaser, TSI, the
Depositary, the Information Agent, the Dealer Manager or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Backup Withholding
In order to avoid "backup withholding" of U.S. federal income tax on
payments of cash pursuant to the Offer, a shareholder surrendering Shares in the
Offer must, unless an exemption applies, provide the Depositary with such
shareholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such TIN is correct and
that such shareholder is not subject to backup withholding. If a shareholder
does not provide such shareholder's correct TIN or fails to provide the
certifications described above, the Internal Revenue Service may impose a
penalty on such shareholder and payment of cash to such shareholder pursuant to
the Offer may be subject to backup withholding of 31%. All shareholders
surrendering Shares pursuant to the Offer should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Purchaser and the Depositary). Certain shareholders (including, among others,
all corporations and certain foreign individuals and entities) are not subject
to backup withholding. Foreign shareholders, if exempt, should complete and sign
a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from
the Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after July 7, 1998. If the
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to accept Shares for payment pursuant to the Offer for any reason,
then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described herein.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an
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<PAGE> 11
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedures for book-entry transfer as set forth in Section 3, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, TSI, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for U.S. federal income tax purposes and also may be a
taxable transaction under state, local, foreign or other tax laws. In general, a
shareholder who tenders Shares in the Offer or receives cash in exchange for
Shares in the Merger will recognize gain or loss for federal income tax purposes
equal to the difference, if any, between the amount of cash received and the
shareholder's tax basis in the Shares sold. Gain or loss will be determined
separately for each block of Shares (i.e., Shares acquired at the same time and
price) exchanged pursuant to the Offer or the Merger. Such gain or loss
generally will be capital gain or loss if the Shares disposed of were held by
the shareholder as capital assets on the date of sale, and will be long-term
capital gain or loss if the holding period for the Shares disposed of is more
than one year at the date of sale. Under present law, long-term capital gains
recognized by an individual shareholder will generally be taxed at a maximum
federal marginal tax rate of 28% (or, in the case of certain gains on capital
assets held by an individual shareholder for more than 18 months, 20%), and
long-term capital gains recognized by a corporate stockholder will be taxed at a
maximum federal marginal tax rate of 35%.
A shareholder of Shares who perfects such shareholder's dissenter's rights,
if any, under the TBCA generally will recognize gain or loss in an amount equal
to the difference between the amount realized and such shareholder's tax basis
in such Shares.
Unless an exemption applies, the Depositary will be required to withhold
31% of any cash payments to which a shareholder or other payee is entitled
pursuant to the Offer or the Merger, unless the shareholder or other payee
provides his or her tax identification number (social security number or
employer identification number) and certifies that such number is correct. Each
shareholder and, if applicable, each other payee is required to complete and
sign the substitute Form W-9 that will be included as part of the Transmittal
Letter sent to shareholders of the Company by the Purchaser to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to TSI and the Depositary.
The foregoing summary constitutes a general description of certain U.S.
federal income tax consequences of the Offer and the Merger without regard to
the particular facts and circumstances of each shareholder of the Company and is
based on the provisions of the Internal Revenue Code of 1986, as amended,
Treasury Department Regulations issued pursuant thereto and published rulings
and court decisions in effect as of the date hereof, all of which are subject to
change, possibly with retroactive effect. No rulings have been or will be sought
from the Internal Revenue Service concerning the tax consequences of the Offer
and the Merger. Special tax consequences not described herein may be applicable
to certain shareholders subject to special tax treatment (including, but not
limited to, insurance companies, tax-exempt organizations, financial
institutions or broker dealers, foreign shareholders and shareholders who have
acquired their Shares pursuant to the exercise of employee stock options or
otherwise as compensation). ALL SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER AND THE
MERGER, INCLUDING THE APPLICABILITY AND
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<PAGE> 12
EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.
The Shares are traded on the NYSE under the symbol "FRA." The following
table sets forth, for each of the quarters indicated, the high and low reported
sales price per Share on the NYSE based on published financial sources.
<TABLE>
<CAPTION>
SALES PRICE
------------
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter............................................. $ 7 1/8 $4 1/2
Second Quarter............................................ 6 3/8 4 1/2
Third Quarter............................................. 9 5 3/4
Fourth Quarter............................................ 7 7/8 5 7/8
1997
First Quarter............................................. 9 6
Second Quarter............................................ 11 1/8 8 1/4
Third Quarter............................................. 10 6 1/4
Fourth Quarter............................................ 7 15/16 5 1/2
1998
First Quarter............................................. 5 7/8 4 3/4
Second Quarter............................................ 6 15/16 5
</TABLE>
On May 1, 1998, the last full trading day prior to the first public
announcement of the Purchaser's intention to commence the Offer, the last
reported sales price of the Shares on the NYSE was $6 3/4 per Share. On May 7,
1998, the last full trading day prior to the commencement of the Offer, the last
reported sales price of the Shares on the NYSE was $8 13/16 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has advised the Purchaser that the Company has not declared or
paid any cash dividends on its common stock since 1986.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS.
Market for the Shares
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and, depending upon the number of Shares so purchased, could adversely effect
the liquidity and market value of the remaining Shares held by the public.
Stock Listing
Depending upon the number of Shares purchased pursuant to the Offer, and
the aggregate market value and per share price of any Shares not purchased
pursuant to the Offer, the Shares may no longer meet the guidelines of the NYSE
for continued listing. According to the NYSE's published guidelines, the NYSE
would consider delisting the Shares if, among other things, the number of
recordholders of at least 100 Shares each should fall below 1,200, the number of
publicly held Shares (exclusive of holdings of officers, directors and their
families and other concentrated holdings of 10% or more ("NYSE Excluded
Holdings")) should fall below 600,000 or the aggregate market value of publicly
held Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000.
If, as a result of the purchase of Shares pursuant to the Offer or otherwise,
the Shares no longer meet the requirements of the NYSE for continued listing and
the listing of the Shares is discontinued, the market for the Shares would be
adversely affected.
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<PAGE> 13
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("Nasdaq") or other sources. The extent of the public market therefor and
availability of such quotations would depend, however, upon such factors as the
number of shareholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer price.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended November 2, 1997 (the "Company 1997 10-K"), as of January 9, 1998, there
were approximately 2,200 holders of record of Shares. According to information
provided by the Company, as of April 30, 1998, there were 10,286,357 Shares
outstanding.
Exchange Act Registration
The Shares currently are registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its shareholders and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement pursuant to Section 14(a) in connection with
shareholders' meetings and the related requirement of furnishing an annual
report to shareholders and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Company. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), may be impaired or eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for continued listing on any stock exchange or
Nasdaq. The Purchaser may seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from the NYSE and the registration of the Shares
under the Exchange Act will be terminated following the consummation of the
Merger.
Margin Regulations
The Shares presently are "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which status has the effect, among other things, of allowing brokers to extend
credit on the collateral of such securities. Depending upon factors similar to
those described above regarding listing and market quotations, it is possible
that, following the Offer, the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for loans made by
brokers.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities."
10
<PAGE> 14
8. CERTAIN INFORMATION CONCERNING THE COMPANY
General
The information concerning the Company contained in this Offer to Purchase,
including the information set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. Neither TSI nor the Purchaser assumes responsibility for
the accuracy or completeness of the information concerning the Company contained
in such documents and records or for any failure by the Company to disclose
events that may have occurred or that may affect the significance or accuracy of
any such information but that are unknown to TSI or the Purchaser.
The Company, founded in 1920, is a leading manufacturer and marketer of
apparel for men and boys. Beginning in fiscal 1996, a limited number of women's
products were added to the Company's product lines. The Company was incorporated
in Texas in 1947 as Farah Manufacturing Company, Inc. The name of the Company
was changed to Farah Incorporated in 1987.
The Company is organized as three distinct operating divisions: Farah
U.S.A., Inc. ("Farah U.S.A."), Farah International, Inc. ("Farah International")
and Savane Direct Incorporated ("Savane Direct," formerly Value Slacks, Inc.).
Farah U.S.A. (76% of consolidated revenue for fiscal 1997) manufactures and
sells a variety of casual and dress apparel to retailers throughout the United
States. Farah International (18% of consolidated revenue for fiscal 1997)
manufactures and sells apparel in Europe and the South Pacific region. Farah
International's primary markets are the United Kingdom, Australia and New
Zealand. Savane Direct (6% of consolidated revenue for fiscal 1997) operates
retail stores that sell first quality apparel manufactured by the Company,
close-outs and seconds from Farah U.S.A., and a limited amount of merchandise
purchased from third parties. As of November 2, 1997, Savane Direct had 36
retail stores, all located in the United States.
The Company is a Texas corporation with its principal executive offices at
4171 North Mesa, Building D, Suite 500, El Paso, Texas 79902-1433. The telephone
number of the Company at such offices is (915) 496-7000.
11
<PAGE> 15
Selected Financial Information
Set forth below is certain selected consolidated financial information with
respect to the Company, excerpted or derived from the Company 1997 10-K and its
Quarterly Report on Form 10-Q for the quarter ended February 2, 1998, both filed
with the Commission pursuant to the Exchange Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information (including any related notes) contained
therein. Such reports and other documents may be inspected and copies may be
obtained from the Commission in the manner set forth below.
FARAH INCORPORATED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED
------------------------- ---------------------------------------
FEBRUARY 1, FEBRUARY 2, NOVEMBER 2, NOVEMBER 3, NOVEMBER 3,
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Net sales.......................... $ 59,044 $ 61,938 $ 273,719 $ 247,598 $ 240,797
Operating income (loss)............ (2,943) (1,027) (578) 1,869 (13,027)
Income (loss) before income
taxes........................... (4,039) (1,390) (3,628) 9,737 (15,276)
Net income (loss).................. (3,070) (1,955) 270 6,756 (12,941)
Net income (loss) per share........ $ (0.30) $ (0.19) $ 0.03 $ 0.66 $ (1.28)
Shares outstanding................. 10,278,239 10,191,103 10,278,989 10,172,971 10,145,326
FINANCIAL POSITION AT PERIOD-END:
Total assets....................... $ 167,094 $ 149,624 $ 175,592 $ 153,863 $ 173,827
Long-term debt excluding current
installment..................... 15,083 4,919 13,771 4,706 12,568
Shareholders' equity............... 79,324 79,454 82,714 82,140 73,970
</TABLE>
Available Information
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is obligated to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interests of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's shareholders
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such information also may be obtained by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a website at http://www.sec.gov that contains
reports, proxy statements and other information. Such material may also be
available for inspection at the offices of the NYSE, located at 20 Broad Street,
New York, New York 10005.
Certain Projected Financial Information
In the course of its discussions with TSI described in Section 11, the
Company provided TSI and its financial advisors with certain business and
financial information that TSI believes was not and is not publicly available.
Such information included, among other things, certain financial projections
(the "Com-
12
<PAGE> 16
pany Projections") prepared by management of the Company as a long-range plan.
The Company Projections do not take into account any of the potential effects of
the transactions contemplated by the Offer and the Merger. The Company does not
as a matter of course publicly disclose internal projections as to future
revenues, earnings or financial condition. The Company Projections disclose,
among other things, the following:
<TABLE>
<CAPTION>
1998 FORECAST 1999 FORECAST
------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales................................................... $279,817 $301,747
Operating income............................................ 6,014 21,580
Income (loss) before income taxes........................... 806 16,597
Net income.................................................. 60 10,981
Net income per share........................................ 0.01 1.02
</TABLE>
THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE
PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION
WAS PROVIDED TO TSI. NONE OF TSI, THE PURCHASER OR ANY PARTY TO WHOM THE
PROJECTIONS WERE PROVIDED GIVES ANY ASSURANCES AS TO THE ACCURACY OF SUCH
INFORMATION. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE
BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESS OF THE COMPANY THAT
MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY AND TSI.
THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED, AND ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN
EXAMINED BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS
WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THE INCLUSION OF SUCH
PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT TSI, THE
PURCHASER OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN
ACCURATE PREDICTION OF FUTURE EVENTS.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND TSI.
General
The Purchaser, a Texas corporation and a wholly owned subsidiary of TSI,
was organized for the purpose of acquiring the Company and has conducted no
activities unrelated to such purpose since its organization. All of the issued
and outstanding shares of capital stock of the Purchaser are owned by TSI. The
principal executive offices of the Purchaser are located at the principal
executive offices of TSI. The telephone number of the Purchaser at such offices
is (813) 249-4900.
TSI markets and manufactures men's and women's sportswear including pants,
jeans, shorts and shirts through all major retail distribution channels
including department and specialty stores. TSI provides major retailers with
comprehensive brand management programs and distinguishes itself from
traditional private label manufacturers by providing apparel retailers with
customer, product and market analysis, apparel design, merchandising, and
inventory forecasting through the use of state-of-the-art technology. TSI is a
Florida corporation with its principal executive offices at 4209 West Waters
Avenue, Tampa, Florida 33634-1302. Its telephone number at such address is (813)
249-4900.
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<PAGE> 17
Selected Financial Information
Set forth below is certain selected consolidated financial information with
respect to TSI. Such financial information has been taken from the periodic
reports and other documents filed by TSI with the Commission. More comprehensive
information concerning TSI is included in such reports and other documents and
the financial information that follows is qualified in its entirety by reference
to such reports and other documents and all of the financial information and
notes contained therein. Such reports and other documents may be inspected and
copies may be obtained from the Commission in the manner set forth below.
TROPICAL SPORTSWEAR INT'L CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOURTEEN THIRTEEN
WEEKS WEEKS FISCAL YEARS ENDED
ENDED ENDED ---------------------------------------------
JANUARY 3, DECEMBER 28, SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 30,
1998 1996 1997 1996 1995
---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................ $ 35,094 $ 30,727 $ 151,692 $ 117,355 $ 110,064
Operating income................. 2,729 2,274 16,612 11,034 7,146
Income before income taxes....... 2,080 1,441 13,176 7,916 2,985
Net income....................... 1,305 919 8,269 5,171 2,160
Net income per share............. $ 0.18 $ 0.15 $ 1.37 $ 0.86 $ 0.36
Weighted average number of shares
used in the calculation....... 7,100,600 6,015,000 6,015,000 6,015,000 6,015,000
BALANCE SHEET DATA:
Total assets..................... $ 72,402 $ 71,290 $ 69,658 $ 63,415 $ 55,237
Long-term debt including
obligations under capital
leases........................ 16,819 9,561 24,055 24,162 27,175
Shareholders' equity............. 41,379 19,301 26,651 18,382 13,211
</TABLE>
Certain Information
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Purchaser and TSI are set forth in Schedule I hereto.
Except as set forth in this Offer to Purchase, neither the Purchaser or
TSI, nor, to the best of their knowledge, any of the persons listed on Schedule
I, nor any associate or majority-owned subsidiary of any of the foregoing,
beneficially owns or has a right to acquire any Shares, and neither the
Purchaser nor TSI nor, to the best of their knowledge, any of the persons or
entities referred to above, nor any of the respective executive officers,
directors or subsidiaries of any of the foregoing, has effected any transaction
in Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither the Purchaser or
TSI, nor, to the best of their knowledge, any of the persons listed on Schedule
I, has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies. Except as set forth in this Offer
to Purchase, none of the Purchaser, TSI, or any of their respective affiliates,
nor, to the best of their knowledge, any of the persons listed on Schedule I,
has had, since November 5, 1994, any business relationships or transactions with
the Company or any of its executive officers, directors or affiliates that would
require reporting under the rules of the Commission. Except as set forth in this
Offer to Purchase, since November 5, 1994, there have been no
14
<PAGE> 18
contacts, negotiations or transactions between the Purchaser, TSI, any of their
respective affiliates or, to the best of their knowledge, any of the persons
listed on Schedule I, and the Company or its affiliates concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets.
Available Information
TSI is subject to the informational filing requirements of the Exchange Act
and, in accordance therewith, is obligated to file reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning TSI's
directors and officers, their remuneration, options granted to them, the
principal holders of TSI's securities and any material interests of such persons
in transactions with TSI is required to be disclosed in proxy statements
distributed to TSI's shareholders and filed with the Commission. Such reports,
proxy statements and other information can be inspected and copied at the
offices of the Commission in the same manner as set forth with respect to
information concerning the Company in Section 8. Such material may also be
available for inspection at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006-1506.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all of the
Shares pursuant to the Offer and the Merger and to pay related fees and expenses
is expected to be approximately $100 million. The Purchaser plans to obtain the
necessary funds either through capital contributions or advances made directly
or indirectly by TSI.
TSI and the Purchaser anticipate that the funds required in connection with
the transactions contemplated by the Merger Agreement will be obtained through
the private placement of senior subordinated debt of TSI.
Pursuant to an Engagement Letter dated April 26, 1998, between Prudential
Securities and its affiliates, including Prudential Securities Credit Corp., and
TSI, Prudential Securities has been engaged to act as TSI's lead underwriter,
placement agent or initial purchaser, as the case may be, in connection with the
proposed issuance to institutional investors of up to $125 million aggregate
principal amount of senior subordinated notes of TSI (the "Securities"). The net
proceeds to TSI from the sale of the Securities principally will be used to
finance the Offer and the Merger and to pay related fees and expenses. This
Offer to Purchase does not constitute an offer to sell or a solicitation of an
offer to buy any of the Securities to be placed by Prudential Securities.
In addition, TSI has received a letter (the "Commitment Letter") dated
April 26, 1998, from Prudential Securities Credit Corp. ("Prudential Credit")
pursuant to which Prudential Credit has committed, subject to the terms and
conditions of the Commitment Letter, to provide TSI with a senior subordinated
exchangeable bridge loan in an initial aggregate principal amount of up to $100
million (the "Bridge Loan"), that will be available to TSI and the Purchaser on
the date of the consummation of the Offer if for any reason the net proceeds
from the sale of Securities have not been received by TSI on or prior to the
date of such consummation.
Borrowings under the Bridge Loan will mature in one year. If, upon
maturity, TSI fails to repay the Bridge Loan in full and provided that no
default or event of default exists on such date (other than the failure to repay
the Bridge Loan on the maturity date), any then outstanding portion of the
Bridge Loan shall automatically be exchanged for senior subordinated exchange
notes (the "Exchange Notes"), which will mature on the date that is 180 days
after the original maturity date of TSI's five-year revolving credit facility.
The Bridge Loan will initially bear interest at a rate per annum equal to the
sum of (a) the three-month London interbank offered rate, adjusted for reserves
("LIBOR") calculated on the basis of the actual number of days elapsed in a year
of 360 days plus (b) a spread (the "Spread") of 400 basis points. If the Bridge
Loan is not repaid in whole within 90 days following the date of the
consummation of the Offer, the Spread will increase by 50 basis points at the
end of such ninety-day period and shall increase by an additional 50 basis
15
<PAGE> 19
points at the end of each 90-day period thereafter until the Maturity Date. If
Exchange Notes are issued on the Maturity Date, the Exchange Notes will bear a
fixed rate of interest per annum equal to the sum of the interest rate in effect
with respect to the Bridge Loan immediately prior to the issuance of the
Exchange Notes plus 100 basis points; provided, however, that the interest rate
applicable to the Bridge Loan and Exchange Notes shall not exceed (i) 18% per
annum or (ii) the maximum rate permitted by applicable law.
The Bridge Loan will contain such covenants with respect to TSI and its
subsidiaries as are usual and customary for financing of this kind. Borrowings
under the Bridge Loan are subject to the satisfaction or waiver of certain
conditions, including, without limitation: (i) the execution and delivery of
definitive documentation with respect to the Bridge Loan, in form and substance
reasonably satisfactory to Prudential Credit, (ii) all conditions precedent to
the Offer shall have been satisfied or, with consent of Prudential Credit,
waived, and (iii) receipt of all necessary governmental, shareholder and
material third-party approvals.
Pursuant to the Commitment Letter, TSI has agreed to pay certain fees to
Prudential Credit to reimburse Prudential Credit for certain expenses and to
provide certain indemnities, as is customary for commitments of the type
described herein. The foregoing discussion of the Commitment Letter is qualified
in its entirety by reference to the Commitment Letter, a copy of which has been
filed with the Commission as an Exhibit to the Schedule 14D-1.
TSI anticipates that the loans made to TSI under the Bridge Loan will be
repaid from the offering and sale of Securities. TSI further anticipates that
amounts outstanding under the Securities will be repaid from a variety of
sources, including, without limitation, funds generated internally by TSI and
its subsidiaries (including, following the Merger, funds generated by the
Company and its subsidiaries) bank refinancing and the public or private sale of
debt or equity securities. No final decisions have been made concerning the
sources to be utilized or the methods by which TSI and its subsidiaries will
repay such indebtedness. Such decisions will be made and may be modified by TSI
based on then prevailing market conditions and such other factors as TSI deems
appropriate.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
The following description was prepared by TSI and the Company. Information
about the Company was provided by the Company and neither the Purchaser nor TSI
takes any responsibility for the accuracy or completeness of any information
regarding meetings or discussions in which TSI or its representatives did not
participate.
Background of the Offer
TSI has principally grown internally through increased sales of core
products to current customers, sales to new customers and expansion into
complementary apparel product lines. TSI has also monitored opportunities to
grow through acquisition of either established brands or established companies.
On December 31, 1997, William W. Compton, Chairman of the Board and Chief
Executive Officer of TSI, telephoned Richard C. Allender, President and Chief
Executive Officer of the Company, to discuss a possible business combination
between the companies. Mr. Allender requested that TSI submit to the Company a
letter of interest prior to further discussions. TSI drafted and submitted such
a letter of interest to the Company on January 6, 1998. The letter of interest
did not contain any terms with regard to an acquisition proposal. On January 8,
1998, Mr. Allender contacted Mr. Compton and indicated that due to personal
circumstances he would prefer to delay any further discussions until February,
1998.
In December, 1997, Prudential Securities began informally working with TSI
as its financial advisor in connection with a potential acquisition of the
Company.
In February, 1998, Mr. Compton telephoned Mr. Allender and the parties
continued their review of the potential benefits of various forms of business
combinations between them.
16
<PAGE> 20
On March 23, 1998, Mr. Allender and Mr. Charles J. Smith, a director of the
Company, traveled to Tampa, Florida and met with Mr. Compton, Mr. Michael Kagan,
Executive Vice President and Chief Financial Officer of TSI and Mr. Richard J.
Domino, President of TSI. The parties discussed recent developments in the
apparel industry and continued their review of the potential benefits of various
strategic relationships including the possibility of combining the companies.
Prior to these discussions, TSI entered into a Confidentiality Agreement with
the Company dated March 20, 1998, a copy of which is filed as an Exhibit to the
Schedule 14D-1, pursuant to which, among other things, TSI agreed that any
non-public information made available to it by the Company would be held in
strict confidence. Also prior to these discussions, on March 23, 1998, the
Company entered into a Confidentiality Agreement with TSI, a copy which is filed
as an Exhibit to the Schedule 14D-1, pursuant to which, among other things, the
Company agreed that any non-public information made available to it by TSI would
be held in strict confidence.
On March 26, 1998, the Company entered into an agreement with Financo
pursuant to which Financo was engaged as the Company's exclusive agent to review
and analyze the financial and structural alternatives available to the Company,
with a view toward meeting its long-term strategic objectives and the
maximization of shareholder value, including but not limited to, (a) identifying
opportunities for the possible sale of the Company; (b) advising the Company
concerning opportunities for such a sale, whether or not identified by Financo;
and (c) as requested by the Company, participating on the Company's behalf in
negotiations concerning such a sale.
On March 26, 1998, TSI entered into a new Confidentiality Agreement with
the Company, a copy of which is filed as an Exhibit to the Schedule 14D-1,
pursuant to which, among other things, TSI agreed that any non-public
information made available to it would be held in strict confidence, and further
agreed to a two year standstill with regard to initiating any form of business
combination or other acquisition transaction involving the Company, with regard
to initiating any purchase or sale of any securities of the Company and with
regard to inducing certain employees of the Company to leave the employ of the
Company, unless TSI was specifically invited or authorized to initiate such a
transaction by the Company or the Company provided its prior written consent.
(The Confidentiality Agreements signed on March 20, 1998 and March 26, 1998 are
hereinafter referred to collectively as the "Confidentiality Agreements").
On March 26, 1998, TSI was invited to conduct a due diligence investigation
of the Company. Commencing on April 1, 1998, members of a due diligence team
established by TSI conducted detailed due diligence involving a presentation by
the Company's management, interviews of the Company's independent auditors and a
detailed review of confidential information provided by the Company in a data
room. Due diligence contacts and communications with the Company continued to
occur on a regular basis until May 1, 1998.
On April 8, 1998, Mr. Compton traveled with certain other operational
personnel to several of the Company's facilities in Mexico accompanied by Mr.
Allender and Jackie L. Boatman, Executive Vice President -- Operations of the
Company. The parties toured the facilities and discussed various aspects of
their operations.
On April 16, 1998, Mr. Compton traveled with certain other operational
personnel to several of the Company's facilities in Costa Rica accompanied by
Mr. Boatman. The parties toured the facilities and discussed various aspects of
their operations.
On April 6, 1998, Financo, on behalf of the Company, issued a letter
advising TSI of the process that would govern the submission of acquisition
proposals. Pursuant to this letter, all bidders were requested to transmit to
Financo a non-binding expression of interest concerning such possible
acquisition. The written proposals were due to be submitted no later than 5:00
p.m. New York City time, on Monday, April 27, 1998.
On April 17, 1998, Financo, on behalf of the Company, submitted to TSI two
forms of acquisition agreements, one of which contemplated a merger and the
other drafted to include a tender offer and a merger, and requested that TSI
review and provide comments to one of the acquisition agreements as part of its
written proposal on April 27, 1998.
17
<PAGE> 21
On April 22, 1998, the Board of Directors of TSI (the "TSI Board"), met and
reviewed with TSI's management and financial and legal advisors the due
diligence conducted to date and the financial and operational implications of an
acquisition of the Company. The TSI Board authorized TSI to make a non-binding
proposal to acquire all of the outstanding Shares of the Company subject to a
price limitation.
On April 27, 1998, TSI submitted a non-binding proposal to Financo, which
included proposed terms of employment agreements with the following of the
Company's executives: Mr. Allender, Mr. Gibson, Mr. Boatman, Mr. Mitchell, Mr.
Kernaghan, and Mr. Martinez. The proposal also included TSI's intention to add
two of the Company's directors to the TSI Board. The proposal was to expire on
May 1, 1998.
On April 29, 1998, a representative of Financo contacted a representative
of TSI's financial advisor and suggested that TSI consider improving the value
of TSI's acquisition proposal. Thereafter, following a meeting among certain of
the executive officers of TSI and consultation with TSI's financial advisors,
TSI increased its offer to $9.00 per Share, which offer was to expire at 5:00
p.m., New York City time, on May 1, 1998.
On April 30, 1998, members of TSI's management and representatives of TSI's
outside counsel and representatives of TSI's financial advisors met with
representatives of the Company, their financial advisors and their outside
counsel to negotiate the terms of the Merger Agreement. Intensive discussions
regarding the Merger Agreement continued among the parties and their advisors
through May 1, 1998.
On May 1, 1998, Financo delivered to Company's Board of Directors its
written opinion to the effect that the consideration to be received by the
public shareholders of the Company in the Offer and Merger is fair to such
shareholders from a financial point of view as of the date of such meeting. The
opinion of Financo is set forth in full as Exhibit to the Company's Schedule
14D-9, which is being mailed to the shareholders of the Company concurrently
with this Offer to Purchase. The shareholders of the Company are urged to read
that opinion in its entirety.
At a special meeting held on May 1, 1998, the TSI Board reviewed the
transactions and, following presentations by senior officers and financial and
legal advisors of TSI, unanimously approved the Merger Agreement, the Offer, and
the Merger.
The Company's Board of Directors held a special meeting on May 1, 1998,
where presentations from senior management of the Company and the Company's
financial and legal advisors were made regarding the proposed transaction
between the Company and TSI. The Board of Directors of the Company thereafter
unanimously approved the Merger Agreement, the Offer and the Merger and
determined that the terms of the Offer and Merger were fair to, and in the best
interest of, the Company's shareholders, and unanimously recommended that the
shareholders of the Company accept the Offer and tender their Shares.
In the evening of May 1, 1998, the parties executed the Merger Agreement.
On May 4, 1998 (prior to the opening of the stock market on the first business
day following execution of the Merger Agreement), the parties publicly announced
the strategic combination.
On May 8, 1998, the Purchaser and TSI commenced the Offer.
Purpose of the Offer and the Merger
The purpose of the Offer, the Merger and the Merger Agreement is to enable
TSI to acquire control of, and the entire equity interest in, the Company. The
Offer is being made pursuant to the Merger Agreement and is intended to increase
the likelihood that the Merger will be effected. The purpose of the Merger is to
acquire all outstanding Shares not purchased pursuant to the Offer. The
transaction is structured as a tender offer followed by a merger in order to
ensure the acquisition by the Purchaser of all the outstanding Shares. Upon
consummation of the Merger, the Company will become a wholly owned subsidiary of
TSI.
If the Merger is consummated, TSI's common equity interest in the Company
would increase to 100% and TSI would be entitled to all benefits resulting from
that interest. These benefits include complete management with regard to the
future conduct of the Company's business and any increase in its value.
Similarly, TSI will also bear the risk of any losses incurred in the operation
of the Company and any decrease in the value of the Company.
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<PAGE> 22
Shareholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company and any opportunity to participate in
its earnings and any future growth. If the Merger is consummated, the
shareholders will no longer have an equity interest in the Company and instead
will have only the right to receive cash consideration pursuant to the Merger
Agreement or to exercise statutory dissenters' rights under Texas law. See
Section 12. Similarly, the shareholders of the Company will not bear the risk of
any decrease in the value of the Company after selling their Shares in the Offer
or the subsequent Merger.
The primary benefits of the Offer and the Merger to the shareholders of the
Company are that such shareholders are being afforded an opportunity to sell all
of their Shares for cash at a price which represents a premium of approximately
33.3% over the closing market price of the Shares on May 1, 1998, the last full
trading day prior to the initial public announcement of the Offer.
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an Exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 9 of this Offer to Purchase.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser will not amend or waive the Minimum Condition and will not decrease
the Offer Price or decrease the number of Shares sought in the Offer, impose any
further conditions to the Offer or amend any condition of the Offer in a manner
materially adverse to the holders of Shares. Notwithstanding the foregoing, the
Merger Agreement provides that the Purchaser may extend the Offer (i) if at the
scheduled Expiration Date any of the conditions to the Offer have not been
satisfied, including but not limited to any legal or regulatory requirements
under the HSR Act, (ii) from time to time for a maximum of an aggregate of ten
business days beyond the initial Expiration Date (which initial Expiration Date
shall be twenty business days following the commencement of the Offer), and
(iii) for any period required by any rule, regulation, interpretation or
position of the Commission or the staff of the Commission applicable to the
Offer. The Merger Agreement further provides, however, that in no event may the
Offer be extended beyond the date of termination of the Merger Agreement, and
either party has the right to terminate the Merger Agreement if the Offer is not
completed by August 31, 1998.
The Merger. The Merger Agreement provides that following the consummation
of the Offer and subject to the terms and conditions thereof, in accordance with
Texas law, in the event that the Purchaser shall acquire at least 90% of the
outstanding Shares of the Company, at the Effective Time the Purchaser shall be
merged with and into the Company and, as a result of the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation"). In the event that
the Purchaser does not acquire at least 90% of the Shares, the Company will duly
call, give notice of, convene and hold an annual or special meeting of its
shareholders as soon as practicable following the consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
Merger (the "Shareholders Meeting").
The respective obligations of TSI and the Purchaser, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction of each of the following conditions: (i) the Merger Agreement shall
have been approved by the requisite vote of the holders of Shares, to the extent
required by applicable law, the Company's Articles of Incorporation and Bylaws
and by the NYSE; (ii) no governmental authority shall have enacted, issued,
promulgated, enforced or entered any law, order, executive order, stay, decree,
judgment, injunction or other order or statute, rule or regulation which is in
effect and which has the effect of making the acquisition of Shares by the
Purchaser or TSI or any affiliate of either of them illegal or otherwise
preventing or prohibiting consummation of the Offer or the Merger; (iii) the
Purchaser shall have
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purchased all Shares validly tendered and not withdrawn pursuant to the Offer,
unless such failure to purchase is a result of a breach of the Purchaser's
obligation to purchase any Shares validly tendered and not withdrawn pursuant to
the Offer; and (iv) the applicable waiting period under the HSR Act shall have
expired or been terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company as treasury stock, any Shares
owned by TSI, the Purchaser or any other wholly owned Subsidiary of TSI, or any
Shares that are held by shareholders exercising dissenters' rights under Texas
law) will be converted into the right to receive the price per share paid
pursuant to the Offer and (ii) each issued and outstanding share of the common
stock, par value $.01 per share, of the Purchaser will be converted into one
share of common stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly after the purchase by the Purchaser of Shares pursuant to the Offer,
the Purchaser shall be entitled to designate such number of directors, rounded
up to the next whole number, on the Company's Board of Directors as is equal to
the product of the total number of directors on the Company's Board of Directors
(giving effect to the directors designated by the Purchaser) multiplied by the
percentage that the number of Shares beneficially owned by the Purchaser or TSI
bears to the total number of Shares then outstanding. The Company will promptly
take all actions necessary to cause the Purchaser's designees to be elected as
directors of the Company, including increasing the size of the Company's Board
of Directors or securing the resignations of such number of its incumbent
directors or both.
Shareholders' Meeting. If required by applicable law in order to
consummate the Merger, the Company agrees, in accordance with applicable law and
the Company's Restated Articles of Incorporation and Amended and Restated
Bylaws, to (a) duly call, give notice of, convene and hold an annual or special
meeting of its shareholders as soon as practicable following consummation of the
Offer for the purpose of considering and taking action on the Merger Agreement
and the transactions contemplated thereby and (b) subject to the fiduciary
obligations of the Company's Board of Directors, include in the Proxy Statement
for the Shareholders Meeting the recommendation of the Company's Board of
Directors that the shareholders of the Company approve the Merger Agreement and
the Merger and use its reasonable best efforts to obtain such approval. To the
extent permitted by law, TSI and the Purchaser each agree to vote all Shares
beneficially owned by them in favor of the Merger. Further, if required by
applicable law in order to consummate the Merger, as promptly as practicable
after the purchase of all Shares validly tendered and not withdrawn pursuant to
the Offer, the Company shall file a Proxy Statement with the Commission under
the Exchange Act, and shall use its reasonable best efforts to have the Proxy
Statement cleared by the Commission. The Company agrees to give TSI and its
counsel the opportunity to review the Proxy Statement prior to its being filed
with the Commission and will give TSI and its counsel the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, the Commission. If the Purchaser acquires at least two-
thirds of the outstanding Shares, the Purchaser will have sufficient voting
power to approve the Merger, even if no other shareholder votes in favor of the
Merger.
The Merger Agreement provides that in the event that the Purchaser acquires
at least 90% of the outstanding Shares, pursuant to the Offer or otherwise, TSI,
the Purchaser and the Company will, at the request of TSI and subject to the
terms of the Merger Agreement, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Company, in accordance
with Texas law.
Options and Restricted Stock. Immediately after the Purchaser has accepted
for payment all Shares validly tendered and not withdrawn prior to the
Expiration Date, each outstanding option to purchase Shares (in each case, an
"Option") granted under (a) the Company's 1991 Stock Option and Restricted Stock
Plan, as amended, (b) the Company's 1988 Stock Option Plan for Non-Employee
Directors (c) the Company's 1996 Non-Employee Director Stock Option Plan, as
amended, (d) the Company's 1998 Stock Option and Restricted Stock Plan, and (e)
the Company's 1986 Stock Option Plan (such plans (a) through
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<PAGE> 24
(e) hereinafter the "Company Option Plans"), whether or not then exercisable or
vested, shall, subject to the Company's receipt of any required consent of the
holders of such Options, be canceled by the Company, and each holder of a
canceled Option shall be entitled to receive from the Purchaser at the same time
as payment for Shares is made by the Purchaser in connection with the Offer, in
consideration for the cancellation of such Option, an amount in cash equal to
the product of (i) the number of Shares previously subject to such Option and
(ii) the excess, if any, of the Offer Price over the exercise price per Share
previously subject to such Option. Immediately prior to the acceptance for
payment by the Purchaser of all Shares validly tendered and not withdrawn prior
to the Expiration Date, all restrictions on any restricted stock awards granted
under the Company Option Plans shall lapse and the holders of such restricted
stock shall be entitled to receive from the Purchaser at the same time as
payment for Shares is made by the Purchaser in connection with the Offer in
consideration for the restricted stock an amount in cash equal to the product of
(i) the number of Shares subject to such restricted stock award and (ii) the
Offer Price.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the
Company agreed that, between the date of the Merger Agreement and the election
or appointment of the Purchaser's designees to the Company's Board of Directors
upon the purchase by the Purchaser of Shares pursuant to the Offer, unless TSI
otherwise agrees in writing (which agreement will not be unreasonably withheld),
(1) the business of the Company and its subsidiaries (the "Subsidiaries") will
be conducted only in, and the Company and the Subsidiaries will not take any
action except in, the ordinary course of business and in a manner substantially
consistent with past practice, (2) the Company will use all reasonable efforts
to preserve substantially intact its business organization, to keep available
the services of the current officers, employees and consultants of the Company
and the Subsidiaries and to preserve the current relationships of the Company
and the Subsidiaries with customers, suppliers and other persons with which the
Company or any Subsidiary has significant business relations, (3) the Company
will not, and will not permit any Subsidiary to take, any action that would (i)
materially and adversely affect the ability of any party to the Merger Agreement
to obtain any consents required for the Offer or the Merger, (ii) cause any of
the conditions to the Offer or the Merger not to be satisfied, or (iii)
materially and adversely affect the ability of any party to perform its
covenants and agreements under the Merger Agreement, and (4) the Company will
not, and will not permit any Subsidiary to: (a) amend or otherwise change its
articles of incorporation or bylaws or other organizational or governing
documents; (b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares
of capital stock of the Company or any Subsidiary of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest of the Company or
any Subsidiary (except for shares of the Company's common stock, if any,
issuable under agreements currently in effect and shares of capital stock
pursuant to currently outstanding Options or employee benefit plans currently in
effect), or (ii) any of the Company's or any Subsidiaries' assets, except for
sales in the ordinary course of business and in a manner consistent with past
practice; (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or sell, lease, mortgage or otherwise dispose of or
otherwise encumber any shares of capital stock of any Subsidiary; (d)
reclassify, combine, split, divide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock; (e) (i) acquire any interest
in any corporation, partnership, other business organization or any division
thereof or any assets, other than the acquisition of assets in the ordinary
course of business consistent with past practice; (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the obligations of any
person, or make any loans or advances, except for indebtedness incurred in the
ordinary course of business and consistent with past practice with a maturity of
not more than one year in a principal amount not, in the aggregate, in excess of
$1,000,000; (iii) enter into, modify, amend or terminate any contract or
agreement material to the business, results of operations or financial condition
of the Company other than in the ordinary course of business, consistent with
past practice; (iv) authorize any capital expenditure; (v) impose, or suffer the
imposition, on any asset of the Company or any Subsidiary of any lien or permit
any such lien to exist; or (vi) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this
subsection (e); (f) except in the ordinary course of business consistent with
past practice and except in the case of officers for annual increases in
compensation payable or to become payable to any officer of the Company
consistent with
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past practice of the Company, (i) increase the compensation payable or to become
payable to any director, officer or other employee, or grant any bonus to, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Company
or any Subsidiary or enter into or amend any collective bargaining agreement, or
(ii) establish, adopt, enter into or amend any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation or other plan, trust or fund for the benefit of any director,
officer or class of employees; (g) commence any litigation other than in
accordance with past practice, or settle or compromise any pending or threatened
litigation which is material or which relates to the Offer or the Merger; (h)
grant or convey to any person any rights, including, but not limited to, by way
of sale, license or sublicense, in any of the Company's intellectual property;
(i) make any significant change in any tax or accounting methods, principles or
practices or systems of internal accounting controls, except as may be
appropriate to conform to changes in tax laws or generally accepted accounting
principles ("GAAP"); or (j) after the date of the Merger Agreement, file any
material tax return without the prior consent of TSI, which consent will not be
unreasonably withheld.
