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________________________________________________________________________________
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
------------------------
AUTHENTIC FITNESS CORPORATION
(NAME OF SUBJECT COMPANY)
------------------------
A ACQUISITION CORP.
THE WARNACO GROUP, INC.
(BIDDERS)
------------------------
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
052661105
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
STANLEY P. SILVERSTEIN, ESQ.
THE WARNACO GROUP, INC.
90 PARK AVENUE
NEW YORK, NY 10019
TELEPHONE: (212) 287-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
WITH COPIES TO:
ALAN C. MYERS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE*
$520,203,258 $104,041
</TABLE>
* Estimated solely for purposes of calculating the filing fee and based,
pursuant to Rule 0-11 under the Securities Exchange Act of 1934, as amended
(the 'Act'). Calculated by multiplying $20.80, the per share tender offer
price, by 20,137,661 the sum of the number of shares of Common Stock sought
in the Offer and the 4,872,111 shares of Common Stock subject to options
vested as of November 15, 1999. Also in accordance with Rule 0-11 under the
Act, the filing fee is determined by multiplying the amount calculated
pursuant to the foregoing sentence by one-fiftieth of one percent.
[ ] 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 previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
The information required in the remainder of this cover page shall not be deemed
to be 'filed' for the purpose of Section 18 of the Securities Exchange Act of
1934 (the 'Act') or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
________________________________________________________________________________
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this 'Statement') filed by
The Warnaco Group, Inc., a Delaware corporation ('Warnaco') and A Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of Warnaco
('Purchaser') relates to the offer by Warnaco and Purchaser to purchase all of
the issued and outstanding shares (the 'Shares') of common stock, par value
$.001 per share, of Authentic Fitness Corporation, a Delaware corporation
('Authentic Fitness'), at a price of $20.80 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated November 17, 1999 (the 'Offer to Purchase') and in the related
Letter of Transmittal (which together constitute the 'Offer'), copies of which
are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
<TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
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(a) The name of the subject company is Authentic Fitness
Corporation, a Delaware corporation, which has its principal
executive offices at 6040 Bandini Boulevard, Commerce, CA
90040.
(b) The exact title of the class of equity securities being
sought is shares of Common Stock, par value $.001 per share,
of Authentic Fitness. Authentic Fitness has advised Warnaco
that, as of November 15, 1999, there were 20,137,661 Shares
issued and outstanding. The information set forth under
'Introduction' and 'The Tender Offer -- Section 1. Terms of
the Offer; Expiration Date' of the Offer to Purchase is
incorporated herein by reference.
(c) The information concerning the principal market in which the
Shares are traded and certain high and low sales prices for
the Shares in such principal market is set forth in 'The
Tender Offer -- Section 6. Price Range of Shares; Dividends'
of the Offer to Purchase and is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Warnaco and the Purchaser. The
information concerning the name, state or other place of
organization, principal business and address of the
principal office of Warnaco and the Purchaser, and the
information concerning the name, business address, present
principal occupation or employment and the name, principal
business and address of any corporation or other
organization in which such employment or occupation is
conducted, material occupations, positions, offices or
employments during the last five years and citizenship of
each of the executive officers and directors of Warnaco and
the Purchaser is set forth under 'Introduction' and 'The
Tender Offer -- Section 9. Certain Information Concerning
Warnaco and Purchaser' and in Schedule I of the Offer to
Purchase and is incorporated herein by reference.
(e) and (f) During the last five years, to the best knowledge of Warnaco
and Purchaser, none of the persons listed in Schedule I of
the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction
and as a result of such proceeding 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) The information set forth under 'Special
Factors -- Background of the Offer and the Merger,' 'Special
Factors -- The Merger Agreement,' 'Special Factors --
Related Party Transactions' and 'The Tender Offer -- Section
9. Certain Information Concerning Warnaco and Purchaser' of
the Offer to Purchase is incorporated herein by reference.
</TABLE>
2
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<TABLE>
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(b) The information set forth under 'Introduction,' 'Special
Factors -- Background of the Offer and the Merger,' 'Special
Factors -- Purpose and Structure of the Offer and the
Merger; Reasons of Warnaco and Purchaser for the Offer and
the Merger,' 'Special Factors -- Plans for Authentic Fitness
after the Offer and the Merger; Certain Effects of the Offer
and the Merger,' 'Special Factors -- The Merger Agreement,'
'The Tender Offer -- Section 8. Certain Information
Concerning Authentic Fitness' and 'The Tender
Offer -- Section 9. Certain Information Concerning Warnaco
and Purchaser' of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth under 'The Tender Offer -- Section
10. Source and Amount of Funds' of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth under 'Introduction,' 'Special
Factors -- Background of the Offer and the Merger,' 'Special
Factors -- Purpose and Structure of the Offer and the
Merger; Reasons of Warnaco and Purchaser for the Offer and
the Merger,' 'Special Factors -- Plans for Authentic Fitness
after the Offer and the Merger; Certain Effects of the Offer
and the Merger' and 'Special Factors -- The Merger
Agreement' of the Offer to Purchase is incorporated herein
by reference.
(f) and (g) The information set forth under 'Special Factors -- Plans
for Authentic Fitness after the Offer and the Merger;
Certain Effects of the Offer and the Merger' and 'The Tender
Offer -- Section 7. Effect of the Offer on the Market for
the Shares; the NYSE Listing, and Exchange Act Registration'
of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth under 'Special
Factors -- Beneficial Ownership of Common Stock' and 'The
Tender Offer -- Section 9. Certain Information Concerning
Warnaco and Purchaser' of the Offer to Purchase is
incorporated herein by reference.
</TABLE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth under 'Introduction,' 'Special Factors -- Background
of the Offer and the Merger,' 'Special Factors -- Purpose and Structure of the
Offer and the Merger; Reasons of Warnaco and Purchaser for the Offer and the
Merger,' 'Special Factors -- Plans for Authentic Fitness after the Offer and the
Merger; Certain Effects of the Offer and the Merger,' 'Special Factors -- The
Merger Agreement' and 'The Tender Offer -- Section 9. Certain Information
Concerning Warnaco and Purchaser,' of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under 'Introduction,' 'Special Factors -- Opinion of
Financial Advisor to Authentic Fitness,' 'Special Factors -- Related Party
Transactions' and 'The Tender Offer -- Section 14. Solicitation Fees and
Expenses' of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth under 'The Tender Offer -- Section 9. Certain
Information Concerning Warnaco and Purchaser' is incorporated herein by
reference.
3
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ITEM 10. ADDITIONAL INFORMATION.
(a) Not Applicable.
(b)-(c) and (e) The information set forth under 'The Tender Offer -- Section
13. Certain Legal Matters and Regulatory Approvals; Certain
Litigation' of the Offer to Purchase is incorporated herein
by reference.
(d) The information set forth under 'The Tender Offer -- Section
7. Effect of the Offer on the Market for the Shares; the
NYSE Listing and Exchange Act Registration' of the Offer to
Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and
Letter of Transmittal and the Agreement and Plan of Merger,
dated as of November 15, 1999, among Warnaco, Purchaser and
the Company, copies of which are attached hereto as Exhibits
(a)(1), (a)(2) and (c), is incorporated herein by reference.
</TABLE>
<TABLE>
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ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated November 17, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from J.P. Morgan & Co. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(6) Form of Guideline's For Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7) Joint Press Release issued by Warnaco and Authentic Fitness
on November 15, 1999.
(b) U.S. $600,000,000 364-Day Credit Agreement dated as of
November 17, 1999 among Warnaco Inc. as Borrower and The
Warnaco Group, Inc. and the Initial Lenders and the Bank of
Nova Scotia and Salomon Smith Barney Inc.
(c) Agreement and Plan of Merger, dated as of November 15, 1999,
among Warnaco, Purchaser and Authentic Fitness.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
4
<PAGE>
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.
November 17, 1999
By: THE WARNACO GROUP, INC.
/s/ STANLEY P. SILVERSTEIN
...................................
NAME: STANLEY P. SILVERSTEIN
TITLE: VICE PRESIDENT AND GENERAL
COUNSEL
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.
November 17, 1999
By: A ACQUISITION CORP.
/s/ STANLEY P. SILVERSTEIN
.....................................
NAME: STANLEY P. SILVERSTEIN
TITLE: VICE PRESIDENT
5
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
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(a)(1) Form of Offer to Purchase dated November 17, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from J.P. Morgan & Co. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(6) Form of Guideline's For Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7) Joint Press Release issued by Warnaco and Authentic Fitness
on November 15, 1999.
(b) U.S. $600,000,000 364-Day Credit Agreement dated as of
November 17, 1999 among Warnaco Inc. as Borrower and The
Warnaco Group, Inc. and the Initial Lenders and the Bank of
Nova Scotia and Salomon Smith Barney Inc.
(c) Agreement and Plan of Merger, dated as of November 15, 1999,
among Warnaco, Purchaser and Authentic Fitness.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.................. 'r'
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
AUTHENTIC FITNESS CORPORATION
AT
$20.80 NET PER SHARE
BY
A ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE WARNACO GROUP, INC.
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 15,
1999 UNLESS THE OFFER IS EXTENDED.
</TABLE>
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF NOVEMBER 15, 1999, BY AND AMONG THE WARNACO GROUP, INC. ('WARNACO'), A
ACQUISITION CORP. ('PURCHASER'), AND AUTHENTIC FITNESS CORPORATION ('AUTHENTIC
FITNESS'). THE BOARD OF DIRECTORS OF AUTHENTIC FITNESS, BY UNANIMOUS VOTE, BASED
UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF A
COMMITTEE OF THE BOARD OF DIRECTORS COMPRISED OF INDEPENDENT DIRECTORS (THE
'AUTHENTIC FITNESS SPECIAL COMMITTEE'), HAS DETERMINED THAT THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING EACH OF THE OFFER AND THE
MERGER (EACH AS DEFINED HEREIN), ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
AUTHENTIC FITNESS STOCKHOLDERS, APPROVED THE MERGER AGREEMENT, THE OFFER AND THE
MERGER, DECLARED THE MERGER AGREEMENT TO BE ADVISABLE AND UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS DEFINED HEREIN)
PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS
DEFINED HEREIN) A NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE,
OF AUTHENTIC FITNESS (THE 'SHARES') THAT, TOGETHER WITH ALL SHARES (IF ANY)
OWNED BY AFFILIATES OF WARNACO AND NOT TENDERED, WOULD REPRESENT A MAJORITY OF
THE SHARES OUTSTANDING (THE 'MINIMUM CONDITION') ON THE DATE SHARES ARE ACCEPTED
FOR PAYMENT. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS SET FORTH
IN THIS OFFER TO PURCHASE. THE OFFER IS NOT SUBJECT TO A FINANCING CONDITION.
SEE 'THE TENDER OFFER -- CONDITIONS TO THE OFFER' SECTION 12.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the enclosed Letter of Transmittal
(as defined herein) (or a facsimile thereof) in accordance with the instructions
in the Letter of Transmittal, have such stockholder's signature thereon
guaranteed (if required by Instruction 1 to the Letter of Transmittal), mail or
deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary (as defined herein) and either deliver the
certificates for such Shares to the Depositary or tender such Shares pursuant to
the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Any stockholder 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 stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the expiration of the Offer,
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3 of this Offer to Purchase.
Questions or requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses 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, the Notice of
Guaranteed Delivery (as defined herein) and other tender offer materials may
also be directed to the Information Agent. A stockholder may also contact
brokers, dealers, commercial banks or trust companies for assistance.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE 'COMMISSION') NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
-----------------------------
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
November 17, 1999
<PAGE>
TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................ 1
SPECIAL FACTORS......................................................... 4
Background of the Offer and the Merger...................... 4
Recommendation of the Authentic Fitness Special Committee
and the Authentic Fitness Board; Fairness of the Offer and
the Merger.................................................. 6
Opinion of Financial Advisor to Authentic Fitness........... 7
Financial Projections Relating to Authentic Fitness......... 11
Cautionary Statement Concerning Forward-looking
Statements.................................................. 12
Position of Warnaco Regarding Fairness of the Offer and the
Merger...................................................... 13
Opinion of Financial Advisor to the Warnaco Special
Committee................................................... 14
Purpose and Structure of the Offer and the Merger; Reasons
of Warnaco and
Purchaser for the Offer and the Merger.............. 19
Plans for Authentic Fitness after the Offer and the Merger;
Certain Effects of
the Offer and the Merger............................ 19
Rights of Stockholders in the Offer and the Merger.......... 20
The Merger Agreement........................................ 20
Interests of Certain Persons in the Offer and the Merger.... 28
Beneficial Ownership of Common Stock........................ 30
Related Party Transactions.................................. 32
THE TENDER OFFER........................................................ 34
1. Terms of the Offer; Expiration Date..................... 34
2. Acceptance for Payment and Payment for Shares........... 35
3. Procedures for Accepting the Offer and Tendering
Shares...................................................... 36
4. Withdrawal Rights....................................... 38
5. Certain U.S. Federal Income Tax Consequences............ 39
6. Price Range of Shares; Dividends........................ 40
7. Effect of the Offer on the Market for the Shares; the
NYSE Listing and Exchange Act Registration.............. 40
8. Certain Information Concerning Authentic Fitness........ 41
9. Certain Information Concerning Warnaco and Purchaser.... 45
10. Source and Amount of Funds.............................. 46
11. Dividends and Distributions............................. 47
12. Conditions to the Offer................................. 47
13. Certain Legal Matters and Regulatory Approvals; Certain
Litigation.................................................. 49
14. Solicitation Fees and Expenses.......................... 51
15. Miscellaneous........................................... 51
Schedule I Information Concerning Directors and Executive Officers of
Warnaco, Purchaser and Authentic Fitness
Schedule II Opinion of Chase Securities Inc.
Schedule
III Section 262 of the Delaware General Corporation Law
</TABLE>
i
<PAGE>
To the Holders of Common Stock of
AUTHENTIC FITNESS CORPORATION:
INTRODUCTION
A Acquisition Corp., a Delaware corporation ('Purchaser') and a wholly
owned subsidiary of The Warnaco Group, Inc., a Delaware corporation ('Warnaco'),
hereby offers to purchase all issued and outstanding shares of common stock, par
value $.001 per share (the 'Common Stock'), of Authentic Fitness Corporation, a
Delaware corporation ('Authentic Fitness'), including the associated preferred
share purchase rights (the 'Rights,' and together with the Common Stock, the
'Shares'), issued pursuant to the Rights Agreement dated August 19, 1999 between
Authentic Fitness and The Bank of New York, as Rights Agent, as amended (the
'Rights Agreement'), at a price of $20.80 per Share, net to the seller in cash,
without interest thereon (the 'Offer Price'), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended and supplemented from time to time, together
constitute the 'Offer').
IN CONSIDERING THE RECOMMENDATION OF THE AUTHENTIC FITNESS SPECIAL
COMMITTEE AND OF THE BOARD OF DIRECTORS OF AUTHENTIC FITNESS (THE 'AUTHENTIC
FITNESS BOARD') WITH RESPECT TO THE OFFER AND THE MERGER AND THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER, STOCKHOLDERS SHOULD BE
AWARE THAT MEMBERS OF AUTHENTIC FITNESS MANAGEMENT AND THE AUTHENTIC FITNESS
BOARD HAVE INTERESTS AND RELATIONSHIPS SUMMARIZED HEREIN THAT MAY PRESENT THEM
WITH POTENTIAL CONFLICTS OF INTEREST IN CONNECTION WITH THE OFFER AND THE
MERGER. THE AUTHENTIC FITNESS SPECIAL COMMITTEE AND THE AUTHENTIC FITNESS BOARD
RECOGNIZED SUCH INTERESTS AND DETERMINED THAT SUCH INTERESTS NEITHER SUPPORTED
NOR DETRACTED FROM THE FAIRNESS OF THE OFFER AND THE MERGER TO STOCKHOLDERS.
Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as otherwise provided
in Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any,
with respect to the purchase of Shares by Purchaser pursuant to the Offer.
Stockholders who hold their Shares through a bank or broker should check with
such institution as to whether they will be charged any service fees. Purchaser
will pay all fees and expenses of J.P. Morgan Securities, Inc., which is acting
as the Dealer Manager for the Offer (in such capacity the 'Dealer Manager'), The
Bank of New York, which is acting as the depositary for the Offer (in such
capacity, the 'Depositary'), and MacKenzie Partners, Inc., which is acting as
information agent for the Offer (in such capacity, the 'Information Agent'),
incurred in connection with the Offer and in accordance with the terms of the
agreements entered into between Purchaser and Warnaco and each such entity. See
'The Tender Offer -- Solicitation Fees and Expenses' Section 14.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 15, 1999 (the 'Merger Agreement'), by and among Warnaco,
Purchaser and Authentic Fitness. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction or, if permissible, waiver of the conditions set
forth in the Merger Agreement, including the purchase of Shares pursuant to the
Offer (sometimes referred to herein as the 'consummation' of the Offer) and the
adoption of the Merger Agreement by the Stockholders (if required by applicable
law) in accordance with the relevant provisions of the General Corporation Law
of the State of Delaware, as amended (the 'DGCL'), Purchaser will be merged with
and into Authentic Fitness. Following consummation of the Merger, Authentic
Fitness will continue as the surviving corporation (the 'Surviving Corporation')
and will be a direct wholly owned subsidiary of Warnaco. The purpose of the
Offer and the Merger is to facilitate the acquisition of all of the Shares for
cash and thereby enable Warnaco to own 100% of the Shares. At the effective
time of the Merger (the 'Effective Time'), each Share issued and outstanding
immediately prior to the Effective Time held by the Stockholders will be
canceled and, subject to appraisal rights under the DGCL, converted
automatically into the right to receive $20.80 in cash, or, in the event any
higher price is paid
1
<PAGE>
in the Offer, such higher price (the 'Merger Consideration'), without interest.
The Merger Agreement is more fully described in 'Special Factors -- The Merger
Agreement.' Stockholders who hold their Shares at the time of the Merger and who
fully comply with the statutory dissenters procedures set forth in the DGCL, the
relevant portions of which are attached to this Offer to Purchase as Schedule
III, will be entitled to dissent from the Merger and have the fair value of
their Shares (which may be more than, equal to, or less than the Merger
Consideration) judicially determined and paid to them in cash pursuant to the
procedures prescribed by the DGCL. DISSENTERS' RIGHTS ARE AVAILABLE ONLY IN
CONNECTION WITH THE MERGER AND NOT IN CONNECTION WITH THE OFFER. SEE 'SPECIAL
FACTORS -- RIGHTS OF STOCKHOLDERS IN THE MERGER.'
THE AUTHENTIC FITNESS BOARD, BY UNANIMOUS VOTE, BASED UPON, AMONG OTHER
THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF THE AUTHENTIC FITNESS
SPECIAL COMMITTEE, HAS DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING EACH OF THE OFFER AND THE MERGER (COLLECTIVELY,
THE 'TRANSACTIONS'), ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE AUTHENTIC
FITNESS STOCKHOLDERS, APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER,
DECLARED THE MERGER AGREEMENT TO BE ADVISABLE AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Authentic Fitness has advised Warnaco that Chase Securities Inc. ('Chase')
has delivered to the Authentic Fitness Special Committee its written opinion,
dated November 15, 1999 (the 'Chase Opinion') and attached as Schedule II, to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger is fair to the holders of the Common Stock (the 'Stockholders'),
other than Warnaco and its affiliates, from a financial point of view. Authentic
Fitness has filed with the Commission a Solicitation/Recommendation Statement on
Schedule 14D-9 (the 'Schedule 14D-9'), which is being mailed to Stockholders
together with this Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) A
NUMBER OF SHARES, TOGETHER WITH THE SHARES (IF ANY) OWNED BY AFFILIATES OF
WARNACO AND NOT TENDERED, REPRESENTING A MAJORITY OF THE SHARES OUTSTANDING ON
THE DATE SHARES ARE ACCEPTED FOR PAYMENT (THE 'MINIMUM CONDITION'). THE OFFER IS
ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE 'THE TENDER OFFER -- CONDITIONS
TO THE OFFER' SECTION 12.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the adoption of the Merger Agreement by the
affirmative vote of a majority of the votes cast by all Stockholders entitled to
vote thereon. See 'Special Factors -- The Merger Agreement.' Under the DGCL and
pursuant to the Authentic Fitness Certificate of Incorporation, the affirmative
vote of the holders of a majority of the outstanding Shares is the only vote of
any class or series of Authentic Fitness capital stock that would be necessary
to adopt the Merger Agreement at any required meeting of Stockholders. IF THE
MINIMUM CONDITION IS SATISFIED AND AS A RESULT OF THE PURCHASE OF SHARES BY
PURCHASER PURSUANT TO THE OFFER, PURCHASER AND ITS AFFILIATES OWN AT LEAST A
MAJORITY OF THE OUTSTANDING SHARES, PURCHASER WILL BE ABLE TO EFFECT THE MERGER
WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER.
If Purchaser acquires, pursuant to the Offer, at least 90% of the then
issued and outstanding Shares, under the DGCL, Purchaser's board of directors
will be able to adopt a plan of merger to effect the Merger without a vote of
Stockholders, pursuant to Section 253 of the DGCL (a 'Short-Form Merger'). If
Purchaser does not acquire at least 90% of the then issued and outstanding
Shares pursuant to the Offer, a vote of the Stockholders will be required under
the DGCL to effect the Merger, and a significantly longer period of time will be
required to effect the Merger. Purchaser and Authentic Fitness have agreed to
take all necessary and appropriate action to cause the Merger to become
effective as promptly as practicable after the consummation of the Offer. Even
if Purchaser does not own 90% of the outstanding Shares following consummation
of the Offer, Warnaco or Purchaser could
2
<PAGE>
seek to purchase additional Shares in the open market or otherwise in order to
reach the 90% threshold and to effect a Short-Form Merger. The consideration per
Share paid for any Shares so acquired in open market purchases may be greater or
less than the Offer Price. Warnaco presently intends to effect a Short-Form
Merger of Purchaser into Authentic Fitness, if permitted to do so under the
DGCL. See 'Special Factors -- Purpose and Structure of the Offer and the Merger;
Reasons of Warnaco and Purchaser for the Offer and the Merger.'
Pursuant to the Merger Agreement, Purchaser shall, and Warnaco shall cause
the Purchaser to extend the Offer at any time up to 40 days in the aggregate, in
one or more periods of not more than 10 business days, if, at the initial
expiration date of the Offer or any extension thereof, any condition to the
Offer is not satisfied or waived; provided however, that the Purchaser shall not
be required to extend the Offer as provided herein unless (i) each such
condition is reasonably capable of being satisfied and (ii) Authentic Fitness is
in material compliance with all of its covenants under the Merger Agreement
after Purchaser shall have given Authentic Fitness five business days' prior
written notice of any such non-compliance.
In addition, without limiting the foregoing, Purchaser may, without the
consent of Authentic Fitness, (a) extend the Offer for up to an additional
30 days, in one or more periods of not more than 10 business days, if any
condition to the Offer is not satisfied or waived and (b) if, on the expiration
date of the Offer, the Shares validly tendered and not withdrawn pursuant to the
Offer are sufficient to satisfy the Minimum Condition but equal less than 90% of
the outstanding Shares, extend the Offer on one occasion for up to 10 business
days notwithstanding that all the conditions to the Offer have been satisfied so
long as (i) Purchaser irrevocably waives the satisfaction of any of the
conditions to the Offer (other than in the case of the first condition set forth
in 'The Tender Offer -- Conditions to the Offer' Section 12 hereto, the
occurrence of any statute, rule, regulation, judgment, order or preliminary or
permanent injunction making illegal or prohibiting the consummation of the Offer
(a 'Prohibition')) that subsequently may not be satisfied during any such
extension of the Offer and (ii) Warnaco does not have knowledge that any such
Prohibition is pending or threatened at the time of such extension. In addition,
the Offer Price may be increased by at least $0.05 per Share and the Offer may
be extended to the extent required by law in connection with such increase in
each case without the consent of Authentic Fitness.
Authentic Fitness has issued one Right for each outstanding Share pursuant
to the Rights Agreement. Authentic Fitness has represented in the Merger
Agreement that it has amended its Rights Agreement (the 'Rights Amendment') to
ensure that (a) neither a 'Distribution Date' nor a 'Stock Acquisition Date' (in
each case as defined in the Rights Agreement) will occur, and none of Warnaco or
Purchaser or any of their 'Affiliates' or 'Associates' will be deemed to be an
'Acquiring Person' (in each case as defined in the Rights Agreement), by reason
of the execution and delivery of the Merger Agreement or the consummation of the
transactions to be effected pursuant to the Merger Agreement and (b) the Rights
will expire immediately prior to the consummation of the Offer. Authentic
Fitness has further represented that the foregoing actions are sufficient to
render the Rights inoperative with respect to (i) the acquisition of Shares by
Warnaco or Purchaser pursuant to the Merger Agreement and the Offer and
(ii) the Merger.
As of November 15, 1999, 20,137,661 Shares were issued and outstanding. As
of November 15, 1999, there were approximately 126 holders of record of the
issued and outstanding Shares. As of November 15, 1999 there were 31,043 Shares
designated as Series A Junior Participating Preferred Stock reserved for
issuance upon the exercise of the Rights distributed to the holders of Common
Stock pursuant to the Rights Agreement. BASED ON THE ISSUED AND OUTSTANDING
SHARES AS OF NOVEMBER 15, 1999, PURCHASER WOULD BE ABLE TO EFFECT A SHORT-FORM
MERGER IF 18,123,895 SHARES WERE VALIDLY TENDERED IN THE OFFER AND NOT WITHDRAWN
PRIOR TO THE CLOSE OF THE OFFER.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
3
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE OFFER AND THE MERGER
In May, 1990, Mrs. Linda J. Wachner, Chairman of the Board of Directors and
Chief Executive Officer of Warnaco, led an investor group in the acquisition of
the activewear division of Warnaco in connection with Warnaco's scheduled
paydown of bank debt. The acquired company, now known as Authentic Fitness
Corporation, was thereafter taken public in 1992. Mrs. Wachner serves as the
Chairman of the Board of Directors and Chief Executive Officer of Authentic
Fitness as well as Warnaco.
In June, 1996, Warnaco first disclosed an interest in acquiring Authentic
Fitness in a stock-for-stock transaction, in order to achieve operating
efficiencies in the manufacturing, marketing and distribution of the combined
company's products.
On July 14, 1996, Warnaco and Authentic Fitness executed a definitive
merger agreement, pursuant to which Warnaco offered 0.82 shares of Warnaco
common stock for each Share. Thereafter, on July 25, 1996, Warnaco and Authentic
Fitness jointly announced the termination of their merger agreement after
Authentic Fitness disclosed it would report a loss for its fourth fiscal quarter
ended July 6, 1996, and consequently, report earnings below Wall Street
estimates for its 1996 fiscal year. This was due, in large measure, to the
previously announced loss of a major customer, Herman's Sporting Goods, Inc.,
which filed for bankruptcy on April 26, 1999 and announced its liquidation in
May, 1996, as well as an attendant decline in revenues for the fourth quarter of
1996, which resulted in lower gross profits.
Since 1996, Warnaco has, from time to time, continued to evaluate the
potential benefits of a merger between Warnaco and Authentic Fitness. Most
recently, in August, 1999, Warnaco management recommended that the Warnaco Board
again consider the acquisition of Authentic Fitness.
On August 19, 1999, Warnaco formed a special committee of independent
directors, comprised of Andrew G. Galef, Donald G. Drapkin and Stewart A.
Resnick (the 'Warnaco Special Committee'), to consider and to make such
recommendations to the Warnaco Board in connection with any Authentic Fitness
transaction as it determined to be appropriate. The Warnaco Special Committee
was formed in light of the common management and equity ownership between
Warnaco and Authentic Fitness. Mr. Galef was elected Chairman of the Warnaco
Special Committee.
Representatives of the Warnaco Special Committee met with Wasserstein
Perella & Co., Inc. ('WP&Co.') on September 7, 1999 to discuss retention of
WP&Co. by the Warnaco Special Committee to advise the committee and to provide
an opinion as to the fairness of the proposed transaction to Warnaco from a
financial point of view. The Warnaco Special Committee entered into an
engagement letter with WP&Co. as of September 14, 1999. On September 15, 1999,
WP&Co. held a meeting with Warnaco management to review financial information
concerning Authentic Fitness.
On September 29, 1999, the Warnaco Special Committee held its initial
meeting. At the meeting, the Warnaco Special Committee (i) ratified the
retention of WP&Co. as the financial advisor and the execution of the engagement
letter with WP&Co., (ii) approved the retention of Kramer Levin Naftalis &
Frankel LLP ('Kramer Levin') as special counsel to the Warnaco Special
Committee, and (iii) received, and discussed a presentation by WP&Co. of its
preliminary analysis concerning a potential all cash acquisition of Authentic
Fitness by Warnaco.
Between September 30, 1999 and October 7, 1999, representatives of the
Warnaco Special Committee, including WP&Co., conducted due diligence and
received certain additional information from Warnaco management in response to
Warnaco Special Committee requests.
On October 7, 1999, the Warnaco Special Committee met with WP&Co. At the
meeting, the Warnaco Special Committee voted unanimously to recommend to the
Warnaco Board that Warnaco offer to acquire all of the Shares at a price of up
to $20.50 per Share.
On October 8, 1999, the Warnaco Special Committee reported to the Warnaco
Board its recommendation that Warnaco present a proposal to acquire Authentic
Fitness in an all cash transaction for $20.50 per Share. Following such report,
with all of its directors present and voting, the Warnaco Board unanimously
approved the Warnaco Special Committee recommendation.
4
<PAGE>
On October 10, 1999 Warnaco sent a letter to the Authentic Fitness Board,
proposing that Warnaco acquire Authentic Fitness in an all cash transaction at
$20.50 per Share. The offer was prepared by the Warnaco Special Committee
without access to the officers of Authentic Fitness and without consideration
by the officers and directors of Warnaco who were affiliated with Authentic
Fitness.
Upon receipt of the Warnaco offer, the Authentic Fitness Board, in light of
the common management and equity ownership between Warnaco and Authentic
Fitness, See 'Special Factors -- Interests of Certain Persons in the Offer and
the Merger,' formed a special committee of independent directors, consisting of
Stuart D. Buchalter, Stanley S. Arkin and Robert D. Walter. In this regard, the
Authentic Fitness Board was aware that the law firm of which Mr. Arkin is a
senior partner provides legal services to Warnaco from time to time and that Mr.
Walter beneficially owns 20,000 shares of, and 10,000 options to purchase,
Warnaco common stock. Mr. Buchalter was elected Chairman of the Authentic
Fitness Special Committee.
The Authentic Fitness Special Committee thereafter interviewed several
firms with respect to serving as its legal and financial advisors. After
considering a number of such firms, the Authentic Fitness Special Committee
retained the law firm of Munger, Tolles & Olson LLP as its legal counsel, and
Chase as its financial advisor.
Chase promptly commenced a review and analysis of business and market
conditions affecting Authentic Fitness and the market for the Shares.
Mr. Buchalter at that time held discussions with one of the large
stockholders of Authentic Fitness not affiliated with Warnaco, and Chase, at Mr.
Buchalter's request, contacted that stockholder's investment bankers. Based on
those discussions, the Authentic Fitness Special Committee concluded that the
other stockholder was not likely to make an offer to acquire Authentic Fitness
at a price higher than that offered by Warnaco.
On October 30 and 31, 1999 Warnaco and Authentic Fitness negotiated a
confidentiality agreement (which remains in effect) regarding proprietary
information of Authentic Fitness. Under this Agreement, certain confidential
business and financial information of Authentic Fitness might be provided to
Warnaco and its representatives. During the course of negotiations, Chase shared
with WP&Co. some such information, in the hope that it might support an
increased offer from Warnaco.
On November 3, 1999, the Warnaco Special Committee met to discuss the
ongoing negotiations with the Authentic Fitness Special Committee and to ratify
the entry by representatives of the Warnaco Special Committee on November 5,
1999 into a confidentiality agreement with Authentic Fitness, after which
Authentic Fitness provided certain non-public information to the Warnaco Special
Committee for its consideration.
On November 8, 1999, Mr. Buchalter advised Mr. Galef that the Authentic
Fitness Special Committee believed Warnaco would have to improve its offer in
order to obtain its recommendation that the Stockholders accept the offer.
During the week of November 8, 1999, representatives of WP&Co. and Chase
had several conversations concerning the negotiation of the offer price;
separately, representatives of WP&Co. had several discussions with individual
members of the Warnaco Special Committee concerning the status of negotiations
of the offer price.
On November 10, 1999, Warnaco's counsel provided to counsel of the
Authentic Fitness Special Committee with a draft agreement providing for a cash
tender offer and a subsequent cash merger.
Throughout this period, the Authentic Fitness Special Committee had a
series of telephonic meetings, both to monitor the progress of events, and to
provide guidance to Mr. Buchalter, its counsel and the financial advisors as to
the evolution of the process.
On November 12, 1999, Mr. Buchalter and representatives of Chase met with
Mr. Galef and representatives of WP&Co. At this meeting, Mr. Galef indicated
that, subject to the negotiation of a mutually satisfactory merger agreement,
Warnaco would be willing to increase the price it would pay per Share to $20.80.
On November 12, 1999, the Warnaco Special Committee convened to receive a
report on the negotiations, the financial information received by WP&Co.
regarding Authentic Fitness, the verbal
5
<PAGE>
opinion of WP&Co. as to the fairness of the proposed offer of $20.80 per Share
to Warnaco and a preliminary summary by Kramer Levin of the proposed Merger
Agreement. At the meeting, the Warnaco Special Committee voted unanimously to
recommend to the Warnaco Board that it approve and adopt the Offer, the Merger
and the Merger Agreement and the transactions contemplated thereby, at a price
of $20.80 per Share, subject to receipt of a written opinion in customary form
from WP&Co. confirming the oral opinion of WP&Co. and the advice of counsel that
the Offer and Merger Agreement in their final forms were legally satisfactory.
On November 15, 1999, the Authentic Fitness Special Committee met and
approved the Merger Agreement and the Transactions. Also on November 15, 1999,
the Authentic Fitness Board met and, based on the approval and recommendation of
the Authentic Fitness Special Committee, affirmed the Authentic Fitness Special
Committee's approval of the transaction. For a discussion of the reasons for the
recommendation of the Authentic Fitness Special Committee and the Authentic
Fitness Board, see the next section of this Offer to Purchase and 'Special
Factors -- Opinion of Financial Advisor to Authentic Fitness.'
Later in the day on November 15, 1999, the Warnaco Board met and approved
the Merger Agreement and the Transactions.
On November 17, 1999, Purchaser commenced the Offer.
RECOMMENDATION OF THE AUTHENTIC FITNESS SPECIAL COMMITTEE AND THE AUTHENTIC
FITNESS BOARD; FAIRNESS OF THE OFFER AND THE MERGER
ON NOVEMBER 15, 1999, THE AUTHENTIC FITNESS SPECIAL COMMITTEE UNANIMOUSLY
DETERMINED THAT THE OFFER AND THE MERGER WERE FAIR TO, AND IN THE BEST INTERESTS
OF, THE AUTHENTIC FITNESS STOCKHOLDERS AND UNANIMOUSLY VOTED TO RECOMMEND THAT
THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER
AND APPROVE THE OFFER AND THE MERGER AGREEMENT.
Fairness of the Merger. In reaching its determination, the Authentic
Fitness Special Committee considered:
the historical market prices of the Shares, including the fact that the
$20.80 per Share to be paid to the Stockholders in the Offer and the
Merger represented a premium of approximately 18% over the $17 9/16 per
Share closing price on October 8, 1999, the last full trading day prior to
the October 10, 1999 announcement of the Proposal, on the New York Stock
Exchange ('NYSE');
the fact that the $20.80 per Share to be paid to the Stockholders in the
Offer and the Merger exceeded the highest price at which the Shares have
traded on the NYSE since March 11, 1998;
the fact that the $20.80 per Share to be paid to the Stockholders in the
Offer and the Merger represented a 12.1% premium over the 52 weeks
pre-announcement high prior to October 10, 1999;
the opinion of Chase dated November 15, 1999, to the effect that, based
upon and subject to the assumptions and qualifications stated in its
opinion, the $20.80 per Share to be paid to the Stockholders in the Offer
and the Merger was fair to Stockholders from a financial point of view,
other than Warnaco and its affiliates, and in light of the report and
analysis presented to the Authentic Fitness Special Committee in
connection with the Chase Opinion. (see 'Special Factors -- Opinion of
Financial Advisor to Authentic Fitness');
that the terms of the Merger Agreement were determined through
arm's-length negotiations between the Authentic Fitness Special Committee
and its legal and financial advisors, on the one hand, and representatives
of Warnaco and the Warnaco Special Committee and their respective legal
and financial advisors, on the other, and provide for the Offer in order
to allow the Stockholders to receive payment for their Shares on an
accelerated basis; and
the terms and conditions of the Merger Agreement, including provisions
which are designed to ensure that the Authentic Fitness Board could
fulfill its fiduciary duties if presented with an acquisition proposal
that is more favorable to Stockholders than the Offer or Merger. In
particular, the Authentic Fitness Special Committee considered that the
Merger Agreement:
6
<PAGE>
(1) permits the Authentic Fitness Board, in certain circumstances, to
provide information to and engage in negotiations with third
parties who have made a proposal to acquire Authentic Fitness, to
modify or withdraw its recomendation of the Merger and to
terminate the Merger Agreement in order to pursue a more favorable
transaction;
(2) contains termination fee obligations of Authentic Fitness that the
Authentic Fitness Special Committee does not believe would
discourage competing third party offers to acquire Authentic
Fitness; and
(3) does not contain a financing condition to Warnaco or the
Purchaser's obligation to complete the Merger.
the ability of Stockholders who object to the Merger to obtain 'fair
value' for their Shares if they exercise and perfect their dissenters'
rights of appraisal under the DGCL.
On November 15, 1999, the Authentic Fitness Board, by unanimous vote, based
upon, among other things, the unanimous recommendation and approval of the
Authentic Fitness Special Committee, determined that the Merger Agreement and
the Transactions are fair to, and in the best interests of, the Stockholders of
Authentic Fitness, approved the Merger Agreement, the Offer and the Merger,
declared the Merger Agreement to be advisable and recommended that Stockholders
accept the Offer and tender their Shares pursuant to the Offer.
In evaluating the Offer and the Merger, the members of the Authentic
Fitness Board, including the members of the Authentic Fitness Special Committee,
considered their knowledge of the business, financial condition and prospects of
Authentic Fitness, and the advice of financial and legal advisors. In light of
the number and variety of factors that the Authentic Fitness Board and the
Authentic Fitness Special Committee considered in connection with their
evaluation of the Offer and the Merger, neither the Authentic Fitness Board nor
the Authentic Fitness Special Committee found it practicable to assign relative
weights to the foregoing factors, and, accordingly, neither the Authentic
Fitness Board nor the Authentic Fitness Special Committee did so.
OPINION OF FINANCIAL ADVISOR TO AUTHENTIC FITNESS
On November 15, 1999, Chase delivered its oral opinion, which opinion was
subsequently confirmed in a written opinion dated as of November 15, 1999, to
the Authentic Fitness Special Committee to the effect that, as of that date, and
based upon the assumptions made, matters considered and limits of review set
forth therein, the consideration to be received by Stockholders pursuant to the
Offer and the Merger was fair, from a financial point of view, to such holders,
other than Warnaco and its affiliates.
A copy of the Chase Opinion, which sets forth the assumptions made, matters
considered and certain limitations on the scope of review undertaken by Chase,
is attached to this document as Schedule II. Stockholders are urged to read such
opinion in its entirety. The Chase Opinion was provided for the use and benefit
of the Authentic Fitness Special Committee in its evaluation of the Offer and
the Merger, was directed only to the fairness to the Stockholders, other than
Warnaco and its affiliates, of the consideration to be received by such holders
pursuant to the Offer and the Merger from a financial point of view, and does
not constitute a recommendation to any Stockholders as to whether such holder
should tender its shares in the Offer or how such holder should vote with
respect to the Merger. The summary of the Chase Opinion set forth herein is
qualified in its entirety by reference to the full text of its opinion attached
to this document as Schedule II.
In arriving at its opinion, Chase, among other things:
reviewed a draft of the Merger Agreement;
reviewed certain publicly available business and financial
information that Chase deemed relevant relating to Authentic Fitness
and the segments in which it operates;
reviewed certain internal non-public financial and operating data and
forecasts provided to Chase by Authentic Fitness management relating
to its business;
7
<PAGE>
discussed, with members of Authentic Fitness management, Authentic
Fitness' operations, historical financial statements and future
prospects;
compared the financial and operating performance of Authentic Fitness
with publicly available information concerning certain other
companies Chase deemed comparable and reviewed the relevant stock
prices of the common stock and certain publicly traded securities of
such other companies;
compared the proposed financial terms of the Offer and the Merger
with the financial terms of certain other transactions that Chase
deemed relevant; and
made such other analyses and examinations as Chase deemed necessary
or appropriate.
Chase assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with or reviewed by or for Chase, or publicly
available, for purposes of its opinion and further relied upon the assurance of
Authentic Fitness management that they were not aware of any facts that would
make such information inaccurate or misleading. Chase neither made nor obtained
any independent evaluations or appraisals of Authentic Fitness assets or
liabilities, nor did Chase conduct a physical inspection of the properties and
facilities of Authentic Fitness. Chase assumed that the financial forecasts
provided to it by Authentic Fitness were reasonably determined on bases
reflecting the best currently available estimates and judgments of Authentic
Fitness management as to the future financial performance of Authentic Fitness.
Chase expressed no view as to such forecasts or the assumptions on which they
were based.
For purposes of rendering its opinion, Chase assumed that, in all respects
material to its analysis, the representations and warranties of each party
contained in the Merger Agreement were true and correct, that each party would
perform all of the covenants and agreements required to be performed by it under
the Merger Agreement and that all conditions to the consummation of the Tender
Offer and the Merger would be satisfied without waiver thereof. Chase also
assumed that the definitive Merger Agreement would not differ in any material
respects from the draft thereof furnished to it.
In connection with the preparation of its opinion, Chase was not authorized
by the Authentic Fitness Special Committee to solicit, nor did Chase solicit,
third-party indications of interest for the acquisition of all or any part of
Authentic Fitness.
The Chase Opinion was necessarily based on market, economic and other
conditions as they existed and could be evaluated on the date of such opinion.
The Chase Opinion was limited to the fairness, from a financial point of view,
to Stockholders, other than Warnaco and its affiliates, of the consideration to
be received by such holders pursuant to the Offer and the Merger, and Chase
expressed no opinion as to the merits of the underlying decision by Authentic
Fitness to engage in the Merger.
The following is a summary of the material financial and comparative
analyses performed by Chase in arriving at its opinion. In the analysis
described below, the estimated enterprise and transaction values were calculated
reflecting, as appropriate, a seasonal debt adjustment and favorable payment
terms resulting from changes in Authentic Fitness' sourcing arrangements.
Comparable Public Companies Analysis. Using publicly available information,
Chase compared certain financial and operating information and ratios for
Authentic Fitness with corresponding financial and operating information and
ratios for companies in lines of business believed to be generally comparable to
those of Authentic Fitness, as follows:
Athletic-Related Apparel
Columbia Sportswear Company;
Nautica Enterprises, Inc.;
The North Face, Inc.;
Quiksilver, Inc.; and
Russell Corporation.
8
<PAGE>
Other Selected Apparel
Guess?, Inc.;
Kellwood Company;
Phillips-Van Heusen Corporation;
Polo Ralph Lauren Corporation;
Tommy Hilfiger Corporation; and
V.F. Corporation.
In examining the comparable companies, Chase calculated the enterprise
value, defined as the total market value of equity on a diluted basis plus
outstanding debt, preferred stock and minority interest less cash and cash
equivalents, of each company as a multiple of its respective estimated calendar
year 1999 earnings before interest, taxes, depreciation and amortization
('EBITDA'), in each case based on selected public research equity analyst
estimates. Chase also calculated the per share equity value, defined as the
total market value of equity on a diluted basis, of each company as a multiple
of its respective estimated calendar year ('CY') 2000 earnings per share , which
is referred to as EPS, in each case based on mean estimates available from The
Institutional Brokers Estimate System. In conducting this analysis, Chase used
closing share prices on November 12, 1999. The analysis yielded the following
multiples:
<TABLE>
<CAPTION>
LOW HIGH MEDIAN MEAN
--- ---- ------ ----
<S> <C> <C> <C> <C>
Enterprise Value as a Multiple of CY
1999 Estimated EBITDA................................... 4.3x 8.1x 5.5x 5.8x
Equity Value as a Multiple of
CY 1999 Estimated EPS................................... 5.9x 12.9x 9.2x 9.9x
</TABLE>
Based on this analysis, Chase estimated a value per share of the Shares
ranging from approximately $15.75 to $20.00.
Comparable Transactions Analysis. Chase reviewed certain publicly available
information regarding selected business combinations in the apparel and
apparel-related industries announced since October 1996. The comparable
transactions and the month and year on which each transaction was announced were
as follows:
Investcorp S.A.'s acquisition of The William Carter Company (October,
1996);
Texas Pacific Group's acquisition of J. Crew Group, Inc. (July,
1997);
The Warnaco Group, Inc.'s acquisition of Designer Holdings Ltd.
(September, 1997);
Tommy Hilfiger U.S.A. Inc.'s acquisition of Pepe Jeans USA, Inc.
(January, 1998);
Tropical Sportswear International Corporation's acquisition of Farah
Incorporated (May, 1998);
Jones Apparel Group, Inc.'s acquisition of Sun Apparel, Inc.
(September, 1998);
Kellwood Company's acquisition of Koret, Inc (November, 1998);
Vestar Capital Partners' acquisition of St. John Knits, Inc.
(February, 1999);
Jones Apparel Group, Inc.'s acquisition of Nine West Group Inc.
(March, 1999);
Doughty Hanson & Co.'s acquisition of Umbro Europe Holdings Ltd.
(April, 1999);
Robert Stephen Holdings plc's acquisition of the minority
shareholdings in Pentland Group plc (July, 1999); and
H.I.G. Capital LLC's acquisition of Happy Kids, Inc. (July, 1999).
In examining these business combinations, Chase calculated the respective
transaction values, defined as the market value of the consideration offered to
target common stockholders on a fully diluted basis plus outstanding debt,
preferred stock and minority interest less cash and cash equivalents, as a
multiple of (i) latest twelve months revenues, which is referred to as LTM
revenues, and (ii) latest twelve months EBITDA, ('LTM EBITDA'). This analysis
yielded the following multiples:
9
<PAGE>
<TABLE>
<CAPTION>
TRANSACTION VALUE
AS A MULTIPLE OF: LOW HIGH MEDIAN MEAN
- ----------------- --- ---- ------ ----
<S> <C> <C> <C> <C>
LTM Revenues.............................................. 0.36x 3.17x 0.68x 0.96x
LTM EBITDA................................................ 4.4x 15.7x 8.1x 8.4x
</TABLE>
Based on this analysis, Chase estimated a value per share of the Common
Stock ranging from approximately $17.50 to $22.00.
Discounted Cash Flow Analysis. Chase performed a discounted cash flow
analysis, which is referred to as DCF, of Authentic Fitness using financial
forecasts for the fiscal years ending June 30, 2000 through June 30, 2002
provided both by Authentic Fitness management, which is referred to as the
Management Case, and based upon the consensus estimates of research equity
analysts, which is referred to as the Street Case. Utilizing such information,
Chase calculated a range of values based upon the discounted present value of
the sum of the projected stream of unlevered free cash flows to Authentic
Fitness from December 31, 1999 through June 30, 2002, and the projected terminal
value of Authentic Fitness at June 30, 2002 based upon a range of multiples
applied to projected earnings before EBITDA, in the fiscal year 2002. The DCF
was calculated for Authentic Fitness assuming discount rates ranging from 12% to
14%, and terminal multiples of EBITDA in the fiscal year 2002 ranging from 5.5x
to 7.0x. This analysis yielded a value per Share ranging from approximately
$17.75 to $23.75 for the Management Case and from approximately $14.25 to $19.25
for the Street Case.
Leveraged Buyout Analysis. Chase performed an analysis of the theoretical
maximum consideration that could be paid in an acquisition of Authentic Fitness
by a financial buyer, using both the Management Case and the Street Case, and
based on market and economic conditions as of November 15, 1999, and considering
capital structures typically employed by financial buyers. In its analysis,
Chase Securities assumed that a financial buyer would be subject to the
following constraints:
a maximum ratio of total indebtedness to estimated calendar year 1999
EBITDA of 4.5x;
a maximum ratio of senior indebtedness to estimated calendar year
1999 EBITDA of 3.0x;
interest charges on senior indebtedness of 9.25%;
interest charges on subordinated indebtedness of 13.0%;
minimum returns on equity ranging from 20% to 30%;
a management promote of 10%; and
a fiscal year 2002 EBITDA terminal multiple range of 5.5x to 7.0x.
This analysis resulted in a theoretical maximum consideration per share of
the Shares that could be paid by a financial buyer in an acquisition transaction
that was estimated to range from approximately $16.25 to $21.50 for the
Management Case and from approximately $13.50 to $18.00 for the Street Case.
