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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998
REGISTRATION NUMBER 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE MEN'S WEARHOUSE, INC.
(Exact name of registrant as specified in its charter)
TEXAS
(State or other jurisdiction of incorporation or organization)
74-1790172
(I.R.S. Employer Identification No.)
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
GARY CKODRE
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
MICHAEL W. CONLON
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010
(713) 651-5427
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common stock, $.01 par value........... 2,750,000 $27.25 $74,937,500 $20,833
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933 and based upon the
average of the high and low sale price of Common Stock as reported on the
Nasdaq National Market on December 23, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 30, 1998
PROSPECTUS
2,750,000 SHARES
THE MENS WEARHOUSE LOGO
COMMON STOCK
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This prospectus relates to the offer and sale of up to 2,750,000 shares of
The Men's Wearhouse, Inc. common stock by some of our future shareholders. Such
shares of common stock are not currently outstanding, but may be issued in the
future upon exchange of the Exchangeable Shares of Moores Retail Group Inc. by
the holders of the Exchangeable Shares. Moores Retail Group Inc. will issue the
Exchangeable Shares to its shareholders when our subsidiary, Golden Moores
Company, acquires the outstanding common stock of Moores Retail Group Inc. We
will not receive any proceeds from this sale.
Our common stock is quoted on the Nasdaq National Market under the symbol
"SUIT". The closing price on December 29, 1998, as reflected on the Nasdaq
National Market was $32.00 per share.
Our principal executive office is located at 5803 Glenmont Drive, Houston,
Texas 77081 and the telephone number is (713) 592-7200.
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FOR INFORMATION CONCERNING CERTAIN RISKS RELATING TO AN INVESTMENT IN THE MEN'S
WEARHOUSE, INC. COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
December , 1998
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference rooms located
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the SEC's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New
York, New York 10048. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's website at "http://www.sec.gov".
Our common stock is quoted on the Nasdaq National Market ("Nasdaq"). Our
annual reports, quarterly and special reports, proxy statements and other
information may also be inspected at the offices of Nasdaq, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings (File
No. 000-20036) we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 prior to the termination of the
offering:
- Annual Report on Form 10-K for the year ended January 31, 1998, as
amended by Form 10-K/A filed May 6, 1998;
- Quarterly Reports on Form 10-Q for the quarters ended May 2, 1998,
August 1, 1998 and October 31, 1998;
- Definitive Proxy Statement for the Annual Meeting held June 24, 1998
which was filed with the SEC on May 19, 1998 as part of Schedule 14A;
and
- The description of The Men's Wearhouse, Inc. common stock contained in
our Form 8-A dated April 3, 1993.
You, and any beneficial owner, may obtain a free copy of these filings by
writing or telephoning our Investor Relations Department at the following
address:
5803 Glenmont Drive
Houston, Texas 77081
Telephone (713) 592-7200
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide information other than that
provided in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
The Men's Wearhouse(R) is a registered trademark and service mark of the
Company.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because this is only a summary, it does not contain all the information that may
be important to you. Before deciding to invest in shares of our common stock you
should read the entire prospectus carefully, especially the "Risk Factors"
section and the financial statements and the notes to those statements. For
purposes of this document, all references to dollar amounts are expressed in
U.S. dollars unless otherwise specified.
THE COMPANY
The Company is one of the largest off-price specialty retailers of men's
tailored business clothing in the United States. At November 28, 1998, the
Company operated 418 stores in 40 states and the District of Columbia, with
approximately 33% of its locations in Texas and California.
The Company operates its stores in the following two formats:
MEN'S WEARHOUSE
We target middle and upper middle income men by offering quality
merchandise at everyday low prices. In addition to value we provide a superior
level of customer service. Men's Wearhouse stores offer a broad selection of
designer, brand name and private label merchandise at prices we believe are
typically 20% to 30% below the regular prices found at traditional department
and specialty stores. The prices of our suits generally range from $199 to $599.
We consider our merchandise to be conservative. Our merchandise includes suits,
sport coats, slacks, business casual, sportswear, outerwear, dress shirts, shoes
and accessories. We concentrate on tailored business attire that is
characterized by infrequent and more predictable fashion changes. Therefore, we
believe we are not as exposed to trends typical of more fashion-forward apparel
retailers, where significant markdowns and promotional pricing are more common.
At November 28, 1998, the Company operated 400 Men's Wearhouse stores in 40
states and the District of Columbia. These stores are referred to as "Men's
Wearhouse stores" or "traditional stores".
In this document, "Men's Wearhouse" means The Men's Wearhouse, Inc. and its
wholly owned subsidiaries, excluding Value Priced Clothing, Inc. and its wholly
owned subsidiary.
VALUE PRICED CLOTHING
We launched Value Priced Clothing in late 1996 to address the market for a
more price sensitive customer. We believe Value Priced Clothing's more basic,
value-oriented approach appeals to certain customers in the men's tailored
clothing market. Value Priced Clothing offers a selection of brand names and
private label merchandise that we believe to be typically 30% to 50% below the
regular prices of traditional department stores and specialty stores. The prices
of suits at these stores generally range from $99 to $199. Value Priced Clothing
operates stores under the names "C&R", "SuitMax" (formerly NAL store format) and
"Suit Warehouse". At November 28, 1998, the Company operated 18 VPC stores in
five states.
We are in the process of closing the C&R stores and changing some of the
former C&R stores into Men's Wearhouse stores. See "Business -- VPC Operations"
on p. 30.
In this document, Value Priced Clothing and its wholly owned subsidiary are
collectively referred to as "VPC". The stores operated by VPC are referred to in
this document as "VPC stores".
EXPANSION STRATEGY
The Company's expansion strategy includes:
- opening additional Men's Wearhouse stores in new and existing markets,
- increasing the size of certain existing Men's Wearhouse stores,
- increasing productivity and profitability in our existing markets,
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- developing the VPC store format in new and existing markets,
- identifying strategic acquisition opportunities, and
- testing expanded merchandise categories in selected stores.
In general terms, we consider a geographic area served by a common group of
television stations as a single market.
On a limited basis, we have acquired store locations, inventories, customer
lists, trademarks and tradenames from existing menswear retailers in both new
and existing markets. We may do so again in the future. At present, we plan to
open approximately 45 new Men's Wearhouse stores and four new SuitMax stores
during 1998, of which 32 Men's Wearhouse stores and two SuitMax stores were open
as of November 28, 1998. We also plan to open an additional 40 to 45 new Men's
Wearhouse stores and 5 to 10 new SuitMax stores in 1999, to close approximately
five stores in 1999, to remodel and relocate existing stores and to continue
expansion in subsequent years. We believe that our ability to increase the
number of traditional stores in the United States above 500 will be limited.
However, we believe that additional growth opportunities exist through
selectively expanding existing stores, improving and diversifying the
merchandise mix, relocating stores and expanding our VPC operations.
We have focused on acquiring and growing our VPC store format. We completed
three acquisitions between January 1997 and February 1998. These acquisitions
included:
- the January 1997 acquisition of C&R Clothiers ("C&R"), a privately held
retailer of 17 men's tailored clothing stores in Southern California,
- the May 1997 acquisition of Walter Pye's Men's Shops, Inc. ("NAL") which
operated four stores in the greater Houston area and one in each of San
Antonio, Texas and New Orleans, Louisiana, and
- the February 1998 acquisition of T.H.C., Inc. ("Suit Warehouse")
operating four stores in metropolitan Detroit.
We are integrating these acquired operations to create a similar store
format and focus. In the process, we have closed most of the C&R stores. We
expect to utilize a common format under the name SuitMax to build brand
awareness with customers. To achieve this format and focus, we intend to:
- close the remaining C&R stores in early 1999,
- open new SuitMax stores, and
- consider further acquisition opportunities.
As a result of the consolidation of the men's tailored clothing industry,
the Company has been and expects to continue to be presented with significant
opportunities for growth within our industry. Such opportunities may include,
but are not limited to:
- increased direct sourcing of merchandise, including possible ventures
with apparel manufacturers,
- acquisitions of menswear retailers,
- the acquisition or licensing of designer or nationally recognized brand
labels,
- expansion and remodeling of certain existing stores,
- testing of new product categories, and
- enhancing our website to allow the sale of merchandise over the internet.