Pursuant to the Merger Agreement, subject to the Confidentiality
Agreements, from the date of the Merger Agreement to the election or appointment
of the Purchaser's designees to the Company's Board of Directors upon the
purchase by the Purchaser of Shares pursuant to the Offer, the Company will
provide TSI, during normal business hours and upon reasonable notice, access to
all financial, operating and other data and information regarding the business
of the Company as TSI reasonably requests, other than information and documents
that in the opinion of the Company's counsel may not be disclosed under
applicable law.
No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that neither the Company nor any of its Subsidiaries will, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage the submission of any proposal or offer from any person relating to
any acquisition or purchase of all or any material portion of the assets of, or
any equity interest in, the Company or any Subsidiary or any merger,
consolidation, share exchange, business combination or other similar transaction
with the Company or any Subsidiary (a "Business Combination Proposal") or
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that nothing shall
prohibit the Company from furnishing information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
Business Combination Proposal by such person received by the Company after the
date of the Merger Agreement, if, and only to the extent that, (a) a majority of
the disinterested members of the Company's Board of Directors, after
consultation with the Company's independent financial advisor and based on the
advice of outside counsel, determines in good faith that such action is required
in order for the Company's Board of Directors not to breach its fiduciary duties
to shareholders imposed by law and (b) prior to furnishing such information to,
or entering into discussions or negotiations with, such person, the Company (i)
gives TSI as promptly as practicable prior written notice of the Company's
intention to furnish such information or begin such discussions, the identity of
such person and the material terms of such Business Combination Proposal and
(ii) receives from such person an executed confidentiality agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement executed by TSI in favor of the Company.
The Company also agreed, pursuant to the Merger Agreement, that neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to TSI or the
Purchaser, the approval or recommendation by such Board of Directors or any such
committee thereof, the Offer, the Merger Agreement or the Merger or (ii) approve
or recommend, or propose to approve or recommend, any Business Combination
Proposal. Notwithstanding the foregoing, the Board of Directors of the Company,
to the extent required by the fiduciary obligations thereof, as determined in
good faith by a majority of the disinterested members thereof based on the
advice of outside counsel, may approve or recommend (and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer, the
Merger Agreement and the Merger) a Superior Proposal. "Superior Proposal" means
a bona fide Business Combination Proposal made by a third party to acquire,
directly or indirectly, all of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms that a
majority
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of the disinterested members of the Board of Directors of the Company determines
in its good faith judgment (based on the advice of the the Company's independent
financial advisor) to be more favorable to the holders of Shares than the Offer
and the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of a majority of such
disinterested members (based on the advice of the Company's independent
financial advisor), is reasonably capable of being financed by such third party.
Indemnification and Insurance. Pursuant to the Merger Agreement, TSI and
the Purchaser have agreed that the Articles of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the Restated Articles of Incorporation and
Amended and Restated Bylaws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers or employees of the Company or any of the Subsidiaries, unless such
modification shall be required by Texas law. In addition, from and after the
Effective Time, TSI and the Surviving Corporation shall indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
of the Merger Agreement or who becomes prior to the Effective Time, an officer,
director, employee or agent of the Company or any of the Subsidiaries
(collectively, the "Indemnified Parties") against all losses, expenses
(including reasonable attorneys' fees), claims, damages, liabilities or amounts
that are paid in settlement of, with the approval of the Surviving Corporation
(which approval shall not unreasonably be withheld), or otherwise in connection
with, any threatened or actual claim, action, suit, proceeding or investigation
(a "Claim"), based in whole or in part on or arising in whole or in part out of
the fact that the Indemnified Party (or the person controlled by the Indemnified
Party) is or was a director, officer, employee or agent of the Company or any of
the Subsidiaries and pertaining to any matter existing or arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, any Claim arising out of the Merger Agreement or any of the
transactions contemplated thereby), whether asserted or claimed prior to, at or
after the Effective Time, in each case to the fullest extent permitted under
Texas law and by the Company's Restated Articles of Incorporation and Amended
and Restated Bylaws as in effect on May 1, 1998, and shall pay any expenses, as
incurred, in advance of the disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Texas law and by the
Company's Restated Articles of Incorporation and Amended and Restated Bylaws as
in effect on May 1, 1998.
TSI and the Purchaser also agreed, pursuant to the Merger Agreement, to
maintain in effect for three years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that TSI may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time;
provided, that neither TSI nor the Surviving Corporation shall be obligated to
make aggregate premium payments for such three-year period in respect of such
policy (or coverage replacing such policy) which exceed, for the portion related
to the Company's directors and officers, 150% of the annual premium payments of
the Company's current policy in effect as of May 1, 1998 (the "Maximum Amount").
If the amount of the premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, TSI shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to TSI and the
Purchaser with respect to, among other things, its organization, capitalization,
financial statements, public filings, conduct of business, employee benefit
plans, intellectual property, labor matters, compliance with laws, tax matters,
litigation, environmental matters, tangible property, material contracts,
undisclosed liabilities, and the absence of any material adverse effect on the
Company since November 2, 1997.
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Termination; Fees. The Merger Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time,
(a) by mutual written consent duly authorized by the boards of
directors of each of TSI, the Purchaser and the Company prior to the date
of the election or appointment of the Purchaser's designees to the
Company's Board of Directors upon the purchase by the Purchaser of Shares
pursuant to the Offer;
(b) by either TSI or the Company if the Effective Time shall not have
occurred on or before August 31, 1998;
(c) by TSI if: (i) due to an occurrence or circumstance that results
in a failure to satisfy any condition of the Offer, the Purchaser shall
have (A) failed to commence the Offer within 10 days following the date of
the Merger Agreement, (B) terminated the Offer without having accepted any
Shares for payment thereunder or (C) failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer, unless
any such failure listed above shall have been caused by or resulted from
the failure of TSI or the Purchaser to perform in any material respect any
covenant or agreement of either of them contained in the Merger Agreement
or the material breach by TSI or the Purchaser of any representation or
warranty of either of them contained in the Merger Agreement; or (ii) prior
to the purchase of Shares pursuant to the Offer, (A) the Company's Board of
Directors withdraws its recommendation of the Merger Agreement or the
Merger or shall have resolved to do so, (B) the Company's Board of
Directors shall have recommended to the shareholders of the Company any
Superior Proposal or resolved to do so, or (C) a tender offer or exchange
offer for 50% or more of the outstanding shares of capital stock of the
Company is commenced (other than by TSI or its affiliates) and the
Company's Board of Directors fails to recommend against the shareholders of
the Company tendering their shares into such tender offer or exchange
offer; or
(d) by the Company if: (i) the Purchaser shall have (A) failed to
commence the Offer within 10 days following the date of the Merger
Agreement, (B) terminated the Offer without having accepted any Shares for
payment thereunder or (C) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer, unless such failure
to pay for Shares shall have been caused by or resulted from the failure of
the Company to satisfy the conditions set forth in paragraph (c) of the
conditions to the Offer as set forth under Section 14 below (the
"Conditions to the Offer"); or (ii) prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company approves or
recommends a Superior Proposal.
The above referenced termination provisions are sometimes referred to,
collectively, or individually, as the "Termination Rights."
Pursuant to the Merger Agreement, the Company shall pay TSI a fee (an
"Alternative Proposal Fee") equal to three percent (3%) of the aggregate amount
payable by the Purchaser to the shareholders of Company pursuant to the Offer
and the Merger, plus all of the TSI Expenses (as hereinafter defined), if:
(i) the Merger Agreement is terminated pursuant to paragraph (c)(ii)
or (d)(ii) of the Termination Rights; or
(ii) the Merger Agreement is terminated pursuant to a Termination
Right (other than (A) due to an occurrence or circumstance that results in
a failure to satisfy paragraphs (a), (f) or (h) of the Conditions to the
Offer or (B) pursuant to paragraph (d) of the Termination Rights, unless
the event providing the basis for such termination is the result of an
occurrence or circumstance that results in a failure to satisfy paragraphs
(b) or (c) of Conditions of the Offer), and (A) the Offer shall have
remained open for at least twenty (20) business days, (B) the Minimum
Condition shall not have been satisfied, (C) a Business Combination
Transaction Proposal shall have been made prior to termination of the
Offer, and (D) such Business Combination Transaction is thereafter
consummated within 12 months of such termination. "Business Combination
Transaction" means any of the following involving the Company: (1) any
merger, consolidation, share exchange, business combination or other
similar transaction; (2) any sale, lease, exchange, transfer or other
disposition (other than a pledge or mortgage) of 50% or more of the assets
of the Company in a single transaction or series of related transactions;
or
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(3) the acquisition by a person or entity or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 50% or more of the
shares of the Company's common stock, whether by tender offer, exchange
offer or otherwise.
TSI shall be entitled to receive the TSI Expenses (but not the Alternative
Proposal Fee) in immediately available funds in the event that the Merger
Agreement is terminated by TSI pursuant to paragraph (c)(i) of the Termination
Rights (other than due to an occurrence or circumstance that results in a
failure to satisfy paragraphs (a), (f) or (h) of the Conditions to the Offer
hereto in which case such TSI Expenses shall not exceed $1,500,000).
As used herein, "TSI Expenses" means all reasonable out-of-pocket expenses
and fees actually incurred by TSI or the Purchaser or on their respective behalf
in connection with the Offer and the Merger prior to the termination of the
Merger Agreement (including, without limitation, all fees and expenses of
counsel, financial advisors, banks or other entities providing financing to TSI
(including financing, commitment and other fees payable thereto), accountants,
environmental and other experts and consultants to TSI and its affiliates, and
all printing and advertising expenses) and in connection with the negotiation,
preparation, execution, performance and termination of the Merger Agreement, the
structuring of the Offer and the Merger, any agreements relating thereto and any
filings to be made in connection therewith.
Except as set forth in this Section, all costs and expenses incurred in
connection with the Merger Agreement and the Offer and the Merger shall be paid
by the party incurring such expenses, whether or not the Offer or the Merger is
consummated.
Employment Agreement
Richard C. Allender, the Chairman of the Board, Chief Executive Officer and
President of the Company, currently has an employment agreement with the Company
dated July 10, 1995. The current employment agreement provides for a three-year
term which renews on a daily basis and provides for a base salary of $400,000
per year. In connection with the Offer, TSI and Mr. Allender entered into a new
Employment Agreement (the "Employment Agreement") to provide for the employment
of Mr. Allender following the consummation of the Offer. The term of the
Employment Agreement will commence on the earlier to occur of the Effective Time
or the date upon which the Purchaser is entitled to designate directors to be
elected to the Company's Board of Directors pursuant to the Merger Agreement,
and will continue for a three (3) year term (the "Initial Term"), after which
the Employment Agreement will be renewed automatically on a daily basis so that
the term after the Initial Term will continue for a twelve (12) month term.
During each year that the Employment Agreement is in effect, TSI and/or its
subsidiaries will pay to Mr. Allender a minimum annual salary of $300,000 ("Base
Salary"). The Employment Agreement also provides that during each year that the
Employment Agreement is in effect, TSI will pay to Mr. Allender an annual bonus
of at least $100,000. On the first day of the Initial Term, TSI will grant to
Mr. Allender options to purchase 15,000 shares of TSI's common stock at an
exercise price equal to the fair market value of the shares on the date of grant
of such option. The options will be vested and immediately exercisable. During
each year that the Employment Agreement is in effect, TSI will grant additional
options to Mr. Allender upon such terms as are generally available to senior
executive officers of TSI or its subsidiaries. During the term of his
employment, Mr. Allender will be entitled to participate in or receive all
benefits under TSI's employee benefit plans and arrangements, including, without
limitation, TSI's 401(k) plan and all benefits which are available to senior
executive officers of TSI or its subsidiaries. TSI will pay the cost of premiums
for Mr. Allender's existing split-dollar life insurance policy, but the cost of
premiums for such split-dollar life insurance policy may not exceed $121,000 per
annum, unless otherwise agreed by TSI. Except as otherwise provided in the
Employment Agreement, TSI will be obligated from and after the date of the
Employment Agreement to pay a minimum of three annual premium payments of
$121,000, or an aggregate amount of premiums of $363,000, including any payments
made during the Initial Term or any term after the Initial Term (the "Minimum
Premium Commitment"). On the first day of the Initial Term and as an inducement
to surrender his rights under his existing employment contract and to remain
with the Company following the closing, TSI will pay Mr. Allender a bonus of
$600,000. In addition, if Mr. Allender is employed by TSI or
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any of its subsidiaries on the last day of the Initial Term, TSI will pay to Mr.
Allender on such date an additional bonus of $500,000 (the "Final Bonus").
During the term of his employment, Mr. Allender will be entitled to receive all
perquisites which are available to senior executive officers of TSI or its
subsidiaries including, without limitation, country club membership dues of
approximately $350 per month; a car allowance of $1,000 per month; and a gas
allowance of $250 per month.
TSI may terminate Mr. Allender's employment for Cause, which means: (i) Mr.
Allender's conviction of a felony involving moral turpitude; or (ii) Mr.
Allender's serious, willful gross misconduct or willful gross neglect of duties
(other than any such neglect resulting from Mr. Allender's incapacity due to
physical or mental illness or any such neglect after the issuance of a notice of
termination delivered pursuant to the Employment Agreement by Mr. Allender for
Good Reason), which, in either case, has resulted, or in all probability is
likely to result, in material economic damage to TSI; provided no act or failure
to act by Mr. Allender will constitute "Cause" under clause (ii) if Mr. Allender
believed in good faith that such act or failure to act was in the best interest
of TSI.
Mr. Allender may terminate his employment at any time during the term of
the Employment Agreement for Good Reason by giving written notice to TSI which
will set forth in reasonable detail the facts and circumstances constituting
Good Reason. "Good Reason" will mean (A) a substantial adverse change in Mr.
Allender's status or position(s) as an executive officer of TSI or its
subsidiaries, including, without limitation, any adverse change in Mr.
Allender's status or position(s) as a result of a material diminution in duties
or responsibilities or the assignment to Mr. Allender of any duties or
responsibilities which, in Mr. Allender's reasonable judgment, are inconsistent
with such status or position(s) or any removal of Mr. Allender from or any
failure to reappoint or reelect Mr. Allender to such position(s) (except in
connection with the termination of Mr. Allender's employment for Cause or
incapability, as a result of Mr. Allender's death or incapacity, or by Mr.
Allender other than for Good Reason); (B) a reduction by TSI or its subsidiaries
in Mr. Allender's Base Salary; (C) Mr. Allender's office is moved, without his
consent, from the city of El Paso, Texas, except for reasonably required travel
on TSI's and its subsidiaries' business; (D) TSI's material breach of any of its
obligations under the Employment Agreement; or (E) (y) any failure by TSI to
continue in effect any benefit plan or arrangement in which Mr. Allender
participates, or any other plan or arrangement providing Mr. Allender with
benefits (hereinafter referred to as "Benefit Plans"), or (z) the taking of any
action by TSI which would adversely affect Mr. Allender's participation in or
materially reduce Mr. Allender's benefits under any such Benefit Plan or deprive
Mr. Allender of any material fringe benefit or perquisite of office enjoyed by
Mr. Allender, unless in the case of either subclause (y) or (z) above, there is
substituted a comparable plan or program that is economically equivalent, in
terms of the benefit offered to Mr. Allender, to the Benefit Plan being altered,
reduced, affected or ended.
If Mr. Allender's employment is terminated by reason of death, his estate
will be paid all salary, bonus or other benefits, otherwise payable to Mr.
Allender through the end of the month in which his death occurred, and TSI and
its subsidiaries will have no further obligations to Mr. Allender under the
Employment Agreement. If Mr. Allender's employment is terminated for Cause, TSI
or its subsidiaries will pay Mr. Allender his Base Salary and benefits through
the date of termination specified in the notice of termination, and TSI and its
subsidiaries will have no further obligations to Mr. Allender under the
Employment Agreement, including, but not limited to, any obligations in respect
of the Minimum Premium Commitment.
If Mr. Allender's employment is terminated (i) by TSI other than as a
result of death or for Cause, or (ii) by Mr. Allender for Good Reason, Mr.
Allender will be entitled to the following: (A) Mr. Allender's earned but unpaid
Base Salary through the date of termination; (B) the Base Salary in effect
immediately prior to the date of termination for the remainder of the current
term of the Agreement; (C) an annual bonus for the current fiscal year prorated
through the date of termination equal to the greater of (x) the annual bonus
awarded to Mr. Allender with respect to TSI's most recent fiscal year ending
prior to the date of termination or (y) $100,000; (D) the amount of the Minimum
Premium Commitment which has not been paid as of the date of termination; and
(E) the Final Bonus; and (ii) after such termination, TSI will continue to
provide Mr. Allender with those benefits he was entitled to immediately prior to
his termination, for thirty-six (36) months.
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To the extent Mr. Allender is an Optionee (as defined under any of TSI's
stock option plans), if Mr. Allender's employment is terminated without Cause or
Mr. Allender terminates his employment for Good Reason, all options held by Mr.
Allender will automatically vest and become exercisable.
The foregoing is a summary of the Employment Agreement which summary is
qualified in its entirety by reference to the Employment Agreement filed as
Exhibit (c)(5) hereto.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company
TSI is conducting a detailed review of the Company and its assets,
corporate structure, operations, properties, policies, management and personnel
and will consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances that exist upon
completion of the Offer. Such changes could include changes in the Company's
corporate structure, operations, properties, policies, personnel, Board of
Directors or management, although, except as disclosed in this Offer to
Purchase, TSI has no current plans with respect to any of such matters. The
Merger Agreement provides that, promptly after the purchase by the Purchaser of
the Shares pursuant to the Offer, TSI has the right to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as is equal to the product of the total number of directors on the
Company's Board of Directors (giving effect to the directors designated by TSI)
multiplied by the percentage that the number of Shares beneficially owned by the
Purchaser and TSI bears to the total number of Shares then outstanding. See
Section 11. The Merger Agreement provides that the directors of the Purchaser at
the Effective Time of the Merger will, from and after the Effective Time, be the
directors of the Surviving Corporation and that the officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified.
The Merger Agreement further provides that TSI will use its reasonable best
efforts to cause two members of the Board of Directors of the Company, as it was
comprised as of the date of the Merger Agreement, to be elected to the Board of
Directors of TSI. Mr. Richard C. Allender and Mr. Charles Smith, a current
director of the Company, are expected to join TSI's Board of Directors pursuant
to this provision of the Merger Agreement.
Except as disclosed in this Offer to Purchase, neither TSI nor the
Purchaser has any present plans or proposals involving an extraordinary
corporate transaction, such as a merger, reorganization, liquidation, relocation
of operations, or sale or transfer of a material amount of the assets of, the
Company or any of the Subsidiaries, or any material changes in the Company's
corporate structure, business or composition of its management or personnel.
Other Matters
Shareholder Approval. Except as described below, under the TBCA, the
approval of the Board of Directors of the Company and the affirmative vote of
the holders of two-thirds of the outstanding Shares are required to adopt and
approve the Merger Agreement and the transactions contemplated thereby. The
Company has represented in the Merger Agreement that the Board of Directors of
the Company unanimously has approved the Merger Agreement, the Offer and the
Merger and the transactions contemplated thereby in satisfaction of the
requirement under the TBCA. Therefore, unless the Merger is consummated pursuant
to the short-form merger provisions under the TBCA described below (in which
case no further corporate action by the shareholders of the Company will be
required to complete the Merger), the only remaining required corporate action
of the Company will be the approval of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of two-thirds of the
Shares. The Merger Agreement provides that TSI will vote, or cause to be voted,
all of the Shares then owned by TSI and the Purchaser in favor of the approval
of the Merger and the approval and adoption of the Merger Agreement. In the
event that TSI, the Purchaser and TSI's other subsidiaries acquire in the
aggregate at least two-thirds of the Shares, the vote of no other shareholder of
the Company will be required to approve the Merger and the Merger Agreement.
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Short-Form Merger. Article 5.16 of the TBCA provides that, if a
corporation owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such other
corporation without any action or vote on the part of the board of directors or
the shareholders of such other corporation (a "short-form merger"). In the event
that the Purchaser acquires in the aggregate at least 90% of the Shares,
pursuant to the Offer or otherwise, then TSI intends to cause the Purchaser to
effect a short-form merger without any vote of the shareholders of the Company,
subject to compliance with the provisions of Article 5.16 of the TBCA. Even if
the Purchaser does not own 90% of the outstanding Shares following consummation
of the Offer, the Purchaser could, after the expiration of the Offer seek to
purchase additional shares in the open market or otherwise in order to reach the
90% threshold and employ a short-form merger. The per share consideration paid
for any Shares so acquired may be greater or less than that paid in the Offer.
Texas Business Combination Law. In general, Article 13.03 of the TBCA (the
"Texas Business Combination Statute") prohibits any person who is an "affiliated
shareholder," including a beneficial owner of 20% or more of the outstanding
voting shares of an issuing public corporation, from engaging in a "business
combination" (including the Merger) with certain Texas corporations for a period
of three years following the time at which such person became an affiliated
shareholder, unless (i) either the transaction by which such person became an
affiliated shareholder or the business combination is approved by the board of
directors of the corporation prior to the time at which such person became an
affiliated shareholder, or (ii) the business combination (including the Merger)
is approved, by the affirmative vote of the holders of at least two-thirds of
the outstanding voting shares of the issuing public corporation not beneficially
owned by the affiliated shareholder or an affiliate or associate of the
affiliated shareholder, at a meeting of shareholders and not by written consent,
called for that purpose not less than six months after the date such person
first became an affiliated shareholder. The requirements of the Texas Business
Combination Statute apply unless the corporation adopts an amendment to its
articles of incorporation or by-laws expressly electing to not be governed
thereby. According to publicly available information, the Company's Restated
Articles of Incorporation and Amended and Restated By-Laws do not include such a
provision. Accordingly, the requirements of the Texas Business Combination
Statute apply to the Company.
The Company has represented in the Merger Agreement that its Board of
Directors unanimously has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and such approval
constitutes approval of the Offer, the Merger Agreement and the transactions
contemplated thereby, including the Merger, for purposes of Article 13.03 of the
TBCA, such that the provisions of Article 13.03 of the TBCA will not apply to
the Offer, the Merger and the Merger Agreement.
Dissenters' Rights. Shareholders do not have dissenters' rights as a
result of the Offer. If the Purchaser acquires 90% or more of the outstanding
shares of the Company and effects a short-form merger, shareholder approval of
the Merger would not be required; however, shareholders may have dissenters'
rights. Notwithstanding the uncertainty regarding the requirement of the
Purchaser to provide statutory dissenters' rights, the Purchaser will provide
dissenters' rights in accordance with the terms of Article 5.16(E) of the TBCA
to any dissenting shareholders. Further, if at least 90% of the outstanding
shares of the Company is not acquired by the Purchaser, thus precluding
availability of a short-form merger, then shareholder approval of the Merger
will be required and shareholders of the Company who file with the Company a
written objection to the Merger in accordance with Article 5.12 of the TBCA and
who do not vote in favor of the Merger will have certain rights under Texas law
to demand payment of the fair value of their Shares if the Merger is
consummated. If a dissenting shareholder complies with the applicable statutory
procedures, such rights could lead to a judicial determination of the fair value
required to be paid to such dissenting holder for such holder's Shares (i.e.,
the value of the Shares immediately before the shareholders meeting approving
the Merger, excluding any appreciation or depreciation in anticipation of the
Merger) and to receive payment of such fair value in cash. If a shareholder
demand to the Surviving Corporation for payment of such fair value remains
unsettled within the 60 days following the consummation of the Merger, the
Surviving Corporation or the dissenting shareholder may commence a proceeding
for judicial determination of the fair value of the Shares and interest accrued.
The court shall determine the fair value of the Shares and shall direct payment
of that value by the Surviving Corporation together with interest thereon,
beginning 91 days after the consummation
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of the Merger to the date of such judgment, to the shareholders entitled to such
payment. The Purchaser cannot make any representation as to the outcome of an
appraisal of fair value of the Shares as determined by a Texas court, and
shareholders should recognize that such an appraisal could result in a
determination of a value higher or lower than, or equivalent to, the
consideration per Share provided in the Offer or consideration per Share to be
paid in the Merger. In an appraisal proceeding, however, the Purchaser could
argue that, for purposes of such proceeding, the fair value of the Shares is
less than the consideration per Share provided in the Offer. Pursuant to Article
5.12 of the TBCA, statutory appraisal rights are the exclusive remedy for
dissenting shareholders for the recovery of the value of their Shares or money
damages with respect to the Merger in the absence of fraud.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE TBCA.
The foregoing description of the TBCA is not necessarily complete and is
qualified in its entirety by reference to the TBCA.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per share price paid
pursuant to the Offer. However, in the event that the Purchaser is deemed to
have acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby shareholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
shareholders in the Merger or such alternative transaction, be filed with the
Commission and disclosed to shareholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 7. If such registration were terminated,
Rule 13e-3 would be inapplicable to the Merger or such alternative transaction.
13. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Merger Agreement provides that, prior to the time
the designees of the Purchaser have been elected to the Board of Directors of
the Company, the Company will not (a) issue, sell, pledge, dispose of, grant,
encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of, (i) any shares of capital stock of the Company or any Subsidiary
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interests of the Company or any Subsidiary (except for shares of the Company's
stock, if any, issuable under agreements in effect on the date of the Merger
Agreement and shares of capital stock issuable pursuant to currently outstanding
Options or employee benefits plans in effect on the date of the Merger
Agreement), or (ii) any of the Company's or any Subsidiary's assets except for
sales in the ordinary course of business in a manner consent with past practice;
(b) declare, set aside, make or pay any dividends or other distributions payable
in cash, stock, property or otherwise with respect to any of its capital stock
or sell, lease, mortgage or otherwise dispose of or otherwise encumber any
shares of capital stock of any Subsidiaries; or (iii) reclassify, combine,
split, divide or redeem, purchase or otherwise acquire, directly or indirectly
any of its capital stock.
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14. CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser shall not
be required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of and payment for Shares tendered, if (i) the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or not been terminated prior to the expiration of the
Offer or (iii) at any time on or after the date of the Merger Agreement, and
prior to the acceptance for payment of Shares, any of the following conditions
shall exist:
(a) there shall have been any judgment, order or decree resulting from
litigation brought by any United States (federal, state or local) or
foreign government, or governmental, regulatory or administrative
authority, agency or commission or court of competent jurisdiction
("Governmental Authority") or other person, or before any court or
Governmental Authority, agency or tribunal, domestic or foreign: (i)
prohibiting the acquisition by TSI or the Purchaser of any Shares; (ii)
prohibiting or limiting in any material respect the ownership or operation
by TSI, the Purchaser or any of their respective subsidiaries of any
material portion of the business or assets of the Company, or to compel
TSI, the Purchaser or any of their respective subsidiaries to dispose of or
hold separate any material portion of the business or assets of the Company
or any of its Subsidiaries, (iii) restraining or prohibiting the making of
the Offer or the consummation of the Merger; (iv) imposing limitations on
the ability of TSI or the Purchaser to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by the Purchaser pursuant to the Offer, or otherwise on
all matters properly presented to the Company's shareholders, including,
without limitation, the approval of the Merger Agreement and the Offer and
the Merger; or (v) requiring divestiture by TSI or the Purchaser of any
Shares;
(b) (i) the Company's Board of Directors shall have withdrawn or
modified in a manner adverse to TSI or the Purchaser the approval or
recommendation of the Offer, the Merger or the Merger Agreement or approved
or recommended any Business Combination Proposal or any other acquisition
of Shares other than the Offer and the Merger or (ii) the Company's Board
of Directors shall have resolved to do any of the foregoing;
(c) the Company shall have failed to perform or comply in any material
respects with all agreements and covenants required by the Merger Agreement
to be performed or complied with by it at or prior to the election or
appointment of the Purchaser's designees to the Company's Board of
Directors upon the purchase by the Purchaser of Shares pursuant to the
Offer, or any of the representations and warranties of the Company
contained in the Merger Agreement that are qualified as to materiality
shall fail to be true and correct, or any such representations and
warranties that are not so qualified shall fail to be true and correct in
all material respects, each as of the date of the election or appointment
of the Purchaser's designees to the Company's Board of Directors upon the
purchase by the Purchaser of Shares pursuant to the Offer as though made on
and as of such date, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct,
or true and correct in all material aspects, as the case may be, as of such
date;
(d) the Merger Agreement shall have been terminated in accordance with
its terms;
(e) the Purchaser and the Company shall have agreed that the Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder;
(f) there shall have occurred (i) any general suspension of, or
limitation on prices for, or trading in securities on the NYSE (other than
limitations on hours or numbers of days of trading); (ii) a currency
moratorium on the exchange market in New York City; (iii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in
the United States; (iv) any limitation (whether or not mandatory) by any
United States government or governmental, administrative or regulatory
authority or agency, on the extension of credit by banks or other lending
institutions; or (v) a decline of at least 25% in either the Dow Jones
Average of Industrial Stocks or the Standard & Poor's 500 index from the
date of the Merger Agreement, or any material disruption or material
adverse change in the financial or capital
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markets generally, or in the markets for high yield debt in particular or
affecting the syndication or funding of the Securities;
(g) it shall have been publicly disclosed or TSI or the Purchaser
shall have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding Shares has been acquired
by any corporation (including the Company or any of its Subsidiaries or
affiliates), partnership, person or other entity or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act), other than TSI, the
Purchaser or any of their affiliates; or
(h) all consents of and notices to or filings with Governmental
Authorities and third parties required in connection with the Offer and the
Merger shall not have been obtained or made other than those the absence of
which, individually or in the aggregate, would not have a material adverse
effect on the Company or prevent or materially delay consummation of any of
the Offer or the Merger.
The foregoing conditions are for the sole benefit of the Purchaser and TSI
and may be asserted by the Purchaser or TSI regardless of the circumstances
giving rise to any such condition or may be waived by the Purchaser or TSI in
whole or in part at any time and from time to time in their sole discretion. The
failure by TSI or the Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right; the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances; and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
15. CERTAIN LEGAL MATTERS.
Except as described in this Section 15, based on information provided by
the Company, none of the Company, the Purchaser or TSI is aware of any license
or regulatory permit that appears to be material to the business of the Company
and the Subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares (and the indirect acquisition of the stock or
other equity interests of the Subsidiaries) as contemplated herein or of any
approval or other action by a domestic or foreign governmental, administrative
or regulatory agency or authority that would be required for the acquisition and
ownership of the Shares (and the indirect acquisition of the stock or other
equity interests of the Subsidiaries) by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser and TSI
presently contemplate that such approval or other action will be sought, except
as described below under "State Takeover Laws." While, except as otherwise
described in this Offer to Purchase, the Purchaser does not presently intend to
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of or other substantial conditions complied with in the
event that such approvals were not obtained or such other actions were not taken
or in order to obtain any such approval or other action. If certain types of
adverse action are taken with respect to the matters discussed below, the
Purchaser could decline to accept for payment or pay for any Shares tendered.
See Section 14 for certain conditions to the Offer, including conditions with
respect to governmental actions.
State Takeover Laws
The Company is incorporated under the laws of the State of Texas. See
Section 12, "Plans for the Company; Other Matters" for a discussion of the Texas
Business Combination Statute.
A number of states have adopted laws and regulations applicable to attempts
to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover statute, which, as a matter of state securities law, made takeovers of
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corporations meeting certain requirements more difficult. However in 1987, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining shareholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of shareholders in the state and were incorporated
there.
The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither TSI nor the Purchaser knows whether any or all of
these takeover laws and regulations will by their terms apply to the Offer, and,
except as set forth above with respect to Article 13.03 of the TBCA, neither TSI
nor the Purchaser has currently complied with any other state takeover statute
or regulation. The Purchaser reserves the right to challenge the applicability
or validity of any state law purportedly applicable to the Offer and nothing in
this Offer to Purchase or any action taken in connection with the Offer is
intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer, the Purchaser might
be required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or may be delayed in
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment or pay for any Shares tendered pursuant to the Offer. See
Section 14.
Antitrust
The Offer and the Merger are subject to the HSR Act, which provides that
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.
TSI and the Company expect to file soon their Notification and Report Forms
with respect to the Offer under the HSR Act. The waiting period under the HSR
Act with respect to the Offer will expire at 11:59 p.m., New York City time, on
the fifteenth day after the date TSI's form is filed unless early termination of
the waiting period is granted. However, the Antitrust Division or the FTC may
extend the waiting period by requesting additional information or documentary
material from TSI or the Company. If such a request is made, such waiting period
will expire at 11:59 p.m., New York City time, on the tenth day after
substantial compliance by TSI with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of TSI. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. The Purchaser will not accept for payment Shares tendered
pursuant to the Offer unless and until the waiting period requirements imposed
by the HSR Act with respect to the Offer have been satisfied. See Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of TSI or its subsidiaries,
including the Company and the Subsidiaries. Private parties, as well as state
governments, may also bring legal action under the antitrust laws under certain
circumstances. Based upon an examination of publicly available information
relating to the businesses in which TSI and the Company are engaged, TSI and the
Purchaser believe that the acquisition of Shares by the Purchaser will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer or other acquisition of Shares by the Purchaser on
antitrust grounds will not be made or,
32
<PAGE> 36
if such a challenge is made, of the result. See Section 14 for certain
conditions to the Offer, including conditions with respect to litigation and
certain governmental actions.
Federal Reserve Board Regulations
Regulations G, U and X (the "Margin Regulations") of the Federal Reserve
Board restrict the extension or maintenance of credit for the purpose of buying
or carrying margin stock, including the Shares, if the credit is secured
directly or indirectly by margin stock. Such secured credit may not be extended
or maintained in an amount that exceeds the maximum loan value of all the direct
and indirect collateral securing the credit, including margin stock and other
collateral. All financing for the Offer will be structured so as to be in full
compliance with the Margin Regulations.
16. FEES AND EXPENSES.
TSI has engaged Prudential Securities to act as financial advisor to TSI in
connection with the proposed acquisition of the Company and as Dealer Manager in
connection with the Offer. TSI will pay Prudential Securities an advisory fee in
connection with the transactions contemplated by the Merger Agreement as well as
a fee in connection with its services as Dealer Manager. The advisory fee will
be paid if the Purchaser acquires at least 90% of the outstanding Shares on or
before the Effective Time and will be equal to the sum of (i) 1% of the
aggregate amount paid by the Purchaser in the Offer and the Merger, and (ii) 1%
of the Company's long-term debt, excluding the Company's revolving credit
facility. TSI has also agreed to indemnify Prudential Securities and certain
related persons against certain liabilities in connection with the Offer,
including certain liabilities under federal securities laws.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and The Bank of New York to act as the Depository in
connection with the Offer. Such firms each will receive reasonable and customary
compensation for their services. The Purchaser has also agreed to indemnify each
such firm against certain liabilities in connection with their services,
including certain liabilities under federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager and the Information Agent) for
making solicitations or recommendations in connection with the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
17. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Company.
The Purchaser is not aware of any jurisdiction in which the making of the Offer
or the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, the Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, the Purchaser cannot comply with any
such law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by the Dealer Manager or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of TSI or the Purchaser not contained herein or in the
Letter of Transmittal and, if given or made, such information or representation
must not be relied upon as having been authorized.
The Purchaser and TSI have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
offices of the Commission and the National Association of Securities Dealers,
Inc. in the manner set forth in Section 9 of this Offer to Purchase (except that
they will not be available at the regional offices of the Commission).
33
<PAGE> 37
FOXFIRE ACQUISITION CORP. MAY 8, 1998
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF TSI AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF TSI.
The following table sets forth the name, business address and present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years, of each director and executive officer of
TSI. Unless otherwise indicated, each such person is a citizen of the United
States of America and the business address of each such person is c/o TSI, 4902
West Waters Avenue, Tampa, Florida 33634-1302. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
TSI. Unless otherwise indicated, each such person has held his or her present
occupation as set forth below, or has been an executive officer at TSI, or the
organization indicated, for the past five years. Directors are identified by an
asterisk.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------------------
<S> <C>
*William W. Compton....................... Mr. Compton has served as Chairman of the Board, Chief
Executive Officer and a Director of TSI since November 1989.