Summary Valuation. Using the methodologies described above, Chase
calculated the following implied ranges of per share values for the Common
Stock. Stockholders are urged to read the following table in conjunction with
the descriptions of the different methodologies set forth above.
<TABLE>
<CAPTION>
ESTIMATED PER SHARE
AUTHENTIC FITNESS
METHODOLOGY VALUE RANGE
- ----------- -----------
<S> <C>
Comparable Public Companies Analysis $15.75 - $20.00
Comparable Transactions Analysis $17.50 - $22.00
Discounted Cash Flow Analysis -- Management Case $17.75 - $23.75
Discounted Cash Flow Analysis -- Street Case $14.25 - $19.25
Leveraged Buyout Analysis -- Management Case $16.25 - $21.50
Leveraged Buyout Analysis -- Street Case $13.50 - $18.00
</TABLE>
Stock Price Analysis. Among other analyses performed and factors considered
by Chase in connection with its opinion, Chase reviewed the trading prices of
the Shares for the period from October 8, 1996 to October 8, 1999, and also
observed that the low and high for the Common Stock for the 52 weeks prior to
the announcement of the Warnaco proposal on October 10, 1999 were $13.13 and
$18.56, respectively. Chase also observed that the Offer Price represented a
premium of 18.4% to the
10
<PAGE>
closing share price of the Shares on October 8, 1999 (the date prior to the
announcement of the Warnaco's proposal) of $17.56 per share and a 12.1% premium
to the 52-week pre-announcement high of $18.56.
The summary set forth above does not purport to be a complete description
of the analyses performed by Chase in arriving at its opinion. Arriving at a
fairness opinion is a complex process not necessarily susceptible to partial
analysis or summary description. Chase believes that its analyses must be
considered as a whole and that selecting portions of analyses and of the factors
considered by it, without considering all such factors and analyses, could
create a misleading view of the processes underlying its opinion. Chase did not
assign relative weights to any of its analyses in preparing its opinion. The
matters considered by Chase in its analyses were based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond Authentic Fitness' control and involve the application of
complex methodologies and educated judgment. Any estimates incorporated in the
analyses performed by Chase are not necessarily indicative of actual past or
future results or values, which may be significantly more or less favorable than
such estimates. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold in
the future, and such estimates are inherently subject to uncertainty. None of
the comparable companies used in the Comparable Public Companies Analysis
described above is identical to Authentic Fitness, and none of the comparable
transactions used in the Comparable Transactions Analysis described above is
identical to the Offer and the Merger. Accordingly, an analysis of publicly
traded comparable companies and transactions is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
or company to which they are being compared.
The Authentic Fitness Special Committee selected Chase to act as its
financial advisor on the basis of the reputation of Chase as an internationally
recognized investment banking firm with substantial expertise in transactions
similar to the Transactions and because it is familiar with Authentic Fitness
and its business. As part of its financial advisory business, Chase Securities
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. Chase has acted as financial advisor to the Authentic
Fitness Special Committee in connection with the delivery of its opinion and
received a fee upon delivery thereof. The Chase Manhattan Corporation and its
affiliates, including Chase, in the ordinary course of business, have provided
investment banking services to Authentic Fitness and Warnaco and may continue to
provide such services. In the ordinary course of business, Chase or its
affiliates may trade in the debt and equity securities of Authentic Fitness and
Warnaco for its own accounts and for the accounts of its customers and,
accordingly, may at anytime hold a long or short position in such securities.
The terms of the engagement of Chase by the Authentic Fitness Special
Committee are set forth in a letter dated as of October 19, 1999. Pursuant to
the terms of this letter agreement, Authentic Fitness paid to Chase a fee of
$600,000 and has agreed to pay an additional fee of approximately $185,000,
payable upon consummation of the Offer. In addition, the Special Committee has
also agreed to reimburse Chase for its reasonable out-of-pocket expenses
(including the fees of its legal counsel) and to indemnify Chase and certain
related persons from and against certain liabilities in connection with its
engagement, including certain liabilities under the federal securities laws,
arising out of its engagement. It is the opinion of the Commission that
indemnification for liabilities arising under federal securities laws is against
public policy and may therefore be unenforceable.
The full text of Chase's presentation to the Authentic Fitness Special
Committee on November 15, 1999 has been included as Exhibit (b)(2) to the
Schedule 13E-3, and the foregoing summary is qualified in its entirety by
reference.
FINANCIAL PROJECTIONS RELATING TO AUTHENTIC FITNESS
Projections Prepared by Authentic Fitness. Authentic Fitness does not, as a
matter of course, make public forecasts or projections as to future sales,
earnings or other income statement data, cash flows or
11
<PAGE>
balance sheet and financial position information. However, as part of the
Authentic Fitness ongoing financial planning process, Authentic Fitness prepares
financial projections, which are not publicly available, of Authentic Fitness'
results of operations. In light of the positions of certain directors and
executive officers of Warnaco as directors and executive officers of Authentic
Fitness, Warnaco may be deemed to have had access to certain of such analyses
prepared by Authentic Fitness (the 'Authentic Fitness Projections'). Such
projections for the three fiscal years ending July 7, 2002 include the following
information:
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING YEAR ENDING
JULY 1, 2000 JULY 7, 2001 JULY 6, 2002
(ESTIMATE) (ESTIMATE) (ESTIMATE)
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue......................................... $475,500 $546,300 $629,700
EBITDA.......................................... 79,503 91,600 109,800
Operating Income................................ 66,730 78,280 95,520
Net Income...................................... 32,276 40,496 53,679
</TABLE>
Projections Developed by Warnaco. In connection with the engagement of
WP&Co. to act as financial advisor to the Warnaco Special Committee, Warnaco
made available to WP&Co. a set of projections of future financial results for
Authentic Fitness developed for fiscal 2000, based on analysts' projections in
line with consensus First Call Corporation earnings estimates and, for fiscal
2001 and 2002, based on analysts' long term growth projections (the 'Analysts'
Projections'). The Analysts' Projections were developed for the use of WP&Co. in
connection with its analysis of the fairness to Warnaco of the Offer Price. The
principal differences between the Authentic Fitness Projections and the
Analysts' Projections are that the Analysts' Projections reflect:
Lower revenue assumptions for Ubertech Texas, Inc., a manufacturing
company acquired by Authentic Fitness in July, 1999 that specializes in
the application of three dimensional silicone-based graphics to apparel
products; and
The elimination of revenues attributable to certain customers of Authentic
Fitness that either have filed for bankruptcy or have been placed on
CreditWatch.
The Analysts' Projections include the following information:
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING YEAR ENDING
JULY 1, 2000 JULY 7, 2001 JULY 6, 2002
(ESTIMATE) (ESTIMATE) (ESTIMATE)
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue......................................... $454,300 $500,000 $560,000
EBITDA.......................................... 74,200 83,100 92,900
Operating Income................................ 63,500 70,700 80,000
Net Income...................................... 29,600 34,400 40,000
</TABLE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
CERTAIN MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS INCLUDE THE
AUTHENTIC FITNESS PROJECTIONS AND THE ANALYSTS' PROJECTIONS (COLLECTIVELY, THE
'PROJECTIONS'). THE AUTHENTIC FITNESS PROJECTIONS HAVE BEEN INCLUDED IN THIS
OFFER TO PURCHASE FOR THE LIMITED PURPOSE OF GIVING STOCKHOLDERS ACCESS TO
FINANCIAL PROJECTIONS PREPARED BY THE AUTHENTIC FITNESS MANAGEMENT THAT MAY BE
DEEMED TO HAVE BEEN AVAILABLE FOR REVIEW BY WARNACO AND PURCHASER. SUCH
INFORMATION WAS PREPARED BY THE AUTHENTIC FITNESS MANAGEMENT FOR INTERNAL USE
AND NOT WITH A VIEW TO PUBLICATION. THE ANALYSTS' PROJECTIONS HAVE BEEN INCLUDED
IN THIS OFFER TO PURCHASE FOR THE LIMITED PURPOSE OF GIVING STOCKHOLDERS ACCESS
TO FINANCIAL PROJECTIONS RELATING TO AUTHENTIC FITNESS DEVELOPED FOR THE USE OF
WP&CO., FINANCIAL ADVISOR TO THE WARNACO SPECIAL COMMITTEE.
BOTH SETS OF PROJECTIONS WERE BASED ON ASSUMPTIONS CONCERNING THE AUTHENTIC
FITNESS PRODUCTS AND BUSINESS PROSPECTS, INCLUDING THE ASSUMPTION THAT AUTHENTIC
FITNESS WOULD CONTINUE TO OPERATE UNDER THE SAME OWNERSHIP STRUCTURE AS
CURRENTLY EXISTS. THE PROJECTIONS WERE ALSO BASED ON OTHER REVENUE AND OPERATING
ASSUMPTIONS. PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND
ASSUMPTIONS THAT
12
<PAGE>
ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE
BEYOND THE ABILITY OF ANY COMPANY TO CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN
ADDITION, THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS AND FORECASTS. NEITHER WARNACO'S NOR THE AUTHENTIC FITNESS
INDEPENDENT ACCOUNTANTS HAVE EXAMINED, COMPILED OR APPLIED ANY AGREED UPON
PROCEDURES TO THIS INFORMATION AND, ACCORDINGLY, ASSUME NO RESPONSIBILITY FOR
THIS INFORMATION. NONE OF WARNACO, PURCHASER, AUTHENTIC FITNESS OR ANY OTHER
PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OR VALIDITY OF THE FOREGOING
PROJECTIONS.
POSITION OF WARNACO REGARDING FAIRNESS OF THE OFFER AND THE MERGER
As a result of the common executive officers and directors between
Authentic Fitness and Warnaco, Warnaco and the Purchaser may be deemed
'affiliates' of Authentic Fitness under Rule 12b-2 of the Exchange Act.
Accordingly, in compliance with Rule 13e-3 under the Exchange Act, Warnaco and
the Purchaser have considered the fairness of the Offer and the Merger to the
Stockholders, other than affiliates of Warnaco, and in connection with the
Offer, have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
'Schedule 13E-3').
Warnaco believes that the consideration to be received by the Stockholders,
pursuant to the Offer and the Merger, is fair to the Authentic Fitness
Stockholders from a financial point of view. Warnaco based its belief solely on
(i) the fact that the Authentic Fitness Board and the Authentic Fitness Special
Committee concluded that the Offer and the Merger are fair to, and in the best
interests of, the Stockholders, (ii) the historical and projected financial
performance of Authentic Fitness and its financial results, (iii) the fact that
the consideration to be paid in the Offer and the Merger represents a premium of
approximately 12.1% over the pre-announcement high for the fifty-two week period
prior to the October 10, 1999 public announcement of Warnaco's original offer to
acquire the outstanding Shares held by the Stockholders, and a premium of
approximately 18% over the reported closing price for the Shares on the last
trading day prior to October 10, 1999, (iv) the fact that the terms of the Offer
and the Merger and the Merger Agreement were negotiated on an arm's-length
basis, (v) the fact that the Offer and the Merger will each provide
consideration to the Stockholders entirely in cash, and (vi) notwithstanding the
fact that its opinion dated November 15, 1999 was provided for the use and
benefit of the Authentic Fitness Special Committee and that Warnaco is not
entitled to rely on such opinion, the fact that the Authentic Fitness Special
Committee received an opinion from Chase to the effect that the $20.80 per Share
in cash to be received by holders of the Common Stock in the Offer and the
Merger is fair to such holders, other than Warnaco and its affiliates, from a
financial point of view.
In connection with its consideration of the fairness of the consideration
to be received by the Stockholders of Authentic Fitness under the Merger
Agreement, Warnaco has adopted the conclusions as to fairness set forth under
'Special Factors -- Recommendation of the Authentic Fitness Special Committee
and the Authentic Fitness Board; Fairness of the Offer and the Merger,' and the
analyses underlying such conclusions, of the Authentic Fitness Special Committee
and the Authentic Fitness Board, based upon the views of the members of the
Warnaco Special Committee and the Warnaco Board as to the reasonableness of such
analyses. Warnaco has not assigned any relative or specific weights to the
foregoing factors. However, Warnaco believes that each of the factors is
material to its determination that the transaction is fair, and has
characterized as positive each of the factors characterized as positive by the
Authentic Fitness Special Committee. Individual members of the Warnaco Special
Committee and the Warnaco Board may have given differing weights to different
factors and may have viewed certain factors more positively or negatively than
others.
Notwithstanding the foregoing conclusions, Warnaco's interests in the Offer
and Merger were represented by the Warnaco Special Committee, together with its
advisors, whose primary concern was fairness to Warnaco, whose interests may
conflict with those of the Stockholders.
13
<PAGE>
OPINION OF FINANCIAL ADVISOR TO THE WARNACO SPECIAL COMMITTEE
Role of Financial Advisor. The Warnaco Special Committee retained WP&Co. to
act as its financial advisor in connection with the Transactions. On November
12, 1999, WP&Co. delivered its oral opinion to the Warnaco Special Committee,
which opinion was subsequently confirmed in writing (the 'WP&Co. Opinion'), to
the effect that, as of such date and subject to the various assumptions and
limitations set forth in the opinion, the $20.80 per Share cash consideration to
be paid by Warnaco pursuant to the Offer and the Merger is fair to Warnaco from
a financial point of view. The members of the Warnaco Special Committee and the
members of the Authentic Fitness Special Committee determined the amount and the
form of consideration through arm's length negotiations and did not base this
determination on any recommendation by WP&Co., although WP&Co. provided advice
to the Warnaco Special Committee from time to time during the course of the
negotiations. WP&Co. was not asked to, and did not, provide advice or any
opinion as to the fairness of the consideration to be paid to the Stockholders
in the Offer and the Merger. The Warnaco Special Committee engaged WP&Co. solely
as advisors to the Warnaco Special Committee and WP&Co. did not act as advisor
to or agent of any other person. No limitations were imposed by the Warnaco
Special Committee on WP&Co. with respect to the investigations made or
procedures followed by WP&Co. in rendering the WP&Co. Opinion.
OPINION OF WP&CO. THE FULL TEXT OF THE WP&CO. OPINION, DATED NOVEMBER 15,
1999, WHICH SETS FORTH, AMONG OTHER THINGS, THE OPINION EXPRESSED, THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY WP&CO. IN RENDERING ITS OPINION, IS ATTACHED AS EXHIBIT
(b)(3) TO THE SCHEDULE 13E-3. THE FOLLOWING DISCUSSION OF THE MATERIAL ASPECTS
OF THE WP&CO. OPINION AND THE ANALYSIS PERFORMED BY WP&CO. IN CONNECTION WITH
RENDERING THE WP&CO. OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE WP&CO. OPINION.
Matters Reviewed. In arriving at its opinion, WP&Co. reviewed and analyzed,
among other things, the following:
A draft of the Merger Agreement and the Offer to Purchase which, for
purposes of the opinion, were assumed not to differ in any material
respect from the final forms thereof;
Publicly available business and financial information concerning Authentic
Fitness and Warnaco that WP&Co. believed to be relevant to its analysis;
Estimates of the financial performance of Authentic Fitness for fiscal
year 2000 as published by third party research analysts which were
consistent with and included in the consensus estimates of the Authentic
Fitness earnings per share for such year as published by First Call
Corporation, a reporting service (such analysts' estimates, the 'Analysts'
2000 Projections');
Certain financial and operating information concerning Authentic Fitness,
including prospective financial information prepared by Warnaco and
Authentic Fitness and provided to WP&Co. for purposes of its analysis;
Historical market prices and trading activity for the Shares and a
comparison of that trading history with those publicly traded companies
selected as being relevant or comparable in certain respects to Authentic
Fitness;
Comparisons of the historical financial results and present financial
condition of Authentic Fitness with those of other publicly traded
companies selected as being relevant or comparable in certain respects to
Authentic Fitness; and
The financial terms of certain other acquisitions and business combination
transactions recently effected that were considered comparable to the
Transactions or otherwise relevant.
WP&Co. also held discussions with management of Warnaco and representatives
of Authentic Fitness concerning:
The historic and current operations of Authentic Fitness; and
Its financial condition and future prospects.
14
<PAGE>
Assumptions and Limitations. In its review and analyses and in rendering
its opinion, WP&Co., with the Warnaco Special Committee's consent, assumed and
relied without independent verification upon various matters, including:
The accuracy and completeness of all financial and other information that
was publicly available or furnished to WP&Co. by Warnaco and Authentic
Fitness;
That the prospective financial information regarding Authentic Fitness for
fiscal 2001 and 2002 prepared by Warnaco and provided to WP&Co. (the 'Long
Term Prospective Financial Information') and the Analysts' 2000
Projections reflect the best currently available information with respect
to the Authentic Fitness future financial performance;
That the Long Term Prospective Financial Information was reasonably
prepared by Warnaco's management in good faith and on bases reflecting the
best currently available judgments and estimates of Warnaco's management;
That obtaining all regulatory and other approvals and third party consents
required for the consummation of the Transactions will not have an adverse
impact on Warnaco or Authentic Fitness or on the anticipated benefits of
the Transactions; and
That the Transactions would be consummated without waiver or modification
of any of the material terms or conditions contained in the Merger
Agreement.
WP&Co. expressed no opinion in the WP&Co. Opinion, and expresses no opinion
herein or otherwise, with respect to any of the Analysts' 2000 Projections or
the Long Term Prospective Financial Information or the assumptions upon which it
or any portion of it is based.
Among the limitations on the opinion are:
The WP&Co. Opinion is for the use and benefit of the Warnaco Special
Committee and was rendered to the Warnaco Special Committee in connection
with its consideration of the Transactions;
WP&Co. was not requested to opine as to, and its opinion does not address,
the merits of the underlying business decision by the Warnaco Special
Committee or Warnaco to effect the Transactions, the effect on Warnaco of
the Transactions or the prospective prices or trading ranges at which
shares of Warnaco common stock will trade at any time;
The WP&Co. Opinion is directed only to the fairness to Warnaco, from a
financial point of view, of the $20.80 per Share cash consideration to be
paid by Warnaco pursuant to the Offer and the Merger and does not
constitute a recommendation to any Stockholder as to whether such
Stockholder should tender his or her Shares in the Offer and should not be
relied upon by any holder in respect of those matters;
WP&Co. did not review any of the books and records of Warnaco or Authentic
Fitness; and
WP&Co. did not conduct a physical inspection of the properties or
facilities of Warnaco or Authentic Fitness or obtain or make an
independent valuation or appraisal of the assets or liabilities
(contingent or otherwise) of Warnaco or Authentic Fitness, and no
valuation or appraisal of that type was provided to them.
The WP&Co. Opinion is necessarily based upon economic and market conditions
and other circumstances existing as of the date of the WP&Co. Opinion and,
accordingly, does not address the fairness to Warnaco of the $20.80 per Share
cash consideration to be paid by Warnaco in the Offer and the Merger as of any
other date. Additionally, the Analysts' 2000 Projections and Long Term
Prospective Financial Information containing forecasts of future results of
operations prepared by third party research analysts and Warnaco and relied on
by WP&Co. may not be indicative of future results, which may be significantly
more or less favorable than suggested by the forecasts, because the forecasts
contain assumptions as to industry performance, general business and economic
conditions, and other matters beyond the control of Warnaco and Authentic
Fitness. See 'Special Factors -- Financial Projections Relating to Authentic
Fitness' for a discussion of certain prospective financial information relating
to Authentic Fitness.
15
<PAGE>
Analyses Performed. In arriving at its opinion, WP&Co. performed
quantitative analyses and considered a number of factors. The preparation of an
opinion as to the fairness of a transaction from a financial point of view
involves various determinations as to the most appropriate and relevant methods
of financial and comparative analyses and the applications of those methods to
the particular circumstances. In arriving at its opinion, WP&Co. did not
attribute any relative weight to any analysis or factor considered but rather
made qualitative judgments as to the significance and relevance of each analysis
and factor.
The following is a summary of the material financial analyses performed by
WP&Co. in connection with providing the WP&Co. Opinion to the Warnaco Special
Committee. Certain of the summaries of financial analyses include information
presented in tabular form. In order to fully understand the financial analyses
used by WP&Co., the tables must be read together with the text accompanying the
tables. The tables alone do not constitute a complete description of the
financial analyses. In particular, you should note that in applying the various
valuation methods to the particular circumstances of Warnaco and Authentic
Fitness, WP&Co. made qualitative judgments as to the significance and relevance
of each analysis and factor. In addition, WP&Co. made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond the control of Warnaco and Authentic
Fitness. Accordingly, the analyses listed in the tables and described below must
be considered as a whole. Considering any portion of the analyses and the
factors considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying the WP&Co. Opinion.
Discounted Cash Flow Analysis. WP&Co. performed a discounted cash flow
analysis to generate an estimate of the net present value of the projected
after-tax unlevered free cash flows of Authentic Fitness based upon the
Analysts' 2000 Projections through fiscal year 2000 and the Long Term
Prospective Financial Information for fiscal years 2001 and 2002. For this
purpose, after-tax unlevered free cash flows are defined as operating cash flow
available after working capital, capital spending including acquisitions, tax
and other operating requirements. Using the Analysts' 2000 Projections and the
Long Term Prospective Financial Information, WP&Co. calculated a range of
present values for Authentic Fitness on a stand alone basis of $20.53 to $27.35
per Share, using a range of after-tax discount rates from 13.5% to 14.5% and a
terminal value based on a range of multiples of estimated EBITDA in fiscal year
2002 from 7.0x to 9.0x.
Comparable Companies Trading Analysis. WP&Co. reviewed the stock market
trading multiples and certain other financial characteristics for selected
companies that WP&Co. deemed comparable to Authentic Fitness. The companies used
by WP&Co. for this analysis were (i) Russell Corporation; (ii) Columbia
Sportswear Company; (iii) Nautica Enterprises, Inc.; (iv) Quiksilver, Inc.;
(v) Cutter & Buck Inc.; and (vi) The North Face, Inc. Using publicly available
information, WP&Co. calculated and analyzed the common equity market value
multiples of certain historical and projected financial criteria, such as net
income, and the enterprise value multiples of certain historical and projected
financial measures, such as EBITDA, as of November 10, 1999, the last full
trading day prior to the distribution of materials to the Warnaco Special
Committee for a meeting on November 12, 1999.
The following table presents a range of implied prices per Share based on
the preceding fiscal year 1999 and estimated 2000 EBITDA and 2000 net income
multiples. For illustrative purposes, WP&Co. also calculated the implied price
per Share assuming a 30% equity control premium, based on selected public
change-in-control transactions with transaction values ranging from $100 million
to $1 billion from 1998 to present.
<TABLE>
<CAPTION>
IMPLIED PRICE PER
COMPARABLE AUTHENTIC IMPLIED SHARE ASSUMING 30%
COMPANIES FITNESS PRICE PER SHARE CONTROL PREMIUM
--------- ------- --------------- ---------------
<S> <C> <C> <C> <C>
Equity Value Multiples:*
2000E Net Income................ 10.0x - 13.0x 14.5x $ 14.42 - $18.74 $ 18.75 - $24.36
Enterprise Value Multiples:*
1999 EBITDA..................... 7.5x - 8.5x 7.6x $ 20.45 - $23.79 $ 26.58 - $30.93
2000E EBITDA.................... 5.0x - 6.0x 7.1x $ 13.45 - $17.06 $ 17.48 - $22.18
</TABLE>
- ------------
*'E' indicates estimate contained in the prospective financial information
described above.
16
<PAGE>
Because of the inherent differences between the businesses, operations,
financial condition and prospects of Authentic Fitness and the businesses,
operations, financial condition and prospects of the companies included in the
comparable company group, WP&Co. believed that it was inappropriate to, and
therefore WP&Co. did not, rely solely on the quantitative results of the
comparable company analysis. Accordingly, WP&Co. also made qualitative judgments
concerning differences between the financial and operating characteristics of
Authentic Fitness and companies in the comparable company group that would
affect the public trading values of Authentic Fitness and such comparable
companies.
Analysis of Comparable Acquisitions. WP&Co. reviewed publicly available
information to determine the purchase prices and multiples paid in certain other
transactions recently effected involving target companies which were similar to
Authentic Fitness in terms of business mix, product portfolio and/or markets
served that WP&Co. considered comparable.
The comparable transactions and the year in which each transaction was
announced were as follows (target/acquiror): (i) Pentland Group PLC/Robert
Stephen Holdings plc (1999); (ii) Lucky Brands Dungarees Inc./Liz Claiborne,
Inc. (1999); (iii) Nine West Group Inc./Jones Apparel Group Inc. (1999);
(iv) Umbro European (Holdings) Ltd./Doughty Hanson & Co. Ltd (1999); (v) Anne
Klein & Co., LLC (Takihyo Co.)/Kasper A.S.L. Ltd. (1999); (vi) Gant
(Phillips-Van Heusen)/Pyramid Partners (1999); (vii) Perry Ellis International
Inc./Supreme International Corp. (1999); (viii) Segrets, Inc./Liz Caliborne,
Inc. (1999); (ix) Koret of California, Inc./Kellwood Company (1998); (x) St.
John Knits Inc./Vestar Capital Partners III, L.P. (1998); (xi) Jerrell
Inc./Haggar Clothing Company (1998); (xii) Sun Apparel, Inc./Jones Apparel Group
Inc. (1998); (xiii) Farah Incorporated/Tropical Sportswear International Corp.
(1998); (xiv) Biderman Industries, USA, Inc./Vestar Capital Partners III, L.P.
(1998); (xv) Joop!/Wuensche AG (1998); (xvi) Pepe Jeans USA, Inc. & Tommy
Hilfiger Canada, Inc./Tommy Hilfiger, Inc. (1998); (xvii) Severin Montres
Group/Gucci Group N.V. (1997); (xviii) Sun Apparel, Inc./Vestar Capital Partners
III, L.P. (1997); (xix) Valentino SpA/Holding di Partecipazioni Industriali
(1997); (xx) Designer Holdings Ltd./The Warnaco Group, Inc. (1997); (xxi) Helly
Hansen Inc./Investcorp S.A. (1997); (xxii) Winning Ways Inc./Jordan Co. (1997);
(xxiii) The William Carter Co./Investcorp S.A. (1996); (xxiv) Lejaby-Euralis/The
Warnaco Group, Inc. (1996); and (xxv) Gerber Childrenswear Inc./Citicorp Venture
Capital Ltd. (1996).
WP&Co. calculated the enterprise value of such comparable transactions and
applied it to certain historical financial criteria of the acquired business,
including sales and EBITDA for the trailing 12-month period.
The following table presents the range of implied prices per Share using
multiples from the selected transactions:
<TABLE>
<CAPTION>
COMPARABLE AUTHENTIC IMPLIED
ACQUISITIONS FITNESS PRICE PER SHARE
------------ ------- ---------------
<S> <C> <C> <C>
Enterprise Value to:
1999 Sales.................................. 1.1x - 1.3x 1.27x $ 17.39 - $21.39
1999 EBITDA................................. 8.0x - 9.0x 7.6x $ 22.12 - $25.46
</TABLE>
Because the reasons for and circumstances surrounding each of the
transactions analyzed were so diverse and because of the inherent differences in
the businesses, operations, financial condition and prospects of Authentic
Fitness and the companies included in the comparable transactions group, WP&Co.
believed that a purely quantitative comparable transaction analysis would not be
particularly meaningful in the context of the Transactions. WP&Co. believed that
the appropriate use of a comparable transaction analysis in this instance would
involve qualitative judgments concerning the differences between the
characteristics of these transactions and companies and the merger and the offer
transactions and Authentic Fitness which would affect the acquisition values of
those acquired companies and Authentic Fitness.
Purchase Price Ratio Analysis. WP&Co. analyzed the enterprise value
multiples and equity value multiples of key operating statistics for a range of
transaction values. Utilizing the $20.80 per Share price, WP&Co. calculated the
ratio of implied equity value to net income as well as the ratio of enterprise
value to sales, revenue, earnings before interest and taxes ('EBIT') and EBITDA,
each as
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derived either from actual historical financial data for the latest fiscal year
or from the Analysts' Estimates for fiscal year 2000.
The following table presents the ratios of implied equity value to fiscal
1999 and forecasted 2000 net income and the ratios of enterprise value to fiscal
1999 and forecasted 2000 sales, EBITDA and EBIT.
<TABLE>
<S> <C> <C>
Equity Value Multiples:*
1999 Net Income 16.3x
2000E Net Income 14.5x
Enterprise Value Multiples:*
1999 Sales 1.28x
2000E Revenue 1.16x
1999 EBITDA 7.6x
2000E EBITDA 7.1x
1999 EBIT 9.1x
2000E EBIT 8.3x
</TABLE>
- ------------
*'E' indicates estimate contained in the prospective financial information
described above.
WP&Co. noted that the $20.80 per Share price yielded a premium to market
price of 18.4% over the closing price of Shares of $17.56 on October 8, 1999,
the last full trading day prior to the announcement that Warnaco was proposing
to purchase Authentic Fitness.
Other. In addition to the analyses outlined above, WP&Co. conducted such
other financial studies, analyses and investigations and considered such other
factors as it deemed appropriate for purposes of its opinion.
General Information. No company or transaction used in the foregoing
analyses is identical to Authentic Fitness or the Transactions. The analyses
described above were preformed solely as a part of the analytical process
utilized by WP&Co. in connection with its analysis of the Transactions and do
not purport to be appraisals or to reflect the prices at which a company may
enter into a business combination or sale transaction.
WP&Co. is an investment banking and advisory firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with: mergers and acquisitions,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements, and valuations for corporate and
other purposes. The Warnaco Special Committee selected WP&Co. as its financial
advisor in connection with the proposed Transactions because WP&Co. is an
internationally recognized investment banking firm and members of WP&Co. have
substantial experience in transactions similar to the Transactions and the
valuation of companies.
As compensation for its services in connection with the Merger, the Warnaco
Special Committee has agreed to pay to WP&Co. fees of $1 million for providing
financial advisory services in connection with the Merger, including providing
the WP&Co. Opinion. $0.75 million of such transaction fee is contingent upon the
consummation of the Transactions. In addition, the Warnaco Special Committee has
agreed, among other things, to reimburse WP&Co. for its expenses reasonably
incurred in connection with its engagement (including counsel fees and expenses)
and to indemnify WP&Co. and certain related parties from certain liabilities
that may arise out of its engagement by the Warnaco Special Committee, which may
include certain liabilities under the federal securities laws. In the opinion of
the Commission that indemnification for liabilities arising under federal
securities laws is against public policy and may therefore be unenforceable.
In the ordinary course of its business, WP&Co. may actively trade the debt
and equity securities of Warnaco and Authentic Fitness for its own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in these securities.
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PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF WARNACO AND
PURCHASER FOR THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is to allow Warnaco and Authentic
Fitness, as a combined company to, among other things, (i) achieve operating
synergies in the manufacturing, distribution and marketing of their respective
products, (ii) effect cost savings in information systems and other areas,
(iii) consolidate complementary earnings and cash flow profiles, (iv) utilize
Warnaco's net operating losses to reduce taxes and further improve cash flow
income, and (v) present a stronger financial profile. In addition, the Merger
will allow the elimination of public company costs and duplicative
administrative functions.
Under the DGCL, the approval of the Authentic Fitness Board and the
affirmative vote of a majority of the votes cast by all Stockholders entitled to
vote thereon are required to approve and adopt the Merger Agreement. The
Authentic Fitness Board has approved and declared to be advisable the Merger
Agreement. If a Short-Form Merger is effected pursuant to the provisions of the
DGCL described below, the Merger can be approved through action of Purchaser's
Board without a stockholder vote. If a Short-Form Merger cannot be effected, the
only remaining required corporate action of Authentic Fitness, Warnaco or
Purchaser is the approval and adoption of the Merger Agreement by the
affirmative vote of a majority of the votes cast by all Stockholders entitled to
vote thereon.
Under the DGCL, if Purchaser acquires, pursuant to the Offer, at least 90%
of the then outstanding Shares, Purchaser's Board of Directors will be able to
effect a Short-Form Merger. If Purchaser does not acquire at least 90% of the
then issued and outstanding Shares pursuant to the Offer, the DGCL requires a
vote of Stockholders to effect the Merger, and a significantly longer period of
time will be required to effect the Merger and the distribution of the Merger
Consideration.
PLANS FOR AUTHENTIC FITNESS AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF
THE OFFER AND THE MERGER
Upon completion of the Offer, Warnaco and Purchaser intend to effect the
Merger in accordance with the Merger Agreement. See 'Special Factors -- The
Merger Agreement.'
Other than by virtue of the Offer and the Merger and except as otherwise
described below or elsewhere in this Offer to Purchase, Warnaco has no current
plans or proposals which relate to or would result in: (i) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving Authentic Fitness or any of its subsidiaries; (ii) a sale or transfer
of a material amount of assets of Authentic Fitness or any of its subsidiaries;
(iii) any material change in the Authentic Fitness capitalization or dividend
policy or indebtedness; (iv) any change in Authentic Fitness management, the
composition of the Authentic Fitness Board or any change in any material term of
the employment contract of any executive officer; or (v) any other material
change in the Authentic Fitness corporate structure or business.
As a result of the Offer, Warnaco will have an interest in the Authentic
Fitness net book value and net earnings, to the extent of the number of Shares
acquired under the Offer. If the Merger is consummated, Warnaco's interest in
such items will be 100%, and Warnaco and its subsidiaries will be entitled to
all benefits resulting from that interest, including all income generated by
Authentic Fitness operations and 100% of future increases in Authentic Fitness
value. Similarly, Warnaco will also bear all of the risk of any decrease in the
value of Authentic Fitness after the Merger, including the risk of 100% of any
losses generated by Authentic Fitness operations. Upon consummation of the
Merger, Stockholders will not have the opportunity to participate in the
earnings and growth of Authentic Fitness and will not have any right to vote on
corporate matters. Similarly, the Stockholders will not face the risk of decline
in the value of Authentic Fitness after the Merger, nor will they be entitled to
receive any dividends paid by Authentic Fitness after the Merger.
Upon consummation of the Merger, Warnaco will directly own 100% of the
Shares. As a result of the Merger, Warnaco will be the sole stockholder of
Authentic Fitness and there will be no public market for the Shares. Upon
consummation of the Merger, the Shares will cease to be listed or quoted on the
NYSE, the registration of the Shares under the Exchange Act will be terminated
and such stock
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<PAGE>
will no longer constitute 'margin securities' under the rules of the Board of
Governors of the Federal Reserve System. Moreover, Authentic Fitness will be
relieved of the obligation to (i) comply with the proxy rules of Regulation 14A
under Section 14 of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), and (ii) file periodic reports with the Commission under the
Exchange Act. In addition, the Authentic Fitness officers, directors and 10%
Stockholders will be relieved of the reporting requirements and restrictions on
'short-swing' trading contained in Section 16 of the Exchange Act with respect
to the Shares. See 'The Tender Offer -- Effect of the Offer on the Market for
the Shares; the NYSE Listing and Exchange Act Registration' Section 7.
The directors of Purchaser and the officers of Authentic Fitness
immediately prior to the Effective Time shall, from and after the Effective
Time, be the directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's certificate of incorporation and by-laws.
After consummation of the Merger, Warnaco plans to cause Authentic Fitness
to fulfill its existing contractual commitments and to exploit the business
opportunities that are available to Authentic Fitness in order to maximize the
opportunities of Authentic Fitness for revenues and profit. Warnaco believes
that a full integration of Authentic Fitness into Warnaco will enable the
combined entity to realize efficiencies and economies of scale. See 'Special
Factors -- Background of the Offer and the Merger.'
RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER
No dissenters' rights are available in connection with the Offer. However,
if the Merger is consummated, Stockholders who do not sell their Shares pursuant
to the Offer and who fully comply with the statutory dissenters procedures set
forth in the DGCL, the relevant portions of which are attached to this Offer to
Purchase as Schedule III, will be entitled to receive in connection with the
Merger, instead of the Merger Consideration, cash for the fair value of their
Shares (which may be more than, equal to, or less than the Merger Consideration)
as determined pursuant to the procedures prescribed by the DGCL. Stockholders
who perfect such rights by complying with the procedures set forth in
Section 262 of the DGCL ('Section 262') will have the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) determined by the Delaware Court of Chancery and will
be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting Stockholders (the
'Dissenting Stockholders') would be entitled to receive payment of a fair rate
of interest from the date of consummation of the Merger on the amount determined
to be the fair value of their Shares (the 'Dissenting Shares'). In determining
the fair value of the Dissenting Shares, the court is required to take into
account all relevant factors. Accordingly, such determination could be based
upon considerations other than, or in addition to, the market value of the
Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated that 'proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court' should be considered in
an appraisal proceeding. The Weinberger court also noted that, under Section
262, fair value is to be determined 'exclusive of any element of value arising
from the accomplishment or expectation of the merger.' As a consequence, the
fair value determined in any appraisal proceeding could be more or less than the
consideration to be paid in the Offer and the Merger. THE PRESERVATION AND
EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE
PROVISIONS OF THE DGCL. The foregoing summary of Section 262 is qualified in its
entirety by reference to Section 262, a copy of which is attached as
Schedule III to this Offer to Purchase.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the
'Schedule 14D-1') filed by Purchaser and Warnaco with the Commission in
connection with the Offer. Such summary is qualified in its entirety by
reference to the Merger Agreement.
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<PAGE>
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable, but in no event later than five business days after
the public announcement of Purchaser's intention to commence the Offer. The
obligation of Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of certain conditions that
are described below under the caption 'The Tender Offer -- Conditions to the
Offer' Section 12.
Purchaser and Warnaco have agreed that, without the prior written consent
of the Authentic Fitness Special Committee, no change in the Offer may be made
which decreases the price per Share payable in the Offer, which reduces the
maximum number of Shares to be purchased in the Offer, or which adds to,
modifies or supplements the conditions to the Offer set forth below under the
caption 'The Tender Offer -- Conditions to the Offer' Section 12, without the
prior written consent of Authentic Fitness. Notwithstanding the foregoing, the
Purchaser may extend the Offer at any time up to 40 days in the aggregate, in
one or more periods of not more than 10 business days, if at the initial
expiration date of the Offer, or any extension thereof, any condition to the
Offer is not satisfied or waived. In addition, Purchaser may, without the
consent of Authentic Fitness, extend the Offer for up to an additional 30 days,
in one or more periods of not more than 10 business days, if any condition to
the Offer is not satisfied or waived and if, on the expiration date of the
Offer, the Shares validly tendered and not withdrawn pursuant to the Offer are
sufficient to satisfy the Minimum Condition (as defined in 'The Tender
Offer -- Conditions to the Offer' Section 12) but equal less than 90 per cent of
the outstanding Shares, extend the Offer on one occasion for up to 10 business
days notwithstanding that all the conditions to the Offer have been satisfied so
long as (i) Purchaser irrevocably waives the satisfaction of any of the
conditions to the Offer (other than in the case of the first condition contained
in Section 12 of this Offer to Purchase, the occurrence of any Prohibition) that
subsequently may not be satisfied during any such extension of the Offer and
(ii) Parent does not have knowledge that any such Prohibition was pending or
threatened at the time of such extension. In addition, the Offer Price may be
increased (provided such increase is in the amount of at least $0.05 per Share)
and the Offer may be extended to the extent required by law or the Commission in
connection with such increase in each case without the consent of Authentic
Fitness. The term 'Offer Documents' means the Schedule 14D-1, the
Schedule 13E-3, this Offer to Purchase and the other documents, in each case
filed by Purchaser and Warnaco with the Commission in connection with the Offer,
together with all supplements and amendments thereto.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and an accordance with the DGCL, at the Effective
Time, Purchaser shall be merged with and into Authentic Fitness. As a result of
the Merger, the separate corporate existence of Purchaser will cease and
Authentic Fitness shall continue as the Surviving Corporation. Upon consummation
of the Merger, each Share issued and outstanding immediately prior to the
Effective Time held by a Stockholder (other than any Dissenting Shares) shall be
canceled and shall be converted automatically into the right to receive from
Surviving Corporation the Merger Consideration payable, without interest. All
Shares that are owned by Authentic Fitness as treasury stock, all Shares owned
by any subsidiary of Authentic Fitness and any Shares owned by Warnaco, the
Purchaser or any other wholly owned subsidiary of Warnaco will be cancelled and
retired and will cease to exist and no consideration will be delivered in
exchange therefor.
Pursuant to the Merger Agreement at the Effective Time, each share of
common stock, par value $.01 per share, of Purchaser 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, par
value $.01 per share, of the Surviving Corporation.
The Merger Agreement provides that the Certificate of Incorporation of
Authentic Fitness, as in effect immediately prior to the Effective Time, will be
amended as set forth in the Merger Agreement, and the Certificate of
Incorporation as so amended at the Effective Time, will be the Certificate of
Incorporation of the Surviving Corporation. The Merger Agreement also provides
that the By-laws of Purchaser, as in effect immediately prior to the Effective
Time, will be the By-laws of the Surviving Corporation.
Directors and Officers of the Surviving Corporation. The directors of the
Purchaser and the officers of Authentic Fitness immediately prior to the
Effective Time shall, from and after the Effective Time,
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<PAGE>
be the directors and officers, respectively, of the Surviving Corporation until
their successors shall have been duly elected or appointed or qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws.
Authentic Fitness Option Plans. Warnaco and Authentic Fitness shall take
all actions necessary to provide that, effective as of the Effective Time,
(i) each outstanding employee stock option to purchase Shares ('Option') granted
under the Authentic Fitness 1998 Stock Option Plan, the 1998 Stock Option Plan
for Non-Employee Directors, the 1993 Stock Option Plan for Non-Employee
Directors, the 1992 Long Term Stock Incentive Plan and the 1990 Key Management
Stock Option Plan (the Collectively, 'Stock Plans'), whether or not then
exercisable or vested, shall be cancelled and (ii) in consideration of such
cancellation, Authentic Fitness (or, at Warnaco's option, the Purchaser) shall
pay to such holders of Options an amount in cash in respect thereof equal to the
product of (A) the excess, if any, of the Offer Price over the exercise price of
each such Option and (B) the number of Shares subject thereto (such payment, if
any, to be net of applicable withholding taxes). As of the Effective Time, the
Stock Plans shall terminate and all rights under any provision of any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of Authentic Fitness or any subsidiary
of Authentic Fitness shall be cancelled. Authentic Fitness shall take all action
necessary to ensure that, after the Effective Time, no person shall have any
right under the Stock Plans or any other plan, program or arrangement with
respect to equity securities of Authentic Fitness, or any direct or indirect
subsidiary of Authentic Fitness. Authentic Fitness shall take all such steps as
may be required to cause the transactions contemplated by the Merger Agreement
and any other dispositions of Authentic Fitness equity securities (including
derivative securities) in connection with the Merger Agreement by each
individual who is a director or officer of Authentic Fitness, to be exempt under
Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with a No-Action Letter dated January 12, 1999, issued by the
Commission to Skadden, Arps, Slate, Meagher & Flom LLP.
Withholding Taxes. Warnaco, Purchaser, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares pursuant to the Offer or Merger such
amounts as Warnaco, Purchaser, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the 'Code') or any provision of
state, local or foreign tax law. To the extent amounts are so withheld by
Warnaco, Purchaser, the Surviving Corporation or the Paying Agent, the withheld
amounts (i) shall be treated for all purposes of the Merger Agreement as having
been paid to the holder of the Shares in respect of which the deduction and
withholding was made, and (ii) shall be promptly paid over to the applicable
taxing authority.
Stockholders' Meeting. If required by applicable law in order to consummate
the Merger, Authentic Fitness, acting through the Authentic Fitness Board,
shall, in accordance with applicable law: (i) duly call, give notice of, convene
and hold a special meeting of its stockholders (the 'Special Meeting') as soon
as practicable following the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the Merger Agreement, (ii) prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and use its reasonable efforts (x) to obtain and furnish the
information required to be included by the federal securities laws (and the
rules and regulations thereunder) in the Proxy Statement (as hereinafter
defined) and, after consultation with Warnaco, to respond promptly to any
comments made by the Commission with respect to the preliminary proxy or
information statement and cause a definitive proxy or information statement (the
'Proxy Statement') to be mailed to its Stockholders and (y) to obtain the
necessary approvals of the Merger and the Merger Agreement by its Stockholders;
and (iii) include in the Proxy Statement the recommendation of the Authentic
Fitness Board that Stockholders vote in favor of the approval of the Merger and
the adoption of the Merger Agreement, unless the Authentic Fitness Board
determines (such determination to be authorized by the Authentic Fitness Special
Committee) after consultation with the outside counsel, that doing so could
reasonably be expected to result in a breach of their fiduciary duties under
applicable law.
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Warnaco shall provide Authentic Fitness with the information concerning
Warnaco and Purchaser required to be included in the Proxy Statement. Warnaco
shall vote, or cause to be voted, all of the Shares then owned by it, the
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of the Merger Agreement.
Merger Without Meeting of Stockholders. In the event that Warnaco or the
Purchaser shall acquire at least 90% of the outstanding Shares pursuant to the
Offer or otherwise, each of the parties to the Merger Agreement has agreed to
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without a meeting of
Stockholders, in accordance with Section 253 of the DGCL.
Conduct of Business. Pursuant to the Merger Agreement, during the period
from the date of the Merger Agreement to the Effective Time, unless Warnaco
otherwise agrees in writing, Authentic Fitness shall, and shall cause its
subsidiaries to, in all material respects, (i) conduct its business in the
usual, regular and ordinary course consistent with past practice and (ii) use
all reasonable efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees.
Without limiting the generality of the foregoing, and except as expressly
contemplated or permitted by the Merger Agreement, or as required by applicable
law, rule or regulation, during the period from the date of the Merger Agreement
to the Effective Time, Authentic Fitness shall not, and shall not permit any of
its subsidiaries to, without the prior written consent of Warnaco:
(i) issue, sell, grant, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for any shares of its capital stock, or any rights,
warrants, option, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of its capital stock or (B) any other
securities in respect of, in lieu of, or in substitution for, any shares of
its capital stock outstanding on the date hereof other than pursuant to
(x) the exercise of stock options or warrants outstanding as of the date
hereof and (y) acquisitions and investments permitted by paragraph (iv)
below; (ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding shares of capital
stock; or (iii) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to its
stockholders in their capacity as such, other than the declaration and
payment of regular quarterly cash dividends on its capital stock in an
amount no greater than, 1.25[c] per Share, in accordance with past dividend
policy and except for dividends paid by a direct or indirect wholly owned
subsidiary of Authentic Fitness and to Authentic Fitness or any of its
wholly owned subsidiaries;
(ii) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money other than under
existing lines of credit or guarantee any such indebtedness or make any
loans, advances or capital contributions to, or investments in, any other
person other than Authentic Fitness or its subsidiaries;
(iii) sell, transfer, mortgage, encumber or otherwise dispose of any
of its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned subsidiary, or cancel, release
or assign any indebtedness to any such person or any claims held by any
such person, in each case that is material to such party, except (i) in the
ordinary course of business consistent with past practice, (ii) pursuant to
contracts or agreements in force at the date of the Merger Agreement or
(iii) pursuant to plans disclosed in writing prior to the execution of the
Merger Agreement to Warnaco;
(iv) except for transactions in the ordinary course of business
consistent with past practice, make any material acquisition or investment
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property
or assets of any other individual, corporation or other entity other than a
wholly owned subsidiary thereof;
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(v) amend its certificate of incorporation, bylaws or similar
governing documents; or
(vi) make any commitment to or take any of these aforementioned
actions.
Access to Information. Pursuant to the Merger Agreement, upon reasonable
notice and subject to applicable laws relating to the exchange of information,
Authentic Fitness shall, and shall cause each of its subsidiaries to, afford to
the officers, employees, accountants, counsel and other representatives of
Warnaco, during normal business hours during the period prior to the Effective
Time, access to all its properties, books, contracts, commitments and records,
and to its officers, employees, accountants, counsel and other representatives
and, during such period, Authentic Fitness shall, and shall cause its
subsidiaries to, make available to Warnaco (i) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws (other than
reports or documents which Authentic Fitness is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as Warnaco may reasonably request. Neither Authentic
Fitness nor any of its subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of its customers, jeopardize the attorney client or work product
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of the Merger Agreement. The
parties will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth therein.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
further provides that Warnaco agrees that all rights to indemnification
(including advancement of expenses) existing on the date of the Merger Agreement
in favor of the present or former officers and directors of Authentic Fitness
and its subsidiaries (the 'Managers') with respect to actions taken in their
capacity as Managers prior to or at the Effective Time as provided in the
respective certificate of incorporation or by-laws of Authentic Fitness and its
subsidiaries shall survive the Merger and shall continue in full force and
effect for a period of six years following the Effective Time, and all such
rights in any agreement in effect as of the date of the Merger Agreement between
Authentic Fitness or any of its subsidiaries and any Manager shall survive the
Merger and continue in full force and effect in accordance with its terms.
Warnaco further agrees that from and after the Effective Time, it shall
indemnify, defend and hold harmless the Managers with respect to actions taken
in their capacity as Managers prior to and at the Effective Time to the fullest
extent permitted under Delaware law (including by way of advancement of
expenses).