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ACQUISITION OF MOORES
Men's Wearhouse, through our wholly owned subsidiary Golden Moores Company,
is acquiring Moores Retail Group Inc., a New Brunswick, Canada corporation
("Moores"). Moores operates 107 men's tailored clothing stores in Canada and
eight stores in the United States. Moores also operates a manufacturing facility
in Montreal, Canada which manufactures nearly all the tailored clothing offered
for sale in the Moores stores. Moores is a holding company and conducts its
operations through three subsidiaries.
Like Men's Wearhouse, Moores focuses on conservative, basic tailored
apparel. This limits exposure to changes in fashion trends and the need for
significant markdowns. Approximately 60% of Moores' merchandise consists of
men's tailored clothing. The remaining 40% includes dress shirts, sportswear,
outerwear and accessories. The prices of suits generally range from Can $149 to
Can $299 in Moores Canadian stores and US $169 to US $299 in Moores U.S. stores.
To acquire Moores, we may issue up to 2,750,000 shares of Men's Wearhouse
common stock. The exact number is uncertain because it will depend on the market
price for the common stock of Men's Wearhouse at the time of closing the
acquisition. If the closing market price of the Men's Wearhouse common stock
averages $20.00 or more for the ten trading day period ending three trading days
prior to the closing, we will issue a total of 2,500,000 shares. If the average
price is between $20.00 and $18.18, we will issue the number of shares that,
when multiplied by the average price, equals $50,000,000 in market value. We are
not required to issue more than 2,750,000 shares. If the market value of
2,750,000 shares is less than $50,000,000, Moores may terminate the acquisition.
The manner in which we will issue our common stock is unusual because of
Canadian tax law considerations. This is explained under the heading
"Acquisition of Moores" on p. 13.
In connection with the closing of this transaction, Moores' existing
indebtedness of approximately $60 million must be repaid. We have the resources
under our existing credit facility to borrow sufficient funds to loan to Moores
to allow Moores to repay this debt. However, we may also enter into an
additional credit facility to fund the repayment of Moores' debt. This is
further explained under the heading "Financing and Capital Resources" on p. 25.
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION OF
THE MEN'S WEARHOUSE, INC.
The following summary consolidated financial information is derived from
and should be read in conjunction with the Company's consolidated financial
information incorporated by reference herein. References herein to years are to
the Company's 52- or 53-week fiscal year, which ends on the Saturday nearest
January 31 in the following calendar year. For example, references to "1997"
mean the fiscal year ended January 31, 1998. All fiscal years for which
financial information is included in this Prospectus had 52 weeks, except for
1995 which had 53 weeks. References herein to "nine months" are to the 39-week
periods ended November 1, 1997 and October 31, 1998.
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YEAR NINE MONTHS
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1993 1994 1995 1996 1997 1997 1998
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(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AND PER SQUARE FOOT DATA)
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STATEMENT OF EARNINGS INFORMATION:
Net sales............................... $240,394 $317,127 $406,343 $483,547 $631,110 $410,867 $504,450
Gross margin............................ 91,766 121,878 157,615 188,366 242,593 154,763 193,018
Operating income........................ 15,818 22,375 30,606 38,134 51,530 27,255 39,108
Net earnings before extraordinary
item.................................. 8,739 12,108 16,508 21,143 28,883 14,941 21,992
Basic earnings per share of common
stock(1).............................. $ 0.33 $ 0.43 $ 0.55 $ 0.67 $ 0.89 $ 0.47 $ 0.66
Diluted earnings per share of common
stock(1).............................. $ 0.32 $ 0.42 $ 0.55 $ 0.67 $ 0.87 $ 0.47 $ 0.64
Weighted average shares
outstanding(1)........................ 26,652 28,216 29,821 31,354 32,343 32,089 33,517
Weighted average shares outstanding plus
dilutive potential common shares
(1)................................... 27,207 28,744 30,339 34,101 35,384 35,123 36,261
OPERATING INFORMATION:
Percentage increase in comparable store
sales(2).............................. 17.2% 8.4% 6.8% 3.9% 8.5% 7.1% 11.0%
Average square footage -- all
stores(3)............................. 4,539 4,553 4,687 4,863 5,097 5,058 5,160
Average sales per square foot of selling
space(4).............................. $ 404 $ 406 $ 416 $ 413 $ 420 $ 281 $ 300
Number of stores:
Open at beginning of the period....... 143 183 231 278 345 345 396
Opened................................ 40 48 48 50 50 36 30
Acquired.............................. -- -- -- 17 6 6 4
Closed................................ -- -- (1) -- (5) (4) (16)
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Open at the end of the period......... 183 231 278 345 396 383 414
Capital expenditures.................... $ 11,461 $ 23,736 $ 22,538 $ 26,222 $ 27,380 $ 19,288 $ 29,066
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JAN. 29, JAN. 29, JAN. 28, FEB. 1, JAN. 31, OCT. 31,
1994 1995 1996 1997 1998 1998
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BALANCE SHEET INFORMATION:
Working capital................................... $ 42,689 $ 68,078 $ 88,798 $136,837 $182,561 $197,830
Total assets...................................... 112,176 160,494 204,105 295,478 379,415 415,838
Long-term debt and capital leases(5).............. 10,790 24,575 4,250 57,500 57,500 32,750
Shareholders' equity.............................. 57,867 84,944 136,961 159,129 220,048 279,108
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(1) All periods have been adjusted to give effect to a 50% stock dividend
effected on August 6, 1993, a 50% stock dividend effected on November 15,
1995, and a 50% stock dividend effected on June 2, 1998. Basic and diluted
earnings per share are based on net earnings before extraordinary item.
(2) Comparable store sales data is calculated by excluding the net sales of a
store for any month of one period if the store was not open throughout the
same month of the prior period.
(3) Average square footage for all stores is calculated by dividing the total
square footage for all stores open at the end of the period by the number of
stores open at the end of such period.
(4) Average sales per square foot of selling space is calculated by dividing
total selling square footage for all stores open the entire period into
total sales for those stores.
(5) February 1, 1997 and January 31, 1998 balances represent the 5 1/4%
Convertible Subordinated Notes Due 2003. See "Financing and Capital
Resources" for a discussion of the redemption of the Notes.
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RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus in evaluating whether to invest in any of our
shares.
PROPOSED ACQUISITION
After we acquire Moores, our management must focus its attention on
combining the operations of Moores with ours. This will temporarily divert some
of our management's attention from normal day-to-day business. Also, combining
personnel with different business backgrounds and locations and combining
companies with two different corporate cultures could be difficult. We have not
previously had any operations outside of the United States. We cannot assure you
that we will be able to integrate the two companies on a timely or profitable
basis. In addition, we have not owned and operated a manufacturing facility in
the past. While we believe that Moores' employees are well qualified to operate
the manufacturing facility, we cannot assure you that key employees will
continue to work for us.
Under the terms of the Combination Agreement, Moores has made certain
representations and warranties with respect to itself and its business. In the
event of a material breach, as defined in the Combination Agreement, of those
representations and warranties, we may terminate the Combination Agreement.
However, these representations and warranties do not survive the closing of the
combination arrangement and we will not have a right to bring any action against
the shareholders of Moores after the closing if the representations and
warranties are thereafter determined to be inaccurate.
EXCHANGE RATE FLUCTUATIONS
Moores conducts most of its business in Canadian dollars. The exchange rate
between Canadian dollars and U.S. dollars has fluctuated over the last ten
years. If the value of the Canadian dollar against the U.S. dollar weakens, then
the revenues and earnings of our Canadian operations will be reduced when they
are translated to U.S. dollars. Also, the value of our Canadian assets in U.S.
dollars will decline.
Both the Company and Moores use direct sourcing programs for inventory
purchases. Some of these transactions are denominated in foreign currencies,
primarily the Italian lira, which create currency exchange risks. Forward
exchange contracts are used to protect against these risks, but we cannot assure
you that currency exchange losses will not occur.