He also served as President of TSI from November 1989 to
November 1994. Mr. Compton has over 28 years of experience
in the apparel industry. Prior to joining TSI, he served as
President and Chief Operating Offer of Munsingwear, Inc., an
apparel manufacturer and Marketer, President/Executive Vice
President of Corporate Marketing for five apparel divisions
of McGregor/Faberge Corporation and President, U.S.A. and a
director of Farah Manufacturing Corporation. Mr. Compton
currently serves on the Board of Directors of Brigham Young
University Marriott School of Management, and on the Board
of Directors of AAMA. Mr. Compton beneficially owns 40
shares of the common stock, no par value per share, of the
Company.
Richard J. Domino......................... Mr. Domino joined TSI in 1988 and has served as President of
TSI since November 1994. Mr. Domino served as Senior Vice
President of Sales and Marketing from January 1994 to
October 1994 and Vice President of Sales from December 1989
to December 1993. He has over 23 years experience in
apparel-related sales and marketing. Before joining TSI, Mr.
Domino was employed by Thomson Sportswear, Inc., a men's
apparel manufacturer and marketer, as its Sales Manager for
the Northwest Territory, and by Haggar Corp., a men's
apparel manufacturer and marketer, as its New Jersey
Salesman.
*Michael Kagan............................ Mr. Kagan has served as Executive Vice President, Chief
Financial Officer, Secretary and a Director of TSI since
November 1989. Mr. Kagan has more than 30 years experience
in the apparel industry. Prior to joining TSI, Mr. Kagan
served as Senior Vice President of Finance for Munsingwear,
Inc. and as Executive Vice President and Chief Operating
Officer of Flexnit Company, Inc., a manufacturer of women's
intimate apparel.
</TABLE>
I-1
<PAGE> 38
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
- ---------------- --------------------------------------------------------------
<S> <C>
*Jesus Alvarez-Morodo..................... Mr. Alvarez-Morodo has served as a Director of TSI since
Citizen of Mexico November 1989. Mr. Alvarez-Morodo has been Vice Chairman of
Virginia Fabregas #80 the Board of Elamex, S.A. de C.V., a manufacturing company
Col. San Rafael controlled by Accel S.A. de C.V. ("Accel") ("Elamex"), since
Mexico, D.F. 06470 1995 and President and Chief Executive Officer of Accel
since 1992. Accel is a publicly traded Mexican holding
company having subsidiaries engaged in warehousing,
distribution and manufacturing. He has been a director of
Elamex since 1990. Mr. Alvarez-Morodo has held various
positions with Accel and its predecessor, Grupo Chihuahua
S.A. de C.V. ("Grupo Chihuahua"), and its subsidiaries since
1982, including Vice President from 1989 to 1992.
*Eloy S. Vallina-Laguera.................. Mr. Vallina-Laguera has served as a Director of TSI since
Citizen of Mexico November 1989. Mr. Vallina-Laguera has been Chairman of the
Ave. Zarco 2401 Board of Accel and its predecessor, Grupo Chihuahua, since
Chihuahua Chih. its inception in 1979, and Chairman of the Board of Elamex
Mexico 31020 since 1990. He is also Chairman of Kleentex Corp., and an
advisory director of Norwest Bank El Paso. Mr.
Vallina-Laguera was Chairman of Banco Commercial Mexicano,
later Multibanco Comermex, one of Mexico's largest
commercial banks at that time, from 1971 until its
expropriation in 1982.
*Leslie J. Gillock........................ Ms. Gillock has served as a Director of TSI since August 1997.
Fruit of the Loom Ms. Gillock has served in various capacities with Fruit of
P.O. Box 90015 the Loom, Inc. since 1978, including Vice President of
Bowling Green, KY Marketing since March 1995, Director of Marketing from
42103-9015 January 1993 through February 1995, and Marketing Manager
for Intimate Apparel from January 1989 through December
1992. She has over 19 years experience in the apparel
industry.
*Donald H. Livingstone.................... Mr. Livingstone has served as a Director of TSI since August
610 Tanner Building 1997. He has been a Teaching Professor at the Brigham Young
Brigham Young University University Marriott School of Management and the Director of
Provo, Utah 84602 its Center for Entrepreneurship since September 1994. Mr.
Livingstone is also currently a member of the Board of
Trustees of The Eureka Funds. From 1976 through March 1995,
he was a partner with Arthur Andersen LLP. He joined Arthur
Andersen LLP in 1966.
*Leon H. Reinhart......................... Mr. Reinhart has served as a Director of TSI since August
First National Bank 1997. Mr. Reinhart has been President, Chief Executive Officer
401 West A Street and a director of First National Bank based in San Diego,
San Diego, CA 92101 California since May 1996. Prior to such time, he served as
Chief Credit Officer and Deputy General Manager of Citibank
Mexico from 1988 through April 1996. Mr. Reinhart's
experience includes more than 20 years as a financial
executive with Citibank, N.A. and its affiliates in a
variety of domestic and international positions.
</TABLE>
I-2
<PAGE> 39
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER.
Unless otherwise indicated, all information concerning the current business
address, citizenship, principal occupation or employment and five-year
employment history for each person identified below is the same as the
information given in paragraph 1 above.
Directors
William W. Compton
Michael Kagan
Jesus Alvarez-Morodo
Eloy S. Vallina-Laguera
Leslie J. Gillock
Donald H. Livingstone
Leon H. Reinhart
Executive Officers
William W. Compton
Michael Kagan
I-3
<PAGE> 40
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each shareholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (for Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, NY 10286-1248 New York, NY 10286-1248
</TABLE>
FOR CONFIRMATION TELEPHONE:
(800) 507-9357
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification on Substitute Form W-9
may be directed to the Information Agent or the Dealer Manager at their
respective locations and telephone numbers set forth below. Shareholders may
also contact their broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
The Information Agent for the Offer is:
(MACKENZIE PARTNERS, INC. LOGO)
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
18th Floor
New York, New York 10292
(212) 778-1818 (Call Collect)
or
CALL TOLL-FREE (800) 881-9234
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 8, 1998
BY
FOXFIRE ACQUISITION CORP.
a wholly owned subsidiary of
TROPICAL SPORTSWEAR INT'L CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE").
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
(for Eligible Institutions Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Stations Confirm Receipt of Facsimile by Receive and Deliver Window
New York, New York 10286-1248 Telephone: New York, New York 10286-1248
(800) 507-9357
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON TENDERED CERTIFICATE(S)
SHARE CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE REPRESENTED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Shareholders.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificates delivered to the Depositary are
being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF
TRANSMITTAL, FARAH INCORPORATED'S STOCK TRANSFER AGENT WILL CONTACT YOU
DIRECTLY WITH REPLACEMENT INSTRUCTIONS.
<PAGE> 2
LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF FARAH
INCORPORATED PURSUANT TO THE OFFER TO PURCHASE DATED MAY 8, 1998, BY FOXFIRE
ACQUISITION CORP. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
THIS LETTER OF TRANSMITTAL IS TO BE USED EITHER IF CERTIFICATES ARE TO BE
FORWARDED HEREWITH OR IF DELIVERY OF SHARES (AS DEFINED BELOW) IS TO BE MADE BY
BOOK-ENTRY TRANSFER TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE DEPOSITORY
TRUST COMPANY (HEREINAFTER REFERRED TO AS THE "BOOK-ENTRY TRANSFER FACILITY")
PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE (AS
DEFINED BELOW). SHAREHOLDERS WHO DELIVER SHARES BY BOOK-ENTRY TRANSFER ARE
REFERRED TO HEREIN AS "BOOK-ENTRY SHAREHOLDERS" AND OTHER SHAREHOLDERS ARE
REFERRED TO HEREIN AS "CERTIFICATE SHAREHOLDERS."
SHAREHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER THEIR SHARES AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE DEPOSITARY
OR COMPLETE THE PROCEDURES FOR BOOK-ENTRY TRANSFER PRIOR TO THE EXPIRATION DATE
MUST TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET
FORTH IN SECTION 3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owners:
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
Account Number:
Transaction Code Number:
(BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Foxfire Acquisition Corp., a Texas
corporation (the "Purchaser") and a wholly owned subsidiary of Tropical
Sportswear Int'l Corporation, a Florida corporation ("TSI"), the above-described
shares of common stock, no par value per share (the "Shares"), of Farah
Incorporated, a Texas corporation (the "Company"), pursuant to the Purchaser's
offer to purchase all outstanding Shares at a price of $9.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated May 8, 1998 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, together
with the Offer to Purchase and any amendments or supplements hereto or thereto,
constitute the "Offer"). The undersigned understands that the Purchaser reserves
the right to transfer or assign, in whole or in part from time to time, to TSI
or one or more direct or indirect wholly owned subsidiaries of TSI, the right to
purchase Shares tendered pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns, and transfers
all right, title and interest in and to all the Shares that are being tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof (collectively, "Distributions")), and irrevocably constitutes
and appoints the Depositary the true and lawful agent and attorney-in-fact of
the undersigned with respect to such Shares and all Distributions, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (i) deliver certificates for such Shares and
all Distributions, or transfer ownership of such Shares and all Distributions on
the account books maintained by the Book-Entry Transfer Facility, together, in
any such case, with all accompanying evidences of transfer and authenticity, to
or upon the order of the Purchaser, upon receipt by the Depositary, as the
undersigned's agent, of the purchase price (adjusted, if appropriate, as
provided in the Offer to Purchase), (ii) present such Shares and all
Distributions for cancellation and transfer on the Company's books and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares and all Distributions, all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares and all Distributions and that, when the same are accepted for payment by
the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Purchaser to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer to
the Depositary for the account of the Purchaser any such Distributions issued to
the undersigned, in respect of the tendered Shares, accompanied by documentation
of transfer, and pending such remittance or appropriate assurance thereof, the
Purchaser shall be entitled to all rights and privileges as owner of any such
Distributions and, subject to the terms of the Merger Agreement (as defined in
the Offer to Purchase), may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser,
in its sole discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints William W. Compton and Michael
Kagan, and each of them, and any other designees of the Purchaser, the attorneys
and proxies of the undersigned, each with full power of substitution, to vote at
any annual, special or adjourned meeting of the Company's shareholders or
otherwise act (including pursuant to written consent) in such manner as each
such attorney and proxy or his
3
<PAGE> 4
or her substitute shall in his or her sole discretion deem proper, to execute
any written consent concerning any matter as each such attorney and proxy or his
or her substitute shall in his or her sole discretion deem proper with respect
to, and to otherwise act with respect to all the Shares tendered hereby which
have been accepted for payment by the Purchaser prior to the time any such vote
or action is taken (and any and all Distributions issued or issuable in respect
thereof) and with respect to which the undersigned is entitled to vote. This
appointment is effective when, and only to the extent that, the Purchaser
accepts for payment such Shares as provided in the Offer to Purchase. This power
of attorney and proxy is coupled with an interest in the tendered Shares, is
irrevocable and is granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Such acceptance for
payment shall revoke all prior powers of attorney and proxies given by the
undersigned at any time with respect to such Shares and no subsequent powers of
attorney or proxies may be given by the undersigned (and, if given, will not be
deemed effective). The Purchaser reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting and other rights with respect to such Shares, including voting at
any shareholders meeting then scheduled.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchaser and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, the Purchaser may not be required to accept for
payment any of the tendered Shares. The Purchaser's acceptance for payment of
Shares pursuant to the Offer will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates for Shares not tendered or accepted for payment, in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased, and/or any certificates for Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of any
Shares purchased, and/or return any certificates for Shares not tendered or
accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-entry
delivery of Shares, please credit the account maintained at the Book-Entry
Transfer Facility indicated above with any Shares not accepted for payment. The
undersigned recognizes that the Purchaser has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Purchaser does not accept for payment any of
the Shares so tendered.
4
<PAGE> 5
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if a certificate for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be ISSUED in the name of someone other than the undersigned.
Issue [ ] check [ ] certificate(s) to:
Name
-------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(INCLUDE ZIP CODE)
---------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
[ ] Credit unpurchased Shares tendered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
---------------------------------------------------------------
(ACCOUNT NUMBER)
===============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if a certificate for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are
to be SENT to someone other than the undersigned.
Send [ ] check [ ] certificate(s) to:
Name
-------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(INCLUDE ZIP CODE)
---------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
---------------------------------------------------------------
5
<PAGE> 6
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
Dated: , 1998
---------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or any other person
acting in a fiduciary or representative capacity, please set forth full title
below.)
(See Instruction 5)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone Number:
-----------------------------------------
Tax Identification Number or Social Security Number:
----------------------------
- --------------------------------------------------------------------------------
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED, SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-------------------------------------------------
Dated: , 1998
---------------------
6
<PAGE> 7
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS FOR THE TENDER OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each an "Eligible Institution,"
and collectively, "Eligible Institutions"). No signature guarantee is required
on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" in this Letter
of Transmittal or (ii) if such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by shareholders
either if certificates for Shares are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. For Shares to be
validly tendered pursuant to the Offer, either (i) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof),
together with any required signature guarantees, or in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase), and any
other required documents, must be received by the Depositary at one of the
Depositary's addresses set forth herein prior to the Expiration Date and either
certificates for tendered Shares must be received by the Depositary at one of
such addresses or such Shares must be delivered pursuant to the procedures for
book-entry transfer (and a book-entry confirmation received by the Depositary),
in each case, prior to the Expiration Date or (ii) the tendering shareholder
must comply with the guaranteed delivery procedure set forth below.
Shareholders whose certificates for Shares are not immediately available,
who cannot complete the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender their Shares pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedures, (i) such tender must be made by or through an Eligible Institution,
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser (or a manually signed
facsimile thereof), must be received by the Depositary prior to the Expiration
Date and (iii) the certificates for (or a book-entry confirmation with respect
to) such Shares, together with this properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an agent's
message, and any other required documents are received by the Depositary within
three trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading day"
is any day on which the New York Stock Exchange, Inc. is open for business. The
Notice of Guaranteed Delivery may be delivered by hand to the Depositary or
transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
The method of delivery of Shares, this Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer Facility,
is at the election and risk of the tendering shareholder. Shares will be deemed
delivered only when actually received by the Depositary (including, in the case
of a book-entry transfer, by book-entry confirmation). If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended.
In all cases, sufficient time should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or a manually signed facsimile thereof), waive any
right to receive any notice of the acceptance of their Shares for payment.
7
<PAGE> 8
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, new certificate(s) for the remainder
of the Shares that were evidenced by the old certificate(s) will be sent to the
registered holder(s), unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered owner(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the shares tendered hereby, the certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case, signed exactly as the name(s) of the registered owner(s)
appear(s) on the certificates for such Shares. Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution. See Instruction
1.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay, or cause to be paid, any stock transfer taxes with respect
to the transfer and sale of Shares to it or its assignee pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if certificates
for Shares not tendered or accepted for payment are to be registered in the name
of, any persons other than the registered holder(s), or if tendered certificates
are registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of and/or certificates for Shares not accepted for payment are to be
returned to a person other than the signer of this Letter of Transmittal or if a
check is to be sent and/or such certificates are to be returned to a person
other than the signer of this Letter of Transmittal or to an address other than
that shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Any shareholder tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained by
such shareholder at the Book-Entry Transfer Facility from which such transfer
was made.
8
<PAGE> 9
8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Purchaser reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular shareholder, whether or not similar
defects or irregularities are waived in the case of other shareholders.
9. SUBSTITUTE FORM W-9. The tendering shareholder (or other payee) is
required, unless an exemption applies, to provide the Depositary with a correct
Taxpayer Identification Number ("TIN"), generally the shareholder's social
security or federal employer identification number, and with certain other
information, on a Substitute Form W-9, which is provided under "Important Tax
Information" below, and to certify under penalties of perjury, that such number
is correct and that the shareholder (or other payee) is not subject to backup
withholding. If a tendering shareholder is subject to backup withholding, he or
she must cross out item 2 of the Certification Box on the Substitute Form W-9
before signing such Form. Failure to furnish the correct TIN on the Substitute
Form W-9 may subject the tendering shareholder (or other payee) to a $50 penalty
imposed by the Internal Revenue Service and payments of cash to the tendering
shareholder (or other payee) pursuant to the Offer may be subject to backup
withholding of 31%. If the tendering shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future, he
or she should write "Applied For" in the space provided for the TIN in Part 1,
sign and date the Substitute Form W-9 and sign and date the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part 1
and the Depositary is not provided with a TIN by the time of payment, the
Depositary will withhold 31% of all such payments for surrendered Shares
thereafter until a TIN is provided to the Depositary.
10. LOST OR DESTROYED CERTIFICATES. If any certificate(s)representing
Shares has been lost or destroyed, the shareholder should check the appropriate
box on page 2 of this Letter of Transmittal. The Company's stock transfer agent
will then instruct such shareholder as to the procedure to be followed in order
to replace the certificate(s). The shareholder will have to post a surety bond
of approximately 2% of the current market value of the Shares. This Letter of
Transmittal and related documents cannot be processed until procedures for
replacing lost or destroyed certificates have been followed.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
locations and telephone numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE COPY
THEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A
BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND CERTIFICATES, OR A BOOK-ENTRY
CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A MANUALLY SIGNED
FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder surrendering Shares must,
unless an exemption applies, provide the Depositary (as payor) with his correct
TIN on the Substitute Form W-9 included in this Letter of Transmittal. If the
shareholder is an individual, his TIN is his social security number. If the
correct TIN is not provided, the shareholder may be subject to a $50 penalty
imposed by the Internal Revenue Service and payments of cash to the tendering
shareholder (or other payee) pursuant to the Offer may be subject to backup
withholding of 31%.
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. In
order for an exempt foreign shareholder to avoid backup withholding, that person
should complete, sign and submit a Form W-8, Certificate of Foreign Status,
signed under penalties of perjury, attesting to his exempt status. A Form W-8
can be obtained from the Depositary. Exempt shareholders, other than foreign
shareholders, should furnish their TIN, write "Exempt" on the face
9
<PAGE> 10
of the Substitute Form W-9 and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payment made to payee. Backup withholding is not an additional tax.
Rather, the federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of his correct TIN (or the TIN of any other
payee) by completing the Substitute Form W-9 included in this Letter of
Transmittal certifying (i) that the TIN provided on the Substitute Form W-9 is
correct (or that such shareholder is awaiting a TIN), and that (ii) the
shareholder is not subject to backup withholding because (a) the shareholder has
not been notified by the Internal Revenue Service that the shareholder is
subject to backup withholding as a result of a failure to report all interest
and dividends or (b) the Internal Revenue Service has notified the shareholder
that the shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record owner(s)
of the Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering shareholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, he or
she should write "Applied For" in the space provided for the TIN in Part 1, sign
and date the Substitute Form W-9 and sign and date the Certificate of Awaiting
Taxpayer Identification Number, which appears in a separate box below the
Substitute Form W-9. If "Applied For" is written in Part 1 and the Depositary is
not provided with a TIN by the time of payment, the Depositary will withhold 31%
of all payments of the purchase price until a TIN is provided to the Depositary.
10
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME:
- ------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX ------------------------------------
AT THE RIGHT AND CERTIFY BY SIGNING AND Social Security Number(s)
FORM W-9 DATING BELOW. OR
----------------------------------
(See Instruction 9) Employer Identification Number(s)
Please fill in your name and
address below.
------------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- Under Penalties of Perjury, I
certify that:
----------------------------- (1) The number shown on the form is my correct Taxpayer PART 3 --
Name
----------------------------- Identification Number (or I am waiting for a number to be Awaiting TIN [ ]
Address (number and street) issued to me) and ------------------------
-----------------------------
(City, State and Zip Code) (2) I am not subject to backup withholding because (i) I am PART 4 -- For Payee
Exempt from
DEPARTMENT OF THE TREASURY exempt from backup withholding, or (ii) I have not been Backup Withholding
INTERNAL REVENUE SERVICE notified by the Internal Revenue Service ("IRS") that I Exempt [ ]
am subject to backup withholding as a result of failure
to report all interest or dividends or (iii) the IRS has
notified me that I am no longer subject to backup
withholding.
------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out Item (2) in Part 2 above if you have
PAYOR'S REQUEST FOR TAXPAYER been notified by the IRS that you are currently subject to backup withholding because
IDENTIFICATION NUMBER (TIN) of under reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received another
notification from the IRS stating that you are no longer subject to backup withholding,
do not cross out Item (2). If you are exempt from backup withholding, check the box in
Part 4 above.
SIGNATURE ------------------------- DATE-------------------------, 1998
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
THE SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART 1 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (i) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (ii) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of payment, 31% of all reportable payments made to me thereafter
will be withheld, until I provide a number.
, 1998
-------------------------------- --------------------------------
Signature Date
11
<PAGE> 12
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent or the Dealer Manager at their respective locations and
telephone numbers set forth below:
The Information Agent for the Offer is:
(MACKENZIE PARTNERS, INC. LOGO)
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
18th Floor
New York, New York 10292
(212) 778-1818 (Call Collect)
or
CALL TOLL-FREE (800) 881-9234
12
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
AT
$9.00 NET PER SHARE
BY
FOXFIRE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
TROPICAL SPORTSWEAR INT'L CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE")
May 8, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Tropical Sportswear Int'l Corporation, a Florida
corporation ("TSI") and its wholly owned subsidiary, Foxfire Acquisition Corp.,
a Texas corporation (the "Purchaser"), to act as Dealer Manager in connection
with the Purchaser's offer to purchase all of the outstanding shares of Common
Stock, no par value per share (the "Shares"), of Farah Incorporated, a Texas
corporation (the "Company"), at $9.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated May 8, 1998 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer").
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated May 8, 1998;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients;
3. The Company's Solicitation/Recommendation Statement on Schedule
14D-9;
4. A printed form of letter that may be sent to those of your clients
for whose accounts you hold Shares in your name or in the name of
your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer;
5. Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set
forth in the Offer to Purchase can be completed on a timely basis;
and
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the Expiration Date, that number of shares
which represents at least sixty-six and two-thirds percent (66 2/3%) of the
Shares outstanding on the Expiration Date and (ii) certain other conditions set
forth in the Offer to Purchase.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), promptly after the Expiration Date the
<PAGE> 2
Purchaser will accept for payment and will pay for all Shares validly tendered
prior to the Expiration Date and not properly withdrawn as, if and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares. Payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (or a timely book-entry confirmation with respect
to such Shares), (ii) a Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an agent's message, and
(iii) any other documents required by the Letter of Transmittal.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or to
comply with the book-entry transfer procedures on a timely basis, a tender may
be effected by following the guaranteed delivery procedures specified in Section
3 of the Offer to Purchase.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS
PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JUNE 5, 1998, UNLESS EXTENDED.
Neither the Purchaser nor TSI will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and Information
Agent as described in the Offer to Purchase) in connection with the solicitation
of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers. The Purchaser will pay all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 6 to the Letter of Transmittal.
Additional copies of the enclosed materials may be obtained by contacting
the Dealer Manager or the Information Agent at their respective locations and
telephone numbers set forth on the back cover of the enclosed Offer to Purchase.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, TSI, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED
IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
AT
$9.00 NET PER SHARE
BY
FOXFIRE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
TROPICAL SPORTSWEAR INT'L CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE")
May 8, 1998
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated May 8, 1998
(the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the Offer by Foxfire Acquisition Corp., a Texas corporation
(the "Purchaser") and a wholly owned subsidiary of Tropical Sportswear Int'l
Corporation, a Florida corporation ("TSI"), to purchase for cash all of the
outstanding shares of Common Stock, no par value per share (the "Shares") of
Farah Incorporated, a Texas corporation (the "Company").
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request your instructions as to whether you wish to tender
any or all of the Shares held by us for your account upon the terms and subject
to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The offer price is $9.00 per Share, net to you in cash, without
interest thereon, upon the terms and conditions set forth in the Offer.
2. The Offer is being made for all outstanding Shares.
3. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER AND DETERMINED THAT THE TERMS OF THE OFFER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
4. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 to the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Purchaser pursuant to the Offer.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, June 5, 1998, unless the Offer is extended by
the Purchaser.
6. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the Expiration Date of the
Offer, that number of shares that represents at least sixty-six and
two-thirds percent (66 2/3%) of the Shares outstanding on the Expiration
Date and (ii) the other conditions set forth in the Offer to Purchase.
<PAGE> 2
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the expiration of the Offer. If you wish to
have us tender any or all of the Shares held by us for your account, please so
instruct us by completing, executing and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. If
you authorize the tender of your Shares, all such Shares will be tendered unless
otherwise specified below. Your instructions should be forwarded to us in ample
time to permit us to submit a tender on your behalf prior to the expiration of
the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in any jurisdiction in which the
making or acceptance of the Offer would not be in compliance with the
securities, blue sky or other laws of such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by Prudential Securities Incorporated, the
Dealer Manager for the Offer, or one or more registered brokers or dealers that
are licensed under the laws of the jurisdiction.
INSTRUCTION WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase dated May 8, 1998, and the related Letter of Transmittal, in
connection with the offer by Foxfire Acquisition Corp., a Texas corporation and
a wholly owned subsidiary of Tropical Sportswear Int'l Corporation, a Florida
corporation, to purchase all of the outstanding shares of common stock, no par
value per share (the "Shares") of Farah Incorporated, a Texas corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in such Offer to Purchase and the related Letter of
Transmittal.
NUMBER OF SHARES TO BE TENDERED:
------------------------ SHARES
Unless otherwise indicated, it will be assumed that you instruct us to
tender all Shares held by us for your account.
I (we) understand that if I (we) sign this instruction form without
indicating a lesser number of Shares in the space above, all Shares held by you
for my (our) account will be tendered.
SIGN HERE
Signature(s)
---------------------------------------------------------------------
(Print Name(s))
------------------------------------------------------------------
Print Address(es)
----------------------------------------------------------------
(Area Code and Telephone Number(s))
----------------------------------------------
(Tax ID or Social Security Number(s))
--------------------------------------------
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer (as
defined below) if certificates for shares of Common Stock, no par value (the
"Shares"), of Farah Incorporated, a Texas corporation (the "Company"), are not
immediately available, or if the procedure for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary at the address set forth below on or prior to the
Expiration Date (as defined in the Offer to Purchase). This form may be
delivered by hand or transmitted by telegram, facsimile transmission or mail to
the Depositary and must include a guarantee by an Eligible Institution (as
defined in the Offer to Purchase). See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand Overnight Courier:
Tender & Exchange Department (for Eligible Institution only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 For Confirmation, Telephone: New York, New York 10286-1248
(800) 507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Foxfire Acquisition Corp., a Texas
corporation (the "Purchaser"), and a wholly owned subsidiary of Tropical
Sportswear Int'l Corporation, a Florida corporation, upon the terms and subject
to the conditions set forth in the Purchaser's Offer to Purchase dated May 8,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Shares (as such
term is defined in the Offer to Purchase) set forth below, all pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of
Shares: Shares
-------------------------------------
Certificate No(s). (if available)
-----------------
- --------------------------------------------------
- --------------------------------------------------
If Share(s) will be tendered by book-entry
transfer, check the box and indicate the account
number at The Depository Trust Company [ ].
Account Number:-
----------------------------------
- --------------------------------------------------
Name(s) of Record Holder(s):
----------------------
- --------------------------------------------------
(Please Print)
Address(es):
--------------------------------------
- --------------------------------------------------
- --------------------------------------------------
(Zip Code)
Area Code and Telephone Number(s):
----------------
- --------------------------------------------------
Signatures:
---------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Dated: , 1998
--------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agent's Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation with respect to such
Shares, in any such case together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), with any
required signature guarantees, or an Agent's Message, and any other required
documents within three trading days (as defined in the Offer to Purchase) after
the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver such Letter of Transmittal and such
certificates for Shares, or such Book-Entry Confirmation, to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution. All capitalized terms used herein
have the meanings set forth in the Offer to Purchase.
Name of Firm:
-------------------------------------
Address:
------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
Area Code and
Telephone Number:
---------------------------------
- --------------------------------------------------
(Authorized Signature)
Title:
--------------------------------------------
Name:
---------------------------------------------
- --------------------------------------------------
(Please type or print)
Dated:
-------------------------------------- ,1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF
GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH
YOUR LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individual(s)(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account or an association,
club or other tax-exempt
organization
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's Social Security number.
(4) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your Social Security number or your
Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except those identified in item (9). For broker transactions,
payees listed in items (1) through (13) and a person registered under the
Investment Advisers Act of 1940 who regularly acts as a broker are exempt.
Payments subject to reporting under sections 6041 and 6041A of the Internal
Revenue Code (the "Code") are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a) of the Code, or an
IRA, or a custodial account under section 403(b)(7) of the Code.
(3) The United States or any agencies or instrumentalities.
(4) A State, the District of Columbia, a possession of the United States, or
any political subdivisions, agencies or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any agencies, or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a) of the Code.
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
(15) A trust exempt from tax under section 664 of the Code or described in
section 4947 of the Code.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code.)
- Payments described in Section 6049(b)(5) of the Code to nonresident aliens.
- Payments on tax-free covenant bonds under Section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A FOREIGN
ENTITY SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividend, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6045, and 6050A and 6050N
of the Code and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmation may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
TAMPA, FL AND EL PASO, TX, MAY 4, 1998 NEWS RELEASE -- Tropical Sportswear Int'l
Corporation (NASDAQ:TSIC) and Farah Incorporated (NYSE:FRA) today jointly
announced the signing of a definitive merger agreement whereby TSI will acquire
100 percent of the outstanding shares of Farah common stock. Pursuant to the
agreement, TSI will pay $9.00 per share for each of the approximately 10.3
million outstanding shares of Farah common stock. The transaction will be
structured as a cash tender offer followed by a cash merger to acquire any
shares not previously tendered. As a result of the transaction, Farah will
become a wholly owned subsidiary of TSI. The transaction is subject to receipt
by TSI of at least 66-2/3% of Farah common stock as well as customary regulatory
approvals. The Board of Directors of both companies unanimously approved the
transaction. TSI expects to commence its cash tender offer for the Farah shares
on May 8, 1998. The transaction is expected to be completed within 90 days.
William W. Compton will remain as Chairman of the Board and CEO of the combined
companies. Richard C. Allender and Charles Smith, both members of the Farah
Board, are expected to join TSI's Board of Directors. On a pro forma basis, the
combined companies reported publicly reported revenues of approximately $434
million for their respective most recent publicly reported twelve months. TSI
will maintain its corporate headquarters, distribution and cutting facilities in
Tampa and also intends to have a continued presence in the El Paso area.
William W. Compton said: "Tropical anticipates there will be cost savings and
other opportunities that will be realized with the combination of the two
companies. We see this acquisition as a tremendous opportunity to improve our
position in the finest retailers in America. Tropical will offer customers and
consumers more innovative products and services using its successful formula of
combining quality, value and technology. The Savane(R), Farah(R), Phillips-Van
Heusen(R), Bill Blass(R), John Henry(R), Bay to Bay(R) and Generra(R) brands are
well established and we plan to continue their development. We intend to
continue the growth of private and national brands in order to provide the
retailer and consumer with a wider range of men's and women's sportswear
choices. The combination of these two, well established, apparel companies will
bring a new and dynamic competitor to the apparel industry."
Richard Allender, Chief Executive Officer of Farah, commented, "the effect of
the acquisition will be to continue the tremendous growth of the Savane(R) label
that has taken place over the last seven years. I am also personally pleased
that TSI will maintain a continued presence in the El Paso area."
Tropical Sportswear Int'l Corporation markets and manufactures men's and women's
sportswear including pants, jeans, shorts and shirts through all major retail
distribution channels including department and specialty stores. TSI provides
major retailers with comprehensive brand management programs and distinguishes
itself from traditional private label manufacturers by providing apparel
retailers with customer, product and market analysis, apparel design,
merchandising, and inventory forecasting through the use of state-of-the-art
technology.
<PAGE> 2
Farah Incorporated is a multinational apparel marketer and manufacturer with
headquarters in the United States. Farah's principal business is the sale of
men's and boys' pants, coats, and shirts and women's slacks. The principal
markets for Farah's products are retail customers in the United States, Europe,
and the South Pacific.
This press release contains certain forward-looking statements with respect to
anticipated future results, which are subject to risks and uncertainties that
could cause actual results to differ materially from anticipated results. Risk
factors include, but are not limited to: economic conditions that affect
consumer spending; successfully identifying emerging fashion trends, foreign and
domestic labor and manufacturing conditions; and, governmental actions such as
import or trade restrictions. Please refer to documents on file with the SEC for
a more detailed discussion of risk factors.
<PAGE> 1
EXHIBIT (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated May 8, 1998 and the related Letter of Transmittal
(and any amendments thereto) and is being made to all holders of Shares. The
Purchaser (as defined below) is not aware of any state where the making of the
Offer is prohibited by administrative or judicial action pursuant to state
statute. If the Purchaser becomes aware of any state where the making of the
Offer is prohibited, the Purchaser will make a good faith effort to comply with
any such statute. If, after such good faith effort, the Purchaser cannot comply
with any applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In those
jurisdictions where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by Prudential Securities Incorporated or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FARAH INCORPORATED
AT
$9.00 NET PER SHARE
BY
FOXFIRE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
TROPICAL SPORTSWEAR INT'L CORPORATION
Foxfire Acquisition Corp. (the "Purchaser"), a Texas Corporation, which
is a wholly owned subsidiary of Tropical Sportswear Int'l Corporation, a Florida
corporation ("TSI"), is offering to purchase all of the outstanding shares of
Common Stock, no par value per share (the "Shares"), of Farah Incorporated, a
Texas corporation (the "Company"), at a purchase price of $9.00 per Share net to
the seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 8, 1998 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, as amended from time
to time, together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, JUNE 5, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn pursuant to the Offer prior to the expiration
of the Offer such number of Shares which constitutes not less than 66-2/3% of
the Shares outstanding on the Expiration Date and (ii) the expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. The Offer is being made pursuant
to an Agreement and Plan of Merger, dated as of May 1, 1998 (the "Merger
Agreement"), among TSI, the Purchaser and the Company. The Merger Agreement
provides, among other things, for the making of the Offer by the Purchaser, and
further provides that, following the completion of the Offer, upon the terms and
subject to the conditions of the Merger Agreement, and in accordance with the
Texas Business Corporation Act (the "TBCA"), the Purchaser will be merged with
and into the Company (the "Merger") and each Share issued and outstanding
immediately prior to the effective time of the Merger (other than Shares owned
by TSI, the Purchaser or any other subsidiary of TSI, or held in the treasury of
the Company, which shall be canceled, and other than Shares, if any, held by
shareholders who have properly exercised and perfected dissenters' rights under
the TBCA), will, by virtue of the Merger be converted into the right to receive
$9.00 in cash, payable to the holder thereof, without interest, upon surrender
of the certificate formerly representing such Share, less any required
withholding taxes. The Merger Agreement is more fully described in Section 11 of
the Offer to Purchase.
<PAGE> 2
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED BY UNANIMOUS VOTE
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
OFFER AND THE MERGER, AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE SHARES AND
RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
The Bank of New York(the "Depositary") of the Purchaser's acceptance for payment
of such Shares for payment pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payments from the Purchaser and transmitting such payments to
shareholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES
WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In
all cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates representing Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii)
the Letter of Transmittal (or a manually signed facsimile thereo), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined in Section 3 of the Offer to Purchase) in connection
with a book-entry transfer, and (iii) any other documents required by the Letter
of Transmittal.
As described in Section 1 of the Offer to Purchase, in the Merger
Agreement, the Purchaser and TSI have agreed with the Company not to extend,
delay acceptance for payment of, or the payment for, Shares, or to terminate,
waive or amend the Offer, except under certain circumstances or if certain
conditions have not been satisfied. Subject to the applicable rules and
regulations of the Securities and Exchange Commission and the terms of the
Merger Agreement, the Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, and regardless of whether or not
any of the events set forth in Section 14 of the Offer to Purchase shall have
occurred, to (i) extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary and (ii) amend
the Offer in any respect by giving oral or written notice of such amendment to
the Depositary. Any extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement to be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date (as defined below). During any such
extension, all Shares previously tendered and not properly withdrawn will remain
subject to the Offer, subject to the rights of a tendering shareholder to
withdraw such shareholder's Shares.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, June 5, 1998, unless and until the Purchaser in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may be withdrawn at any time after July 7,
1998. For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered such
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates to be withdrawn have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to
Purchase) unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser in its sole discretion, which
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's shareholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
<PAGE> 3
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Manager or to the Information Agent as set forth below. Requests for copies of
the Offer to Purchase and the related Letter of Transmittal and all the tender
offer materials may be directed to the Information Agent, and copies will be
furnished promptly at the Purchaser's expense. The Purchaser will not pay any
fees or commissions to any broker or dealer or any other person (other than the
Dealer Manager and the Information Agent) for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manger for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
18th Floor
New York, New York 10292
(212) 778-1818 (Call Collect)
or
CALL TOLL-FREE (800) 881-9234
<PAGE> 1
FRIDAY, MAY 8, 1998, _____ EASTERN TIME
COMPANY PRESS RELEASE
Source: Tropical Sportswear Int'l Corporation
TROPICAL SPORTSWEAR INT'L CORPORATION COMMENCES TENDER OFFER
FOR FARAH SHARES
TAMPA, Florida -- May 8, 1998 -- On May 4, 1998, Tropical Sportswear Int'l
Corporation, (Nasdaq: TSIC) announced that it had entered into a definitive
merger agreement with Farah Incorporated (NYSE: FRA).
Foxfire Acquisition Corp., a wholly owned subsidiary of Tropical, has today
commenced a tender offer at $9.00 in cash per share for all of the shares of
Farah. The initial expiration date for the tender offer is June 5, 1998.
Prudential Securities Incorporated is the Dealer Manager, and MacKenzie
Partners, Inc. is the Information Agent for the tender offer.