Warnaco agrees that for a period of six years after the Effective Time, it
shall cause to be maintained in effect policies of directors' and officers'
liability insurance equivalent in scope and amount of coverage to the current
policies maintained by Authentic Fitness with respect to claims arising from
facts or events which occurred prior to or at the Effective Time to the extent
available; provided that in no event shall Warnaco or the Surviving Corporation
be obligated to expend, in order to maintain or procure such insurance coverage,
(i) if such insurance is purchased in one lump sum payment, an amount exceeding
twelve times the annual premium of the Authentic Fitness directors' and
officers' insurance policy in effect on the date hereof (the 'Current Premium')
or (ii) if such insurance is purchased annually, an amount annually more than
two times the Current Premium, but in either such case Warnaco or the Surviving
Corporation shall be obligated to purchase a policy with the greatest coverage
available for a cost not exceeding such amount.
The covenants contained in the Merger Agreement regarding indemnification
of Managers shall survive the Closing, shall continue without time limit and are
intended to benefit Authentic Fitness and each of the indemnified parties.
Subject to the requirements of the DGCL, the Certificate of Incorporation and
By-laws of Authentic Fitness and the Surviving Corporation shall not be amended
in a manner which adversely affects the rights of the indemnified parties under
the Merger Agreement.
Notification of Certain Matters. Authentic Fitness shall give prompt notice
to Warnaco and Warnaco shall give prompt notice to Authentic Fitness, of (i) the
occurrence, or non-occurrence of any event the
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occurrence, or non-occurrence of which would cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (ii) any material failure
of Authentic Fitness or Warnaco, 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 the
Merger Agreement shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Publicity. The initial press release with respect to the execution of the
Merger Agreement shall be a joint press release reasonably acceptable to Warnaco
and Authentic Fitness. Thereafter, so long as the Merger Agreement is in effect,
neither Authentic Fitness, Warnaco nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement with
respect to the Merger, the Merger Agreement or the other transactions
contemplated thereby without the prior consultation of the other party, except
as may be required by law or by any listing agreement with a national securities
exchange.
Further Assurances. Warnaco and Authentic Fitness shall, and shall cause
their subsidiaries to, use all reasonable efforts (i) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and, subject to the conditions set forth in the Merger
Agreement, to consummate the transactions contemplated by the Merger Agreement
as promptly as practicable and (ii) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by Authentic Fitness or Warnaco or any of their
respective subsidiaries in connection with the Merger and the other transactions
contemplated by the Merger Agreement, and to comply with the terms and
conditions of any such consent, authorization, order or approval.
Authentic Fitness and Warnaco shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of the Merger Agreement, the transactions
contemplated therein, including, without limitation, using all reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby and using all reasonable efforts to defend any litigation
seeking to enjoin, prevent or delay the consummation of the transactions
contemplated thereby or seeking material damages.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by Authentic Fitness, Warnaco and Purchaser as to the
enforceability of the Merger Agreement. Authentic Fitness also has provided,
subject to appropriate materiality standards, representations and warranties as
to absence of certain changes or events concerning the Authentic Fitness
business, compliance with law, absence of litigation, corporate status,
capitalization, the accuracy of financial statements and filings with the
Commission.
Conditions to Each Party's Obligation to Effect the Merger. Under the
Merger Agreement, the respective obligations of each party to effect the Merger
are subject to the satisfaction at or prior to the Closing Date of the following
conditions: (i) the Merger Agreement and the transactions contemplated thereby
shall have been approved and adopted by the requisite vote of the Stockholders
of Authentic Fitness to the extent required by the DGCL and the Certificate of
Incorporation and the By-laws of Authentic Fitness; (ii) no foreign, United
States or state governmental authority or other agency or commission or foreign,
United States or state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Shares by Purchaser illegal or otherwise restricting, preventing or
prohibiting consummation of the Offer or the Merger; and (iii) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
not be applicable to the obligations of Warnaco or Purchaser if, in breach of
the Merger Agreement or the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer.
25
<PAGE>
No Solicitation. Authentic Fitness will not, and will not authorize or
permit any of its representatives to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing information) or take any
other action reasonably designed to facilitate any inquiries or the making of
any proposal which constitutes or would reasonably be expected to lead to an
Acquisition Proposal or (ii) in the event of an unsolicited written Acquisition
Proposal, engage in negotiations or discussions with, or provide any information
or data to, any person (other than to Warnaco, any of its affiliates or
representatives and except for information which has been previously publicly
disseminated by the parties) relating to any Acquisition Proposal; provided
however, that nothing contained in the Merger Agreement shall prohibit Authentic
Fitness, the Authentic Fitness Special Committee or the Authentic Fitness Board
from (A) taking and disclosing to its shareholders a position with respect to a
tender or an exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or (B) making such disclosure to its
shareholders with respect to such acquisition proposal as, in good faith
judgment of the Authentic Fitness Special Committee and/or the Authentic Fitness
Board, after consultation with outside counsel, is required by law.
It is understood that any violation of the restrictions set forth in the
Merger Agreement by an executive officer of Authentic Fitness or any investment
banker, attorney or other representative of Authentic Fitness, whether or not
such person is purporting to act on behalf of Authentic Fitness or otherwise,
shall be deemed to be a breach of the Merger Agreement by Authentic Fitness.
Notwithstanding any other provision of the Merger Agreement, Authentic Fitness
may (i) at any time prior to the time Warnaco, the Purchaser or any of their
affiliates purchases Shares pursuant to the Offer, engage in discussions or
negotiations with a third party who (without any solicitation (except as
permitted by the Merger Agreement), directly or indirectly, by Authentic Fitness
or its representatives after the date of the Merger Agreement) seeks to initiate
such discussions or negotiations and may furnish such third party information
concerning Authentic Fitness and its business, properties and assets if, and
only if, (A)(w) the third party has first made an Acquisition Proposal that
could reasonably be expected to lead to a transaction that is more favorable to
Stockholders than the Offer and the Merger, taking into account all aspects of
the Merger and of the Acquisition Proposal, (x) the Acquisition Proposal is
reasonably capable of being completed (as determined in good faith by the
Authentic Fitness Board after consultation with its financial
advisors and outside counsel), (y) the third party has demonstrated that
financing for the Acquisition Proposal is reasonably likely to be obtained (as
determined in good faith by the Authentic Fitness Special Committee after
consultation with its financial advisors), and (z) the Authentic Fitness Special
Committee shall have concluded in good faith, after considering applicable
provisions of state law and after consultation with outside counsel, that a
failure to do so could reasonably be expected to constitute a breach by the
Authentic Fitness Board of its fiduciary duties to its shareholders
under applicable law and (B) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, Authentic Fitness
(x) provides prompt notice to Warnaco to the effect that it is furnishing
information to or entering into discussions or negotiations with such person or
entity and (y) receives from such person an executed confidentiality agreement
substantially similar to the Confidentiality Agreement, and (ii) comply with
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer. Authentic Fitness shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by Authentic Fitness or its
representatives with respect to the foregoing. Authentic Fitness shall notify
Warnaco hereto orally and in writing of any such inquiries, offers or proposals
(including, without limitation, the material terms and conditions of any such
proposal and the identity of the person making it), within 24 hours of the
receipt thereof, shall keep Warnaco informed of the status and details of any
such inquiry, offer or proposal, and shall give Warnaco three business days'
advance written notice of any agreement (specifying the material terms and
conditions thereof) to be entered into with or any information to be supplied to
any person making such inquiry, offer or proposal.
The term 'Acquisition Proposal' means a written proposal or offer (other
than by Warnaco or the Purchaser) for a tender or exchange offer, merger,
consolidation or other business combination involving Authentic Fitness or any
material subsidiary or any proposal to acquire in any manner an equity interest
which could result in such party having a 50% or greater equity interest in or
all or substantially all of the assets of the Authentic Fitness or any material
subsidiary, other than the
26
<PAGE>
transactions contemplated by the Merger Agreement. As used in the Merger
Agreement, 'Board of Directors' includes any committee thereof.
Termination; Termination Fee and Expenses. The Merger Agreement may be
terminated and the Merger and the other transactions contemplated thereby may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof (i) by the mutual consent of the Warnaco and
Authentic Fitness Special Committees; (ii) by the Warnaco or Authentic Fitness
Board if: (A) a Governmental Entity issued an order that becomes final and
non-appealable, prohibiting the Merger, (B) the Offer expires without any Shares
being purchased however, such right shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has resulted in the
failure of Purchaser to purchase shares in the Offer, or (C) the Effective Time
has not occurred by June 30, 2000 (unless the Effective Time has not occurred
because of a material breach of the Merger Agreement by the party seeking to
terminate); (iii) by the Board of Directors of Authentic Fitness if
(A) Warnaco, the Purchaser or any of their affiliates shall have failed to
commence the Offer on or prior to five business days following the date of the
initial public announcement of the Offer; provided, that Authentic Fitness may
not terminate the Merger Agreement if Authentic Fitness is in material breach of
the Merger Agreement; or (B) at any time prior to the time Warnaco, the
Purchaser or any of their affiliates shall purchase Shares pursuant to the
Offer, upon three business days prior notice to Warnaco if, as a result of an
Acquisition Proposal described in the Merger Agreement, (1) the
Authentic Fitness Board shall have concluded in good faith, after
considering applicable provisions of state law and after consultation with
outside counsel, that their fiduciary duties could reasonably require that such
Acquisition Proposal be accepted; (2) Authentic Fitness shall have complied with
all its obligations under the Merger Agreement; (3) the person making the
Acquisition Proposal shall have acknowledged and agreed in writing to pay or
cause to be paid the termination and other fees set forth in the Merger
Agreement if such Acquisition Proposal is consummated or any other Acquisition
Proposal is consummated with such person or any of its affiliates and
(4) during the three business days prior to any such termination, Authentic
Fitness shall, and shall cause its respective financial and legal advisors to,
in good faith, seek to negotiate with Warnaco to make such adjustment in the
terms and conditions of the Merger Agreement as would enable Authentic Fitness
to proceed with the transactions contemplated therein; or (iv) by the
Warnaco Board if (A) due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Section 12 of this Offer to Purchase, Warnaco, the
Purchaser, or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the date of the initial public
announcement of the Offer; provided, that Warnaco may not terminate the Merger
Agreement if Warnaco is in material breach of the Merger Agreement; or
(B) prior to the purchase of Shares of Authentic Fitness Common Stock pursuant
to the Offer, the Board of Directors of Authentic Fitness shall have withdrawn,
or modified or changed in a manner adverse to Warnaco or the Purchaser its
approval or recommendation of the Offer, the Merger Agreement or the Merger or
shall have recommended an Acquisition Proposal or shall have resolved to do
either of the foregoing.
If the Merger Agreement (i) is terminated by Warnaco because the Authentic
Fitness Board changed its recommendation in a manner adverse to Warnaco, or
(ii) is terminated by the Authentic Fitness Board prior to Warnaco's or
Purchaser's purchase of Shares, and the Authentic Fitness Board concludes that
failure to accept an Acquisition Proposal could reasonably be expected to
constitute a breach of its fiduciary duties, then Authentic Fitness shall pay to
Warnaco promptly a termination fee equal to $10 million in cash. If (i) the
Merger Agreement is terminated because the Offer expired without any shares
being purchased by the Purchaser (as a result of the failure of the third
condition in Section 12 of this Offer to Purchase) or if the Effective Time
shall not have occurred by June 30, 2000, and (ii) at the time of such
termination, there shall have been an Acquisition Proposal made by a third party
which, at the time of such termination, shall not have been (x) rejected by the
Authentic Fitness Board and (y) withdrawn by the third party and (iii) within 18
months of any such termination, Authentic Fitness or its affiliate becomes a
subsidiary or part of such third party or a subsidiary or part of an affiliate
of such third party, or merges with or into the third party or a subsidiary or
affiliate of the third party or enters into a definitive agreement to consummate
an Acquisition Proposal with such third party or affiliate thereof, then
Authentic Fitness shall pay to Warnaco, at the closing of the transaction (and
as a condition to the closing) in which Authentic Fitness becomes such a
subsidiary or part of such
27
<PAGE>
other person or the closing of such Acquisition Proposal occurs, a termination
fee equal to $10 million in cash. Notwithstanding the foregoing, no amount shall
be due to Warnaco or Purchaser hereunder if either such party has purchased any
Shares pursuant to the Offer.
In the event of the termination of the Merger Agreement as provided above,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
the Merger Agreement shall forthwith become null and void, and there shall be no
liability on the part of the Warnaco or Authentic Fitness, except nothing in the
Merger Agreement shall relieve any party of liability for fraud or for breach of
the Merger Agreement (other than a breach of the Merger Agreement arising solely
out of the inaccuracy of a representation or warranty made by Authentic Fitness
that was accurate when made on the date hereof and which inaccuracy was not
caused by the intentional actions or omissions by Authentic Fitness).
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
General. In considering the recommendation of the Authentic Fitness Special
Committee and of the Authentic Fitness Board with respect to the Offer and the
Merger and the fairness of the consideration to be received in the Offer and the
Merger, Stockholders should be aware that certain officers and directors of
Warnaco, Purchaser and Authentic Fitness have the interests and relationships
summarized below that may present them with potential conflicts of interest in
connection with the Offer and the Merger. The Authentic Fitness Special
Committee and the Authentic Fitness Board recognized such interests and
determined that such interests neither supported nor detracted from the fairness
of the Offer and the Merger to the Stockholders.
Relationships of Directors with Warnaco. Currently, of the six directors of
Authentic Fitness, three are also directors of Warnaco and, of such three, two
are executive officers of Warnaco. Mrs. Linda J. Wachner, Chairman of the
Authentic Fitness Board and Chief Executive Officer of Authentic Fitness, is
also Chairman of the Warnaco Board and Chief Executive Officer of
Warnaco. Mr. William S. Finkelstein, a director of Authentic Fitness, is also
Senior Vice President, Chief Financial Officer and a director of Warnaco. Mr.
Joseph A. Califano, Jr., a director of Authentic Fitness is also a director of
Warnaco. See 'Special Factors -- Beneficial Ownership of Common Stock' for
information regarding Shares and options to acquire Shares beneficially owned by
certain of Warnaco's executive officers or directors. See also
'Schedule I -- Directors and Executive Officers of Warnaco.'
Relationships with Robert D. Walter. Mr. Robert D. Walter is a member of
the Special Committee of Authentic Fitness. In addition to Mr. Walter's
beneficial ownership of 47,000 Shares, he owns 20,000 shares of and 10,000
options to purchase, Warnaco common stock.
Relationships with Mrs. Linda J. Wachner. Stockholders should be aware that
Mrs. Wachner has certain interests that present actual or potential conflicts of
interest in connection with the Offer and the Merger. As a result of Mrs.
Wachner's current beneficial ownership of approximately 20.6% of the issued and
outstanding Shares, consisting of 1,946,342 Shares and 2,741,900 options to
purchase Shares and Mrs. Wachner's position as Chairman of the Authentic Fitness
Board and Chief Executive Officer of Authentic Fitness, Mrs. Wachner may be
deemed to control Authentic Fitness. As a result of Mrs. Wachner's current
beneficial ownership of approximately 19.6% of the issued and outstanding
Warnaco Common Stock, consisting of 4,286,626 shares of Warnaco common stock and
8,308,490 options to purchase shares of Warnaco common stock, Mrs. Wachner may
be deemed to control Warnaco. See 'Special Factors -- Beneficial Ownership of
Common Stock.'
Authentic Fitness and Mrs. Wachner have entered into an employment
agreement, which was amended on November 1, 1993 (the 'Employment Agreement'),
pursuant to which Authentic Fitness has agreed to employ Mrs. Wachner as the
Chief Executive Officer of Authentic Fitness and of Authentic Fitness Products,
Inc. through October 31, 2000, with automatic one-year renewals thereafter, and
to use its best efforts to ensure that she is elected to serve as a director of
Authentic Fitness for two successive three year terms. The amended Employment
Agreement provides for Mrs. Wachner to receive a base salary of $975,000 per
year for the term of the Employment Agreement with automatic cost of living
increases beginning January 1, 1996. Mrs. Wachner's salary under the Employment
Agreement was $1,063,357 in fiscal 1999. Under the Employment Agreement, Mrs.
Wachner is also
28
<PAGE>
eligible for annual bonuses, as determined by the Compensation Committee. In
this regard, Stockholders approved the Executive Incentive Compensation Plan
('Executive Plan') at the 1994 Annual Meeting of Stockholders.
The Employment Agreement provides that Mrs. Wachner shall devote such time
to the business and affairs of Authentic Fitness as is reasonably necessary to
perform the duties of her position, except that she is not required to perform
any duties or responsibilities which would be likely to result in non-
compliance with or breach or violation of her employment contract with Warnaco.
In the event that Mrs. Wachner's employment is terminated by Authentic
Fitness other than for 'cause,' or by Mrs. Wachner for 'good reason,' which
includes a change in control of Authentic Fitness, in each case as defined in
the Employment Agreement, she will be entitled to receive a lump-sum payment
equal to the present value of base salary payments owing pursuant to the
Employment Agreement through the end of the then current term of employment, all
other accrued but unpaid amounts owing to her in connection with her employment,
and a lump-sum termination payment of $2,000,000. If Mrs. Wachner's employment
is terminated by Authentic Fitness for cause or if she voluntarily terminates
her employment without good reason, she will be entitled to receive any amounts
owing to her under the Employment Agreement through the date of termination. In
the case of any other termination of employment, Mrs. Wachner will receive
continued payments of base salary through the end of the term of employment.
Mrs. Wachner has advised the directors of Warnaco and Authentic Fitness
that she intends to forego any compensation that may otherwise be owed to her by
Authentic Fitness as a result of the Offer and the Merger and will not accept a
salary for service as Chief Executive Officer of Authentic Fitness after the
consummation of the Merger.
Ownership of Common Stock. As of November 15, 1999, the directors and
executive officers of Authentic Fitness, as a group, beneficially owned an
aggregate of 2,130,954 Shares (representing approximately 10.6% of the then
outstanding Shares), excluding Shares subject to options to purchase Shares
granted by Authentic Fitness pursuant to its stock option plans ('Options'). As
of November 15, 1999, the members of the Authentic Fitness Special Committee, as
a group, beneficially owned an aggregate of 21,200 Shares, excluding options to
purchase Shares. All such Shares held by such directors and executive officers
and by the members of the Authentic Fitness Special Committee will be treated in
the Merger in the same manner as Shares held by other Stockholders. See 'The
Merger -- Treatment of Securities in the Merger.' In the aggregate, the
directors and executive officers of Authentic Fitness will be entitled to
receive approximately $44,323,843 for their Shares upon consummation of the
Offer and the Merger (based upon the number of Shares owned as of November 15,
1999) and the members of the Authentic Fitness Special Committee will be
entitled to receive approximately $440,960 for their Shares upon consummation of
the Offer and the Merger (based upon the number of Shares owned as of
November 15, 1999).
Options. As of November 15, 1999, the directors and executive officers of
Authentic Fitness had Options to acquire an aggregate of 3,380,900 Shares.
Immediately after the Effective Date, pursuant to the Merger Agreement, each
outstanding Option, including those held by such directors and executive
officers, whether or not then vested and exercisable will, in accordance with
procedures that apply to all holders of Options, be canceled and each holder of
an Option shall be entitled to receive from Purchaser in consideration for the
cancellation of such Option, an amount in cash, net of applicable withholding
taxes, equal to the product of (i) the number of Shares previously subject to
such Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to such Option. The directors and
executive officers of Authentic Fitness, as a group, will receive total
consideration of $12,332,697 (net of exercise price, but before applicable
taxes) in exchange for the cancellation of their Options based on the number of
Options as of November 15, 1999. See 'Special Factors -- The Merger
Agreement -- Treatment of Stock Options.'
Compensation of Members of the Authentic Fitness Special Committee. Each of
Stuart D. Buchalter, Stanley S. Arkin and Robert D. Walter will each receive
$25,000 for serving as a member of the Authentic Fitness Special Committee.
Stuart D. Buchalter will receive an additional $12,500 for serving as the
chairman of the Authentic Fitness Special Committee. This compensation was
authorized by the Authentic Fitness Board in order to compensate the members of
the Authentic Fitness Special
29
<PAGE>
Committee for the significant additional time commitment that was required of
them in connection with fulfilling their duties and responsibilities and was
paid without regard to whether the Authentic Fitness Special Committee approved
the Offer and the Merger or whether the Merger was consummated. See 'Special
Factors -- Director Compensation -- Interests of Certain Persons in the Merger.'
Directors and Officers of the Surviving Corporation. The directors of
Purchaser and the officers of Authentic Fitness immediately prior to the
Effective Time (which are set forth in Schedule I) shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
Authentic Fitness Director Compensation. Authentic Fitness does not pay any
additional remuneration to employees for serving as directors. In fiscal 1999,
directors of Authentic Fitness who are not employees received an annual retainer
fee of $50,000 plus fees of $1,500 per day for attendance at meetings of the
Board of Directors and $1,000 per day for attendance at meetings of its
committees. Directors are also reimbursed for out-of-pocket expenses. See
'Special Factors -- Interests of Certain Persons in the Offer and the
Merger -- Compensation of Members of the Special Committee.' In addition, each
non-employee director receives an option under the 1998 Stock Option Plan for
Non-employee Directors to purchase 10,000 Shares annually at an exercise price
equal to the fair market value on the date of grant.
The Authentic Fitness Special Committee and the Authentic Fitness Board
were aware of these actual and potential conflicts of interest and considered
them along with the other matters described under 'Special
Factors -- Recommendation of the Authentic Fitness Special Committee and
Authentic Fitness Board; Fairness of the Offer and the Merger.'
Indemnification and Insurance. For a discussion of certain agreements by
Warnaco with respect to indemnification of, and insurance for, directors and
officers of Authentic Fitness, see 'The Merger Agreement -- Indemnification and
Insurance.'
To the best knowledge of Warnaco and Purchaser, all of the executive
officers and directors of Authentic Fitness currently intend to tender Shares
owned by them pursuant to the Offer.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Security Ownership of Directors and Executive Officers of Authentic
Fitness. The following table sets forth, as of November 15, 1999, the aggregate
amount and percentage of Shares beneficially owned by each current executive
officer and director of Authentic Fitness. Any such person whose name does not
appear does not beneficially own any Shares as of November 15, 1999. The table
also sets forth, as of November 15, 1999, the aggregate amount and percentage of
Shares beneficially owned by all current directors and executive officers, as a
group, of Authentic Fitness. No pension, profit-sharing or similar plan of
Authentic Fitness owns any Common Stock.
30
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- ----------------
<S> <C> <C>
Directors and Executive Officers(a)
Linda J. Wachner(a)(b)...................................... 4,688,242 20.5%
Christopher G. Staff(a)..................................... 112,554 *
Michael P. Mc Hugh(a)....................................... 18,680 *
Susan Guensch(a)............................................ 211,131 1.0%
Stanley S. Arkin(c)......................................... 37,600 *
Stuart D. Buchalter(d)...................................... 61,600 *
Joseph A. Califano, Jr.(d).................................. 47,000 *
William S. Finkelstein(d)................................... 164,714 *
Robert D. Walter(d)......................................... 47,000 *
All directors and executive officers as a group (9 5,388,521 23.0%
persons)..................................................
Other 5% Stockholders
Pentland Ventures Ltd ...................................... 5,067,458 25.2%
Pentland Center; Lakeside, Squires Lane, Finchley N3
London, England
General Electric Capital Corporation ....................... 1,809,179 9.0%
260 Long Ridge Road
Stamford, Connecticut 06902
John J. Lattanzio(e) ....................................... 1,755,800 8.7%
277 Park Avenue, 27th Floor
New York, New York 10172
Fayez Sarofim & Co.(f) ..................................... 1,306,600 6.5%
2907 Two Houston Center
Houston, Texas 77010
Leon G. Cooperman(g) ....................................... 1,277,300 6.3%
88 Pine Street, Wall Street Plaza, 31st Floor
New York, New York 10005
</TABLE>
- ------------
* Less than 1%
(a) The business address of each of the directors and executive officers is c/o
Authentic Fitness Corporation, 6040 Bandini Blvd., Commerce, California
90040. The number of Shares beneficially owned by the following officers
includes vested but unexercised options in the following amounts: Mrs.
Wachner: 2,741,900; Mr. Staff: 90,000; Mr. Mc Hugh: 16,667; and Ms.
Guensch: 194,000.
(b) Includes Shares of Common Stock held by a trust of which Mrs. Wachner has
the sole power to vote and no power to dispose of such Shares.
(c) Includes vested but unexercised options to purchase 35,000 Shares of Common
Stock granted pursuant to the 1993 Stock Plan for Non-Employee Directors
and the 1998 Stock Plan for Non-Employee Directors.
(d) Includes vested but unexercised options to purchase 45,000 Shares of Common
Stock granted pursuant to the 1993 Stock Plan for Non-Employee Directors
and the 1998 Stock Plan for Non-Employee Directors.
(e) Information based on a Schedule 13G, dated February 12, 1999, filed with
the Commission by John J. Lattanzio reporting the beneficial ownership of
the Shares of Common Stock set forth in the table. According to such
Schedule 13G, Mr. Lattanzio has sole power to vote or direct the vote of
1,155,200 Shares and shared power to vote or direct the vote of 600,600
Shares, sole dispositive power for 1,155,200 Shares and shared dispositive
power for 600,600 Shares.
(f) Information based on a Schedule 13G, dated February 12, 1999, filed with
the Commission by Fayez Sarofim & Co. ('Fayez') reporting the beneficial
ownership of the Shares of Common Stock set forth in the table. According
to such Schedule 13G, Fayez has sole power to vote or direct the vote
(footnotes continued on next page)
31
<PAGE>
(footnotes continued from previous page)
of 550,000 Shares and shared power to vote or direct the vote of 634,200
Shares, sole dispositive power for 550,000 Shares and shared dispositive
power for 756,600 Shares.
(g) Information based on a Schedule 13G, dated September 7, 1999, filed with
the Commission by Leon G. Cooperman reporting the beneficial ownership of
the Shares of Common Stock set forth in the table. According to such
Schedule 13G, Mr. Cooperman has sole power to vote or direct the vote of
860,000 Shares and shared power to vote or direct the vote of 417,300
Shares, sole dispositive power for 860,000 Shares and shared dispositive
power for 417,300 Shares.
Transactions by Certain Persons in Common Stock. Since September 17, 1999,
60 days prior to the initial filing of the Schedule 13E-3, through November 17,
1999, none of Authentic Fitness, Warnaco or Purchaser, any majority-owned
subsidiary thereof, any director or executive officer thereof and no pension,
profit-sharing or similar plan of Authentic Fitness, Warnaco or Purchaser has
effected any purchases or sales of Common Stock.
Ownership of Warnaco Shares by Directors and Executive Officers of
Authentic Fitness. The following table sets forth, as of November 15, 1999, the
aggregate amount and percentage of shares of common stock of Warnaco
beneficially owned by each current executive officer and director of Authentic
Fitness. The table also sets forth, as of November 15, 1999, the aggregate
amount and percentage of shares of common stock of Warnaco beneficially owned by
all current directors and executive officers, as a group, of Authentic Fitness.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES PERCENT
- ---- --------- -------
<S> <C> <C>
Directors and Executive Officers(a)
Linda J. Wachner(a)(b)...................................... 13,070,280 19.6%
William S. Finkelstein(a)................................... 672,494 1%
Joseph A. Califano, Jr.(c).................................. 92,000 *
Robert D. Walter............................................ 30,000 *
All directors and executive officers of Authentic Fitness
that own shares of Warnaco, as a group (4 persons)........ 13,864,774 20.6%
</TABLE>
- ------------
* Less than 1%
(a) The business address of each of the directors and officers is c/o The
Warnaco Group, Inc., 90 Park Avenue, New York, New York 10016. The number
of shares beneficially owned by the following officers includes vested but
unexercised options in the following amounts: Mrs. Wachner: 8,308,490 and
Mr. Finkelstein: 449,658.
(b) Includes 418 shares of common stock held by a trust of which Mrs. Wachner
has the sole power to vote and no power to dispose of such Shares.
(c) Includes vested but unexercised options to purchase 90,000 shares of common
stock granted pursuant to the Amended and Restated 1993 Stock Plan for
Non-Employee Directors and the 1998 Stock Plan for Non-Employee Directors.
RELATED PARTY TRANSACTIONS
AUTHENTIC FITNESS
In fiscal 1994, Authentic Fitness entered into an exclusive license
agreement for a period of ten years with an option to renew for successive
additional ten year terms with Warnaco, pursuant to which Warnaco has the right
to manufacture and distribute men's and women's sportswear under the Catalina'r'
brand name. Authentic Fitness recorded approximately $1.3 million of royalty
income associated with this agreement in both fiscal 1999 and fiscal 1998,
respectively.
Authentic Fitness' fashion swimwear for women is manufactured in the
facilities of Authentic Fitness or is sourced from domestic and international
contractors. A portion of the manufacturing of
32
<PAGE>
Authentic Fitness is performed by Warnaco. From time to time, Authentic Fitness
and Warnaco jointly negotiate contracts and agreements with vendors and
suppliers.
From time to time, Warnaco and the Authentic Fitness jointly negotiate
contracts and agreements with vendors and suppliers.
Authentic Fitness rents certain office facilities in New York, New York and
Los Angeles, California from Warnaco pursuant to month to month leases. Payments
for the leased facilities amounted to approximately $0.6 million in both fiscal
1999 and 1998. Authentic Fitness purchases certain services from Warnaco
including contract manufacturing, occupancy services related to leased
facilities, laboratory testing, transportation and other services. Payments for
such services totaled approximately $22.7 million and $9.7 million in fiscal
1999 and fiscal 1998, respectively.
In fiscal 1995, Authentic Fitness entered into a sub-license agreement with
Warnaco to manufacture and market certain women's intimate apparel under the
Speedo'r' name. Royalty income related to this agreement was approximately $0.1
million in both fiscal 1999 and fiscal 1998. In addition, Authentic Fitness
sells merchandise to Warnaco and provides other services from time to time. Net
revenues relating to sales of such merchandise and other services, totaled
approximately $18.1 million and $8.0 million in fiscal 1999 and fiscal 1998,
respectively.
In fiscal 1998 Warnaco paid Authentic Fitness approximately $0.5 million,
for certain design and occupancy services. Warnaco also purchased inventory from
Authentic Fitness for sale in its retail outlet stores of approximately
$11.2 million in fiscal 1998. In fiscal 1998, outstanding balances in the amount
of $4.1 million were settled. The net amount due (to) from Authentic Fitness at
January 3, 1998 and January 2, 1999 was approximately $2.6 million and
approximately $(.7) million, respectively.
Mr. Buchalter is of counsel to the California law firm of Buchalter, Nemer,
Fields and Younger, which, from time to time, provides legal services to
Authentic Fitness.
Mr. Arkin is the Senior Partner of the New York law firm of Arkin, Schaffer
& Kaplan LLP which, from time to time, provides legal services to Authentic
Fitness and Warnaco.
Fees and Expenses. The following is an estimate of expenses to be incurred
in connection with the Offer and Merger, other than the fees and expenses of
Chase Securities Inc. (see 'Special Factors -- Opinion of Financial Advisor to
Authentic Fitness'). The Merger Agreement provides that all costs and expenses
incurred in connection with the Offer and the Merger will be paid by Warnaco.
<TABLE>
<CAPTION>
EXPENSES TO BE
PAID BY
PURCHASER
AND ITS AFFILIATES AMOUNT
- ------------------ ------
<S> <C>
Legal Fees and Expenses................................. $3,000,000
Printing and Mailing.................................... 70,000
Filing Fees............................................. 100,000
Dealer Manager Fees..................................... 250,000
Depositary Fees......................................... 20,000
Information Agent Fees.................................. 5,000
Miscellaneous........................................... 50,000
----------
Total.............................................. $3,700,000
----------
----------
</TABLE>
33
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of such extension or amendment), Purchaser will
accept for payment, and will pay for, all Shares validly tendered prior to
the Expiration Date (as hereinafter defined) and not withdrawn as permitted
by 'The Tender Offer -- Withdrawal Rights' Section 4. The term 'Expiration
Date' means 12:00 midnight, New York City time, on Wednesday, December 15,
1999, unless and until 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 term 'Expiration
Date' shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but
subject to the terms and conditions of the Merger Agreement), at any time
and from time to time, to extend for any reason the period of time during
which the Offer is open, including the occurrence of any of the conditions
specified in 'The Tender Offer -- Conditions to the Offer' Section 12, by
giving oral or written notice of such extension to the Depositary. During
any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the rights of a tendering
stockholder to withdraw his Shares. See 'The Tender Offer -- Withdrawal
Rights' Section 4.
Subject to the applicable regulations of the Commission, Purchaser
also expressly reserves the right, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement), at any time and from
time to time, (i) to delay acceptance for payment of, or, regardless of
whether such Shares were theretofore accepted for payment, payment for, any
Shares, pending receipt of any regulatory approval specified in 'The Tender
Offer -- Certain Legal Matters; Regulatory Approval; Certain Litigation'
Section 13, (ii) to terminate the Offer and not accept for payment any
Shares upon the occurrence of any of the conditions specified in 'The
Tender Offer -- Conditions to the Offer' Section 12, and (iii) to waive any
condition or otherwise amend the Offer in any respect, by giving oral or
written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof.
The Merger Agreement provides that Purchaser shall not (i) decrease
the price per Share payable pursuant to the Offer, (ii) amend the
conditions to the Offer set forth in Annex A to the Merger Agreement, and
(iii) impose conditions to the Offer in addition to those set forth in
Annex A to the Merger Agreement, without the prior written consent of the
Authentic Fitness Special Committee.
Notwithstanding the foregoing, Purchaser shall be entitled to and
shall, and Warnaco agrees to cause Purchaser to, extend the Offer at any
time up to 40 days in the aggregate, in one or more periods of not more
than 10 business days, if at the initial expiration date of the Offer, or
any extension thereof, any condition to the Offer is not satisfied or
waived; provided however, that Purchaser shall not be required to extend
the Offer as provided in this sentence unless (i) each such condition is
reasonably capable of being satisfied and (ii) Authentic Fitness is in
material compliance with all of its covenants under the Merger Agreement
after Purchaser shall have given Authentic Fitness five business days prior
written notice of any such non-compliance. In addition, without limiting
the foregoing, Purchaser may, without the consent of Authentic Fitness,
(A) extend the Offer for up to an additional 30 days, in one or more
periods of not more than 10 business days, if any condition to the Offer is
not satisfied or waived and (B) if, on the expiration date of the Offer,
the Shares validly tendered and not withdrawn pursuant to the Offer are
sufficient to satisfy the Minimum Condition but equal less than 90% of the
outstanding Shares, extend the Offer on one occasion for up to 10 business
days notwithstanding that all the conditions to the Offer have been
satisfied so long as (i) Purchaser irrevocably waives the satisfaction of
any of the conditions to the Offer (other than in the case of the first
condition listed in Section 12 of the Offer to Purchase, a Prohibition that
subsequently may not be satisfied during any such extension of the Offer)
and (ii) Warnaco does not have knowledge that any such Prohibition is
pending or threatened at the time of such extension. In addition, the Offer
Price may be increased and the Offer may be extended to the extent required
by law in connection with such increase in each case
34
<PAGE>
without the consent of Authentic Fitness. Purchaser acknowledges that
(i) Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause
(i) of the first sentence of this paragraph), any Shares upon the
occurrence of any of the conditions specified in 'The Tender -- Offer
Certain Conditions of the Offer' Section 12, without extending the period
of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension 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. Subject to applicable law (including Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that
material changes be promptly disseminated to Stockholders in a manner
reasonably designed to inform them of such changes) and without limiting
the manner in which Purchaser may choose to make any public announcement,
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of
the Offer, Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the
Expiration Date, Purchaser should increase the consideration being offered
in the Offer, such increase in the consideration being offered will be
applicable to all Stockholders whose Shares are accepted for payment
pursuant to the Offer and, if at the time notice of any such increase in
the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time
earlier than the period ending on the tenth business day from and including
the date that such notice is first so published, sent or given, the Offer
will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a 'business day' means any day other
than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
Authentic Fitness has provided Purchaser with Authentic Fitness
stockholder list 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 to record holders of
Shares whose names appear on the Authentic Fitness stockholder list and
will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing.
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),
Purchaser will accept for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn, promptly
after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions to the Offer set forth in 'The
Tender Offer -- Conditions to the Offer' Section 12. Subject to applicable
rules of the Commission, Purchaser expressly reserves the right to delay
acceptance for payment of, or payment for, Shares in order to comply in
whole or in part with any other applicable law.
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) the certificates evidencing such Shares (the 'Share
Certificates') or timely confirmation (a 'Book-Entry 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 'The Tender Offer -- Procedures for Accepting
the Offer and Tendering Shares' Section 3, (ii) the Letter of Transmittal
(or a 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) in lieu of the Letter of Transmittal and
(iii) any other documents required under the Letter of Transmittal.
35
<PAGE>
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
the Book-Entry Confirmation which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares which are the subject of
such Book-Entry Confirmation, that such participant has received and agrees
to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when Purchaser gives oral or written notice
to the Depositary of Purchaser's acceptance for payment of such Shares
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 Stockholders for the purpose of
receiving payments from Purchaser and transmitting such payments to
tendering Stockholders whose Shares have been accepted for payment. Under
no circumstances will interest on the purchase price for Shares be paid,
regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if Share Certificates
are submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedure set forth in 'The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares' Section 3, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), as
promptly as practicable following the expiration or termination of the
Offer.
If, prior to the Expiration Date, Purchaser shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration shall be paid to all holders of Shares that are
purchased pursuant to the Offer, whether or not such Shares were tendered
prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer,
but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of
tendering Stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter
of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message in lieu of the Letter of
Transmittal) and any other documents required by the Letter of Transmittal,
must be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and either (i) the Share Certificates
evidencing tendered Shares must be received by the Depositary at such
address or such Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary (including an Agent's Message if the tendering
stockholder has not delivered a Letter of Transmittal), in each case prior
to the Expiration Date, or (ii) the tendering stockholder must comply with
the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS
AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL
BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. 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.
36
<PAGE>
Book-Entry Transfer. The Depositary will establish accounts with
respect to the Shares at 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 system of
the Book-Entry Transfer Facility may make a book-entry delivery of Shares
by causing the Book-Entry Transfer Facility to transfer such Shares into
the Depositary's account at the Book-Entry Transfer Facility in accordance
with the Book-Entry Transfer Facility's procedures for such transfer.
However, although delivery of Shares may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message in lieu of the
Letter of Transmittal, and any other required documents, must, in any case,
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, or the
tendering stockholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY
DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member in good standing of the Security
Transfer Agent Medallion Signature Program, or by any other 'eligible
guarantor institution', as such term is defined in Rule 17Ad-15 under the
Exchange Act (each of the foregoing being referred to as an 'Eligible
Institution'), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box entitled
'Special Payment Instructions' or the box entitled 'Special Delivery
Instructions' on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is
to be made, or a Share Certificate not accepted for payment or not tendered
is to be returned, to a person other than the registered holder(s), then
the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appears on the Share Certificate, with the signature(s) on such
Share Certificate or stock powers guaranteed by an Eligible Institution.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares
pursuant to the Offer and such stockholder's Share Certificates evidencing
such Shares are not immediately available or such stockholder cannot
deliver the Share Certificates and all other required documents to the
Depositary prior to the Expiration Date, or such stockholder cannot
complete the procedure for delivery by book-entry transfer on a timely
basis, such Shares may nevertheless be tendered, provided that all the
following conditions are satisfied:
(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 made available by Purchaser, is received
prior to the Expiration Date by the Depositary as provided below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a 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
any other documents required by the Letter of Transmittal are
received by the Depositary within three NYSE trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth
in the form of Notice of Guaranteed Delivery made available by Purchaser.
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 the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, and the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature
37
<PAGE>
guarantees (or, in the case of a book-entry transfer, an Agent's Message),
and any other documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion,
which determination shall be final and binding on all parties. Purchaser
reserves the absolute right to reject any and all tenders determined by it
not to be in proper form or the acceptance for payment of which may, in the
opinion of its counsel, be unlawful. Purchaser also reserves the absolute
right to waive any condition of the Offer or any defect or irregularity in
the tender of any Shares of any particular stockholder, whether or not
similar defects or irregularities are waived in the case of other
Stockholders. No tender of Shares will be deemed to have been validly made
until all defects and irregularities have been cured or waived. None of
Purchaser, Warnaco, the Depositary, the Information Agent 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. 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.
Other Requirements. By executing the Letter of Transmittal as set
forth above, a tendering stockholder irrevocably appoints designees of
Purchaser as such stockholder's proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the
full extent of such stockholder's rights with respect to the Shares
tendered by such stockholder and accepted for payment by Purchaser (and
with respect to all other Shares or other securities issued or issuable in
respect of such Shares on or after November 15, 1999), if any. All such
proxies shall be considered coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such
Shares (and such other Shares and securities) will be revoked without
further action, and no subsequent proxies may be given nor any subsequent
written consent executed by such stockholder (and, if given or executed,
will not be deemed to be effective) with respect thereto. The designees of
Purchaser will, with respect to the Shares for which the appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual
or special meeting of Stockholders of Authentic Fitness or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's payment
for such Shares, Purchaser must be able to exercise full voting rights with
respect to such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of
the procedures described above will constitute a binding agreement between
the tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT TO CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED
PURSUANT TO THE OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY
WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY
THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF
TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A STOCKHOLDER,
THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH
STOCKHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by
Purchaser pursuant to the Offer, may also be withdrawn at any time after
January 14, 2000. If 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
Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of
38
<PAGE>
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 in this Section 4.
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 page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release
of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution,
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 'The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares' Section 3, 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.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by Purchaser, in its sole
discretion, whose determination will be final and binding. None of
Purchaser, Warnaco, the Depositary, the Information Agent 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.
Any Shares properly withdrawn will thereafter be deemed not to have
been validly tendered for purposes of the Offer. However, withdrawn Shares
may be re-tendered at any time prior to the Expiration Date by following
one of the procedures described in 'The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares' Section 3.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for
Shares pursuant to the Offer or in the Merger will be a taxable transaction
for U.S. federal income tax purposes and may also be a taxable transaction
under applicable state, local or foreign tax laws. In general, a
stockholder will recognize gain or loss for U.S. federal income tax
purposes equal to the difference between the amount of cash received in
exchange for the Shares sold and such U.S. holder's adjusted tax basis in
such Shares. Assuming the Shares constitute capital assets in the hands of
the U.S. holder, such gain or loss will be capital gain or loss and, in the
case of an individual stockholder, will be taxable at 20% when the Shares
tendered pursuant to the Offer or converted pursuant to the Merger were
held in excess of 12 months. Gain or loss will be calculated separately for
each block of Shares tendered pursuant to the Offer or converted pursuant
to the Merger. The deduction of capital losses is subject to certain
limitations. Prospective investors should consult their own tax advisors in
this regard.
In general, in order to prevent backup federal income tax withholding
at a rate of 31% on the cash consideration to be received in the Offer or
pursuant to the Merger, each stockholder who is not otherwise exempt from
such requirements must provide such stockholder's correct taxpayer
identification number (and certain other information) by completing the
Substitute Form W-9 in the Letter of Transmittal.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING BROKER-DEALERS, STOCKHOLDERS WHO ACQUIRED SHARES
PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES AND FOREIGN CORPORATIONS.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO
CHANGE POSSIBLY WITH RETROACTIVE EFFECT. STOCKHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING
39
<PAGE>
THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL
AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE under the symbol 'ASM.' Authentic Fitness paid its
initial quarterly cash dividend of 1.25[c] per share on October 2, 1995.
Since that time Authentic Fitness has declared sixteen successive quarterly
cash dividends of 1.25[c] per share. The following table sets forth, for
the quarters indicated, the high and low sales prices for the Shares as
reported on the Composite Tape.
<TABLE>
<CAPTION>
PRICE
-----------------------
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended July 4, 1998
First quarter.......................................... 15 3/4 11
Second quarter......................................... 19 9/16 14 15/16
Third quarter.......................................... 21 15 7/8
Fourth quarter......................................... 18 7/8 14 3/8
Fiscal Year Ended July 3, 1999
First quarter.......................................... 15 3/4 10 1/2
Second quarter......................................... 18 1/4 13 1/8
Third quarter.......................................... 18 15 5/16
Fourth quarter......................................... 18 1/4 15 15/16
Fiscal Year Ended July 1, 2000
First quarter.......................................... 18 9/16 15 15/16
Second quarter through November 16, 1999............... 20 3/8 17 9/16
</TABLE>
On October 8, 1999, the last full trading day prior to the public
announcement of Warnaco's original offer to acquire Authentic Fitness, the
closing price per Share as reported on the NYSE was $17 9/16. On November
15, 1999, the last full trading day prior to the public announcement of the
execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on the NYSE was $19 1/2.
On November 16, 1999 the last full trading day prior to the commencement of
the Offer, the closing price per Share as reported on the NYSE was $20 3/8.
STOCKHOLDERS ARE URGED TO OBTAIN AUTHENTIC FITNESS CURRENT MARKET
QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; THE NYSE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade
publicly and will reduce the number of holders of Shares, which could
adversely affect the liquidity and market value of the remaining Shares
held by the Stockholders.
Depending upon the number of Shares purchased pursuant to the Offer,
the Shares may no longer meet the requirements of the NYSE for continued
listing and may be delisted from the NYSE.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders
of at least 100 Shares 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.
Authentic Fitness has advised Purchaser that, as of November 11, 1999,
there were 20,137,661 Shares outstanding, held by approximately 126 holders
of record. 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 could be adversely affected.
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
40
<PAGE>
would be reported by such exchange or through the National Association of
Securities Dealers Automated Quotation System or other sources. The extent
of the public market therefor and the availability of such quotations would
depend, however, upon such factors as the number of Stockholders 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. 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 Merger Consideration.
The Shares are currently 'margin securities', as such term is defined
under the rules of the Board of Governors of the Federal Reserve System
(the 'Federal Reserve Board'), which 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, following the Offer it is possible that the Shares
might no longer constitute 'margin securities' for purposes of the margin
regulations of the Federal Reserve Board, in which event such Shares could
no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by Authentic Fitness to the
Commission if the Shares are not listed on a national securities exchange
and there are fewer than 300 record holders. The termination of the
registration of the Shares under the Exchange Act would substantially
reduce the information required to be furnished by Authentic Fitness to
holders of Shares 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 in
connection with Stockholders' meetings and the requirements of Rule 13e-3
under the Exchange Act with respect to 'going private' transactions, no
longer applicable to the Shares. In addition, 'affiliates' of Authentic
Fitness and persons holding 'restricted securities' of Authentic Fitness
may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. If
registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be 'margin securities' or be eligible for NYSE
reporting.
8. CERTAIN INFORMATION CONCERNING AUTHENTIC FITNESS. Except as otherwise
set forth herein, the information concerning Authentic Fitness contained in
this Offer to Purchase, including financial information, has been furnished
by Authentic Fitness or has been taken from or based upon publicly
available documents and records on file with the Commission and other
public sources. Purchaser does not assume any responsibility for the
accuracy or completeness of the information concerning Authentic Fitness
furnished by Authentic Fitness or contained in such documents and records
or for any failure by Authentic Fitness to disclose events which may have
occurred or may affect the significance or accuracy of any such information
but which are unknown to Purchaser or Warnaco.
General. Authentic Fitness is a Delaware corporation with its
principal executive offices located at 6040 Bandini Blvd., Commerce,
California, 90040. Authentic Fitness designs, manufactures and markets
swimwear, swim accessories and active fitness apparel under the Speedo'r',
Speedo'r'Authentic Fitness'r', Catalina'r', Anne Cole'r', Cole of
California'r', Ralph Lauren'r', Polo Sport Ralph Lauren'r', Polo Sport-RLX
'r', Oscar de la Renta'r', Sunset Beach'r', Sandcastle'r' and Sporting
Life'r' brand names; and activewear and swimwear under the White Stag'r'
brand name. In addition, Authentic Fitness operates 139 Speedo'r' Authentic
Fitness'r' retail stores, which sell active fitness apparel in major
metropolitan areas of the United States and Canada, including an E-commerce
Internet website -- www.Speedo.com.
Except as described in this Offer to Purchase, (i) to the best
knowledge of Authentic Fitness, none of the persons listed in Section 3 of
Schedule I to this Offer to Purchase or any associate or majority-owned
subsidiary of Authentic Fitness or any of the persons so listed,
beneficially owns or has any right to acquire, directly or indirectly, any
Shares and (ii) to the best knowledge of Authentic Fitness, none of the
persons or entities referred to above nor any director, executive
41
<PAGE>
officer or subsidiary of any of the foregoing, has effected any transaction
in the Shares during the past 60 days.
Except as provided in the Merger Agreement and as otherwise described
in this Offer to Purchase, to the best knowledge of Authentic Fitness, none
of the persons listed in Section 3 of Schedule I to this Offer to Purchase,
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of Authentic Fitness, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or voting of such securities, joint ventures, loan
or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, consents or
authorizations. Except as set forth in this Offer to Purchase, since
July 6, 1997, to the best knowledge of Authentic Fitness, none of the
persons listed in Section 3 of Schedule I hereto, has had any business
relationship or transaction with Authentic Fitness or any of its executive
officers, directors or affiliates that is required to be reported under
the rules and regulations of the Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, since July 6, 1997, there
have been no contacts, negotiations or transactions between any of the
Authentic Fitness subsidiaries or, to the best knowledge of Authentic
Fitness, any of the persons listed in Section 3 of Schedule I to this
Offer to Purchase, on the one hand, and Authentic Fitness or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election
of directors or a sale or other transfer of a material amount of assets.