MANUFACTURING RISKS
Moores, through its wholly owned subsidiary Golden Brand Clothing (Canada)
Ltd. ("Golden Brand"), manufactures nearly all of the tailored clothing offered
for sale by Moores stores. A large part of Moores' growth and profitability has
resulted from the ability of Golden Brand to manufacture high quality clothes in
an efficient and timely manner. A long interruption in Golden Brand's ability to
manufacture tailored clothing could have a material negative impact on the
Moores operations.
There are a variety of risks associated with the manufacturing business
including:
- labor,
- machinery,
- maintenance,
- product scheduling and delivery systems, and
- obtaining raw materials on a timely basis.
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We could experience shortages in men's tailored clothing to sell in our
stores if Golden Brand fails to meet its production goals for any reasons,
including:
- labor disputes,
- delays in production, or
- machinery breakdowns or repair problems.
Golden Brand's principal raw material is fabric. Many of Golden Brand's
suppliers have supplied fabric to Golden Brand for more than ten years. If one
of the current suppliers is unable or unwilling to provide fabric, we believe
that there are many other suppliers of fabric who could supply fabric to Golden
Brand at comparable cost. As is normal in the industry, most of Golden Brand's
supply contracts are seasonal. There could be a negative effect on the ability
of Golden Brand to meet its production goals if any of the following occurred:
- an unexpected loss of a supplier of fabric,
- a long interruption in shipments from any fabric supplier,
- an unexpected loss of any of the suppliers of raw materials other than
fabric or other finished goods, or
- a long interruption in the shipment of raw materials or finished goods.
The negative effect would be particularly noticeable with regard to Golden
Brand's seasonal or time-sensitive products.
LABOR NEGOTIATIONS
The work force of Golden Brand's manufacturing facility is unionized. On
December 23, 1998, the membership of the Union ratified a new contract that will
run until November 30, 2001. We cannot predict the effect, if any, that any
future collective bargaining agreements with these unions will have on our
operations and financial performance.
EXPANSION STRATEGY
A large part of our growth has resulted from the addition of new Men's
Wearhouse stores and the increased sales volume and profitability provided by
these stores. We will continue to depend on adding new stores to increase our
sales volume and profitability. We believe that our ability to increase the
number of traditional stores in the United States above 500 will be limited.
However, we anticipate that additional growth opportunities exist through the
VPC operations. When we enter new markets, we have to:
- obtain suitable store locations,
- hire personnel,
- establish distribution methods, and
- advertise our name and our distinguishing characteristics to consumers
who may not be familiar with us.
We cannot assure you that we will be able to open and operate new Men's
Wearhouse or VPC stores on a timely and profitable basis. The costs associated
with opening new stores may negatively affect our profitability. Our expansion
strategy may also be negatively impacted by conditions in the commercial real
estate market existing at the time we seek to expand.
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In addition to our growth through adding new traditional stores, we have
experienced increases in store sales over the previous year for each of the past
five years. Comparable store sales increased:
- 3.9% for 1996,
- 8.5% for 1997, and
- 11.0% for the first nine months of 1998.
We cannot assure you that we will experience similar rates of comparable
store sales growth in future periods.
We are also integrating and developing our operations that target the more
price sensitive clothing customers. VPC acquired the 17 C&R stores, the six NAL
stores and the four Suit Warehouse stores to begin this process. We have closed
most of the C&R locations and anticipate that all C&R locations will be closed
by the end of the first quarter of 1999. In some cases, we are relocating Men's
Wearhouse stores to old C&R store locations. SuitMax stores are being opened to
replace C&R stores. However, we cannot assure you that these stores or any
further expansion into the more price sensitive market will be successful. We do
expect that we will experience lesser operating margins from VPC as we make
substantial advertising expenditures to gain market identity and rationalize
acquired assets to meet the new SuitMax format.
SEASONALITY AND GENERAL ECONOMIC CONDITIONS
Like most retail businesses, our business is seasonal. Historically, over
30% of our net sales and approximately 50% of our net earnings have been made
during November, December and January. Like other retail businesses, our
operations may be negatively affected by local, regional or national economic
downturns. Any economic downturn affecting us might cause consumers to reduce
their spending, which would impact our sales. We cannot assure you that a long
economic downturn would not have a noticeable negative impact on us.
DECLINING UNIT SALES OF MEN'S TAILORED CLOTHING
According to industry sources, sales in the men's tailored clothing market
generally have declined over the past several years. We believe that this
decline is attributable primarily to: (1) men allocating less of their income to
tailored clothing and (2) certain employers relaxing their dress codes. We
believe that this decrease in sales has contributed, and will continue to
contribute, to a consolidation among retailers of men's tailored clothing.
Despite this overall decline, we have been able to increase our share of the
men's tailored clothing market. Although we believe we are in a consolidating
segment of the retailing industry, we cannot assure you that we will continue to
be able to expand our sales volume or maintain our profitability within that
segment of the industry.
COMPETITION
The men's tailored clothing market is fragmented, and we face intense
competition for:
- customers,
- access to quality merchandise, and
- suitable store locations.
We compete with:
- specialty men's clothing stores,
- traditional department stores,
- other off-price retailers and manufacturer-owned stores,
- independently-owned outlet stores,
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- discount operators, and
- three-day stores.
Several of these competitors are part of large department store chains that
have much greater financial, marketing and other resources than we have
available. We cannot assure you that we will be able to compete successfully
with our competitors in the future. See "Business -- Competition" at p. 36.
POSSIBLE FLUCTUATIONS IN STOCK PRICE
The market price of our common stock has fluctuated in the past and may
change rapidly in the future depending on news announcements and changes in
general market conditions. See "Price Range of Common Stock" at p. 23. The
following factors, among others, may cause significant fluctuations in our stock
price:
- news announcements regarding quarterly or annual results of operations,
- monthly comparable store sales,
- acquisitions,
- competitive developments,
- litigation impacting us, or
- market views as to the prospects of retailing generally.
CONTROL OF THE COMPANY
After the Exchangeable Shares are exchanged into our common stock, our
executive officers and directors will own approximately 24% of the outstanding
shares of our common stock. Because the executive officers and directors own
such a large percentage of the outstanding shares of our common stock, if they
act together, they could exercise substantial control over:
- the election of all of the directors,
- the approval of any sale of assets, merger or consolidation, and
- the outcome of all of the matters submitted to our shareholders for a
vote.
RELIANCE ON KEY PERSONNEL
Mr. George Zimmer has been very important to our success. Mr. Zimmer is our
Chairman of the Board, Chief Executive Officer and primary advertising
spokesman. The loss of Mr. Zimmer's services could have a significant negative
effect upon the Company.
Also, our continued success and the achievement of our expansion goals are
dependent upon our ability to attract and retain additional qualified employees
as we expand.
PREFERRED STOCK AUTHORIZED FOR ISSUANCE
After consummation of the proposed Moores transaction, we will have
available for issuance 1,999,999 shares of preferred stock, $.01 par value per
share. Our Board of Directors is authorized to issue any or all of this
preferred stock, in one or more series, without any further action on the part
of shareholders. Your rights as a holder of our common stock may be negatively
affected if we issue a series of preferred stock in the future that has
preference over the common stock with respect to the payment of dividends or
distribution upon our liquidation, dissolution or winding up. See "Description
of Capital Stock -- Preferred Stock" at p. 38.
10
<PAGE> 12
YEAR 2000 RISKS
In mid-1997, we began a company-wide project to upgrade our information
technology. This information technology is designed to increase the efficiency
and the future productivity of our operations. By completing these changes, we
expect our computer systems to properly recognize and use dates beyond December
31, 1999. The costs related to the project are expected to be between
approximately $12.0 million and $20.0 million. The costs related specifically to
Year 2000 issues cannot be separated from this amount. We expect all of our
business systems to be Year 2000 compliant by mid-1999. We do not anticipate
that the cost will have a material effect on our consolidated financial position
or results of operations in any given year. However, we cannot give you any
assurances that we will be able to completely identify or address all Year 2000
compliance issues. We also cannot assure you that third parties with whom we do
business will not experience system failures as a result of the Year 2000 issue.
Finally, we cannot predict the consequences of noncompliance. See
"Business -- Management Information and Telecommunication Systems" at p. 35.