Tropical Sportswear Int'l Corporation markets and manufactures men's and
women's sportswear including pants, jeans, shorts and shirts through all major
retail distribution channels including department and specialty stores. TSI
provides major retailers with comprehensive brand management programs and
distinguishes itself from traditional private label manufacturers by providing
apparel retailers with customer, product and market analysis, apparel design,
merchandising, and inventory forecasting through the use of state-of-the-art
technology.
For more information contact:
Tropical Sportswear Int'l Corporation, Tampa
Michael Kagan, (813) 249-4900
<PAGE> 1
EXHIBIT (b)(1)
April 26, 1998
CONFIDENTIAL:
Tropical Sportswear Int'l Corporation
4902 W. Waters Avenue
Tampa, Florida 33634
Attention: William W. Compton
Chief Executive Officer
BRIDGE COMMITMENT LETTER
Ladies and Gentlemen:
We understand that Tropical Sportswear Int'l Corporation (the
"Company") intends to participate in a competitive bidding process relating to
the proposed sale of all of the outstanding capital stock of Farah Incorporated
("Farah"). We also understand that if the Company is the successful bidder in
the sale process, the Company expects to consummate the acquisition of all of
the outstanding capital stock of Farah (the "Acquisition") on or prior to July
1, 1998 (such date on which the Acquisition is actually consummated, the
"Closing Date").
We further understand that, if the Company is the successful bidder,
the Company currently expects to fund the Acquisition with (i) borrowings under
a five-year revolving credit facility which will be entered into in connection
with the Acquisition (the "Credit Facility") and (ii) the net proceeds from the
issuance and sale by the Company of up to $100 million aggregate principal
amount of senior subordinated notes (the "Securities") in a private placement
pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") or in a public offering registered under the Securities Act
(in either case, the "Offering"). Prudential Securities Incorporated
("Prudential") will act as the sole initial purchaser or underwriter of the
Securities in the Offering.
The Company and Prudential Securities Incorporated ("Prudential") have
entered into an engagement letter of even date herewith (the "Engagement
Letter") pursuant to which Prudential was engaged, on an exclusive basis, to act
as the sole initial purchaser or underwriter in the Offering and to assist in
structuring and arranging for the Bridge Loan. In the event that the Offering
cannot be consummated on or prior to the Closing Date, you have requested that
Prudential Securities Credit Corp. (the "Lender") commit to provide
<PAGE> 2
the Company a senior subordinated exchangeable bridge loan in the initial
aggregate principal amount of up to $100 million (such amount being referred to
herein as the "Commitment") on the terms and conditions set forth in Annex 1 and
Annex 2 hereto (the "Bridge Loan"). Accordingly, subject to the terms and
conditions set forth in this letter and Annex 1 and Annex 2 hereto, which are
hereby incorporated by this reference (together with this letter, the "Bridge
Commitment Letter"), the parties hereto agree as follows:
1. BRIDGE FINANCING COMMITMENT. The Lender hereby commits, subject to
the terms and conditions in this Bridge Commitment Letter, to make the Bridge
Loan to the Company on the Closing Date if the net proceeds from the Offering
have not been received by the Company on or prior to the Closing Date for any
reason other than a breach or default by the Company, or failure by the Company
to satisfy any condition, under any of the documents relating to the Offering
including, without limitation, the purchase agreement relating to the Offering.
The Bridge Loan will mature one year after the Closing Date. If the Bridge Loan
is not repaid in full on such date and provided that no default or event of
default (to be defined) exists on such date (other than failure to repay the
Bridge Loan at maturity), any outstanding portion of the Bridge Loan shall be
automatically exchanged for senior subordinated notes of the Company (the
"Exchange Notes"), which will mature on the date that is 180 days after the
original maturity date of the Credit Facility.
2. FINANCING DOCUMENTATION. The Bridge Loan shall be made pursuant to,
and shall be governed by, a definitive loan agreement and certain related
agreements, and the Exchange Notes will be issued pursuant to the terms of an
indenture and certain related agreements, in each case prepared by King &
Spalding and covering the matters referred to in this Bridge Commitment Letter
and such other matters as the Lender may request (collectively, the "Bridge
Financing Documents"). The Bridge Financing Documents shall be in form and
substance reasonably satisfactory to the Lender.
3. CONDITIONS PRECEDENT. The obligation of the Lender under this Bridge
Commitment Letter to make the Bridge Loan is subject to (a) the execution and
delivery of the Bridge Financing Documents on terms and in form reasonably
satisfactory to the Lender and (b) satisfaction or waiver, at the sole
discretion of the Lender, of the conditions precedent set forth in Annex 1.
4. COOPERATION. The Company will cooperate with Prudential in
connection with the Offering and any syndication of the Bridge Loan (as
contemplated by paragraph 5 hereof) and shall, without limitation, upon
Prudential's request: (a) make available requested members of senior management
and representatives of the Company, and cause Farah to make available its
representatives and members of its senior management, to participate in due
diligence meetings with Prudential and its advisors, (b) provide all information
necessary to prepare a preliminary (and final) prospectus or offering memorandum
relating to the Offering and/or the Bridge Loan, including all relevant
information about the Company and it subsidiaries, Farah, the Acquisition and
the financing thereof and any other matters which Prudential may
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<PAGE> 3
reasonably deem necessary to a successful Offering or successful syndication of
the Bridge Loan or which Prudential, its counsel or the Company may consider
necessary or appropriate for accurate, complete and adequate disclosure under
the securities laws, and (c) commence a "road show" with respect to the Offering
as soon as is reasonably feasible after execution of the Bridge Commitment
Letter.
5. INDEMNIFICATION; EXPENSES. Whether or not the Bridge Loan is made
(a) the parties hereto agree to pay their respective fees and expenses
(including fees and expenses of counsel) incurred in connection with this Bridge
Commitment Letter, the Bridge Financing Fee Letter, the Acquisition or otherwise
arising out of the transactions contemplated hereby and (b) the Company hereby
agrees to defend, indemnify and hold harmless the Lender and the other
indemnified parties as set forth in the indemnification provisions attached as
Exhibit A hereto and incorporated herein by this reference (the "Indemnification
Provisions"). The obligations of the Company under this Section shall survive
expiration or termination of this Bridge Commitment Letter.
6. FEES. The commitment for the Bridge Loan set forth herein may not be
accepted by the Company unless the Engagement Letter and the Bridge Financing
Fee Letter are simultaneously accepted. The Company agrees that it shall pay
each of the fees described in the Bridge Financing Fee Letter on the dates
specified therein.
7. EXPIRATION; TERMINATION. (a) This Bridge Commitment Letter and the
Commitment hereunder will expire, without further act or condition:
(i) at 5:00 p.m. (New York time) on May 15, 1998 unless
prior to that time the Company has accepted this Bridge Commitment
Letter, the Bridge Financing Fee Letter and the Engagement Letter by
returning signed copies hereof and thereof to the Lender;
(ii) at 5:00 p.m. (New York time) on July 1, 1998 unless
prior to that time the Bridge Loan has been funded in accordance with
the terms and conditions of this Bridge Commitment Letter and the
Bridge Financing Documents; or
(iii) upon the Company advising Prudential in writing that it
has been advised that it is not the successful bidder for Farah.
(b) This Bridge Commitment Letter and the Commitment hereunder may be
terminated prior to expiration pursuant to Section 7(a) above:
(i) by the Company at any time upon payment of all fees,
expenses and other amounts then payable under this Bridge Commitment
Letter, the Bridge Financing Fee Letter and the Engagement Letter; and
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<PAGE> 4
(ii) by the Lender, if any breach or default occurs in the
performance of any material obligation of the Company set forth in, or
relating to the transactions contemplated by, this Bridge Commitment
Letter, the Bridge Financing Fee Letter, the Engagement Letter or any
other agreement or legal obligation enforceable by the Lender or any of
its affiliates.
8. SYNDICATION; ISSUANCE OF OTHER DEBT. The Lender shall have the right
to syndicate its Commitment, in whole or in part, and, after the closing of the
Bridge Loan, to sell and assign its loans and notes, to other accredited
investors. Until the earlier to occur of (a) the date on which the Commitment
expires or is terminated prior to funding and (b) the date on which all amounts
outstanding under the Bridge Loan are paid in full, the Company will not, and
will not permit its affiliates or any person acting for any of them, to: (i)
syndicate, offer or issue, or attempt to syndicate, offer or issue, any debt
(other than the Credit Facility or any permanent refinancing of the Bridge Loan)
or any equity or other security (including any renewals or refinancings thereof)
intended to replace the Bridge Loan, (ii) engage in any discussions concerning
the syndication, offering or issuance of any such debt or other security other
than confidential discussions with the Lender or Prudential as to possible
alternatives for repayment of the Bridge Loan (other than the Credit Facility
and/or the Bridge Loan) or (iii) make any acquisition of the stock or any
significant portion of the assets of, or merge or consolidate with, any person
or entity other than (A) in connection with the Acquisition and (B) short-term
investments in marketable securities made for cash management purposes.
9. COMMITMENTS PERSONAL TO THE COMPANY. The Commitment of the Lender
confirmed by this Bridge Commitment Letter is personal to the Company, may be
enforced solely by the Company, and may not be assigned to or enforced by any
other person or entity.
10. CONFIDENTIALITY. This Bridge Commitment Letter and the Bridge
Financing Fee Letter are confidential and shall not be disclosed by the Company
to any third party other than its accountants, attorneys and advisors and then
only on a confidential basis in connection with the transactions contemplated
herein, without the prior written consent of the Lender. Notwithstanding the
foregoing, you may make such disclosures of the Bridge Commitment Letter, the
Bridge Financing Fee Letter and the Engagement Letter as are required by law or
judicial process or as may be required or appropriate in response to any summons
or subpoena or in connection with any litigation, it being understood that in
such event you shall first give the Lender prior written notice thereof. If this
Bridge Commitment Letter is not accepted by you as provided in the final
paragraph hereof, you are directed to immediately return this Bridge Commitment
Letter (and copies hereof) to the undersigned.
11. GOVERNING LAW; CONSENT TO JURISDICTION. This Bridge Commitment
Letter and the Bridge Financing Fee Letter shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York without
regard to the principles governing conflicts of laws. The Company hereby
irrevocably submits to the non-exclusive
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<PAGE> 5
jurisdiction of any court of the State of New York or the United States District
Court for the Southern District of the State of New York for the purpose of any
suit, action or other proceeding arising out of this Bridge Commitment Letter,
the Bridge Financing Fee Letter or any of the agreements or transactions
contemplated hereby or thereby, which is brought by or against the Company and
(a) hereby irrevocably agrees that all claims in respect of any such suit,
action or proceeding may be heard and determined in any such court, (b) to the
extent that the Company has acquired, or hereafter may acquire, any immunity
from jurisdiction of any such court or from any legal process therein, the
Company hereby waives, to the fullest extent permitted by law, such immunity and
(c) hereby agrees not to commence any action, suit or proceeding relating to
this Bridge Commitment Letter, the Bridge Financing Fee Letter or any of such
agreements or transactions, other than in such court except to the extent
mandated by applicable law. The Company hereby waives and agrees not to assert
in any such suit, action or proceeding, in each case to the fullest extent
permitted by law, any claim that (i) it is not personally subject to the
jurisdiction of any such court, (ii) it is immune from process (whether through
service or notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to the Company or its property,
or (iii) any such suit, action or proceeding is brought in an inconvenient
forum.
12. WAIVER OF TRIAL BY JURY. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVES, AND THE LENDER ON BEHALF OF ITSELF AND EACH SUBSEQUENT
HOLDER, HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM OR COUNTERCLAIM BASED UPON,
ARISING OUT OF OR IN CONNECTION WITH THIS BRIDGE COMMITMENT LETTER, THE BRIDGE
FINANCING FEE LETTER OR THE OTHER AGREEMENTS AND TRANSACTIONS CONTEMPLATED
HEREIN OR THEREIN.
13. SEVERABILITY. If it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that any term or
provision hereof is invalid or unenforceable (a) the remaining terms and
provisions hereof shall be unimpaired and shall remain in full force and effect
and (b) the invalid or unenforceable provision or term shall be replaced by a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of such invalid or unenforceable term or provision.
14. COMPLETE AGREEMENT; WAIVERS AND OTHER CHANGES TO BE IN WRITING.
This Bridge Commitment Letter, the Bridge Financing Fee Letter and the
Engagement Letter embody the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof and thereof and supersede any
and all prior agreements and understandings relating to the matters provided for
herein and therein. No alteration, waiver, amendment or supplement thereof or
thereto shall be binding or effective unless the same is set forth in a writing
signed by a duly authorized representative of each party hereto or thereto.
Notwithstanding the foregoing, that certain Engagement Letter dated April 1998
between the Company and Prudential (the "Old Engagement Letter") shall not be
superseded
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<PAGE> 6
or otherwise amended or modified by this Bridge Commitment Letter and such Old
Engagement Letter shall remain in full force and effect.
15. POWER, AUTHORITY AND BINDING EFFECT. Each of the parties hereto
represents and warrants to each of the other parties hereto that (a) it has all
requisite corporate power and authority to enter into this Bridge Commitment
Letter and the Bridge Financing Fee Letter and (b) each of this Bridge
Commitment Letter, the Bridge Financing Fee Letter and the Engagement Letter has
been duly and validly authorized by all necessary corporate action on the part
of such party, has been duly executed and delivered by such party and
constitutes a legally valid and binding agreement of such party, enforceable
against it in accordance with its terms.
16. NO RIGHTS OR LIABILITY. Neither this Bridge Commitment Letter nor
the Bridge Financing Fee Letter creates, nor shall either of them be construed
as creating, any rights enforceable by a person or entity not a party hereto,
except for the Company and as provided in the Indemnification Provisions. The
Company acknowledges and agrees that (a) neither of the Lender, nor any other
accredited investor who assumes a portion of the Commitment or becomes the
holder of any Exchange Note (collectively, the "Holders"), is not and shall not
be construed as a fiduciary or agent of the Company, Farah or any other person
and shall have no duties or liabilities to any such persons' equity holders or
creditors by virtue of this Bridge Commitment Letter, the Bridge Financing Fee
Letter or the retention of Prudential under the Old Engagement Letter or the
Engagement Letter, all of which are hereby expressly waived, and (b) none of the
Holders shall have any liability (including, without limitation, liability for
any losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses or disbursements resulting from any negligent act
or omission of any of the Holders) (whether direct or indirect, in contract,
tort or otherwise) to the Company, Farah or any other person (including, without
limitation, their respective equity holders and creditors) for or in connection
with (i) the engagement of Prudential pursuant to the Old Engagement Letter, the
Engagement Letter or (ii) this Bridge Commitment Letter, the Bridge Financing
Fee Letter, the Old Engagement, the Engagement Letter or any of the transactions
contemplated hereby, except that, subject to Section 5, a claim in contract for
actual direct damages directly and proximately caused by a breach of any
contractual obligation expressly set forth in any written agreement signed by
the party against which enforcement of such claim is sought shall not be
impaired hereby and (c) the Lender was induced to enter into this Bridge
Commitment Letter and the Bridge Financing Fee Letter by, inter alia, the
provisions of this Section.
17. NO LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES. No party hereto liable for any damages hereunder to any other party
shall ever be liable for any special, indirect or consequential damages or, to
the fullest extent that a claim for punitive damages may lawfully be waived, for
any punitive damages, on any claim (whether founded in contact, tort, legal duty
or any other theory of liability) arising from or related in any manner to this
Bridge Commitment Letter or the negotiation, execution, administration,
performance, breach of enforcement of this Bridge Commitment Letter, the Bridge
Financing Documents or
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the instruments and agreements evidencing, governing or relating to the other
financing transactions contemplated hereby or any amendment thereto or the
funding of the Bridge Loan or the consummation of, or any failure to consummate,
the Acquisition or any act, omission, breach or wrongful conduct in any manner
related thereto.
18. RELIANCE ON INFORMATION. In undertaking and performing its
obligations under this Bridge Commitment Letter, the Lender is relying and will
continue to rely: (a) without independent verification thereof, on the accuracy
and completeness of all financial and other information furnished by or on
behalf of the Company or Farah or any of their respective subsidiaries or
affiliates, and (b) on each of the representations, warranties and covenants by
the Company set forth in this Bridge Commitment Letter. The Company represents
and warrants to the Lender that all financial and other information which it has
provided to the Lender in connection with this Bridge Commitment Letter, the
Offering and the Acquisition does not and will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
19. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Bridge Commitment Letter may be executed by the parties
hereto. Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken shall constitute one and the same
agreement.
20. TIME OF ESSENCE. Time shall be of the essence whenever and wherever
a date or period of time is prescribed or referred to in this Bridge Commitment
Letter.
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Please confirm that the Company accepts and agrees to the foregoing, by
signing this Bridge Commitment Letter in the space provided below and returning
it, along with a duly accepted copy of the Engagement Letter and the Bridge
Financing Fee Letter, to the undersigned representative of the Lender at its
address set forth above by not later than 5:00 p.m. (New York time) on April 27,
1998.
Very truly yours,
PRUDENTIAL SECURITIES CREDIT CORP.
By: /s/
----------------------------------
Name:
Title: President Capital Markets
Agreed to and Accepted as
of April 27, 1998:
TROPICAL SPORTSWEAR
INT'L CORPORATION
By: /s/ William W. Compton
------------------------------
Name: William W. Compton
Title: CEO and Chairman
By: /s/ Michael Kagan
------------------------------
Name: Michael Kagan
Title: Executive Vice President
8
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EXHIBIT A
INDEMNIFICATION PROVISIONS
Capitalized terms used and not otherwise defined herein are used with
the meanings attributed thereto in the bridge commitment letter dated April 27,
1998 (the "Bridge Commitment Letter") from Prudential Securities Credit Corp.
("Pru Credit") to Tropical Sportswear Int'l Corporation (the "Company") of which
these indemnification provisions form an integral part.
The Company agrees that it will indemnify and hold harmless Pru Credit
and any other person or entity that provides all or any portion of the Bridge
Loan or who becomes a Holder of Exchange Notes (collectively, including Pru
Credit, the "Lenders") to the fullest extent permitted by law, from and against
any and all losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements (and any and all actions, suits,
proceedings and investigations in respect thereof and any and all legal or other
costs, expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, proceeding or investigation (whether or not in
connection with litigation in which any of the Lenders is a party thereto),
directly or indirectly, caused by, relating to, based upon, arising out of or in
connection with (a) the Bridge Commitment Letter or Bridge Financing Fee Letter,
(b) the Acquisition or (c) any untrue statement or alleged untrue statement of a
material fact contained in, or omissions or alleged omissions from any filing
with any governmental agency or similar statements or omissions in or from any
information furnished by the Company or any of its subsidiaries or affiliates or
Farah or any of its subsidiaries or affiliates to any of the Lenders or any
other person in connection with the Bridge Commitment Letter, the Bridge
Financing Fee Letter or the Acquisition; provided, however, that such indemnity
agreement shall not apply to any such loss, claim, damage, obligation, penalty,
judgment, award, liability, cost, expense or disbursement to the extent it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily and directly from the gross
negligence or willful misconduct of any of the Lenders. The Company also agrees
that the Lenders shall have no liability (whether direct or indirect, in
contract or tort or otherwise) to the Company for or in connection with the
Bridge Commitment Letter or Bridge Financing Fee Letter or the transactions
contemplated thereby including, without limitation, the Acquisition and the
Bridge Loan, except for any such losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and disbursements
that are finally judicially determined by a court of competent jurisdiction (not
subject to further appeal) to have resulted from the gross negligence or willful
misconduct of the Lenders.
These Indemnification Provisions shall be in addition to any liability
which the Company may have to the Lenders or the persons indemnified below in
this sentence and shall extend to the following: The Lenders, Prudential, their
respective affiliated entities, directors, officers,
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employees, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws), and none of such indemnified persons shall be
liable for any act or omission of any of the others. All references to
"Lender(s)" in these Indemnification Provisions shall be understood to include
any and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to
which any Indemnified Party proposes to demand indemnification, it shall notify
the Company with reasonable promptness; provided, however, that any failure by
any Lender to so notify the Company shall not relieve the Company from its
obligations hereunder. Pru Credit, on behalf of the Lenders, shall have the
right to retain counsel of their choice to represent the Lenders, and the
Company shall pay the fees, expenses and disbursements of such counsel; and such
counsel shall, to the extent consistent with its professional responsibilities,
cooperate with the Company and any counsel designated by the Company. The
Company shall be liable for any settlement of any claim against any of the
Lenders made with the Company's written consent, which consent shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of Pru Credit, settle or compromise any claim, or permit a default or consent to
the entry of any judgment in respect thereof, unless such settlement, compromise
or consent includes, as an unconditional term thereof, the giving by the
claimant to each of the Lenders of an unconditional and irrevocable release from
all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and the Lenders, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and the Lenders, on the other hand, and also the
relative fault of the Company, on the one hand, and the Lenders, on the other
hand, in connection with the statements, acts or omissions which resulted in
such losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements and the relevant equitable
considerations shall also be considered. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for such fraudulent misrepresentation. Notwithstanding the
foregoing, none of the Lenders shall be obligated to contribute any amount
hereunder that exceeds the amount of fees previously received by such Lender
pursuant to the Bridge Commitment Letter and/or the Bridge Financing Fee Letter,
as applicable.
Neither termination of the Commitment nor funding or repayment of the
Bridge Loan shall affect these Indemnification Provisions which shall then
remain operative and in full force and effect.
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ANNEX 1
SUMMARY OF TERMS AND CONDITIONS OF BRIDGE LOAN
Capitalized terms used and not otherwise defined herein have the
meanings set forth in the Bridge Commitment Letter to which this Summary of
Terms and Conditions is attached and of which it forms a part.
BORROWER: Tropical Sportswear Int'l Corporation (the
"Company").
LENDER(S): Prudential Securities Credit Corp. ("Pru Credit")
and such other accredited investors from whom Pru
Credit accepts commitments to provide a portion of
the Bridge Loan (collectively, with Pru Credit, the
"Lenders").
AMOUNT: Up to $100 million unsecured senior subordinated
exchangeable bridge loan (the "Bridge Loan").
FUNDING DATE: Subject to the terms and conditions in the
Bridge Commitment Letter, the Bridge Loan will be
funded on the Closing Date.
USE OF PROCEEDS: The proceeds of the Bridge Loan will be used
solely to finance a portion of the purchase price for
the Acquisition.
MATURITY: All amounts outstanding under the Bridge Loan will
be required to be repaid in full one year after the
Closing Date (the "Maturity Date"). If, upon the
Maturity Date, the Company fails to repay the Bridge
Loan in full and provided no default or event of
default has occurred and is continuing (other than
the failure to repay the Bridge Loan on the Maturity
Date), any then outstanding portion of the Bridge
Loan shall automatically be exchanged for a senior
subordinated exchange note (each, an "Exchange
Note"), which shall be due on the date that is 180
days after the original maturity date of the Credit
Facility.
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The Exchange Notes will be issued pursuant to an
Indenture the form of which will be attached as an
exhibit to the loan agreement relating to the Bridge
Loan and comprising part of the Bridge Financing
Documents and will have the terms summarized on Annex
2 to the Bridge Commitment Letter.
INTEREST: The Bridge Loan will initially bear interest at a
rate per annum equal to the sum of (a) the 3-month
London interbank offered rate, adjusted for reserves
("LIBOR") calculated on the basis of the actual
number of days elapsed in a year of 360 days plus (b)
a spread (the "Spread") of 400 basis points. If the
Bridge Loan is not repaid in whole within 90 days
following the Closing Date, the Spread will increase
by 50 basis points at the end of such 90-day period
and shall increase by an additional 50 basis points
at the end of each 90-day period thereafter until the
Maturity Date. If Exchange Notes are issued on the
Maturity Date, the Exchange Notes will bear a fixed
rate of interest per annum equal to the sum of the
interest rate in effect with respect to Bridge Loan
immediately prior to the issuance of the Exchange
Notes plus 100 basis points; provided, however, that
the interest rate applicable to the Bridge Loan and
the Exchange Notes shall not exceed (i) 18% per annum
or (ii) the maximum rate permitted by applicable law.
RANKING: The Bridge Loan will be an unsecured, senior
subordinated obligation of the Company ranking junior
to all amounts outstanding under the Credit Facility,
pari passu with all other unsubordinated indebtedness
of the Company and senior to all subordinated
indebtedness of the Company.
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MANDATORY REPAYMENT: The Company will be required to repay the Bridge Loan
at a price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon to
the date of repayment with all of the net proceeds
received in connection with (i) the issuance and sale
in a public offering or private placement of any debt
or equity securities after the Closing Date by the
Company or any affiliate or direct or indirect
subsidiary of the Company including, without
limitation, in the Offering, and (ii) subject to
prior mandatory prepayments required under the Credit
Facility, any asset sale or series of asset sales by
the Company or any affiliate or direct or indirect
subsidiary of the Company.
To the extent that Prudential proposes to consummate
the Offering and act as the sole initial purchaser or
underwriter in connection therewith and the Offering
is not consummated for any reason other than by
reason of a default by Prudential under the terms and
conditions of the purchase agreement, if executed,
relating to the Offering, the Company will be
required, on the day on which Prudential proposed to
consummate the Offering, to repay in full all
principal outstanding under the Bridge Loan plus
accrued and unpaid interest thereon to the date of
repayment.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control (to be
defined), the Company will be required to repay the
Bridge Loan in full at a price equal to 101% of the
principal amount then outstanding plus accrued and
unpaid interest thereon to the date of such
repayment.
PAYMENTS: Payments by the Company will be made by wire transfer
of immediately available funds to an account
designated in writing by the Lenders.
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TRANSFERABILITY AND Pru Credit will have the absolute and unconditional
PARTICIPATIONS: right (a) to make assignments of or grant
participations in the Commitment and Bridge Loan
(subject to customary restrictions on assignees' or
participants' voting rights) and (b) to transfer and
assign all or any portion of the Bridge Loan to any
affiliate or unaffiliated accredited investor(s)
without the consent of the Company, provided that
each such assignment shall be for not less than $5.0
million. In addition, any Lender may at any time
create a security interest in all or any portion of
its rights under the Bridge Loan Agreement
(including, without limitation, its Bridge Loan) in
favor of any Federal Reserve Bank in accordance with
applicable law.
EXPENSES AND All out-of-pocket costs and expenses of Pru Credit,
INDEMNIFICATION: including, without limitation, expenses incurred in
connection with the due diligence of Pru Credit
associated with the preparation, execution, delivery
and administration of the Bridge Financing Documents
(including, without limitation, legal, auditing and
accounting fees and expenses) shall be paid by Pru
Credit. All reasonable out-of-pocket expenses of Pru
Credit and each of the other Lenders incurred in
connection with the waiver, amendment and/or
enforcement of the Bridge Financing Documents
(including, without limitation, legal, auditing and
accounting fees and reasonable expenses) are to be
paid by the Company.
The Company will indemnify and hold harmless the
Lenders in connection with the Bridge Financing
Documents on terms substantially identical to, and,
in any event, no less favorable than, the terms set
forth in Exhibit A to the Bridge Commitment Letter.
14
<PAGE> 15
MODIFICATION OF THE BRIDGE Modification of the Bridge Loan may be made with
LOAN: consent of the Lenders holding greater than 50% of
the aggregate principal amount of the Bridge Loan
then outstanding, except that, without the consent of
the Lenders holding 100% of the Bridge Loan affected
thereby, no modification or change may extend the
maturity of any Bridge Loan or time of payment of any
interest on the Bridge Loan, reduce the rate of
interest or the principal amount of any Bridge Loan,
alter the mandatory prepayment provisions of the
Bridge Loan or reduce the percentage of Lenders
necessary to modify or change the Bridge Loan.
COST AND YIELD PROTECTION: The Lenders shall receive cost and yield protection
customary for facilities and transactions of this
type, including, but not limited to, compensation in
respect of prepayments and other typical "breakage"
events, taxes (including but not limited to gross-up
provisions for withholding taxes imposed by any
governmental authority), changes in capital
requirements, guidelines or policies or their
interpretation or application, illegality, change in
circumstances, reserves and other provisions deemed
necessary by the Lenders to provide customary
protection for U.S. and non-U.S. financial
institutions.
CONDITIONS PRECEDENT: The several obligations of the Lenders to make, or to
cause one of their respective affiliates to make, the
Bridge Loan will be subject to closing conditions
deemed appropriate by the Lenders for financings of
this kind generally and for this transaction in
particular, including, without limitation, the
following closing conditions:
15
<PAGE> 16
Concurrent Transactions. All conditions precedent
to the Acquisition (other than payment of the
purchase price for the Acquisition) shall have been
satisfied or, with the consent of each of the
Lenders, waived, and the Acquisition shall have been
consummated. All conditions precedent to funding
under the Credit Facility shall have been satisfied
or, with the consent of the Lenders, waived, and
funding shall have occurred. There shall not exist
(pro forma for the Acquisition) any default or event
of default under the Credit Facility or the Bridge
Financing Documents, or under any other material
indebtedness of the Company or its subsidiaries, and
each of the Lenders shall have funded its share of
the Commitment.
Absence of Certain Changes. No material adverse
change in the consolidated financial condition,
business, operations, assets, liabilities or
prospects of the Company or Farah (including any
event which, in the reasonable opinion of Pru Credit,
is likely to result in such a material adverse
change) shall have occurred since December 31, 1998
and February 1, 1998, respectively, the date of the
Company's and Farah's most recent financial
statements delivered to Pru Credit as of the date
hereof, and no material inaccuracy in such financial
statements shall exist. Other than liabilities
incurred by the Company and its subsidiaries or Farah
in the ordinary course of business since September
27, 1997 and November 2, 1997, respectively, and
reflected in the monthly financial statements with
respect to the Company and Farah described in the
paragraph below titled "Financial Statements", the
Company and its subsidiaries and Farah shall have no
material liabilities except those set forth in such
financial statements or disclosed in the footnotes.
16
<PAGE> 17
Documentation, Legal Matters, etc. The Bridge
Loan Documents shall be prepared by King & Spalding
and shall be in form satisfactory to Pru Credit and
shall contain the terms summarized herein and such
other terms as are customary for similar financings.
All other matters relating to the Acquisition and the
financing therefor shall be reasonably satisfactory
to each of the Lenders in all material respects, and
the Lenders shall have received such additional
certificates, legal and other opinions, including, to
the extent required by the Credit Facility for the
benefit of the lenders thereunder, a third-party
opinion with respect to the solvency of the Company
in form and substance reasonably satisfactory to each
of the Lenders and their counsel, and such other
documentation as they shall reasonably request.
Financial Statements. At least five business days
prior to the Closing Date, each of the Lenders shall
have received: (a) audited financial statements for
the three-year period ended September 27, 1997 and
any appropriate unaudited financial statements for
any interim quarterly periods of the Company
(including pro forma financial statements giving
effect to the Acquisition meeting the requirements of
Regulation S-X for Form S-1 registration statements),
(b) audited financial statements for the three-year
period ended November 2, 1997 and any appropriate
interim quarterly periods of Farah and (c) unaudited
financial statements for each of the Company and
Farah for each quarter and month prior to the Closing
Date since the date of the last audited financial
statements delivered pursuant to the preceding clause
(a) and (b).
Approvals and Consents. All governmental,
shareholder and third-party approvals and consents
necessary or desirable in connection with the
Acquisition and the financing thereof shall have been
received and shall be in full force and effect, and
all applicable waiting periods shall have expired
without any action being taken by any applicable
authority.
17
<PAGE> 18
Litigation, etc. There shall not exist any
action, suit, investigation, litigation or proceeding
pending or threatened in any court or before any
arbitrator or governmental authority that, in the
opinion of any Lender, adversely affects or could
adversely affect the Company, Farah or the
Acquisition, the financing thereof or any of the
other transactions contemplated hereby.
Accuracy of Representations and Warranties. All
representations and warranties contained in the
Bridge Financing Documents, the Credit Facility and
the definitive agreement relating to the Acquisition
shall be true and correct in all material respects as
of the Closing Date.
Market Disruption. There shall not have occurred
any material disruption or material adverse change,
as determined by Pru Credit, in the financial or
capital markets generally, or in the markets for high
yield debt or equity securities in particular or
affecting the syndication or funding of Bridge Loan
(or the refinancing thereof).
COVENANTS: The Bridge Loan Documents will contain such covenants
with respect to the Company and its subsidiaries as
are usual and customary for financings of this kind,
including, without limitation, as to (i) use of
proceeds, (ii) refinancing of the Bridge Loan, (iii)
furnishing of financial information in accordance
with generally accepted accounting principles, (iv)
compliance with laws, (v) maintenance of existence,
(vi) payment of taxes, (vii) maintenance of
insurance, (viii) restrictions on liens, (ix)
restrictions on indebtedness, (x) restrictions on
investments, (xi) restrictions on dividends,
distributions, redemptions and other restricted
payments (to be defined), (xii) restrictions on sales
of assets, (xiii) restrictions on mergers and
consolidations (other than with existing
subsidiaries) and prohibition of additional
acquisitions and consolidations, (xiv) restrictions
on transactions with affiliates, (xv) restrictions on
sale-leaseback transactions, (xvi) restrictions on
business activities; and (xvii) restrictions on
amendments to charter documents.
18
<PAGE> 19
EVENTS OF DEFAULT: The Bridge Loan Documents will include such events of
default (and, as appropriate, grace periods) as are
usual and customary for financings of this kind,
including, without limitation: (i) nonpayment of
principal, interest, fees or other amounts, (ii)
payment default on other indebtedness aggregating
$5.0 million or more which is not cured within
applicable grace periods or the acceleration (for any
reason) of such indebtedness, (iii) covenant
defaults, (iv) undischarged judgments in excess of an
amount to be agreed, (v) certain bankruptcy events
with respect to the Company or Farah or any of their
material subsidiaries, (vi) material
misrepresentations and (vi) certain ERISA events.
In case an Event of Default shall occur and be
continuing, the holders of a majority in aggregate
principal amount of Bridge Loan then outstanding, by
notice in writing to the Company and other Lenders,
may declare the principal of and all accrued interest
on the Bridge Loan to be immediately due and payable;
provided, however, that no such notice shall be
necessary in the case of a bankruptcy Event of
Default with respect to the Company. An acceleration
notice may be annulled and past defaults (except for
payment defaults not yet cured) may be waived by the
holders of a majority in aggregate principal amount
of Bridge Loan then outstanding.
REPRESENTATIONS AND The Bridge Loan Agreement will contain such
WARRANTIES: representations and warranties with respect to the
Company and its subsidiaries and Farah as are usual
and customary for financings of this kind, including,
without limitation, (i) organization and good
standing, (ii) capitalization, (iii) authorization
and enforceability, (iv) no conflicts, (v)
governmental regulations (including margin
regulations), (vi) no defaults, (vii) no violation of
law, (viii) absence of litigations, proceedings,
labor disputes, etc., (ix) financial condition
(including solvency matters), (x) Investment Company
Act and Hart-Scott-Rodino matters, (xi) absence of
material adverse change, (xii) absence of undisclosed
liabilities, (xiii) financial statements, and (xiv)
full disclosure.
GOVERNING LAW AND FORUM: New York.
19
<PAGE> 20
COUNSEL FOR THE LENDERS: King & Spalding.
<PAGE> 21
ANNEX 2
SUMMARY OF TERMS AND CONDITIONS OF EXCHANGE NOTES
Capitalized terms used but not defined herein have the meanings given
in the Bridge Commitment Letter to which this Annex 2 is attached or, if not
defined therein, in Annex 1 thereto.
EXCHANGE NOTES: On the Maturity Date, if the Company fails to repay
the Bridge Loan in full and provided no default or
event of default has occurred and is continuing
(other than the failure to repay the Bridge Loan on
the Maturity Date), any then outstanding portion of
the Bridge Loan shall automatically be exchanged for
Exchange Notes. The principal amount of any Exchange
Note will equal 100% of the aggregate principal
amount of the Bridge Loan for which it is exchanged
plus accrued and unpaid interest thereon to the
Maturity Date.
The Company will issue Exchange Notes under an
indenture which complies with the Trust Indenture Act
of 1939, as amended (the "Indenture"). The Company
will appoint a trustee reasonably acceptable to the
holders of the Exchange Notes.
MATURITY: The Exchange Notes will mature on the date that is
180 days after the original maturity of the Credit
Facility.
INTEREST RATE: See "Interest" under Annex 1.
RANKING: Same as Bridge Loan.
OPTIONAL REDEMPTION: Except as provided in the next sentence, the Company
may redeem the Exchange Notes, in whole or in part,
at any time at a price equal to 102.75% of the
principal amount thereof plus accrued and unpaid
interest thereon to the date of redemption. Once an
Exchange Note has been transferred to a person who
was not a Lender of the Bridge Loan or any affiliate
thereof, such Exchange Note will be subject to call
protection customary for fixed rate high-yield debt
securities for a period of five years.
21
<PAGE> 22
MANDATORY REDEMPTION: The Company will be required to redeem Exchange Notes
at a redemption price equal to 100% of the principal
amount of the Exchange Notes being redeemed plus
accrued and unpaid interest thereon to the date of
redemption with all of the net proceeds received in
connection with (i) the issuance and sale in a public
offering or private placement of any debt or equity
securities after the Closing Date by the Company or
any affiliate or direct or indirect subsidiary of the
Company including, without limitation, in the
Offering and (ii) subject to prior mandatory
prepayments required under the Credit Facility, any
asset sale or series of asset sales by the Company or
any affiliate or direct or indirect subsidiary of the
Company.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control, the
Company will be required to redeem the Exchange Notes
at a redemption price equal to 101% of the principal
amount thereof plus accrued and unpaid interest
thereon to the date of redemption.
PAYMENTS: Same as Bridge Loan.
TRANSFERABILITY: Unlimited except as otherwise provided by law.
DEFEASANCE PROVISIONS OF
EXCHANGE NOTES: Customary.
MODIFICATION: Same as Bridge Loan.