Financial Information. Set forth below is certain selected
consolidated financial information relating to Authentic Fitness and its
subsidiaries which has been excerpted or derived from the audited financial
statements contained in the Authentic Fitness Annual Report on Form 10-K
for the fiscal year ended July 3, 1999 (the 'Form 10-K') and the unaudited
quarterly information contained in the Authentic Fitness Quarterly Report
on Form 10-Q for the quarter ended October 2, 1999 (the 'Form 10-Q') and
incorporated by reference in the Schedule 13E-3. More comprehensive
financial information is included in the Form 10-K, the Form 10-Q and
other documents filed by Authentic Fitness with the Commission. The
financial information that follows is qualified in its entirety by
reference to such reports and other documents, including the financial
statements and related notes contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices
of the Commission in the manner set forth below.
42
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------
JULY 4, JULY 3,
1998 1999
---- ----
<S> <C> <C>
Statement of Operations Data:
Net revenues........................................... $367,484 $410,817
Gross profit........................................... 148,664 163,254
Selling, general and administrative expenses........... 87,124 94,617
Facility consolidations and other...................... 1,408(a) 3,324(b)
Depreciation and amortization.......................... 10,351 11,177
-------- --------
Income before interest, income taxes and cumulative
effect of change in accounting principle.............. 49,781 54,136
Interest expense....................................... 14,253 14,060
-------- --------
Income before income taxes and cumulative effect of
change in accounting principle........................ 35,528 40,076
Income taxes........................................... 12,759 15,629
-------- --------
Income before cumulative effect of change in accounting
principle............................................. 22,769 24,447
Cumulative effect of change in accounting principle.... -- 2,518(c)
-------- --------
Net income............................................. $ 22,769 $ 21,929
-------- --------
-------- --------
Dividends on common stock.............................. $ 1,149 $ 1,005
-------- --------
-------- --------
Per share data:
Net income:
Basic............................................. $1.02 $1.08
Diluted........................................... $1.01 $1.06
Weighted average number of shares of common stock
outstanding(d):
Basic............................................. 22,310 20,359
Diluted........................................... 22,510 20,684
Product line summary:
Net revenues:
Speedo'r'......................................... $198,420 $225,167
Designer Swimwear................................. 106,103 125,383
Speedo'r' Authentic Fitness'r' Retail............. 56,764 60,267
Skiwear and other................................. 6,197 --
-------- --------
$367,484 $410,817
-------- --------
-------- --------
Percentage of net revenues:
Speedo'r'......................................... 54.0% 54.8%
Designer Swimwear................................. 28.9% 30.5%
Speedo'r' Authentic Fitness'r' Retail............. 15.4% 14.7%
Skiwear and other................................. 1.7% --
-------- --------
100.0% 100.0%
-------- --------
-------- --------
Balance Sheet Data:
<S> <C> <C>
Working capital........................................ $ 69,097 $ 46,641
Total assets........................................... 316,162 323,226
Long-term debt (excluding current maturities).......... 33,178 22,476
Stockholders' equity................................... 150,842 131,601
</TABLE>
(footnotes on next page)
43
<PAGE>
(footnotes from previous page)
(a) Reflects costs incurred for plant consolidation and retail store closures
of $0.9 million after-tax (or $0.04 per diluted share).
(b) Reflects costs incurred for plant consolidations of $2.0 million after-tax
(or $0.10 per diluted share).
(c) Reflects the write-off of deferred financing costs related to certain
indebtedness and the refinancing of the Company's credit agreement in March
1996.
(d) Effective with the 1999 fiscal year, the Company early adopted the
provisions of SOP 98-5, `Reporting on the Costs of Start-up Activities'
(`SOP 98-5'), which requires, among other things, that certain
pre-operating costs which had previously been deferred and amortized be
expensed as incurred. The Company recorded the impact as the cumulative
effect of a change in accounting principle of $2.5 million, net of income
tax benefits, or $0.12 per diluted share.
(e) All share and per share amounts have been restated to reflect the
two-for-one stock split effective February 10, 1994 and the impact of
Statement of Financial Accounting Standards No. 128, `Earnings Per Share',
adopted effective July 4, 1998.
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
--------------------------
OCTOBER 2, OCTOBER 3,
1999 1998
---- ----
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Total assets................................................ $307,517 $277,461
Total stockholders' equity.................................. 131,622 107,389
Net revenues. $ 43,859 $ 39,619
Income (loss) before interest, income taxes, minority
interest and cumulative effect of change in accounting
principle................................................. (5,356) (9,954)
Net income (loss)........................................... (5,235) (10,096)
Basic earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle.................................. $ (0.26) $ (0.34)
Cumulative effect of change in accounting principle.... -- (0.12)
-------- --------
Basic earnings (loss) per share............................. $ (0.26) $ (0.46)
Diluted earnings (loss) per share:
Income (loss) before cumulative effect of change in
accounting principle.................................. $ (0.26) $ (0.34)
Cumulative effect of change in accounting principle.... -- (0.12)
-------- --------
Diluted earnings (loss) per share........................... $ (0.26) $ (0.46)
-------- --------
-------- --------
Cash dividends declared per share of common stock........... $ 0.01 $ 0.01
-------- --------
-------- --------
Weighted average number of common stock outstanding:
Basic.................................................. 19,892,790 22,071,483
---------- ----------
---------- ----------
Diluted................................................ 19,892,790 22,071,483
---------- ----------
---------- ----------
</TABLE>
Authentic Fitness is subject to the informational filing requirements
of the Exchange Act and, in accordance therewith, is required to file
periodic 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 Authentic Fitness
directors and officers, their remuneration, stock options granted to them,
the principal holders of the Authentic Fitness securities and any material
interest of such persons in transactions with Authentic Fitness is required
to be disclosed in proxy statements distributed to Stockholders of
Authentic Fitness and filed with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048 and the Citicorp Center, 500 West Madison Street,
44
<PAGE>
Suite 1400, Chicago, Illinois 60661. Information regarding the public
reference facilities may be obtained from the Commission by telephoning
1-800-SEC-0330. The Authentic Fitness filings are also available to the
public on the Commission Internet site (http://www.sec.gov). Copies of such
materials may also be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Certain reports and other information concerning
Authentic Fitness may also be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
9. CERTAIN INFORMATION CONCERNING WARNACO AND PURCHASER. Purchaser is
a newly incorporated Delaware corporation organized in connection with the
Offer and the Merger and has not carried on any activities other than in
connection with the Offer and the Merger. The principal offices of
Purchaser are located at 90 Park Avenue, New York, New York, 10016.
Purchaser is a wholly owned subsidiary of Warnaco.
Until immediately prior to the time that Purchaser will purchase
Shares pursuant to the Offer, it is not anticipated that Purchaser will
have any significant assets or liabilities or engage in activities other
than those incident to its formation and capitalization and the
transactions contemplated by the Offer and the Merger. Because Purchaser is
newly formed and has minimal assets and capitalization, no meaningful
financial information regarding Purchaser is available.
Warnaco. Warnaco is a Delaware corporation with principal executive
offices at 90 Park Avenue, New York, New York, 10016, and its telephone
number is (212) 661-1300. Warnaco and its subsidiaries design, manufacture
and market a broad line of women's intimate apparel, such as bras, panties,
sleepwear, shapewear and daywear, and men's apparel, such as sportswear,
underwear and accessories, women; sportswear and dresses and fragrances all
of which are sold under a variety of internationally recognized owned and
licensed brand names including Warners'r', Olga'r', Calvin Klein'r',
Lejaby'r', Van Raalte'r', Weight Watchers'r', Izka'r', Chaps by Ralph
Lauren'r', A.B.S. by Allen B. Schwartz'r' and Penhaligons'r'.
During fiscal 1998, Warnaco acquired the sub-license to produce Calvin
Klein'r' jeans and jeans-related products for children in the United
States, Mexico and Central and South America. Warnaco also acquired the
sub-license to distribute Calvin Klein'r' jeans, jeans-related products and
khakis for men and women in Mexico, Central America and Canada. In
addition, Warnaco discontinued several underperforming product lines and
styles. During fiscal 1997, Warnaco acquired Designer Holdings Ltd.
(`Designer Holdings'), which develops, manufactures and markets designer
jeanswear and sportswear for men, women and juniors, and holds a 40-year
extendable license from Calvin Klein, Inc. to develop, manufacture and
market designer jeanswear and jeans related sportswear collections in
North, South and Central America under the Calvin Klein Jeans'r', CK/Calvin
Klein Jeans'r' and CK/Calvin Klein/Khakis'r' labels.
During fiscal 1996, Warnaco made three strategic acquisitions, GJM,
Lejaby and Bodyslimmers, designed to increase the breadth of the Warnaco's
product lines and increase the worldwide distribution of the Warnaco's
products. In March 1994, Warnaco acquired the worldwide trademarks, rights
and business of Calvin Klein'r' men's underwear and licensed the Calvin
Klein trademark for men's accessories. In addition, the acquisition
included the worldwide trademarks and rights of Calvin Klein women's
intimate apparel. In 1999, Warnaco entered into an exclusive license
agreement with Weight Watchers International, Inc., to market shapewear and
activewear for the mass market under the Weight Watchers label and acquired
a 70% equity interest in Penhaligon's Ltd., a United Kingdom based retailer
of perfumes, soaps, toiletries and other products for men and women.
Mrs. Wachner has been a Director, Chairman of the Board and Chief
Executive Officer of Authentic Fitness since its inception in May 1990.
Mrs. Wachner concurrently serves as and has been a Director, President and
Chief Executive Officer of Warnaco since August 1987, and the Chairman of
the Board of Warnaco since August 1991. Mr. Robert D. Walter has been a
Director of Authentic Fitness since November 1992. Mr. Walter served as a
Vice President and Chief Financial Officer of Warnaco from June 1986 to
February 1988 pursuant to a consulting contract. Mr. William S. Finkelstein
has been a Director of Authentic Fitness since May 1992. Mr. Finkelstein
has been Senior Vice President of Warnaco since May 1992 and Chief
Financial Officer and a
45
<PAGE>
Director of Warnaco since May 1995. Mr. Joseph Califano, Jr. has been a
Director of Authentic Fitness since November 1993. Mr. Califano is also a
director of Warnaco. As noted herein, Mrs. Wachner, Mssrs. Finkelstein, and
Califano are beneficial owners of the Authentic Fitness Common Stock.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of Purchaser and Warnaco and certain other information
are set forth in Schedule I hereto.
Available Information. Warnaco is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required
to file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Warnaco's directors and
officers, their remuneration, stock options granted to them, the principal
holders of Warnaco's securities and any material interest of such persons
in transactions with Warnaco is required to be disclosed in proxy
statements distributed to Warnaco's Stockholders and filed with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's regional offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Information
regarding the public reference facilities may be obtained from the
Commission by telephoning 1-800-SEC-0330. Warnaco's filings are also
available to the public on the Commission Internet site
(http://www.sec.gov). Copies of such materials may also be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. Certain reports and other
information concerning Warnaco may also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
Except as described in this Offer to Purchase, (i) none of Purchaser
or Warnaco nor, to the best knowledge of Purchaser and Warnaco, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of Purchaser or Warnaco or any of the persons so
listed, beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of Purchaser or Warnaco nor, to the
best knowledge of Purchaser and Warnaco, any of the persons or entities
referred to above nor any director, executive officer or subsidiary of any
of the foregoing, has effected any transaction in the Shares during the
past 60 days.
Except as provided in the Merger Agreement and as otherwise described
in this Offer to Purchase, none of Purchaser or Warnaco nor, to the best
knowledge of Purchaser and Warnaco, any of the persons listed in Schedule I
to this Offer to Purchase, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of
Authentic Fitness, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or
voting of such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving
or withholding of proxies, consents or authorizations. Except as set forth
in this Offer to Purchase, since July 6, 1997, none of Purchaser or Warnaco
nor, to the best knowledge of Purchaser and Warnaco, any of the persons
listed on Schedule I hereto, has had any business relationship or
transaction with Authentic Fitness or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. Except as set forth
in this Offer to Purchase, since July 6, 1997 there have been no contacts,
negotiations or transactions between any of Purchaser or Warnaco, or any of
their respective subsidiaries or, to the best knowledge of Purchaser and
Warnaco, any of the persons listed in Schedule I to this Offer to Purchase,
on the one hand, and Authentic Fitness or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, an election of directors or a sale or
other transfer of a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS. The Offer is not conditioned upon any
financing arrangements. The total amount of funds required by Purchaser to
consummate the Offer and the Merger, pay the fees and expenses of the Offer
and the Merger expected to be incurred by Parent
46
<PAGE>
and refinance all the existing revolving bank debt of Authentic Fitness, is
estimated to be approximately $557 million. Purchaser will obtain all such
funds from Warnaco, either directly or indirectly, in the form of capital
contributions and/or loans from Warnaco and its affiliates. Warnaco will
obtain all such funds pursuant to a $600 Million Credit Agreement, dated as
of November 17, 1999 (the '$600 Million Credit Agreement'), among Warnaco,
as borrower, Warnaco and its material domestic subsidiaries, as guarantors,
The Bank of Nova Scotia ('Scotiabank') and Salomon Smith Barney, Inc.
('SSB'), as co-lead arrangers and co-book managers, Scotiabank, as
administrative agent, Citibank, N.A., as syndication agent, Morgan Guaranty
Trust Company of New York, as documentation agent and the banks from time
to time parties thereto (the 'Banks'). This summary is not a complete
description of the terms and conditions of the $600 Million Credit
Agreement, and is qualified in its entirety by reference to the full text
of the $600 Million Credit Agreement, which is incorporated herein by
reference and copies of which have been filed with the Commission as an
exhibit to the Schedule 14D-1 and the Schedule 13E-3. The $600 Million
Credit Agreement may be examined, and copies obtained, in the manner set
forth in Sections 8 and 9 of this Offer to Purchase. In addition, Warnaco
has obtained sufficient additional commitments under its existing trade
credit facility to refinance the trade debt of Authentic Fitness that is
expected to be outstanding at the Effective Time. Subject to the
satisfaction of certain customary conditions precedent, loans under the
$600 Million Credit Agreement may be utilized to finance the transactions
contemplated under the Merger Agreement and to pay fees and expenses
incurred by Warnaco in connection with the Merger.
The loans under the $600 Million Credit Agreement are subject to
mandatory repayment in certain limited circumstances. Voluntary prepayments
of the loans and voluntary reductions of the credit facility are permitted,
in whole or in part, at the option of Warnaco in minimum principal amounts,
without premium or penalty, subject to reimbursement of certain of the
Banks' costs under certain conditions.
The Borrower's obligations under the $600 Million Credit Agreement are
to be unconditionally guaranteed by Warnaco, acting in its capacity as
guarantor. Neither the loans under the $600 Million Credit Agreement nor
Warnaco's guarantee obligation are secured by any collateral. The $600
Million Credit Agreement contains representations and warranties,
conditions precedent, covenants, events of default and other provisions
customarily found in similar agreements.
11. DIVIDENDS AND DISTRIBUTIONS. Authentic Fitness paid its initial
quarterly cash dividend of 1.25[c] per share on October 2, 1995. Since that
time, Authentic Fitness has declared sixteen successive quarterly cash
dividends of 1.25[c] per share.
12. CONDITIONS TO THE OFFER. Notwithstanding any other provision of
the Offer (subject to the provisions of the Merger Agreement), the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for
or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to
the restriction referred to above, the payment for, any tendered Shares,
and may terminate the Offer and not accept for payment any tendered shares
if (i) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer such number of Shares which, together with
all Shares owned by affiliates of Warnaco and not tendered, would
constitute at least a majority of the Shares outstanding on the date of
purchase (the 'Minimum Condition'), (ii) any applicable waiting period
under the HSR Act has not expired or terminated prior to the expiration of
the Offer, or (iii) at any time on or after the date of the Merger
Agreement, and before the time of acceptance of Shares for payment pursuant
to the Offer, any of the following events shall occur and be continuing:
there shall be any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or
applicable to the Offer or the Merger by any domestic or foreign
federal or state governmental regulatory or administrative agency or
authority or court or legislative body or commission which
(l) prohibits, or imposes any material limitations on, Warnaco's or
the Purchaser's ownership or operation of all or a material portion
of the Authentic Fitness businesses or assets, (2) prohibits, or
makes illegal the
47
<PAGE>
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, (3) results in a material
delay in or restricts the ability of the Purchaser, or renders the
Purchaser unable, to accept for payment, pay for or purchase some or
all of the Shares, or (4) imposes material limitations on the ability
of the Purchaser or Warnaco effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to
the Authentic Fitness stockholders, provided that Warnaco shall have
used all reasonable efforts to cause any such judgment, order or
injunction to be vacated or lifted;
there shall be any action or proceeding pending by any domestic or
foreign federal or state governmental regulatory or administrative
agency or authority which (1) seeks to prohibit, or impose any
material limitation on, Warnaco's or the Purchaser's ownership or
operation of all or a material portion of the Authentic Fitness
businesses or assets, (2) seeks to prohibit or make illegal the
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, or (3) seeks to impose
material limitations on the ability of the Purchaser or Warnaco
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased
by it on all matters properly presented to the Authentic Fitness
stockholders; provided that the Warnaco shall have used all
reasonable efforts to cause any such action or proceeding to be
dismissed;
the representations and warranties of Authentic Fitness set forth in
the Merger Agreement shall not be true and correct in any respect,
disregarding for this purpose any standard of materiality contained
in any such representation or warranty, as of the date of
consummation of the Offer as though made on or as of such date or
Authentic Fitness shall have breached or failed in any material
respect to perform or comply with any material obligation, agreement
or covenant required by the Merger Agreement to be performed or
complied with by it (including without limitation if Authentic
Fitness shall have entered into any definitive agreement or any
agreement in principle with any person with respect to a Takeover
Proposal or similar business combination with Authentic Fitness),
except, in the case of the failure of any representation or warranty,
(i) for changes specifically permitted by the Merger Agreement and
(ii) (A) those representations and warranties that address matters
only as of a particular date which are true and correct as of such
date or (B) where the failure of such representations and warranties
to be true and correct, do not, individually or in the aggregate,
have a Company Material Adverse Effect (as defined in the Merger
Agreement);
there shall have occurred a change, event or circumstance that has
had, or would reasonably be expected to have, a Company Material
Adverse Effect;
(1) any general suspension of trading in securities on any national
securities exchange or in the over-the-counter market, (2) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), or
(3) any limitation (whether or not mandatory) by a United States
governmental authority or agency on the extension of credit by banks
or other financial institutions;
the Authentic Fitness Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Warnaco or the Purchaser
(including by amendment of the Schedule 14D-9) its recommendation of
the Offer, the Merger Agreement, or the Merger, or recommended
another proposal or offer, or shall have resolved to do any of the
foregoing; or
the Merger Agreement shall have been terminated in accordance with
its terms;
which in the reasonable judgment of Warnaco or the Purchaser, in any such
case, and regardless of the circumstances giving rise to such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment or payments.
48
<PAGE>
The foregoing conditions are for the sole benefit of the Purchaser and
Warnaco and may be asserted by either of them or may be waived by Warnaco
or the Purchaser, in whole or in part at any time and from time to time in
the sole discretion of Warnaco or the Purchaser.
13. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS; CERTAIN LITIGATION
General. Except as described in this Section 13, based on information
provided by Authentic Fitness, none of Authentic Fitness, Purchaser or
Warnaco is aware of (i) any license or regulatory permit that appears to be
material to the business of Authentic Fitness and its subsidiaries, taken
as a whole, that might be adversely affected by the acquisition of Shares
by Warnaco or Purchaser pursuant to the Offer, the Merger or otherwise, or
(ii) except as set forth herein, any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by
Purchaser pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, Purchaser and Warnaco presently
contemplate that such approval or other action will be sought, except as
described below under 'State Antitakeover Statutes.' While, except as
otherwise described in this Offer to Purchase, 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 Authentic Fitness' business or
that certain parts of Authentic Fitness' 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,
Purchaser could decline to accept for payment, or pay for, any Shares
tendered. See Section 12 for certain conditions to the Offer, including
conditions with respect to governmental actions.
State Antitakeover Statutes. Section 203 of the DGCL, in general,
prohibits a Delaware corporation, such as the Company, from engaging in a
'Business Combination' (defined to include a variety of transactions,
including mergers) with an 'Interested Stockholder' (defined generally as a
person that is the beneficial owner of 15% or more of the outstanding
voting stock of the subject corporation) for a period of three years
following the date that such person became an Interested Stockholder
unless, prior to the date such person became an Interested Stockholder, the
board of directors of the corporation approved either the Business
Combination or the transaction that resulted in the stockholder becoming an
Interested Stockholder. The provisions of Section 203 of the DGCL are not
applicable to any of the transactions contemplated by the Merger Agreement
because the Merger Agreement and the transactions contemplated thereby were
approved by the Authentic Fitness Board prior to the execution thereof.
A number of states have adopted laws and regulations that purport to
apply to attempts to acquire corporations that are incorporated in such
states, or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, employees,
principal executive offices or principal places of business in such states.
In Edgar v. MITE Corp., the Supreme Court of the United States (the
'Supreme Court') invalidated on constitutional grounds the Illinois
Business Takeover statute, which, as a matter of state securities law, made
certain corporate acquisitions 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
stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of
stockholders in the state and were incorporated there.
Warnaco and Purchaser do not believe that the antitakeover laws and
regulations of any state other than the State of Delaware will by their
terms apply to the Offer, and, except as set forth above with respect to
Section 203 of the DGCL, neither Warnaco nor Purchaser has attempted to
comply with any state antitakeover statute or regulation. Purchaser
reserves the right to challenge
49
<PAGE>
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 antitakeover statute is applicable to the Offer and
an appropriate court does not determine that it is inapplicable or invalid
as applied to the Offer, Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state
authorities, and 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, Purchaser may not be obligated to accept for payment,
or pay for, any Shares tendered pursuant to the Offer. See 'The Tender
Offer--Conditions to the Offer' Section 12.
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 'DOJ') and the Federal Trade Commission (the
'FTC')and certain waiting period requirements have been satisfied.
Warnaco expects to file its Notification and Report Form with respect
to the Offer under the HSR Act on November 19, 1999. The waiting period
under the HSR Act with respect to the offer will expire at 11:59 p.m., New
York City time, the fifteenth day after the date Parent's form is filed,
unless early termination of the waiting period is granted. However, the DOJ
or the FTC may extend the waiting period by requesting additional
information or documentary material from Warnaco or Authentic Fitness. 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 Warnaco
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 Warnaco. In practice, complying with a request for
additional information or material can take a significant amount of time.
In addition, if the DOJ 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. 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 'The Tender Offer -- Conditions to the Offer'
Section 12.
The FTC and the DOJ frequently scrutinize the legality under the
Antitrust Laws (as defined below) of transactions such as Purchaser's
acquisition of Shares pursuant to the Offer and the Merger. At any time
before or after Purchaser's acquisition of Shares, the DOJ 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 seeking
divestiture of Shares acquired by Purchaser or divestiture of substantial
assets of Warnaco or its 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 information provided by
Authentic Fitness relating to the businesses in which Warnaco and Authentic
Fitness are engaged, Warnaco and Purchaser believe that the acquisition of
Shares by 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 Purchaser on antitrust grounds will not be made
or, if such a challenge is made, of the result. See Section 12 for certain
conditions to the Offer, including conditions with respect to litigation
and certain governmental actions.
As used in this Offer to Purchase, 'Antitrust Laws' shall mean and
include the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the Federal Trade Commission Act, as amended, and all other Federal
and state statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
Litigation. Between October 12, and October 13, 1999, six class action
complaints on behalf of Authentic Fitness shareholders were filed in
Delaware Chancery Court against Linda J. Wachner, William S. Finkelstein,
Joseph A. Califano, Robert D. Walter, Stuart D. Buchalter, and Stanley
Arkin (collectively the 'Individual Defendants'), Warnaco, and Authentic
Fitness. These actions include: Brickell Partners v. Wachner, et al., Del.
Ch., C.A. No. 17464, Orlofsky v. Wachner, et al.,
50
<PAGE>
Del. Ch., C.A. No. 17473NC, Pollack v. Authentic Fitness Corp., et al.,
Del. Ch, C.A. No. 17470NC, Pomeranc v. Authentic Fitness Corp., et al.,
Del. Ch., C.A. No. 17467, Simonetti v. Authentic Fitness Corp., et al.,
Del. Ch., C.A. No. 17466, and Weisz v. Wachner, et al., Del. Ch., C.A.
No. 17465. Only the complaint in the Brickell Partners action has been
served upon any of the defendants. All six complaints make virtually
identical claims, alleging an unlawful scheme by the Individual Defendants,
in breach of their fiduciary duties, to allow Warnaco to acquire Shares for
inadequate consideration. Plaintiffs are seeking injunctive relief to
prevent the transaction, and in the event the transaction is consummated,
recission thereof and damages to the class. Plaintiffs have sought leave to
consolidate the six actions in the Delaware Chancery Court, and Warnaco has
moved to dismiss the complaint in the Brickell Partners action.
14. SOLICITATION FEES AND EXPENSES. Except as set forth below,
Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer.
J.P. Morgan Securities Inc. ('J.P. Morgan') is acting as Dealer
Manager in connection with the Offer, for which services J.P. Morgan will
receive approximately $250,000. Purchaser and Warnaco have also agreed
to reimburse J.P. Morgan for its out-of-pocket expenses, including the fees
and disbursements of counsel, incurred in connection with its role as
Dealer Manager, and to indemnify J.P. Morgan and certain related persons
against certain liabilities and expenses in connection with its role,
including certain liabilities under the federal securities laws. It is
the opinion of the Commission that indemnification for liabilities arising
under federal securities laws is against public policy and may therefore
be unenforceable.
Purchaser and Warnaco have retained MacKenzie Partners, Inc., as the
Information Agent and The Bank of New York as the Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by
mail, telephone, telecopy, telegraph and personal interview and may request
banks, brokers, dealers and other nominee Stockholders to forward materials
relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, MacKenzie Partners, Inc. will be paid a fee of approximately $5,000
and will also be reimbursed for certain out-of-pocket expenses and may be
indemnified against certain liabilities and expenses in connection with the
Offer, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including certain
liabilities under federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by Purchaser for customary
handling and mailing expenses incurred by them in forwarding material to
their customers.
15. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial
action pursuant to any valid state statute. If Purchaser becomes aware of
any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, Purchaser will make a good faith
effort to comply with any such state statute. If, after such good faith
effort, Purchaser cannot comply with any such state 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 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 Purchaser by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, WARNACO OR AUTHENTIC FITNESS NOT
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Warnaco and Purchaser have filed with the Commission the
Schedule 14D-1, together with exhibits, furnishing certain additional
information with respect to the Offer. Pursuant to Rule 14d-9 promulgated
under the Exchange Act, Authentic Fitness has filed with the Commission the
51
<PAGE>
Schedule 14D-9 with respect to the Offer, and may file amendments thereto.
Warnaco, Purchaser and Authentic Fitness have filed a statement on Schedule
13E-3 with respect to the Offer, and may file amendments thereto. Such
statements, including exhibits and any amendments thereto, which furnish
certain additional information with respect to the Offer, may be inspected
at, and copies may be obtained from, the same places and in the same manner
as set forth in 'The Tender Offer -- Certain Information Concerning
Authentic Fitness' Section 8. (except that they will not be available at
the regional offices of the Commission).
A ACQUISITION CORP.
November 17, 1999
52
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
WARNACO, PURCHASER AND AUTHENTIC FITNESS
1. DIRECTORS AND EXECUTIVE OFFICERS OF WARNACO. The following table sets
forth, as of November 15, 1999, the name, current business address, citizenship
and present principal occupation or employment, and material occupations,
positions, offices or employments and business addresses thereof for the past
five years of each director and executive officer of Warnaco. Unless otherwise
indicated, the current business address of each person is The Warnaco Group,
Inc., 90 Park Avenue, New York, New York, 10016. Unless otherwise indicated,
each such person is a citizen of the United States.
A. DIRECTORS
<TABLE>
<S> <C>
Linda J. Wachner. President and Chief Executive Officer of Warnaco since
August 1987, and the Chairman of the Board since
August 1991. Chairman and Chief Executive Officer of
Authentic Fitness since May 1990. Director of Applied
Graphics Technologies, Inc., Authentic Fitness Corporation
and The New York Stock Exchange, Inc.
Joseph A. Califano, Jr. .............. Chairman and President of The National Center on Addiction
The National Center on Addiction and Substance Abuse at Columbia University. Director of
& Substance Abuse Authentic Fitness, Automatic Data Processing, Inc.,
Columbia University HealthPlan Services, Inc., True North Communications, Inc.
152 West 57th Street and Kmart Corporation. Trustee of New York University and
12th Floor the Twentieth Century Fund and a Governor of New York
New York, NY 10019 Presbyterian Hospital. Founding Chairman of the Board
of the Institute for Social and Economic Policy in the
Middle East at the Kennedy School of Government at
Harvard University and member of the Institute of
Medicine of the National Academy of Sciences.
Donald G. Drapkin .................... Vice Chairman of the Board of MacAndrews & Forbes
MacAndrews & Forbes Holdings, Inc. and various of its affiliates since 1987.
Holdings, Inc. Mr. Drapkin was a partner in the law firm of Skadden,
35 East 62nd Street Arps, Slate, Meagher & Flom LLP for more than five years
New York, NY 10021 prior to 1987. Director of Algos Pharmaceutical Corporation,
Anthracite Capital, Inc., BlackRock Asset Investors,
Cardio Technologies, Inc., The Molson Companies Limited,
Playboy Enterprises, Inc., Revlon Inc. VIMRx
Pharmaceuticals Inc. and Weider Nutrition International,
Inc. (On December 27, 1996, Marvel, Marvel Holdings,
Marvel Parent and Marvel III, of which Mr. Drapkin was a
Director on such date, filed voluntary petitions for
reorganization under Chapter 11 of the United States
Bankruptcy Code.)
William S. Finkelstein................ Senior Vice President of Warnaco since May 1992 and Chief
Financial Officer and a Director of Warnaco since May
1995. Director of Authentic Fitness.
Joseph H. Flom ....................... Partner in Skadden, Arps, Slate, Meagher & Flom LLP, a law
Skadden, Arps, Slate, Meagher & Flom firm. Trustee of the Petrie Stores Liquidating Trust.
LLP
919 Third Avenue
New York, New York 10022
Andrew G. Galef ...................... Served as Chairman of the Board of Directors until
The Spectrum Group, Inc. August 1991. Chairman and a principal of The Spectrum
11050 Santa Monica Blvd. Group, Inc. since its incorporation in 1978. Chairman of
Los Angeles, CA 90025 the Board of MagneTek, Inc. since July 1984. Director of
Petco Animal Supplies since 1988.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------------------------------
<S> <C>
Walter F. Loeb ....................... President of Loeb Associates, Inc. and Publisher of the Loeb
Loeb Associates Inc. Retail Letter. Consultant with the retail industry since
500 7th Avenue February 1990. Trustee of Federal Realty Investment Trust, a
New York, NY 10018 Director of Gymboree Corporation, Hudson's Bay Authentic
Fitness Corporation, Mothers Work, Inc. and Wet Seal, Inc.
Advisor to the Commanding General of Army and Air Force
Exchange Services.
Dr. Manuel T. Pacheco ................ President of the University of Missouri since August 1997;
University of Missouri from 1991 to 1997, President of the University of Arizona.
321 University Hall
Columbia, Missouri 65211-3020
Stewart A. Resnick ................... Chief Executive Officer and Chairman of Franklin Mint
The Franklin Mint Corporation since 1985. Chairman of the Board of Roll
Franklin Center, PA 19091 International Corporation. Member of the Board of Trustees of
Bard College in New York, the Acquisitions Committee of the
National Gallery in Washington, D.C. and Co-Chairman of the
Marketing Department Advisory Board and member of the
Management Education Council of The Wharton School at the
University of Pennsylvania.
</TABLE>
B. EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------------------------------
<S> <C>
Linda J. Wachner...................... See above.
William S. Finkelstein................ See above.
Stanley P. Silverstein................ Vice President, General Counsel and Secretary of Warnaco
since December 1990.
Carl J. Deddens....................... Vice President and Treasurer of Warnaco since March 1996.
Vice President and Treasurer of Revlon, Inc. from 1991 to
1996.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth, as of November 15, 1999, the name, current business address, citizenship
and present principal occupation or employment, and material occupations,
positions, offices or employments and business addresses thereof for the past
five years of each director and executive officer of Warnaco. Unless otherwise
indicated, the current business address of each person is A Acquisition Corp.,
90 Park Avenue, New York, New York, 10016. Unless otherwise indicated, each such
person is a citizen of the United States.
A. DIRECTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------------------------------
<S> <C>
Linda J. Wachner...................... See above.
William S. Finkelstein................ See above.
Stanley P. Silverstein................ See above.
</TABLE>
B. EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------------------------------
<S> <C>
Linda J. Wachner...................... See above.
William S. Finkelstein................ See above.
Stanley P. Silverstein................ See above.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF AUTHENTIC FITNESS. The following
table sets forth, as of November 15, 1999, the name, current business address,
citizenship and present principal occupation or employment, and material
occupations, positions, offices or employments and business addresses thereof
for the past five years of each director and executive officer of Warnaco.
Unless otherwise indicated, the current business address of each person is
Authentic Fitness Corporation, 6040 Bandini Blvd., Commerce, California, 90040.
Unless otherwise indicated, each such person is a citizen of the United States.
I-2
<PAGE>
A. DIRECTORS
<TABLE>
<S> <C>
Stanley S. Arkin Director of Authentic Fitness since October 1995. Senior
Arkin Shaffer & Kaplan LLP Partner of Arkin, Schaffer & Kaplan LLP, a law firm. Fellow
1370 Avenue of the Americas of the American College of Trial Lawyers and past Chairman
New York, New York 10019 of the Association of the Bar of the City of New York
Committee on the Criminal Courts, Law and Procedure, and
its Committee on Professional Discipline, and member of the
Association's Executive Committee.
Stuart D. Buchalter .................. Director of Authentic Fitness since May 1990. Of counsel to
Buchalter Nemer Fields & Younger Buchalter, Nemer, Fields and Younger, a law firm. Past
601 S. Figueroa St., Suite 2400 Chairman of the Board and Chief Executive Officer of the
Los Angeles, CA 90017 Art Stores from June 1993 to January 1995. Director of City
National Corp., Earl Scheib, Inc., e4L, Inc. and Faroudja,
Inc.; Vice Chairman of the Board of Trustees of Otis
College of Art and Design.
Joseph A. Califano, Jr. .............. Director of Authentic Fitness since November 1993. Chairman
The National Center on Addiction and President of The National Center on Addiction and
& Substance Abuse Substance Abuse at Columbia University. Director of The
Columbia University Warnaco Group, Inc., Automatic Data Processing, Inc.,
152 West 57th Street HealthPlan Services, Inc. and Kmart Corporation. Trustee of
12th Floor New York University and the Twentieth Century Fund and a
New York, NY 10019 Governor of New York Presbyterian Hospital. Founding
Chairman of the Board of the Institute for Social and
Economic Policy in the Middle East at the Kennedy School of
Government at Harvard University and member of the
Institute of Medicine of the National Academy of Sciences.
William S. Finkelstein................ Director of Authentic Fitness since May 1992. Senior Vice
President of Warnaco since May 1992 and Chief Financial
Officer and a Director of Warnaco since May 1995.
Linda J. Wachner...................... Director, Chairman and Chief Executive Officer of Authentic
Fitness since May 1990. President and Chief Executive
Officer of Warnaco since August 1987, and the Chairman of
the Board of Warnaco since August 1991. Director of Applied
Graphics Technologies, Inc., Authentic Fitness Corporation
and The New York Stock Exchange, Inc.
Robert D. Walter...................... Director of Authentic Fitness since November 1992.
</TABLE>
B. EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------------------------------
<S> <C>
Linda J. Wachner...................... See above.
Christopher G. Staff.................. President and Chief Operating Officer of Authentic Fitness
since February 1997. Past President of the Speedo'r' and
White Stag'r'/Skiwear Divisions and Chief Operating Officer
of Authentic Fitness from April 1992 until September 1994 and
as President of Authentic Fitness from May 1990 until April
1992. Director of Authentic Fitness from May 1990 until
September 1994. President and Chief Executive Officer of
Van's, Inc. from September 1994 until June 1995 and as a
consultant to the apparel and sportswear industry from June
1995 until November 1996. Rejoined Authentic Fitness in
November 1996.
Susan Guensch......................... President of the Speedo'r' Division since July 1996. Joined
Authentic Fitness in June 1984 as Assistant Merchandiser for
the Speedo'r' Division and since that time has served in
various positions of increasing responsibility with Authentic
Fitness and its predecessor.
Michael P. Mc Hugh.................... Senior Vice President and Chief Financial Officer of
Authentic Fitness since May 1998. Corporate Vice President
and Chief Financial Officer of J. Crew Group, Inc. from
September 1986 to April 1998.
</TABLE>
I-3
<PAGE>
[LOGO]
SCHEDULE II
November 15, 1999
Special Committee of the Board of Directors
Authentic Fitness Corporation
6040 Bandini Boulevard
Commerce, California 90040
Members of the Special Committee:
Authentic Fitness Corporation (the 'Company'), The Warnaco Group, Inc. (the
'Acquiror') and A Acquisition Corp., a newly formed, wholly owned subsidiary of
the Acquiror (the 'Acquisition Sub'), propose to enter into an Agreement and
Plan of Merger (the 'Agreement') pursuant to which (i) the Acquiror and the
Acquisition Sub would commence a tender offer (the 'Tender Offer') for all
outstanding shares of the Company's common stock, par value $0.001 per share, of
the Company (the 'Company Shares') for $20.80 per share, net to the seller in
cash (the 'Consideration'), and (ii) the Acquisition Sub would be merged with
the Company in a merger (the 'Merger'), in which each Company Share not acquired
in the Tender Offer, other than Company Shares held in treasury or owned by any
subsidiary of the Company or by the Acquiror or any subsidiary of the Acquiror
or as to which dissenter's rights have been perfected, would be converted into
the right to receive the Consideration. The Tender Offer and the Merger, taken
together, are referred to as the 'Transaction'.
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares pursuant to the Transaction is fair, from a
financial point of view, to such holders, other than the Acquiror and its
affiliates.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed a draft dated November 15, 1999 of the Agreement;
(b) reviewed certain publicly available business and financial
information we deemed relevant relating to the Company and the industries
in which it operates;
(c) reviewed certain internal non-public financial and operating data
and forecasts provided to us by the management of the Company relating to
its business;
(d) discussed, with members of the senior management of the Company,
the Company's operations, historical financial statements and future
prospects;
(e) compared the financial and operating performance of the Company
with publicly available information concerning certain other companies we
deemed comparable and reviewed the relevant stock prices of the Company
Shares and certain publicly traded securities of such other companies;
(f) compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed relevant; and
(g) made such other analyses and examinations as we have deemed
necessary or appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with or reviewed by or for us, or publicly
available, for purposes of this opinion and have further relied upon the
assurance of the management of the Company that they are not aware of any facts
that would make such information inaccurate or misleading. We have neither made
nor obtained any independent evaluations or appraisals of the assets or
liabilities of the Company, nor have we conducted a physical inspection of the
properties or facilities of the Company. We have assumed that the financial
forecasts provided to or discussed with us by the Company have been reasonably
determined on bases reflecting the best currently available estimates and
judgments of the management of the Company as to the
II-1
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future financial performance of the Company. We express no view as to such
forecasts or the assumptions on which they were based.
For purposes of rendering our opinion, we have assumed that, in all
respects material to our analysis, the representations and warranties of each
party contained in the Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it under
the Agreement and that all conditions to the consummation of the Tender Offer
and the Merger will be satisfied without waiver thereof. We have also assumed
that the definitive Agreement will not differ in any material respects from the
draft thereof furnished to us.
In connection with the preparation of this opinion, we have not been
authorized by the Special Committee of the Board of Directors to solicit, nor
have we solicited, third-party indications of interest for the acquisition of
all or any part of the Company.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to the
holders of the Company Shares, other than the Acquiror and its affiliates, of
the Consideration, and we express no opinion as to the merits of the underlying
decision by the Company to engage in the Merger. Our opinion does not constitute
a recommendation to any holder of Company Shares as to whether such shareholder
should tender any Company Shares pursuant to the Tender Offer or how such
shareholder should vote on the proposed Merger or any matter related thereto.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We have acted as financial advisor to the Special Committee
of the Board of Directors of the Company in connection with the Transaction and
will receive a fee for our services, payment of a significant portion of which
is payable upon delivery of this opinion. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of our engagement. The Chase
Manhattan Corporation and its affiliates, including Chase Securities Inc., in
the ordinary course of business, have provided investment banking services to
the Company and to the Acquiror and may continue to provide such services. In
the ordinary course of business, we or our affiliates may trade in the debt and
equity securities of the Company and the Acquiror for our own accounts and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Consideration to be received by the holders of the Company
Shares pursuant to the Transaction is fair, from a financial point of view, to
such holders, other than the Acquiror and its affiliates.
This opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company in its evaluation of the Transaction and shall
not be used for any other purpose without the prior written consent of Chase
Securities Inc. This opinion shall not be reproduced, disseminated, quoted,
summarized or referred to at any time, in any manner or for any purpose, nor
shall any public references to Chase Securities Inc. be made by the Company,
without the prior written consent of Chase Securities Inc.
Very truly yours,
CHASE SECURITIES INC.
II-2
<PAGE>
SCHEDULE III
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of such stockholder's shares of stock under
the circumstance described in subsections (b) and (c) of this section. As used
in this section, the word 'stockholder' means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words 'stock' and 'shall' mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words 'depository receipt' mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further provided that
no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
1251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. shares of stock of the corporation surviving or resulting from
such merger or consolidation;
b. shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to
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<PAGE>
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all of the shares of such constituent corporation,
and shall include in such notice a copy of this section; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand
in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or with 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
III-2
<PAGE>
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree
III-3
<PAGE>
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this State
or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
III-4
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for shares
and any other required documents should be sent or delivered by each stockholder
of Authentic Fitness or his broker, dealer, commercial bank, trust company or
other nominee to the Depositary, at the applicable address set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
Tender and Exchange (212) 815-6213 Tender and Exchange
Department (For Eligible Institutions Department
P.O. Box 11248 Only) 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York Confirm Facsimile by New York, New York
10286-1248 Telephone: 10286
(800) 507-9357
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent at its
address and telephone number set forth below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning 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 Manager for the Offer is:
J.P. MORGAN & CO.
60 Wall Street
New York, New York 10260
Call Toll Free: 877-576-0605
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
AUTHENTIC FITNESS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 17, 1999
BY
A ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
THE WARNACO GROUP, INC.
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER
15, 1999, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
Tender and Exchange Department (212) 815-6213 Tender and Exchange Department
P.O. Box 11248 (For Eligible Institutions Only) 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 For Confirmation Telephone: New York, New York 10286
(800) 508-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by stockholders of Authentic
Fitness Corporation if certificates for Shares (as such term is defined below)
are to be forwarded herewith or, unless an Agent's Message (as defined in
Instruction 2 below) is utilized, if delivery of Shares is to be made by
book-entry transfer to an account maintained by the Depositary at the Book-Entry
Transfer Facility (as defined in, and pursuant to the procedures set forth in,
Section 3 of the Offer to Purchase). Stockholders who deliver Shares by
book-entry transfer are referred to herein as 'Book-Entry Stockholders' and
other stockholders who deliver Shares are referred to herein as 'Certificate
Stockholders.'
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares
pursuant to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT 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 Owner(s) ________________________________________
Window Ticket Number (if any) _________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________
Name of Institution that Guaranteed Delivery __________________________
If delivered by Book-Entry Transfer, check box: [ ]
Account Number ________________________________________________________
Transaction Code Number _______________________________________________
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------
DESCRIPTION OF SHARES SURRENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK EXACTLY AS NAME(S) SHARE CERTIFICATE(S) ENCLOSED
APPEAR(S) ON SHARE CERTIFICATE(S) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
NUMBER
OF SHARES
SHARE CERTIFICATE REPRESENTED BY
NUMBER(S)(1) SHARE CERTIFICATE(S)(1)
TOTAL SHARES
- -------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
Unless otherwise indicated, it will be assumed that all Shares represented by Share certificates
delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to A Acquistition Corp., a Delaware
corporation ('Purchaser') and wholly owned subsidiary of The Warnaco Group,
Inc., a Delaware corporation ('Warnaco'), the above-described shares of common
stock, par value $.001 per share (the 'Common Stock'), including the associated
preferred share purchase rights (the 'Rights' and, together with the Common
Stock, the 'Shares'), of Authentic Fitness Corporation, a Delaware corporation
('Authentic Fitness'), pursuant to Purchaser's offer to purchase all of the
outstanding Shares at a price of $20.80 per Share, net to the seller in cash,
without interest thereon (the 'Offer Price') upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 17, 1999 and in
this Letter of Transmittal (which, together with any amendments or supplements
thereto or hereto, collectively constitute the 'Offer'). The undersigned
understands that Purchaser reserves the right to transfer or assign, in whole at
any time, or in part from time to time, to one or more of its affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer. Receipt of the Offer is hereby acknowledged.
Authentic Fitness has distributed one Right for each outstanding Share
pursuant to the Rights Agreement (as defined in the Offer to Purchase). The
Rights are currently evidenced by and trade with certificates evidencing the
Common Stock. Authentic Fitness has taken such action so as to make the Rights
Agreement inapplicable to Warnaco, Purchaser and their respective affiliates and
associates in connection with the transactions contemplated by the Merger
Agreement.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 15, 1999 (the 'Merger Agreement'), by and among Warnaco,
Purchaser and Authentic Fitness.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other Shares
or other securities issued or issuable in respect thereof on or after Wednesday,
December 15, 1999 (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 any and all Distributions), or transfer ownership of such Shares (and any
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 Purchaser, (ii) present
such Shares (and any and all Distributions) for transfer on the books of
Authentic Fitness, and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any and all Distributions),
all in accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned hereby irrevocably
appoints Linda J. Wachner, William S. Finkelstein and Stanley P. Silverstein, in
their respective capacities as officers of Purchaser, and any individual who
shall thereafter succeed to any such office of Purchaser, and each of them, as
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution and resubstitution, to vote at any annual or special meeting of the
stockholders of Authentic Fitness or any adjournment or postponement thereof or
otherwise in such manner as each such attorney-in-fact and proxy or his
substitute shall in his sole discretion deem proper with respect to, to execute
any written consent concerning any matter as each such attorney-in-fact and
proxy or his substitute shall in his sole discretion deem proper with respect
to, and to otherwise act as each such attorney-in-fact and proxy or his
substitute shall in his sole discretion deem proper with respect to, all of the
Shares (and any and all Distributions) tendered hereby and accepted for payment
by Purchaser. This appointment will be effective if and when, and only to the
extent that, Purchaser accepts such Shares for payment pursuant to the Offer.
This power of attorney and proxy are irrevocable and are granted in
consideration of the acceptance for payment of such Shares in accordance with
the terms of the Offer. Such acceptance for payment shall, without further
action, revoke any prior powers of attorney and proxies granted by the
undersigned at any time with respect to such Shares (and any and all
Distributions), and no subsequent powers of attorney, proxies, consents or
revocations may
<PAGE>
be given by the undersigned with respect thereto (and, if given, will not be
deemed effective). Purchaser reserves the right to require that, in order for
Shares (or other Distributions) to be deemed validly tendered, immediately upon
Purchaser's acceptance for payment of such Shares, Purchaser must be able to
exercise full voting, consent and other rights with respect to such Shares (and
any and all Distributions), including voting at any meeting of the stockholders
of Authentic Fitness.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned owns the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act,
and that when the same are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase this tender is
irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions of the Offer (and if
the Offer is extended or amended, the terms or conditions of any such extension
or amendment). Without limiting the foregoing, if the price to be paid in the
Offer is amended in accordance with the Merger Agreement, the price to be paid
to the undersigned will be the amended price notwithstanding the fact that a
different price is stated in this Letter of Transmittal. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated under 'Special Payment Instructions,' please
issue the check for the purchase price of all 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 above under 'Description of Shares Tendered.'
Similarly, unless otherwise indicated under 'Special Delivery Instructions,'
please mail the check for the purchase price of all Shares purchased and/or
return any certificates for Shares not tendered or not accepted for payment (and
any accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing above under 'Description of Shares Tendered.' In the event
that the boxes entitled 'Special Payment Instructions' and 'Special Delivery
Instructions' are both completed, please issue the check for the purchase price
of all Shares purchased and/or return any certificates evidencing Shares not
tendered or not accepted for payment (and any accompanying documents, as
appropriate) in the name(s) of, and deliver such check and/or return any such
certificates (and any accompanying documents, as appropriate) to, the person(s)
so indicated. Unless otherwise indicated herein in the box entitled 'Special
Payment Instructions,' please credit any Shares tendered herewith by book-entry
transfer that are not accepted for payment by crediting the account at the
Book-Entry Transfer Facility designated above. The undersigned recognizes that
Purchaser has no obligation, pursuant to the 'Special Payment Instructions,' to
transfer any Shares from the name of the registered holder thereof if Purchaser
does not accept for payment any of the Shares so tendered.
