SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 16, 1999
-----------------------------------
Date of Report (Date of earliest event reported)
THE WARNACO GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-10857 95-4032739
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
90 Park Avenue, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
(212) 661-1300
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a)-(b)
On December 15, 1999, The Warnaco Group, Inc., a Delaware
corporation ("Warnaco"), through A Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Warnaco ("Purchaser"), accepted for purchase
19,526,560 shares of the common stock, par value $0.001 per share (the
"Shares"), of Authentic Fitness Corporation, a Delaware corporation (the
"Company"), that had been validly tendered and not withdrawn (including shares
tendered via guaranteed delivery) pursuant to Purchaser's offer for all of the
outstanding Shares at $20.80 per Share, net to the seller in cash, without
interest (the "Offer"). The Offer was made pursuant to an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of November 15, 1999, by and among
Warnaco, Purchaser and the Company, which provided for, among other things, the
making of the Offer by Purchaser and, following the consummation of the Offer,
the merger of Purchaser with and into the Company (the "Merger"). The Shares
purchased pursuant to the Offer constituted approximately 96.95% of the Shares
then issued and outstanding. The aggregate purchase price for the Shares
purchased pursuant to the Offer was approximately $406 million.
On December 16, 1999, the Merger provided for by the Merger
Agreement became effective. Pursuant to the Merger, Shares which were not
validly tendered pursuant to the Offer and accepted for purchase by Purchaser
(and whose holders had not sought appraisal of their Shares in accordance with
applicable provisions of Delaware law) were converted into the right to receive
$20.80 per Share, net to the seller in cash, upon delivery of appropriate
documentation to the Paying Agent for the Merger. As a result of the Merger,
Parent owns 100% of the outstanding Shares of the Company. The total amount of
funds required to consummate the Offer and the Merger, pay the fees and
expenses of the Offer and the Merger and refinance all the existing revolving
bank debt of the Company, was approximately $599 million (which amount includes
the $406 million required to pay for Shares purchased in the Offer, as set
forth in the preceding paragraph).
The information set forth herein has been previously disclosed
by Warnaco in press releases dated November 15, 1999 and December 16, 1999,
and in a Tender Offer Statement on Schedule 14D-1, filed with the
Securities and Exchange Commission on November 17, 1999 (the "Schedule
14D-1"), and amended on December 16, 1999 (the "Amendment No. 1 to the
Schedule 14D-1"). Additional information concerning the Offer and the
Merger, a brief description of the Company, the nature and amount of
consideration paid for the Shares and the source of funds therefor, the
principle followed in determining the amount of the consideration, the
identity of the persons from whom the Shares were acquired and the nature
of any material relationship between such persons and Warnaco or any of its
affiliates, any director or officer of Warnaco or any associate of such
director or officer and the nature of the Company's business and
Warnaco's plans for the Company may be found in the Schedule 14D-1 and
Amendment No. 1 to the Schedule 14D-1, copies of which are attached hereto
as Exhibits 2.1 and 2.2, respectively, and which are incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) Financial Statements of Business Acquired
and Pro Forma Financial Information
The financial statements and pro forma financial
information required by this item shall be filed as soon as practicable by
amendment to this Form 8-K, but in no event later than February 29, 2000.
(c) Exhibits
2.1 Tender Offer Statement on Schedule 14D-1, dated November 17, 1999.
2.2 Amendment No. 1 to Schedule 14D-1 and Schedule 13D, dated
December 16, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: January 18, 2000
THE WARNACO GROUP, INC.
By:/s/ STANLEY P. SILVERSTEIN
-------------------------------
Name: Stanley P. Silverstein
Title: Vice President and
General Counsel
EXHIBIT 2.1
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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)
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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
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CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
$520,203,258 $104,041
* 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.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
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).
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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.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(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.
(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.
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.
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.
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.
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
EXHIBIT INDEX
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.
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.................. 'r'
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.
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 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
TABLE OF CONTENTS
PAGE
----
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
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 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 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.
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.