22
<PAGE> 23
REGISTRATION RIGHTS: The Company will file, not later than the Maturity
Date, and will use its best efforts to cause to
become effective as soon thereafter as practicable, a
shelf registration statement with respect to the
Exchange Notes (a "Shelf Registration Statement"). If
a Shelf Registration Statement is filed, the Company
will keep such registration statement effective and
available (subject to customary exceptions) until it
is no longer needed to permit unrestricted resales of
the Exchange Notes. If within 35 days after the
Maturity Date (the "Target Effectiveness Date"), a
Shelf Registration Statement for the Exchange Notes
has not been declared effective, then the Company
will pay liquidated damages in the form of an
increase of 50 basis points per annum in the interest
rate then in effect on the principal amount of
Exchange Notes outstanding to holders of such
Exchange Notes who are unable freely to transfer
Exchange Notes from and including the 31st day after
the Maturity Date to but excluding the effective date
of such Shelf Registration Statement. If the Shelf
Registration Statement has not been declared
effective on the 90th day after the Target
Effectiveness Date, the liquidated damages shall
increase by 50 basis points per annum, and on each
90-day anniversary of the Target Effectiveness Date
thereafter, shall increase by 50 basis points per
annum, to a maximum increase in interest of 200 basis
points. The Company will also pay such liquidated
damages for any period of time (subject to customary
exceptions) following the effectiveness of a Shelf
Registration Statement that such Shelf Registration
Statement is not available for sales thereunder. All
accrued liquidated damages will be paid on each
quarterly interest payment date. In addition, unless
and until the Company has caused the Shelf
Registration Statement to become effective, the
holders of the Exchange Notes will have the right to
"piggy-back" in the registration of any debt
securities (subject to customary scale-back
provisions) that are registered by the Company (other
than on a Form S-4) unless all the Exchange Notes
will be redeemed or repaid from the proceeds of such
securities.
COVENANTS: Same as Bridge Loan.
EVENTS OF DEFAULT: Same as Bridge Loan.
23
<PAGE> 24
GOVERNING LAW AND FORUM: New York.
COUNSEL FOR THE LENDERS: King & Spalding.
24
<PAGE> 1
EXHIBIT (c)(1)
===============================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
TROPICAL SPORTSWEAR INT'L CORPORATION
FOXFIRE ACQUISITION CORP.
AND
FARAH INCORPORATED
DATED MAY 1, 1998
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE OFFER................................................................................................2
1.01 The Offer.................................................................................2
1.02 Target Action.............................................................................3
THE MERGER...............................................................................................5
2.01 The Merger................................................................................5
2.02 Effective Time; Closing...................................................................5
2.03 Effect of the Merger......................................................................5
2.04 Articles of Incorporation; Bylaws.........................................................5
2.05 Directors and Officers....................................................................5
2.06. Conversion of Securities..................................................................6
2.07 Employee Stock Options; Restricted Stock..................................................6
2.08 Dissenting Shares.........................................................................7
2.09 Surrender of Shares; Stock Transfer Books.................................................7
REPRESENTATIONS AND WARRANTIES OF THE TARGET.............................................................9
3.01 Organization and Qualification; Subsidiaries..............................................9
3.02 Articles of Incorporation and Bylaws.....................................................10
3.03 Capitalization...........................................................................10
3.04 Authority Relative to This Agreement.....................................................10
3.05 No Conflict; Required Filings and Consents...............................................11
3.06 Permits; Compliance......................................................................12
3.07 SEC Filings; Financial Statements........................................................12
3.08 Absence of Certain Changes or Events.....................................................13
3.09 Absence of Litigation....................................................................14
3.10 Employee Benefit Plans...................................................................14
3.11 Labor Matters............................................................................16
3.12 Taxes....................................................................................17
3.13 Environmental Matters....................................................................18
3.14 Opinion of Financial Advisor.............................................................20
3.15 Brokers..................................................................................20
3.16 Tangible Property........................................................................20
3.17 Material Contracts.......................................................................21
3.18 Offer Documents; Schedule 14D-9..........................................................21
3.19 Change in Control........................................................................21
3.20 Intellectual Property....................................................................22
3.21 Insurance................................................................................23
3.22 Certain Business Practices...............................................................23
3.23 State Takeover Laws......................................................................23
3.24 Board Recommendation.....................................................................23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
AND ACQUIROR SUB...................................................................................23
4.01 Corporate Organization...................................................................24
4.02 Authority Relative to This Agreement.....................................................24
4.03 No Conflict; Required Filings and Consents...............................................24
4.04 Offer Documents; Proxy Statement.........................................................25
4.05 Brokers..................................................................................25
4.06 Financing................................................................................26
CONDUCT OF BUSINESS PENDING THE MERGER..................................................................26
5.01 Conduct of Business by the Target Pending the
Acquiror Sub's Election Date.............................................................26
ADDITIONAL AGREEMENTS...................................................................................28
6.01 Shareholder's Meeting....................................................................28
6.02 Proxy Statement..........................................................................29
6.03 Target Board Representation; Section 14(f)...............................................29
6.04 Access to Information; Confidentiality...................................................30
6.05 No Solicitation of Transactions..........................................................30
6.06 Directors' and Officers' Indemnification.................................................31
6.07 Obligations of Acquiror Sub..............................................................33
6.08 Public Announcements.....................................................................33
6.09 Delivery of SEC Documents................................................................33
6.10 Notification of Certain Matters..........................................................33
6.11 Further Action...........................................................................34
6.12 Employee Benefits........................................................................34
6.13 Appropriate Action; Consents; Filings....................................................34
6.14 Payments in Respect of Target Options....................................................35
6.15 Supplemental Indenture...................................................................36
6.16 Employee Stock Purchase Plan.............................................................36
6.17 Directorships............................................................................37
CONDITIONS TO THE MERGER................................................................................37
7.01 Conditions to the Merger.................................................................37
TERMINATION, AMENDMENT AND WAIVER.......................................................................37
8.01 Termination..............................................................................37
8.02 Fees and Expenses........................................................................39
8.03 Amendment................................................................................40
8.04 Waiver...................................................................................40
GENERAL PROVISIONS......................................................................................40
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
9.01 Non-Survival of Representations, Warranties and Agreements...............................40
9.02 Notices..................................................................................40
9.03 Certain Definitions......................................................................42
9.04 Severability.............................................................................43
9.05 Assignment; Binding Effect; Benefit......................................................43
9.06 Incorporation of Schedules...............................................................43
9.07 Specific Performance.....................................................................43
9.08 Governing Law............................................................................43
9.09 Headings.................................................................................43
9.10 Counterparts.............................................................................44
9.11 Waiver of Jury Trial.....................................................................44
9.12 Entire Agreement.........................................................................44
</TABLE>
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 1, 1998 (this
"Agreement"), by and among Tropical Sportswear Int'l Corporation, a Florida
corporation ("Acquiror"), Foxfire Acquisition Corp., a Texas corporation and a
direct, wholly owned subsidiary of Acquiror ("Acquiror Sub"), and Farah
Incorporated, a Texas corporation (the "Target").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Acquiror, Acquiror Sub and the
Target have each determined that it is in the best interests of their respective
shareholders for Acquiror, through Acquiror Sub, to acquire the Target upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that
Acquiror Sub shall make a cash tender offer (as it may be amended from time to
time as permitted by this Agreement, the "Offer") to acquire all the issued and
outstanding shares of common stock, no par value per share, of the Target
("Target Common Stock"; shares of Target Common Stock being hereinafter
collectively referred to as the "Shares") for $9.00 per Share (such amount, or
iany greater amount per Share paid pursuant to the Offer, being hereinafter
referred to as the "Per Share Amount") net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of this Agreement
and the Offer;
WHEREAS, the Board of Directors of Acquiror and Acquiror Sub have
approved the making of the Offer and the transactions related thereto;
WHEREAS, the Board of Directors of the Target has approved the making
of the Offer and resolved and agreed, subject to the terms and conditions
contained herein, to recommend that holders of Shares tender their Shares
pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of Acquiror, Acquiror Sub and the Target have each approved the merger
(the "Merger") of Acquiror Sub with and into the Target in accordance with the
Texas Business Corporation Act ("Texas Law") following the consummation of the
Offer and upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Acquiror, Acquiror Sub and the Target hereby agree as follows:
ARTICLE I
<PAGE> 6
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing (unless such event
shall have been waived by Acquiror Sub), Acquiror shall cause Acquiror Sub to
commence, and Acquiror Sub shall commence, the Offer at the Per Share Amount as
promptly as reasonably practicable after the date hereof, but in no event later
than five business days after the public announcement of Acquiror Sub's
intention to commence the Offer. The obligation of Acquiror Sub to accept for
payment and pay for Shares tendered pursuant to the Offer shall be subject only
to (i) the condition (the "Minimum Condition") that at least the number of
Shares that, when combined with the Shares already owned by Acquiror and its
direct and indirect subsidiaries, constitute two-thirds of the then outstanding
Shares shall have been validly tendered and not withdrawn prior to the
expiration of the Offer and (ii) the satisfaction or waiver of the other
conditions set forth in Annex A hereto. Acquiror Sub expressly reserves the
right to waive any such condition (other than the Minimum Condition), to
increase the price per Share payable in the Offer, and to make any other changes
in the terms and conditions of the Offer; provided, however, that
(notwithstanding Section 8.03) no change may be made which (A) decreases the
price per Share payable in the Offer, (B) reduces the maximum number of Shares
to be purchased in the Offer, (C) imposes conditions to the Offer in addition to
those set forth in Annex A hereto, (D) amends or changes the terms and
conditions of the Offer in any manner materially adverse to the holders of
Shares (other than Acquiror and its subsidiaries) or (E) changes or waives the
Minimum Condition. Notwithstanding clause (D) of the foregoing sentence,
Acquiror Sub may, without the consent of the Target (i) extend the Offer, if at
the scheduled expiration date of the Offer any of the conditions to Acquiror
Sub's obligations to purchase the Shares have not been satisfied, (ii) extend
the Offer from time to time for up to a maximum of an aggregate of 10 business
days beyond the initial expiration date of the Offer (which initial expiration
date shall be 20 business days following the commencement of the Offer),
notwithstanding that all conditions to the Offer are satisfied as of the date of
such extension, and (iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer. Notwithstanding the
foregoing, the Offer may not be extended beyond the date of termination of this
Agreement pursuant to Section 8. The Per Share Amount shall, subject to
applicable withholding of taxes, be net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions of the Offer. Subject to
the terms and conditions of the Offer (including, without limitation, the
Minimum Condition), Acquiror Sub shall accept for payment and pay, as promptly
as practicable after expiration of the Offer, for all Shares validly tendered
and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Acquiror Sub shall file with the Securities and Exchange Commission
(the "SEC") and disseminate to holders of Shares to the extent required by law a
Tender Offer Statement on
<PAGE> 7
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer and the other Transactions (as
hereinafter defined). The Schedule 14D-1 shall contain or shall incorporate by
reference an offer to purchase (the "Offer to Purchase") and forms of the
related letter of transmittal and any related summary advertisement (the
Schedule 14D-1, the Offer to Purchase and such other documents, together with
all supplements and amendments thereto, being referred to herein collectively as
the "Offer Documents"). Acquiror, Acquiror Sub and the Target agree to correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become false or misleading in any material respect, and
Acquiror and Acquiror Sub further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws. The Target
and its counsel shall be given an opportunity to review and comment on the Offer
Documents and any amendments thereto prior to the filing thereof with the SEC.
Acquiror and Acquiror Sub will provide the Target and its counsel with a copy of
any written comments or telephonic notification of any verbal comments Acquiror
or Acquiror Sub may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt thereof and will provide the Target and its
counsel with a copy of any written responses and telephonic notification of any
verbal response of Acquiror, Acquiror Sub or their counsel. In the event that
the Offer is terminated or withdrawn by Acquiror Sub, Acquiror and Acquiror Sub
shall cause all tendered Shares to be returned to the registered holders of the
Shares represented by the certificate or certificates surrendered to the Paying
Agent (as defined herein).
SECTION 1.02. Target Action. (a) The Target hereby approves of and
consents to the Offer and represents that (i) the Target's Board of Directors,
at a meeting duly called and held on May 1, 1998, has (A) determined that this
Agreement and the transactions contemplated hereby, including, without
limitation, the terms of each of the Offer and the Merger (the "Transactions"),
are fair to and in the best interests of the holders of Shares (other than
Acquiror and its subsidiaries), (B) approved this Agreement and the Transactions
and (C) resolved to recommend, subject to the conditions set forth herein, that
the shareholders of the Target accept the Offer and approve this Agreement and
the Transactions; and (ii) Financo, Inc. ("Target Banker") has delivered to the
Target's Board of Directors a written opinion that the consideration to be
received by the holders of Shares pursuant to each of the Offer and the Merger
is fair to such holders from a financial point of view. The Target has been
authorized by Target Banker, subject to prior review by Target Banker, to
include such fairness opinion (or references thereto) in the Offer Documents and
in the Schedule 14D-9 (as defined in paragraph (b) of this Section 1.02) and the
Proxy Statement referred to in Section 6.02. Subject to the fiduciary duties of
the Target's Board of Directors under applicable law, the Target hereby consents
to the inclusion in the Offer Documents of the recommendation of the Target's
Board of Directors described above.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Target shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing,
<PAGE> 8
subject only to the fiduciary duties of the Target's Board of Directors under
applicable law, the recommendation of the Target's Board of Directors described
in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the extent
required by Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any other applicable federal securities laws.
The Target, Acquiror and Acquiror Sub agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 which shall have become
false or misleading, and the Target further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Acquiror, Acquiror Sub and their counsel
shall be given an opportunity to review and comment on the Schedule 14D-9 and
any amendments thereto prior to the filing thereof with the SEC. The Target will
provide Acquiror and Acquiror Sub and their counsel with a copy of any written
comments or telephonic notification of any verbal comments the Target may
receive from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt thereof and will provide Acquiror and Acquiror Sub and their
counsel with a copy of any written responses and telephonic notification of any
verbal response of the Target or its counsel.
(c) The Target shall promptly furnish Acquiror Sub with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of the
most recent date reasonably practicable. The Target shall furnish Acquiror Sub
with such additional information, including, without limitation, updated
listings and computer files of shareholders, mailing labels and security
position listings, and such other assistance as Acquiror, Acquiror Sub or their
agents may reasonably request. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer or the Merger,
Acquiror and Acquiror Sub shall hold in confidence the information contained in
such labels, listings and files, shall use such information only in connection
with the Offer and the Merger, and, if this Agreement shall be terminated in
accordance with Section 8.01, shall deliver promptly to the Target all copies of
such information then in their possession and shall certify in writing to the
Target its compliance with this Section 1.02(c).
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement (including Article VII), and in accordance with
Texas Law, at the Effective Time (as hereinafter defined), Acquiror Sub shall be
merged with and into the Target. As a result of the Merger, the separate
corporate existence of Acquiror Sub shall cease and the Target shall continue as
the surviving corporation of the Merger (the "Surviving Corporation"). The name
of the Surviving Corporation shall be Savane International Corp.
<PAGE> 9
SECTION 2.02. Effective Time; Closing. As promptly as practicable and
in no event later than the first business day following the satisfaction or
waiver of the conditions set forth in Article VII (or such other date as may be
agreed by each of the parties hereto), the parties hereto shall cause the Merger
to be consummated by filing articles of merger (the "Articles of Merger") with
the Secretary of State of the State of Texas (the "Secretary") in such form as
is required by, and executed in accordance with the relevant provisions of,
Texas Law. The term "Effective Time" means the date and time of the filing of
the Articles of Merger with the Secretary (or such later time as may be agreed
in writing by each of the parties hereto and specified in the Articles of
Merger). Immediately prior to the filing of the Articles of Merger, a closing
will be held at the Dallas, Texas offices of Baker & McKenzie (or such other
place and time as the parties may agree).
SECTION 2.03. Effect of the Merger. The effect of the Merger shall be
as provided in the applicable provisions of Texas Law.
SECTION 2.04. Articles of Incorporation; Bylaws. (a) At the Effective
Time, the Articles of Incorporation of the Target, as in effect immediately
prior to the Effective Time, shall be amended as of the Effective Time by
operation of this Agreement and by virtue of the Merger without any further
action by the shareholders or directors of the Surviving Corporation to read in
its entirety as set forth on Annex B hereto.
(b) At the Effective Time, the Bylaws of Acquiror Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 2.05. Directors and Officers. The directors of Acquiror Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until a successor is
elected or appointed and has qualified or until the earliest of such director's
death, resignation, removal or disqualification, and the officers of the Target
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified, or as otherwise provided in the Bylaws of
the Surviving Corporation.
SECTION 2.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Acquiror Sub, the
Target or the holders of any of the following shares of capital stock:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 2.06(b)
and any Dissenting Shares (as hereinafter defined)) shall be canceled and shall
be converted automatically into the right to receive an amount equal to the Per
Share Amount in cash (the "Merger Consideration") payable,
<PAGE> 10
without interest, to the holder of such Share, upon surrender, in the manner
provided in Section 2.09, of the certificate that formerly evidenced such Share;
(b) Each Share held in the treasury of the Target and each Share owned
by Acquiror Sub, Acquiror or any direct or indirect wholly owned subsidiary of
Acquiror or of the Target immediately prior to the Effective Time shall be
cancelled without any conversion thereof and no payment or distribution shall be
made with respect thereto; and
(c) Each share of Common Stock, $0.01 par value per share, of Acquiror
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, no par value per share, of the Surviving
Corporation.
SECTION 2.07. Employee Stock Options; Restricted Stock. (a) Immediately
after the Tender Offer Acceptance Date (as hereinafter defined), each
outstanding option to purchase Shares (in each case, an "Option") granted under
(a) the Target's 1991 Stock Option and Restricted Stock Plan, as amended, (b)
the Target's 1988 Stock Option Plan for Non-Employee Directors (c) the Target's
1996 Non-Employee Director Stock Option Plan, as amended, (d) the Target's 1998
Stock Option and Restricted Stock Plan, and (e) the Target's 1986 Stock Option
Plan (such plans (a) through (e) hereinafter the "Target Option Plans"), whether
or not then exercisable or vested, shall, subject to the Target's receipt of any
required consent of the holders of such Options, be cancelled by the Target, and
each holder of a cancelled Option shall be entitled to receive from Acquiror Sub
at the same time as payment for Shares is made by Acquiror Sub in connection
with the Offer, in consideration for the cancellation of such Option, an amount
in cash equal to the product of (i) the number of Shares previously subject to
such Option and (ii) the excess, if any, of the Per Share Amount over the
exercise price per Share previously subject to such Option. The term "Tender
Offer Acceptance Date" means the date on which the Acquiror Sub shall have
accepted for payment all Shares validly tendered and not withdrawn prior to the
expiration date with respect to the Offer.
(b) Immediately prior to the Tender Offer Acceptance Date, all
restrictions on any restricted stock awards granted under the Target Option
Plans shall lapse and the holders of such restricted stock shall be entitled to
receive from Acquiror Sub at the same time as payment for Shares is made by
Acquiror Sub in connection with the Offer in consideration for the restricted
stock an amount in cash equal to the product of (i) the number of Shares subject
to such restricted stock award and (ii) the Per Share Amount.
SECTION 2.08. Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and which are held by shareholders who shall not have voted in
favor of this Agreement or consented thereto in writing and who shall have
timely filed with the Target a written objection to the action contemplated by
this Agreement in accordance with Section 5.12 of Texas Law (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive
<PAGE> 11
the Merger Consideration. Such shareholders shall be entitled to receive
payment of the fair value of such Shares held by them in accordance with the
provisions of Texas Law, except that all Dissenting Shares held by shareholders
who effectively shall have withdrawn or lost their rights to demand payment of
the fair value of such Shares under Texas Law shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the Merger Consideration, without any interest
thereon, upon surrender, in the manner provided in Section 2.09, of the
certificate or certificates that formerly evidenced such Shares. The Target
shall give Acquiror (i) prompt notice of any written notice of intent to seek
dissenters rights received by the Target and (ii) the opportunity to direct all
negotiations and proceedings with respect to any such notices. The Target shall
not, without the prior written consent of Acquiror, voluntarily make any payment
with respect to, or settle, offer to settle, or otherwise negotiate with respect
to, any such notices.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior to
the Effective Time, Acquiror Sub shall designate a bank or trust company
reasonably satisfactory to the Target to act as agent (the "Paying Agent") for
the holders of Shares in connection with the Merger to receive the funds to
which holders of Shares shall become entitled pursuant to Section 2.06(a). At
the Effective Time, Acquiror shall cause the Surviving Corporation to have
sufficient funds to deposit, and shall cause the Surviving Corporation to
deposit in trust with the Paying Agent, cash in the aggregate amount equal to
the product of (i) the number of Shares outstanding immediately prior to the
Effective Time (other than Shares owned by Acquiror or Acquiror Sub) and (ii)
the Per Share Amount. Such funds shall be invested by the Paying Agent as
directed by the Surviving Corporation, provided that such investments shall be
in obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $150 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise); provided,
however, that no loss on any investment made pursuant to this Section 2.09 shall
relieve Acquiror or the Surviving Corporation of its obligation to pay the Per
Share Amount for each Share outstanding immediately prior to the Effective Time.
(b) Promptly after the Effective Time, Acquiror shall cause the
Surviving Corporation to mail to each person who was, at the Effective Time, a
holder of record of Shares entitled to receive the Merger Consideration pursuant
to Section 2.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant
<PAGE> 12
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Target, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable. The
Surviving Corporation shall pay all charges and expenses, including those of the
Paying Agent, in connection with the distribution of the Merger Consideration.
(c) At any time following one year after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it) and, thereafter, such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar law.
(d) Acquiror, Acquiror Sub or the Surviving Corporation, as the case
may be, shall be entitled to deduct and withhold from the consideration
otherwise payable to any holder of Target Common Stock pursuant to this
Agreement such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended, or under any provision of state, local or foreign tax law.
(e) At the close of business on the day of the Effective Time, the
stock transfer books of the Target shall be closed and, thereafter, there shall
be no further registration of transfers of Shares on the records of the Target.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
<PAGE> 13
Except as set forth in the Disclosure Schedule delivered by the Target
and signed by the Target and Acquiror for identification prior to the execution
and delivery of this Agreement (the "Target Disclosure Schedule"), which shall
identify exceptions by specific section references, the Target hereby represents
and warrants to Acquiror and Acquiror Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. The Target
is a corporation, and each subsidiary of the Target (a "Subsidiary") is a
corporation or partnership, in each case duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate or partnership
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Target and each Subsidiary are duly
qualified or licensed as a foreign corporation or partnership to do business,
and are in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by them or the nature of their business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect on the Target. As used in this
Agreement, the term "Material Adverse Effect" means with respect to any person,
any event, change or effect, individually or together with any other event,
change or effect, that is or is reasonably likely to be materially adverse (i)
to the financial condition, business or results of operations of such person and
its subsidiaries, taken as a whole, or (ii) the ability of the Target to perform
its obligations under this Agreement or to consummate any of the Transactions.
As of the date hereof, a true and correct list of all Subsidiaries, together
with the jurisdiction of organization of each Subsidiary and the percentage of
the outstanding capital stock or other equity interests of each Subsidiary owned
by the Target and each other Subsidiary, is set forth in Section 3.01 of the
Target Disclosure Schedule. Except as disclosed in Section 3.01 of the Target
Disclosure Schedule, the Target does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity.
SECTION 3.02. Articles of Incorporation and Bylaws. The Target has
heretofore furnished or made available to Acquiror a complete and correct copy
of the Articles of Incorporation and Bylaws or equivalent organizational and
governing documents, each as amended to date, of the Target and each Subsidiary.
Neither the Target nor any Subsidiary is in violation of any provision of its
Articles of Incorporation, Bylaws or equivalent organizational and governing
documents.
SECTION 3.03. Capitalization. The authorized capital stock of the
Target consists of 20,000,000 shares of Target Common Stock. As of April 30,
1998, 10,286,357 shares of Target Common Stock were issued and outstanding, all
of which are validly issued, fully paid and nonassessable and not subject to
preemptive rights, and 1,016,500 shares of Target Common Stock were issuable
pursuant to outstanding Options or restricted stock awards under the Target
Option Plans and there are 36,275 shares of treasury stock. Except as set forth
in this Section 3.03, Section 3.03 of the Target Disclosure Schedule or in the
Target SEC Reports (as hereinafter
<PAGE> 14
defined), as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of, or other equity interests in, the
Target or any Subsidiary obligating the Target or any Subsidiary to issue, sell
or otherwise transfer any shares of capital stock of, or other equity interests
in, the Target or any Subsidiary. Between March 17, 1998 and the date of this
Agreement, no shares of Target Common Stock have been issued by the Target,
except pursuant to the exercise of Options or as set forth in Section 3.03 of
the Target Disclosure Schedule. There are no outstanding contractual obligations
of the Target or any Subsidiary to repurchase, redeem or otherwise acquire any
shares of Target Common Stock or any capital stock of, or any equity interest
in, any Subsidiary. Except as described in the Target SEC Reports or Section
3.03 of the Target Disclosure Schedule, each outstanding share of capital stock
of, or other equity interest in, each Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and is owned by the Target or a Subsidiary
free and clear of any lien or other adverse claim. None of the outstanding
shares of capital stock or other equity interests of the Target or any
Subsidiary has been issued in violation of any preemptive rights of the current
or past shareholders or partners of the Target or any of the Subsidiaries.
SECTION 3.04. Authority Relative to This Agreement. The Target has all
necessary corporate power and authority to execute and deliver this Agreement
and, with respect to the Merger, upon the approval of this Agreement and the
Merger by the Target's shareholders in accordance with this Agreement and Texas
Law, to perform its obligations hereunder and to consummate the Transactions.
The execution and delivery of this Agreement by the Target and the consummation
by the Target of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Target are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval of this
Agreement and the Merger by the Target's shareholders in accordance with Texas
Law and the filing and recordation of appropriate Articles of Merger with the
Secretary in accordance with this Agreement and Texas Law). This Agreement has
been duly and validly executed and delivered by the Target and, assuming the due
authorization, execution and delivery of this Agreement by Acquiror and Acquiror
Sub, constitutes a legal, valid and binding obligation of the Target,
enforceable against the Target in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Target do not, and the
performance of this Agreement by the Target will not, subject to (x) with
respect to the Merger, obtaining the requisite approval of this Agreement and
the Merger by the Target's shareholders in accordance with this Agreement and
Texas Law, and (y) obtaining the consents, approvals, authorizations and permits
and making the filings described in Section 3.05(a) and Section 3.05(b) of the
Target Disclosure Schedule, (i) conflict with or violate the Articles of
Incorporation, Bylaws or equivalent organizational documents of the Target or
any Subsidiary, (ii) conflict with or violate any law applicable to the Target
or any Subsidiary or by which any property or asset of the Target or any
Subsidiary is bound or affected, or (iii) except as specified in Section
3.05(a)(iii) of the Target Disclosure
<PAGE> 15
Schedule, result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any right of termination, unilateral amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Target or any Subsidiary, or require the consent of any
third party pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Target or any Subsidiary is a party or by which the Target or any
Subsidiary or any property or asset of the Target or any Subsidiary is bound or
affected, except for such conflicts, violations, breaches, defaults or other
occurrences which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Target.
(b) The execution and delivery of this Agreement by the Target do not,
and the performance of this Agreement by the Target will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
pursuant to the Exchange Act, state securities or "blue sky" laws ("Blue Sky
Laws"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder (the "HSR Act"), and filing
and recordation of appropriate Articles of Merger with the Secretary as required
by Texas Law, (ii) as specified in Section 3.05(b) of the Target Disclosure
Schedule and (iii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger, or otherwise prevent the Target
from performing its obligations under this Agreement and would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance. Except as disclosed in Section 3.06
of the Target Disclosure Schedule, each of the Target and the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any United States (federal, state or local) or foreign government, or
governmental, regulatory or administrative authority, agency or commission or
court of competent jurisdiction ("Governmental Authority") necessary for the
Target or any Subsidiary to own, lease and operate its properties or to carry on
its business as it is now being conducted, except for those which the failure to
possess would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect on the Target (the "Target Permits") and, as of
the date hereof, no suspension or cancellation of any of the Target Permits is
pending or, to the knowledge of the Target, threatened, except such suspensions
or terminations as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Target. Except as disclosed
in Section 3.06 of the Target Disclosure Schedule or as would not reasonably be
expected to have a Material Adverse Effect on the Target, neither the Target nor
any Subsidiary is in conflict with, or in default or violation of, or, with the
giving of notice or the passage of time, would be in conflict with, or in
default or violation of, (a) any law applicable to the Target or any Subsidiary
or by which any property or asset of the Target or any Subsidiary is bound or
affected, (b) any of the Target Permits, or (c) any of the provisions of its
Articles of Incorporation or Bylaws (or other organizational or governing
instruments).
<PAGE> 16
SECTION 3.07. SEC Filings; Financial Statements. (a) The Target has
filed all forms, reports and documents required to be filed by it with the SEC
since December 31, 1994 (collectively, the "Target SEC Reports"). The Target SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act of 1933, as amended, and the Exchange Act, as
the case may be, and the rules and regulations thereunder and (ii) did not, at
the time they were filed (or at the effective date thereof in the case of
registration statements), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Subsidiary is currently required
to file any form, report or other document with the SEC under Section 12 of the
Exchange Act.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the Target SEC Reports was prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis ("U.S. GAAP") throughout the periods indicated (except as may
be indicated in the notes thereto and except that financial statements included
with interim reports do not contain all U.S. GAAP notes to such financial
statements) and each fairly presented in all material respects the financial
position, results of operations and changes in shareholders' equity and cash
flows of the Target as at the respective dates thereof and for the respective
periods indicated therein (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount or effect).
(c) Except (i) to the extent set forth on the balance sheet of the
Target and the consolidated Subsidiaries as at November 2, 1997, including the
notes thereto, (ii) as set forth in Section 3.07(c) of the Target Disclosure
Schedule or (iii) as disclosed in any SEC Report filed by the Target after
November 2, 1997, and prior to the date of this Agreement, neither the Target
nor any Subsidiary has any liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Target,
prepared in accordance with U.S. GAAP, except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
November 2, 1997, which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on the Target.
(d) The Target has heretofore furnished or made available to Acquiror
complete and correct copies of all amendments and modifications (if any) that
have not been filed by the Target with the SEC to all agreements, documents and
other instruments that previously had been filed by the Target as exhibits to
the Target SEC Reports and are currently in effect.
SECTION 3.08. Absence of Certain Changes or Events. Since November 2,
1997, except as contemplated by, or disclosed pursuant to, this Agreement,
including Section 3.08 of the Target Disclosure Schedule, or disclosed in any
Target SEC Report filed since November 2,
<PAGE> 17
1997, and prior to the date of this Agreement, the Target and the Subsidiaries
have conducted their business only in the ordinary course and in a manner
consistent with past practice and, since November 2, 1997, there has not been
(a) any event or events (whether or not covered by insurance), changes or
occurrences that have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the Target, (b) any material change
by the Target in its tax or accounting methods, principles or practices, or
systems of internal accounting controls, except as may be appropriate to conform
to changes in the tax laws or U.S. GAAP, (c) any entry by the Target or any
Subsidiary into any commitment or transaction, except in the ordinary course of
business and consistent with past practice, (d) any declaration, setting aside
or payment of any dividend or distribution in respect of any capital stock of
the Target or any redemption, purchase or other acquisition or exchange of any
shares, or securities convertible into any shares, of the capital stock of the
Target or a Subsidiary, (e) other than pursuant to the Plans (as defined in
Section 3.10), any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option, stock purchase or other employee benefit plan, except in the ordinary
course of business consistent with past practice, (f) any granting by the Target
or any of its Subsidiaries to any director, employee or officer of the Target or
any of its Subsidiaries of any increases in compensation, severance or
termination pay except in the ordinary course of business consistent with past
practice or any entry by the Target or any of its Subsidiaries into any
employment, severance or termination agreement with any such director, employee
or officer, or (g) incurrence of any additional debt obligations or other
obligations for borrowed money (other than indebtedness of a Subsidiary to the
Target or another Subsidiary) in excess of an aggregate of $1,000,000 except in
the ordinary course of the business of the Target consistent with past
practices.
SECTION 3.09. Absence of Litigation. Except as disclosed in Section
3.09 of the Target Disclosure Schedule or the Target SEC Reports filed prior to
the date of this Agreement, there is no claim, action, proceeding or
investigation pending or, to the best knowledge of the Target or any of the
Subsidiaries, threatened against the Target or any Subsidiary, or, to the
knowledge of Target, against any director or employee, or against any property,
asset, interest or right of any of them, before any arbitrator or Governmental
Authority which (a) individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Target or (b) seeks to and is
reasonably likely to significantly delay or prevent the consummation of the
Offer or the Merger. Neither the Target nor any Subsidiary nor any property or
asset of the Target or any Subsidiary is in violation of any order, writ,
judgment, injunction, decree, determination or award having, individually or in
the aggregate, a Material Adverse Effect on the Target.
SECTION 3.10. Employee Benefit Plans.
(a) Section 3.10 of the Target Disclosure Schedule lists (a) all
material employee benefit plans, programs and arrangements, including but not
limited to all material plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), currently
contributed to or maintained for the benefit of any current or
<PAGE> 18
former employee, officer or director of the Target or any Subsidiary (the
"Plans") and (b) all written contracts and agreements relating to employment and
all severance agreements with any of the directors or officers of the Target or
any Subsidiary (other than, in each case, any such contract or agreement that is
terminable by the Target or any Subsidiary at will without penalty or other
adverse consequence) (the "Target Employment Contracts"). Section 3.10 of the
Target Disclosure Schedule sets forth the name of each officer or employee of
the Target or any Subsidiary with an annual base compensation greater than
$100,000 and the annual base compensation applicable to each such officer or
employee. The Target has made available to Acquiror a copy of each Plan, each
material document prepared in connection with each Plan and each Target
Employment Contract. Except as set forth in Section 3.10 of the Target
Disclosure Schedule, none of the Plans is a multiemployer plan within the
meaning of Section 3(37) of ERISA. Except as set forth in Section 3.10 of the
Target Disclosure Schedule, each Plan has been operated in accordance with its
terms and the requirements of applicable law except where the failure to so
operate would not have a Material Adverse Effect on the Target. The Target does
not currently have any direct or indirect material liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination of,
or withdrawal from, any Plan or other retirement plan or arrangement and, as of
the date hereof, no fact exists or event has occurred that would reasonably be
expected to give rise to any such liability. The Target and the Subsidiaries
have complied in all respects with the Worker Adjustment Retraining Notification
Act, and no fact or event exists that could give rise to liability under such
act, except for such occurrences, noncompliances and liabilities as would not,
individually or in the aggregate, have a Material Adverse Effect on the Target.
(b) Neither the Target nor any Subsidiary has any liability to the
Pension Benefit Guaranty Corporation ("PBGC") other than routine premium costs,
nor has there been any application for waiver or waiver of the minimum funding
standards imposed by Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code") and no "accumulated funding deficiency" within the meaning
of Section 412(a) of the Code exists (whether or not waived) with respect to any
Plan. Except as set forth in Section 3.10 of the Target Disclosure Schedule, no
Plan has any material unfunded accrued benefits as determined per U.S. GAAP that
are not fully reflected in the Target financial statements.
(c) No Plan that is a defined benefit pension plan within the meaning
of Section 3(35) of ERISA ("Defined Benefit Plan") has been terminated or
partially terminated. The Target and any applicable Subsidiary have made full
and timely payment of all amounts required under the terms of each of the Plans
that are employee pension benefit plans as defined in Section 3(2) of ERISA.
Except as disclosed on Section 3.10 of the Target Disclosure Schedule, no
reportable event within the meaning of Section 4043 of ERISA has occurred with
respect to any Plan that is a Defined Benefit Plan.
(d) Each Plan that is intended to qualify under section 401(a) of the
Code has received a determination from the Internal Revenue Service stating that
is so qualifies and that its trust is exempt from taxation under section 501(a)
of the Code and, except as set forth in Section
<PAGE> 19
3.10 of the Target Disclosure Schedule, nothing has occurred since the date of
such determination that could materially adversely affect such qualification or
exempt status.
(e) No breaches of fiduciary duty have occurred with respect to any
Plan that might reasonably be expected to give rise to material liability and no
prohibited transaction (within the meaning of Section 406 of ERISA or section
4975 of the Code) has occurred with respect to any Plan that gives rise to or
might reasonably be expected to give rise to material liability.
(f) Except as set forth in Section 3.10 of the Target Disclosure
Schedule, no Plan that is a "welfare plan" as defined in section 3(1) of ERISA
provides medical or death benefits with respect to current or former employees
of the Target or any Subsidiary beyond their termination of employment (other
than to the extent required by applicable law).
(g) The Target and all Subsidiaries have complied in material respects
with the continuation coverage requirements of Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA").
(h) Except as set forth in Section 3.10 of the Target Disclosure
Schedule and except for Plans maintained pursuant to a collective bargaining
agreement, each Plan can be amended or terminated at any time and without
material liability to the Target other than for benefits accrued prior to such
amendment or termination. No agreement, commitment, or obligation exists to
increase any benefits under any Plan or to adopt any new Plan. Except where
there would not be a Material Adverse Effect on Target or its Subsidiaries, each
of the Subsidiaries that is incorporated, organized or domiciled outside the
jurisdiction of the United States has withheld or collected and paid over to the
applicable Governmental Authority or other custodial entity all material
contributions, taxes, premiums or payments required by law (whether representing
the employer's or employee's portions thereof) for any employee welfare program
existing in the applicable jurisdiction, including without limitation, any
program or fund for social security, retirement, employee savings, or mandatory
insurance for employee benefits or risks.
(i) There are no material claims, lawsuits, or arbitrations pending or,
to the knowledge of the Target or any of the Subsidiaries, threatened involving
any Plan (other than routine claims for benefits) nor is there any reasonable
basis to anticipate any such claims, lawsuits, or arbitrations involving any
Plans.
(j) Notwithstanding any of the foregoing to the contrary, for all
purposes of Section 3.10 other than the first, third and fourth sentences of
Section 3.10 (a), the term "Plan" shall not include any multi-employer plan
within the meaning of Section 3(37) of ERISA that is disclosed in Section 3.10
of the Target Disclosure Schedule.