<PAGE>
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
NUMBER OF SHARES REPRESENTED BY LOST, DESTROYED OR STOLEN CERTIFICATES:
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5 AND 7)
Fill in ONLY if check is to be issued in a
name other than that set forth above.
Issue and deliver check to:
Name ___________________________________________
(PLEASE PRINT)
Address ________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
(INCLUDE ZIP CODE)
________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE INSTRUCTION 11)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 7)
Fill in ONLY if check is to be issued in the
name set forth above but delivered to an
address other than that set forth above.
Deliver check to:
Name ___________________________________________
(PLEASE PRINT)
Address ________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
(INCLUDE ZIP CODE)
<PAGE>
<TABLE>
<S> <C>
IMPORTANT
STOCKHOLDER SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
(SIGNATURE(S) OF OWNER(S))
Must be signed by 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 a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or
representative capacity, please set forth full title. See
Instruction 4. (For information concerning signature
guarantees see Instruction 3.)
Dated:_______________________________________________, 1999
Name(s)____________________________________________________
___________________________________________________________
(PLEASE PRINT)
Capacity___________________________________________________
(SEE INSTRUCTION 4)
Address____________________________________________________
___________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No. (Business)_____________________
Area Code and Telephone No. (Residence)____________________
Tax Identification or Social Security No.__________________
(COMPLETE THE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3, IF REQUIRED)
Authorized Signature_______________________________________
Name_______________________________________________________
(PLEASE PRINT)
Title______________________________________________________
(PLEASE PRINT)
Name of Firm_______________________________________________
Address____________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No_________________________________
Dated:_____________________________________________________
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
(1) GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Instruction 1, includes
any participant in any of the Book-Entry Transfer Facility's systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled 'Special Payment Instructions' or the box entitled 'Special Delivery
Instructions' on the Letter of Transmittal or (b) 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 Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an 'Eligible Institution'). In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
(2) DELIVERY OF LETTER OF TRANSMITTAL AND SHARES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders of
Authentic Fitness either if Share certificates are to be forwarded herewith or,
unless an Agent's Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in
Section 3 of the Offer to Purchase. For a stockholder to validly tender Shares
pursuant to the Offer, either (a) a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), together with any required signature
guarantees or an Agent's Message (in connection with book-entry transfer) and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either
(i) certificates for tendered Shares must be received by the Depositary at one
of such addresses prior to the Expiration Date or (ii) Shares must be delivered
pursuant to the procedures for book-entry transfer set forth herein and in
Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be
received by the Depositary prior to the Expiration Date or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth herein
and in Section 3 of the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth herein and in Section 3 of the Offer to
Purchase.
Pursuant to such guaranteed delivery 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
Purchaser, must be received by the Depositary prior to the Expiration Date and
(iii) the certificates for all tendered Shares, in proper form for transfer (or
a Book-Entry Confirmation with respect to all tendered Shares), together with a
properly completed and duly executed Letter of Transmittal (or a 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 must
be 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 NYSE is open for business.
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 Purchaser
may enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
THE METHOD OF DELIVERY OF THE 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 STOCKHOLDER. THE 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 stockholders, by executing
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of acceptance of their Shares for payment.
<PAGE>
(3) INADEQUATE SPACE. If the space provided herein under 'Description of
Shares Tendered' is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
(4) PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares that are to be tendered in the box entitled 'Number of
Shares Tendered.' In any such case, new certificate(s) for the remainder of the
Shares that were evidenced by the old certificates will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the Expiration Date or the
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 alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the 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 Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of the authority of such person so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the registered holder(s). Signatures on any such Share certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
(6) STOCK TRANSFER TAXES. Except as otherwise provided in this
Instruction 6, Purchaser will pay all stock transfer taxes with respect to the
transfer and sale of any Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or if certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person 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(s) or such other person) payable
on account of the transfer to such other person will be deducted from the
purchase price of such Shares purchased unless evidence satisfactory to
Purchaser 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 Share certificates evidencing the
Shares tendered hereby.
(7) SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of, and/or
Share certificates for Shares not accepted for payment or not tendered are to be
issued in the name of and/or 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 stockholder(s) delivering Shares
by book-entry transfer may request that Shares not purchased be credited to such
account maintained at the Book-Entry Transfer Facility as such stockholder(s)
may designate in the box entitled 'Special Payment Instructions.' If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated above as
the account from which such Shares were delivered.
<PAGE>
(8) 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 at its address and phone numbers set forth
below, or from brokers, dealers, commercial banks or trust companies.
(9) WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser
reserves the absolute right in its sole discretion to waive, at any time or from
time to time, any of the specified conditions of the Offer (other than the
Minimum Condition), in whole or in part, in the case of any Shares tendered.
(10) BACKUP WITHHOLDING. In order to avoid 'backup withholding' of federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ('TIN') on
Substitute Form W-9 in this Letter of Transmittal and certify, under penalties
of perjury, that such TIN is correct and that such stockholder is not subject to
backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax liability
of the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the stockholder upon filing an income tax
return.
The stockholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held 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.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and 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 the
enclosed 'Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9' for more instructions.
(11) LOST, DESTROYED OR STOLEN SHARE CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) 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 PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's correct taxpayer identification number on Substitute Form W-9
below. If such stockholder is an individual, the taxpayer identification number
is his or her social security number. If a tendering stockholder is subject to
backup withholding, such stockholder must cross out item
<PAGE>
(2) of the Certification box on the Substitute Form W-9. If the Depositary is
not provided with the correct taxpayer identification number, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations, and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. Exempt stockholders, other than
foreign individuals, should furnish their TIN, write 'Exempt' on the face of the
Substitute Form W-9 below, 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 payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If 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 stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct taxpayer
identification number by completing the form contained herein certifying that
the taxpayer identification number provided on Substitute Form W-9 is correct
(or that such stockholder is awaiting a taxpayer identification number).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner 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 stockholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, such stockholder
should write 'Applied For' in the space provided for in the TIN in Part 1, and
sign and date the Substitute Form W-9. If 'Applied For' is written in Part I and
the Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
PAYER'S NAME:
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY ________________________________
DEPARTMENT OF THE TREASURY BY SIGNING AND DATING BELOW. Social Security Number
INTERNAL REVENUE SERVICE (If awaiting TIN write
'Applied For')
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION OR
NUMBER ('TIN') __________________________________
Employer Identification Number
(If awaiting TIN write
'Applied For')
---------------------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATE -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued for me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or
(b) I have not been notified by the Internal Revenue Service (the 'IRS') that I am subject to
backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
----------------------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS
that you are currently subject to backup withholding because of under-reporting interest or dividends
on your tax returns. However, if after being notified by the IRS that you are subject to backup
withholding, you receive another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such item (2). (Also see instructions in the enclosed Guidelines).
----------------------------------------------------------------------------------------------------------
SIGNATURE __________________DATE ______________, 1999 PART 3 -- Awaiting TIN [ ]
----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 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
(1) 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 (2) 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 cash payments made to me thereafter may be
withheld, but that such amounts may be refunded to me if I
then provide a Taxpayer Identification Number within 60
days.
Signature________________________ Date _________________, 1999
- --------------------------------------------------------------------
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at its address and telephone numbers set forth
below:
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 959-5500 (call collect)
or
Call Toll Free: (800) 322-2885
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
AUTHENTIC FITNESS CORPORATION
TO
A ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE WARNACO GROUP, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) if certificates
representing shares of common stock, par value $.001 per share (the 'Common
Stock'), including the associated preferred share purchase rights (the 'Rights'
and, together with the Common Stock, the 'Shares'), of Authentic Fitness
Corporation, a Delaware corporation, are not immediately available, if the
procedure for book-entry transfer cannot be completed prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase), or if time will not
permit all required documents to reach the Depositary prior to the Expiration
Date. Such form may be delivered by hand, transmitted by facsimile transmission
or mailed to the Depositary. 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 or Overnight Courier:
Tender and Exchange Department (212) 815-6213 Tender and Exchange Department
P.O. Box 11248 (For Eligible Institutions Only) 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 For Confirmation Telephone: New York, New York 10286
(800) 508-9357
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE WILL 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>
Ladies and Gentlemen:
The undersigned hereby tenders to A Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of The Warnaco Group, Inc, a Delaware
corporation (the 'Purchaser'), upon the terms and subject to the conditions set
forth in Purchaser's Offer to Purchase dated November 17, 1999 and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, constitute the 'Offer'), receipt of which is hereby acknowledged, the
number of shares set forth below of common stock, par value $.001 per share (the
'Common Stock'), including the associated preferred share purchase rights (the
'Rights' and, together with the Common Stock, the 'Shares'), of Authentic
Fitness Corporation, a Delaware corporation, pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares:_________________________________________________________
Certificate Nos. (if available):
__________________________________________________________________________
__________________________________________________________________________
Check box if Shares will be tendered by book-entry transfer: [ ]
Account Number: __________________________________________________________
Dated: _____________________________________________________________, 1999
Name(s) of Record Holder(s):
__________________________________________________________________________
__________________________________________________________________________
PLEASE PRINT
Address(es):
__________________________________________________________________________
__________________________________________________________________________
ZIP CODE
Area Code and Tel. No.:
__________________________________________________________________________
__________________________________________________________________________
Signature(s): ____________________________________________________________
__________________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, guarantees to deliver to the Depositary
either certificates representing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or an Agent's
Message, and any other documents required by the Letter of Transmittal, 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 the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm:_______________________________ ____________________________________________
AUTHORIZED SIGNATURE
Address:____________________________________ Name:_______________________________________
PLEASE PRINT
____________________________________________ Title:______________________________________
ZIP CODE
Area Code and Tel. No.:_____________________ Dated:________________________________, 1999
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
AUTHENTIC FITNESS CORPORATION
AT
$20.80 NET PER SHARE
BY
A ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE WARNACO GROUP, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 15,
1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
November 17, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by A Acquisition Corp., a Delaware corporation
('PURCHASER') and wholly owned subsidiary of The Warnaco Group, Inc., a Delaware
corporation ('WARNACO'), to act as Dealer Manager in connection with Purchaser's
offer to purchase all outstanding shares of common stock, par value $.001 per
share (the 'COMMON STOCK'), including the associated preferred share purchase
rights (the 'RIGHTS' and, together with the Common Stock, the 'SHARES'), of
Authentic Fitness Corporation, a Delaware corporation ('AUTHENTIC FITNESS'), at
$20.80 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 17, 1999 (the
'OFFER TO PURCHASE') and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the 'OFFER') enclosed
herewith. Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares that, together with all Shares owned by
affiliates of Warnaco and not tendered, represents at least a majority of the
Shares outstanding on the date Shares are accepted for payment. The Offer is
also subject to other conditions set forth in the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated November 17, 1999;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary, or if the procedures for book-entry transfer
cannot be completed, by the Expiration Date (as defined in the Offer to
Purchase);
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. A letter to stockholders of Authentic Fitness from Stuart D.
Buchalter, Chairman of the Authentic Fitness Special Committee, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 dated
November 17, 1999, which has been filed by Authentic Fitness with the
Securities and Exchange Commission;
<PAGE>
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to The Bank of New York, Tender and
Exchange Department, P.O. Box 11248, Church Street Station, New York, New
York 10286-1248 (the 'Depositary').
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), Purchaser will accept for payment and pay for Shares which are
validly tendered prior to the Expiration Date and not theretofore properly
withdrawn when, as and if Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Offer. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in Section 3 of the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or a properly completed and manually signed
facsimile thereof) or an Agent's Message (as defined in the Offer to Purchase)
in connection with a book-entry transfer and (iii) all other documents required
by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in the Offer to Purchase) for soliciting tenders of
Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse
brokers, dealers, commercial banks and trust companies for customary mailing and
handling costs incurred by them in forwarding the enclosed materials to their
customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, DECEMBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer prior to the expiration of the
Offer, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, J.P.
Morgan Securities Inc., the Dealer Manager, or MacKenzie Partners, Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover of the Offer to Purchase.
Very truly yours,
J.P. MORGAN & CO.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE INFORMATION AGENT, THE
DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
AUTHENTIC FITNESS CORPORATION
AT
$20.80 NET PER SHARE
BY
A ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
THE WARNACO GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 15,
1999, UNLESS THE OFFER IS EXTENDED.
November 17, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated
November 17, 1999 and the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the 'OFFER') in
connection with the offer by A Acquisition Corp., a Delaware corporation
('PURCHASER') and wholly owned subsidiary of The Warnaco Group, Inc., a Delaware
corporation ('WARNACO'), to purchase for cash all outstanding shares of common
stock, par value $.001 per share (the 'COMMON STOCK'), including the associated
preferred share purchase rights (the 'RIGHTS' and, together with the Common
Stock, the 'SHARES'), of Authentic Fitness Corporation, a Delaware corporation
('AUTHENTIC FITNESS'). We are the holder of record of Shares held 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 enclosed Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
We request instructions as to whether you wish us 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 invited to the following:
1. The offer price is $20.80 per Share, net to you in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of Authentic Fitness, by the unanimous vote
of those directors present, has approved the Merger Agreement (as defined
in the Offer to Purchase) and the transactions contemplated thereby,
including the Offer and the Merger (each as defined in the Offer to
Purchase), and determined that the Offer and the Merger are fair to, and in
the best interests of, the stockholders of Authentic Fitness and recommends
that stockholders accept the Offer and tender their Shares pursuant to the
Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Wednesday, December 15, 1999, unless the Offer is
extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date (as defined
in the Offer to Purchase) that number of Shares that, together with all
Shares owned by affiliates of Warnaco and not tendered, represents at least
a majority of the Shares outstanding on the date Shares are accepted for
payment. The Offer is also subject to other conditions set forth in the
Offer to Purchase. See Section 12 of the Offer to Purchase.
<PAGE>
6. Any stock transfer taxes applicable to the sale of Shares to
Purchaser pursuant to the Offer will be paid by Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Except as disclosed in the Offer to Purchase, Purchaser is not aware of any
state in which the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. In any jurisdiction in
which 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
Purchaser by J.P. Morgan & Co. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
on the reverse side of this letter. 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 on the reverse side of this letter. Your
instructions should be forwarded to us in sufficient time to permit us to submit
a tender on your behalf prior to the expiration of the Offer.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
AUTHENTIC FITNESS CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated November 17, 1999 and the related Letter of Transmittal
in connection with the Offer by A Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of The Warnaco Group, Inc., a Delaware corporation, to
purchase all outstanding shares of common stock, par value $.001 per share (the
'Common Stock'), including the associated preferred share purchase rights (the
'Rights' and together with the Common Stock, the 'Shares'), of Authentic Fitness
Corporation, a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Shares to be Tendered:*
<TABLE>
<S> <C>
- ------------------------------ Shares
Dated:-------------------------, 1999 -------------------------------
-------------------------------
SIGNATURE(S)
-------------------------------
PRINT NAME(S)
-------------------------------
ADDRESS(S)
-------------------------------
AREA CODE AND TELEPHONE NUMBER
-------------------------------
TAX ID OR SOCIAL SECURITY NUMBER
</TABLE>
- ------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payor. -- 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 payor.
<TABLE>
<CAPTION>
- --------------------------------------------------
Give the
For this type of account: SOCIAL
SECURITY
number of --
- -------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, the
first individual on
the account(1)
4. Custodian account of a The minor(2)
minor (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 incompetent
for a designated ward, person(3)
minor, or incompetent
person
7. a. A revocable savings The grantor-
trust account (in trustee(1)
which grantor is
also trustee)
b. Any 'trust' account The actual owner(4)
that is not a legal or
valid trust under
State law
8. Sole proprietorship The owner(4)
account
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------
Give the
For this type of account: EMPLOYER
IDENTIFICATION
number of --
- -------------------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity (Do
or 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, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a state or
local governmental
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 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 the name of the owner.
(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>
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 Card or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for
alien individuals required to file U.S. tax returns) at an office of the
Social Security Administration or the Internal Revenue Service.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
A corporation.
A financial institution.
An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
The United States or any agency or instrumentality thereof.
A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
An international organization or any agency or instrumentality thereof.
A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
A real estate investment trust.
A common trust fund operated by a bank under section 584(a).
An entity registered at all times during the tax year under the Investment
Company Act of 1940.
A foreign central bank of issue.
Payments not Generally Subject to Backup Withholding
Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:
Payments to nonresident aliens subject to withholding under section 1441.
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 where the amount received is 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).
Payments described in section 6049(b)(5) to non-resident aliens.
Payments on tax-free covenant bonds under section 1451.
Payments made by certain foreign organizations.
Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE 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,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 604lA(a),
6045 and 6050A.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividend, 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 to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholder. -- 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. -- Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
<TABLE>
<S> <C>
CONTACT:
FOR WARNACO: FOR AUTHENTIC FITNESS:
William S. Finkelstein Stuart D. Buchalter
212-370-8287 Chairman, Special Committee
213-891-5130
Lawrence A. Rand
Wendi Kopsick
Adam Weiner
Kekst and Company
212-521-4800
</TABLE>
FOR IMMEDIATE RELEASE
WARNACO AND AUTHENTIC FITNESS
SIGN DEFINITIVE MERGER AGREEMENT
-- WARNACO TO START CASH TENDER OFFER AT $20.80 PER AUTHENTIC FITNESS SHARE --
NEW YORK, NY AND LOS ANGELES, CA, NOVEMBER 15, 1999 -- The Warnaco Group, Inc.
(NYSE: WAC) and Authentic Fitness Corporation (NYSE: ASM) announced today that
they have entered into a definitive merger agreement for Warnaco's acquisition,
subject to certain conditions, of all of the common stock of Authentic Fitness
for $20.80 per share in cash. The aggregate value of the transaction, including
the assumption of Authentic Fitness' debt, will be approximately $540 million.
The definitive agreement provides that Warnaco will promptly commence a cash
tender offer for all of the outstanding shares of Authentic Fitness common stock
at a price of $20.80 per share. The tender offer is subject to a majority of the
Authentic Fitness common shares being validly tendered and not withdrawn, the
expiration of the Hart-Scott-Rodino waiting period, and other customary
conditions. The offer is not subject to the receipt of financing, as Warnaco has
already secured bank commitments for all the financing necessary to complete the
transaction. Assuming successful completion of the tender offer, Warnaco will
consummate a second-step merger in which the remaining Authentic Fitness shares
will be exchanged for the same $20.80 per share cash consideration.
The boards of directors of both companies, each advised by a special committee
of independent directors, have unanimously approved the transaction. Chase
Securities Inc. acted as financial advisor to the Authentic Fitness special
committee and Wasserstein Perella & Co., Inc., acted as financial advisor to the
Warnaco special committee.
Authentic Fitness is the Los Angeles based manufacturer and seller of Speedo'r'
wearing apparel, swimwear and accessories, and owns and operates Speedo'r'
Authentic Fitness'r' stores in the United States and Canada. Authentic Fitness
also markets directly and through its licensees swimwear, apparel and
accessories under the Anne Cole'r', Catalina'r', Cole of California'r', Sunset
Beach'r', Oscar de La Renta'r', Ralph Lauren'r', Polo Sport Ralph Lauren'r', and
other brand names.
The Warnaco Group Inc. headquartered in New York, is a leading manufacturer of
intimate apparel, menswear, jeanswear and accessories sold under such brands as
Warner's'r', Olga'r', Van Raalte'r', Lejaby'r', Weight Watchers'r',
Bodyslimmers'r', IZKA'r', Chaps by Ralph Lauren'r', Calvin Klein'r', men's and
women's underwear, men's accessories, and men's, women's, junior women's and
children's jeans and A.B.S. by Allen B. Schwartz'r' sportswear, and
Penhaligon's'r' fragrances.
<PAGE>
EXECUTION COPY
U.S. $600,000,000
364-DAY CREDIT AGREEMENT
Dated as of November 17, 1999
Among
WARNACO INC.
as Borrower
and
THE WARNACO GROUP, INC.
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
THE BANK OF NOVA SCOTIA and SALOMON SMITH BARNEY INC.
as Co-Lead Arrangers and Co-Book Managers
and
CITIBANK, N.A.
as Syndication Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Documentation Agent
and
THE BANK OF NOVA SCOTIA
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C>
SECTION 1.01. Certain Defined Terms............................................2
SECTION 1.02. Computation of Time Periods.....................................22
SECTION 1.03. Accounting Terms................................................22
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances...................................................22
SECTION 2.02. Making the Advances.............................................23
SECTION 2.03. Repayment of Advances...........................................24
SECTION 2.04. Termination or Reduction of the Commitments.....................24
SECTION 2.05. Prepayments.....................................................24
SECTION 2.06. Interest........................................................25
SECTION 2.07. Fees............................................................26
SECTION 2.08. Conversion of Advances..........................................26
SECTION 2.09. Increased Costs, Etc............................................27
SECTION 2.10. Illegality......................................................28
SECTION 2.11. Payments and Computations.......................................29
SECTION 2.12. Taxes...........................................................30
SECTION 2.13. Sharing of Payments, Etc........................................33
SECTION 2.14. Use of Proceeds.................................................33
SECTION 2.15. Defaulting Lenders..............................................33
SECTION 2.16. Evidence of Debt................................................36
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness...........................36
SECTION 3.02. Conditions Precedent to Initial Borrowing.......................38
SECTION 3.03. Conditions Precedent to Each Borrowing..........................39
SECTION 3.04. Determinations Under Section 3.01...............................40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.01. Representations and Warranties of the Borrower..................40
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants...........................................43
SECTION 5.02. Negative Covenants..............................................46
SECTION 5.03. Financial Covenants.............................................50
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default...............................................50
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action........................................53
SECTION 7.02. Agents' Reliance, Etc...........................................53
SECTION 7.03. Scotiabank, Citibank, Morgan and Affiliates.....................54
SECTION 7.04. Lender Credit Decision..........................................54
SECTION 7.05. Indemnification.................................................54
SECTION 7.06. Successor Agents................................................55
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc.................................................55
SECTION 8.02. Notices, Etc....................................................56
SECTION 8.03. No Waiver; Remedies.............................................56
SECTION 8.04. Costs and Expenses..............................................56
SECTION 8.05. Right of Set-off................................................58
SECTION 8.06. Binding Effect..................................................59
SECTION 8.07. Assignments, Designations and Participations....................59
SECTION 8.08. Confidentiality.................................................64
SECTION 8.09. Execution in Counterparts.......................................64
SECTION 8.10. Governing Law...................................................64
SECTION 8.11. Jurisdiction, Etc...............................................64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.12. Waiver of Jury Trial............................................65
Schedules
Schedule I - List of Commitments and Applicable Lending Offices
Schedule II - Existing Debt
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(g) - Disclosed Litigation
Schedule 5.02(d) - Assets Held For Sale
Exhibits
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E-1 - Form of Opinion of Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel for the Loan Parties
Exhibit E-2 - Form of Opinion of Stanley P. Silverstein, General
Counsel for the Borrower
Exhibit F - Form of Group Guaranty
Exhibit G - Form of Subsidiary Guaranty
</TABLE>
<PAGE>
364-DAY CREDIT AGREEMENT
Dated as of November 17, 1999
WARNACO INC., a Delaware corporation (together with any
successors-in-interest permitted hereunder, (the "Borrower"), THE WARNACO GROUP,
INC., a Delaware corporation (together with any successors-in-interest permitted
hereunder, "Group"), the banks, financial institutions and other institutional
lenders (the "Initial Lenders") listed on the signature pages hereof, THE BANK
OF NOVA SCOTIA ("Scotiabank") and SALOMON SMITH BARNEY, INC. ("SSB"), as co-lead
arrangers and co-book managers (the "Arrangers"), CITIBANK, N.A. ("Citibank"),
as syndication agent (the "Syndication Agent") for the Lenders (as hereinafter
defined), MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as documentation
agent (the "Documentation Agent") for the Lenders, and Scotiabank, as
administrative agent (the "Administrative Agent") for the Lenders, agree as
follows:
PRELIMINARY STATEMENTS
(1) The Borrower or a single-purpose wholly owned subsidiary
of the Borrower (the "Purchaser") will either (a) offer to acquire a controlling
interest in Authentic Fitness Corporation, a Delaware corporation ("Authentic
Fitness") through a tender offer (the "Tender Offer") for all of Authentic
Fitness's outstanding common stock (the "Authentic Fitness Stock"), but in any
event for not less than sufficient shares of Authentic Fitness's stock to enable
the Purchaser, voting without any other shareholders of Authentic Fitness, to
approve a merger of the Purchaser with Authentic Fitness and as promptly as
practicable after the closing of the Tender Offer, the Purchaser, if a
single-purpose wholly owned Subsidiary of the Borrower, will consummate a merger
with Authentic Fitness in which Authentic Fitness will be the surviving
corporation or (b) agree to merge with Authentic Fitness in which Authentic
Fitness will be the surviving corporation (such merger described in either
clause (a) or (b) above between the Purchaser and Authentic Fitness being the
"Merger"and the surviving corporation of each such merger being the "Surviving
Corporation").
(2) The Borrower has requested that, at any time after the
earlier to occur of the consummation of the Tender Offer or the Merger, the
Initial Lenders lend to the Borrower up to $600,000,000 under this Agreement to
pay to the holders (other than the Borrower, Group and their Subsidiaries) of
Authentic Fitness Stock the cash consideration for their shares in the Tender
Offer and subsequent merger or the Merger, pay transaction fees and expenses,
pay severance and other reorganization expenses in connection with the
acquisition of Authentic Fitness and to refinance certain Existing Debt (as
hereinafter defined). The Initial Lenders have indicated their willingness to
agree to lend such amounts on the terms and conditions of this Agreement.
<PAGE>
2
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with
Scotiabank at its office at One Liberty Plaza, New York, New York
10006, Special Management Account No. 0608335, Reference:
Warnaco-364 Day.
"Advance" means an advance by a Lender to the Borrower
pursuant to Article II, and refers to a Base Rate Advance or a
Eurodollar Rate Advance (each of which shall be a "Type" of Advance).
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 10% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agents" means each of the Syndication Agent, the
Documentation Agent and the Administrative Agent, together, in each
case, with any successor or successors of any thereof appointed
pursuant to Article VII hereof.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Debt Rating in effect on such date
as set forth below:
<PAGE>
3
<TABLE>
<CAPTION>
=============================================================================================
Rating Debt Base Rate Eurodollar
Level Rating Advances Rate Advances
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Level 1 A- or A3 or 0.000% 0.750%
higher
- ---------------------------------------------------------------------------------------------
Level 2 BBB+ or Baa1 0.000% 0.875%
- ---------------------------------------------------------------------------------------------
Level 3 BBB or Baa2 0.000% 1.000%
- ---------------------------------------------------------------------------------------------
Level 4 BBB- or Baa3 0.000% 1.250%
- ---------------------------------------------------------------------------------------------
Level 5 BB+ or Ba1 0.500% 1.750%
- ---------------------------------------------------------------------------------------------
Level 6 Lower than 0.750% 2.000%
Level 5 or
unrated
=============================================================================================
</TABLE>
provided, however, that if at any time on or after May 31, 2000, Group
shall have a Debt Rating of BB+ or lower by S&P or Ba1 or lower by
Moody's, the Applicable Margin shall be increased by 0.125% for the
next succeeding calendar month and by 0.125% for each succeeding
calendar month for which Group's Debt Ratings shall not be BBB- or
higher from S&P or Baa3 or higher from Moody's.
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Debt Rating in effect on such
date as set forth below:
<PAGE>
4
<TABLE>
<CAPTION>
=======================================================================
Rating Debt Applicable
Level Rating Percentage
- -----------------------------------------------------------------------
<S> <C> <C>
Level 1 A- or A3 or higher 0.100%
- -----------------------------------------------------------------------
Level 2 BBB+ or Baa1 0.125%
- -----------------------------------------------------------------------
Level 3 BBB or Baa2 0.150%
- -----------------------------------------------------------------------
Level 4 BBB- or Baa3 0.175%
- -----------------------------------------------------------------------
Level 5 BB+ or Ba1 0.250%
- -----------------------------------------------------------------------
Level 6 Lower than Level 0.375%
5 or unrated
=======================================================================
</TABLE>
"Approved Accounting Firm" means Arthur Andersen LLP, Deloitte
& Touche LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP or KPMG
Peat Marwick LLP, or any successor thereof.
"Arrangers" has the meaning specified in the recital of
parties to this Agreement.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"Authentic Fitness" has the meaning set forth in the
Preliminary Statements.
"Authentic Fitness Stock" has the meaning set forth in the
Preliminary Statements.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest established by the
Administrative Agent, from time to time, at its Domestic
Lending Office as its base rate for loans in United States
dollars;
(b) 1/2 of one percent per annum above the Federal
Funds Rate; and
(c) for the period from December 15, 1999 through
January 15, 2000, 2 percent per annum above the Federal Funds
Rate.
<PAGE>
5
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.06(a)(i).
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with Citibank at its office at 399 Park
Avenue, New York, New York 10043, Account No. 3846-9269.
"Borrowing" means a borrowing consisting of Advances of the
same Type made on the same day by the Lenders.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"Capitalized Leases" has the meaning specified in clause (e)
of the definition of "Debt".
"Citibank" has the meaning specified in the recital of parties
to this Agreement.
"Commitment" means, with respect to any Lender at any time,
(a) the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Commitment" or (b) if such Lender has entered
into one or more Assignments and Acceptances, the amount set forth for
such Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(c) as such Lender's "Commitment", as such
amount may be reduced at or prior to such time pursuant to Section
2.04.
"Confidential Information" means any information, whether
written or oral that the Borrower or Group furnishes to any Agent or
Lender which is designated as confidential or which could reasonably be
expected by such Agent or Lender to be confidential, provided, that for
purposes of this definition, unless otherwise specified by the Borrower
or Group, the term "Confidential Information" will include, without
limitation, any information furnished by the Borrower or Group
regarding proposed acquisitions (including, without limitation, the
acquisition of Authentic Fitness) and new product launches by Group or
its Subsidiaries, and provided, further, that the term "Confidential
Information" does not include any information that is or becomes
generally available to the public or that is or becomes available to
such Agent or Lender from a source other than the Borrower or Group.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
<PAGE>
6
"Control Date" means the date on which Persons designated or
approved by Group constitute a majority of the Board of Directors of
Authentic Fitness.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.08, 2.09 or 2.10.
"Currency Hedge Agreements" means currency swap agreements,
currency future or option contracts and other similar agreements.
"Debt" of any Person means, without duplication, the
following:
(a) all indebtedness of such Person for borrowed
money,
(b) all Obligations of such Person for the deferred
purchase price of property or services (other than trade
payables not overdue by more than 90 days incurred in the
ordinary course of such Person's business), including, without
limitation, the Trade Credit Facility,
(c) all Obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments,
(d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession
or sale of such property),
(e) all Obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP,
recorded as capital leases ("Capitalized Leases"),
(f) all Obligations, contingent or otherwise, of such
Person under acceptance, letter of credit or similar
facilities,
(g) all Obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock, valued, in
the case of Redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued
and unpaid dividends,
(h) all Obligations of such Person in respect of
Hedge Agreements,
<PAGE>
7
(i) all Debt of others of the kinds referred to in
clauses (a) through (h) above guaranteed directly or
indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an
agreement (A) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (B) to
purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure
the holder of such Debt against loss, (C) to supply funds to
or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of
whether such property is received or such services are
rendered) or (D) otherwise to assure a creditor against loss,
and
(j) all Debt referred to in clauses (a) through (h)
above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Debt.
"Debt Rating" means, as of any date, the higher of the ratings
that have been most recently announced by S&P and Moody's for any class
of non-credit enhanced long-term senior unsecured debt issued by Group
in effect on such date, provided that if neither S&P nor Moody's shall
have in effect such a rating, the Applicable Margin and the Applicable
Percentage will be set in accordance with Rating Level 6 under the
definition of "Applicable Margin" or "Applicable Percentage", as the
case may be, subject, in the case of the Applicable Margin, to the
proviso to the definition of "Applicable Margin". For purposes of the
foregoing, (a) if only one of S&P and Moody's shall have in effect a
Debt Rating, the Applicable Margin and the Applicable Percentage shall
be determined by reference to the available rating; (b) if the ratings
established by S&P and Moody's shall fall within different levels
separated by two or more levels, the Applicable Margin and the
Applicable Percentage shall be based upon the level that is one level
above the lower rating; (c) if any rating established by S&P or Moody's
shall be changed, such change shall be effective as of the date on
which such change is reported to Group; and (d) if S&P or Moody's shall
change the basis on which ratings are established, each reference to
the Debt Rating announced by S&P or Moody's, as the case may be, shall
refer to the then equivalent rating by S&P or Moody's, as the case may
be.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender at any
time, the amount of any Advance required to be made by such Lender to
the Borrower or for the account of the Borrower pursuant to Section
2.01 at or prior to such time which has not been so made as of such
time; provided, however, any Advance made by the Administrative Agent
for the account of such Lender pursuant to Section 2.02(d) shall not be
considered a Defaulted
<PAGE>
8
Advance even if, at such time, such Lender shall not have reimbursed
the Administrative Agent therefor as provided in Section 2.02(d). In
the event that a portion of a Defaulted Advance shall be deemed made
pursuant to Section 2.15(a), the remaining portion of such Defaulted
Advance shall be considered a Defaulted Advance originally required to
be made pursuant to Section 2.01 on the same date as the Defaulted
Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender at any
time, any amount required to be paid by such Lender to any Agent or any
other Lender hereunder or under any other Loan Document at or prior to
such time which has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender to
(a) the Administrative Agent pursuant to Section 2.02(d) to reimburse
the Administrative Agent for the amount of any Advance made by the
Administrative Agent for the account of such Lender, (b) any other
Lender pursuant to Section 2.14 to purchase any participation in
Advances owing to such other Lender and (c) any Agent pursuant to
Section 7.05 to reimburse such Agent for such Lender's ratable share of
any amount required to be paid by the Lenders to such Agent as provided
therein. In the event that a portion of a Defaulted Amount shall be
deemed paid pursuant to Section 2.15(b), the remaining portion of
such Defaulted Amount shall be considered a Defaulted Amount
originally required to be made hereunder or under any other Loan
Document on the same date as the Defaulted Amount so deemed paid in
part.
"Defaulting Lender" means, at any time, any Lender that, at
such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take or be the subject of any action or proceeding of a type
described in Section 6.01(e).
"Designated Lender" means each special purpose corporation
that (i) shall have been designated by a Designating Lender and shall
have become a party to this Agreement, all pursuant to Section 8.07(d),
and (ii) is not otherwise a Lender.
"Designating Lender" shall mean each Lender that is a party
hereto (other than by virtue of a Designation Agreement) that shall
designate a Designated Lender pursuant to a Designation Agreement in
accordance with Section 8.07(d).
"Designation Agreement " means a designation agreement entered
into by a Designating Lender and a Designated Lender, and accepted by
the Administrative Agent, in substantially the form of Exhibit D
hereto.
"Designer Holdings" means Designer Holdings Ltd., a Delaware
corporation, together with its successors.
"Documentation Agent" has the meaning specified in the recital
of parties to this Agreement.
<PAGE>
9
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Domestic Subsidiary" means any Subsidiary of Group organized
under the laws of the United States or any state thereof.
"EBITDA" means, for any period, net income (or net loss) from
operations (determined without giving effect to extraordinary or
non-recurring gains or losses) plus, to the extent deducted in
calculating such net income (loss), the sum of (a) Interest Expense,
(b) income tax expense, (c) depreciation expense, (d) amortization
expense and (e) minority interests in Authentic Fitness during the
period commencing on the date the Tender Offer, if any, is consummated
and ending on the date of the Merger less dividends paid to the
minority interests in respect thereof, in each case determined in
accordance with GAAP and, on a pro forma basis, as if any acquisitions
consummated after the first day of the applicable testing period
occurred on the first day of such period.
"Effective Date" means the first date on which the conditions
specified in Section 3.01 have been satisfied.
"Eligible Assignee" means any Person approved by the
Administrative Agent and the Borrower, such approval not to be
unreasonably withheld; provided, however, that neither the Borrower nor
an Affiliate of the Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat
of injury to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment or
decree relating to the environment, health, safety or Hazardous
Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
<PAGE>
10
"Equity Interests" means, with respect to any Person, shares
of capital stock of (or other ownership or profit interests, including
partnership, member, joint venture, or trust interests, in) such
Person, warrants, options or other rights for the purchase or other
acquisition from such Person of shares of capital stock of (or such
other equity ownership or equity profit interests in) such Person,
securities convertible into or exchangeable for shares of capital stock
of (or such other equity ownership or equity profit interests in) such
Person, or warrants, rights or options for the purchase or other
acquisition from such Person of such shares (or such other equity
interests), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (d) the cessation
of operations at a facility of the Borrower or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Borrower or any of its ERISA Affiliates from
a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (f)
the failure by the Borrower or any of its ERISA Affiliates to make a
payment to a Plan if the conditions for the imposition of a lien under
Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
<PAGE>
11
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period or, if
for any reason such rate is not available, the rate at which deposits
in U.S. dollars are offered by the principal office of the
Administrative Agent in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal
to the Administrative Agent's Eurodollar Rate Advance comprising part
of such Borrowing to be outstanding during such Interest Period and for
a period equal to such Interest Period by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Interest
Period.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances comprising part of the same Borrowing
means the reserve percentage applicable two Business Days before the
first day of such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which
the interest rate on Eurodollar Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excluded Person" means (i) Linda J. Wachner or (ii) any trust
of which Linda J. Wachner is the sole trustee or is a trustee with
effective control over the voting stock held by such trust or over the
management or policies of Group (or, in case of her death or
disability, another trustee of comparable experience and ability
selected by the Borrower within 180 days thereafter after consultation
with the Administrative Agent).
<PAGE>
12
"Excluded Subsidiary" means, provided that the terms of the
Trust Stock preclude the issuance of a guaranty, the Trust, provided,
that neither Group nor the Borrower nor any of their Subsidiaries shall
make any additional Investments in the Trust other than those
Investments which existed on the date of the Five Year Waiver and those
Investments necessary to pay its normal operating expenses in the
ordinary course of business.
"Excluded Taxes" means, in the case of each Lender, franchise
taxes and taxes upon or determined by reference to such Lender's net
income (including, without limitation, branch profit taxes), in each
case imposed by the United States or any political subdivision or
taxing authority thereof or therein or by any jurisdiction in which
such Lender has its Applicable Lending Office, is resident or in which
such Lender is organized or has its principal or
registered office and, in the case of each Agent, franchise taxes and
net income taxes upon or determined by reference to such Agent's net
income (including, without limitation, branch profits taxes) imposed by
the United States or by the state or foreign jurisdiction under the
laws of which such Agent is organized (or by any political subdivision
of such state or foreign jurisdiction), is resident or has its
principal or registered office.
"Existing Debt" means the Debt described in Schedule II
hereto.
"Existing Five Year Credit Agreement" means the Credit
Agreement dated as of August 12, 1997 as amended and restated by the
Amended and Restated Credit Agreement dated as of November __, 1999
among the Borrower, the lenders party thereto, Scotiabank and SSB, as
co-lead arrangers and co-book managers, Citibank, as Syndication Agent,
Commerzbank, as documentation agent, and Scotiabank, as administrative
agent, competitive bid agent, swing line bank and an issuing bank, as
such agreement may be amended, modified, extended, renewed, refinanced,
replaced or otherwise supplemented through the date hereof and from
time to time.
"Facility" means, at any time, the aggregate amount of the
Lenders' Commitments at such time.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fiscal Quarter" means a fiscal quarter of Group and its
Consolidated Subsidiaries ending on or about March 31, June 30,
September 30 or December 31 of each year.
<PAGE>
13
"Fiscal Year" means a fiscal year of Group and its
Consolidated Subsidiaries ending on or about December 31 of each year.
"Five Year Waiver" means the Letter Waiver dated as of
October 14, 1997 to the Existing Five Year Credit Agreement.
"GAAP" has the meaning specified in Section 1.03.
"Group" has the meaning specified in the recital of parties to
this Agreement.
"Group Guaranty" has the meaning specified in Section
3.01(f)(i).
"Guaranties" means the Group Guaranty and the Subsidiary
Guaranty.
"Guarantors" means Group and each of its Domestic Subsidiaries
that are Material Subsidiaries (other than the Borrower and each
Excluded Subsidiary) and each other Subsidiary which is required to
guarantee the Borrower's Obligations under the Loan Documents pursuant
to Section 5.01(j).
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any other chemicals,
materials or substances designated, classified or regulated as being
"hazardous" or "toxic", or words of similar import, under any
Environmental Law.
"Hedge Agreements" means Currency Hedge Agreements and
Interest Rate Hedge Agreements.
"Indebtedness for Borrowed Money" of any Person means all Debt
of such Person for borrowed money or evidenced by notes, bonds,
debentures or other similar instruments (other than Trust Stock in a
face amount of not more than $120,000,000), all Obligations of such
Person for the deferred purchase price of any property, service or
business (other than trade accounts payable (including the Trade Credit
Facility and other similar financing arrangements to the extent that
the aggregate principal amount of Debt, including loans, acceptances
and letters of credit thereunder, does not exceed $550,000,000 (it
being understood and agreed that to the extent that the principal
amount of Debt under the Trade Credit Facility and other similar
financing arrangements exceeds $550,000,000, a pro-rata portion of such
excess (calculated by reference to the relative amount of loans
constituting such Debt) shall be included in this definition of
"Indebtedness for Borrowed Money")) incurred in the ordinary course of
business and constituting current liabilities), and all Obligations of
such Person under Capitalized Leases (limited in each case to the
principal amount thereof).
<PAGE>
14
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Expense" means, with respect to any Person for any
period of measurement, the excess, if any, of (i) interest expense
(whether cash or accretion) of such Person during such period
determined in accordance with GAAP, and shall include in any event,
without limitation, interest expense with respect to Indebtedness for
Borrowed Money, the Trade Credit Facility and payments under Interest
Rate Hedge Agreements over (ii) interest income of such Person for such
period, including payments received under Interest Rate Hedge
Agreements; provided, however, that interest expense for any acquired
entity, including Authentic Fitness, for any period beginning prior to
the acquisition date shall be such entity's actual interest expense for
such period.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, with respect to Eurodollar Rate
Advances, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three, four,
five or six months, or, if available to all Lenders, nine or twelve
months, as the Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the first day of such Interest Period, select;
provided, however, that:
(a) the Borrower may not select any Interest Period
that ends after the Termination Date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day, unless the Borrower and the Administrative Agent
otherwise agree; and
<PAGE>
15
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month unless the Borrower and the
Administrative Agent otherwise agree.
"Interest Rate Hedge Agreements" means interest rate swap, cap
or collar agreements, interest rate future or option contracts and
other similar agreements
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any arrangement pursuant to which the investor incurs Debt
of the types referred to in clauses (i) or (j) of the definition of
"Debt" in respect of such Person.
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Section 8.07, including the
Designated Lenders, if any; provided, however, that the term "Lender"
shall exclude each Designated Lender when used (i) in reference to an
Advance or the Commitments or terms relating thereto, except to the
extent a Designated Lender is the obligee of an Advance actually funded
by such Designated Lender pursuant to Section 2.01 hereof and (ii) in
any determination or calculation of Required Lenders, it being
understood that for purposes hereof, any Advance made by a Designated
Lender shall be deemed to have been made by the applicable Designating
Lender.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means (a) for purposes of this Agreement, the
Notes, if any, and any amendments or modifications hereof or thereof
and for all other purposes other than for purposes of the Guarantees,
(i) this Agreement, (ii) the Notes, if any and (iii) the Guarantees and
(b) for purposes of the Guarantees, (i) this Agreement, (ii) the Notes,
if any, (iii) the Guarantees and (iv) the Interest Rate Hedge
Agreements entered into by Group or the Borrower with Lenders, in the
case of each of the foregoing agreements referred to in clause (a) or
(b), and any amendments, supplements or modifications hereof or
thereof.
<PAGE>
16
"Loan Parties" means the Borrower and the Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or Group and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of (i) the
Borrower or Group and its Subsidiaries taken as a whole, (b) the rights
and remedies of any Agent or Lender under any Loan Document or (c) the
validity or enforceability of any Loan Document.
"Material Guarantor" means, at any time, a Guarantor having
(i) at least 10% of Consolidated total assets of Group and its
Subsidiaries (determined as of the last day of the most recent Fiscal
Quarter) or (ii) at least 10% of Consolidated EBITDA of Group and its
Subsidiaries for the 12-month period ending on the last day of the most
recent Fiscal Quarter.
"Material Subsidiary" of any Person means, at any time, a
Subsidiary of such Person having (i) at least $15,000,000 in total
assets (determined as of the last day of the most recent fiscal quarter
of such Person) or (ii) EBITDA of at least $15,000,000 for the 12-month
period ending on the last day of the most recent fiscal quarter of such
Person.
"Merger" has the meaning set forth in the Preliminary
Statements.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any of its ERISA
Affiliates is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any of its ERISA Affiliates and at least
one Person other than the Borrower and its ERISA Affiliates or (b) was
so maintained and in respect of which the Borrower or any of its ERISA
Affiliates could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any Sale of any
asset or the incurrence or issuance of any Indebtedness for Borrowed
Money or the issuance of any Equity Interest
<PAGE>
17
by any Person, the aggregate amount of cash received from time to time
(whether as initial consideration or through payment or disposition of
deferred consideration) by or on behalf of such Person in connection
with such transaction after deducting therefrom only (without
duplication) (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees and other
similar fees and commissions, (b) the amount of taxes payable in
connection with or as a result of such transaction and (c) the amount
of any Debt secured by a Lien on such asset that, by the terms of the
agreement or instrument governing such Debt, is required to be repaid
upon such disposition, in each case to the extent, but only to the
extent, that the amounts so deducted are, at or about the time of
receipt of such cash, actually paid to a Person that is not an
Affiliate of such Person or any Loan Party or any Affiliate of any Loan
Party and are properly attributable to such transaction or to the asset
that is the subject thereof; provided, however, that in the case of
taxes that are deductible under clause (b) above but for the fact that,
at the time of receipt of such cash, such taxes have not been actually
paid or are not then payable, such Loan Party or such Subsidiary may
deduct an amount (the "Reserved Amount") equal to the amount reserved
in accordance with GAAP for such Loan Party's or such Subsidiary's
reasonable estimate of such taxes, other than taxes for which such Loan
Party or such Subsidiary is indemnified, provided further, however,
that, at the time such taxes are paid, an amount equal to the amount,
if any, by which the Reserved Amount for such taxes exceeds the amount
of such taxes actually paid shall constitute "Net Cash Proceeds" of the
type for which such taxes were reserved for all purposes hereunder.
"New Five Year Credit Agreement" means the Five Year Credit
Agreement expected to be entered into by the Borrower, the lenders
party thereto, Scotiabank and SSB, as co-lead arrangers and co-book
runners, Citibank, as syndication agent, Societe Generale and
Commerzbank A.G. as co-documentation agents, and Scotiabank, as
administrative agent and competitive bid agent, as such agreement may
be amended, modified, extended, renewed, refinanced, replaced or
otherwise supplemented from time to time.
"Note" has the meaning specified in Section 2.16.
"Notice of Borrowing" has the meaning specified in
Section 2.02(a).
"Obligation" means, with respect to any Person, any obligation
of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed,
undisputed, legal, equitable, secured or unsecured, and whether or not
such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(e). Without limiting the
generality of the foregoing, the Obligations of the Loan Parties under
the Loan Documents include (a) the obligation to pay principal,
interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Loan Party under any Loan
Document and (b) the obligation to reimburse any amount in respect of
any of the foregoing
<PAGE>
18
that any Lender, in its sole discretion, may elect to pay or advance on
behalf of such Loan Party.
"Other Taxes" has the meaning specified in Section 2.12(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or
any successor).
"Permitted Liens" means the following:
(a) Liens, other than in favor of the PBGC, arising
out of judgments or awards in respect of which Group or any of
its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review and in respect of which it shall
have secured a subsisting stay of execution pending such
appeal or proceedings for review, provided it shall have set
aside on its books adequate reserves, in accordance with GAAP,
with respect to such judgment or award and provided further
that the aggregate amount secured by such Liens does not
exceed $5,000,000 in any one case or $10,000,000 in the
aggregate;
(b) Liens for taxes, assessments or governmental
charges or levies, provided payment thereof shall not at the
time be required in accordance with the provisions of Section
5.01(b) and such amount, when taken together with any amount
payable under Section 5.01(b) as to which any Lien has been
attached as described in the last phrase thereof, shall not
exceed $10,000,000;
(c) deposits, Liens or pledges to secure payments of
workmen's compensation and other payments, unemployment and
other insurance, old-age pensions or other social security
obligations, or the performance of bids, tenders, leases,
contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds,
or other similar obligations arising in the ordinary course of
business;
(d) mechanics', workmen's, repairmen's,
warehousemen's, vendors' or carriers' Liens or other similar
Liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such Liens;
(e) statutory landlord's Liens under leases to which
Group or any of its Subsidiaries is a party;
(f) any Lien constituting a renewal, extension or
replacement of a Lien constituting a Permitted Lien, but only
if at the time such Lien is granted and immediately after
giving effect thereto, no Default would exist;
<PAGE>
19
(g) leases or subleases granted to other Persons not
materially interfering with the conduct of the business of
Group and its Subsidiaries, taken as a whole;
(h) zoning restrictions, easements, rights of way,
licenses and restrictions on the use of real property or minor
irregularities in title thereto, which do not materially
impair the use of such property in the normal operation of the
business of Group or any of its Subsidiaries or the value of
such property for the purpose of such business; and
(i) statutory or common law Liens (such as rights of
set-off) on deposit accounts of Group and its Subsidiaries and
other Liens under the L/C Related Documents (as defined in the
Existing Five Year Credit Agreement).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Commitment at such
time and the denominator of which is the Facility at such time.