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 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:
(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;
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.
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:
TRANSACTION VALUE
AS A MULTIPLE OF: LOW HIGH MEDIAN MEAN
- ----------------- --- ---- ------ ----
LTM Revenues.......................... 0.36x 3.17x 0.68x 0.96x
LTM EBITDA............................ 4.4x 15.7x 8.1x 8.4x
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.
ESTIMATED PER SHARE
AUTHENTIC FITNESS
METHODOLOGY VALUE RANGE
- ----------- -----------
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
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 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
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:
YEAR ENDING YEAR ENDING YEAR ENDING
JULY 1, 2000 JULY 7, 2001 JULY 6, 2002
(ESTIMATE) (ESTIMATE) (ESTIMATE)
---------- ---------- ----------
(IN THOUSANDS)
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
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:
YEAR ENDING YEAR ENDING YEAR ENDING
JULY 1, 2000 JULY 7, 2001 JULY 6, 2002
(ESTIMATE) (ESTIMATE) (ESTIMATE)
---------- ---------- ----------
(IN THOUSANDS)
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
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 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.
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.
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.
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.
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 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.
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
- ------------
*'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.
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 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.
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, 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.
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;
(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
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.
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 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 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 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 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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------------------ ---------------- ----------------
Directors and Executive Officers(a)
<S> <C> <C>
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
persons).................................................. 5,388,521 23.0%
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 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
- ---- --------- -------
Directors and Executive Officers(a)
<S> <C> <C>
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 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.
EXPENSES TO BE
PAID BY
PURCHASER
AND ITS AFFILIATES AMOUNT
- ------------------ ------
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
----------
----------
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 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.
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.
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 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 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
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
---- ---
Fiscal Year Ended July 4, 1998
<S> <C> <C>
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
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 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.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------
JULY 4, JULY 3,
1998 1999
---- ----
Statement of Operations Data:
<S> <C> <C>
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:
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>
- --------------------
(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,
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
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
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 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.
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 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., 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 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
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
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
The National Center on Addiction National Center on Addiction and
& Substance Abuse Substance Abuse at Columbia
Columbia University University. Director of Authentic
152 West 57th Street Fitness, Automatic Data Processing,
12th Floor Inc., HealthPlan Services, Inc.,
New York, NY 10019 True North Communications, Inc. and
Kmart Corporation. Trustee of New
York University and the Twentieth
Century Fund and a 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.
Donald G. Drapkin .................... Vice Chairman of the Board of
MacAndrews & Forbes MacAndrews & Forbes Holdings, Inc.
Holdings, Inc. and various of its affiliates since
35 East 62nd Street 1987. Mr. Drapkin was a partner in
New York, NY 10021 the law firm of Skadden, Arps,
Slate, Meagher & Flom LLP for more
than five years 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,
Skadden, Arps, Slate, Meagher & Flom Meagher & Flom LLP, a law firm.
LLP Trustee of the Petrie Stores
919 Third Avenue Liquidating Trust.
New York, New York 10022
Andrew G. Galef ...................... Served as Chairman of the Board of
The Spectrum Group, Inc. Directors until August 1991.
11050 Santa Monica Blvd. Chairman and a principal of The
Los Angeles, CA 90025 Spectrum Group, Inc. since its
incorporation in 1978. Chairman of
the Board of MagneTek, Inc. since
July 1984. Director of Petco Animal
Supplies since 1988.
NAME AND ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT;
5-YEAR EMPLOYMENT HISTORY
---------------- ------------------------------------
Walter F. Loeb ....................... President of Loeb Associates, Inc.
Loeb Associates Inc. and Publisher of the Loeb Retail
500 7th Avenue Letter. Consultant with the retail
New York, NY 10018 industry since February 1990.
Trustee of Federal Realty
Investment Trust, a 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
University of Missouri Missouri since August 1997; from
321 University Hall 1991 to 1997, President of the
Columbia, Missouri 65211-3020 University of Arizona.