SECTION 3.11. Labor Matters. Except as set forth in Section 3.11 of the
Target Disclosure Schedule or in the Target SEC Reports, neither the Target nor
any Subsidiary is a party to, nor does it have any obligation pursuant to, any
material oral and legally binding or
<PAGE> 20
written agreement, collective bargaining or otherwise, with any party regarding
the rates of pay or working conditions of any of its employees, and, except as
set forth in Section 3.11 of the Target Disclosure Schedule is obligated under
any agreement to recognize or bargain with any labor organization or union on
behalf of its employees. Except as set forth in Section 3.11 of the Target
Disclosure Schedule, the Target and each Subsidiary is in compliance with all
applicable federal, state, local and foreign laws and regulations concerning the
employer-employee relationship and with all agreements relating to the
employment of its employees, including, but not limited to, applicable wage and
hour laws, immigration laws, fair employment laws, safety laws, worker
compensation statutes, unemployment laws and social security laws, except for
such non-compliance as would not have a Material Adverse Effect on the Target
and its Subsidiaries, taken as a whole. Neither the Target nor any of its
Subsidiaries is the subject of any litigation asserting that it has committed an
unfair labor practice within the meaning of the National Labor Relations Act or
comparable foreign, state or local law or seeking to compel the Target or any of
its Subsidiaries to bargain with any labor organization as to wages or
conditions of employment. There is no strike or material labor dispute involving
the Target or any Subsidiary pending or, to the knowledge of the Target or any
of the Subsidiaries, threatened.
SECTION 3.12. Taxes. (a) Except as set forth in Section 3.12 of the
Target Disclosure Schedule, the Target and each of the Subsidiaries have (i)
filed all federal, state, local and foreign tax returns required to be filed by
them prior to the date of this Agreement (taking into account extensions), and
all tax returns filed are accurate and complete in all material respects, (ii)
paid or accrued all taxes shown to be due on such returns and paid all
applicable ad valorem and value added taxes as are due and (iii) paid or accrued
all taxes for which a notice of assessment or collection has been received
(other than amounts being contested in good faith by appropriate proceedings),
except in the case of clause (i), (ii) or (iii) for any such filings, payments
or accruals which would not, individually or in the aggregate, have a Material
Adverse Effect on the Target. Except as set forth in Section 3.12 of the Target
Disclosure Schedule, neither the Internal Revenue Service nor any other federal,
state, local or foreign taxing authority has asserted any claim for taxes, or to
the best knowledge of the Target and each of the Subsidiaries, is threatening to
assert any claims for taxes, which claims, individually or in the aggregate,
could have a Material Adverse Effect on the Target. The Target and each
Subsidiary has open years for federal, state and foreign tax returns only as set
forth in Section 3.12 of the Target Disclosure Schedule. The Target and each
Subsidiary have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all taxes
required by law to be withheld or collected, except for amounts which would not,
individually or in the aggregate, have a Material Adverse Effect on the Target.
Neither the Target nor any of the Subsidiaries has made an election under
Section 341(f) of the Code. There are no liens for taxes upon the assets of the
Target or any Subsidiary (other than liens for taxes that are not yet due or
that are being contested in good faith by appropriate proceedings), except for
liens which would not, individually or in the aggregate, have a Material Adverse
Effect on the Target. Except as set forth in Section 3.12 of the Target
Disclosure Schedule, there has not been an ownership change, as defined in
Section 382(g) of the Code, of the Target or any of the Subsidiaries that
occurred either after September 19, 1985, or on or after any taxable period in
which the Target or any of
<PAGE> 21
the Subsidiaries incurred a net operating loss that carries over to any taxable
period ending after November 2, 1997. Except as set forth in Section 3.12 of the
Target Disclosure Schedule, neither the Target or any of the Subsidiaries has or
has had a permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such foreign
country.
(b) Except as set forth in Section 3.12 of the Target Disclosure
Schedules, neither the Target, any Subsidiary incorporated under the laws of the
United States of America, Farah Manufacturing (U.K.) Limited, Farah (New
Zealand) Limited, Farah (Australia) Pty. Limited, Touche Industrial, S.A. de C.
V. or Corporacion Farah - Costa Rica, S.A. has executed an extension or waiver
of any statute of limitations on the assessment or collection of any tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any taxes due or to become due for the Target or
any Subsidiary for the period or periods through and including the date of the
Target financial statements filed in the most recent Target SEC Report that has
been made and is reflected on such financial statements is sufficient to cover
all such taxes in all material respects.
(d) The Target and each Subsidiary is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
tax withholding requirements under federal, foreign, state, and local tax laws,
and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Target.
SECTION 3.13. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Hazardous
Substances" means (A) any hazardous substance, hazardous material, hazardous
waste, regulated substance or toxic substance as defined in or regulated under
any Environmental Laws, including but not limited to the following federal
statutes and their state counterparts, as each may be amended from time to time,
and all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act, the Toxic Substances Control Act and the Clean Air Act; (B) petroleum and
petroleum products, byproducts and breakdown products including crude oil and
any fractions thereof; (C) natural gas, synthetic gas, and any mixtures thereof;
(D) asbestos requiring abatement, removal or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated biphenyls; (E)
any other chemicals, materials or substances defined or regulated as toxic or
hazardous or as a pollutant or contaminant or as a waste under any applicable
Environmental Law; and (F) any substance with respect to which a federal,
foreign, state or local agency requires environmental investigation, monitoring,
reporting or remediation; and (ii) "Environmental Laws" means any federal,
state, foreign, or local law, rule
<PAGE> 22
or regulation, now or hereafter in effect and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment, health, safety or natural resources, including without limitation,
those relating to (A) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances or (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances.
(b) Except as described in Section 3.13 of the Target Disclosure
Schedule or as would not individually or in the aggregate result in or be likely
to result in any fine, tax, assessment, penalty, loss, cost, damage, liability,
expense or other payment related thereto, that would reasonably be expected to
have a Material Adverse Effect on the Target: (i) the Target and each Subsidiary
and any property owned, leased, or operated by the Target or by any of the
Subsidiaries and, where required by the context, the owner or operator of such
property, but only with respect to such property (an "Operating Property"), and
any facility or property in which the Target or any of the Subsidiaries
participates in the management and, where required by the context, the owner or
operator of such facility or property, but only with respect to such facility or
property (a "Participation Facility"), are and have been in compliance with all
applicable Environmental Laws; (ii) the Target and each Subsidiary have obtained
all permits, approvals, identification numbers, licenses or other authorizations
required under any applicable Environmental Laws ("Environmental Permits") and
are and have been in compliance with their requirements; (iii) such
Environmental Permits are transferable to the Surviving Corporation pursuant to
the Merger without the consent of any Governmental Authority; (iv) there are no
underground or aboveground storage tanks or any surface impoundments, septic
tanks, pits, sumps or lagoons in which Hazardous Substances are being or have
been treated, stored or disposed of on any Operating Property, Participation
Facility, or on any real property formerly owned, leased or occupied by the
Target or any Subsidiary; (v) there is, to the best knowledge of the Target, no
asbestos or asbestos-containing material on any Operating Property or
Participation Facility in violation of applicable Environmental Laws; (vi) the
Target and the Subsidiaries have not released, discharged or disposed of
Hazardous Substances on any Operating Property or Participation Facility or on
any real property formerly owned or leased by the Target or any Subsidiary, and
none of such property is contaminated with any Hazardous Substances; (vii)
neither the Target nor any of the Subsidiaries is undertaking, and neither the
Target nor any of the Subsidiaries has completed, any investigation or
assessment or remedial or response action relating to any such release,
discharge or disposal of or contamination with Hazardous Substances at any site,
location or operation, either voluntarily or pursuant to the order of any
Governmental Authority or the requirements of any Environmental Law; and (viii)
there are no pending or, to the knowledge of the Target, past or threatened
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, consent orders or consent agreements relating in
any way to Environmental Laws, any Environmental Permits or any Hazardous
Substances ("Environmental Claims") against the Target or any Subsidiary or any
Operating Property or Participation Facility, and there are no circumstances
that can reasonably be expected to form the basis of any such
<PAGE> 23
Environmental Claim, including without limitation with respect to any off-site
disposal location presently or formerly used by the Target or any of the
Subsidiaries or any of their predecessors.
(c) The Target and the Subsidiaries have made available to Acquiror
copies of any environmental reports, studies or analyses in its possession or
under its control relating to Operating Property or Participation Facility or
the operations of the Target or the Subsidiaries.
SECTION 3.14. Opinion of Financial Advisor. The Target has received a
copy of the written opinion of Target Banker on the date of this Agreement to
the effect that the consideration to be paid by Acquiror Sub in the Offer and
the Merger is fair from a financial point of view to the Target's shareholders
as of the date thereof.
SECTION 3.15. Brokers. No broker, finder or investment banker (other
than Target Banker) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Target or any Subsidiary. The Target has heretofore
furnished to Acquiror a correct copy of all agreements between the Target and
Target Banker pursuant to which such firm would be entitled to any payment
relating to the Transactions.
SECTION 3.16. Tangible Property. (a) Except as described in Section
3.16 of the Target Disclosure Schedule, the Target and the Subsidiaries have
good and marketable title to all their tangible properties and assets free and
clear of all liens, with only such exceptions as, individually or in the
aggregate, would not have a Material Adverse Effect on the Target. All tangible
properties used in the businesses of the Target and the Subsidiaries are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with past practice.
(b) All items of inventory of the Target and the Subsidiaries reflected
on the most recent balance sheet included in the Target financial statements
contained in the Target SEC Reports prior to the date of this Agreement and
prior to the Effective Time consisted and will consist, as applicable, of items
of a quality and quantity usable and salable in the ordinary course of business
and conform to generally accepted standards in the industry in which the Target
and the Subsidiaries are a part.
(c) The accounts receivable of the Target and the Subsidiaries as set
forth on the most recent balance sheet included in the Target financial
statements contained in the Target SEC Reports prior to the date of this
Agreement or arising since the date thereof are valid and genuine; have arisen
solely out of bona fide sales and deliveries of goods, performance of services
and other business transactions in the ordinary course of business consistent
with past practice; are not subject to valid defenses, set-offs or
counterclaims; and are collectible in all material respects after billing at the
full recorded amount thereof less, in the case of accounts receivable appearing
on the most recent balance sheet included in the Target financial statements
contained in the Target SEC Reports prior to the date of this Agreement, the
recorded allowance for
<PAGE> 24
collection losses on such balance sheet. The allowance for collection losses on
such balance sheet has been determined in accordance with U.S. GAAP.
(d) All Assets that are material to the Target's business on a
consolidated basis, held under leases or subleases by any of the Target and the
Subsidiaries, are held under valid contracts enforceable in accordance with
their respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such contract is in full force and effect.
(e) The assets of the Target and the Subsidiaries include all assets
required to operate the business of the Target and the Subsidiaries as presently
conducted.
SECTION 3.17. Material Contracts. Section 3.17 of the Target Disclosure
Schedule lists each contract which is required by its terms or is currently
expected to result in the payment or receipt by the Target or any Subsidiary of
more than $500,000 and which is not terminable by the Target or any Subsidiary
without the payment of any penalty or fine on not more than three months' notice
(a "Material Contract") to which the Target or any Subsidiary is a party, other
than contracts which have been filed as an exhibit to or have been incorporated
by reference in any Target SEC Report. Each Material Contract is in full force
and effect and is enforceable against the parties thereto (other than the
Target) in accordance with its terms, and no condition or state of facts exists
that, with notice or the passage of time, or both, would constitute a material
default by the Target or, to the knowledge of the Target, any third party under
such Material Contracts. The Target has duly complied in all material respects
with the provisions of each Material Contract to which it is a party.
SECTION 3.18. Offer Documents; Schedule 14D-9. Neither the Schedule
14D-9 nor any information supplied by the Target for inclusion in the Offer
Documents shall, at the respective times the Schedule 14D-9, the Offer
Documents, or any amendments or supplements thereto are filed with the SEC or
are first published, sent or given to shareholders of the Target, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Target with respect to information supplied by Acquiror Sub or Acquiror for
inclusion in the Schedule 14D-9. The Schedule 14D-9 shall comply in all material
respects as to form with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 3.19. Change in Control. Except as set forth in Section 3.19 of
the Target Disclosure Schedule, the Target is not a party to any contract,
agreement or understanding that contains a "change in control," "potential
change in control" or similar provision, which, as a result of the consummation
of the Transactions will (either alone or upon the occurrence of any
<PAGE> 25
additional acts or events) result in (i) any payment exceeding $500,000 (whether
of severance pay or otherwise) becoming due from the Target to any person, or
(ii) the acceleration of any obligations in excess of $500,000 under such
contract, agreement or understanding.
SECTION 3.20. Intellectual Property. Section 3.20 of the Target
Disclosure Schedule (i)(A) identifies each trademark, service mark, trade name,
copyright and all registrations and applications for any of the foregoing; (ii)
lists each patent, invention, industrial model, process, design and all
registrations and applications for any of the foregoing; and (iii) identifies
any know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trade dress,
labels and logos, pertaining to any product, software or service manufactured,
marketed, licensed or sold by the Target and the Subsidiaries in the conduct of
their business or used, employed or exploited in the development, license, sale,
marketing, distribution or maintenance thereof and which is material to the
business of the Target and the Subsidiaries taken as a whole and (B) lists all
contracts and other agreements to which the Target or any Subsidiary is a party,
including, such contract and agreement where the Target or any Subsidiary is
either licensee or licensor, for each of the foregoing items of intellectual
property (all of the foregoing, the "Target's Intellectual Property"). None of
the Target's affiliates, including, to the Target's knowledge, any of its
shareholders, has any interest (other than as a shareholder of the Target) in,
owns, possesses or otherwise holds in any manner any of the Target's
Intellectual Property. Except as set forth in Section 3.20 of the Target
Disclosure Schedule, all patents, copyrights, trademarks, including state,
federal and foreign registrations and applications, and other rights and
property listed in Section 3.20 of the Target Disclosure Schedule are valid and
in full force and effect. The rights and properties listed in Section 3.20 of
the Target Disclosure Schedule are subject to maintenance fees and renewal fees;
however, as of the date hereof except as set forth in Section 3.20 of the Target
Disclosure Schedule,, these rights and properties will not be subject to any
unpaid maintenance fees or renewal fees falling due within ninety (90) days
after the date hereof. Except as set forth on Schedule 3.20 of the Target
Disclosure Schedule, the Target owns or has the exclusive right to use the
Target's Intellectual Property in connection with the business now operated by
it and its Subsidiaries. The Target has taken reasonable security measures to
protect the secrecy, confidentiality and value of the Target's Intellectual
Property. Except as set forth in Section 3.20 of the Target Disclosure Schedule,
the Target has not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the Target's Intellectual
Property, and there is no claim, action, suit or proceeding pending or, to the
Target's knowledge, threatened or reasonably anticipated against the Target with
respect thereto. Except as set forth in Section 3.20 of the Target Disclosure
Schedule, the Target is not required to pay any royalty or other amount to
anyone with respect to any of the Target's Intellectual Property. To the
Target's knowledge, the Target's trademarks, service marks, trade names, trade
dress, labels and logos described in Section 3.20 of the Target Disclosure
Schedule are sufficient for the conduct of its business as now conducted by it
and as described in the SEC Report. Neither the Target nor any Subsidiary is in
default under any of the Target Intellectual Property licenses.
<PAGE> 26
SECTION 3.21. Insurance. All material assets and risks of the Target
and the Subsidiaries are covered by valid and currently effective insurance
policies in such types and amounts as are consistent with customary practices
and standards of companies engaged in businesses and operations similar to those
of the Target. None of the Target and the Subsidiaries has received notice from
any insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $100,000
pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by the Target or any Subsidiary under such
policies.
SECTION 3.22. Certain Business Practices. As of the date of this
Agreement, except for such actions which would not have a Material Adverse
Effect, neither the Target, any Subsidiary nor any director, officer, or, to the
best knowledge of the Target, any agent or employee of the Target or any
Subsidiary has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
SECTION 3.23. State Takeover Laws. Prior to the date hereof, the Target
and each Subsidiary has taken all necessary action to exempt the Transactions
from, or to make inapplicable to the Transactions, any "moratorium," "fair
price," "business combination," "control share," or other anti-takeover Laws,
including Part 13 of Texas Law that are applicable or purport to be applicable
to the Transactions.
SECTION 3.24. Board Recommendation. The Board of Directors of the
Target, at a meeting duly called and held, has by vote of those directors
present (who constituted all of the directors then in office) (i) determined
that this Agreement and the Transactions, including the Offer and the Merger,
taken together, are fair to and in the best interests of the shareholders of the
Target and (ii) resolved to recommend that the holders of the shares of the
Target Common Stock approve this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND ACQUIROR SUB
Except as set forth in the Disclosure Schedule delivered by Acquiror to
the Target and signed by the Target and Acquiror for identification prior to the
execution and delivery of this Agreement (the "Acquiror Disclosure Schedule"),
which shall identify exceptions by specific section references, Acquiror and
Acquiror Sub hereby, jointly and severally, represent and warrant to the Target
that:
<PAGE> 27
SECTION 4.01. Corporate Organization. Each of Acquiror and Acquiror Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such power, authority and
governmental approvals would not, individually or in the aggregate, have a
material adverse effect on the ability of Acquiror and Acquiror Sub to perform
their obligations hereunder and to consummate the Transactions.
SECTION 4.02. Authority Relative to This Agreement. Each of Acquiror
and Acquiror Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Acquiror and
Acquiror Sub and the consummation by Acquiror and Acquiror Sub of the
Transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of Acquiror or Acquiror
Sub are necessary to authorize this Agreement or to consummate the Transactions
(other than with respect to the Merger, the filing and recordation of
appropriate Articles of Merger with the Secretary, as required by this Agreement
and Texas Law). This Agreement has been duly and validly executed and delivered
by Acquiror and Acquiror Sub and, assuming the due authorization, execution and
delivery of this Agreement by the Target, constitutes a legal, valid and binding
obligation of each of Acquiror and Acquiror Sub enforceable against each of
Acquiror and Acquiror Sub in accordance with its terms.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Acquiror and Acquiror Sub do not,
and the performance of this Agreement by Acquiror and Acquiror Sub will not,
subject to obtaining the consents, approvals, authorizations and permits and
making the filings described in Section 4.03(a) and Section 4.03(b) of the
Acquiror Disclosure Schedule, (i) conflict with or violate the Articles of
Incorporation or Bylaws of either Acquiror or Acquiror Sub, (ii) conflict with
or violate any law applicable to Acquiror or Acquiror Sub or by which any
property or asset of either of them is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Acquiror or
Acquiror Sub or require the consent of any third party pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror or Acquiror Sub is
a party or by which Acquiror or Acquiror Sub or any property or asset of any of
them is bound or affected, except for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
have a Material Adverse Effect on Acquiror or prevent Acquiror and Acquiror Sub
from performing their respective obligations under this Agreement and
consummating the Transactions.
<PAGE> 28
(b) The execution and delivery of this Agreement by Acquiror and
Acquiror Sub do not, and the performance of this Agreement by Acquiror and
Acquiror Sub will not require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) pursuant to the Exchange Act, Blue Sky Laws, the
HSR Act and filing and recordation of appropriate Articles of Merger with the
Secretary as required by this Agreement and Texas Law and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not have a Material Adverse Effect on Acquiror
and would not prevent or delay consummation of the Transactions, or otherwise
prevent Acquiror or Acquiror Sub from performing their respective obligations
under this Agreement.
SECTION 4.04. Offer Documents; Proxy Statement. The Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to shareholders of the Target, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The information supplied by Acquiror for inclusion in the proxy
statement to be sent to the shareholders of the Target in connection with the
Target Shareholders Meeting (such proxy statement, as amended and supplemented,
being referred to herein as the "Proxy Statement") and Schedule 14D-9 will not,
on the date the Proxy Statement or Schedule 14D-9 (or any amendment or
supplement thereto) is first mailed to shareholders of the Target, at the time
of the Shareholders Meeting and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Target Shareholders Meeting which shall have become false or misleading;
provided, however, that Acquiror or Acquiror Sub makes no representation or
warranty with respect to information supplied by the Target for inclusion in the
Offer Documents. The Offer Documents shall comply in all material respects as to
form with the requirements of the Exchange Act and the rules and regulations
thereunder.
SECTION 4.05. Brokers. No broker, finder or investment banker (other
than Prudential Securities Incorporated) is entitled to any brokerage, finder's
or other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Acquiror or Acquiror Sub.
SECTION 4.06. Financing. Acquiror has firm commitment letters that
provide for adequate financing to Acquiror (the "Acquiror Financing") in order
for Acquiror and Acquiror Sub to fulfill their obligations under this Agreement.
Acquiror will make available to Acquiror Sub the funds to purchase all Shares
tendered pursuant to the Offer and to consummate the Merger.
<PAGE> 29
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Target Pending the Acquiror
Sub's Election Date. The Target covenants and agrees that, between the date of
this Agreement and the election or appointment of Acquiror Sub's designees to
the Target's Board of Directors pursuant to Section 6.03 upon the purchase by
Acquiror Sub of any Shares pursuant to the Offer (the "Acquiror Sub's Election
Date"), except as set forth in Section 5.01 of the Target Disclosure Schedule or
as contemplated by any other provision of this Agreement, unless Acquiror shall
otherwise agree in writing (which agreement shall not be unreasonably withheld),
(1) the business of the Target and the Subsidiaries shall be conducted only in,
and the Target and the Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner substantially consistent with past
practice, (2) the Target shall use all reasonable efforts to preserve
substantially intact its business organization, to keep available the services
of the current officers, employees and consultants of the Target and the
Subsidiaries and to preserve the current relationships of the Target and the
Subsidiaries with customers, suppliers and other persons with which the Target
or any Subsidiary has significant business relations, (3) the Target will not,
and will not permit any Subsidiary to take any action that would (i) materially
and adversely affect the ability of any party to obtain any consents required
for the Transactions, (ii) cause any of the conditions to the Offer set forth on
Annex A, or any of the conditions to the Merger set forth in Article VII, not to
be satisfied, or (iii) materially and adversely affect the ability of any party
to perform its covenants and agreements under this Agreement, and (4) the Target
will not, and will not permit any Subsidiary to:
(a) amend or otherwise change its Articles of Incorporation or Bylaws
or other organizational or governing documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of
capital stock of the Target or any Subsidiary of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Target or any Subsidiary
(except for shares of the Target Common Stock, if any, issuable under agreements
currently in effect on the date hereof and described in Section 3.03 of the
Target Disclosure Schedule and shares of capital stock pursuant to currently
outstanding Options or Plans currently in effect on the date hereof and
described in Section 3.10 of the Target Disclosure Schedule), or (ii) any of the
Target's or any Subsidiaries' assets, except for sales in the ordinary course of
business and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock or sell, lease,
<PAGE> 30
mortgage or otherwise dispose of or otherwise encumber any shares of capital
stock of any Subsidiary;
(d) reclassify, combine, split, divide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division thereof or
any assets, other than the acquisition of assets in the ordinary course of
business consistent with past practice; (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any person, or
make any loans or advances, except for indebtedness incurred in the ordinary
course of business and consistent with past practice with a maturity of not more
than one year in a principal amount not, in the aggregate, in excess of
$1,000,000; (iii) enter into, modify, amend or terminate any contract or
agreement material to the business, results of operations or financial condition
of the Target other than in the ordinary course of business, consistent with
past practice; (iv) authorize any capital expenditure, other than capital
expenditures set forth in Section 5.01(e)(iv) of the Target Disclosure Schedule;
(v) impose, or suffer the imposition, on any asset of the Target or any
Subsidiary of any lien or permit any such lien to exist (other than in
connection with liens in effect as of the date hereof that are disclosed in
Section 5.01(e)(v) of the Target Disclosure Schedule or for liens incurred in
connection with indebtedness permitted under clause (ii) above); or (vi) enter
into or amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in this subsection (e);
(f) except in the ordinary course of business consistent with past
practice and except in the case of officers for annual increases in compensation
payable or to become payable to any officer of the Target consistent with past
practices of the Target, (i) increase the compensation payable or to become
payable to any director, officer or other employee, or grant any bonus to, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Target
or any Subsidiary or enter into or amend any collective bargaining agreement, or
(ii) establish, adopt, enter into or amend any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation or other plan, trust or fund for the benefit of any director,
officer or class of employees;
(g) commence any litigation other than in accordance with past
practice, or settle or compromise any pending or threatened litigation which is
material or which relates to the Transactions, provided that nothing in this
Section 5.01(g) will prohibit the Target from settling or compromising any such
litigation if, after consultation with counsel, the Target's Board of Directors
believes that such action is necessary to comply with its fiduciary duties;
(h) grant or convey to any person any rights, including, but not
limited to, by way of sale, license or sublicense, in any of the Target's
Intellectual Property;
<PAGE> 31
(i) make any significant change in any tax or accounting methods,
principles or practices or systems of internal accounting controls, except as
may be appropriate to conform to changes in tax laws or U.S. GAAP; or
(j) after the date of this Agreement, file any material tax return
without the prior consent of Acquiror, which consent will not be unreasonably
withheld.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Shareholder's Meeting. (a) If required by applicable law
in order to consummate the Merger, the Target shall, in accordance with
applicable law and the Target's Articles of Incorporation and Bylaws, (a) duly
call, give notice of, convene and hold an annual or special meeting of its
shareholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and the transactions
contemplated hereby (the "Target Shareholders Meeting") and (b) subject to the
fiduciary obligations of the Target's Board of Directors as advised by
independent legal counsel, include in the Proxy Statement the recommendation of
the Target's Board of Directors that the shareholders of the Target approve this
Agreement and the Transactions, including, without limitation, the Merger and
use its reasonable best efforts to obtain such approval. To the extent permitted
by law, Acquiror and Acquiror Sub each agree to vote all Shares beneficially
owned by them in favor of the Merger.
(b) Notwithstanding the provisions of Section 6.01(a), in the event
that Acquiror and Acquiror Sub shall acquire in the aggregate at least 90% of
the outstanding Shares, pursuant to the Offer or otherwise, the parties hereto
shall, at the request of Acquiror, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of shareholders of the Target, in accordance with
Texas Law.
SECTION 6.02. Proxy Statement. If required by applicable law in order
to consummate the Merger, as promptly as practicable after the purchase of all
Shares validly tendered and not withdrawn pursuant to the Offer, the Target
shall file the Proxy Statement with the SEC under the Exchange Act, and shall
use its reasonable best efforts to have the Proxy Statement cleared by the SEC.
Acquiror, Acquiror Sub and the Target shall cooperate with each other in the
preparation of the Proxy Statement, and the Target shall notify Acquiror of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Acquiror promptly copies of all
correspondence between the Target or any representative of the Target and the
SEC. The Target shall give Acquiror and its counsel
<PAGE> 32
the opportunity to review the Proxy Statement prior to its being filed with the
SEC and shall give Acquiror and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Target, Acquiror and Acquiror Sub agrees
to use its reasonable best efforts, after consultation with the other parties
hereto, to respond promptly to all such comments of and requests by the SEC and
to cause the Proxy Statement and all required amendments and supplements thereto
to be mailed to the holders of Shares entitled to vote at the Target
Shareholders Meeting at the earliest practicable time with the intent being to
complete the Merger before August 31, 1998. Without limiting the generality of
the foregoing, the Target agrees that its obligations pursuant to this Section
6.02 shall not be affected by the commencement, public proposal, public
disclosure or communication to the Target of any Business Combination Proposal.
SECTION 6.03. Target Board Representation; Section 14(f). (a) Promptly
upon the purchase by Acquiror Sub of Shares pursuant to the Offer, and from time
to time thereafter, Acquiror Sub shall be entitled to designate up to such
number of directors, rounded up to the next whole number, on the Target's Board
of Directors as shall give Acquiror Sub representation on the Target's Board of
Directors equal to the product of the total number of directors on the Target's
Board of Directors (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Acquiror Sub or any affiliate of Acquiror Sub at such time
bears to the total number of Shares then outstanding, and the Target shall, at
such time, promptly take all actions necessary to cause Acquiror Sub's designees
to be elected as directors of the Target, including increasing the size of the
Target's Board of Directors or securing the resignations of incumbent directors
or both. At such times, the Target shall use its best efforts to cause persons
designated by Acquiror Sub to constitute the same percentage as persons
designated by Acquiror Sub shall constitute of the Target's Board of Directors
of (i) each committee of the Target's Board of Directors (some of whom may be
required to be independent as required by applicable law), (ii) each board of
directors of each domestic Subsidiary and (iii) each committee of each such
board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, until the time Acquiror Sub acquires a majority
of the then outstanding Shares on a fully diluted basis, the Target shall use
its best efforts to ensure that all the members of the Target's Board of
Directors and each committee of the Target's Board of Directors and such boards
and committees of the domestic Subsidiaries as of the date hereof who are not
employees of the Target shall remain members of the Target's Board of Directors
and of such boards and committees.
(b) The Target shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Target and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Acquiror or Acquiror Sub shall supply to the Target and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
<PAGE> 33
(c) Following the election or appointment of designees of Acquiror Sub
pursuant to this Section 6.03, prior to the Effective Time, any amendment of
this Agreement or the Articles of Incorporation or Bylaws of the Target, any
termination of this Agreement by the Target, any extension by the Target of the
time for the performance of any of the obligations or other acts of Acquiror or
Acquiror Sub or waiver of any of the Target's rights hereunder shall require the
concurrence of a majority of the directors of the Target then in office who
neither were designated by Acquiror Sub nor are employees of the Target or if no
such directors are then in office, no such amendment, termination, extension or
waiver shall be effected which is materially adverse to the holders of Shares
(other than Acquiror and its subsidiaries).
SECTION 6.04. Access to Information; Confidentiality. Subject to the
Confidentiality Agreement (as hereinafter defined), from the date hereof to
Acquiror Sub's Election Date, the Target will provide Acquiror, during normal
business hours and upon reasonable notice, access to all financial, operating
and other data and information regarding the business of the Target as Acquiror
reasonably requests, other than information and documents that in the opinion of
Target's counsel may not be disclosed under applicable law.
SECTION 6.05. No Solicitation of Transactions.
(a) The Target shall not, directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person relating to any acquisition or purchase of
all or any material portion of the assets of, or any equity interest in, the
Target or any Subsidiary or any merger, consolidation, share exchange, business
combination or other similar transaction with the Target or any Subsidiary (an
"Business Combination Proposal") or participate in any negotiations regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing;
provided, however, that nothing contained in this Section 6.05 shall prohibit
the Target from furnishing information to, or entering into discussions or
negotiations with, any person in connection with an unsolicited Business
Combination Proposal by such person received by the Target after the date of the
Agreement, if, and only to the extent that, (a) a majority of the disinterested
members of the Target's Board of Directors, after consultation with Target
Banker and based on the advice of outside counsel, determines in good faith that
such action is required in order for the Target's Board of Directors not to
breach its fiduciary duties to shareholders imposed by law and (b) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, the Target (i) gives Acquiror as promptly as practicable
prior written notice of the Target's intention to furnish such information or
begin such discussions, the identity of such person and the material terms of
such Business Combination Proposal and (ii) receives from such person an
executed confidentiality agreement on terms no less favorable to the Target than
those contained in the Confidentiality Agreement. The Target agrees not to
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which the Target is a party. The Target immediately
shall cease and cause to be terminated all
<PAGE> 34
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.
(b) Neither the Board of Directors of Target nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Acquiror or Acquiror Sub, the approval or recommendation by such
Board of Directors or any such committee of the Offer, this Agreement or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
Business Combination Proposal. Notwithstanding the foregoing, the Board of
Directors of Target, to the extent required by the fiduciary obligations
thereof, as determined in good faith by a majority of the disinterested members
thereof based on the advice of outside counsel, may approve or recommend (and,
in connection therewith, withdraw or modify its approval or recommendation of
the Offer, this Agreement and the Merger) a Superior Proposal. For purposes of
this Agreement, "Superior Proposal" means a bona fide Business Combination
Proposal made by a third party to acquire, directly or indirectly, all of the
Shares then outstanding or all or substantially all the assets of Target, and
otherwise on terms that a majority of the disinterested members of the Board of
Directors of Target determines in its good faith judgment (based on the advice
of the Target's independent financial advisor) to be more favorable to the
holders of Shares than the Offer and the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of a
majority of such disinterested members (based on the advice of Target's
independent financial advisor), is reasonably capable of being financed by such
third party.
SECTION 6.06. Directors' and Officers' Indemnification. (a) The
Articles of Incorporation and Bylaws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in the Articles of Incorporation and Bylaws of the Target, which provisions
shall not be amended, repealed or otherwise modified for a period of six (6)
years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers or employees of the Target or any of the Subsidiaries,
unless such modification shall be required by Texas Law.
(b) From and after the Effective Time, Acquiror and the Surviving
Corporation shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date of this Agreement or who becomes prior to
the Effective Time, an officer, director, employee or agent of the Target or any
of the Subsidiaries (collectively, the "Indemnified Parties") against all
losses, expenses (including reasonable attorneys' fees), claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the
Surviving Corporation (which approval shall not unreasonably be withheld), or
otherwise in connection with, any threatened or actual claim, action, suit,
proceeding or investigation (a "Claim"), based in whole or in part on or arising
in whole or in part out of the fact that the Indemnified Party (or the person
controlled by the Indemnified Party) is or was a director, officer, employee or
agent of the Target or any of the Subsidiaries and pertaining to any matter
existing or arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, any Claim arising out of this
<PAGE> 35
Agreement or any of the transactions contemplated hereby), whether asserted or
claimed prior to, at or after the Effective Time, in each case to the fullest
extent permitted under Texas Law and by Target's Articles of Incorporation and
Bylaws as in effect on the date hereof, and shall pay any expenses, as incurred,
in advance of the disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Texas Law and by
Target's Articles of Incorporation and Bylaws as in effect on the date hereof.
Without limiting the foregoing, in the event any such Claim is brought against
any of the Indemnified Parties, Acquiror or the Surviving Corporation shall have
the right to assume the defense thereof and neither Acquiror nor the Surviving
Corporation shall be liable to such Indemnified Parties for any legal expenses
of other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Acquiror or the
Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues that raise
conflicts of interest between Acquiror or the Surviving Corporation and the
Indemnified Parties, such Indemnified Parties may retain counsel satisfactory to
them and which shall be reasonably satisfactory to Acquiror and the Surviving
Corporation and they shall pay all reasonable fees and expenses of such counsel
for such Indemnified Parties. The Indemnified Parties, or the Acquiror and the
Surviving Corporation, as the case may be, shall use all reasonable efforts to
assist in the defense of any such Claim, provided that the Acquiror and the
Surviving Corporation shall not be liable for any settlement effected without
their written consent, which consent, however, shall not be unreasonably
withheld. The Acquiror and the Surviving Corporation shall be obligated pursuant
to this paragraph to pay only one law firm to represent the Indemnified Parties
with respect to each such Claim unless there is, as determined by counsel to the
Indemnified Parties, under applicable standards of professional conduct, a
conflict or a reasonable likelihood of a conflict on any significant issue
between the positions of any two or more Indemnified Parties at the expense of
the Acquiror and the Surviving Corporation.
(c) Prior to the Effective Time the Target shall, and after the
Effective Time Surviving Corporation shall, to the fullest extent permitted by
Texas Law, make reasonable advances to the Indemnified parties to cover expenses
for which such Indemnified Parties would otherwise be entitled to
indemnification pursuant to this Section 6.06.
(d) Acquiror shall maintain in effect for three years from the
Effective Time, if available, the current directors' and officers' liability
insurance policies maintained by the Target (provided that Acquiror may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, that neither Acquiror nor the
Surviving Corporation shall be obligated to make aggregate premium payments for
such three-year period in respect of such policy (or coverage replacing such
policy) which exceed, for the portion related to Target's directors and
officers, 150% of the annual premium payments on Target's current policy in
effect as of the date of this Agreement (the "Maximum Amount"). If the amount of
the premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, Acquiror shall use its reasonable efforts to maintain the
most advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to the Maximum Amount.
<PAGE> 36
SECTION 6.07. Obligations of Acquiror Sub. Acquiror shall take all
action necessary to cause Acquiror Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
SECTION 6.08. Public Announcements. (a) Acquiror, Acquiror Sub and the
Target shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any
Transaction and shall not issue any such press release or make any such public
statement prior to such consultation and (b) prior to the Effective Time, the
Target will not issue any other press release or otherwise make any public
statements regarding its business, except as may be required by law or any
listing agreement with the NYSE, to which the Target is a party.
SECTION 6.09. Delivery of SEC Documents. The Target shall promptly
deliver to Acquiror true and correct copies of any report, statement or schedule
filed with the SEC subsequent to the date of this Agreement.
SECTION 6.10. Notification of Certain Matters. The Target shall give
prompt notice to Acquiror, and Acquiror shall give prompt notice to the Target,
of (a) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (b) any failure of the Target, Acquiror or Acquiror Sub, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.10 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.11. Further Action. At any time and from time to time, each
party to this Agreement agrees, subject to the terms and conditions of this
Agreement, to take such actions and to execute and deliver such documents as may
be necessary to effectuate the purposes of this Agreement at the earliest
practicable time.
SECTION 6.12 Employee Benefits.
(a) Each of Acquiror and Acquiror Sub agrees that, during the period
commencing at the Acquiror Sub's Election Date and ending on the first
anniversary thereof, the employees of the Target and the Subsidiaries will
continue to be provided with benefits under employee benefit plans that are no
less favorable in the aggregate than those currently provided by the Target and
the Subsidiaries to such employees.
(b) Acquiror will cause the Target (and, after the Merger, the
Surviving Corporation) to honor all employee benefit obligations to current and
former employees and directors under the Target's employee benefit plans in
existence on the date hereof and disclosed in Section 3.10 of the Target
Disclosure Schedule and all employment or severance agreements
<PAGE> 37
entered into by the Target or adopted by the Board of Directors of the Target
prior to the date hereof and disclosed in Sections 3.10 or 6.12(b) of the Target
Disclosure Schedule; provided, however, that nothing shall prevent Acquiror or
the Target (and, after the Merger, the Surviving Corporation) from taking any
action with respect to such plans, obligations or agreements or refraining from
taking any such action which is permitted or provided for under the terms
thereof or under applicable law.