"Purchaser" has the meaning set forth in the Preliminary
Statements.
"Redeemable" means, with respect to any capital stock, Debt or
other right or Obligation, any such right or Obligation that (a) the
issuer has undertaken to redeem at a fixed or determinable date or
dates, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer
or (b) is redeemable at the option of the holder.
"Register" has the meaning specified in Section 8.07(g).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means, at any time, Lenders owed or holding
more than 50% of the sum of (a) the aggregate principal amount of the
Advances outstanding at such time and (b) the aggregate Unused
Commitments at such time; provided, however, if any Lender shall be a
Defaulting Lender at such time, there shall be excluded from the
determination of Required Lenders at such time (i) the aggregate
principal amount of the Advances owing to such Lender (in its capacity
as a Lender) and outstanding at such time and (ii) the Unused
<PAGE>
20
Commitment of such Lender at such time and provided further that for
purposes of this definition, any Advance made by a Designated Lender
shall be deemed to have been made by its applicable Designating Lender.
"Sale" has the meaning specified in Section 2.05(b).
"S&P" means Standard & Poor's Ratings Group, currently a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Scotiabank" has the meaning specified in the recital of
parties to this Agreement.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any of its ERISA Affiliates and no Person
other than the Borrower and its ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any of its ERISA
Affiliates could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries. The
term "wholly owned Subsidiary" shall exclude any directors' or
officers' qualifying shares which may be outstanding.
"Subsidiary Guaranty" has the meaning specified in Section
3.01(f)(ii).
"Surviving Corporation" has the meaning set forth in the
Preliminary Statements.
"Syndication Agent" has the meaning specified in the recital
of parties to this Agreement.
"Tangible Assets" means total assets minus goodwill and
intangibles, in each case determined in accordance with GAAP.
"Taxes" has the meaning specified in Section 2.12(a).
"Tender Offer" has the meaning set forth in the Preliminary
Statements.
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21
"Termination Date" means the earlier of October 8, 2000 and
the date of termination in whole of the Commitments pursuant to Section
2.04 or 6.01.
"Trade Credit Facility" means the revolving loan facility
under the Sixth Amended and Restated Credit Agreement dated as of
November 19, 1999 among the Borrower, certain lenders party thereto and
Scotiabank, as agent for said lenders, as each such agreement has
been amended to date and the same may be amended, extended, renewed,
refinanced, replaced or otherwise modified from time to time.
"Trust" means Designer Finance Trust, a trust formed under the
laws of Delaware.
"Trust Stock" means the Trust Originated Preferred Securities
issued by the Trust.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Commitment" means, with respect to any Lender at any
time,
(a) such Lender's Commitment at such time minus
(b) the sum of the aggregate principal amount of all
Advances made by such Lender and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
<PAGE>
22
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) Each Lender severally agrees,
on the terms and conditions hereinafter set forth, to make Advances to the
Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount for each such Advance not
to exceed such Lender's Unused Commitment at such time. Each Borrowing shall be
in an aggregate amount of $3,000,000 or an integral multiple of $1,000,000 in
excess thereof and shall consist of Advances of the same Type made on the same
day by the Lenders ratably according to their respective Commitments. Amounts
borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.
(b) For any Lender which is a Designating Lender, any Advance
to be made by such Lender may from time to time and upon notice to the
Administrative Agent, be made by its Designated Lender pursuant to the terms
hereof in such Designating Lender's sole discretion, and nothing herein shall
constitute a Commitment to make Advances by such Designated Lender; provided,
that (i) if any Designated Lender elects not to, or fails for any reason
whatsoever to, make such Advance, its Designating Lender hereby agrees that it
shall make such Advance pursuant to the terms hereof and (ii) notwithstanding
anything to the contrary, neither the designation of a Designated Lender, the
election or other determination that a Designated Lender will make any Advance
nor any other condition or circumstance relating to the Designated Lender shall
in any way release, diminish or otherwise affect the relevant Designating
Lender's Commitment or any of its other obligations hereunder or under any other
Loan Document or any rights of the Borrower, any Agent or any Lender with
respect to such Designating Lender. Any Advance actually funded by a Designated
Lender shall constitute a utilization of the Commitment of the Designating
Lender for all purposes hereunder.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be
made on notice, given not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or on the date of the proposed
Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the
Borrower to the Administrative Agent, which shall give to each Lender prompt
notice thereof by telecopier or telex. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telephone, confirmed immediately in writing,
or telecopier or telex, in substantially the form of Exhibit B hereto,
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing,
and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Advance. The Borrower may not give to the
Administrative Agent more than two Notices of Borrowing in any calendar month.
Each Lender shall, before 12:00 Noon (New York City time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments of such Lender
<PAGE>
23
and the other Lenders. After the Administrative Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will make such funds available to the Borrower by crediting
the Borrower's Account.
(b) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Borrowing if the aggregate amount of such Borrowing is less than $10,000,000
or if the obligation of the Lenders to make Eurodollar Rate Advances shall then
be suspended pursuant to Section 2.08, 2.09 or 2.10 and (ii) the Advances may
not be outstanding as part of more than 6 separate Borrowings.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the date specified in
such Notice of Borrowing for such Borrowing the applicable conditions set forth
in Article III, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Administrative Agent, the
Administrative Agent agrees to give prompt notice thereof to the Borrower
(provided that failure to give such notice shall not affect the obligations of
the Borrower under this Section 2.02(d)), and such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at such time under Section 2.06 to Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Advance as part of such
Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
<PAGE>
24
SECTION 2.03. Repayment of Advances. The Borrower shall repay
to the Administrative Agent for the ratable account of the Lenders on the
Termination Date the aggregate outstanding principal amount of the Advances then
outstanding.
SECTION 2.04. Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Administrative Agent, to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Lenders, provided that each
partial reduction (i) shall be in the aggregate amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably
among the Lenders in accordance with their respective Commitments. Upon the
termination or reduction of a Commitment (or portion thereof) pursuant to this
Section 2.04 or Section 2.05(b), such Commitment (or portion thereof) may not be
reinstated.
SECTION 2.05. Prepayments. (a) Optional. The Borrower may,
upon at least one Business Day's notice in the case of Base Rate Advances and
two Business Days' notice in the case of any Eurodollar Rate Advances, in each
case to the Administrative Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding aggregate principal amount of the Advances
comprising part of the same Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the aggregate principal
amount prepaid; provided, however, that (i) each partial prepayment of the
Facility shall be in an aggregate principal amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof and (ii) any such prepayment of a
Eurodollar Rate Advance made other than on the last day of an Interest Period
therefor shall be made together with payment of all amounts, if any, required
pursuant to Section 8.04(c).
(b) Mandatory. The Borrower shall:
(i) on the date of receipt of Net Cash Proceeds from the sale,
transfer or other disposition (a "Sale") of any assets of the Borrower,
Group or any of their respective Subsidiaries (other than Sales of
assets in accordance with clauses (i), (iv), (v), (vii) and (viii) of
Section 5.02(d)) that individually or in the aggregate exceed
$150,000,000 from the date hereof, provided that Sales of assets in
accordance with clause (iii) of Section 5.02(d) shall be included in
this Section 2.05(b)(i) only to the extent that the outstanding amount
of advances against receivables which are the subject of a transaction
described in clause (iii) of Section 5.02(a) shall be increased above
$200,000,000 after the date hereof; and
(ii) on the date of receipt of the Net Cash Proceeds by the
Borrower, Group or any of their respective Subsidiaries from the
incurrence or issuance by the Borrower, Group or any such Subsidiary of
any Indebtedness for Borrowed Money (other than in the ordinary course
of business) or from the issuance by the Borrower, Group or any such
Subsidiary of any Equity Interests (other than Equity Interests issued
for the sole purpose of financing an acquisition) or issued to Group,
the Borrower or a Subsidiary of Group,
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25
apply 100% of such Net Cash Proceeds to prepay the outstanding aggregate
principal amount of the Advances, together with accrued interest to the date of
such prepayment on the aggregate principal amount prepaid. Upon such prepayment,
the Commitments of the Lenders shall automatically be terminated ratably in an
aggregate amount equal to such Net Cash Proceeds.
SECTION 2.06. Interest. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(x) the Base Rate in effect from time to time plus (y) the Applicable
Margin in effect from time to time, payable in arrears quarterly on the
first day of each January, April, July and October during such periods.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (x)
the Eurodollar Rate for such Interest Period for such Advance plus (y)
the Applicable Margin in effect from time to time, payable in arrears
on the last day of such Interest Period and, if such Interest Period
has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurodollar Rate Advance shall
be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on (i) the
unpaid principal amount of each Advance owing to each Lender, payable in arrears
on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid
on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
SECTION 2.07. Fees. (a) Commitment Fee. The Borrower shall pay
to the Administrative Agent for the account of the Lenders a commitment fee,
from the date hereof in the case of each Initial Lender and from the effective
date specified in the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender until the Termination Date, payable
quarterly on the first day of each January, April, July and October, commencing
January 7, 2000, and on the Termination Date, at the rate per annum equal to the
Applicable Percentage in effect from time to time on the average daily Unused
Commitment of such Lender; provided, however, (i) that any commitment fee
accrued with respect to any of the Commitments of a Defaulting Lender during the
period prior to the time such Lender became a Defaulting Lender and
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26
unpaid at such time shall not be payable by the Borrower so long as such Lender
shall be a Defaulting Lender except to the extent that such commitment fee shall
otherwise have been due and payable by the Borrower prior to such time and (ii)
that no commitment fee shall accrue on any of the Commitments of a Defaulting
Lender so long as such Lender shall be a Defaulting Lender.
(b) Agents' Fees. The Borrower shall pay to each of the Agents
for its own account such fees as may from time to time be agreed between the
Borrower and such Agent.
SECTION 2.08. Conversion of Advances. (a) Optional. The
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.08, 2.09 and 2.10, Convert all Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b) and no
Conversion of any Advances shall result in more separate Borrowings than
permitted under Section 2.02(b). Each such notice of a Conversion shall, within
the restrictions specified above, specify (i) the date of such Conversion, (ii)
the Advances to be Converted, and (iii) if such Conversion is into Eurodollar
Rate Advances, the duration of the initial Interest Period for each such
Advance. Each notice of Conversion shall be irrevocable and binding on the
Borrower.
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $10,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders,
whereupon each such Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost (other than in taxes, including
interest, additions to tax and penalties relating thereto, except to the extent
that the same are required to be
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27
paid pursuant to Section 2.12 hereof) to any Lender of agreeing to make or of
making, funding or maintaining Eurodollar Rate Advances (excluding for purposes
of this Section 2.09 any such increased costs resulting from (x) Taxes, Other
Taxes, Excluded Taxes or taxes excluded from the definitions of Taxes or Other
Taxes in Section 2.12(e) or from indemnification pursuant to Section 2.12(f) (as
to which Section 2.12 shall govern) and (y) changes in the basis of taxation of
overall net income or overall gross income by the United States or by the
foreign jurisdiction or state under the laws of which such Lender is organized
or has its Applicable Lending Office or any political subdivision thereof), then
the Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost; provided, however, that, before making any such
demand, each Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid the
need for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender
and provided further that the Borrower's obligations to any Designated Lender
hereunder shall be limited as set forth in Section 8.04(e). A certificate as to
the amount of such increased cost, submitted to the Borrower by such Lender,
shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend, then, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to the Administrative Agent for
the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend, provided, however, that the Borrower's obligations to any Designated
Lender hereunder shall be limited as set forth in Section 8.04(e). A certificate
as to such amounts submitted to the Borrower by such Lender shall be conclusive
and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances, Lenders
(other than Designated Lenders) owed at least a majority of the then aggregate
unpaid principal amount thereof notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will not adequately
reflect the cost (excluding for purposes of this Section 2.09 any such increased
costs resulting from (i) Taxes, Other Taxes, Excluded Taxes or taxes excluded
from the definitions of Taxes or Other Taxes in Section 2.12(e) or from
indemnification pursuant to Section 2.12(f) (as to which Section 2.12 shall
govern) and (ii) changes in the basis of taxation of overall net income or
overall gross income by the United States or by the foreign jurisdiction or
state under the laws of which such Lender is organized or has its Applicable
Lending Office or any political subdivision thereof) to such Lenders of making,
funding or maintaining their Eurodollar Rate Advances for such
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28
Interest Period, the Administrative Agent shall forthwith so notify the Borrower
and the Lenders, whereupon (i) each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended until
the Administrative Agent shall notify the Borrower that such Lenders have
determined that the circumstances causing such suspension no longer exist.
SECTION 2.10. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender (other than a Designated Lender) shall notify
the Administrative Agent that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any central bank
or other governmental authority asserts that it is unlawful, for any Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) each Eurodollar Rate Advance will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders
to make Eurodollar Rate Advances or to Convert Advances into Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist; provided that if it becomes unlawful for any Designated Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make or
fund or maintain Eurodollar Rate Advances, such Designated Lender shall
immediately assign its rights and obligations with respect to such Advance to
its applicable Designating Lender.
SECTION 2.11. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, if any, irrespective of
counterclaim or set-off (except as otherwise provided in Section 2.15), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds. The Administrative Agent will promptly thereafter cause to be distributed
like funds relating to the payment of principal or interest or commitment fees
ratably (other than amounts payable pursuant to Section 2.09, 2.12 or 8.04(c))
to the Lenders for the account of their respective Applicable Lending Offices,
and like funds relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. Upon its acceptance
of an Assignment and Acceptance and recording of the information contained
therein in the Register pursuant to Section 8.07(c), from and after the
effective date specified in such Assignment and Acceptance, the Administrative
Agent shall make all payments hereunder and under any Notes issued in connection
therewith in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances to which, or the manner in which,
such funds are to be applied, the Administrative Agent may, but shall not be
obligated to, elect to distribute such funds to each Lender ratably in
accordance
<PAGE>
29
with such Lender's proportionate share of the principal amount of all
outstanding Advances, in repayment or prepayment of such of the outstanding
Advances or other Obligations owed to such Lender, and for application to such
principal installments, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under the
Note, if any, held by such Lender, to charge from time to time against any or
all of the Borrower's accounts with such Lender any amount so due.
(d) All computations of interest based on clause (a) of the
definition of Base Rate shall be made by the Administrative Agent on the basis
of a year of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate or the Federal Funds Rate and fees shall
be made by the Administrative Agent on the basis of a year of 360 days, in each
case for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or commitment fees are
payable. Each determination by the Administrative Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(e) Whenever any payment hereunder or under the Notes, if any,
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day.
(f) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower
hereunder or under any Notes shall be made, in accordance with Section 2.11,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and each Agent, Excluded
Taxes (all such non-Excluded Taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be
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30
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or any Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12) such Lender or such Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under any Notes
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and each Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.12) paid by such Lender or such Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 30 days from the date
such Lender or such Agent (as the case may be) makes written demand therefor,
including in such demand an identification of the Taxes or Other Taxes (together
with the amounts thereof) with respect to which such indemnification is being
sought.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent and the Documentation Agent,
at their respective addresses referred to in Section 8.02, the original or a
certified copy of a receipt evidencing payment thereof. In the case of any
payment hereunder or under any Notes by or on behalf of the Borrower through an
account or branch outside the United States or on behalf of the Borrower by a
payor that is not a United States person, if the Borrower determines that no
Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause
such payor to furnish, to the Administrative Agent and the Documentation Agent,
at such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms "United States" and "United States person"
shall have the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender, and on the date of the
Assignment and Acceptance or Designation Agreement pursuant to which it becomes
a Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Lender remains
lawfully able to do so), shall provide each of the Administrative Agent and the
Borrower with two original Internal Revenue Service forms 1001, 4224 or W-8 as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement or
the
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31
Notes, if any. If any Lender which is not a "United States person" determines
that it is unable to submit to the Borrower or the Administrative Agent any form
or certificate that such Lender is otherwise required to submit pursuant to this
Section 2.12, or that it is required to withdraw or cancel any such form or
certificate, or that any such form or certificate previously submitted has
otherwise become ineffective or inaccurate, such Lender shall promptly notify
the Borrower and the Administrative Agent of such fact. In addition, if a Lender
provides a form W-8 (or any successor or related form) to the Administrative
Agent and the Borrower pursuant to this Section 2.12, such Lender shall also
provide a certificate stating that such Lender is not a "bank" within the
meaning of section 881(c)(3)(A) of the Internal Revenue Code of 1986 and shall
promptly notify the Administrative Agent and the Borrower if such Lender
determines that it is no longer able to provide such certification. If the form
provided by a Lender at the time such Lender first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under subsection (a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Lender assignee on such date. Upon
the reasonable request of the Borrower or the Administrative Agent, each Lender
that has not provided the forms or other documents, as provided above, on the
basis of being a United States person shall submit to the Borrower and the
Administrative Agent a certificate to the effect that it is such a "United
States person" (as defined in Section 7701(a)(30) of the Internal Revenue Code).
(f) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in Section 2.12(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which such Lender became a Lender hereunder, or if such form
otherwise is not required under the first sentence of subsection (e) above
because the Borrower has not requested in writing such form subsequent to the
date on which such Lender became a Lender hereunder), such Lender shall not be
entitled to indemnification under Section 2.12(a) or (c) with respect to Taxes
imposed by the United States; provided, however, that should a Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as the Lender shall reasonably request to
assist the Lender to recover such Taxes.
(g) Any Lender or Agent claiming any additional amounts
payable pursuant to this Section 2.12 shall use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
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(h) Within 60 days after the written request of the Borrower,
each Lender or Agent shall execute and deliver to the Borrower such certificates
or forms as are reasonably requested by the Borrower in such request, which can
be furnished consistent with the facts and which are reasonably necessary to
assist the Borrower in applying for refunds of Taxes paid by the Borrower
hereunder or making payment of Taxes hereunder; provided, however, that no
Lender or Agent shall be required to furnish to the Borrower and financial or
other information which it considers confidential. The cost of preparing any
materials referred to in the previous sentence shall be borne by the Borrower.
If a Lender or Agent determines in good faith that it has received a refund of
any Taxes or Other Taxes with respect to which Borrower has made a payment of
additional amounts, such Lender or Agent shall pay to the Borrower an amount
that such Lender or Agent determines in good faith to be equal to the net
benefit, after tax, that was obtained by such Lender or Agent (as the case may
be) as a consequence of such refund.
(i) All obligations of the Borrower owed to any Designated
Lender pursuant to this Section 2.12 shall be limited to the amount that the
Borrower would be obligated to pay to such Designated Lender's applicable
Designating Lender but for such designation, as set forth in Section 8.04(e).
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of Obligations owing to it (other
than pursuant to Section 2.09, 2.12 or 8.04(c)) in excess of its ratable share
of payments on account of the Obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
Obligations owing to them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.13
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely to pay the holders of Authentic Fitness Stock the cash consideration for
their shares in the Tender Offer and the Merger, to refinance the Existing Debt,
to pay severance and other reorganization expenses in connection with the Tender
Offer and the Merger and to pay fees and expenses in connection with the Tender
Offer and the Merger.
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SECTION 2.15. Defaulting Lenders. (a) In the event that, at
any one time, (i) any Lender shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the Obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its Obligation to make any such payment against the Obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance shall be a Base Rate Advance and shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (A)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (B) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender shall
be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount
to any Agent or any of the other Lenders and (iii) the Borrower shall make any
payment hereunder or under any other Loan Document to the Administrative Agent
for the account of such Defaulting Lender, then the Administrative Agent may, on
its behalf or on behalf of such other Lenders and to the fullest extent
permitted by applicable law, apply at such time the amount so paid by the
Borrower to or for the account of such Defaulting Lender to the payment of each
such Defaulted Amount to the extent required to pay such Defaulted Amount. In
the event that the Administrative Agent shall so apply any such amount to the
payment of any such Defaulted Amount on any date, the amount so applied by the
Administrative Agent shall constitute for all purposes of this Agreement and the
other Loan Documents payment, to such extent, of such Defaulted Amount on such
date. Any such amount so applied by the Administrative Agent shall be retained
by the Administrative Agent or distributed by the Administrative Agent to such
other Lenders, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent and such
other Lenders and, if the amount of such payment made by the Borrower shall at
such time be
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34
insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Lenders, in the following order of priority:
(i) first, to the Agents for any Defaulted Amount
then owing to the Agents; and
(ii) second, to any other Lenders for any Defaulted Amounts
then owing to such other Lenders, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lenders.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender shall
be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other
Lender shall be required to pay or distribute any amount hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrower or such other Lender shall pay such amount to the Administrative Agent
to be held by the Administrative Agent, to the fullest extent permitted by
applicable law, in escrow or the Administrative Agent shall, to the fullest
extent permitted by applicable law, hold in escrow such amount otherwise held by
it. Any funds held by the Administrative Agent in escrow under this subsection
(c) shall be deposited by the Administrative Agent in an account with the
Administrative Agent, in the name and under the control of the Administrative
Agent, but subject to the provisions of this subsection (c). The terms
applicable to such account, including the rate of interest payable with respect
to the credit balance of such account from time to time, shall be the
Administrative Agent's standard terms applicable to escrow accounts maintained
with it. Any interest credited to such account from time to time shall be held
by the Administrative Agent in escrow under, and applied by the Administrative
Agent from time to time in accordance with the provisions of, this subsection
(c). The Administrative Agent shall, to the fullest extent permitted by
applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Advances required to be made by such Defaulting
Lender and to pay any amount payable by such Defaulting Lender hereunder and
under the other Loan Documents to any Agent or any other Lender, as and when
such Advances or amounts are required to be made or paid and, if the amount so
held in escrow shall at any time be insufficient to make and pay all such
Advances and amounts required to be made or paid at such time, in the following
order of priority:
(i) first, to the Agents for any amount then due and payable
by such Defaulting Lender to the Agents hereunder;
(ii) second, to any other Lenders for any amount then due and
payable by such Defaulting Lender to such other Lenders hereunder,
ratably in accordance with such respective amounts then due and payable
to such other Lenders; and
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35
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender that is a Defaulting Lender shall, at any time,
cease to be a Defaulting Lender, any funds held by the Administrative Agent in
escrow at such time with respect to such Lender shall be distributed by the
Administrative Agent to such Lender and applied by such Lender to the
Obligations owing to such Lender at such time under this Agreement and the other
Loan Documents ratably in accordance with the respective amounts of such
Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under
this Section 2.15 are in addition to other rights and remedies that the Borrower
may have against such Defaulting Lender with respect to any Defaulted Advance
and that any Agent or any Lender may have against such Defaulting Lender with
respect to any Defaulted Amount.
SECTION 2.16. Evidence of Debt. (a) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower agrees
that upon notice by any Lender to the Borrower (with a copy of such notice to
the Administrative Agent) to the effect that a promissory note or other evidence
of indebtedness is required or appropriate in order for such Lender to evidence
(whether for purposes of pledge, enforcement or otherwise) the Advances owing
to, or to be made by, such Lender, the Borrower shall promptly execute and
deliver to such Lender a promissory note substantially in the form of Exhibit A
hereto (each a "Note"), payable to the order of such Lender in a principal
amount equal to the Commitment of such Lender.
(b) The Register maintained by the Administrative Agent
pursuant to Section 8.07(g) shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the Type of Advances
comprising such Borrowing and, if appropriate, the Interest Period applicable
thereto, (ii) the terms of each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder, and (iv)
the amount of any sum received by the Administrative Agent from the Borrower
hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in
the Register pursuant to subsection (b) above, and by each Lender in its account
or accounts pursuant to subsection (a) above, shall be prima facie evidence of
the amount of principal and interest due and payable or to become due and
payable from the Borrower to, in the case of the Register, each Lender and, in
the case of such account or accounts, such Lender, under this Agreement, absent
manifest error; provided, however, that the failure of the Administrative Agent
or such Lender to
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36
make an entry, or any finding that an entry is incorrect, in the Register or
such account or accounts shall not limit or otherwise affect the obligations of
the Borrower under this Agreement.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective on and as of the first date (the "Effective
Date") on which the following conditions precedent have been satisfied:
(a) All governmental and third party consents and approvals
necessary in connection with the Loan Documents shall have been
obtained (without the imposition of any conditions that are not
acceptable to the Lenders) and shall remain in effect, all applicable
waiting periods shall have expired without any action being taken by
any competent authority and no law or regulation shall be applicable in
the reasonable judgment of the Lenders that restrains, prevents or
imposes materially adverse conditions on the Loan Documents.
(b) The Borrower shall have paid all accrued and invoiced fees
and expenses of the Agents and the Lenders (including the accrued and
invoiced fees and expenses of counsel to the Agents).
(c) On the Effective Date, the following statements shall be
true and the Administrative Agent shall have received for the account
of each Lender a certificate signed by a duly authorized officer of the
Borrower, dated the Effective Date, stating that:
(i) The representations and warranties
contained in each Loan Document are correct on and as of the
Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(d) The Administrative Agent shall have received on or before
the Effective Date the following, each dated such day, in form and
substance satisfactory to the Administrative Agent and in sufficient
copies for each Lender:
(i) A guaranty in substantially the form of Exhibit F
(as amended, supplemented or otherwise modified from time to
time in accordance with its terms, the "Group Guaranty"), duly
executed by Group.
(ii) A guaranty in substantially the form of Exhibit
G (together with each other guaranty delivered pursuant to
Section 5.01(k), in each case as amended,
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37
supplemented or otherwise modified from time to time in
accordance with its terms, the "Subsidiary Guaranty"), duly
executed by the Guarantors (other than Group).
(iii) Certified copies of the resolutions of the
Board of Directors of the Borrower and each other Loan Party
approving this Agreement and each other Loan Document to which
it is or is to be a party and the transactions contemplated
hereby, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to this Agreement and each other Loan Document.
(iv) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying
the names and true signatures of the officers of the Borrower
and such other Loan Party authorized to sign this Agreement,
each other Loan Document to which they are or are to be
parties and the other documents to be delivered hereunder and
thereunder.
(v) If requested by any Lender, a Note to the order
of such Lender.
SECTION 3.02. Conditions Precedent to Initial Borrowing. The
obligation of each Lender to make an Advance on the occasion of the initial
Borrowing shall be subject to the further conditions precedent that on the date
of such Borrowing:
(a) Before and immediately after giving effect to the Tender
Offer or the Merger, as the case may be, there shall have occurred no
Material Adverse Change since January 2, 1999 or there shall have
occurred no material adverse change in the business, condition
(financial or otherwise), operations, performance, properties or
prospects of Authentic Fitness and its Subsidiaries taken as a whole
since July 3, 1999, and all information by or on behalf of the Borrower
to the Lenders shall be true and correct in all material aspects.
(b) If a Tender Offer is initiated, the Arrangers shall be
reasonably satisfied that the Tender Offer Condition (as defined below)
is met simultaneously with the application of the proceeds of the
initial Borrowing. The "Tender Offer Condition" shall be met if (i) the
Purchaser shall acquire shares of Authentic Fitness Stock having
sufficient voting power to enable the Purchaser, voting without any
other shareholders of Authentic Fitness, to approve the Merger and (ii)
the terms of such Merger permit the remaining shareholders of Authentic
Fitness to receive cash consideration without approval from any
regulatory authority and permit the Merger to be effected in accordance
with its terms.
(c) All material governmental and third party consents and
approvals necessary in connection with the Tender Offer, if any
(including, without limitation, those consents and approvals with
respect to outstanding debt or credit facilities of Authentic Fitness
that relate to change of control as a result of the Tender Offer and
the Merger), the delivery and performance of the Guaranties by the
Guarantors and the other transactions contemplated hereby shall have
been obtained (without the imposition of any conditions that are not
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38
reasonably acceptable to the Lender Parties) and shall remain in
effect; all applicable waiting periods shall have expired without any
action being taken by any competent authority; and no law or regulation
shall be applicable that restrains, prevents or imposes materially
adverse conditions upon the Tender Offer, the Merger, the Guaranties or
the other transactions contemplated hereby.
(d) The Lender Parties shall be reasonably satisfied with the
corporate and legal structure and capitalization of the Borrower, the
Purchaser and the Guarantors and the proposed corporate and legal
structure of the Surviving Corporation, including, without limitation,
the charter and by-laws of the Purchaser and the proposed charter and
by-laws of the Surviving Corporation and each agreement or instrument
relating thereto.
(e) The Administrative Agent shall have received on or before
the date of the initial Borrowing the following, each dated such date,
in form and substance satisfactory to the Administrative Agent and in
sufficient copies for each Lender:
(i) A favorable opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel for the Loan Parties, in
substantially the form of Exhibit E-1 hereto with such changes
as may approved by the Administrative Agent and as to such
other matters as any Lender through the Administrative Agent
may reasonably request.
(ii) A favorable opinion of Stanley P. Silverstein,
General Counsel for the Borrower, in substantially the form of
Exhibit E-2 hereto with such changes as may approved by the
Administrative Agent and as to such other matters as any
Lender through the Administrative Agent may reasonably
request.
(iii) A favorable opinion of Shearman & Sterling,
counsel for the Arrangers, in form and substance reasonably
satisfactory to the Arrangers.
(iv) The Existing Five Year Credit Agreement, duly
executed by all parties required thereunder and the Trade
Credit Facility, duly executed by all parties required
thereunder, in each case, substantially in the form of the
most recent draft of such agreement existing on or prior to
the Effective Date, with such changes as may be reasonably
acceptable to the Arrangers.
(v) Copies of amendments to such of the other credit
facilities of the Borrower and Group and their respective
Subsidiaries which are necessary to make such facilities
consistent with the Existing Five Year Credit Agreement, in
form and substance reasonably satisfactory to the Arrangers.
SECTION 3.03. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(including the initial Borrowing) shall be subject to the further conditions
precedent that on the date of such Borrowing the following
<PAGE>
39
statements shall be true (and each of the giving of the applicable Notice of
Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Borrowing such statements are true):
(a) the representations and warranties contained in
each Loan Document are correct in all material respects on and
as of the date of such Borrowing, before and after giving
effect to such Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date
other than any such representations or warranties that, by
their terms, refer to a specific date other than the date of
such Borrowing, in which case such representations and
warranties shall have been correct as of such specific date,
and
(b) no event has occurred and is continuing, or would
result from such Borrowing or from the application of the
proceeds therefrom, that constitutes a Default.
SECTION 3.04. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
Loan Documents shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent shall
promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
Each of Group and the Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not have a Material Adverse Effect and
(iii) has all requisite corporate power and authority to own or lease
and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) whether or not such Subsidiary
is a wholly-owned Subsidiary. Each such Subsidiary (i) is
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40
a corporation duly organized, a limited liability company or a trust
duly formed, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, (ii) is duly qualified and in
good standing as a foreign corporation, limited liability company or
trust in each other jurisdiction in which it owns or leases property or
in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would
not have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted.
(c) The execution, delivery and performance by each Loan Party
of this Agreement and each other Loan Document to which it is or is to
be a party, and the consummation of the transactions contemplated
hereby are, within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
such Loan Party's charter or by-laws, (ii) violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award, (iii) conflict with or result in the breach of, or constitute a
default under, any contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument binding on or affecting any Loan
Party, any of its Subsidiaries or any of their respective properties or
(iv) result in or require the creation or imposition of any Lien upon
or with respect to any of the properties of any Loan Party or any of
its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which is or would be
reasonably likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
recordation, filing or performance by any Loan Party of this Agreement
or any other Loan Document to which it is or is to be a party, or for
the consummation of the transactions contemplated hereby.
(e) This Agreement has been, and each other Loan Document when
delivered hereunder will have been, duly executed and delivered by each
Loan Party party thereto. This Agreement is, and each other Loan
Document when delivered hereunder will be, the legal, valid and binding
obligation of each Loan Party party thereto, enforceable against such
Loan Party in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and by general principles of equity (regardless of whether enforcement
is sought in equity or at law).
(f) (i) The Consolidated balance sheets of Group and its
Subsidiaries as at January 2, 1999, and the related Consolidated
statements of operations, stockholders' equity and cash flow of Group
and its Subsidiaries for the fiscal years then ended, accompanied by
<PAGE>
41
an opinion of PricewaterhouseCoopers LLP, independent public
accountants, and the Consolidated balance sheet of Group and its
Subsidiaries as at July 3, 1999, and the related Consolidated
statements of operations, stockholders' equity and cash flow of Group
and its Subsidiaries for the six months then ended, duly certified by
the chief financial officer of Group, copies of which have been
furnished to each Lender, fairly present, subject, in the case of said
balance sheet as at July 3, 1999, and said statements of operations,
stockholders' equity and cash flow for the six months then ended, to
year-end audit adjustments, the Consolidated financial condition of
Group and its Subsidiaries as at such dates and the Consolidated
results of the operations of Group and its Subsidiaries for the periods
ended on such dates, all in accordance with generally accepted
accounting principles applied on a consistent basis, and (ii) since
January 2, 1999, there has been no Material Adverse Change.
(g) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) purports to affect
the legality, validity or enforceability of this Agreement, any other
Loan Document or (ii) is or would be reasonably likely to have a
Material Adverse Effect, except, in the case of this clause (ii), for
any such action, suit, investigation, litigation or proceeding
described on Schedule 4.01(g) hereto.
(h) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock, except for Authentic Fitness Stock.
(j) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the application of the proceeds or
repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated hereby, will violate any provision of such
Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder.
(k) For any date on or before December 31, 1999, the Borrower
has, and as soon as practicable after the Control Date, Authentic
Fitness will have (i) initiated a review and assessment of all areas
within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be adversely affected by the risk that computer applications used
by such Person or any of its Subsidiaries (or suppliers, vendors and
customers) may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date after
December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and
timetable for addressing the Year 2000 problem on a timely basis and
(iii) to date, implemented that plan in accordance with such timetable.
Based on the foregoing, each such Person believes that all of its
computer
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42
applications that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all dates before
and after January 1, 2000, except to the extent that a failure to do so
could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder,
Group and the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and Environmental Laws,
except where the failure so to comply would not have a Material Adverse
Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, would reasonably be likely to by law become a Lien
upon its property; provided, however, that neither Group nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors so
long as any such amount, when taken together with any amount required
to be paid as described in clause (b) of the definition of "Permitted
Liens", shall not exceed $10 million.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which it or
such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that Group and its Subsidiaries may consummate the
Merger and any other merger, consolidation or voluntary dissolution or
liquidation permitted under Section 5.02(b).
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43
(e) Visitation Rights. At any reasonable time and from time to
time, permit any Agent or any of the Lenders or any agents or
representatives thereof, upon reasonable notice to the Borrower to
examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, the Borrower and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the
Borrower and any of its Subsidiaries with any of their officers or
directors and with their independent certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, other than with respect to transactions
among Group and/or its wholly owned Subsidiaries, all transactions
otherwise permitted under the Loan Documents with any of their
Affiliates on terms that are no less favorable to Group or such
Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate, provided, however, that the
foregoing restriction shall not apply to transactions pursuant to any
agreement referred to in Section 5.02(a)(ii), and provided further that
the Borrower shall not engage in any transaction with any such
Subsidiary that would render such Subsidiary insolvent or cause a
default under, or a breach of, any material contract to which such
Subsidiary is a party.
(i) Reporting Requirements. Furnish to the Lenders (and for
purposes hereof, any Designated Lender shall be deemed to have received
the following information from its Designating Lender):
(i) as soon as available and in any event within 50
days after the end of each of the first three quarters of each
Fiscal Year, Consolidated balance sheets of Group and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and Consolidated statements of cash flows
of Group and its Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of
such quarter, duly certified (subject to year-end audit
adjustments) by the chief financial officer of the Borrower as
having been prepared in accordance with generally accepted
accounting principles and a certificate of the chief financial
officer of Group as to compliance with the terms of this
Agreement and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with Section
5.03, provided that in the event of any change in GAAP used in
the
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44
preparation of such financial statements, the Borrower shall
also provide, if necessary for the determination of compliance
with Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(ii) as soon as available and in any event within 95
days after the end of each Fiscal Year of Group, a copy of the
annual audit report for such year for Group and its
Subsidiaries, containing Consolidated balance sheet of Group
and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, in each
case accompanied by an opinion acceptable to the Required
Lenders by any Approved Accounting Firm or by other
independent public accountants acceptable to the Required
Lenders, and a certificate of the chief financial officer or
Group as to compliance with the terms of this Agreement
setting forth in reasonable detail the calculations necessary
to demonstrate compliance with Section 5.03, provided that in
the event of any change in GAAP used in the preparation of
such financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section
5.03, a statement of reconciliation conforming such financial
statements to GAAP;
(iii) as soon as possible and in any event within two
Business Days after the occurrence of each Default continuing
on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of
such Default and the action that the Borrower has taken and
proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Borrower sends to any of its
security holders generally, and copies of all reports and
registration statements that Group or any Subsidiary files
with the Securities and Exchange Commission or any national
securities exchange;
(v) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(g);
(vi) within five Business Days after receipt thereof
by any Loan Party, copies of each notice from S&P or Moody's
indicating any change in the Debt Rating; and
(vii) such other information respecting the Borrower
or any of its Subsidiaries as any Lender through the
Administrative Agent may from time to time reasonably request.
(j) Covenant to Guarantee Obligations. At such time as any new
direct or indirect Domestic Subsidiary that is a Material Subsidiary
(including, without limitation,
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45
Authentic Fitness and its Subsidiaries as required by Section 5.01(k)
below) is formed or acquired, cause such new Subsidiary that is a
wholly owned Subsidiary to (i) within 30 days thereafter or such later
time as the Borrower and the Administrative Agent shall agree (but in
any event no later than 30 additional days thereafter), duly execute
and deliver to the Administrative Agent guarantees, in substantially
the form of Exhibit H and otherwise in form and substance reasonably
satisfactory to the Administrative Agent, guaranteeing the Borrower's
Obligations under the Loan Documents, provided, however, that the
foregoing shall not apply to (A) Excluded Subsidiaries, (B) joint
ventures or (C) any Subsidiary organized solely for the purpose of
entering into any agreements and transactions referred to in Section
5.02(a)(ii) to the extent that such agreements require that such
Subsidiary not be a Guarantor hereunder, and (ii) within 30 days after
the delivery of such guarantees or such later time as the Borrower and
the Administrative Agent shall agree (but in any event no later than 30
additional days thereafter), deliver to the Administrative Agent a
signed copy of a favorable opinion, addressed to the Administrative
Agent, of counsel for the Loan Parties acceptable to the Administrative
Agent as to the documents contained in clause (i) above, as to such
guarantees being legal, valid and binding obligations of such
Subsidiaries enforceable in accordance with their terms and as to such
other matters as the Administrative Agent may reasonably request.
(k) Consummation of Merger. If there is a Tender Offer, cause
the Merger to be consummated in compliance with all applicable laws and
regulations as soon as practicable after consummation of the Tender
Offer and cause Authentic Fitness and its Subsidiaries to become a
Guarantor pursuant to Section 5.01(j) as soon as practicable and, in
any event, within 30 days after consummation of the Merger.
(l) Authentic Fitness. As soon as practicable after
consummation of the Merger, cause the commitments under all Existing
Debt of Authentic Fitness and its Subsidiaries (other than Debt of
Authentic Fitness and its Subsidiaries that become Obligations under
the Trade Credit Facility) to be terminated and all such indebtedness
to be repaid in full.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, neither Group
nor the Borrower will at any time:
(a) Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien
on or with respect to any of its properties of any character, whether
now owned or hereafter acquired, or assign, or permit any of its
Subsidiaries to assign, any right to receive income, other than:
(i) Permitted Liens,
(ii) Liens on receivables of any kind (and in
property securing or otherwise supporting such receivables) in
connection with agreements for limited
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46
recourse sales or financings by the Borrower or any of its
Subsidiaries or by Designer Holdings or any of its
Subsidiaries for cash of such receivables or interests
therein, provided that (A) any such agreement is of a type and
on terms customary for comparable transactions in the good
faith judgment of the Board of Directors of Group and (B) such
agreement does not create any interest in any asset other than
receivables (and property securing or otherwise supporting
such receivables), related general intangibles and proceeds of
the foregoing,
(iii) other Liens securing Debt, including Liens
incurred pursuant to subsection (v) below, in an aggregate
principal amount outstanding at any time not to exceed 10% of
Consolidated Tangible Assets of Group and its Subsidiaries at
such time; provided that Liens securing Debt of Authentic
Fitness Products Inc. under credit facilities existing on the
date that Authentic Fitness becomes a Subsidiary of the
Borrower are expressly permitted until the consummation of the
acquisition of 100% of the capital stock of Authentic Fitness,
(iv) Liens arising from covenants by the Borrower or
its Subsidiaries to grant security interests in the assets of
Warnaco of Canada Limited or its Subsidiaries (the "Canadian
Subsidiaries") to secure Debt of the Canadian Subsidiaries in
the event that the Lenders hereunder or lenders under the
Existing Five Year Credit Agreement, the New Five Year Credit
Agreement or the Trade Credit Facility are granted Liens by
Group or its Subsidiaries in their respective assets to secure
the Obligations under the Loan Documents, the Existing Five
Year Credit Agreement, the New Five Year Credit Agreement or
the Trade Credit Facility, as the case may be, and
(v) Liens on Margin Stock.
(b) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
(other than Excluded Subsidiaries) to do so or to voluntarily
liquidate, except that:
(i) the Borrower or the Purchaser and Authentic
Fitness may consummate the Merger;
(ii) any Subsidiary of Group may merge into or
consolidate with any other Subsidiary of Group, provided that
if any such Subsidiary is a Domestic Subsidiary of Group, the
person formed thereby shall be a direct or indirect wholly
owned Domestic Subsidiary of Group;
(iii) any Subsidiary of Group may merge into or
consolidate with any other Person pursuant to an acquisition,
provided that, if any such Subsidiary is a
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47
Domestic Subsidiary of Group, the Person formed thereby shall
be a direct or indirect wholly owned Domestic Subsidiary of
Group;
(iv) any Domestic Subsidiary of Group may merge into
or consolidate with Group;
(v) the Borrower may merge into or consolidate with
any other Person so long as the Borrower is the surviving
corporation; and
(vi) any Subsidiary of Group may voluntarily
liquidate and distribute its assets to Group or any direct or
indirect wholly owned Domestic Subsidiary of Group, provided,
in each case, that no Default shall have occurred and be
continuing at the time of such proposed transaction or would
result therefrom.
(c) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries (other than Excluded Subsidiaries) to create,
incur, assume or suffer to exist, any Debt if after giving effect
thereto the Borrower shall fail to be in compliance with each of the
covenants set forth in Section 5.03.
(d) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets, except:
(i) sales of inventory in the ordinary course of its
business;
(ii) sales, leases, transfers or other disposals of
assets, or grants of any option or other right to purchase,
lease or otherwise acquire assets, following the Effective
Date for fair value (valued at the time of any such sale,
lease, transfer or other disposal), in an aggregate amount in
each Fiscal Year not to exceed 20% per annum of the
Consolidated total assets of Group and its Subsidiaries as
valued at the end of the preceding Fiscal Year of the
Borrower, and the fair value of such assets shall have been
determined in good faith by the Board of Directors of Group;
(iii) sales of assets on terms customary for
comparable transactions in the good faith judgment of the
Board of Directors of Group pursuant to agreements referred to
in Section 5.02(a)(ii);
(iv) transfers of assets between Group and its
Subsidiaries;
(v) sales of assets listed on Schedule 5.02(d)
hereto;
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48
(vi) sales of assets and properties of Group and its
Subsidiaries in connection with sale-leaseback transactions
otherwise permitted hereunder (including, without limitation,
under Section 5.02(c));
(vii) the sale or discount of accounts (A) owing by
Persons incorporated, residing or having their principal place
of business in the United States in an aggregate amount not
exceeding $10,000,000 in face amount per calendar year or (B)
that are past due by more than 90 days, provided that the sale
or discount of such accounts is in the ordinary course of
Group's business and consistent with prudent business
practices;
(viii) the licensing of trademarks and trade names by
Group or any of its Subsidiaries in the ordinary course of its
business, provided that such licensing takes place on an
arm's-length basis;
(ix) the rental by Group and its Subsidiaries, as
lessors, in the ordinary course of their respective
businesses, on an arm's-length basis, of real property and
personal property, in each case under leases (other than
Capitalized Leases); and
(x) sales of Margin Stock for fair value as
determined in good faith by the Board of Directors of Group.
(e) Authentic Fitness. From and after the Control Date and
prior to the date that Authentic Fitness becomes a wholly-owned
Subsidiary, permit Authentic Fitness to (i) issue any securities,
rights or options or (ii) declare or make any dividends or
distributions to the holders of Authentic Fitness Stock, except, in
each case, as contemplated by the terms of either or both of the Tender
Offer and the Merger and otherwise except to the extent any such
transactions are entered into and performed in the ordinary course of
Authentic Fitness's business as previously conducted and necessary for
the prudent operation of Authentic Fitness's business.
(f) Nature of Business. Make, or permit any of its
Subsidiaries to make, (A) except as otherwise permitted pursuant to
subsection (B) below, any change in the nature of its business as
carried on at the date hereof in a manner materially adverse to the
Agents and the Lender Parties or (B) any investments (except
Investments in a net aggregate amount (after giving effect to any
dividends or other returns of capital) invested from the date hereof
not to exceed $100,000,000) other than in apparel manufacturing or
wholesaling businesses or apparel accessories manufacturing or
wholesaling businesses or in related retail businesses, provided that,
on an annual basis, at least 51% of the revenue of Group and its
Subsidiaries on a Consolidated basis is derived from apparel
manufacturing or wholesaling businesses or apparel accessories
manufacturing or wholesaling businesses.
<PAGE>
49
(g) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies
(except as required or permitted by the Financial Accounting Standards
Board or generally accepted accounting principles), reporting practices
or Fiscal Year.
SECTION 5.03. Financial Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, Group and
the Borrower will:
(a) Leverage Ratio. Maintain, at the end of each Fiscal
Quarter a ratio of (x) Indebtedness for Borrowed Money to (y)
Consolidated EBITDA of Group and its Subsidiaries for the preceding
four Fiscal Quarters of not more than 3.75 to 1.0 for each Fiscal
Quarter ending on or before September 30, 2000 and 3.50 to 1.0 for each
Fiscal Quarter thereafter.
(b) Coverage Ratio. Maintain, as of the end of each Fiscal
Quarter, a ratio of Consolidated EBITDA of Group and its Subsidiaries
for the four consecutive Fiscal Quarters then ended to Consolidated
Interest Expense of Group and its Subsidiaries for such period of not
less than 3.00:1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower or any
other Loan Party shall fail to pay any interest on any Advance or make
any other payment of fees or other amounts payable under any Loan
Document within three Business Days after the same becomes due and
payable; or
(b) Any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) (i) Group or the Borrower shall fail to perform or observe
any term, covenant or agreement contained in Section 5.01(d), (j) or
(k), 5.02 or 5.03, or (ii) any Loan Party shall fail to perform or
observe any other term, covenant or agreement contained in any Loan
Document on its part to be performed or observed if such failure shall
remain unremedied for 30 days (A) after written notice thereof shall
have been given to the
<PAGE>
50
Borrower by any Agent or any Lender or (B) after any officer of the
Borrower obtains knowledge thereof; or
(d) Any Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt under the Trade
Credit Facility or other Debt that is outstanding in a principal or
notional amount of at least $20,000,000 in the aggregate (but excluding
Debt outstanding hereunder) of such Loan Party or such Subsidiary (as
the case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or
required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption or other than as a result of any
event which provides cash to such Loan Party in an amount sufficient to
satisfy such redemption or prepayment), purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
or
(e) Group, the Borrower or any of their Material Subsidiaries
(or any group of Subsidiaries which, in the aggregate, would constitute
a Material Subsidiary) shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any
Group, the Borrower or any of their Subsidiaries (or any group of
Subsidiaries which, in the aggregate, would constitute a Material
Subsidiary) seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief
of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a
period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property)
shall occur; or such Loan Party or any of its Subsidiaries shall take
any corporate action to authorize any of the actions set forth above in
this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $20,000,000 shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of
<PAGE>
51
such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect unless the payment of such judgment or
order is covered by insurance and such insurance coverage is not in
dispute; or
(g) Any non-monetary judgment or order shall be rendered
against any Loan Party or any of its Subsidiaries that could be
reasonably expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(h) any provision of any Loan Document, after delivery thereof
pursuant to Section 3.01 or 5.01(k), shall for any reason cease to be
valid and binding on or enforceable against any Loan Party party to it,
or any such Loan Party shall so state in writing; or
(i) (A) Group shall at any time cease to have legal and
beneficial ownership of 100% of the capital stock of the Borrower
(except if such parties shall merge); or (B) any Person, or two or more
Persons acting in concert, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Stock of Group (or other securities convertible
into such Voting Stock) representing 25% or more of the combined voting
power of all Voting Stock of Group (other than Excluded Persons); or
(C) any Person, or two or more Persons acting in concert shall have
acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or
their acquisition of, the power to exercise, directly or indirectly, a
controlling influence over the management or policies of Group, or
control over Voting Stock of Group (or other securities convertible
into such securities) representing 25% or more of combined voting power
of all Voting Stock of Group (other than Excluded Persons); or (D)
Linda J. Wachner (or, in the case of her death or disability, another
officer or officers of comparable experience and ability selected by
the Borrower within 180 days thereafter after consultation with the
Administrative Agent) shall cease to be Chairman and Chief Executive
Officer of Group and the Borrower); or
(j) Any Loan Party or any of its ERISA Affiliates shall incur,
or shall be reasonably likely to incur, liability in excess of
$20,000,000 in the aggregate as a result of one or more of the
following: (i) the occurrence of any ERISA Event; (ii) the partial or
complete withdrawal of such Loan Party or any of its ERISA Affiliates
from a Multiemployer Plan; or (iii) the reorganization or termination
of a Multiemployer Plan;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement and the other
<PAGE>
52
Loan Documents to be forthwith due and payable, whereupon the Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrower; provided, however, that in the
event of an actual or deemed entry of an order for relief with respect to any
Loan Party or any of its Material Subsidiaries (or any group of Subsidiaries
which, in the aggregate, would constitute a Material Subsidiary) under the
Federal Bankruptcy Code, (x) the obligation of each Lender to make Advances
shall automatically be terminated and (y) the Advances, all such interest and
all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to such Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Notes, if any), each Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lenders and all holders of Notes; provided, however, that no Agent
shall be required to take any action that exposes such Agent to personal
liability or that is contrary to this Agreement or applicable law. Each Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. None of the Agents nor
any of their directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement and the other Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, each Agent: (i) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender that is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement and the other Loan Documents; (iv) shall not
have
<PAGE>
53
any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement and the other Loan
Documents on the part of any Loan Party or to inspect the property (including
the books and records) of any Loan Party (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of or the other Loan Documents or any other instrument or
document furnished pursuant hereto; and (vi) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram or telex) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 7.03. Scotiabank, Citibank, Morgan and Affiliates.