Stewart A. Resnick ................... Chief Executive Officer and
The Franklin Mint Chairman of Franklin Mint
Franklin Center, PA 19091 Corporation since 1985. Chairman of
the Board of Roll 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.
B. EXECUTIVE OFFICERS
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS 5-YEAR EMPLOYMENT HISTORY
---------------- -----------------------------------
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.
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
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS 5-YEAR EMPLOYMENT HISTORY
---------------- -------------------------------------
Linda J. Wachner...................... See above.
William S. Finkelstein................ See above.
Stanley P. Silverstein................ See above.
B. EXECUTIVE OFFICERS
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS 5-YEAR EMPLOYMENT HISTORY
---------------- -----------------------------------
Linda J. Wachner...................... See above.
William S. Finkelstein................ See above.
Stanley P. Silverstein................ See above.
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.
A. DIRECTORS
Stanley S. Arkin Director of Authentic Fitness since
Arkin Shaffer & Kaplan LLP October 1995. Senior Partner of
1370 Avenue of the Americas Arkin, Schaffer & Kaplan LLP, a law
New York, New York 10019 firm. Fellow of the American
College of Trial Lawyers and past
Chairman 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
Buchalter Nemer Fields & Younger May 1990. Of counsel to Buchalter,
601 S. Figueroa St., Suite 2400 Nemer, Fields and Younger, a law
Los Angeles, CA 90017 firm. Past Chairman of the Board
and Chief Executive Officer of the
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
The National Center on Addiction November 1993. Chairman and
& Substance Abuse President of The National Center on
Columbia University Addiction and Substance Abuse at
152 West 57th Street Columbia University. Director of
12th Floor The Warnaco Group, Inc., Automatic
New York, NY 10019 Data Processing, Inc., HealthPlan
Services, Inc. and Kmart
Corporation. Trustee of New York
University and the Twentieth
Century Fund and a 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.
B. EXECUTIVE OFFICERS
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND ADDRESS 5-YEAR EMPLOYMENT HISTORY
---------------- -----------------------------------
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.
[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 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.
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 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.
(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 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.
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>
<CAPTION>
<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
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>
<CAPTION>
<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.
[ ] 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 ____________________________________________
- -----------------------------------------------------------------------------
DESCRIPTION OF SHARES SURRENDERED
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
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.
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 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.
[ ] 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)
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:_____________________________________________________
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.
(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.
(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 (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>
<CAPTION>
T
<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>
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
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>
<CAPTION>
<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.
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>
<CAPTION>
<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.
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;
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.
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.
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.
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:*
- ------------------------------ Shares
Dated:-------------------------, 1999 -------------------------------
-------------------------------
SIGNATURE(S)
-------------------------------
PRINT NAME(S)
-------------------------------
ADDRESS(S)
-------------------------------
AREA CODE AND TELEPHONE NUMBER
-------------------------------
TAX ID OR SOCIAL SECURITY NUMBER
- ------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
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.
- --------------------------------------------------
Give the
For this type of account: SOCIAL
SECURITY
number of --
- -------------------------------------------------
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
- --------------------------------------------------
Give the
For this type of account: EMPLOYER
IDENTIFICATION
number of --
- -------------------------------------------------
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
- ----------------------------------------------------------------------------
(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.
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.
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
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.
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
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
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
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
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
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.
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:
<TABLE>
<CAPTION>
=============================================================================================
Rating Debt Base Rate Eurodollar
Level Rating Advances Rate Advances
- ---------------------------------------------------------------------------------------------
<S> <C> <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:
=======================================================================
Rating Debt Applicable
Level Rating Percentage
- -----------------------------------------------------------------------
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
=======================================================================
"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.
"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.
"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,
(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 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.
"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.
"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.
"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).
"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.
"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).
"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
(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.
"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
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 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;
(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
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.
"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").
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
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.
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,
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 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
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 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 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
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
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.
(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.
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 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
(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
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,
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 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
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 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 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 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).
(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 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, 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
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
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;
(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.
(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
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 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 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 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,
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
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 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 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 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 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, 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.