(c) Employees of the Target (and, after the Merger, the Surviving
Corporation) shall be given credit for all actual service with the Target and
any Subsidiaries under all employee benefit plans, programs and policies of the
Surviving Corporation or Acquiror in which they become participants for all
purposes thereunder, except to the extent that such crediting would produce
duplication of benefits or violate any provision of ERISA or the Code.
SECTION 6.13. Appropriate Action; Consents; Filings. (a) The Target and
Acquiror shall use their best efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable law or required to be taken by any Governmental
Authority or otherwise to consummate and make effective the Transactions as
promptly as practicable, (ii) obtain from any Governmental Authorities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Acquiror or the Target or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Transactions, including, without
limitation, the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Exchange Act, and any other
applicable federal or state securities laws, (B) the rules and regulations of
the NYSE, (C) Texas Law, (D) the HSR Act and any related governmental request
thereunder, and (E) any other applicable law; provided that Acquiror and the
Target shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Target and Acquiror shall use reasonable best efforts to furnish to each
other all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Offer Documents and the Schedule
14D-9) in connection with the transactions contemplated by this Agreement.
(b) (i) Each of Acquiror and the Target shall give (or shall cause
their respective subsidiaries to give) any notices to third parties, and use,
and cause their respective subsidiaries to use, their reasonable best efforts to
obtain any third party consents (including those set forth in Section
3.05(a)(iii)), (A) necessary to consummate the Transactions, (B) disclosed or
required to be disclosed in the Target Disclosure Schedule or the Acquiror
Disclosure Schedule or (C) required to prevent a Material Adverse Effect from
occurring prior to or after Acquiror Sub's Election Date.
<PAGE> 38
(ii) In the event that Acquiror or the Target shall fail to obtain any
third party consent described in subsection (b)(i) above, it shall use its best
efforts, and shall take any such actions reasonably requested by the other
party, to minimize any adverse effect upon the Target and Acquiror, their
respective subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after Acquiror Sub's Election Date, from
the failure to obtain such consent.
(c) From the date of this Agreement until Acquiror Sub's Election Date,
each party shall promptly notify the other party of any pending, or to the best
knowledge of the first party, threatened, action, proceeding or investigation by
or before any Governmental Authority or any other person (i) challenging or
seeking material damages in connection with the Transactions or (ii) seeking to
restrain or prohibit the consummation of the Transactions or otherwise limit the
right of Acquiror or, to the knowledge of such first party, any Acquiror
Subsidiary to own or operate all or any portion of the businesses or assets of
the Target, which in either case is reasonably likely to have a Material Adverse
Effect on the Target prior to the Effective Time, or a Material Adverse Effect
on the Acquiror and the Acquiror Subsidiaries (including the Surviving
Corporation) after the Effective Time.
SECTION 6.14. Payments in Respect of Target Options.
(a) As soon as practicable after the date of this Agreement, the Board
of Directors of Target (or if appropriate, any committee administering the
Target Option Plans) shall adopt such resolutions or take such other actions as
are required to adjust the terms of all outstanding Options to provide that each
Option outstanding immediately after the Tender Offer Acceptance Date shall be
canceled in accordance with Section 2.07 hereof. After the date of this
Agreement, neither the Board of Directors of Target nor any committee thereof
shall cause any Option to become exercisable as a result of the execution of
this Agreement or the consummation of the Transactions; provided, however,
Acquiror acknowledges that all Options regardless of whether exercisable or
vested will be subject to Section 2.07 of this Agreement.
(b) All amounts payable pursuant to Section 2.07 shall be subject to
any required withholding of taxes and shall be paid without interest. Target
shall use its best efforts to obtain all consents of the holders of the Options
as shall be necessary to effectuate the provisions of this Agreement relating
thereto. Notwithstanding anything to the contrary contained in this Agreement,
payment shall, at Acquiror's request, be withheld in respect of any Option until
all necessary consents are obtained.
(c) The Target Option Plans shall terminate as of the Effective Time,
and the provisions in any other Plan providing for the issuance, transfer or
grant of any capital stock of Target or any interest in respect of any capital
stock of Target shall be deleted as of the Effective Time of the Merger, and
Target shall ensure that following the Effective Time of the Merger no holder of
a Option or any participant in any Target Option Plan or other Plan shall have
any right thereunder to acquire any capital stock of Target or the Surviving
Corporation.
<PAGE> 39
SECTION 6.15. Supplemental Indenture. After the date of the acceptance
for payment of shares of Target Common Stock pursuant to the Offer and prior to
the Effective Time, Target and the Trustee (as defined below) shall enter into a
supplemental indenture (the "Supplemental Indenture") to the Indenture dated as
of February 1, 1994 (the "Indenture"), between Target and Texas Commerce Bank,
N.A., as Trustee (the "Trustee"), pursuant to the Indenture, which shall (i)
become effective upon the Effective Time and (ii) provide that, from and after
the Effective Time, each of Target's outstanding Convertible Notes shall cease
to be convertible into shares of Target Common Stock, but shall be convertible
solely into an amount of cash, without interest, equal to the product of (x) the
number of shares of Target Common Stock into which such Convertible Note was
convertible immediately prior to the Effective Time, and (y) the Merger
Consideration. Target shall give Acquiror a reasonable opportunity to comment on
the form of Supplemental Indenture prior to the execution thereof, and shall not
enter into the Supplemental Indenture if Acquiror reasonably objects thereto.
SECTION 6.16. Employee Stock Purchase Plan. As soon as practicable
after the date of this Agreement, the Board of Directors of Target shall take
such action as is necessary to terminate the Farah U.S.A. Inc Employee Stock
Purchase Plan.
SECTION 6.17. Directorships. Acquiror shall use its reasonable best
efforts to cause two members of the Board of Directors of Target, as designated
by Acquiror, to be elected to the Board of Directors of Acquiror.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The obligations of the Target,
Acquiror, and Acquiror Sub to consummate the Merger are subject to the
satisfaction of the following conditions, and only the following conditions:
(a) this Agreement shall have been approved by the affirmative vote of
the shareholders of the Target to the extent required by Texas Law, the Target's
Articles of Incorporation and Bylaws and by the NYSE.
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any law, order, executive order, stay, decree, judgment,
injunction or other order or statute, rule or regulation (each an "Order") which
is in effect and which has the effect of making the acquisition of Shares by
Acquiror or Acquiror Sub or any affiliate of either of them illegal or otherwise
preventing or prohibiting consummation of the Transactions;
(c) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; and
(d) Acquiror Sub or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer; provided,
however, that neither
<PAGE> 40
Acquiror nor Acquiror Sub shall be entitled to assert the failure of this
condition if, in breach of this Agreement or the terms of the Offer, Acquiror
Sub fails to purchase any Shares validly tendered and not withdrawn pursuant to
the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval of this Agreement and the
transactions contemplated hereby as follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Acquiror, Acquiror Sub and the Target prior to Acquiror
Sub's Election Date; or
(b) by either Acquiror or the Target if the Effective Time shall not
have occurred on or before August 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; provided, that the passage of the period referred to in this
Section 8.01(b) shall be tolled for any part thereof during which any party to
this Agreement shall be subject to a nonfinal order or other action restraining,
enjoining or otherwise prohibiting the purchase of shares of Target Common Stock
pursuant to the Offer or the consummation of the Merger or the calling or
holding of the Target Shareholders Meeting;
(c) by Acquiror if: (i) due to an occurrence or circumstance that
results in a failure to satisfy any condition set forth in Annex A hereto,
Acquiror Sub shall have (A) failed to commence the Offer within 10 days
following the date of this Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 90 days following the commencement of the Offer,
unless any such failure listed above shall have been caused by or resulted from
the failure of Acquiror or Acquiror Sub to perform in any material respect any
covenant or agreement of either of them contained in this Agreement or the
material breach by Acquiror or Acquiror Sub of any representation or warranty of
either of them contained in this Agreement; or (ii) prior to the purchase of
Shares pursuant to the Offer, (A) the Target's Board of Directors withdraws its
recommendation of this Agreement or the Merger or shall have resolved to do so,
(B) shall have recommended to the shareholders of the Target any Superior
Proposal or resolved to do so, or (C) a tender offer or exchange offer for 50%
or more of the outstanding shares of capital stock of the Target is commenced
(other than by Acquiror or its affiliates) and the Target's Board of Directors
fails to recommend against the shareholders of the Target tendering their shares
into such tender offer or exchange offer; or
<PAGE> 41
(d) by the Target if: (i) Acquiror Sub shall have (A) failed to
commence the Offer within 10 days following the date of this Agreement, (B)
terminated the Offer without having accepted any Shares for payment thereunder
or (C) failed to pay for Shares pursuant to the Offer within 90 days following
the commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted from the failure of the Target to satisfy the
conditions set forth in paragraph (c) of Annex A; or (ii) to the extent
permitted by Section 6.05(b), prior to the purchase of Shares pursuant to the
Offer, the Board of Directors of the Target approves or recommends a Superior
Proposal.
SECTION 8.02. Fees and Expenses. (a) The Target shall pay Acquiror a
fee (an "Alternative Proposal Fee") equal to three percent (3%) of the
aggregate amount payable by Acquiror Sub to the shareholders of Target pursuant
to the Offer and the Merger, plus all of the Acquiror Expenses (as hereinafter
defined), if:
(i) this Agreement is terminated pursuant to Section
8.01(c)(ii) or (d)(ii); or
(ii) this Agreement is terminated pursuant to Section 8.01
(other than (A) due to an occurrence or circumstance that results in a failure
to satisfy paragraphs (a), (f) or (h) of Annex A hereto or (B) pursuant to
Section 8.01(d) unless the event providing the basis for such termination is the
result of an occurrence or circumstance that results in a failure to satisfy
paragraphs (b) or (c) of Annex A hereto) and (A) the Offer shall have remained
open for at least twenty (20) business days, (B) the Minimum Condition shall not
have been satisfied, (C) a Business Combination Transaction Proposal shall have
been made prior to termination of the Offer, and (D) such Business Combination
Transaction described in clause 8.02(ii)(C) is thereafter consummated within 12
months of such termination. As used herein, the term "Business Combination
Transaction" shall mean any of the following involving the Target: (1) any
merger, consolidation, share exchange, business combination or other similar
transaction (other than the Transactions); (2) any sale, lease, exchange,
transfer or other disposition (other than a pledge or mortgage) of 50% or more
of the assets of the Target in a single transaction or series of related
transactions; or (3) the acquisition by a person or entity or any "group" (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 50% or more of the shares of
Target Common Stock, whether by tender offer, exchange offer or otherwise.
(b) Acquiror shall be entitled to receive the Acquiror Expenses (but
not the Alternative Proposal Fee) in immediately available funds in the event
that this Agreement is terminated by Acquiror pursuant to Section
8.01(c)(i)(other than due to an occurrence or circumstance that results in a
failure to satisfy paragraphs (a), (f) or (h) of Annex A hereto in which case
such Acquiror Expenses shall not exceed $1,500,000).
(c) As used herein, "Acquiror Expenses" means all reasonable
out-of-pocket expenses and fees actually incurred by Acquiror or Acquiror Sub or
on their respective behalf in
<PAGE> 42
connection with the Transactions prior to the termination of this Agreement
(including, without limitation, all fees and expenses of counsel, financial
advisors, banks or other entities providing financing to Acquiror (including
financing, commitment and other fees payable thereto), accountants,
environmental and other experts and consultants to Acquiror and its affiliates,
and all printing and advertising expenses) and in connection with the
negotiation, preparation, execution, performance and termination of this
Agreement, the structuring of the Transactions, any agreements relating thereto
and any filings to be made in connection therewith.
(d) Except as set forth in this Section, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after the
approval of this Agreement and the Transactions by the shareholders of the
Target, no amendment may be made which would violate Texas Law. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any inaccuracy in the
representations and warranties of any other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any agreement
of any other party or condition benefiting such party contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon termination of this Agreement
pursuant to Section 8.01, as the case may be, except that (a) the
representations and warranties of the Target set forth in Article III shall
terminate on the Acquiror Sub's Election Date, and (b) the agreement set forth
in Articles II and IX and Sections 6.03(c), 6.06, 6.07, 6.12 and 6.14 shall
survive termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
facsimile, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at
<PAGE> 43
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 9.02):
if to Acquiror or Acquiror Sub:
Tropical Sportswear Int'l Corporation
4902 West Waters Avenue
Tampa, Florida 33634-1302
Attention: President
Facsimile: (813) 249-4904
with a copy to:
Stephen A. Opler
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
42nd Floor
Atlanta, Georgia 30309-3424
Facsimile: (404) 881-4777
if to the Target:
Farah Incorporated
4171 N. Mesa
Bldg. D, Suite 500
El Paso, Texas 79902-1433
Attention: President
Facsimile: (915) 496-7545
with a copy to:
Daniel W. Rabun
Baker & McKenzie
2001 Ross Avenue, Suite 4500
Dallas, Texas 75201
Facsimile: (214) 965-5902
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified person;
<PAGE> 44
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or any person with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
such shares, or (iv) pursuant to Section 13(d) of the Exchange Act and any rules
or regulations promulgated thereunder;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in New York, New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government;
and
(f) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary), owns or has rights to
acquire, directly or indirectly, 50% or more of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a
<PAGE> 45
mutually acceptable manner in order that the Transactions be consummated as
originally contemplated to the fullest extent possible.
SECTION 9.05. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article II and Sections 6.06 and 6.12, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 9.06. Incorporation of Schedules. The Target Disclosure
Schedule and the Acquiror Disclosure Schedule referred to herein and signed for
identification by the parties hereto are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE RULES OF CONFLICTS OF LAW THEREOF. ALL ACTIONS AND PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT
SITTING IN THE CITY OF EL PASO, TEXAS.
SECTION 9.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.11. Waiver of Jury Trial. Each of Acquiror, the Target and
Acquiror Sub hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of Acquiror, the
Target or Acquiror Sub in the negotiation, administration, performance and
enforcement thereof.
<PAGE> 46
SECTION 9.12. Entire Agreement. This Agreement, the Target Disclosure
Schedule, the Acquiror Disclosure Schedule, the confidentiality agreement, dated
March 12, 1998, (the "Confidentiality Agreement"), between the Target and
Acquiror, and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
<PAGE> 47
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Target have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
TROPICAL SPORTSWEAR INT'L CORPORATION
By: /s/ William W. Compton
-----------------------------------------------
William W. Compton
Chairman and Chief Executive Officer
FOXFIRE ACQUISITION CORP.
By: /s/ Michael Kagan
-----------------------------------------------
Michael Kagan
Secretary
FARAH INCORPORATED
By: /s/ Richard C. Allender
-----------------------------------------------
Richard C. Allender
Chairman of the Board, Chief Executive Officer
and President
43
<PAGE> 48
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Acquiror Sub shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the HSR
Act shall not have expired or been terminated prior to the expiration of the
Offer or (iii) at any time on or after the date of this Agreement, and prior to
the acceptance for payment of Shares, any of the following conditions shall
exist:
(a) there shall have been any judgement, order or decree resulting from
litigation brought by any Governmental Authority or other person, or before any
court or Governmental Authority, agency or tribunal, domestic or foreign: (i)
prohibiting the acquisition by Acquiror or Acquiror Sub of any Shares; (ii)
prohibiting or limiting in any material respect the ownership or operation by
Acquiror, Acquiror Sub or any of their respective subsidiaries of any material
portion of the business or assets of Target, or to compel Acquiror, Acquiror Sub
or any of their respective subsidiaries to dispose of or hold separate any
material portion of the business or assets of Target or any of its Subsidiaries,
(iii) restraining or prohibiting the making of the Offer or the consummation of
the Merger; (iv) imposing limitations on the ability of Acquiror or Acquiror Sub
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by Acquiror Sub
pursuant to the Offer, or otherwise on all matters properly presented to the
Target's shareholders, including, without limitation, the approval of this
Agreement and the Transactions; or (v) requiring divestiture by Acquiror or
Acquiror Sub of any Shares;
(b) (i) the Target's Board of Directors shall have withdrawn or
modified in a manner adverse to Acquiror or Acquiror Sub the approval or
recommendation of the Offer, the Merger or this Agreement or approved or
recommended any Business Combination Proposal or any other acquisition of Shares
other than the Offer and the Merger or (ii) the Target's Board of Directors
shall have resolved to do any of the foregoing;
(c) the Target shall have failed to perform or comply in any material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Acquiror Sub's Election
Date, or any of the representations and warranties of the Target contained in
this Agreement that are qualified as to materiality shall fail to be true and
correct, or any such representations and warranties that are not so qualified
shall fail to be true and correct in all material respects, each as of the
Acquiror Sub's Election Date as though made on and as of the Acquiror Sub's
Election Date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct, or true and
correct in all material aspects, as the case may be, as of such date;
(d) this Agreement shall have been terminated in accordance with its
terms;
A-1
<PAGE> 49
(e) Acquiror Sub and the Target shall have agreed that Acquiror Sub
shall terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder;
(f) there shall have occurred (i) any general suspension of, or
limitation on prices for, or trading in securities on the New York Stock
Exchange (other than limitations on hours or numbers of days of trading); (ii) a
currency moratorium on the exchange market in New York City; (iii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States; (iv) any limitation (whether or not mandatory) by any United
States government or governmental, administrative or regulatory authority or
agency, on the extension of credit by banks or other lending institutions; or
(v) a decline of at least 25% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 index from the date hereof, or any material
disruption or material adverse change in the financial or capital markets
generally, or in the markets for high yield debt in particular or affecting the
syndication or funding of the Acquiror Financing;
(g) it shall have been publicly disclosed or Acquiror or Acquiror Sub
shall have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of more than 25% of the outstanding Shares has been acquired by
any corporation (including the Target or any of its Subsidiaries or affiliates),
partnership, person or other entity or "group" (within the meaning of Section
13(d)(3) of the Exchange Act), other than Acquiror, Acquiror Sub or any of their
Affiliates; or
(h) all consents of and notices to or filings with governmental
authorities and third parties required in connection with the Transactions shall
not have been obtained or made other than those the absence of which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Target or prevent or materially delay consummation of any of the
Transactions.
The foregoing conditions are for the sole benefit of Acquiror Sub and
Acquiror and may be asserted by Acquiror Sub or Acquiror regardless of the
circumstances giving rise to any such condition or may be waived by Acquiror Sub
or Acquiror in whole or in part at any time and from time to time in their sole
discretion. The failure by Acquiror or Acquiror Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right; the
waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-2
<PAGE> 50
ANNEX B
ARTICLES OF INCORPORATION
<PAGE> 51
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SAVANE INTERNATIONAL CORP.
1. SAVANE INTERNATIONAL CORP. (the "Corporation"), pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act, hereby adopts
amended and restated articles of incorporation which accurately copy the
articles of incorporation and all amendments thereto that are in effect to date
and as further amended by such restated articles of incorporation as hereinafter
set forth and which contain no other change in any provision thereof.
2. The articles of incorporation of the Corporation are amended by the
restated articles of incorporation by deleting in their entirety Articles One
and Four and inserting new Articles One and Four as follows:
ARTICLE ONE
The name of the corporation is Savane International Corp.
ARTICLE FOUR
The total number of shares of stock which the Corporation
shall have authority to issue is one thousand (1000) shares, all of
which shall be common stock (par value $.01 per share).
3. The articles of incorporation prior to this amendment stated that
the Corporation's registered office was 8889 Gateway West, El Paso, Texas, and
that the name of the registered agent at such address was William F. Farah.
However, pursuant to a filing with the Secretary of State of Texas, the
registered office of the Corporation was changed to 6070 Gateway East, Building
E, Suite 102, El Paso, Texas 79905, and the registered agent was changed to
Crawford Kerr, Jr.
<PAGE> 52
4. Effective at the time of the filing with the Secretary of State of
Texas of the Restated and Amended Articles of Incorporation of the Corporation
with respect hereto, each share of the Corporation's common stock outstanding
immediately prior to such time shall without any action on the part of the
respective holders thereof, be cancelled and exchanged for ________ shares of
common stock, and each stock certificate that, immediately prior to the time of
such filing, represented shares of the Corporation's common stock shall, from
and after such time and without the necessity of presenting the same for
exchange, represent the number of whole shares of common stock as equals the
product obtained by multiplying the number of shares of common stock formerly
represented by such certificate by __________.
5. Each such amendment made by these restated articles of incorporation
has been effected in conformity with the provisions of the Texas Business
Corporation Act and such restated articles of incorporation and each such
amendment made by the restated articles of incorporation were duly adopted by
the shareholders of the Corporation on the __th day of May, 1998.
6. The number of shares outstanding was _____; the number of shares
entitled to vote on the restated articles of incorporation as so amended was
_____; the number of shares voted for such restated articles of incorporation as
so amended was ____; and the number of shares voted against such restated
articles of incorporation as so amended was _______.
7. The articles of incorporation and all amendments and supplements
thereto are hereby superseded by the following restated articles of
incorporation which accurately copy the entire text thereof as further amended
as above set forth, and no other provision is changed except as set forth above:
-2-
<PAGE> 53
ARTICLE ONE
The name of the Corporation is Savane International Corp.
ARTICLE TWO
The period of the Corporation's duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the Corporation is organized
are: To engage in any commercial, mercantile, industrial,
manufacturing, merchandising, transportation, marine, exploration,
mining, agricultural, research, licensing, servicing or agency business
not prohibited by law, and any, some or all of the foregoing.
ARTICLE FOUR
The total number of shares of stock which the Corporation
shall have authority to issue is one thousand (1000) shares, all of
which shall be common stock (par value $.01 per share).
ARTICLE FIVE
The post-office address of the Corporation's registered office
is 6070 Gateway East, Building E, Suite 102, El Paso, Texas 79905, and
the name of its registered agent at such address is Crawford Kerr, Jr.
ARTICLE SIX
The number of directors of the Corporation may be fixed by the
by-laws, but shall not be less than three (3).
ARTICLE SEVEN
The names and addresses of the directors are:
<TABLE>
<CAPTION>
Names Address
<S> <C>
Jesus Alvarez-Morodo 4902 W. Waters Avenue, Tampa, Florida 33634-1302
William W. Compton 4902 W. Waters Avenue, Tampa, Florida 33634-1302
Leslie Gillock 4902 W. Waters Avenue, Tampa, Florida 33634-1302
Michael Kagan 4902 W. Waters Avenue, Tampa, Florida 33634-1302
Donald H. Livingstone 4902 W. Waters Avenue, Tampa, Florida 33634-1302
</TABLE>
-3-
<PAGE> 54
<TABLE>
<S> <C>
Leon Reinhart 4902 W. Waters Avenue, Tampa, Florida 33634-1302
Eloy S. Vallina 4902 W. Waters Avenue, Tampa, Florida 33634-1302
</TABLE>
ARTICLE EIGHT
The shareholders of the Corporation shall not be entitled to
any preemptive right to acquire unissued or treasury shares of the
Corporation.
ARTICLE NINE
Each outstanding share of common stock shall be entitled to
one vote on all matters submitted to a vote at a meeting of
shareholders. The shareholders of the corporation shall not be entitled
to the right of cumulative voting.
ARTICLE TEN
A director of the Corporation shall not be liable to the
Corporation or its shareholders for monetary damages for an act or
omission in the director's capacity as a director, except to the extent
such exemption from liability or limitation thereof is not permitted
under the Texas Miscellaneous Corporation Laws Act as currently in
effect or as the same may hereafter be amended.
No amendment, modification or repeal of this Article Ten shall
adversely affect any right or protection of a director that exists at
the time of such amendment, modification or repeal.
Dated: the ____ day of May, 1998.
SAVANE INTERNATIONAL CORP.
By
-------------------------------
Richard C. Allender, President
By
-------------------------------
Karen S. Castillo, Secretary
-4-
<PAGE> 55
State of Texas )
)
County of Dallas )
I, _________, a Notary Public, do hereby certify that on this _____ day
of May, 1998, personally appeared before me _____ and _____, the President and
Secretary, respectively, of the corporation executing the foregoing document,
and being first duly sworn, acknowledged that they signed the foregoing document
in the capacities therein set forth and declared that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and
year before written.
-------------------------------------
Notary Public in and for the
State of Texas
-5-
<PAGE> 1
[LOGO SAVANE]
EXHIBIT (c)(2)
March 20, 1998
Mr. William W. Compton
Chairman of the Board and
Chief Executive Officer
Tropical Sportswear International Corporation
4902 W. Waters Avenue
Tampa, Florida 33634-1302
Dear Mr. Compton:
In connection with your consideration of a possible acquisition of, or
investment in, Farah Incorporated, a Texas corporation (the "Company"), the
Company has agreed to provide you certain information regarding the Company
which is non-public, confidential and proprietary in nature.
1. As a condition to the Company furnishing information to you, the
Company is requiring that you agree, as set forth below, to treat "Evaluation
Materials" confidentially. As used in this Agreement, the term "Evaluation
Materials" should, except as otherwise provided herein, mean any information
that either the Company or its financial advisor, or its other representatives
furnish to you and your directors, officers, partners, employees, agents and
representatives (including without limitation, financial advisors, counsel,
persons contemplating providing financing for any transaction, accountants,
experts and consultants) (collectively, the "Representatives") in connection
with a possible transaction involving the Company, whether furnished orally or
in writing or gathered by inspection and regardless of whether specifically
identified as "confidential," together with analyses, compilations, studies or
other documents prepared by you or by your Representatives which contain or
otherwise reflect or are derived from such information.
The term "Evaluation Materials" does not include information which (a)
is or becomes generally available to the public other than as a result of a
disclosure by you or any of your Representatives, or (b) was within your
possession prior to its being furnished to you by the Company or its financial
advisor or representative or was or becomes available to you on a
non-confidential basis from a source other than the Company or its financial
advisor or representatives, provided that such source is not known by you, after
reasonable inquiry, to be prohibited from disclosing such information to you by
a contractual, legal or fiduciary obligation to the Company or its financial
advisor or representatives.
2. You agree that the Evaluation Materials will be used solely for the
purpose of evaluating a possible transaction with the Company and that such
Evaluation Materials will be kept confidential by you; provided, however, that
you may disclose any Evaluation Materials to your Representatives who need to
know such information for the purpose of evaluating the transaction (it being
understood that they shall be informed by you of the confidential nature of such
information and that you shall undertake reasonable efforts to cause them to
treat such information on a confidential basis). You will be responsible for any
breach of this Agreement by your Representatives. You agree, at your sole
expense, to take all reasonable measures, including but not limited to court
proceedings, to restrain your Representatives from unauthorized disclosure or
use of the Evaluation Materials.
<PAGE> 2
Mr. William W. Compton
March 20, 1998
Page 2
3. The public disclosure of your possible interest in consummating a
transaction involving the Company could have a material adverse effect on the
Company's business if for any reason a definitive agreement with respect to such
transaction is not consummated. In addition, any disclosure by you or any of
your Representatives of your possible interest in consummating a transaction
involving the Company to any shareholder could have a material adverse effect on
the Company's business. Accordingly, you agree that without the prior written
consent of the Company, you will not, and you will direct your Representatives
not to, disclose to any person either the fact that discussions or negotiations
are taking place concerning a possible transaction between you and the Company
or any of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof and no Evaluation Materials will be
provided to any such persons; provided, however, that you may make such
disclosure as you determine may be required by any applicable law, regulation or
rule based upon advice of legal counsel. You agree to provide the Company
reasonable prior notice of any such disclosure. The term "person" as used in
this letter shall be broadly interpreted to include, without limitation, any
corporation, company, governmental agency or body, partnership or individual.
4. You acknowledge that you are aware, and that you will advise your
Representatives who are informed as to the matters which are the subject of this
letter, that certain laws prohibit any person who has received material,
non-public information concerning the matters which are the subject of this
letter from purchasing or selling securities of the Company or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
5. In the event that you are requested in any proceeding to disclose
any Evaluation Materials, you will give the Company prompt notice of such
request so that the Company may seek an appropriate protective order. It is
further agreed that, if in the absence of a protective order you are nonetheless
compelled to disclose Evaluation Materials, you may disclose such information
without liability hereunder; provided, however, that you give the Company
written notice of the information to be disclosed as far in advance of its
disclosure as is practicable.
6. Upon the Company's request, you shall promptly deliver to the
Company all written Evaluation Materials furnished to you or your
Representatives by the Company or its financial advisor or representative, and
any other written materials containing or reflecting any information in the
Evaluation Materials (whether prepared by the Company, its advisors or
otherwise) and will not retain any copies, extracts or other reproductions in
whole or in part of such written materials. Upon the Company's request, all
documents, memoranda, notes and other writings whatsoever prepared by you or
your advisors based on the information in the Evaluation Materials shall be
destroyed, and such destruction shall be certified in writing to the Company by
an authorized officer supervising such destruction.
7. During the course of your evaluation, all inquiries and other
communications with officers and employees of the Company with respect to a
possible transaction are to be made only to officers and employees of the
Company who are specifically designated by Richard C. Allender, on behalf of the
Company. Accordingly, you agree not to directly or indirectly contact or
communicate with any officer or other employee of the Company with respect to a
possible transaction without the express written consent of the Company.
8. Although the Company has endeavored to include in the Evaluation
Materials information known to it which it believes to be relevant for the
purpose of your investigation, you understand that neither the Company nor any
of its financial advisors or representatives have made or
<PAGE> 3
Mr. William W. Compton
March 20, 1998
Page 3
make any representation or warranty as to the accuracy or completeness of the
Evaluation Materials. You agree that neither the Company nor any of its
financial advisors or representatives shall have any liability to you or any of
your Representatives resulting from the use of the Evaluation Materials. Only
those representations or warranties that are made to you in a definitive sale
agreement when, as, and if, it is executed, and subject to such limitations and
restrictions as may be specified in such definitive sale agreement, will have
legal effect.
9. You agree that money damages would not be a sufficient remedy for
any breach of this Agreement by you or your Representatives, and that in
addition to all other remedies the Company shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach, and you further agree to waive and to use your reasonable efforts to
cause your Representatives to waive any requirement for the securing or posting
of any bond in connection with such remedy.
<PAGE> 4
Mr. William W. Compton
March 20, 1998
Page 4
10. Without the Company's prior written consent, those of your
employees who have received Evaluation Materials will not for a period of two
(2) years from the date hereof directly induce or cause others to induce any
person who is either an officer of the Company or any of its subsidiaries or
involved in any of the negotiations or due diligence review in respect of a
transaction to leave the employment of the Company.
11. This Agreement shall be governed and construed in accordance with
the laws of the State of Texas without giving effect to its conflict of laws,
principles or rules.
12. If at any time you consider a transaction which would involve
participation, directly or indirectly by a third party, you agree to cause such
third party to execute a confidentiality agreement satisfactory to the Company
prior to the disclosure to such party of any Evaluation Materials.
13. If you are in agreement with the foregoing, please so indicate by
signing, dating and returning one copy of this Agreement, which will constitute
your agreement with respect to the matters set forth herein.
Very truly yours,
FARAH INCORPORATED
By:/s/ Richard C. Allender
------------------------------------------
Richard C. Allender
Chairman of the Board, President and Chief
Executive Officer
Confirmed and agreed to:
TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
By:/s/ William W. Compton
----------------------------
Mr. William W. Compton
Chairman of the Board and
Chief Executive Officer
Dated: 3/20/98
--------------------------
<PAGE> 1
EXHIBIT (c)(3)
SAVANE
March 20, 1998
Mr. William W. Compton
Chairman of the Board and
Chief Executive Officer
Tropical Sportswear International Corporation
4902 W. Waters Avenue
Tampa, Florida 33634-1302
Dear Mr. Compton:
In connection with your consideration of a possible acquisition of, or
investment in, Farah Incorporated, a Texas corporation (the "Company"), the
Company has agreed to provide you certain information regarding the Company
which is non-public, confidential and proprietary in nature.
1. As a condition to the Company furnishing information to you, the
Company is requiring that you agree, as set forth below, to treat "Evaluation
Materials" confidentially. As used in this Agreement, the term "Evaluation
Materials" should, except as otherwise provided herein, mean any information
that either the Company or its financial advisor, or its other representatives
furnish to you and your directors, officers, partners, employees, agents and
representatives (including without limitation, financial advisors, counsel,
persons contemplating providing financing for any transaction, accountants,
experts and consultants) (collectively, the "Representatives") in connection
with a possible transaction involving the Company, whether furnished orally or
in writing or gathered by inspection and regardless of whether specifically
identified as "confidential," together with analyses, compilations, studies or
other documents prepared by you or by your Representatives which contain or
otherwise reflect or are derived from such information.
The term "Evaluation Materials" does not include information which (a)
is or becomes generally available to the public other than as a result of a
disclosure by you or any of your Representatives, or (b) was within your
possession prior to its being furnished to you by the Company or its financial
advisor or representative or was or becomes available to you on a
non-confidential basis from a source other than the Company or its financial
advisor or representatives, provided that such source is not known by you, after
reasonable inquiry, to be prohibited from disclosing such information to you by
a contractual, legal or fiduciary obligation to the Company or its financial
advisor or representatives.
2. You agree that the Evaluation Materials will be used solely
for the purpose of evaluating a possible transaction with the Company and that
such Evaluation Materials will be
<PAGE> 2
Mr. William W. Compton
March 20, 1998
Page 2
kept confidential by you; provided, however, that you may disclose any
Evaluation Materials to your Representatives who need to know such information
for the purpose of evaluating the transaction (it being understood that they
shall be informed by you of the confidential nature of such information and that
you shall undertake reasonable efforts to cause them to treat such information
on a confidential basis). You will be responsible for any breach of this
Agreement by your Representatives. You agree, at your sole expense, to take all
reasonable measures, including but not limited to court proceedings, to restrain
your Representatives from unauthorized disclosure or use of the Evaluation
Materials.
3. The public disclosure of your possible interest in
consummating a transaction involving the Company could have a material adverse
effect on the Company's business if for any reason a definitive agreement with
respect to such transaction is not consummated. In addition, any disclosure by
you or any of your Representatives of your possible interest in consummating a
transaction involving the Company to any shareholder could have a material
adverse effect on the Company's business. Accordingly, you agree that without
the prior written consent of the Company, you will not, and you will direct your
Representatives not to, disclose to any person either the fact that discussions
or negotiations are taking place concerning a possible transaction between you
and the Company or any of the terms, conditions or other facts with respect to
any such possible transaction, including the status thereof and no Evaluation
Materials will be provided to any such persons; provided, however, that you may
make such disclosure as you determine may be required by any applicable law,
regulation or rule based upon advice of legal counsel. You agree to provide the
Company reasonable prior notice of any such disclosure. The term "person" as
used in this letter shall be broadly interpreted to include, without limitation,
any corporation, company, governmental agency or body, partnership or
individual.
4. You acknowledge that you are aware, and that you will advise
your Representatives who are informed as to the matters which are the subject of
this letter, that certain laws prohibit any person who has received material,
non-public information concerning the matters which are the subject of this
letter from purchasing or selling securities of the Company or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
5. In the event that you are requested in any proceeding to
disclose any Evaluation Materials, you will give the Company prompt notice of
such request so that the Company may seek an appropriate protective order. It is
further agreed that, if in the absence of a protective order you are nonetheless
compelled to disclose Evaluation Materials, you may disclose such information
without liability hereunder; provided, however, that you give the Company
written notice of the information to be disclosed as far in advance of its
disclosure as is practicable.
6. Upon the Company's request, you shall promptly deliver to the
Company all written Evaluation Materials furnished to you or your
Representatives by the Company or its financial advisor or representative, and
any other written materials containing or reflecting any
<PAGE> 3
Mr. William W. Compton
March 20, 1998
Page 3
information in the Evaluation Materials (whether prepared by the Company, its
advisors or otherwise) and will not retain any copies, extracts or other
reproductions in whole or in part of such written materials. Upon the Company's
request, all documents, memoranda, notes and other writings whatsoever prepared
by you or your advisors based on the information in the Evaluation Materials
shall be destroyed, and such destruction shall be certified in writing to the
Company by an authorized officer supervising such destruction.
7. During the course of your evaluation, all inquiries and other
communications with respect to a possible transaction are to be made only to
directors, officers and employees of the Company who are specifically designated
by Richard C. Allender, on behalf of the Company. Accordingly, you agree not to
directly or indirectly contact or communicate with any shareholder, director,
officer or other employee of the Company with respect to a possible transaction
without the express written consent of the Company.
8. Although the Company has endeavored to include in the
Evaluation Materials information known to it which it believes to be relevant
for the purpose of your investigation, you understand that neither the Company
nor any of its financial advisors or representatives have made or make any
representation or warranty as to the accuracy or completeness of the Evaluation
Materials. You agree that neither the Company nor any of its financial advisors
or representatives shall have any liability to you or any of your
Representatives resulting from the use of the Evaluation Materials. Only those
representations or warranties that are made to you in a definitive sale
agreement when, as, and if, it is executed, and subject to such limitations and
restrictions as may be specified in such definitive sale agreement, will have
legal effect.
9. You agree that money damages would not be a sufficient remedy
for any breach of this Agreement by you or your Representatives, and that in
addition to all other remedies the Company shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach, and you further agree to waive and to use your reasonable efforts to
cause your Representatives to waive any requirement for the securing or posting
of any bond in connection with such remedy.
10. (a) You agree that, for a period of two (2) years after the
date hereof, unless and until you shall have been specifically invited or
authorized in writing by the Company, you will not, and will cause each of your
Affiliates (as defined below) not to, directly or indirectly, solicit, seek or
offer to effect, negotiate with or provide any information to any person with
respect to, or make any statement, proposal or inquiry, whether written or oral,
either alone or in concert with others, to the Board of Directors of the
Company, to any director or officer of the Company or to any shareholder or
securityholder of the Company or otherwise make any public announcement or
proposal or offer whatsoever with respect to, (i) any form of business
combination or other acquisition transaction involving the Company, including,
without limitation, a merger, consolidation, tender or exchange offer, sale or
purchase of assets or securities, or dissolution or liquidation of the Company,
(ii) any form of restructuring, recapitalization or similar transaction
<PAGE> 4
Mr. William W. Compton
March 20, 1998
Page 4
with respect to the Company, (iii) any request or proposal to amend, waive or
terminate any provision of this Agreement or (iv) any proposal or other
statement inconsistent with the terms of this Agreement. The term "Affiliates"
shall mean a person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with
you.