We have been advised that Moores expects its payroll and accounting systems
to be Year 2000 compliant by January 31, 1999 and its merchandising and point of
sale systems to properly recognize and use dates beyond December 31, 1999 before
March 31, 1999. In addition, we have been informed that Moores is in the process
of evaluating the machinery utilized in its manufacturing operations to attempt
to cause it to be Year 2000 compliant. Moores expects to have its manufacturing
operations Year 2000 compliant by March 31, 1999. Moores has indicated that the
costs related to making its business and manufacturing systems Year 2000
compliant are not expected to exceed Can $500,000. Moores has also indicated to
us that they do not anticipate that the cost will have a material effect on its
consolidated financial position or results of operations in any given year.
However, we cannot give you any assurances that Moores will be able to
completely identify or address all Year 2000 compliance issues. Also third
parties with whom Moores does business may experience system failures as a
result of the Year 2000 issue. This could adversely affect Moores. Finally, we
cannot predict the consequences of Moores' noncompliance. See "Business of
Moores -- Management Information Systems" at p. 18.
The statements included in this section "Year 2000 Risks" are intended to
be and are designated "Year 2000 Readiness Disclosure" statements within the
meaning of the Year 2000 Information and Readiness Disclosure Act.
FORWARD-LOOKING STATEMENTS
Certain statements made in this prospectus and in other public filings and
releases by the Company contain "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995) that involve risk and
uncertainty. These forward-looking statements may include, but are not limited
to:
- future capital expenditures,
- acquisitions (including the amount and nature thereof),
- future sales,
- earnings,
- margins,
- costs,
- number and costs of store openings,
- demand for men's clothing,
- market trends in the retail men's clothing business,
- currency fluctuations,
- inflation, and
- various economic and business trends.
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<PAGE> 13
Management may make forward-looking statements orally or in writing,
including but not limited to, this prospectus and other of our filings with the
SEC under the Securities Exchange Act of 1934 and the Securities Act of 1933.
In connection with such forward-looking statements, you should consider
that they involve known and unknown risks, uncertainties and other factors that
are, in some cases, beyond our control. You are cautioned that any such
statements are not guarantees of future performance and that actual results and
trends in the future may differ materially. Differences may result from a
variety of factors including, but not limited to:
- domestic or international economic activity and inflation,
- successful execution of internal operating plans,
- successful execution of new store and new market expansion plans,
- performance issues with key suppliers,
- foreign currency fluctuations,
- government export and import policies,
- legal proceedings,
- our ability to continue to identify and complete successful expansions
into existing markets,
- our ability to continue to identify and complete successful penetrations
into new markets, and
- our ability to integrate any expansion with our existing operations.
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<PAGE> 14
ACQUISITION OF MOORES
The Men's Wearhouse, Inc. has entered into a Combination Agreement dated as
of November 18, 1998 (the "Combination Agreement") with Moores, the shareholders
of Moores and a wholly owned subsidiary of Men's Wearhouse pursuant to which
Moores will be restructured so that such wholly-owned subsidiary of Men's
Wearhouse will own the only outstanding common stock of Moores. The shareholders
of Moores and employees who hold certain options to purchase a class of Moores
capital stock will exchange their shares of capital stock of Moores and their
options for a new class of exchangeable shares (the "Exchangeable Shares") of
Moores. Except to the extent required by the laws of the Province of New
Brunswick, the only rights of the Exchangeable Shares are to permit the holders
thereof to exchange each Exchangeable Share for a share of Men's Wearhouse
common stock and to receive dividends on the Exchangeable Shares in an amount
equal to dividends, if any, paid on Men's Wearhouse common stock. Men's
Wearhouse has no present plans to commence payment of dividends. Each
Exchangeable Share will also have the right, under the terms of a share of
special voting preferred stock to be issued by Men's Wearhouse, to cast a vote
equivalent to the vote of one share of Men's Wearhouse common stock on each
matter submitted to the holders of Men's Wearhouse common stock for a vote.
The Combination Agreement provides that Moores will exchange at least
2,500,000 shares of Exchangeable Shares, and, therefore, Men's Wearhouse will
ultimately be required to issue at least 2,500,000 shares of Men's Wearhouse
common stock, in exchange for the Exchangeable Shares, to the existing
shareholders and option holders of Moores. However, if the average closing price
of the Men's Wearhouse common stock for the ten trading days ending three
trading days prior to closing is less than $20.00 per share, Moores will
increase the number of Exchangeable Shares, and, therefore, Men's Wearhouse will
increase the number of shares of Men's Wearhouse common stock to be issued, so
that the aggregate number of shares of Men's Wearhouse common stock to be
issued, when multiplied by the average price, equals $50,000,000 in market
value; provided that Moores will not be required to issue more than 2,750,000
Exchangeable Shares and Men's Wearhouse will not be required to issue more than
2,750,000 shares of Men's Wearhouse common stock. In the event such market value
of the Men's Wearhouse common stock does not equal or exceed $50,000,000, Moores
may terminate the Combination Agreement.
The combination arrangement includes the Exchangeable Share feature so that
the exchange at the time of closing will not be taxable to the present
shareholders of Moores under Canadian income tax law.
In connection with the closing of this transaction, Moores' existing
indebtedness of approximately $60 million must be repaid. The Company has the
resources under its existing credit facility to borrow sufficient funds to loan
to Moores to allow Moores to repay this debt. However, the Company may also
enter into an additional credit facility to fund the repayment of Moores' debt.
See "Financing and Capital Resources".
After the closing of this transaction, management intends to evaluate the
eight Moores stores operating in the United States with regard to duplicative
markets and customary business performance. This could result in store
modifications, relocations or closures of certain Men's Wearhouse or Moores
stores in the U.S. market. Management is not able to estimate at this time the
costs, if any, that may be incurred for such modifications, relocations or
closures.
Under the terms of the Combination Agreement, Moores has made certain
representations and warranties with respect to itself and its business. In the
event of a material breach, as defined in the Combination Agreement, of those
representations and warranties, Men's Wearhouse may terminate the Combination
Agreement. However, these representations and warranties do not survive the
closing of the combination arrangement and Men's Wearhouse will not have a right
to bring any action against the shareholders of Moores after the closing if the
representations and warranties are thereafter determined to be inaccurate.
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<PAGE> 15
BUSINESS OF MOORES
GENERAL
Moores is one of Canada's leading specialty retailers of men's tailored
clothing, with 107 stores in the ten Canadian provinces. In September 1997,
Moores expanded into the U.S. market with the opening of four stores in the
greater Cleveland/Northeastern Ohio market and has since expanded to eight
stores in Ohio and Illinois. Moores operates all stores under the name Moores
The Suit People(R). Moores distinguishes itself from other retailers of men's
tailored clothing by manufacturing virtually all of its tailored clothing. As a
result, Moores achieves certain cost savings compared to its competitors in
Canada and is able to provide greater value to its Canadian customers by
offering a broad selection of quality merchandise at everyday low prices.
Moores' prices for tailored clothing typically range from 20% to 30% below
traditional Canadian department and specialty stores and 30% to 40% below
traditional U.S. department and specialty stores. The Moores stores are
primarily located in strip centers or power centers.
Approximately 60% of Moores' merchandise consists of men's tailored
clothing, including suits, sport coats and dress pants and the remaining 40%
includes dress shirts, sportswear, outerwear and accessories. Moores focuses
principally on conservative, basic tailored apparel, thereby limiting Moores'
exposure to changes in fashion trends and the need for markdowns and promotional
sales. Moores typically offers a full assortment of suits and sport coats in
sizes ranging from 36 short to 54 extra long, and carries a larger selection in
each size than that usually carried by traditional men's apparel retailers.
INDUSTRY OVERVIEW
The men's apparel industry in Canada is served by several distribution
channels, including men's specialty clothing stores, traditional department
stores, off-price retail chains, manufacturer-owned stores and outlet stores.
Although specialty retailers of men's tailored clothing may carry higher
quality and more expensive designer and brand name suits, sport coats and dress
pants than Moores, the breadth of selection may be limited. These retailers
usually offer the customer a high level of customer service. However, the
merchandise at these men's specialty clothing retailers tends to be more
expensive. In addition, these retailers often lack the buying power enjoyed by
apparel chains that purchase in volume, and tailoring costs are generally
included in the price of each garment irrespective of the amount of tailoring
needed.