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
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 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 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.
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
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
<TABLE>
<CAPTION>
SCHEDULE I
WARNACO INC.
COMMITMENTS AND
APPLICABLE LENDING OFFICES
Lending Domestic Eurodollar
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:
</TABLE>
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. $50 Million Credit Agreement between Authentic Fitness Products Inc., as
Borrower, and The Bank of Nova Scotia, as agent.
SCHEDULE 4.01(B)
WARNACO INC.
SUBSIDIARIES
[TO COME]
SCHEDULE 5.02(D)
WARNACO INC.
ASSETS HELD FOR SALE
1. Assets related to the C.F. Hathaway division
2. Knitwear division assets including Aguas Buenos, Puerto Rico
3. 80 Park Avenue, Apartment 15J, New York, NY 10016
4. Dothan, Alabama plant assets
5. Honduras Joint Venture - Invasa
6. 838,235 shares of common stock of Interworld Corporation
7. Certain other internet-related investments
8. Investment in ARIS Industries
EXHIBIT A
WARNACO INC.
FORM OF PROMISSORY NOTE
U.S.$_______________ 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:
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
(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:
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 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.
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.
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".
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.
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.
[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:
AGREEMENT AND PLAN OF MERGER
by and among
THE WARNACO GROUP, INC.
A ACQUISITION CORP.
and
AUTHENTIC FITNESS CORPORATION
November 15, 1999
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
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 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 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 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.
(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 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 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 & 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 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
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.
(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 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.
(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 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 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 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
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 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.
(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 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 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,
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 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 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.
(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.
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,
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 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 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.
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 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 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, 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 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 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 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 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
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).
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 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.
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.
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 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 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).
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 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
(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 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 be followed by "without
limitation" whether or not they are in fact followed by such words or words
of like import.
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
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, 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;
(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.
TABLE OF CONTENTS
Page
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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
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
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
INDEX OF DEFINED TERMS
DEFINED TERM Page
- ------------ ----
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
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
EXHIBIT 2.2
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
(FINAL AMENDMENT)
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
AUTHENTIC FITNESS CORPORATION
(NAME OF SUBJECT COMPANY)
A ACQUISITION CORP.
THE WARNACO GROUP, INC.
(Bidders)
----------------
COMMON STOCK, PAR VALUE $.001 PER SHARE
(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 10016
TELEPHONE: (212) 287-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
ALAN C. MYERS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
DECEMBER 16, 1999
(DATE OF EVENT WHICH REQUIRES FILING OF STATEMENT ON SCHEDULE 13D)
==============================================================================
CALCULATION OF FILING FEE
Transaction Valuation* $520,203,258
Amount of Filing Fee $104,041
- ----------
* 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"). The filing fee was determined by multiplying (a) the
sum of 20,137,661 shares of Authentic Fitness common stock and 4,872,111
options to purchase shares of Authentic Fitness common stock and (b) the
merger consideration of $20.80 per share in cash. In accordance with Rule
0-11 under the Securities Exchange Act of 1934, as amended, the filing
fee was determined by multiplying the amount calculated pursuant to the
preceding sentence by 1/50 of one percent.
|X| 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.
Amount Previously Paid: $104,041
Form or Registration No.: Schedule 14D-1
Filing Party: The Warnaco Group, Inc.
Date Filed: November 17, 1999
CUSIP No. 052661105
- ------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
THE WARNACO GROUP, INC.
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEM 2(e) OR 2(f)
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORIGIN
Delaware
- ------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,526,560
- ------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES |_|
CERTAIN SHARES
- ------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
96.95%
- ------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- ------------------------------------------------------------------------------
CUSIP No. 052661105
- ------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
A ACQUISITION CORP.