(b) You agree that, for a period of two (2) years after the date
hereof, without the prior written consent of the Company, you will not, and will
cause each of your Affiliates not to, singly or as part of a "partnership,
limited partnership, syndicate or other group" (as those terms are used within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which meanings shall apply for all purposes of
this Agreement), directly or indirectly, through one or more intermediaries or
otherwise:
(i) acquire, offer or propose to acquire, or agree to
acquire, by purchase or otherwise, (A) any securities entitled to, or
that may be entitled to, vote generally in the election of the
Company's Board of Directors (collectively; "Voting Securities"), or
(B) any direct or indirect rights or options to acquire (through
purchase, exchange, conversion or otherwise) any Voting Securities or
(C) any assets or securities of the Company;
(ii) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A of the Exchange Act) with respect to the Voting
Securities (including by the execution of action by written consent),
become a "participant" in any "election contest" (as such terms are
defined or used in Rule 14a-11 of the Exchange Act) with respect to the
Company, seek to advise, encourage or influence any person or entity
with respect to the voting of any Voting Securities or demand a copy of
the Company's stock ledger, list of its shareholders or other books and
records;
(iii) participate in or encourage the formation of any
group which owns or seeks or offers to acquire beneficial ownership of
securities of the Company or any assets of the Company or rights to
acquire such securities or which seeks or offers to effect control of
the Company or for the purpose of circumventing any provisions of this
Agreement; or
(iv) otherwise act, alone or in concert with others
(including by providing financing to another party), to seek or offer
to control, in any manner, the management, Board of Directors or
policies of the Company.
(c) Without the Company's prior written consent, those of your
employees who have received Evaluation Materials will not for a period of two
(2) years from the date hereof directly induce or cause others to induce any
person who is either an officer of the Company or any of its subsidiaries or
involved in any of the negotiations or due diligence review in respect of a
transaction to leave the employment of the Company.
<PAGE> 5
Mr. William W. Compton
March 20, 1998
Page 5
11. This Agreement shall be governed and construed in accordance
with the laws of the State of Texas without giving effect to its conflict of
laws, principles or rules.
12. If at any time you consider a transaction which would involve
participation, directly or indirectly by a third party, you agree to cause such
third party to execute a confidentiality agreement .satisfactory to the Company
prior to the disclosure to such party of any Evaluation Materials.
13. If you are in agreement with the foregoing, please so indicate
by signing, dating and returning one copy of this Agreement, which will
constitute your agreement with respect to the matters set forth herein.
Very truly yours,
FARAH INCORPORATED
By: /s/ Richard C. Allender
--------------------------------
Richard C. Allender
Chairman of the Board, President and
Chief Executive Officer
Confirmed and agreed to:
TROPICAL SPORTSWEAR
INTERNATIONAL CORPORATION
By:/s/ William W. Compton
--------------------------------
Mr. William W. Compton
Chairman of the Board and
Chief Executive Officer
Dated: 3/26/98
-----------------------------
<PAGE> 1
EXHIBIT (c)(4)
T S I
TROPICAL SPORTSWEAR INT'L
March 23, 1998
Mr. Richard C. Allender
Chairman of the Board
President and Chief Executive Officer
Farah Incorporated
P.O. Box 13800
El Paso, Texas 79913-3800
Dear Mr. Allender:
In connection with your consideration of a possible acquisition of, or
investment in, Farah Incorporated, a Texas corporation (the "Company") by
Tropical Sportswear Int'l Corporation ("TSI"), TSI has agreed to provide you
certain information regarding the TSI which is non-public, confidential and
proprietary in nature.
1. As a condition to TSI furnishing information to you, TSI is
requiring that you agree, as set forth below, to treat "Evaluation Materials"
confidentially. As used in this Agreement, the term "Evaluation Materials"
should, except as otherwise provided herein, mean any information that either
TSI or its financial advisor, or its other representatives furnish to you and
your directors, officers, partners, employees, agents and representatives
(including without limitation, financial advisors, counsel, accountants, experts
and consultants) (collectively, the "Representatives") in connection with a
possible transaction involving TSI, whether furnished orally or in writing or
gathered by inspection and regardless of whether specifically identified as
"confidential" together with analyses, compilations, studies or other documents
prepared by you or by your Representatives which contain or otherwise reflect or
are derived from such information.
The term "Evaluation Materials" does not include information which (a)
is or becomes generally available to the public other than as a result of a
disclosure by you or any of your Representatives, or (b) was within your
possession prior to its being furnished to you by TSI or its financial advisor
or representative or was or becomes available to you on a non-confidential basis
from a source other than TSI or its financial advisor or
<PAGE> 2
Mr. Richard C. Allender
March 23, 1998
Page 2
representatives, provided that such source is not known by you, after reasonable
inquiry, to be prohibited from disclosing such information to you by a
contractual, legal or fiduciary obligation to TSI or its financial advisor or
representatives.
2. You agree that the Evaluation Materials will be used solely for the
purpose of evaluating a possible transaction with TSI and that such Evaluation
Materials will be kept confidential by you; provided, however, that you may
disclose any Evaluation Materials to your Representatives who need to know such
information for the purpose of evaluating the transaction (it being understood
that they shall be informed by you of the confidential nature of such
information and that you shall undertake reasonable efforts to cause them to
treat such information on a confidential basis). You will be responsible for any
breach of this Agreement by your Representatives. You agree, at your sole
expense, to take all reasonable measures, including but not limited to court
proceedings, to restrain your Representatives from unauthorized disclosure or
use of the Evaluation Materials.
3. The public disclosure of your possible interest in consummating a
transaction involving TSI could have a material adverse effect on TSI's business
if for any reason a definitive agreement with respect to such transaction is not
consummated. In addition, any disclosure by you or any of your Representatives
of your possible interest in consummating a transaction involving TSI to any
shareholder could have a material adverse effect on TSI's business. Accordingly,
you agree that without the prior written consent of TSI, you will not, and you
will direct your Representatives not to, disclose to any person either the fact
that discussions or negotiations are taking place concerning a possible
transaction between you and TSI or any of the terms, conditions or other facts
with respect to any such possible transaction, including the status thereof and
no Evaluation Materials will be provided to any such persons; provided, however,
that you may make such disclosure as you determine may be required by any
applicable law, regulation or rule based upon advice of legal counsel. You agree
to provide TSI reasonable prior notice of any such disclosure. The term "person"
as used in this letter shall be broadly interpreted to include, without
limitation, any corporation, company, governmental agency or body, partnership
or individual.
4. You acknowledge that you are aware, and that you will advise your
Representatives who are informed as to the matters which are the subject of this
letter, that certain laws prohibit any person who has received material,
non-public information concerning the matters which are the subject of this
letter from purchasing or selling securities of TSI or from communicating such
information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
5. In the event that you are requested in any proceeding to disclose
any Evaluation Materials, you will give TSI prompt notice of such request so
that TSI may
<PAGE> 3
Mr. Richard C. Allender
March 23, 1998
Page 3
seek an appropriate protective order. It is further agreed that, if in the
absence of a protective order you are nonetheless compelled to disclose
Evaluation Materials, you may disclose such information without liability
hereunder; provided, however, that you give TSI written notice of the
information to be disclosed as far in advance of its disclosure as is
practicable.
6. Upon TSI's request, you shall promptly deliver to TSI all written
Evaluation Materials furnished to you or your Representatives by TSI or its
financial advisor or representative, and any other written materials containing
or reflecting any information in the Evaluation Materials (whether prepared by
TSI, its advisors or otherwise) and will not retain any copies, extracts or
other reproductions in whole or in part of such written materials. Upon TSI's
request, all documents, memoranda, notes and other writings whatsoever prepared
by you or your advisors based on the information in the Evaluation Materials
shall be destroyed, and such destruction shall be certified in writing to TSI by
an authorized officer supervising such destruction.
7. During the course of your evaluation, all inquiries and other
communications with officers and employees of TSI with respect to a possible
transaction are to be made only to officers and employees of TSI who are
specifically designated by William W. Compton or Michael Kagan, on behalf of
TSI. Accordingly, you agree not to directly or indirectly contact or communicate
with any officer or other employee of TSI with respect to a possible transaction
without the express written consent of TSI.
8. Although TSI has endeavored to include in the Evaluation Materials
information known to it which it believes to be relevant for the purpose of your
investigation, you understand that neither TSI nor any of its financial advisors
or representatives have made or make any representation or warranty as to the
accuracy or completeness of the Evaluation Materials. You agree that neither TSI
nor any of its financial advisors or representatives shall have any liability to
you or any of your Representatives resulting from the use of the Evaluation
Materials. Only those representations or warranties that are made to you in a
definitive sale agreement when, as, and if, it is executed, and subject to such
limitations and restrictions as may be specified in such definitive sale
agreement, will have legal effect.
9. You agree that money damages would not be a sufficient remedy for
any breach of this Agreement by you or your Representatives, and that in
addition to all other remedies TSI shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and you
further agree to waive and to use your reasonable efforts to cause your
Representatives to waive any requirement for the securing or posting of any bond
in connection with such remedy.
<PAGE> 4
Mr. Richard C. Allender
March 23, 1998
Page 4
10. This Agreement shall be governed and construed in accordance with
the laws of the State of Florida without giving effect to its conflict of laws,
principles or rules.
11. If at any time you consider a transaction which would involve
participation directly or indirectly by a third party, you agree to cause such
third party to execute a confidentiality agreement satisfactory to TSI prior to
the disclosure to such party of any Evaluation Materials.
12. If you are in agreement with the foregoing, please so indicate by
signing, dating and returning one copy of this Agreement, which will constitute
your agreement with respect to the matters set forth herein.
Very truly yours,
TROPICAL SPORTSWEAR INT'L CORPORATION
By: /s/ William W. Compton
-------------------------
Mr. William W. Compton
Chairman of the Board and
Chief Executive Officer
FARAH INCORPORATED
By:/s/ Richard C. Allender
----------------------
Richard C. Allender
Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 1
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into by and between Tropical
Sportswear Int'l Corporation, a Florida corporation (the "Company"), and Richard
C. Allender (the "Executive").
In consideration of the following and mutual covenants and agreements
hereinafter set forth, the Company and the Executive do hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive and the Executive hereby
agrees to serve as an employee of the Company or one or more of its subsidiaries
on the terms and conditions set forth herein. The Executive's employment
pursuant to this Agreement will involve the Company and each of its subsidiaries
and their respective operations.
(b) The term of this Agreement shall commence on the earlier to occur of
the Effective Time or the Acquiror Sub's Election Date, as such terms are
defined in that certain Agreement and Plan of Merger, dated as of May 1, 1998,
among the Company, Foxfire Acquisition Corp., a Texas corporation, and Farah
Incorporated, a Texas corporation, (the "Effective Date") and shall continue for
a three (3) year term (the "Initial Term"). Following expiration of the Initial
Term, this Agreement shall be renewed automatically on a daily basis so that the
term of this Agreement after the Initial Term shall continue for a twelve (12)
month term. This term of this Agreement may be terminated as provided in Section
4.
(c) The Executive shall serve as Executive Vice President-Global Affairs
of the Company or such other offices as the Chairman of the Board of Directors
of the Company or its subsidiaries (the "Chairman") shall assign, and shall
perform such duties and responsibilities as may from time to time be prescribed
by the Chairman, provided that such duties and responsibilities are consistent
with the Executive's position. The Executive shall perform and discharge
faithfully, diligently and to the best of his ability such duties and
responsibilities and shall devote all of his working time and efforts to the
business and affairs of the Company and its subsidiaries. In furtherance of the
foregoing during the term of the Agreement, the Executive acknowledges and
agrees that he may not serve on the board of directors of any other corporation
or similar body of any other entity without the prior written approval of the
Chairman.
(d) In connection with his employment, the Executive shall be based at the
Company's El Paso office, or such other location as may be agreeable to both the
Company and the Executive.
(e) During the term of this Agreement, the Company shall use its best
efforts to cause the Executive to be appointed as a member of the Board of
Directors of the Company (the "Board").
2. COMPENSATION.
(a) On the first day of the Initial Term, the Company shall pay to the
Executive a bonus of $600,000.
(b) During each year that this Agreement is in effect, the Company and/or
its subsidiaries shall pay to the Executive a minimum annual salary of $300,000,
or such additional amounts as the Chairman may approve (the "Base Salary"),
payable in monthly installments on the last day of each month
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throughout the term of such employment, subject to Section 4 hereof. The
Chairman, upon review of the Executive's performance and/or the profitability of
the Company and its subsidiaries, may direct the Company or its subsidiaries to
pay the Executive a bonus, as the Chairman in his sole discretion may determine
to be appropriate; provided, however, that during each year that this Agreement
is in effect, the Company shall pay to the Executive an annual bonus, payable
within ninety (90) days following the end of the Company's fiscal year, of at
least $100,000 (prorated based on the number of days of the Executive's
employment if less than a full fiscal year).
(c) On the first day of the Initial Term, the Company shall grant to the
Executive options to purchase 15,000 shares of the Company's common stock, par
value $.01 per share, under the Company's 1997 Employee Stock Option Plan (the
"Stock Option Plan") or any successor thereto, upon such terms as are available
to senior executive officers of the Company or its subsidiaries. The exercise
price for the options shall be the Fair Market Value (as such term is defined in
the Stock Option Plan) on the date of grant of such options. The options shall
be vested and immediately exerciseable. During each year that this Agreement is
in effect, the Company shall make additional grants to the Executive under the
Stock Option Plan upon such terms as are generally available to senior executive
officers of the Company or its subsidiaries.
(d) During the term of his employment hereunder, the Executive shall be
entitled to participate in or receive all benefits under the Company's employee
benefit plans and arrangements, including, without limitation, the Company's
401(k) plan and all Benefits, as defined below, which are available to senior
executive officers of the Company or its subsidiaries, including the right to
have had the health and medical insurance on terms which are substantially the
same in scope and coverage as the health and medical insurance provided by Farah
Incorporated on May 1, 1998 (the "Existing Plan"), without regard to any
pre-existing conditions. Nothing paid to the Executive under any such plans or
arrangements shall be deemed to be in lieu of compensation to the Executive
hereunder. The Company may elect to continue Executive's participation in the
Existing Plan in lieu of the Company's health and medical insurance plans.
(e) The Company agrees to pay the cost of premiums for the Executive's
existing split-dollar life insurance policy. The cost of premiums for such
split-dollar life insurance policy shall not exceed $121,000 per annum, unless
otherwise agreed by the Company. Except as otherwise provided in Section 5 of
this Agreement, the Company shall be obligated from and after the date of this
Agreement to pay a minimum of three annual premium payments of $121,000, or an
aggregate amount of premiums of $363,000, including any payments made during the
Initial Term or any term after the Initial Term (the "Minimum Premium
Commitment").
(f) If the Executive is employed by the Company or any of its subsidiaries
on the last day of the Initial Term, the Company shall pay to the Executive on
such date an additional bonus of $500,000 (the "Final Bonus").
(g) During the term of his employment hereunder, the Executive shall be
entitled to receive all perquisites which are available to senior executive
officers of the Company or its subsidiaries including, without limitation,
monthly membership dues of approximately $350 at the El Paso Country Club (or
such other club as the Executive may designate); a car allowance of $1,000 per
month; and a gas allowance of $250 per month. Nothing paid to the Executive
under any such arrangements shall be deemed to be in lieu of compensation to the
Executive hereunder.
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<PAGE> 3
3. UNAUTHORIZED DISCLOSURE AND ACTIVITY.
(a) While employed by the Company and for a period of three (3) years
after termination of employment, the Executive shall not, without a written
consent of the Chairman or a person duly authorized thereby, disclose to any
person, other than a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an executive officer of the Company or its subsidiaries, any material
confidential information obtained by him while in the employ of the Company or
its subsidiaries with respect to any of the products, improvements, license
agreements, formulas, designs, methods of manufacture, vendors or customers;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive) or any information not otherwise
considered by the Board to be confidential. The Executive shall not disclose any
confidential information of the type described above, except as may be required
by law in connection with any judicial or administrative proceeding or inquiry,
with respect to which the Executive shall have given the Company prior written
notice and a reasonable opportunity to seek a protective order. Notwithstanding
the foregoing, at no time during the term of this Agreement or thereafter shall
the Executive, directly or indirectly, reveal, divulge or disclose to any person
or entity any trade secret of the Company or its subsidiaries except at the
direction of the Company. The parties acknowledge and agree that this Agreement
is not intended to, and does not, alter either the Company's rights or the
Executive's obligations under any state or federal statutory or common law
regarding trade secrets or unfair trade practices.
(b) In addition, the Executive shall not either during the term of this
Agreement or within three (3) years following termination of employment from any
reason whatsoever, solicit any employee of the Company or its subsidiaries to
terminate his relationship with the Company or its subsidiaries or attempt to
influence an employee to seek employment with any competitor of the Company or
its subsidiaries.
(c) (i) The Executive agrees that he will not (without the prior written
consent of the Company) at any time during the period beginning
with termination of the Executive's employment pursuant to
Sections (b)-(d) and ending three (3) years from the date thereof
(the "Non-Compete Period"), directly or indirectly, either
individually or in conjunction with any person or entity, be
engaged in, as a principal, agent, shareholder, consultant,
officer, director, or employee, the provision of management,
sales or marketing services relating to the merchandising,
manufacturing, distributing, selling or marketing of men's,
women's, boys' or girls' sportswear (tops and bottoms) (the
"Business") in the Restricted Territory. For purposes of this
Agreement, the term "Restricted Territory" means the United
States and North, Central and South America, the United Kingdom,
Western Europe, Australia, New Zealand and Fiji. The Company and
the Executive acknowledge and agree that the Company and its
subsidiaries do business and sell men's, women's, boys' and
girls' sportswear (tops and bottoms) in all 50 states of the
United States and in each other country in the Restricted
Territory.
(ii) Notwithstanding subsection (i) above, the Executive may own
or hold up to 5% of the outstanding shares of capital stock of
any company engaged in the Business that is a publicly-traded
company so long as the Executive does not have any other
relationship, directly or indirectly, with such company.
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<PAGE> 4
(d) The Executive understands and agrees that the relationship between the
Company and its subsidiaries and each of its Protected Clients (as defined
below) constitutes a valuable asset of the Company and its subsidiaries and may
not be converted to the Executive's own use. Accordingly, the Executive hereby
agrees that during the term of this Agreement and, following termination of
employment pursuant to Section 5(b)-(d) for three (3) years thereafter, the
Executive shall not, without the prior written consent of the Company, directly
or indirectly, on the Executive's own behalf or as a principal or representative
of any person or entity or otherwise, solicit a Protected Client for the purpose
of providing or selling Competitive Services (as defined below); provided,
however, that the prohibition of this covenant shall apply only to Protected
Clients with whom the Executive had Material Contact on the Company's or its
subsidiaries' behalf during the twelve (12) months immediately preceding the
termination of his employment hereunder. For purposes of this Agreement, the
term "Protected Clients" means clients of the Company and its subsidiaries that
obtained Competitive Services from the Company or its subsidiaries within one
(1) year prior to the date of termination of the Executive's employment
hereunder. For purposes of this Agreement, the term "Competitive Services" means
the merchandising, manufacturing, distributing, selling or marketing of men's,
women's, boys' or girls' sportswear (tops and bottoms). For purposes of this
Agreement, the Executive had "Material Contact" with a Protected Client if (a)
he had business dealings with the Protected Client on the Company's behalf; (b)
he was responsible for supervising or coordinating the dealings between the
Company and the Protected Client; or (c) he obtained trade secrets or
confidential information about the customer as a result of his association with
the Company.
(e) The Executive agrees that during the term of his employment hereunder
and for three (3) years thereafter, he shall refrain from expressing or causing
others to express to any third party any derogatory or negative opinions
regarding the Company, any of its subsidiaries or any of their respective
officers, directors, employees, suppliers, customers, operations or products. In
addition, the Executive agrees that during the term of his employment hereunder
and for three (3) years thereafter, he shall make no statement or cause others
to make any statement to any third party (including, without limitation, any of
the Company's or its subsidiaries' respective officers, directors, employees,
suppliers or customers) that is intended to or does disparage the Company or any
of its subsidiaries or any of their respective officers, directors, employees,
suppliers, customers, operations or products.
(f) (i) The Executive acknowledges that a breach by him of Section 3
would cause irreparable damage to the Company, and in the event of the
Executive's actual or threatened breach of Section 3, the Company
shall be entitled to a temporary restraining order and an injunction
restraining the Executive from breaching such provisions without the
necessity of posting bond or proving irreparable harm, such being
conclusively admitted by the Executive. Nothing shall be construed as
prohibiting the Company from pursuing any other available remedies for
such breach or threatened breach, including, without limitation, the
recovery of damages from the Executive. The Executive acknowledges
that the restrictions set forth in Section 3 are reasonable in scope
and duration given the nature of the business of the Company. The
Executive agrees that the issuance of an injunction will not pose an
unreasonable restriction on the Executive's ability to obtain
employment or other work following termination of this Agreement.
(ii) The Executive has carefully read and considered the
provisions of Section 3, and, having done so, agrees that the
restrictions set forth in such sections including, without limitation,
the time period of restriction and geographical area of restriction
are fair and reasonable and are reasonably required for the protection
of the
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<PAGE> 5
interests of the Company. Notwithstanding the foregoing, in the event
that any of the provisions of Section 3 hereof shall be held to be
invalid or unenforceable, the remaining provisions hereof shall
nevertheless continue to be valid and enforceable as though the
invalid or unenforceable part(s) had not been included therein. In the
event that any provisions of subsection (b), and (c), (d) or (e)
relating to the time period and/or the area of restriction shall be
declared by a court of competent jurisdiction to exceed the maximum
time period or area such court deems reasonable and enforceable, this
Agreement shall be reformed by such court and the time period and/or
area of restriction deemed reasonable and enforceable by the court
shall become and thereafter be the maximum time period and/or area of
restriction.
4. TERMINATION.
(a) Death. The Executive's employment hereunder shall terminate upon his
death.
(b) Incapacity. The Company may terminate the Executive's employment
hereunder by giving written Notice of Termination, as defined below, to the
Executive in the event of the Executive's incapacity. For purposes of this
Agreement, the term "incapacity" shall mean that the Executive has been
determined (which determination shall be final and binding on all persons,
absent manifest error), as a result of a physical or mental illness or personal
injury he has incurred (including illness or injury resulting from any substance
abuse), by a Qualified Physician (who may be the doctor treating or otherwise
acting as the Executive's doctor in connection with the illness or injury in
question) selected by the Executive with the consent of the Company, or by the
Company at its expense and with the consent of the Executive (which consent
shall not be unreasonably withheld in either case), to be unable to perform, at
the time of that determination and, in all reasonable medical likelihood,
indefinitely thereafter, the normal duties then most recently assigned, under
and in accordance with the terms hereof, to the Executive while on Active
Status; provided that, the determination whether the Executive has incurred an
incapacity shall be made by a majority of three (3) Qualified Physicians,
(a) one (1) of whom shall be selected by the Executive,
(b) one (1) of whom shall be selected by the Company, and
(c) the remaining one (1) of whom shall be selected by the
Qualified Physicians selected by the Executive and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Executive and the Company if:
(1) (A) the Company has reasonably withheld its consent to the
Qualified Physician, if any, selected by the Executive or
(B) the Executive has reasonably withheld his consent to the
Qualified Physician, if any, selected by the Company and
(2) the Qualified Physicians selected by the Executive and the
Company disagree as to whether the Executive has incurred an incapacity. For
purposes of this definition, if the Executive is unable by reason of illness or
injury to give an informed consent to the performance of the treatment of that
illness or injury, a Qualified Physician selected by any person who is
authorized by applicable law to give that consent will be deemed to have been
selected by the Executive.
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<PAGE> 6
The term "Qualified Physician" means, in the case of any
determination whether the Executive has sustained an incapacity, a physician (a)
holding an M.D. degree from a medical school located in the United States, (b)
specializing and board certified in the treatment of the injury or illness that
has or may have caused that incapacity and (c) having admission privileges to
one or more hospitals located in Texas or in the state in which the Executive
then is domiciled.
The term "Active Status" means the Executive's employment status
from the Effective Date to the date of termination of such employment pursuant
to this Agreement.
(c) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement only, "Cause" shall mean: (i) the
Executive's conviction of a felony involving moral turpitude; or (ii) the
Executive's serious, willful gross misconduct or willful gross neglect of duties
(other than any such neglect resulting from the Executive's incapacity due to
physical or mental illness or any such neglect after the issuance of a Notice of
Termination, as defined below, by the Executive for Good Reason), which, in
either case, has resulted, or in all probability is likely to result, in
material economic damage to the Company; provided no act or failure to act by
the Executive will constitute "Cause" under clause (ii) if the Executive
believed in good faith that such act or failure to act was in the best interest
of the Company.
Any termination of the Executive's employment by the Company for Cause
shall be authorized by a vote of at least a majority of the following officers
of the Company: the Chairman of the Board, the President and the Chief Financial
Officer of the Company. In the case of clause (ii) of the second sentence of
this subsection (c), the Executive shall be given notice by the Chairman of the
Board specifying in detail the particular act or failure to act on which the
officers making the determination are relying in proposing to terminate him for
Cause and offering the Executive an opportunity, on a date at least 14 days
after receipt of such notice, to have a hearing, with counsel, before a majority
of the officers who authorized the termination for Cause. The Executive shall
not be terminated for Cause if, within 30 days after the date of the Executive's
hearing before such officers (or if the Executive waives a hearing, within 30
days after receiving notice of the proposed termination), he has corrected the
particular act or failure to act specified in the notice and by so correcting
such act or failure to act he has reduced the economic damage his act or failure
to act has allegedly caused the Company or its subsidiaries to a level which is
no longer material or has eliminated the probability that such act or failure to
act is likely to result in material economic damage to the Company or its
subsidiaries. No termination for Cause shall take effect until the expiration of
the correction period described in the preceding sentence and the determination
by a majority of the non-employee members of the Board that the Executive has
failed to correct the act or failure to act in accordance with the terms of the
preceding sentence.
(d) Good Reason. The Executive may terminate his employment at any time
during the term of this Agreement for Good Reason by giving written notice to
the Company which shall set forth in reasonable detail the facts and
circumstances constituting Good Reason. "Good Reason" shall mean (A) a
substantial adverse change in the Executive's status or position(s) as an
executive officer of the Company or its subsidiaries, including, without
limitation, any adverse change in the Executive's status or position(s) as a
result of a material diminution in duties or responsibilities or the assignment
to the Executive of any duties or responsibilities which, in the Executive's
reasonable judgment, are inconsistent with such status or position(s) or any
removal of the Executive from or any failure to reappoint or reelect the
Executive to such position(s) (except in connection with the termination of the
Executive's employment for Cause or incapability, as a result of the Executive's
death or incapacity, or by the Executive other than for Good Reason); (B) a
reduction by the Company or its subsidiaries in the
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<PAGE> 7
Executive's Base Salary; (C) the Executive' s office is moved, without his
consent, from the city of El Paso, Texas, except for reasonably required travel
on the Company's and its subsidiaries' business; (D) the Company's material
breach of any of its obligations under this Agreement; or (E) (y) any failure by
the Company to continue in effect any benefit plan or arrangement in which the
Executive participates, or any other plan or arrangement providing the Executive
with benefits (hereinafter referred to as "Benefit Plans"), or (z) the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
Benefit Plan or deprive the Executive of any material fringe benefit or
perquisite of office enjoyed by the Executive, unless in the case of either
subclause (y) or (z) above, there is substituted a comparable plan or program
that is economically equivalent, in terms of the benefit offered to the
Executive, to the Benefit Plan being altered, reduced, affected or ended.
(e) Notice of Termination. Any termination by the Company pursuant to the
Sections 4(b) or (c) above shall be communicated by written Notice of
Termination to the Executive. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for such termination. The
date of termination specified in the Notice of Termination shall not be earlier
than the date such Notice is delivered or mailed to the Executive.
5. PAYMENTS TO THE EXECUTIVE UPON TERMINATION.
(a) Death. If the Executive's employment shall be terminated by reason of
death, his estate shall be paid all salary, bonus or other Benefits, as defined
below, otherwise payable to the Executive through the end of the month in which
his death occurred, and the Company and its subsidiaries shall have no further
obligations, to the Executive under this Agreement.
(b) Incapacity. If the Executive's employment is terminated by the Company
or the Executive by reason of incapacity, the Executive or person charged with
legal responsibility for the Executive's estate shall be entitled to be paid the
following:
(i) (A) the Executive's earned but unpaid Base Salary through the
date of termination;
(B) Base Salary in effect immediately prior to the date of
termination for the remainder of the current term of the
Agreement (i.e., the Initial Term or any renewal term),
payable in monthly installments, less the amount of any
disability benefits provided or purchased by the Company
immediately prior to the date of termination;
(C) an annual bonus for the current fiscal year prorated through
the date of termination equal to the greater of (A) the
annual bonus awarded to the Executive with respect to the
Company's most recent fiscal year ending prior to the date
of termination or (B) $100,000;
(D) the amount of the Minimum Premium Commitment which has not
been paid as of the date of termination; and
(E) the Final Bonus.
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The amounts under clause (A), (C) and (E) shall be paid
within thirty days from the date of termination of the
Agreement.
(ii) after such termination, the Company shall maintain for
the Executive's benefit, the Benefits, as defined below, in
full force and effect, for thirty-six (36) months.
The term "Benefits" shall mean all health insurance, long-term disability, life
insurance (excluding the split-dollar policy described in Section 2(e) and which
benefits in respect thereof are described below) and accidental death and
disability benefits in which the Executive was entitled to participate
immediately prior to such termination; provided that such continued
participation is possible under the general terms and provisions of such
programs, plans and arrangements providing for the Benefits; provided further
that if the Executive's participation in any such plan, program or arrangement
is barred, or any such plan, program or arrangement is discontinued or the
Benefits thereunder materially reduced, the Company and its subsidiaries shall
arrange to provide the Executive with Benefits substantially similar to those
which the Executive was entitled to receive under such plans, programs and
arrangements immediately prior to the date of termination. The Company shall
also make available to the Executive federal group health plan continuation
coverage for the period following the period in which Benefits are provided
during the severance period. Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, in no event shall the Company or
any of its subsidiaries be obligated to provide the Executive with Benefits or
make any payments to the Executive after the thirty-six (36th) month following
the termination of the Executive's employment hereunder; provided Executive
shall continue to be entitled to any benefits provided to him under any insured
Benefit after such thirty-six month period. Further, notwithstanding any
provision of this Agreement to the contrary and notwithstanding the termination
of Executive's employment hereunder, if requested by the Company or any of its
subsidiaries, the Executive shall agree to continue or resume full-time
employment (unless such employment would have a material adverse effect on any
benefits of Executive under a long-term disability policy) with the Company or
its subsidiaries for up to three (3) additional years on any economic terms
proposed by the Company, if such employment is necessary for the Company or its
subsidiaries to provide the Executive with insured Benefits.
(c) Cause. If the Executive's employment shall be terminated for Cause,
the Company or its subsidiaries shall pay the Executive his Base Salary and
Benefits through the date of termination specified in the Notice of Termination,
and the Company and its subsidiaries shall have no further obligations to the
Executive under this Agreement, including, but not limited to, any obligations
in respect of the Minimum Premium Commitment.
(d) Other Than Cause. If the Executive's employment is terminated (i) by
the Company other than as a result of death, disability or Cause as specified in
Sections 4(a), (b) or (c) above, or (ii) by the Executive for Good Reason, the
Executive shall be entitled to the following:
(i) (A) the Executive's earned but unpaid Base Salary through
the date of termination;
(B) Base Salary in effect immediately prior to the date
of termination for the remainder of the current term
of the Agreement (i.e., the Initial Term or any
renewal term);
(C) an annual bonus for the current fiscal year prorated
through the date of termination equal to the greater
of (A) the annual bonus awarded to the
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Executive with respect to the Company's most recent
fiscal year ending prior to the date of termination
or (B) $100,000;
(D) the amount of the Minimum Premium Commitment which
has not been paid as of the date of termination; and
(E) the Final Bonus.
(ii) after such termination, the Company shall maintain for the
Executive's benefit, the Benefits, as defined below, in full
force and effect, for thirty-six (36) months.
The amounts under clause (A), (C) and (E) shall be paid within thirty days from
the date of termination of the Agreement.
(e) The Executive shall not be required to mitigate damages or the amount
of any payment provided for under Section 5 of this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the date of termination or
otherwise.
6. STOCK OPTIONS UPON TERMINATION. To the extent the Executive is an
Optionee (as defined under any of the Company's stock option plans (the
"Plans")), if the Executive's employment is terminated without Cause or the
Executive terminates his employment for Good Reason, all options held by the
Executive shall vest and become exercisable in accordance with the terms of the
Plans.
7. NOTICES. For the purpose of this Agreement, notices and all other
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
or mailed by first-class mail or airmail, postage prepaid, addressed:
in the case of the Company, to:
Tropical Sportswear Int'l Corporation
4902 West Waters Avenue
Tampa, Florida 33634-1302
Attention: Corporate Secretary
in the case of the Executive, to:
Richard C. Allender
900 Broadmoor
El Paso, Texas 79912
or to such other address as either party shall designate by giving written
notice of such change to the other party.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is approved
by the Chairman and agreed to in writing signed by the Executive and such
officer as may be specifically authorized by the Chairman. No waiver
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by either party hereto of any breach of this Agreement shall be deemed a waiver
of similar or dissimilar provisions or conditions of this Agreement. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
9. VALIDITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom, and in lieu of such
illegal, invalid or unenforceable provision, there shall be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
to the terms and intent of such illegal, invalid or unenforceable provision as
may be possible.
10. SURVIVAL. The provisions of this Agreement shall not survive the
termination of the Executive's employment hereunder, except that the provisions
of Sections 3, 4, 5 and 6 hereof shall survive such termination and shall be
binding upon the Executive's personal or legal representative, executors,
administrators, successors, heirs, distributees, devisees and legatees and
except that the provisions of Sections 2, 4, 5, 6 and 7 hereof shall survive
such termination and shall be binding upon the Company and its subsidiaries.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. ENTIRE AGREEMENT. This Agreement, together with any awards of
stock options or stock awards under the Company's stock option and restricted
stock plans, constitutes the full agreement and understanding of the parties
hereto regarding the employment of the Executive with the Company and its
subsidiaries and all prior agreements or understandings are merged herein.
13. ARBITRATION. Any claim or dispute arising in connection with this
Agreement shall be finally resolved by arbitration in El Paso, Texas, conducted
pursuant to and in accordance with the commercial rules of arbitration of the
American Arbitration Association. Any party may request arbitration by sending
written notice to the other party. In any such arbitration, the only issues to
be considered and determined by the arbitrators shall be issues pertaining to
rights and obligations of the parties under this Agreement, and remedies
appropriate thereto. The decision and award of the arbitrator(s) shall be final
and binding upon the parties, shall constitute the sole and exclusive remedy for
any dispute between the parties, may be entered in any court having jurisdiction
thereof, and application may be made to such court for judicial acceptance
and/or an order enforcing such decision and/or award. Notwithstanding this
Section 13, and as provided in Section 3(f) above, nothing in this arbitration
provision shall prevent the Company from applying to a court of law or equity
for a temporary restraining order, an injunction, or similar relief, in order to
enforce its rights under Section 3 of this Agreement.
14. LEGAL FEES AND EXPENSES. Each party shall bear and pay his or its
own expenses in connection with this Agreement, including in connection with any
claim or dispute that arises concerning the rights of the Executive or the
Company under this Agreement.
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15. LIMITATIONS ON PAYMENTS. Notwithstanding any other provision of
this Agreement, if any portion of any payment under this Agreement, or under any
other agreement with or plan of the Company or its affiliates (in the aggregate
"Total Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that the value
of the aggregate Total Payments that the Executive is entitled to receive shall
be One Dollar ($1) less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or which the Company may pay
without loss of deduction under Section 280G(a) of the Code. For purposes of
this Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meaning assigned to them in Section 280G of the Code, and such
"parachute payments" shall be valued as provided therein. Present value for
purposes of this Agreement shall be calculated in accordance with Section
1274(b) (2) of the Code. Within fifteen (15) days following the Date of
Termination or notice by the Company to the Executive of its belief that there
is a payment or benefit due the Executive which will result in an excess
parachute payment as defined in Section 280G of the Code, the Executive and the
Company, at the Company's expense, shall obtain the opinion (which need not be
unqualified) of nationally recognized tax counsel selected by the Company's
independent auditors and acceptable to the Executive in his sole discretion
(which may be regular outside counsel to the Company), which opinion sets forth
(i) the amount of the Base Period Income, (ii) the amount and present value of
Total Payments and (iii) the amount and present value of any excess parachute
payments determined without regard to the limitations of this paragraph. As used
in this Agreement, the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period" as defined
in Section 280G(d) (1) of the Code. For purposes of such opinion, the value of
any noncash benefits or any deferred payment or benefit shall be determined by
the Company's independent auditors in accordance with the principles of Sections
28OG(d) (3) and (4) of the Code, which determination shall be evidenced in a
certificate of such auditors addressed to the Company and the Executive. If such
opinion determines that there would be an excess parachute payment, any payment
or benefit determined by such counsel to be includible in Total Payments shall
be reduced or eliminated as specified by the Executive in writing delivered to
the Company within five (5) days of his receipt of such opinion or, if the
Executive fails to so notify the Company, then as the Company shall reasonably
determine, so that under the bases of calculations set forth in such opinion
there will be excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this paragraph, the Executive and the
Company shall obtain at the Company's expense, and the legal counsel may rely on
in providing the opinion, the advice of a firm of recognized executive
compensation to be received by the Executive. If the provisions of Sections 28OG
and 4999 of the Code are repealed without succession, then this paragraph shall
be of no further force or effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of this 1st day of May, 1998.
TROPICAL SPORTSWEAR INT'L CORPORATION
By: /S/ William W. Compton
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William W. Compton
Chairman and Chief Executive Officer
/S/ Richard C. Allender
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Richard C. Allender
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