Department stores can offer a broader selection of men's tailored clothing
and may offer lower prices at certain times than specialty stores; however,
department stores tend to be less focused on men's tailored clothing than Moores
because their men's departments often allocate relatively less selling space and
sales personnel to tailored men's clothing. In addition, menswear departments in
department stores tend to be highly promotional, and prices on a particular
piece of clothing can vary greatly throughout a selling season. Department
stores may have centralized tailoring facilities not located in the store, which
can delay the tailoring process and the ultimate delivery of merchandise to the
customer.
Many off-price retailers, manufacturer-owned stores and outlet stores offer
low prices, but the quality and depth of their menswear selection may be
inconsistent. As with department stores, there may be less focus on men's
tailored clothing since such retailers may also carry women's and children's
merchandise. Customer service in many of these stores tends to be limited, with
patrons often being required to help themselves in locating their desired style,
color and size, and in some instances return policies are inflexible. Tailoring
is often unavailable. These stores are also generally unable to replenish their
inventories once merchandise is sold in any given season.
BUSINESS STRATEGY
The key elements of the Moores historical business strategy has been as
follows:
Vertically Integrated. Moores conducts its manufacturing operations
through its wholly-owned subsidiary, Golden Brand, which is the second
largest manufacturer of men's suits and sport coats in
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<PAGE> 16
Canada, and one of the largest in North America. Golden Brand manufactures
virtually all the tailored clothing offered for sale in Moores stores, and
in fiscal 1997, substantially all of Golden Brand's sales were to Moores
stores. Moores' vertical integration generates cost savings compared to its
competitors through the reduction of marketing and sales costs at the
manufacturing level, reduction of wholesaler mark-ups, and minimization of
warehousing, distribution and other administrative overhead costs.
Value Focused. Moores offers value to its customers through a broad
selection of high quality merchandise at everyday low prices. Moores offers
first quality merchandise rather than close-outs or seconds. Moores offers
a broad and deep assortment of colors, fabrics and sizes. The prices of
suits generally range from Can $149 to Can $299 in Moores Canadian stores
and US $169 to US $299 in Moores U.S. stores. A "compare at" tag attached
to each garment lists Moores' price for the item and the price charged by
traditional department and specialty stores for comparable merchandise.
Customer Service Oriented. Moores structures its business and
operations to address the needs and preferences of its customers. Moores
regularly replenishes its stock, including a complete line of basic men's
tailored clothing. Merchandise in all Moores stores is presented in a
similar manner so that customers familiar with one Moores store can easily
locate merchandise in other Moores stores. Each store employee is trained
in product knowledge and customer service and is able to address the
clothing needs of an individual customer. Each store provides on-site
tailoring services to facilitate prompt alterations at a low cost to
customers. Moores' management believes that its focus on customer service
ensures that a significant portion of its business comes from repeat
customers and that its percentage of returns is low.
Marketing Driven. The Canadian operations of Moores typically spend
approximately 8% of sales per year on advertising. Moores advertises
primarily through flyers that are focused solely on men's apparel. Flyers
are distributed regularly to target households, mainly through newspaper
inserts. In Canada, which has a population of approximately 30 million,
Moores distributed over 131 million flyers, printed on recycled paper,
during fiscal 1997.
MERCHANDISING
Moores focuses on conservative, basic tailored apparel. Approximately 60%
of Moores' merchandise consists of men's tailored clothing, including suits,
sport coats and dress pants, and the remaining 40% includes dress shirts,
sportswear, outerwear and accessories. Although conservative styles are
emphasized, each season's merchandise reflects current fabric, color and fashion
trends. Moores carries over 50 different sizes in regular, short, long (tall),
extra long (extra tall) and portly, while most department and specialty stores
carry exclusively core sizes (sizes 38 to 46 regular, 42 to 46 long, 38 to 42
short). Although Moores does not claim to specialize in these non-core sizes,
its reputation for carrying a full selection of suits and sport coats in a wide
range of sizes attracts many customers that require tailored clothing in special
sizes.
The chart below lists Moores' market share in Canada for calendar year 1997
among retailers of men's tailored clothing reported by the Canadian Apparel
Market Monitor.
MARKET SHARE AND RANK BY CATEGORY IN 1997
<TABLE>
<CAPTION>
MARKET SHARE RANK
------------ ----
<S> <C> <C>
Suits....................................................... 18.5%(1) 1
Sport Coats................................................. 18.6% 1
Dress Pants................................................. 11.8% 2
</TABLE>
- ---------------
(1) Moores' next largest competitor held 12.9% of the Canadian market share in
terms of retail sales for men's suits.
Unlike many retailers who run sales at various times of the year, Moores
offers value to its customers at everyday low prices. Moores runs a sale only at
the end of the spring (June) and fall (December) seasons.
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<PAGE> 17
These sales serve to reduce stock at season's end and prepare the stores for the
arrival of the new season's merchandise.
Moores has developed its own or has purchased brand names, and each brand
name represents different price points, quality and style. The labels currently
being offered in Canada and/or the U.S. include the following: Le Collezioni
(Tradizioni) di Successo, Champlain, Christian Dumas, Corporate Collections,
Hyde Park, Progress Brand, Brittany International, Traveller Suit by Moores,
Pine Point and Marble Arch.
CUSTOMER SERVICE
Moores believes that superior customer service is fundamental to its
operating strategy. To further this objective, Moores actively recruits quality
store personnel and provides training. Store personnel, including managers,
sales associates and tailors, are trained and encouraged to be courteous,
friendly and knowledgeable while addressing the needs of customers. Store
personnel are trained to offer guidance and answer questions pertinent to
choosing, for example, the right color or style of a suit, as well as being able
to fit a garment for alteration. Professional and personal attention is
emphasized to establish and maintain a continuing relationship with the
customer.
Moores' formal training program, under the direction of a Manager of
Training and Development, is carried out through training sessions at the retail
headquarters and regionally as well as weekly in-store meetings. Depending on
their level of experience, employees receive initial training for a period of
two days or two weeks. This training is supplemented by regular interaction
among regional supervisors, store managers and sales associates.
Each of Moores' stores provides on-site tailoring services to facilitate
prompt alterations at a reasonable cost to customers, with pants being hemmed
while the customer waits. With the extensive array of sizes and merchandise in
each store, hemming is often the only alteration required.
STORE OPERATIONS
Moores' retail operations are led by the President of Moores The Suit
People Inc. and 16 regional supervisors, each responsible for five to seven
stores. Store management consists of a store manager and one to two assistant
store managers, depending on the size of the store. Moores carefully screens
candidates for regional supervisor and store manager positions, selecting only
those individuals that demonstrate thorough training and extensive experience in
the retail industry. Turnover among regional supervisors and managers has been
minimal. Every regional supervisor and store manager is required to complete an
extensive training program designed to develop leadership and management skills.
Historically, Moores' expansion strategy has provided numerous
opportunities for employees to move into sales and store management positions.
Moores' own qualified and experienced employees historically have filled key
in-store management positions. This "promotion from within" philosophy enables
Moores to attract and maintain a well trained, highly motivated and loyal
workforce. The majority of upper and middle management started their careers on
Moores' sales floor or in its factory.
Moores has centralized many of its operations, including the implementation
of standard policies and procedures, centralized accounting systems,
company-wide training programs, uniform store layouts and centralized
purchasing, replenishment, advertising and pricing programs.
PROPERTIES
Moores leases all of its stores and presently intends to lease all of its
future locations. Moores stores average approximately 6,000 square feet and
Moores is currently targeting retail space ranging from 5,000 to 7,000 square
feet for its new stores. Moores generally leases space in strip centers or power
centers, and avoids the significantly higher occupancy costs for mall locations.
Of Moores' 115 stores, only 12 are in traditional mall locations. A store is
only leased in a mall if no suitable alternative is available in a desired area.
Store leases typically have terms to maturity of ten years with many containing
a five year renewal option.