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED |_|
PURSUANT TO ITEM 2(e) OR 2(f)
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORIGIN
Delaware
- ------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,526,560
- ------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES |_|
CERTAIN SHARES
- ------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
96.95%
- ------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- ------------------------------------------------------------------------------
This Amendment No. 1 to the Tender Offer Statement on Schedule 14D-1
amends and supplements the Tender Offer Statement on Schedule 14D-1
originally filed on November 17, 1999 (the "Schedule 14D-1") by The Warnaco
Group, Inc., a Delaware corporation ("Parent"), and A Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Purchaser"),
with respect to Purchaser's offer to purchase all of the outstanding shares
of common stock, par value $.001 per share (the "Shares"), of Authentic
Fitness Corporation, a Delaware corporation (the "Company"), at $20.80 per
Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated
November 17, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer"), which were filed as Exhibits (a)(1) and (a)(2),
respectively, to the Schedule 14D- 1. The Schedule 14D-1, as amended by
this Amendment No. 1, also constitutes a Statement on Schedule 13D with
respect to the acquisition by Purchaser of beneficial ownership of the
Shares pursuant to the Offer. Unless otherwise defined herein, all
capitalized terms used herein shall have the respective meanings given to
such terms in the Schedule 14D-1.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Item 6 is hereby amended to add the following:
On December 16, 1999, at 2:33 p.m., Eastern Standard Time (the
"Effective Time"), pursuant to the Merger Agreement (as defined in the
Offer to Purchase), the merger of Purchaser with and into the Company was
consummated. As a result of the Merger, as of the Effective Time, (a) all
issued and outstanding shares of the Common Stock of the Company (other
than (i) shares of Common Stock owned of record by Parent or Purchaser,
(ii) Dissenting Shares (as defined in the Merger Agreement) or (iii) shares
of Common Stock held in the treasury of the Company) were automatically
converted into the right to receive $20.80 per share in cash, and (b) each
issued and outstanding share of Purchaser was converted into one validly
issued, fully paid and nonassessable share of Common Stock of the Company.
Parent, the holder of all One Hundred (1,000) issued and outstanding shares
of Common Stock of Purchaser, thus became the owner of One Hundred (1,000)
shares of Common Stock of the Company, representing 100% of the issued and
outstanding shares of Common Stock of the Company.
ITEM 10. ADDITIONAL INFORMATION.
Item 10(f) is hereby amended and supplemented to include the
following information:
On December 15, 1999, A Acquisition Corp. accepted for purchase and
payment, pursuant to its tender offer for all of the outstanding shares of
the common stock of Authentic Fitness Corporation at $20.80 per share net
to the seller in cash, all shares of Authentic Fitness Corporation common
stock which were validly tendered and not withdrawn as of the expiration of
its tender offer at 12:00 midnight, New York City time, on Wednesday,
December 15, 1999. A Acquisition Corp. believes that approximately
19,526,560 Authentic Fitness shares, or 96.95% of the total issued and
outstanding Authentic Fitness Corporation shares, were validly tendered
pursuant to the tender offer and not withdrawn.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
Item 11 is hereby amended to add the following:
(a)(8) Press Release of Parent dated December 16, 1999.
(a)(9) Press Release of Parent dated December 16, 1999.
(c)(2) Joint Filing Agreement, dated as of December 16, 1999, among A
Acquisition Corp., the Warnaco Group, Inc. and Authentic Fitness
Corporation.
SIGNATURES
After due inquiry, and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
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. MCHUGH
---------------------------------------
Name: Michael P. McHugh
Title: Senior Vice President and Chief
Financial Officer
Date: December 16, 1999
INDEX TO EXHIBITS
Exhibit
Number Exhibit
(a)(8) Press Release of Parent dated December 16, 1999.
(a)(9) Press Release of Parent dated December 16, 1999.
(c)(2) Joint Filing Agreement, dated as of December 16, 1999, among
A Acquisition Corp., the Warnaco Group, Inc. and Authentic
Fitness Corporation.
Exhibit (a)(8)
CONTACT: Linda J. Wachner Lawrence A. Rand
212-370-8204 Wendi Kopsick
Adam Weiner
William S. Finkelstein Kekst & Company
212-370-8287 212-521-4800
FOR IMMEDIATE RELEASE
THE WARNACO GROUP, INC. COMPLETES TENDER OFFER FOR
AUTHENTIC FITNESS COMMON STOCK
NEW YORK, NY AND DECEMBER 16, 1999-The Warnaco Group, Inc.