With respect to its Commitment, the Advances made by it and any Notes issued to
it, each of Scotiabank, Citibank and Morgan shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not an Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Scotiabank,
Citibank and Morgan in their individual capacities. Each of Scotiabank, Citibank
and Morgan and their Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, any Loan Party, any of its
Subsidiaries and any Person who may do business with or own securities of any
Loan Party or any such Subsidiary, all as if Scotiabank, Citibank and Morgan
were not Agents and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. Each Lender agrees to indemnify
each Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Advances then owed to each of them (or
if no Advances are at the time outstanding or if any Advances are owed to
Persons that are not Lenders, ratably according to the respective amounts of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against such Agent in any way relating to or arising out of this
Agreement or the other Loan Documents or any action taken or omitted by such
Agent under this Agreement or the other Loan Documents, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct; and provided
further that no Designated Lender shall be liable for any payment under this
Section 7.05 so long as, and to the extent that, its Designating Lender makes
such payments on its behalf. The Borrower,
<PAGE>
54
the Agents and the other Lenders shall continue to deal solely and directly with
the Designating Lender in connection with the Designated Lender's rights and
obligations under this Agreement. Without limitation of the foregoing, each
Lender agrees to reimburse each Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by such Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and the other Loan Documents, to the
extent that such Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agents. Any Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent with the approval of the Borrower. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that (a) no amendment, waiver or consent shall, unless
in writing and signed by all the Lenders (other than the Designated Lenders and
other than any Lender which is, at such time, a Defaulting Lender), do any of
the following at any time: (i) waive any of the conditions specified in Section
3.01 or, in the case of the initial Borrowing, Section 3.02, (ii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder, (iii) release any Material Guarantor,
or (iv) amend this Section 8.01, (b) no amendment, waiver or consent shall,
unless in writing and signed by the Required Lenders and each Lender
<PAGE>
55
affected by such amendment, waiver or consent (other than the Designated Lenders
and other than any Lender which is, at such time, a Defaulting Lender), (i)
reduce the principal of, or interest on, the Advances owed to such Lender or any
fees or other amounts payable hereunder to such Lender or (ii) postpone any date
fixed for any payment of principal of, or interest on, the Advances owed to such
Lender or any fees or other amounts payable hereunder to such Lender and (c) no
amendment, waiver or consent shall, unless in writing and signed by the Required
Lenders and each affected Lender (other than the Designated Lenders and other
than any Lender which is, at such time, a Defaulting Lender), increase the
Commitments of such Lender or subject such Lender to any additional obligations;
provided, however, that no amendment, waiver or consent shall, unless in writing
and signed by an Agent in addition to the Lenders required above to take such
action, affect the rights or duties of such Agent under this Agreement. Each
Designating Lender shall act as its Designated Lender's agent and attorney in
fact and exercise on behalf of its Designated Lender all rights, if any, to vote
and to grant and make approvals, waivers, consents or waivers in accordance with
this Section 8.01. The Borrower, the Agents and the other Lenders shall continue
to deal solely and directly with the Designating Lender in connection with the
Designated Lender's rights and obligations under this Agreement. Any request by
any Loan Party for an amendment or waiver of any provision of any Loan Document
shall be made by such Loan Party by giving a written request therefor to the
Administrative Agent.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopy, telex or cable communication) and mailed, telegraphed,
telecopied, telexed, cabled or delivered, if to the Borrower, at its address at
90 Park Avenue, New York, New York 10016, Attention: Chief Financial Officer,
with a copy to General Counsel; if to any Initial Lender or Agent, at its
Domestic Lending Office specified opposite its name on Schedule I hereto, if to
any other Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other parties. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective when deposited in the
mails, delivered to the telegraph company, transmitted by telecopier, confirmed
by telex answerback or delivered to the cable company, respectively, except that
notices and communications to an Agent pursuant to Article II, III or VII shall
not be effective until received by such Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or of any Exhibit hereto to be executed and delivered hereunder shall
be effective as delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or Agent to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) Group and the Borrower
agree to pay on demand (i) all reasonable costs and expenses (other than taxes,
including interest, additions to tax
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56
and penalties relating thereto, except to the extent that the same are required
to be paid pursuant to Section 2.12 hereof) of the Agents in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, (A) all due diligence,
syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and all other out-of-pocket expenses and (B)
the reasonable fees and expenses of counsel for the Agents with respect thereto,
with respect to advising the Agents as to their respective rights and
responsibilities, or the protection or preservation of rights or interests,
under the Loan Documents, with respect to negotiations with any Loan Party or
with other creditors of any Loan Party or any of its Subsidiaries arising out of
any Default or any events or circumstances that may give rise to a Default and
with respect to presenting claims in or otherwise participating in or monitoring
any bankruptcy, insolvency or other similar proceeding involving creditors'
rights generally, and any proceeding ancillary thereto) and (ii) all reasonable
costs and expenses (other than taxes, including interest, additions to tax and
penalties relating thereto, except to the extent that the same are required to
be paid pursuant to Section 2.12 hereof) of the Agents and the Lenders in
connection with the enforcement of the Loan Documents, whether in any action,
suit or litigation, any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally or otherwise (including, without
limitation, the reasonable fees and expenses of counsel for the Agents and each
Lender with respect thereto).
(b) Group and the Borrower agree to indemnify and hold
harmless each of the Agents and each Lender (other than any Designated Lender to
the extent such indemnification obligation exceeds that which the Borrower would
owe to its Designating Lender) and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel, but
other than taxes, including interest, additions to tax and penalties relating
thereto, except to the extent that the same are required to be paid pursuant to
Section 2.12 hereof) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Facility or the actual or proposed use of the proceeds
of the Advances, the Loan Documents or any of the transactions contemplated
thereby, including, without limitation, any acquisition or proposed acquisition
by Group or any of its Subsidiaries of all or any portion of Authentic Fitness
Stock or other Equity Interests in Authentic Fitness or all or substantially all
of the assets of Authentic Fitness or any of its Subsidiaries or (ii) the actual
or alleged presence of Hazardous Materials on any property of the Borrower or
any of its Subsidiaries or any Environmental Action relating in any way to the
Borrower or any of its Subsidiaries, in each case whether or not such
investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby, the Tender Offer or the Merger, are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. The
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57
Borrower also agrees not to assert any claim against any Agent, any Lender, any
of their Affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to this
Agreement, any of the transactions contemplated herein, the Tender Offer or the
Merger, or the actual or proposed use of the proceeds of the Advances, except in
the event of gross negligence or willful misconduct on the part of such Agent,
Lender or Affiliate.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender other than on the last day of the Interest Period for such Advance, as a
result of a payment or Conversion pursuant to Section 2.09, 2.10 or 2.12,
acceleration of the maturity of the Advances pursuant to Section 6.01 or for any
other reason, the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender any amounts required to compensate such Lender for
any additional losses, costs or expenses that it may reasonably incur as a
result of such payment or Conversion, including, without limitation, any loss
(excluding loss of anticipated profits and taxes, including interest, additions
to tax and penalties relating thereto, except to the extent that the same are
required to be paid pursuant to Section 2.12 hereof), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by any Lender to fund or maintain such Advance; provided, however, that
notwithstanding any of the foregoing, the Borrower shall not be required to
compensate any Designated Lender for any losses, costs or expenses to the extent
such amounts exceed that which the Borrower would owe to its Designating Lender,
but for such designation.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.09, 2.12 and 8.04 and the agreements and obligations of
any Lender or Agent contained in Section 2.12 shall survive the payment in full
of principal, interest and all other amounts payable hereunder.
(e) Notwithstanding anything to the contrary, neither the
designation of any Designated Lender, any Advance made by any Designated Lender,
nor any other condition or circumstance relating to any Designated Lender shall
increase (i) any obligations or liabilities of the Borrower hereunder,
including, without limitation, pursuant to Section 2.09, 2.10, 2.12 or this
Section 8.04, or (ii) any obligations or liabilities of the Borrower under any
Loan Documents, in each case, as compared with any obligations or liabilities
which would arise if the Designating Lender were the Lender for all purposes and
had not otherwise appointed a Designated Lender.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or such Affiliate to or for the credit or the
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58
account of the Borrower against any and all of the Obligations of the Borrower
now or hereafter existing under this Agreement and any Note held by such Lender,
whether or not such Lender shall have made any demand under this Agreement or
such Note, if any, and although such obligations may be unmatured. Each Lender
agrees promptly to notify the Borrower after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender and its Affiliates under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender and its Affiliates may
have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower, Group and the Agents and when the
Administrative Agent shall have been notified by each Initial Lender that such
Initial Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Agents and each Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 8.07. Assignments, Designations and Participations.
(a) Each Lender (other than any Designated Lender except for an assignment to
its Designating Lender) may assign, and, if demanded by the Borrower upon at
least 30 Business Days' notice to such Lender and the Administrative Agent
following either (w) such Lender becoming a Defaulting Lender, (x) a payment by
the Borrower of Taxes with respect to such Lender in accordance with Section
2.12, (y) the occurrence of an event that would, upon payment to such Lender of
amounts hereunder, require a payment by the Borrower of Taxes with respect to
such Lender in accordance with Section 2.12 or (z) a demand for payment under
Section 2.09 and will assign, to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it (including accrued interest) and any Note held by it), with (except
in the case of an assignment to an Affiliate of such Lender) the prior written
consent of the Administrative Agent and (so long as no Default has occurred and
is continuing) the Borrower, such consent not to be unreasonably withheld;
provided, however, that (A) except in the case of (x) an assignment to a Person
that, immediately prior to such assignment, was a Lender, (y) an assignment to
an Affiliate of the assigning Lender (including an assignment by a Designated
Lender to its Designating Lender) or (z) an assignment of all of a Lender's
rights and obligations under this Agreement, the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $10,000,000 or an integral multiple of $1,000,000
in excess thereof, and the amount of the Commitment of the assigning Lender
being retained by such Lender immediately after giving effect to such assignment
(determined as of the effective date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000, (B) each
such assignment shall be to an Eligible Assignee, (C) each such assignment made
as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall
be arranged by the Borrower after consultation with
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the Administrative Agent and shall be either an assignment of all of the rights
and obligations of the assigning Lender under this Agreement or an assignment of
a portion of such rights and obligations made concurrently with another such
assignment or other such assignments that together cover all of the rights and
obligations of the assigning Lender under this Agreement, (D) no Lender shall be
obligated to make any such assignment as a result of a demand by the Borrower
pursuant to this Section 8.07(a) (1) unless and until such Lender shall have
received one or more payments from either the Borrower or one or more Eligible
Assignees in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together with accrued
interest thereon to the date of payment of such principal amount and all other
amounts payable to such Lender under this Agreement and (2) if a Default has
occurred and is continuing, (E) no such assignments will be permitted until the
earlier to occur of the Effective Date and the date that syndication of the
Commitments hereunder has been completed as notified by the Administrative Agent
to the Lenders, and (F) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with any Note subject to such
assignment and a processing and recordation fee of $3,500, provided that the
Borrower shall pay such recordation fee in the case of any assignment demanded
by the Borrower pursuant to this Section 8.07(a). Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of a Lender hereunder and (y) the Lender's assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
or any other Loan Document or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or the performance or observance by any Loan Party of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the any Agent, such assigning Lender or any other Lender
and based on such documents and information as it shall deem appropriate at the
time,
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continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes each Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the each Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Note subject to such assignment or extension, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit C or Exhibit E hereto, as the case
may be, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower.
(d) Any Lender (other than a Designated Lender) may at any
time designate not more than one Designated Lender to fund Advances on behalf of
such Designating Lender subject to the terms of this Section 8.07(d). Such
designation may occur by execution by such parties of a Designation Agreement.
The parties to each such designation shall execute and deliver to the
Administrative Agent and the Borrower for their acceptance a Designation
Agreement. Upon receipt of an appropriately completed Designation Agreement
executed by a Designating Lender and a designee representing that it is a
Designated Lender and consented by the Borrower, the Administrative Agent will
accept such Designation Agreement and will give prompt notice thereof to the
Borrower and the other Lenders, whereupon, (i) upon the written request of the
Designating Lender, the Borrower shall execute and deliver to the Designating
Lender a Note payable to the order of the Designated Lender, (ii) from and after
the effective date specified in the Designation Agreement, the Designated Lender
shall become a party to this Agreement with a right to make Advances on behalf
of its Designating Lender pursuant to Section 2.01 and (iii) the Designated
Lender shall not be required to make payments with respect to any obligations in
this Agreement except to the extent of excess cash flow of such Designated
Lender which is not otherwise required to repay obligations of such Designated
Lender which are then due and payable; provided, however, that regardless of
such designation and assumption by the Designated Lender, the Designating Lender
(i) shall be and remain obligated to the Borrower, the Agents and the Lenders
for each and every of the obligations of the Designating Lender and its related
Designated Lender with respect to this Agreement, including, without limitation,
any indemnification obligations under Section 7.05 hereof and any sums otherwise
payable to the Borrower by the Designated Lender and (ii) neither the
designation of a Designated Lender, the election or other determination that a
Designated Lender will make any Advance nor any other condition or circumstance
relating to the Designated Lender shall in any way release, diminish or
otherwise affect the relevant Designating Lender's Commitment or any other of
its obligations hereunder or under any other Loan Document or any rights of the
Borrower, any Agent or any Lender with respect to such Designating Lender.
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The Borrower, the Agents and the Lenders may, at their option, pursue remedies
against any Designating Lender which arise out of any failure of its Designated
Lender to perform such Designated Lender's obligations under this Agreement or
any other Loan Document. Each Designating Lender shall serve as the
administrative agent and attorney in fact for its Designated Lender and shall on
behalf of its Designated Lender: (i) receive any and all payments made for the
benefit of such Designated Lender and (ii) give and receive all communications
and notices and take all actions hereunder, including, without limitation,
votes, approvals, waivers, consents and amendments under or relating to this
Agreement and the other Loan Documents to the extent, if any, such Designated
Lender shall have any rights hereunder or thereunder. To the extent a Designated
Lender shall have the right to receive or give any such notice, communication,
vote, approval, waiver, consent or amendment, it shall be signed by its
Designating Lender as administrative agent and attorney in fact for such
Designated Lender and need not be signed by such Designated Lender on his own
behalf. The Borrower, the Agents and the Lenders may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same.
Notwithstanding anything to the contrary contained herein, no Designated Lender
may assign or transfer all or any portion of its interest hereunder or under any
other Loan Document, other than via an assignment to its Designating Lender in
accordance with the provisions of this Section 8.07.
(e) By executing and delivering a Designation Agreement, the
Lender making the designation thereunder and its designee thereunder confirm and
agree with each other and the other parties hereto as follows: (i) such Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; (ii) such Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such designee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Designation Agreement; (iv) such designee will, independently and without
reliance upon any Agent, such designating Lender or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such designee confirms that it is a Designated Lender; (vi)
such designee appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to such Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such designee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(f) Upon its receipt of a Designation Agreement executed by a
designating Lender and a designee representing that it is a Designated Lender,
the Administrative Agent shall, if such Designation Agreement has been completed
and is substantially in the form of Exhibit D
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hereto, (i) accept such Designation Agreement, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower.
(g) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance and each
Designation Agreement delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and, with respect to
Lenders other than Designated Lenders, the Commitment of, and principal amount
of the Advances owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of any Note
issued to it for all purposes of this Agreement, (iv) the Borrower, the Agents
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of this Agreement or
any Loan Document, or any consent to any departure by any Loan Party therefrom,
except to the extent that such amendment, waiver or consent would (i) reduce the
principal of, or interest on, the Advances or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, (ii)
postpone any date fixed for any payment of principal of, or interest on, the
Advances or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation or (iii) release any Material Guarantor.
(i) Any Lender may, in connection with any assignment,
designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee, designee or
participant or proposed assignee, designee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender.
(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may (without the prior consent of the Borrower and the
Administrative Agent) at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
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63
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(k) Each of the Borrower, the Lenders and the Agents agrees
that it will not institute against any Designated Lender or join any other
Person in instituting against any Designated Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
payment in full of the latest maturing commercial paper note issued by such
Designated Lender. Notwithstanding the foregoing, the Designating Lender
unconditionally agrees to indemnify the Borrower, the Agents and each Lender
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be incurred by or asserted against the Borrower, such Agent
or such Lender, as the case may be, in any way relating to or arising as a
consequence of any such forbearance or delay in the initiation of any such
proceeding against its Designated Lender.
SECTION 8.08. Confidentiality. None of the Agents nor any
Lender shall disclose any Confidential Information to any other Person without
the consent of Group and the Borrower, other than (a) to such Agent's or such
Lender's Affiliates and their officers, directors, employees, agents and
advisors and, as contemplated by Section 8.07(i), to actual or prospective
assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process, (c) to any rating
agency when required by it, provided that, prior to any such disclosure, such
rating agency shall undertake to preserve the confidentiality of any
Confidential Information relating to Group or the Borrower received by it from
such Lender and (d) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any
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party may otherwise have to bring any action or proceeding relating to this
Agreement in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the
Agents and the Lenders 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 any
Agent or any Lender in the negotiation, administration, performance or
enforcement thereof.
<PAGE>
65
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
WARNACO INC.
By /s/ Carl J. Deddens
---------------------------
Title:
THE WARNACO GROUP, INC.
By /s/ Carl J. Deddens
---------------------------
Title:
THE BANK OF NOVA SCOTIA
as Administrative Agent
By /s/ John Hopmans
---------------------------
Title:
Initial Lenders
---------------
THE BANK OF NOVA SCOTIA
By /s/ John Hopmans
---------------------------
Title:
CITIBANK, N.A.
By /s/ Marc Merlino
---------------------------
Title: VP
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Robert Bottamedi
---------------------------
Title: Vice President
<PAGE>
SOCIETE GENERALE
By /s/ Robert Peterson
---------------------------
Title: Vice President
COMMERZBANK AG
By /s/ Robert Donohue
---------------------------
Title: Senior Vice President
By /s/ Peter Doyle
---------------------------
Title: Assistant Vice President
<PAGE>
SCHEDULE I
WARNACO INC.
COMMITMENTS AND
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Domestic Eurodollar Lending
Name of Bank Commitment Lending Office Office
- ------------ ---------- --------------- ------
<S> <C> <C> <C>
The Bank of Nova $100,000,000 Suite 2700 Suite 2700
Scotia 600 Peachtree Street N.E. 600 Peachtree Street N.E.
Atlanta, GA 30308 Atlanta, GA 30308
Credit Contact: Credit Contact:
John Hopmans John Hopmans
Phone: (212) 225-5009 Phone: (212) 225-5009
Fax: (212) 225-5090 Fax: (212) 225-5090
Administrative Contact: Administrative Contact:
Eudia Smith Eudia Smith
Phone: (404) 877-1554 Phone: (404) 877-1554
Fax: (404) 888-8988 Fax: (404) 888-8988
Citibank, N.A. $100,000,000 399 Park Avenue 399 Park Avenue
New York, NY 10043 New York, NY 10043
Credit Contact: Credit Contact:
Marc Merlino Marc Merlino
Phone: (212) 559-1875 Phone: (212) 559-1875
Fax: (212) 793-7585 Fax: (212) 793-7585
Administrative Contact: Administrative Contact:
One Court Square One Court Square
Long Island City, NY Long Island City, NY
Phone: (718) 248-3546 Phone: (718) 248-3546
Fax: (718) 248-7093 Fax: (718) 248-7093
Morgan Guaranty $200,000,000
Bank and Trust
Company of New
York
Societe Generale $100,000,000 1221 Avenue of the 1221 Avenue of the
Americas Americas
New York, NY 10020 New York, NY 10020
Credit Contact: Credit Contact:
Administrative Contact: Administrative Contact:
Commerzbank AG $100,000,000 2 World Financial Center 2 World Financial Center
New York, NY 10281-1050 New York, NY 10281-1050
Credit Contact: Credit Contact:
Administrative Contact: Administrative Contact:
<PAGE>
SCHEDULE II
EXISTING DEBT
1. $215 Million Restated Credit Agreement between Authentic Fitness Products
Inc., as Borrower, and The Bank of Nova Scotia and General Electric Capital
Corporation, as agents.
2. $50 Million Credit Agreement between Authentic Fitness Products Inc., as
Borrower, and The Bank of Nova Scotia, as agent.
<PAGE>
SCHEDULE 4.01(B)
WARNACO INC.
SUBSIDIARIES
[TO COME]
<PAGE>
SCHEDULE 5.02(D)
WARNACO INC.
ASSETS HELD FOR SALE
1. Assets related to the C.F. Hathaway division
2. Knitwear division assets including Aguas Buenos, Puerto Rico
3. 80 Park Avenue, Apartment 15J, New York, NY 10016
4. Dothan, Alabama plant assets
5. Honduras Joint Venture - Invasa
6. 838,235 shares of common stock of Interworld Corporation
7. Certain other internet-related investments
8. Investment in ARIS Industries
<PAGE>
EXHIBIT A
WARNACO INC.
FORM OF PROMISSORY NOTE
U.S.$_______________ Dated: _______________, ____
FOR VALUE RECEIVED, the undersigned, WARNACO INC., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "Lender") for the account of its Applicable
Lending Office on the Termination Date (each as defined in the Credit Agreement
referred to below) the principal sum of U.S.$[amount of the Lender's Commitment
in figures] or, if less, the aggregate principal amount of the Advances made by
the Lender to the Borrower pursuant to the 364 Day Credit Agreement dated as of
November __, 1999 among the Borrower, The Warnaco Group, Inc., the banks,
financial institutions and other institutional lenders listed on the signature
pages thereof, The Bank of Nova Scotia ("Scotiabank") and Salomon Smith Barney,
Inc., as co-lead arrangers and co-book managers, Citibank, N.A., as syndication
agent, Morgan Guaranty Trust Company of New York, as documentation agent, and
Scotiabank, as administrative agent (as amended, supplemented or modified from
time to time, the "Credit Agreement"; the terms defined therein being used
herein as therein defined) outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Scotiabank, as Administrative Agent for the account
of the Lender, at _________________________, ____________________, __________,
in same day funds. Each Advance owing to the Lender by the Borrower pursuant to
the Credit Agreement, and all payments made on account of principal thereof,
shall be recorded by the Lender and, prior to any transfer hereof, endorsed on
the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
WARNACO INC.
By
------------------------------
Title:
<PAGE>
EXHIBIT B
WARNACO INC.
FORM OF NOTICE OF BORROWING
The Bank of Nova Scotia, as Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
[Insert Address]
[Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, Warnaco Inc., refers to the 364 Day Credit
Agreement, dated as of November __, 1999 (as amended, supplemented or modified
from time to time, the "Credit Agreement", the terms defined therein being used
herein as therein defined), among the undersigned, The Warnaco Group, Inc., the
banks, financial institutions and other institutional lenders listed on the
signature pages thereof, The Bank of Nova Scotia ("Scotiabank") and Salomon
Smith Barney, Inc., as co-lead arrangers and co-book managers, Citibank, N.A.,
as syndication agent, Morgan Guaranty Trust Company of New York, as
documentation agent, and Scotiabank, as administrative agent and hereby gives
you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that
the undersigned hereby requests a Borrowing under the Credit Agreement, and in
that connection sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing
is _______________, ____.
(ii) The Type of Advances comprising the Proposed Borrowing is
[Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed
Borrowing is $_______________.
[(iv) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Borrowing is _____ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
(A) the representations and warranties contained in each Loan
Document are correct, before and after giving effect to the Proposed
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date other than any such representatives and
warranties that, by their terms, refer to a date other than the date of
such Borrowing; and
<PAGE>
(B) no event has occurred and is continuing, or would result
from such Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes a Default.
Very truly yours,
WARNACO INC.
By
-----------------------
Title:
<PAGE>
EXHIBIT C
WARNACO INC.
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the 364 Day Credit Agreement dated as of
November __, 1999 (as amended or modified from time to time, the "Credit
Agreement") among Warnaco Inc., a Delaware corporation (the "Borrower"), The
Warnaco Group, Inc., the banks, financial institutions and other institutional
lenders listed on the signature pages thereof, The Bank of Nova Scotia
("Scotiabank") and Salomon Smith Barney, Inc., as co-lead arrangers and co-book
managers, Citibank, N.A., as syndication agent, Morgan Guaranty Trust Company of
New York, as documentation agent, and Scotiabank, as administrative agent. Terms
defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under the Credit Agreement. After giving
effect to such sale and assignment, the Assignee's Commitments and the amount of
the Advances owing to the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.13 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights
<PAGE>
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and facility fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE>
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: ___________%
Assignee's Commitment: $__________
Aggregate outstanding principal amount of
Advances assigned: $__________
Principal amount of Note payable to
Assignee, if any: $__________
Principal amount of Note payable to
Assignor, if any: $__________
Effective Date*: _______________, ____
[NAME OF ASSIGNOR], as Assignor
By
-------------------------------------
Title:
Dated: _______________, ____
[NAME OF ASSIGNEE], as Assignee
By
-------------------------------------
Title:
Dated: _______________, ____
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
- --------
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
<PAGE>
Accepted [and Approved]* this
__________ day of _______________, ____
THE BANK OF NOVA SCOTIA, as Administrative Agent
By
-------------------------------------
Title:
[Approved this __________ day
of _______________, ____
WARNACO INC.
By
-------------------------------------]*
Title:
- --------
* Required if the Assignee is an Eligible Assignee solely by reason of clause
(viii) of the definition of "Eligible Assignee".
<PAGE>
EXHIBIT D
WARNACO INC.
FORM OF DESIGNATION AGREEMENT
Dated _______________, ____
Reference is made to the 364 Day Credit Agreement dated as of
November __, 1999 (as amended or modified from time to time, the "Credit
Agreement") among Warnaco Inc., a Delaware corporation (the "Borrower"), The
Warnaco Group, Inc., the banks, financial institutions and other institutional
lenders listed on the signature pages thereof, The Bank of Nova Scotia
("Scotiabank") and Salomon Smith Barney, Inc., as co-lead arrangers and co-book
managers, Citibank, N.A., as syndication agent, Morgan Guaranty Trust Company of
New York, as documentation agent, and Scotiabank, as administrative agent. Terms
defined in the Credit Agreement are used herein with the same meaning.
_________________________ (the "Designor")
and _________________________ (the "Designee") agree as follows:
1. The Designor hereby designates the Designee, and the
Designee hereby accepts such designation, to have a right to make Advances
pursuant to Sections 2.01 of the Credit Agreement.
2. Except as set forth in Section 7 below, the Designor makes
no representation or warranty and assumes no responsibility with respect to (i)
any statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto and (ii) the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto.
3. The Designee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Designation Agreement; (ii) agrees that it will, independently and without
reliance upon the Agent, the Designor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is a Designated Lender; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; and (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender.
4. The Designee hereby appoints Designor as Designee's agent
and attorney in fact and grants to Designor an irrevocable power of attorney to
receive payments made for the benefit of Designee under the Credit Agreement, to
deliver and receive all communications and notices under the Credit Agreement
and other Loan Documents and to exercise on Designees' behalf all rights, if
any, to vote and to grant and make approvals, waivers, consents of amendments to
or under the Credit Agreement and other Loan Documents. Any document executed by
the Designor on the Designee's behalf in connection with the Credit Agreement or
other Loan Documents shall be the legal, valid and binding obligation of the
Designee, enforceable against the Designee in accordance with its terms. The
Designor and Designee each hereby acknowledge that the Borrower, the Agents and
each of the Lenders are relying on and are beneficiaries of the preceding
provisions.
<PAGE>
5. Following the execution of this Designation Agreement by
the Designor and its Designee, it will be delivered to the Agent for acceptance
and recording by the Agent. The effective date for this Designation Agreement
(the "Effective Date") shall be the date of acceptance hereof by the Agent,
unless otherwise specified on the signature page hereto.
6. Each of the Borrower, the Designor and the Administrative
Agent hereby (i) acknowledges that the Designee is relying on the non-petition
provisions of Section 8.07(k) of the Credit Agreement as agreed to by all
signatories thereto and (ii) reaffirms that it will not institute against the
Designee or join any other Person in instituting against the Designee any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any federal or state bankruptcy or similar law for one year and one day
after the payment in full of the last maturing commercial paper note issued by
the Designee. Notwithstanding the foregoing, the Designor unconditionally agrees
to indemnify the Borrower, the Agents and each Lender against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be incurred
by or asserted against the Borrower, such Agent or such Lender, as the case may
be, in any way relating to or arising as a consequence of any such forbearance
or delay in the initiation of any such proceeding against its Designee.
7. The Designor unconditionally agrees to pay or reimburse the
Designee and save the Designee harmless against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed or asserted
by any of the parties to the Loan Documents against the Designee, in its
capacity as such, in any way relating to or arising out of this Agreement or any
other Loan Documents or any action taken or omitted by the Designee hereunder or
thereunder, provided, that the Designor shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursement if the same results from the Designee's
gross negligence or willful misconduct.
8. The Designor and Designee hereby represent and warrant for
the benefit of the Borrower, the Agents and the Lenders that the execution,
delivery and performance by such Designee of this Designation Agreement and the
performance of its obligations under the Loan Documents are within such
Designee's corporate powers, have been duly authorized by all necessary
corporate action, and do not violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award binding on such Designee.
9. This Designation Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
10. This Designation Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Designation Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Designation Agreement.
IN WITNESS WHEREOF, the Designor and the Designee have caused
this Designation Agreement to be executed by their officers thereunto duly
authorized as of the date first above written.
Effective Date*: _______________, ____
- --------
* This date should be no earlier than five Business Days after the delivery of
this Designation Agreement to the Agent.
<PAGE>
[NAME OF DESIGNOR],
as Designor
By
----------------------------
Title:
[NAME OF DESIGNEE],
as Designee
By
----------------------------
Title:
Applicable Lending Office
(and address for notices):
[Address]
Accepted this ____ day
of _______________, ____
THE BANK OF NOVA SCOTIA., as Administrative Agent
By
---------------------------------
Title:
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
THE WARNACO GROUP, INC.
A ACQUISITION CORP.
and
AUTHENTIC FITNESS CORPORATION
November 15, 1999
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 15, 1999, by and among The Warnaco Group, Inc., a Delaware corporation
("Parent"), A Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent (the "Purchaser"), and Authentic Fitness Corporation, a
Delaware corporation (the "Company").
WHEREAS, the Board of Directors of Parent, based upon the
recommendation of a special committee of its independent directors (the "Parent
Special Committee"), the Board of Directors and sole stockholder of Purchaser,
and the Board of Directors of the Company, based upon the recommendation of a
special committee of its independent directors (the "Company Special Committee")
have approved, and determined that it is in the best interests of their
respective companies and stock holders to consummate, the transactions provided
for herein; and
WHEREAS, Parent and the Purchaser have proposed acquiring all
of the outstanding common stock, par value $.001 per share, of the Company
(together with the associated purchase rights under the Company Rights
Agreement (as defined in Section 3.15), the "Shares" or "Company Common Stock")
at a price of $20.80 per Share in cash; and
WHEREAS, the Company, Parent and Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer (as defined herein) and the Merger (as defined herein).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
<PAGE>
THE OFFER AND MERGER
Section 1.01 The Offer. (a) Provided this Agreement shall not
have been terminated in accordance with Section 7.01, as promptly as practicable
(but in no event later than five business days after the public announcement of
the execution hereof), the Purchaser shall, and Parent shall cause Purchaser to,
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) an offer (the "Offer") to purchase for
cash any and all shares of the issued and outstanding Company Common Stock at a
price of $20.80 per Share, net to the seller in cash (such price, or such higher
price per Share as may be paid in the Offer, being referred to herein as the
"Offer Price"), subject to the conditions set forth in Annex A hereto. The
Company shall not tender Shares held by it or by any of its subsidiaries
pursuant to the Offer. The Purchaser shall, and Parent shall cause the Purchaser
to, on the terms and subject to the prior satisfaction or waiver of the
conditions of the Offer, accept for payment and pay for Shares tendered as soon
as it is legally permitted to do so under applicable law. The obligations of the
Purchaser to consummate the Offer and to accept for payment and to pay for any
Shares validly tendered on or prior to the expiration of the Offer and not
withdrawn shall be subject only to the conditions set forth in Annex A hereto.
(b) The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement and
the conditions set forth in Annex A hereto. The Purchaser shall not, and Parent
shall cause the Purchaser not to, decrease the Offer Price or decrease the
number of Shares sought, amend the conditions to the Offer set forth in Annex A
or impose conditions to the Offer in addition to those set forth in Annex A,
without the prior written consent of the Company (such consent to be authorized
by the Company Special Committee). Notwithstanding the foregoing, the Purchaser
shall be entitled to and shall, and Parent shall cause the Purchaser to, extend
the Offer at any time up to 40 days in the aggregate, in one or more periods of
not more than 10 business days, if at the
2
<PAGE>
initial expiration date of the Offer, or any extension thereof, any condition to
the Offer is not satisfied or waived; provided however, that the Purchaser shall
not be required to extend the Offer as provided in this sentence unless (i) each
such condition is reasonably capable of being satisfied and (ii) the Company is
in material compliance with all of its covenants under this Agreement after the
Purchaser shall have given the Company five business days prior written notice
of any non-compliance. In addition, without limiting the foregoing, the
Purchaser may, without the consent of the Company, (A) extend the Offer for up
to an additional 30 days, in one or more periods of not more than 10 business
days, if any condition to the Offer is not satisfied or waived and (B) if, on
the expiration date of the Offer, the Shares validly tendered and not withdrawn
pursuant to the Offer are sufficient to satisfy the Minimum Condition (as
defined in Annex A hereto) but equal less than 90 per cent of the outstanding
Shares, extend the Offer on one occasion for up to 10 business days
notwithstanding that all the conditions to the Offer have been satisfied so long
as (i) Purchaser irrevocably waives the satisfaction of any of the conditions to
the Offer (other than in the case of paragraph (a) of Annex A hereto the
occurrence of any statute, rule, regulation, judgment, order or preliminary or
permanent injunction making illegal or prohibiting the consummation of the
Offer (a "Prohibition")) that subsequently may not be satisfied during any such
extension of the Offer and (ii) Parent does not have knowledge that any such
Prohibition was pending or threatened at the time of such extension. In
addition, the Offer Price may be increased (provided such increase is in the
amount of at least five cents per share) and the Offer may be extended to the
extent required by law or the Commission in connection with such increase in
each case without the consent of the Company.
(c) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") (i) a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule 14D-1") and (ii) a Rule
3
<PAGE>
13e-3 Transaction Statement on Schedule 13E-3, including all exhibits thereto
(together with all amendments and supplements thereto, the "Schedule 13E-3"),
with respect to the Transactions (as defined herein). The Schedule 14D-1 and the
Schedule 13E-3 shall contain or shall incorporate by reference the Offer to
Purchase and a form of letter of transmittal and summary advertisement (the
Schedule 14D-1, the Schedule 13E-3, the Offer to Purchase and related letter of
transmittal and related summary advertisement, together with any amendments and
supplements thereto, collectively the "Offer Documents"). The Offer Documents
shall comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information supplied by the Company for inclusion in the Offer Documents. Each
of Parent and the Purchaser shall further take all steps necessary to cause the
Offer Documents to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and the Purchaser, on the one hand, and the
Company, on the other hand, shall promptly correct any information provided by
it for use in the Offer Documents if and to the extent that it shall have become
false and misleading in any material respect and the Purchaser further shall
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given an opportunity to review and comment upon the
Schedule 14D-1 and the Schedule 13E-3 (and shall provide any comments thereon as
soon as practicable) prior to the filing thereof with the SEC. In addition,
Parent shall, and shall cause the Purchaser to, provide the Company and its
counsel in writing with any comments that Parent, Purchaser or their counsel
may receive from the SEC or its
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staff with respect to the Offer Documents promptly after receipt of such
comments and with copies of any written responses and telephonic notification of
any verbal responses by Parent, Purchaser or their counsel.
(d) Parent shall provide or cause to be provided to Purchaser
all of the funds necessary to purchase any shares of Company Common Stock that
Purchaser becomes obligated to purchase pursuant to the Offer.
Section 1.02 Company Actions.
(a) The Company hereby approves of and consents to the Offer
and represents that, upon the recommendation of the Company Special Committee,
its Board of Directors, at a meeting duly called and held, has (i) approved this
Agreement (including all terms and conditions set forth herein) and the
transactions contem plated hereby, including the Offer and the Merger (as
defined in Section 1.04) (collectively, the "Transactions"), determining that
the Merger is advisable and that the terms of the Offer and the Merger are fair
to, and in the best interests of, the Company's stockholders and recommending
that the Company's stockholders accept the Offer and approve the Merger and this
Agreement and (ii) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares thereunder to the Purchaser and approve
and adopt this Agreement and the Merger; provided, that such recommendation may
be withdrawn, modified or amended if, in the opinion of the Company Special
Committee, after consultation with outside legal counsel, failure to do so is
reasonably likely to constitute a breach by its Board of Directors of its
fiduciary duties to its shareholders under applicable law. The Company
represents that Section 203 of the Delaware General Corporation Law (the "DGCL")
and the Rights Agreement (as defined herein) are each inapplicable to the
transactions contemplated by this Agreement. The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of its Board of Directors
described in clause (ii) of the immediately preceding sentence.
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(b) Concurrently with the commencement of the Offer, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") which shall, subject to
the fiduciary duties of the Company's directors under applicable law, as
determined by the Board of Directors after consultation with outside legal
counsel, and to the provisions of this Agreement, contain the recommendation
referred to in clause (ii) of Section 1.02(a) hereof. The Schedule 14D-9 shall
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or the Purchaser for inclusion in the Schedule 14D-9. The
Company further shall take all steps necessary to cause the Schedule 14D-9 to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. Each of the
Company, on the one hand, and Parent and the Purchaser, on the other hand, shall
promptly correct any information provided by it for use in the Schedule 14D-9 if
and to the extent that it shall have become false and misleading in any material
respect and the Company further shall take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of the Shares, in each case as and to the extent required by
applicable federal securities laws. Parent, the Purchaser and their counsel
shall be given an opportunity to review and comment upon the Schedule 14D-9 (and
shall provide any comments thereon as soon as practicable) prior to the filing
thereof with the SEC. In addition, the Company shall provide Parent, the
Purchaser and their counsel in writing with any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after receipt of such comments and with copies of any
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written responses and telephonic notification of any verbal responses by the
Company or its counsel.
(c) Notwithstanding anything to the contrary contained
herein, if the members of the Board of Directors of the Company determine (such
determination to be authorized by the Company Special Committee), after
consultation with outside counsel, that the failure to do so could reasonably be
expected to result in a breach of their fiduciary duties under applicable law,
the Company's Board of Directors may withdraw, modify or amend the
recommendation referred to in clause (ii) of Section 1.02(a) hereof, and such
withdrawal, modification or amendment shall not constitute a breach of this
Agreement.
(d) In connection with the Offer, the Company shall promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
stockholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents and subject to the requirements of applicable
law, Parent shall, and shall cause the Purchaser to, hold in confidence the
information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, shall use such information
only in connection with the Offer and Merger, and, if this Agreement is
terminated, shall upon request of the Company deliver or cause to be delivered
to the Company all copies of such information then in its possession or the
possession of its agents or representatives.
Section 1.03 The Merger. Subject to the terms and conditions of this
Agreement and the provisions of the DGCL, at the Effective Time, the Company and
the Purchaser shall consummate a merger (the "Merger") pursuant to which (a)
the Purchaser shall be merged with and into the Company and the separate
corporate existence of
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the Purchaser shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger (the "Surviving Corporation") under the name
"Authentic Fitness Corporation" and shall continue to be governed by the laws of
the State of Delaware, and (c) the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. Pursuant to the Merger, (x) the Certificate
of Incorporation of the Purchaser, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation, and (y) the By-laws of the Purchaser, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation
and such By-laws; provided, that Section 1 of the Certificate of Incorporation
of the Surviving Corporation shall be amended to read in its entirety as
follows: "The name of the Corporation is Authentic Fitness Corporation." The
Merger shall have the effects set forth in the DGCL.
Section 1.04 Effective Time. Parent shall, and shall cause the
Purchaser to, and the Company shall cause an appropriate Certificate of Merger
(the "Certificate of Merger") to be executed and filed on the date of the
Closing (as defined in Section 1.06) (or on such other date as Parent and the
Company may agree) with the Department of State of the State of Delaware (the
"Department of State") as provided in the DGCL. The Merger shall become
effective on the date on which the Certificate of Merger has been duly filed
with the Department of State or such time as is agreed upon by the parties and
specified in the Certificate of Merger, and such time is hereinafter referred to
as the "Effective Time."
Section 1.05 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., on a date to be specified by the parties, which shall
be as soon as practicable, but in no event later than the third business day,
after satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Skadden, Arps, Slate, Meagher &
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Flom LLP, if prior to January 7, 2000, at 919 Third Avenue, New York, NY 10022,
or if on or after January 7, 2000, at 4 Times Square, New York, NY 10023 unless
another date or place is agreed to in writing by the parties hereto.
Section 1.06 Directors and Officers of the Surviving Corporation. The
directors of the Purchaser and the officers of the Company immediately prior to
the Effective Time shall, from and after the Effective Time, be the directors
and officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
Section 1.07 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of
Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
or information statement relating to the Merger and this Agreement and
use its reasonable efforts (x) to obtain and furnish the information
required to be included by the federal securities laws (and the rules
and regulations thereunder) in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, to respond promptly to
any comments made by the SEC with respect to the preliminary proxy or
information statement and cause a definitive proxy or information
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statement (the "Proxy Statement") to be mailed to its stockholders
and (y) to obtain the necessary approvals of the Merger and this
Agreement by its stockholders; and
(iii) include in the Proxy Statement the
recommendation of the Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of this Agreement,
unless, the Board of Directors of the Company determines (such
determination to be authorized by the Company Special Committee) after
consultation with outside counsel, that doing so could reasonably be
expected to result in a breach of their fiduciary duties under
applicable law.
(b) Parent shall provide the Company with the information
concerning Parent and Purchaser required to be included in the Proxy Statement.
Parent shall vote, or cause to be voted, all of the Shares then owned by it, the
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of this Agreement.
Section 1.08 Merger Without Meeting of Stockholders. In the event that
Parent, the Purchaser or any other Subsidiary of Parent, shall acquire at least
90 percent of the outstanding shares of Company Common Stock pursuant to the
Offer or otherwise, each of the parties hereto shall take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
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Section 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock or common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share
of the Purchaser Common Stock shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, $.01 par value per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are owned by the Company as treasury stock,
all shares of Company Common Stock owned by any Subsidiary (as defined in
Section 3.01) of the Company and any shares of Company Common Stock owned by
Parent, the Purchaser or any other wholly owned Subsidiary of Parent shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Shares. Each issued and outstanding share of
Company Common Stock (other than Shares to be cancelled in accordance with
Section 2.01(b) hereof and any Dissenting Shares (as defined in Section 2.03
hereof)), shall be converted into the right to receive the Offer Price payable
to the holder thereof, without interest (the "Merger Consideration"), upon
surrender of the certificate formerly representing such share of Company Common
Stock in the manner provided in Section 2.02 hereof. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.02
hereof, without interest.
Section 2.02 Exchange of Certificates.
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(a) Paying Agent. Parent shall designate a bank or trust
company (the "Paying Agent") reasonably acceptable to the Company to make the
payments of the funds to which holders of shares of Company Common Stock shall
become entitled pursuant to Section 2.01(c) hereof. Prior to the Effective Time,
Parent shall take all steps necessary to deposit or cause to be deposited with
the Paying Agent such funds for timely payment thereunder. Such funds shall be
invested by the Paying Agent as directed by Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as practicable after the
Effective Time but in no event more than three business days thereafter, Parent
shall cause the Paying Agent to mail to each holder of record of a certificate
or certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.01 hereto into the right to receive the
Merger Consideration, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Paying Agent and shall
be in such form and have such other provisions as Parent and the Surviving
Corporation may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration (subject to subsection (e), below) for each share of Company
Common Stock formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be cancelled. 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, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
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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 tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.02.
(c) Transfer Books; No Further Ownership Rights in Company
Common Stock. At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by applicable law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. 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 (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) as general
creditors thereof with respect to the payment of any Merger Consideration that
may be payable upon surrender of any Certificates such stockholder holds, as
determined pursuant to this Agreement, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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(e) Withholding Taxes. If so specified in the Offer Documents,
Parent, the Purchaser, the Surviving Corporation and the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable to a
holder of Shares pursuant to the Offer or Merger such amounts as Parent, the
Purchaser, the Surviving Corporation or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code") or any provision of state, local
or foreign tax law. To the extent amounts are so withheld by Parent, the
Purchaser, the Surviving Corporation or the Paying Agent, the withheld amounts
(i) shall be treated for all purposes of this Agreement as having been paid to
the holder of the Shares in respect of which the deduction and withholding was
made, and (ii) shall be promptly paid over to the applicable taxing authority.
Section 2.03 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if and to the extent required by the DGCL, shares of
Company Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of Company Common
Stock who have properly exercised appraisal rights with respect thereto (the
"Dissenting Common Stock") in accordance with Section 262 of the DGCL, shall not
be exchangeable for the right to receive the Merger Consideration, and holders
of such shares of Dissenting Common Stock shall be entitled to receive payment
of the appraised value of such shares of Dissenting Common Stock in accordance
with the provisions of Section 262 of the DGCL unless and until such holders
fail to perfect or effectively withdraw or otherwise lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of Dissenting Common Stock shall thereupon be treated as if they had been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive the Merger Consideration, without any interest thereon.
Notwithstanding anything to the contrary contained in this Section 2.03, if (i)
the Merger is rescinded or abandoned or (ii) the stockholders of the
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Company revoke the authority to effect the Merger, then the right of any
stockholder to be paid the fair value of such stockholder's Dissenting Common
Stock pursuant to Section 262 of the DGCL shall cease. The Company shall give
Parent prompt notice of any demands received by the Company for appraisals of
shares of Dissenting Common Stock. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisals or offer to settle or settle any such demands.