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<PAGE> 18
As of October 31, 1998, Moores operated 115 stores in the ten Canadian
provinces and 2 states in the United States. The following table sets forth the
location, by province or state, of these stores:
<TABLE>
<CAPTION>
CANADA
- ------
<S> <C>
Ontario................................................... 46
Quebec.................................................... 22
British Columbia.......................................... 13
Alberta................................................... 11
Manitoba.................................................. 5
New Brunswick............................................. 3
Nova Scotia............................................... 3
Saskatchewan.............................................. 2
Newfoundland.............................................. 1
Prince Edward Island...................................... 1
U.S.
- ----
Ohio...................................................... 6
Illinois.................................................. 2
---
Total 115
===
</TABLE>
Moores' distribution facilities are leased. Its manufacturing facility in
Montreal encompasses approximately 200,000 square feet of leased space,
including 10,000 square feet of office space, with a current annual rental of
approximately Can $570,000 (or Can $2.85 per square foot). The lease expires on
February 29, 2004.
MANUFACTURING
Manufacturing Operations. Golden Brand operates a tailored clothing
manufacturing facility in Montreal. This facility includes a cutting room,
fusing department, pant shop and coat shop. At full capacity, the coat shop can
produce 12,000 units per week and the pant shop can produce 25,000 units per
week. Average production for the nine months ended October 31, 1998 was 10,173
units and 20,177 units per week, respectively. Management believes that, if
required, additional capacity could be added at a relatively low cost.
Import Operations. All of Moores' imported merchandise is imported through
Golden Brand. Moores imports and direct sources dress shirts and knit shirts,
casual pants, leather jackets and coats, rainwear and outerwear. For fiscal
1997, Moores imported merchandise from approximately 27 sources worldwide, which
accounts for approximately 20% of annual cost of sales.
PURCHASING
Retail Stores. In fiscal 1997 Moores stores purchased approximately 80% of
its merchandise from Golden Brand and the remaining 20% from approximately 20
other suppliers, none of which accounted for more than 5% of Moores total
purchases.
Manufacturing Operations. Golden Brand purchases fabric, trimmings and
other raw materials from approximately 50 suppliers, many of whom have supplied
materials to Golden Brand for more than 10 years. Fabric represents nearly all
of Golden Brand's raw material purchases. Golden Brand purchases high quality
fabric from European, Canadian, Far Eastern, South American and U.S. mills. In
fiscal 1997, approximately 14% of Golden Brand's purchases were from one
Canadian supplier with whom it has done business for over 20 years. Moores
believes, however, that there are a number of alternative sources of supply from
which it could fulfill its fabric requirements.
DISTRIBUTION
Moores' distribution facilities include a 70,000 square foot facility
located near Golden Brand's factory in Montreal, of which 50,000 square feet are
used for staging and distribution of merchandise to Moores stores
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<PAGE> 19
and 20,000 square feet are bonded to allow Moores to defer payment of import
duty until imported goods are shipped to stores. Moores also leases a 15,000
square foot facility at its Toronto headquarters, which is used primarily for
storage of seasonal recalls, as well as offices for its retail operations.
All of the merchandise manufactured by Golden Brand is tagged and labeled
at the factory and sent to Moores' distribution facility in Montreal prior to
being shipped to the stores. Moores' imported merchandise is ticketed at the
offshore factories where the merchandise is produced, and is received by Golden
Brand at its bonded warehouse ready to be shipped directly to the stores.
Merchandise supplied to the stores by third-party suppliers is handled similarly
and the large majority is generally drop-shipped directly to the stores by such
suppliers.
MANAGEMENT INFORMATION SYSTEMS
Since 1992, Moores has operated a fully-integrated, point-of-sale inventory
and management information system processed by a DEC Alpha Unix-based computer
with proprietary software. The system provides inventory and sales information
by store and by SKU. Moores' POS systems have been designed to integrate all
major aspects of Moores' business, including sales by store, inventory levels,
purchase order management, merchandise planning and the general ledger
functions. Store inventory levels are regularly monitored and adjusted to
reflect sales trends. The inventory control system provides information that
enhances management's ability to make informed and timely buying and
manufacturing decisions and accommodate unexpected increases or decreases in
demand for a particular item. The inventory management system is capable of
reporting product information, such as style, fabric, vendor lot, model number,
size and color. Through its stock replenishment system, the merchandise of each
Moores store is restocked on a weekly or, if needed, more frequent basis.
Moores has been in the process of updating and upgrading its information
systems to attempt to cause them to be Year 2000 compliant. Moores believes it
has completed an inventory of its payroll, accounting, merchandising and point
of sale systems to ensure that the operation of such systems will not be
materially adversely affected by the Year 2000 date change. Moores expects to
have its payroll and accounting systems Year 2000 compliant by January 31, 1999
and its merchandising and point of sale systems Year 2000 compliant by March 31,
1999. Moores is also in the process of evaluating the machinery and embedded
technology involved in Golden Brand's manufacturing operations. Moores expects
that such evaluation should be complete and all manufacturing technology should
be Year 2000 compliant by March 31, 1999. Moores has indicated that anticipated
costs related to Year 2000 compliance should not exceed Can $500,000.
Moores has requested and is in the process of receiving written responses
from its vendors and suppliers confirming that the vendor or supplier is Year
2000 compliant. Moores will continue to monitor those vendors and suppliers, as
well as those that have not provided written assurance. Moores expects to use
alternate sources to replace those vendors and suppliers who do not provide
written assurance of their Year 2000 readiness.
Assuming no general failure of utilities to provide basic services over
large geographic areas or of the banking systems generally to conduct business
substantially as usual, or of the credit card systems to confirm credit
generally, Moores believes that at the store level, the worst case scenario
would require the processing of credit approval by telephone and the ordering
and allocation of inventory by telephone. While each of these scenarios would
increase the cost of doing business and may result in the loss of some sales,
Moores does not believe that either of these situations would have a material
adverse effect on Moores' results of operations.
At the manufacturing level, production could be slowed if the machinery
fails to work after December 31, 1999; however, Golden Brand does have alternate
machinery which could be utilized if the automated machinery fails to be Year
2000 compliant. If all suppliers were unable to supply the fabric needs of the
Golden Brand manufacturing operations, then, given this worst case scenario,
Golden Brand may lose one to two months of production. However, no one supplier
accounts for more than 14% of the fabric used in Golden Brand's production.
Moores anticipates that if any one supplier is unable to provide fabric, an
alternate source could be found to meet production needs. If there is a
significant disruption in the supply chain due to the Year 2000 issue and the
amount of fabric available from suppliers is limited, it may be difficult to
obtain the
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<PAGE> 20
fabric necessary to meet the demands of the manufacturing operations and
available fabric may experience a significant increase in cost.
Moores has not developed a contingency plan at present. However, Moores
intends to adopt such a plan, if necessary, in mid-1999 to address any
unresolved issues or risks that may exist at that time.
The statements included in this section are intended to be and are
designated "Year 2000 Readiness Disclosure" statements within the meaning of the
Year 2000 Information and Readiness Disclosure Act.
EMPLOYEES
Moores employs over 2,000 employees. At October 31, 1998, Moores stores
employed approximately 1,280 employees, of whom approximately 766 were full-time
employees and 514 were part-time or temporary. At the same date, Golden Brand
employed approximately 930 full-time employees in its factory, warehouse and
office. Except for approximately 70 supervisory and office personnel, all of
Golden Brand's employees belong to the Union of Needletrades, Industrial and
Textile Employees. On December 23, 1998, the membership of the Union ratified a
new contract that will run until November 30, 2001. Golden Brand is part of a
collective bargaining unit, of which it is the largest company. Management
believes that its relations with employees are good.
LEGAL PROCEEDINGS
Moores is involved in various routine legal proceedings, including ongoing
litigation incidental to the conduct of its business. Moores believes that none
of these matters will have a material adverse effect on the financial condition
or results of operations of Moores.
TRADEMARK AND SERVICE MARKS
Moores is the owner of several Canadian registered trademarks, including
"Moores The Suit People", "The Suit People", "Moores Vetements Pour Hommes" and
"Golden Brand". "Moores The Suit People" has been registered with the U.S.
Patent and Trademark Office and Moores' applications for the registration of a
number of other trademarks are currently pending in the U.S. Patent and
Trademark Office.