(NYSE: WAC) announced today that its wholly owned subsidiary, A Acquisition
Corp., has accepted for purchase and payment, pursuant to its tender offer
for all of the outstanding shares of the common stock of Authentic Fitness
Corporation (NYSE: ASM) at $20.80 per share, net to the seller in cash, all
shares of Authentic Fitness common stock which were validly tendered and
not withdrawn as of the expiration of its tender offer at 12:00 midnight,
New York City time, on December 15, 1999. Warnaco stated that approximately
19,526,560 Authentic Fitness shares, or 96.95% of the total, were validly
tendered pursuant to the tender offer and not withdrawn, including 284,573
shares tendered pursuant to notices of guaranteed delivery.
The tender offer will be followed by a merger of A Acquisition
Corp. with and into Authentic Fitness Corporation in which those Authentic
Fitness Corporation stockholders who did not tender, and who do not seek
appraisal, of their shares will have their shares converted into $20.80 per
share net to each stockholder in cash. Warnaco currently expects to
complete the merger today.
Questions and requests for assistance with respect to the offer
may be directed to MacKenzie Partners, Inc., the Information Agent for the
offer, at (212) 929-5500 (call toll free) or (800) 322-2885, or to J.P.
Morgan & Co., the Dealer Manager for the offer, at (877) 576-0605 (call
toll free).
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(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.
Exhibit (a)(9)
CONTACT: Linda J. Wachner Lawrence A. Rand
212-370-8204 Wendi Kopsick
Adam Weiner
William S. Finkelstein Kekst & Company
212-370-8287 212-521-4800
FOR IMMEDIATE RELEASE
WARNACO GROUP COMPLETES AUTHENTIC FITNESS ACQUISITION
NEW YORK, NY, DECEMBER 16, 1999- The Warnaco Group, Inc. (NYSE: WAC)
announced today that it has completed its acquisition of Authentic Fitness
Corporation by merging a wholly owned subsidiary of Warnaco with Authentic
Fitness. As a result of the merger, Authentic Fitness has become a wholly
owned Warnaco subsidiary. Earlier today, Warnaco announced that its
subsidiary had acquired approximately 96.95% of the Authentic Fitness
shares pursuant to a tender offer at $20.80 per Authentic Fitness share
that expired yesterday at midnight.
As a result of the merger, any Authentic Fitness shares (other than
shares held by persons exercising dissenters rights) not accepted for
payment in connection with the tender offer will be converted into the
right to receive $20.80 per share in cash, upon presentation to The Bank of
New York of appropriate documentation. Within the next few days, The Bank
of New York will mail to non-tendering stockholders materials to be used to
exchange Authentic Fitness stock certificates for such payment.
Questions and requests for assistance with respect to the offer may
be directed to MacKenzie Partners, Inc., the Information Agent for the
offer, at (212) 929-5500 (call toll free) or (800) 322-2885, or to J.P.
Morgan & Co., the Dealer Manager for the offer, at (877) 576-0605 (call
toll free).
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(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.
Exhibit (c)(2)
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange
Act of 1934, as amended, the undersigned hereby agree to the joint filing
with each of A Acquisition Corp., a Delaware corporation, The Warnaco
Group, Inc., a Delaware corporation, and Authentic Fitness Corporation, a
Delaware corporation, on behalf of each of them of a statement on Schedule
13D (including amendments thereto) with respect to the Common Stock, par
value $.001 per share, of Authentic Fitness Corporation, and that this
Agreement be included as an Exhibit to such joint filing. This Agreement
may be executed in any number of counterparts all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this
Agreement this 16th day of December, 1999.
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. MCHUGH
----------------------------------------
Name: Michael P. McHugh
Title: Senior Vice President and Chief
Financial Officer
Date: December 16, 1999