Section 2.04 Company Option Plans. Parent and the Company shall take
all actions necessary to provide that, effective as of the Effective Time, (i)
each outstanding employee stock option to purchase Shares ("Option") granted
under the Company's 1998 Stock Option Plan, the 1998 Stock Option Plan for
Non-Employee Directors, the 1993 Stock Option Plan for Non-Employee Directors,
the 1992 Long Term Stock Incentive Plan and 1990 Key Management Stock Option
Plan (the "Stock Plans"), whether or not then exercisable or vested, shall be
cancelled and (ii) in consideration of such cancellation, the Company (or, at
Parent's option, the Purchaser) shall pay to such holders of Options an amount
in cash in respect thereof equal to the product of (A) the excess, if any, of
the Offer Price over the exercise price of each such Option and (B) the number
of Shares subject thereto (such payment, if any, to be net of applicable
withholding taxes). As of the Effective Time, the Plan shall terminate and all
rights under any provision of any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the capital stock
of the Company or any Subsidiary of the Company shall be cancelled. The Company
shall take all action necessary to ensure that, after the Effective Time, no
person shall have any right under the Plan or any other plan, program or
arrangement with respect to equity securities of the Company, or any direct or
indirect Subsidiary of the Company. The Company shall take all such steps as may
be required to cause the transactions contemplated by this Section 2.04 and any
other dispositions of Company equity securities (including derivative
securities) in connection with this Agreement by each individual who is a
director or officer of the
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Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act, such
steps to be taken in accordance with the No-Action Letter dated January 12,
1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows:
Section 3.01 Corporate Organization. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted. Each of the Company
and its Significant Subsidiaries (as defined below) is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not reasonably be
expected to have, when aggregated with all other such failures, a Material
Adverse Effect (as defined below) on the Company ("Company Material Adverse
Effect"). As used in this Agreement, the term "Material Adverse Effect" means, a
material adverse effect on the business, results of operations or financial
condition of such party and its subsidiaries taken as a whole or a material
adverse effect on the party's ability to consummate the transactions
contemplated hereby other than any adverse effect arising from general economic
or industry conditions. As used in this Agreement, (i) the word "subsidiary"
when used with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, of which (x) at least a
majority of the securities or other interests having by their terms voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
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indirectly beneficially owned or controlled by such party or by any one or more
of its subsidiaries, or by such party and one or more of its subsidiaries, or
(y) such party or any subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company and (ii) "Significant
Subsidiary" has the meaning given such term in Rule 405 of the Securities Act of
1933, as amended (the "Securities Act"). The copies of the Certificate of
Incorporation and Bylaws (or similar organizational documents) of the Company,
which have previously been made available to Parent, are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
Section 3.02 Capitalization. (a) The authorized capital stock of the
Company consists of 60,000,000 Shares and 15,000,000 shares of preferred stock,
$.01 par value ("Company Preferred Stock"). At the close of business on November
11, 1999, there were 20,137,661 Shares issued and outstanding and no shares of
Company Preferred Stock issued and outstanding and there were 12,675,054 shares
designated as Series A Junior participating Preferred Stock reserved for
issuance upon the exercise of the Rights distributed to the holders of Common
Stock pursuant to the Rights Agreement. As of November 11, 1999, there were
4,872,111 Shares issuable upon the exercise of outstanding Company Options
pursuant to the Company Stock Option Plans. Except as set forth in Section
3.02(a) of the disclosure schedule of the Company delivered to Parent
concurrently herewith (the "Company Disclosure Schedule"), all of the issued and
outstanding Company Shares have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except as set forth in Section
3.02(a) of the Company Disclosure Schedule, since November 15, 1999 the Company
has not issued any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock, other than pursuant to
the exercise of stock options referred to above and as disclosed in Section
3.02(a) of the Company Disclosure Schedule. Except as set forth above or in
Section 3.02(a) of the Company Disclosure Schedule or as otherwise contemplated
or permitted by Section
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5.01(a) hereof, as of the date of this Agreement there are not and, as of the
Effective Time there will not be, any shares of capital stock issued and
outstanding or any subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any
securities of the Company, including any securities representing the right to
purchase or otherwise receive any Company Shares or Company Preferred Stock.
(b) Except as set forth in Section 3.02(b) of the Company
Disclosure Schedule, the Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of its Significant Subsidiaries,
free and clear of any liens, charges, encumbrances, adverse rights or claims and
security interests whatsoever ("Liens") which would reasonably be expected to
have, in the aggregate, a Company Material Adverse Effect, and all of such
shares are duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. None of the Company's Significant Subsidiaries has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any security
of such Significant Subsidiary, including any securities representing the right
to purchase or otherwise receive any shares of capital stock or any other equity
security of such Significant Subsidiary.
Section 3.03 Authority. (a) The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to obtaining the approval of holders
of a majority of the Shares prior to the consummation of the Merger in
accordance with Section 251 of the DGCL, if so required. The execution, delivery
and performance by the Company of this Agreement, and the consummation by it of
the transactions contemplated hereby, have been duly authorized by its Board of
Directors and, except for obtaining the approval of its stockholders as
contemplated by Section 1.08 hereof, no other corporate action on the part of
the Company is necessary
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to authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery hereof by the other parties thereto, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
(b) The Board of Directors of the Company has approved and
taken all corporate action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this Agreement.
Section 3.04 Consents and Approvals; No Violations. (a) Except for (i)
the consents and approvals set forth in Section 3.04(a) of the Company
Disclosure Schedule, (ii) the filing with the Securities and Exchange
Commission (the "SEC") of the Offer Documents and, if necessary, of a proxy
statement in definitive form relating to the meeting the Company's stockholders
to be held in connection with this Agreement and the transactions contemplated
hereby (the "Proxy Statement"), (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware pursuant to the DGCL, (iv)
if necessary, the adoption of this Agreement by the requisite votes of the
stockholders of the Company and (v) filings, permits, authorizations, consents
and approvals as may be required under, and other applicable requirements of,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), no consents or approvals of, or filings, declarations or registrations
with, any federal, state or local court, administrative or regulatory agency or
commission or other governmental authority or instrumentality, domestic or
foreign (each a "Governmental Entity"), are necessary for the consummation by
the Company of the transactions contemplated hereby, other than such other
consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not reasonably be expected to have, in the
aggregate, a Company Material Adverse Effect.
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(b) Except as set forth in Section 3.04(b) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the terms or provisions
hereof, will (i) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws of the Company or any of the similar organizational
documents of any of its Significant Subsidiaries or (ii) assuming that the
consents and approvals referred to in Section 3.04(a) and the authorization
hereof by the Company's stockholders are duly obtained in accordance with the
DGCL, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
or any of its subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except, in the case of
clause (ii) above, for such violations, conflicts, breaches, defaults, losses,
terminations of rights thereof, accelerations or Lien creations which, in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.
Section 3.05 SEC Reports. Since July 6, 1996, the Company has filed all
required forms, reports, schedules and documents with the SEC (the "Company
Reports"), and no such form, report, schedule or document, at the time it was
filed, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances
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in which they were made, not misleading. As of their respective dates,
all Company Reports complied in all material respects with all applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
Section 3.06 Financial Statements. Each consolidated balance sheet of
the Company (including the related notes, where applicable) included in the
Company Reports fairly presents, in all material respects, the consolidated
financial position of the Company and its subsidiaries as of the date thereof,
and the other financial statements included in the Company Reports (including
the related notes, where applicable) fairly present, in all material respects
(subject, in the case of the unaudited statements, to audit adjustments normal
in nature and amount), the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of the Company and its
subsidiaries for the respective periods or dates therein set forth. Each of such
statements has been prepared in accordance with GAAP consistently applied during
the periods involved, except in each case as indicated in such statements or in
the notes thereto. The books and records of the Company and its subsidiaries
have been, and are being, maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements.
Section 3.07 Broker's Fees. Except as set forth in Section 3.07 of the
Company Disclosure Schedule, neither the Company nor any subsidiary of the
Company nor any of their respective officers or directors on behalf of the
Company or such subsidiaries has employed any financial advisor, broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated hereby, except, in
the case of the Company Special Committee, Chase Securities Inc.
Section 3.08 Absence of Certain Changes or Events. Except as disclosed
in the Company Reports filed or press releases of the Company (the "Company
Releases") issued prior to the date hereof or as set forth in Section
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3.08 of the Company Disclosure Schedule, since July 3, 1999, (a) no events
have occurred which would reasonably be expected to have, in the aggregate, a
Company Material Adverse Effect and (b) the Company and its subsidiaries have
carried on and operated their respective businesses in all material respects in
the ordinary course of business consistent with past practice, except for such
deviations of the Company's business from the ordinary course of business which
would not reasonably be expected to have, in the aggregate, a Company Material
Adverse Effect.
Section 3.09 Legal Proceedings. (a) Except as set forth in the Company
Reports, the Company Releases or in Section 3.09 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any, and
there are no pending or, to the best of the Company's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Company or
any of its subsidiaries or challenging the validity or propriety of the
transactions contemplated hereby which, in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect.
(b) Except as set forth in the Company Reports, the Company
Releases or in Section 3.09 of the Company Disclosure Schedule, there is no
injunction, order, judgment, decree or regulatory restriction imposed upon the
Company, any of its subsidiaries or the assets of the Company or any of its
subsidiaries which, when aggregated with all other such injunctions, orders,
judgments, decrees and restrictions, would reasonably be expected to have a
Company Material Adverse Effect.
Section 3.10 Compliance with Applicable Law. Except as disclosed in
Section 3.10 of the Company Disclosure Schedule, the Company and each of its
subsidiaries hold, and have at all applicable times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses and have complied with, and are not in default in any
material respect under any, applicable law, statute,
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order, rule, regulation, and/or written policy or guideline of any Governmental
Entity relating to the Company or any of its subsidiaries, except where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, when aggregated with all other such
failures, reasonably be expected to have a Company Material Adverse Effect, and
neither the Company nor any of its subsidiaries knows of, or has received notice
of, any material violations of any of the above which, in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
Section 3.11 Company Information. The information relating to the
Company and its subsidiaries to be provided by the Company to be contained in
the Proxy Statement, if any, or the Offer Documents, or in any other document
filed with any other Governmental Entity in connection herewith, shall not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading. Each of the Schedule 14D-9 and the Schedule 13E-3
(except that no representation is made as to such portions thereof that relate
only to Parent or any of its subsidiaries) shall comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 3.12 Opinion of Financial Advisor. The Company Special
Committee has received the opinion of Chase Securities Inc., financial advisor
to the Company Special Committee, to the effect that, as of the date of such
opinion, the consideration to be received in the Offer and the Merger is fair to
the holders of Company Shares, other than affiliates of Parent, from a financial
point of view.
Section 3.13 Intellectual Property.
(a) As used herein, the term "Intellectual Property" means all
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans and general intangibles of like nature, together with goodwill,
registrations and applications relating to the
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foregoing; patents and patent applications, copyrights, including registrations
and applications; proprietary computer programs, including any and all software
implementations of algorithms, models and methodologies whether in source code
or object code form, proprietary databases and compilations, including any and
all data and collections of data, all documentation, including user manuals and
training materials, related to any of the foregoing and the content and
information contained on any Website (collectively, "Software"); confidential
information, technology, know-how, inventions, processes, formulae, algorithms,
models and methodologies (such confidential items, collectively "Trade Secrets")
held for use or used in the business of the Company as conducted as of the
Closing Date or as presently contemplated to be conducted and any licenses to
use any of the foregoing, including those for the benefit of the Company and
those granted by the Company to third parties.
(b) Section 3.13(b) of the Company Disclosure Schedule sets
forth, for all Intellectual Property owned by the Company or any Company
Subsidiary, a complete and accurate list, of all U.S. and foreign: (i) patents
and patent applications; (ii) trademark and service mark registrations
(including Internet domain name registrations), trademark and service mark
applications and material unregistered trademarks and service marks; and (iii)
copyright registrations, copyright applications and material unregistered
copyrights.
(c) Section 3.13(c) of the Company Disclosure Schedule lists
all contracts for material Software which is licensed, leased or otherwise used
by the Company or any Company Subsidiary, and all Software which is owned by the
Company or any Company Subsidiary ("Proprietary Software"), and identifies which
Software is owned, licensed, leased, or otherwise used, as the case may be.
(d) Section 3.13(d) of the Company Disclosure Schedule sets
forth a complete and accurate list of all material agreements granting or
obtaining any right to use or practice any rights under any Intellectual
Property, to which the Company or any Company Subsidiary
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is a party or otherwise bound, as licensee or licensor thereunder, including,
without limitation, license agreements, settlement agreements and covenants
not to sue (collectively, the "License Agreements").
(e) Except as set forth on Section 3.13(e) of the Company
Disclosure Schedule and except as would not have a Company Material Adverse
Effect: (i) the Company or Company Subsidiaries own or have the right to use all
Intellectual Property, free and clear of all Liens; (ii) any Intellectual
Property owned or used by the Company or Company Subsidiaries has been duly
maintained, is valid and subsisting, in full force and effect and has not been
cancelled, expired or abandoned; (iii) the Company has not received written
notice from any third party regarding any actual or potential infringement by
the Company or any Company Subsidiary of any intellectual property of such third
party, and the Company has no knowledge of any basis for such a claim against
the Company or any Company Subsidiary; (iv) the Company has not received written
notice from any third party regarding any assertion or claim challenging the
validity of any Intellectual Property owned or used by the Company or any
Company Subsidiaries and the Company has no knowledge of any basis for such a
claim; (v) neither the Company nor any Company Subsidiaries have licensed or
sublicensed its rights in any Intellectual Property, or received or been granted
any such rights, other than pursuant to the License Agreements; (vi) to the best
of the Company's knowledge, no third party is misappropriating, infringing,
diluting or violating any Intellectual Property owned by the Company or any
Company Subsidiaries; (vii) the License Agreements are valid and binding
obligations of the Company or Company Subsidiaries, enforceable in accordance
with their terms, and there exists no event or condition which will result in a
violation or breach of, or constitute a default by the Company or Company
Subsidiaries or, to the knowledge of the Company, the other party thereto, under
any such License Agreement; and (viii) the Company and each of the Company
Subsidiaries takes reasonable measures to protect the confidentiality of Trade
Secrets including requiring third parties having access thereto to execute
written nondisclosure agreements.
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(f) Except as set forth in Section 3.13(f) of the Disclosure
Schedule, the disclosure under the heading "YEAR 2000 COMPLIANCE" contained in
the Company's Annual Report on Form 10-K for the period ended July 3, 1999 is
accurate and in compliance with applicable law in all material respects.
Section 3.14 Takeover Statutes. The Company has taken all actions
necessary such that no restrictive provision of any "fair price," "moratorium,"
"control share acquisition," "interested shareholder" or other similar
anti-takeover statute or regulation (including, without limitation, Section 203
of the DGCL) (each a "Takeover Statute") or restrictive provision of any
applicable anti-takeover provision in the governing documents of the Company is,
or at the Effective Time will be, applicable to the Company, Parent, the
Purchaser, the Shares, the Tender Offer, the Merger or any other transaction
contemplated by this Agreement.
Section 3.15 Company Rights Agreement. The Company and its Board of
Directors have taken all action which may be necessary under the Rights
Agreement dated as of August 19, 1999, between the Company and The Bank of New
York, as Rights Agent, as amended (the "Company Rights Agreement"), so that the
Offer is deemed to be a "Qualified Offer" (as defined in the Company Rights
Agreement) and the execution and delivery of this Agreement(and any amendments
thereto by the parties hereto), and the consummation of the Transactions, will
not cause (i) Parent or Purchaser to constitute an "Acquiring Person" (as
defined in the Company Rights Agreement), (ii) a "Distribution Date," "Section
13 Event," "Triggering Event," or "Stock Acquisition Date" (each as defined in
the Company Rights Agreement) to occur or (iii) the Rights (as defined in the
Company Rights Agreement) to become exercisable pursuant to Section 7 thereof or
otherwise. The Company shall cause the Company Rights Agreement to be amended
such that the "Final Expiration Date" (as such term is defined in the Company
Rights Agreement) and the expiration of the Rights shall occur upon the
acceptance for payment of Shares pursuant to the Offer.
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Section 3.16 Tax Returns and Tax Payments. The Company and its
subsidiaries have timely filed (or, as to subsidiaries, the Company has filed on
behalf of such subsidiaries) all material Tax Returns (as defined below)
required to be filed by it. The Company and its subsidiaries have paid (or, as
to subsidiaries, the Company has paid on behalf of such subsidiaries) all Taxes
(as defined below) shown to be due on such Tax Returns or has provided (or, as
to Subsidiaries, the Company has made provision on behalf of such Subsidiaries)
reserves in its financial statements for any Taxes that have not been paid,
whether or not shown as being due on any Tax Returns. Neither the Company nor
any of its subsidiaries has requested any extension of time within which to file
any Tax Returns in respect of any taxable year which have not since been filed,
nor made any request for waivers of the time to assess any Taxes that are
pending or outstanding. No claim for unpaid Taxes has been asserted against the
Company or any of its Subsidiaries in writing by a Tax authority which, if
resolved in a manner unfavorable to the Company or any of its Subsidiaries, as
the case may be, would result, individually or in the aggregate in a material
Tax liability to the Company and its Subsidiaries taken as a whole. There are no
material Liens for Taxes upon the assets of the Company or any Subsidiary except
for Liens for Taxes not yet due and payable or for Taxes that are being disputed
in good faith by appropriate proceedings and with respect to which adequate
reserves have been taken. No audit of any Tax Return of the Company or any of
its Subsidiaries is being conducted by a Tax authority. None of the Company or
any of its subsidiaries has made an election under Section 341(f) of the Code.
Neither the Company nor any of its subsidiaries has any liability for Taxes of
any person (other than the Company and its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any comparable provision of state, local or
foreign law). As used herein, "Taxes" shall mean all taxes of any kind,
including, without limitation, those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits, license, value
added, property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever,
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together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority, domestic or foreign. As used
herein, "Tax Return" shall mean any return, report or statement required to be
filed with any governmental authority with respect to Taxes. As used herein,
"Code" shall mean the Internal Revenue Code of 1986, as amended and the Treasury
Regulations promulgated thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and the Purchaser jointly and severally represent and warrant to
the Company as follows:
Section 4.01 Corporate Organization. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted. Each of Parent and
its Significant Subsidiaries is duly licensed or qualified to do business in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not reasonably be expected to have, when aggregated
with all other such failures, a Material Adverse Effect on the Parent ("Parent
Material Adverse Effect). The copies of the Restated Certificate of
Incorporation and Bylaws (or similar organizational documents) of Parent, which
have previously been made available to the Company, are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
Section 4.02 Authority. Each of Parent and the Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, deliv-
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ery and performance by Parent and the Purchaser of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly authorized
by their Boards of Directors and by Parent as the sole stockholder of Purchaser
and no other corporate action on the part of Parent and the Purchaser is
necessary to authorize the execution and delivery by Parent and the Purchaser of
this Agreement and the consummation by them of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Parent and the
Purchaser, as the case may be, and, assuming due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding obligation
of each of Parent and the Purchaser, as the case may be, enforceable against
them in accordance with its respective terms.
Section 4.03 Consents and Approvals; No Violation. (a) Except for (i)
the consents and approvals set forth in Section 4.03(a) of the Parent Disclosure
Schedule, (ii) the filing with the SEC of the Offer Documents, (iii) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware pursuant to the DGCL, and (iv) filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the HSR Act and the Securities Act, no
consents or approvals of, or filings, declarations or registrations with, any
Governmental Entity are necessary for the consummation by Parent and the
Purchaser of the transactions contemplated hereby, other than such other
consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not reasonably be expected to have, in the
aggregate, a Parent Material Adverse Effect.
(b) Except as set forth in Section 4.03(b) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent or the Purchaser, nor the consummation by Parent or the Purchaser of the
transactions contemplated hereby, nor compliance by Parent or the Purchaser with
any of the terms or provisions hereof, will (i) conflict with or violate any
provision of the Restated Certificate of Incorporation or Bylaws of Parent or
any of the similar
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organizational documents of any of its Significant Subsidiaries or (ii) assuming
that the consents and approvals referred to in Section 4.03(a), (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Parent or any of its subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Parent or any of its subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent or any of its
subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected, except, in the case of clause (ii) above,
for such violations, conflicts, breaches, defaults, losses, terminations of
rights thereof, accelerations or Lien creations which, in the aggregate, would
not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.04 Broker's Fees. Except as set forth in Section 4.04 of the
Parent Disclosure Schedule, neither Parent nor any subsidiary of Parent nor any
of their respective officers or directors on behalf of Parent or such
subsidiaries has employed any financial advisor, broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated hereby, except, in the case of the
Parent Special Committee, Wasserstein Perella & Co.
Section 4.05 Purchaser's Operations. The Purchaser was formed solely
for the purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
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Section 4.06 Parent Information. The information relating to Parent and
its subsidiaries to be provided by Parent to be contained in the Offer Documents
and the Proxy Statement, if any, or in any other document filed with any other
Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Offer Documents and the Proxy Statement, if any (except that
no representation is made as to such portions thereof that relate only to the
Company or any of its subsidiaries) shall comply in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder and
the Securities Act and the rules and regulations thereunder, respectively.
Section 4.07 Share Ownership. Neither Parent, the Purchaser nor any of
their respective Subsidiaries, beneficially owned, as of the date of this
Agreement, any Shares of the Company and none of the forgoing is an "Interested
Stockholder" for purposes of Section 203 of the DGCL.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Businesses Prior to the Effective Time. Except
as set forth in Section 5.01 of the Company Disclosure Schedule, as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, unless Parent otherwise agrees in writing, the Company shall,
and shall cause its subsidiaries to, in all material respects, (i) conduct its
business in the usual, regular and ordinary course consistent with past practice
and (ii) use all reasonable efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees. Without limiting the generality of
the foregoing, and except as set forth
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in Section 5.01 of the Company Disclosure Schedule, as expressly contemplated or
permitted by this Agreement, or as required by applicable law, rule or
regulation, during the period from the date of this Agreement to the Effective
Time, the Company shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of Parent:
(a) (i) issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (A) any additional shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe for any shares of its capital stock, or any rights, warrants,
option, calls, commitments or any other agreements of any character to purchase
or acquire any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of its capital stock or (B) any other securities in respect of, in
lieu of, or in substitution for, any shares of its capital stock outstanding on
the date hereof other than pursuant to (x) the exercise of stock options or
warrants outstanding as of the date hereof and (y) acquisitions and investments
permitted by paragraph (d) hereof; (ii) redeem, purchase or otherwise acquire,
or propose to redeem, purchase or otherwise acquire, any of its outstanding
shares of capital stock; or (iii) split, combine, subdivide or reclassify any
shares of its capital stock or declare, set aside for payment or pay any
dividend, or make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to its
stockholders in their capacity as such, other than the declaration and payment
of regular quarterly cash dividends on its capital stock in an amount no greater
than, 1.25(cent) per Company Share, in accordance with past dividend policy and
except for dividends paid by a direct or indirect wholly owned subsidiary of the
Company and to the Company or any of its wholly owned subsidiaries;
(b) other than in the ordinary course of business consistent
with past practice, incur any indebtedness
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for borrowed money or guarantee any such indebtedness or make any loans,
advances or capital contributions to, or investments in, any other person other
than the Company or its subsidiaries;
(c) sell, transfer, mortgage, encumber or otherwise dispose of
any of its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims held by any such
person, in each case that is material to such party, except (i) in the ordinary
course of business consistent with past practice, (ii) pursuant to contracts or
agreements in force at the date of this Agreement or (iii) pursuant to plans
disclosed in writing prior to the execution of this Agreement to the other
party;
(d) except for transactions in the ordinary course of business
consistent with past practice, make any material acquisition or investment
either by purchase of stock or securities, merger or consolidation,
contributions to capital, property transfers, or purchases of any property or
assets of any other individual, corporation or other entity other than a wholly
owned subsidiary thereof;
(e) amend its certificate of incorporation, bylaws or similar
governing documents; or
(f) make any commitment to, take any of the actions prohibited
by this Section 5.01.
Section 5.02 No Solicitation.
(a) From and after the date hereof, the Company will not, and
will not authorize or permit any of its representatives to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information) or take any other action reasonably designed to facilitate any
inquiries or the making of any proposal which constitutes or would reasonably be
expected to lead to an Acquisition Proposal or (ii) in the event of an
unsolicited written Acquisition Proposal,
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engage in negotiations or discussions with, or provide any information or data
to, any person (other than to Parent, any of its affiliates or representatives
and except for information which has been previously publicly disseminated by
the parties) relating to any Acquisition Proposal; provided however, that
nothing contained in this Section 5.02 or any other provision hereof shall
prohibit the Company, the Company Special Committee or the Company Board of
Directors from (A) taking and disclosing to its shareholders a position with
respect to a tender or an exchange offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act or (B) making such disclosure
to its shareholders with respect to such Acquisition Proposal as, in good faith
judgment of the Company Special Committee and/or Company Board of Directors,
after consultation with outside counsel, is required by law.
(b) Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by an
executive officer of the Company or any investment banker, attorney or other
representative of the Company, whether or not such person is purporting to act
on behalf of the Company or otherwise, shall be deemed to be a breach of its
Section 5.02 by the Company. Notwithstanding any other provision of this
Agreement, the Company may (i) at any time prior to the time Parent, the
Purchaser or any of their affiliates shall purchase shares pursuant to the
Offer, engage in discussions or negotiations with a third party who (without any
solicitation (except as permitted by Section 5.02), directly or indirectly, by
the Company or its representatives after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party information
concerning the Company and its business, properties and assets if, and only if,
(A)(w) the third party has first made an Acquisition Proposal that could
reasonably be expected to lead to a transaction that is more favorable to the
Company's shareholders than the Offer and the Merger, taking into account all
aspects of the Merger and of the Acquisition Proposal, (x) the Acquisition
Proposal is reasonably capable of being completed (as determined in good faith
by the Company Special Committee after consultation with its
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financial advisors and outside counsel), (y) the third party has demonstrated
that financing for the Acquisition Proposal is reasonably likely to be obtained
(as determined in good faith by the Company Special Committee after consultation
with its financial advisors), and (z) the Company Special Committee shall have
concluded in good faith, after considering applicable provisions of state law,
applicable provisions of state law and after consultation with outside counsel,
that a failure to do so could reasonably be expected to constitute a breach
by its Board of Directors of its fiduciary duties to its shareholders under
Dapplicable law and (B) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, the Company
(x) provides prompt notice to Parent to the effect that it is furnishing
information to or entering into discussions or negotiations with such person
or entity and (y) receives from such person an executed confidentiality
agreement substantially similar to the Confidentiality Agreement, (as defined
in Section 8.05), and (ii) comply with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer. The Company shall
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by the Company or its representatives with respect to the foregoing.
The Company shall notify Parent hereto orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the material
terms and conditions of any such proposal and the identity of the person making
it), within 24 hours of the receipt thereof, shall keep Parent informed of the
status and details of any such inquiry, offer or proposal, and shall give Parent
three business days' advance written notice of any agreement (specifying the
material terms and conditions thereof) to be entered into with or any
information to be supplied to any person making such inquiry, offer or proposal.
(c) The term "Acquisition Proposal" shall mean a written
proposal or offer (other than by Parent or the Purchaser) for a tender or
exchange offer, merger, consolidation or other business combination involving
the Company or any Significant Subsidiary or any proposal to acquire in any
manner an equity interest which could
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result in such party having a 50% or greater equity interest in or all or
substantially all of the assets of the Company or any Significant Subsidiary,
other than the transactions contemplated by this Agreement. As used in this
Section, "Board of Directors" includes any committee thereof.
Section 5.03 Regulatory Matters. The Company and Parent shall, and
Parent shall cause the Purchaser to, take all actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
this Agreement and the transactions contemplated hereby (which actions shall
include, without limitation, filing the notification and report form and
furnishing all other information required under the HSR Act and in connection
with approvals of or filings with any other Governmental Entity) and shall
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each of
the Company, Parent and the Purchaser shall, and shall cause its Subsidiaries
to, take all actions necessary to obtain (and shall cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by Parent, the Purchaser, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
Section 5.04 Financing. At the consummation of the Offer, Parent and
the Purchaser shall have sufficient funds available (through cash on hand and
existing credit arrangements or otherwise) to purchase all of the Shares
outstanding on a fully diluted basis and to pay all fees and expenses related to
the transactions contemplated by this Agreement.
Section 5.05 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release reasonably acceptable
to Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor
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any of their respective affiliates shall issue or cause the publication of any
press release or other announcement with respect to the Merger, this Agreement
or the other transactions contemplated hereby without the prior consultation of
the other party, except as may be required by law or by any listing agreement
with a national securities exchange.
Section 5.06 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence of any event the occurrence, or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of the Company or Parent, 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 5.06 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.07 Access to Information. (a) Upon reasonable notice and
subject to applicable laws relating to the exchange of information, the Company
shall, and shall cause each of its subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the Parent, during
normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records, and to its officers,
employees, accountants, counsel and other representatives and, during such
period, the Company shall, and shall cause its subsidiaries to, make available
to the Parent (i) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of Federal securities laws (other than reports or documents which
Parent or the Company, as the case may be, is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably request. Neither the
Company nor
37
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any of its subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of its customers, jeopardize the attorney client or work product
privilege of the institution in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. The
parties agree that the Confidentiality Agreement survives the execution of this
Agreement and shall remain in full force and effect.
(b) No investigation by either of the parties or their
respective representatives shall affect the representations, warranties,
covenants or agreements of the other set forth herein.
Section 5.08 Further Assurances. (a) Subject to the terms and
conditions of this Agreement, each of Parent and the Company shall, and shall
cause its subsidiaries to, use all reasonable efforts (i) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its subsidiaries with
respect to the Merger and, subject to the conditions set forth in Article VI
hereof, to consummate the transactions contemplated by this Agreement as
promptly as practicable and (ii) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by the Company or Parent or any of their respective
subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement, and to comply with the terms and conditions of
any such consent, authorization, order or approval.
(b) Subject to the terms and conditions of this Agreement,
each of Parent and the Company shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
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necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using all reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby
and using all reasonable efforts to defend any litigation seeking to enjoin,
prevent or delay the consummation of the transactions contemplated hereby or
seeking material damages.
Section 5.09 Employee Benefit Plans. As of the Effective Time, Parent
shall cause the Company to continue to employ all current employees of the
Company at substantially the same salaries and wages (including commission and
sales incentive programs), and on substantially the same terms and conditions as
those in effect immediately prior to the Effective Time: provided, however, that
nothing in this Section 5.09 shall be interpreted as preventing Parent or the
Company from terminating the employment of any employee of the Company, with or
without cause, subsequent to the Effective Time. For purposes of all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and other employment agreements,
arrangements and policies of Parent under which an employee's benefit depends,
in whole or in part, on length of service, credit will be given to current
employees of the Company for service with the Company prior to the Effective
Time, provided that such crediting of service does not result in duplication of
benefits. Parent shall, and shall cause the Company to, honor in accordance with
their terms all employee benefit plans (as defined in Section 3(3) of ERISA) and
other employment, consulting, benefit, compensation or severance agreements,
arrangements and policies of the Company (collectively, the "Company Plans");
provided, however, that Parent or the Company may amend, modify or terminate any
individual Company Plans in accordance with the terms of such Plans and
applicable law (including obtaining the consent of the other parties to and
beneficiaries of such Company Plans to the extent required thereunder).
39
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Section 5.10 Indemnification; Directors' and Officers'
Insurance. (a) Parent agrees that all rights to indemnification (including
advancement of expenses) existing on the date hereof in favor of the present or
former officers and directors of the Company and its subsidiaries (the
"Managers") with respect to actions taken in their capacity as Managers prior to
or at the Effective Time as provided in the respective certificate of
incorporation or by-laws of the Company and its subsidiaries shall survive the
Merger and shall continue in full force and effect for a period of six years
following the Effective Time, and all such rights in any agreement in effect as
of the date hereof between the Company or any of its subsidiaries and any
Manager shall survive the Merger and continue in full force and effect in
accordance with its terms. Parent, from and after the Effective Time, shall
indemnify, defend and hold harmless the Managers with respect to actions taken
in their capacity as Managers prior to and at the Effective Time to the fullest
extent permitted under Delaware law (including by way of advancement of
expenses).
(b) Parent shall, for a period of six years after the
Effective Time, cause to be maintained in effect policies of directors' and
officers' liability insurance equivalent in scope and amount of coverage to the
current policies maintained by the Company with respect to claims arising from
facts or events which occurred prior to or at the Effective Time to the extent
available; provided that in no event shall Parent or the Surviving Corporation
be obligated to expend, in order to maintain or procure such insurance coverage,
(i) if such insurance is purchased in one lump sum payment, an amount exceeding
twelve times the annual premium of the Company's directors' and officers'
insurance policy in effect on the date hereof (the "Current Premium") or (ii) if
such insurance is purchased annually, an amount annually more than two times the
Current Premium, but in either such case Parent or the Surviving Corporation
shall be obligated to purchase a policy with the greatest coverage available for
a cost not exceeding such amount.
(c) The covenants contained in this Section 5.10 shall survive
the Closing, shall continue
40
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without time limit and are intended to benefit the Company and each of the
indemnified parties. Subject to the requirements of the DGCL, the Certificate of
Incorporation and By-laws of the Company and the Surviving Corporation shall not
be amended in a manner which adversely affects the rights of the indemnified
parties under this Section 5.10.
Section 5.11 Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the merger, the proper officers and directors of each party to
this Agreement and their respective subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, Parent.
Section 5.12 Actions by Company. Except as otherwise required by
applicable law, any actions contemplated to be taken under this Agreement by the
Board of Directors of the Company or the Company may be taken by the Company
Special Committee on behalf of the Company or its Board of Directors.
Notwithstanding any other provisions contained herein, (i) any amendment or
modification of, or supplement to, this Agreement that is adverse to the holders
of the Company Shares shall require the consent of the Company Special Committee
and (ii) the waiver of any obligation, covenant, agreement or condition herein,
or the giving of any consent or the exercise of any material right thereunder by
the Company or its Board of Directors shall require the consent of the Company
Special Committee.
41
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ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of Company Common
Stock, if required by applicable law and the Certificate of Incorporation, in
order to consummate the Merger;
(b) Statutes; Consents. No statute, rule, order, decree or
regulation shall have been enacted or promulgated by any foreign or domestic
Governmental Entity or authority of competent jurisdiction which prohibits the
consummation of the Merger and all foreign or domestic governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and shall be in effect
at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a
foreign or United States federal or state court or other governmental authority
of competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(d) Purchase of Shares in Offer. Parent, the Purchaser or
their affiliates shall have purchased shares of Company Common Stock pursuant to
the Offer or the Tender Agreement, except that Parent and the Purchaser shall
not be entitled to rely on this condition if the Purchaser shall have failed to
purchase Shares pursuant to the Offer in breach of its obligations under this
Agreement.
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ARTICLE VII
TERMINATION
Section 7.01 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval thereof:
(a) By the mutual consent of the Parent Special Committee and
the Company Special Committee.
(b) By either of the Board of Directors of the Company or the
Board of Directors of Parent:
(i) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their respective
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall
have become final and non-appealable; provided that the party seeking
to terminate this Agreement shall have used all reasonable efforts to
challenge such order, decree or ruling;
(ii) if the Offer shall have expired without any
Shares being purchased therein, provided, however, that the right to
terminate this Agreement under this Section 7.01(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 Purchaser to purchase Shares in the Offer; or
(iii) if the Effective Time shall not have occurred
by June 30, 2000, unless the Effective Time shall not have occurred
because
43
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of a material breach of this Agreement by the
party seeking to terminate this Agreement.
(c) By the Board of Directors of the Company:
(i) if Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of
the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 7.01(c)(i) if the Company is in material
breach of this Agreement; or
(ii) at any time prior to the time Parent, the
Purchaser or any of their affiliates shall purchase Shares pursuant to
the Offer, upon three business days' prior notice to Parent if, as a
result of an Acquisition Proposal described in clauses (A)(w), (x) and
(y) of Section 5.02(b), (1) the Company Special Committee shall have
concluded in good faith, after considering applicable provisions of
state law and after consultation with out side counsel, that the
failure to accept such Acquisition Proposal could reasonably be
expected to constitute a breach by its Board of Directors of its
fiduciary duties; (2) the Company shall have complied with all its
obligations under Sections 1.08 and 5.02; (3) the person making the
Acquisition Proposal shall have acknowledged and agreed in writing to
pay or cause to be paid the termination and other fees set forth in
Section 7.03 if such Acquisition Proposal is consummated or any other
Acquisition Proposal is consummated with such person or any of its
affiliates and (4) during the three business days prior to any such
termination, the Company shall, and shall cause its respective
financial and legal advisors to, in good faith, seek to negotiate with
Parent to make such adjustment in the terms and conditions of this
Agreement as would enable the
44
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Company to proceed with the transactions con templated herein.
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a failure to satisfy any
of the conditions set forth in Annex A hereto, Parent, the Purchaser,
or any of their affiliates shall have failed to commence the Offer on
or prior to five business days following the date of the initial public
announcement of the Offer; provided, that Parent may not terminate this
Agreement pursuant to this Section 7.01(d)(i) if Parent is in material
breach of this Agreement; or
(ii) if, prior to the purchase of shares of Company
Common Stock pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn, or modified or changed in a manner
adverse to Parent or the Purchaser its approval or recommendation of
the Offer, this Agreement or the Merger or shall have recommended an
Acquisition Proposal or shall have resolved to do either of the
foregoing.
Section 7.02 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.01, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, and there shall be no liability on the part of the Parent
or the Company, except as provided in Section 7.03 and except that nothing in
this Section 7.02 shall relieve any party of liability for fraud or for breach
of this Agreement (other than a breach of this Agreement arising solely out of
the inaccuracy of a representation or warranty made by the Company that was
accurate when made on the date hereof and which inaccuracy was not caused by the
intentional actions or omissions by the Company).
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Section 7.03 Termination Fee; Expenses. If this Agreement (i) is
terminated by Parent pursuant to Section 7.01(d)(ii), or (ii) is terminated by
the Company pursuant to Section 7.01(c)(ii), then the Company shall pay to
Parent promptly (but not later than two business days after such notice is given
or received by the Company pursuant to Section 7.01(c)(ii) or 7.01(d)(ii)) a
termination fee equal to $10 million in cash. If (i) this Agreement is
terminated pursuant to Section 7.01(b)(ii) (as a result of the failure of
Condition (c) in Annex A) or Section 7.01(b)(iii), and (ii) at the time of such
termination, there shall have been an Acquisition Proposal made by a third party
which, at the time of such termination, shall not have been (x) rejected by the
Company and its Board and (y) withdrawn by the third party and (iii) within
eighteen months of any such termination, the Company or its affiliate becomes a
subsidiary or part of such third party or a subsidiary or part of an affiliate
of such third party, or merges with or into the third party or a subsidiary or
affiliate of the third party or enters into a definitive agreement to consummate
an Acquisition Proposal with such third party or affiliate thereof, then the
Company shall pay to Parent, at the closing of the transaction (and as a
condition to the closing) in which the Company or its affiliate becomes such a
subsidiary or part of such other person or the closing of such Acquisition
Proposal occurs, a termination fee equal to $10 million in cash. Notwithstanding
the provisions of this Section 7.03, no amount shall be due to Parent or
Purchaser hereunder if either such party has purchased any Shares pursuant to
the Offer.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company
46
<PAGE>
shall require approval of its Board of Directors upon the recommendation of the
Company Special Committee), at any time prior to the Closing Date with respect
to any of the terms contained herein; provided, however, that no amendment,
modification or supplement of this Agreement shall be made which adversely
effects such holders after the consummation of the Offer, unless approved by a
majority of the shares not held by Purchaser and its affiliates.
Section 8.02 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 8.03 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
The Warnaco Group, Inc.
90 Park Avenue
New York, New York 10016
Attention: Stanley P. Silverstein
Telephone No.: (212) 287-8000
Telecopy No.: (212) 687-0480
with a copy to:
Skadden, Arps, Slate,
Meagher & Flom LLP
(if before January 7, 2000)
919 Third Avenue
New York, New York 10022
Attention: Alan C. Myers
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
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(if on or after January 7, 2000)
4 Times Square
New York, New York 10023
Attention: Alan C. Myers
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
And a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Robert Spatt
Telephone No.: (212) 455-2000
Telecopy No.: (212) 455-2502
(b) if to the Company, to:
Authentic Fitness Corporation
6040 Bandini Boulevard
Commerce, California 90040
Telephone No.: (323) 726-1262
Telecopy No.: (323) 721-3613
Attn: General Counsel
with a copy to:
Munger Tolles & Olson LLP
355 South Grand Avenue, 35th Floor
Los Angeles, California, 90071
Telephone No.: (213) 683-9100
Telecopy No.: (213) 687-3702
Attention: Simon M. Lorne
Section 8.04 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.05 Entire Agreement; Third Party Beneficiaries. This
Agreement and that certain confidentiality
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agreement, dated as of November 1, 1999 between the Company and the Purchaser
(the "Confidentiality Agreement") (including the documents and the instruments
referred to herein and therein): (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b) except as
provided in Sections 1.03, 2.04, 5.09 and 5.10, are not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
Section 8.06 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.07 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof or of any other
jurisdiction.
Section 8.08 Assignment. 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, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 8.09 Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. "Include,"
"includes," and "including" shall be deemed to
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be followed by "without limitation" whether or not they are in fact followed by
such words or words of like import.
50
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
THE WARNACO GROUP, INC.
By: /s/ Stanley P. Silverstein
----------------------------------
Name: Stanley P. Silverstein
Title: Vice President and
General Counsel
A ACQUISITION CORP.
By: /s/ Stanley P. Silverstein
-----------------------------------
Name: Stanley P. Silverstein
Title: Vice President
AUTHENTIC FITNESS CORPORATION
By: /s/ Michael P. Mc Hugh
-------------------------------------
Name: Michael P. Mc Hugh
Title: Senior Vice President
and Chief Financial
Officer
By: /s/ Stuart D. Buchalter
-----------------------------------------
Name: Stuart D. Buchalter
Title: Chairman Authentic
Fitness Corporation Special
Committee
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer (subject to the
provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate the Offer and not accept for payment any tendered
shares if (i) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer such number of Shares which, together with all
Shares owned by affiliates of Parent and not tendered, would constitute at least
a majority of the Shares outstanding on the date of purchase (the "Minimum
Condition"), (ii) any applicable waiting period under the HSR Act has not
expired or terminated prior to the expiration of the Offer, or (iii) at any time
on or after the date of the Merger Agreement, and before the time of acceptance
of Shares for payment pursuant to the Offer, any of the following events shall
occur and be continuing:
(a) there shall be any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or
applicable to the Offer or the Merger by any domestic or foreign federal or
state governmental regulatory or administrative agency or authority or court or
legislative body or commission which (l) prohibits, or imposes any material
limitations on, Parent's or the Purchaser's ownership or operation of all or a
material portion of the Company's businesses or assets, (2) prohibits, or makes
illegal the acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer or the Merger, (3) results in a material delay in or
restricts the ability of the Purchaser, or renders the Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares, or (4)
imposes material limitations on the ability of the Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
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<PAGE>
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders, provided that Parent shall
have used all reasonable efforts to cause any such judgment, order or injunction
to be vacated or lifted;
(b) there shall be any action or proceeding pending by any
domestic or foreign federal or state governmental regulatory or administrative
agency or authority which (1) seeks to prohibit, or impose any material
limitation on, Parent's or the Purchaser's ownership or operation of all or a
material portion of the Company's businesses or assets, (2) seeks to prohibit or
make illegal the acceptance for payment, payment for or purchase of Shares or
the consummation of the Offer or the Merger, or (3) seeks to impose material
limitations on the ability of the Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the right
to vote the Shares purchased by it on all matters properly presented to the
Company's stockholders; provided that the Parent shall have used all reasonable
efforts to cause any such action or proceeding to be dismissed;
(c) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct in any respect,
disregarding for this purpose any standard of materiality contained in any such
representation or warranty, as of the date of consummation of the Offer as
though made on or as of such date or the Company shall have breached or failed
in any material respect to perform or comply with any material obligation,
agreement or covenant required by the Merger Agreement to be performed or
complied with by it (including without limitation if the Company shall have
entered into any definitive agreement or any agreement in principle with any
person with respect to an Takeover Proposal or similar business combination with
the Company), except, in the case of the failure of any representation or
warranty, (i) for changes specifically permitted by the Merger Agreement and
(ii) (A) those representations and warranties that address matters only as of a
particular date which are true and correct as of such date or (B) where the
failure of such representations and warranties to be true and correct, do not,
individually or in the aggregate, have a Company Material Adverse Effect;
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<PAGE>
(d) there shall have occurred a change, event or circumstance
that has had, or would reasonably be expected to have, a Company Material
Adverse Effect;
(e) (1) any general suspension of trading in securities on any
national securities exchange or in the over-the-counter market, (2) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), or (3) any limitation
(whether or not mandatory) by a United States governmental authority or agency
on the extension of credit by banks or other financial institutions;
(f) the Company's Board of Directors shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing; or
(g) the Merger Agreement shall have been terminated in
accordance with its terms;
which in the reasonable judgment of Parent or the Purchaser, in any such case,
and regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment or
payments.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by either of them or may be waived by Parent or the
Purchaser, in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser.
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TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I
THE OFFER AND MERGER
Section 1.01 The Offer................................................................2
Section 1.02 Company Actions..........................................................5
Section 1.03 The Merger...............................................................7
Section 1.04 Effective Time...........................................................8
Section 1.05 Closing..................................................................8
Section 1.06 Directors and Officers of the
Surviving Corporation....................................................9
Section 1.07 Stockholders' Meeting....................................................9
Section 1.08 Merger Without Meeting of
Stockholders............................................................10
ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 Conversion of Capital Stock.............................................11
Section 2.02 Exchange of Certificates................................................12
Section 2.03 Dissenting Shares.......................................................14
Section 2.04 Company Option Plans....................................................15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Corporate Organization..................................................16
Section 3.02 Capitalization..........................................................17
Section 3.03 Authority...............................................................18
Section 3.04 Consents and Approvals; No Violations...................................19
Section 3.05 SEC Reports.............................................................20
Section 3.06 Financial Statements....................................................21
Section 3.07 Broker's Fees...........................................................21
Section 3.08 Absence of Certain Changes or Events....................................22
Section 3.09 Legal Proceedings.......................................................22
Section 3.10 Compliance with Applicable Law..........................................22
Section 3.11 Company Information.....................................................23
Section 3.12 Opinion of Financial Advisor............................................23
Section 3.13 Intellectual Property...................................................23
Section 3.14 Takeover Statutes.......................................................26
Section 3.15 Company Rights Agreement................................................26
Section 3.16 Tax Returns and Tax Payments............................................27
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 4.01 Corporate Organization..................................................28
Section 4.02 Authority...............................................................29
Section 4.03 Consents and Approvals; No Violation....................................29
Section 4.04 Broker's Fees...........................................................30
Section 4.05 Purchaser's Operations..................................................30
Section 4.06 Parent Information......................................................31
ARTICLE V
COVENANTS
Section 5.01 Conduct of Businesses Prior to
the Effective Time......................................................31
Section 5.02 No Solicitation.........................................................33
Section 5.03 Regulatory Matters......................................................36
Section 5.05 Publicity...............................................................36
Section 5.06 Notification of Certain Matters.........................................37
Section 5.07 Access to Information...................................................37
Section 5.08 Further Assurances......................................................38
Section 5.09 Employee Benefit Plans..................................................39
Section 5.10 Indemnification; Directors' and
Officers' Insurance.....................................................40
Section 5.11 Additional Agreements...................................................41
Section 5.12 Actions by Company......................................................41
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Each Party's Obligation
to Effect the Merger....................................................42
ARTICLE VII
TERMINATION
Section 7.01 Termination.............................................................43
Section 7.02 Effect of Termination...................................................45
Section 7.03 Termination Fee; Expenses...............................................46
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ARTICLE VIII
MISCELLANEOUS
Section 8.01 Amendment and Modification..............................................47
Section 8.02 Nonsurvival of Representations and
Warranties..............................................................47
Section 8.03 Notices.................................................................47
Section 8.04 Counterparts............................................................49
Section 8.05 Entire Agreement; Third Party
Beneficiaries...........................................................49
Section 8.06 Severability............................................................49
Section 8.07 Governing Law...........................................................49
Section 8.08 Assignment..............................................................49
Section 8.09 Headings................................................................50
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INDEX OF DEFINED TERMS
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1996 Plan ................................................1, 15-20, 22, 24-28, 35, 39, 40, 46
Acquisition Proposal...............................................................................35
Agreement ..................................................................................1
Certificate of Merger...............................................................................8
Certificates .................................................................................12
Closing ..................................................................................8
Closing Date ..................................................................................9
Code .................................................................................14
Company ..................................................................................1
Company Common Stock................................................................................1
Company Disclosure Schedule........................................................................17
Company Plans .................................................................................39
Company Preferred Stock............................................................................17
Company Releases .................................................................................22
Company Reports .................................................................................20
Company Rights Agreement...........................................................................26
Company Special Committee...........................................................................1
Department of State.................................................................................8
DGCL ..................................................................................5
Dissenting Common Stock............................................................................14
Effective Time ..................................................................................8
Exchange Act ..................................................................................2
Expense Amount .................................................................................46
Governmental Entity................................................................................19
HSR Act .................................................................................19
License Agreements.................................................................................25
Liens .................................................................................18
Managers .................................................................................40
Merger ..................................................................................7
Merger Consideration...............................................................................11
Minimum Condition ................................................................................A-1
Offer ..................................................................................2
Offer Documents ..................................................................................4
Offer Price ..................................................................................2
Offer to Purchase ..................................................................................2
Option .................................................................................15
Parent ..................................................................................1
Parent Special Committee.....................................................................1, 4, 15
Paying Agent .................................................................................12
Proprietary Software...............................................................................24
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Proxy Statement .................................................................................10
Purchaser ..................................................................................1
Purchaser Common Stock.............................................................................11
Schedule 13E-3 ..................................................................................4
Schedule 14D-1 ..................................................................................4
Schedule 14D-9 ..................................................................................6
SEC ..................................................................................3
Securities Act .................................................................................17
Shares ..................................................................................1
Significant Subsidiary.............................................................................17
Software .................................................................................24
Special Meeting ..................................................................................9
Stock Plans .................................................................................15
subsidiary .................................................................................16
Surviving Corporation...............................................................................8
Takeover Statute .................................................................................26
Tax Return .................................................................................28
Taxes .................................................................................27
Trade Secrets .................................................................................24
Transactions ..................................................................................5
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