Moores believes that its rights to its trademarks and trade names are
significant assets in Canada.
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<PAGE> 21
USE OF PROCEEDS
Because the shares of Men's Wearhouse common stock will be issued upon
exchange of the Exchangeable Shares by the selling shareholders, the Company
will receive no net cash proceeds upon such issuance.
SELLING SHAREHOLDERS
The selling shareholders will be the holders of the Exchangeable Shares of
Moores and initially will include both the existing shareholders of Moores and
those employees who hold certain options to purchase a class of Moores capital
stock. The selling shareholders include transferees, donees, pledgees or other
successors selling shares received from a selling shareholder named below after
the date of this prospectus. We will add these transferees, donees, pledgees or
other successors to the list of selling shareholders through a prospectus
supplement. The selling shareholders will receive up to 2,750,000 Exchangeable
Shares on the date we consummate the combination of Moores with our Company. The
selling shareholders may acquire more Exchangeable Shares if we choose to pay
future dividends in the form of additional shares.
The selling shareholders may acquire the common stock offered by this
prospectus if they exchange their Exchangeable Shares for our common stock. As
of , 1999, they will have the right to exchange each Exchangeable
Share for one share of our common stock. As of , 1999, if the
selling shareholders converted all of their Exchangeable Shares for our common
stock, they would own approximately shares of our common stock which
represents % of our common stock currently outstanding. Any additional
Exchangeable Shares they receive as dividends may also be converted into our
common stock.
We have the option to redeem the Exchangeable Shares upon the occurrence of
certain events. The redemption price is equal to one share of our common stock
plus any dividends declared but unpaid as of the date of redemption. We must
redeem each outstanding Exchangeable Share on the fifth anniversary of the
effective date of the consummation of the combination with Moores.
The following table sets forth the name of each selling shareholder, the
number of Exchangeable Shares that will be beneficially owned by each selling
shareholder as of the consummation of our combination with Moores Retail Group
Inc., and the number of shares of Men's Wearhouse common stock which may be
offered by each selling shareholder pursuant to this prospectus. Since we are
unable to predict exactly how many Exchangeable Shares will be issued upon
consummation of the combination or whether any stock dividends of Exchangeable
Shares will be distributed in the future, we are unable to predict the number of
shares of Men's Wearhouse common stock which will be beneficially owned by each
selling shareholder from time to time during the offering under this prospectus.
Any and all of the shares listed below may be offered for sale by a selling
shareholder from time to time and therefore we are unable to estimate the number
of shares that will be beneficially owned by each selling shareholder upon
termination of this offering. None of the selling shareholders has held any
position, office or any other material relationship with us within the past
three years. Following the consummation of the Moores transaction, Pat De Marco
will be a director and officer of Moores Retail Group Inc.
<TABLE>
<CAPTION>
EXCHANGEABLE SHARES SHARES TO BE OFFERED
OWNED AT PURSUANT TO
CLOSING(1) THIS PROSPECTUS(1)
------------------- --------------------
<S> <C> <C>
Marpro Holdings Inc.......................................
MGB Limited Partnership...................................
Capital D'Amerique CDPQ Inc...............................
Cerberus International, Ltd...............................
Ultra Cerberus Fund, Ltd..................................
Styx International, Ltd...................................
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
EXCHANGEABLE SHARES SHARES TO BE OFFERED
OWNED AT PURSUANT TO
CLOSING(1) THIS PROSPECTUS(1)
------------------- --------------------
<S> <C> <C>
The Long Horizons Overseas Fund, Ltd......................
The Long Horizons Fund, L.P...............................
Styx Partners, L.P........................................
Ira Solway................................................
Richard Dulgar............................................
Ricky Arruda..............................................
Jerry Czorny..............................................
Joe Bruno.................................................
Francesco Franco..........................................
Armand Benchetrit.........................................
Richard C. Bull...........................................
Mario Candida.............................................
Dan Addario...............................................
Brian Coen................................................
Dennis Button.............................................
Steve Faulhafer...........................................
Ramesh Naraine............................................
Mario Parziale............................................
David Starrett............................................
Pat De Marco..............................................
Pearl Chang...............................................
</TABLE>
- ---------------
(1) The share amounts to be issued to the selling shareholders may vary based on
certain assumptions contained in the Combination Agreement. Therefore, the
share amounts indicated above show the range of shares that may in fact be
issued to the selling shareholders. The first number represents the number
of shares to be issued if we issue 2.5 million shares in connection with the
Moores acquisition and the second number represents the number of shares to
be issued if we issue 2.75 million shares in connection therewith.
21
<PAGE> 23
PLAN OF DISTRIBUTION
These shares of our common stock are being registered to allow public
secondary trading by the holders of such shares of our common stock from time to
time after the date of this prospectus. We will not receive any of the proceeds
from the offering of these shares of common stock by the selling shareholders.
We have been advised by the selling shareholders that the shares offered by
this prospectus may be sold from time to time by or for the account of the
selling shareholders pursuant to this prospectus or pursuant to Rule 144 under
the Securities Act of 1933. Sales of shares pursuant to this prospectus may be
made in the over-the-counter market, on Nasdaq or otherwise at prices and on
terms then prevailing or at prices related to the then current market price (in
each case as determined by the selling shareholders). Sales may be made directly
or through agents designated from time to time, or through dealers or
underwriters to be designated or in negotiated transactions.
The shares may be sold by any one or more of the following methods:
- a block trade (which may involve crosses) in which the seller's broker or
dealer will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction,
- purchases by a broker or dealer as principal and resale by the broker or
dealer for their account pursuant to this prospectus,
- exchange distributions and/or secondary distributions in accordance with
the rules of Nasdaq,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers,
- privately negotiated transactions,
- through put or call option transactions, or
- through short sales.
If applicable law requires, we will add a supplement to this prospectus to
disclose the following information about any particular offering:
- the specific shares to be sold,
- the names of the selling shareholders,
- the purchase prices and public offering prices,
- the names of any agent, dealer or underwriter making a sale of the
shares, or
- any applicable commissions or discounts.
The selling shareholders may sell shares directly to other purchasers,
through agents or through broker-dealers. Any selling agents or broker-dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the selling shareholders, from purchasers of shares for whom
they act as agents, or from both sources. That compensation may be in excess of
customary commissions.
The selling shareholders and any broker-dealers that participate in the
distribution of the shares may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933 in connection with the sales. Any commissions, and
any profit on the resale of shares, received by the selling shareholders and any
such broker-dealers may be deemed to be underwriting discounts and commissions.
We have been advised by each of the selling shareholders that they have not, as
of the date of this prospectus, entered into any arrangement with any agent,
broker or dealer for the sale of the shares.
Pursuant to the registration rights agreement relating to the registration
of our common stock to be issued upon the exchange of the Exchangeable Shares
(the "Registration Rights Agreement"), we shall use our reasonable best efforts
to keep the registration statement effective until the earlier of (i) the date
on which all
22
<PAGE> 24
of the Exchangeable Shares are either owned by Men's Wearhouse or are no longer
outstanding and (ii) the date on which all of the shares covered by the
Registration Statement may be sold without registration pursuant to Rules 144
and 145 under the Securities Act of 1933.
Pursuant to the Registration Rights Agreement, we have agreed to indemnify
each selling shareholder and any underwriter of the shares, as well as such
underwriter's officers, directors employees and agents and each person
controlling such underwriter, against certain liabilities, including liabilities
arising under the Securities Act of 1933. The selling shareholders have agreed
to indemnify us and any underwriter of the shares, as well as such underwriter's
officers, directors, and each person who controls such underwriter, against
certain liabilities, including liabilities arising under the Securities Act of
1933.
We may suspend the use of this prospectus and any supplements hereto in
certain circumstances due to pending corporate developments, public filings with
the SEC or similar events.
We will pay all costs and expenses incurred by us in connection with the
registration of the sale of shares pursuant to this prospectus. We will not be
responsible for any commissions, underwriting discounts or similar charges on
sales of the shares.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on Nasdaq under the symbol "SUIT". The following
table sets forth, on a per share basis for the periods indicated, the high and
low sale prices per share for our common stock as reported by Nasdaq. The prices
set forth below for periods prior to June 2, 1998 have been adjusted to give
retroactive effect to the 50% stock dividend paid on that date.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year ended February 1, 1997
First quarter............................................. $25.67 $17.00
Second quarter............................................ 24.67 11.33
Third quarter............................................. 18.00 12.17
Fourth quarter............................................ 19.00 10.83
Fiscal Year ended January 31, 1998
First quarter............................................. $20.67 $15.33
Second quarter............................................ 25.08 16.75
Third quarter............................................. 27.50 22.33
Fourth quarter............................................ 26.50 20.00
Fiscal Year ended January 30, 1999
First quarter............................................. $29.67 $22.33
Second quarter............................................ 36.88 26.67
Third quarter............................................. 34.63 14.00
Fourth quarter (through December 29, 1998)................ 32.00 22.00
</TABLE>
The closing sale price of our common stock on December 29, 1998, as
reported on Nasdaq, was $32.00. As of December 29, 1998, we had approximately
1,100 record holders and approximately 4,200 beneficial holders of our common
stock.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and for the
foreseeable future we intend to retain all of our earnings for the future
operation and expansion of our business. Our credit agreement prohibits the
payment of cash dividends on our common stock. See "Financing and Capital
Resources".
23
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected statement of earnings and balance sheet information
for the fiscal years indicated has been derived from the Company's consolidated
financial information. The Company's consolidated financial statements as of
February 1, 1997 and January 31, 1998 and for each of the three years in the
period ended January 31, 1998 were audited by Deloitte & Touche LLP, independent
auditors, whose report thereon is incorporated by reference herein. The
comparable selected information for the nine months ended November 1, 1997 and
October 31, 1998 has been derived from the Company's unaudited consolidated
financial statements, which, in the opinion of management, include all
adjustments (consisting only of normal recurring entries) that the Company
considers necessary for a fair presentation of such data. The information set
forth below should be read in conjunction with the consolidated financial
statements and notes thereto of the Company incorporated by reference herein.
References herein to years are to the Company's 52- or 53-week fiscal year,
which ends on the Saturday nearest January 31 in the following calendar year.
For example, references to "1997" mean the fiscal year ended January 31, 1998.
All fiscal years for which financial information is included in this Prospectus
had 52 weeks, except for 1995 which had 53 weeks. The unaudited results for the
nine months ended October 31, 1998 are not indicative of the results expected
for the full 1998 fiscal year.
<TABLE>
<CAPTION>
YEAR NINE MONTHS
--------------------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AND PER SQUARE FOOT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales................................... $240,394 $317,127 $406,343 $483,547 $631,110 $410,867 $504,450
Gross margin................................ 91,766 121,878 157,615 188,366 242,593 154,763 193,018
Operating income............................ 15,818 22,375 30,606 38,134 51,530 27,255 39,108
Net earnings before extraordinary item...... 8,739 12,108 16,508 21,143 28,883 14,941 21,992
Basic earnings per share of common
stock(1).................................. $ 0.33 $ 0.43 $ 0.55 $ 0.67 $ 0.89 $ 0.47 $ 0.66
Diluted earnings per share of common
stock(1).................................. $ 0.32 $ 0.42 $ 0.55 $ 0.67 $ 0.87 $ 0.47 $ 0.64
Weighted average shares outstanding(1)...... 26,652 28,216 29,821 31,354 32,343 32,089 33,517
Weighted average shares outstanding plus
dilutive potential common shares(1)....... 27,207 28,744 30,339 34,101 35,384 35,123 36,261
OPERATING INFORMATION:
Percentage increase in comparable store
sales(2).................................. 17.2% 8.4% 6.8% 3.9% 8.5% 7.1% 11.0%
Average square footage -- all stores(3)..... 4,539 4,553 4,687 4,863 5,097 5,058 5,160
Average sales per square foot of selling
space(4).................................. $ 404 $ 406 $ 416 $ 413 $ 420 $ 281 $ 300
Number of stores:
Open at beginning of the period............. 143 183 231 278 345 345 396
Opened...................................... 40 48 48 50 50 36 30
Acquired.................................... -- -- -- 17 6 6 4
Closed...................................... -- -- (1) -- (5) (4) (16)
-------- -------- -------- -------- -------- -------- --------
Open at the end of the period............... 183 231 278 345 396 383 414
Capital expenditures.......................... $ 11,461 $ 23,736 $ 22,538 $ 26,222 $ 27,380 $ 19,288 $ 29,066
</TABLE>
<TABLE>
<CAPTION>
JAN. 29, JAN. 29, JAN. 28, FEB. 1, JAN. 31, OCT. 31,
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital....................................... $ 42,689 $ 68,078 $ 88,798 $136,837 $182,561 $197,830
Total assets.......................................... 112,176 160,494 204,105 295,478 379,415 415,838
Long-term debt and capital leases(5).................. 10,790 24,575 4,250 57,500 57,500 32,750
Shareholders' equity.................................. 57,867 84,944 136,961 159,129 220,048 279,108
</TABLE>
- ---------------
(1) All periods have been adjusted to give effect to a 50% stock dividend
effected on August 6, 1993, a 50% stock dividend effected on November 15,
1995, and a 50% stock dividend effected on June 2, 1998. Basic and diluted
earnings per share are based on net earnings before extraordinary item.
(2) Comparable store sales data is calculated by excluding the net sales of a
store for any month of one period if the store was not open throughout the
same month of the prior period.
(3) Average square footage for all stores is calculated by dividing the total
square footage for all stores open at the end of the period by the number of
stores open at the end of such period.
(4) Average sales per square foot of selling space is calculated by dividing
total selling square footage for all stores open the entire period into
total sales for those stores.
(5) February 1, 1997 and January 31, 1998 balances represent the 5 1/4%
Convertible Subordinated Notes Due 2003. See "Financing and Capital
Resources" for a discussion of the redemption of the Notes.
24
<PAGE> 26
FINANCING AND CAPITAL RESOURCES
In June 1997, the Company entered into a new revolving credit agreement
with its bank group (the "Credit Agreement") which replaced a previously
existing credit facility. The Credit Agreement provides for borrowing of up to
$125 million through April 30, 2002. As of October 31, 1998, there was $32.8
million outstanding under the Credit Agreement.
Advances under the Credit Agreement bear interest at a rate per annum equal
to, at the Company's option, (i) the agent's prime rate or (ii) the reserve
adjusted LIBOR rate plus an interest rate margin varying between .875% to
1.375%. The Credit Agreement provides for fees applicable to unused commitments
of .125% to .275%.
The Credit Agreement contains certain restrictive and financial covenants,
including the requirement to maintain a minimum amount of Consolidated Net Worth
(as defined). The Company is also required to maintain certain debt to cash
flow, cash flow coverage and current ratios and must keep its average store
inventories below certain specified amounts. In addition, the Credit Agreement
limits additional indebtedness, creation of liens, Restrictive Payments (as
defined) and Investments (as defined). The Credit Agreement also prohibits
payment of cash dividends on the common stock of the Company. The Credit
Agreement permits, with certain limitations, the Company to merge or consolidate
with another company, sell or dispose of its property and make acquisitions. The
Company is in compliance with the covenants in the Credit Agreement.
The Company expects to amend and restate the Credit Agreement concurrently
with the closing of the Moores acquisition. Modifications will include covenant
adjustments to take into consideration the combination with Moores, extend the
maturity date and provide for additional lenders to the Credit Agreement.
The Company has entered into a non-binding engagement letter with
NationsBank NA to arrange additional senior credit facilities in an aggregate
amount up to Can $120 million. These facilities will be used to refinance the
Moores' indebtedness and to provide working capital, capital expenditures and
other ongoing financing needs of Moores. See "Acquisition of Moores". The
facilities will consist of a five-year amortizing term loan and a five-year
revolving credit facility. Covenants and interest rates are expected to be
substantially similar to those contained in the Company's existing Credit
Agreement. Closing of the credit facilities is subject to consummation of the
Moores acquisition.
The Company anticipates that its existing cash and cash flow from
operations, supplemented by borrowings under the Credit Agreement, will be
sufficient to fund its planned store openings, other capital expenditures and
operating cash requirements for at least the next 12 months as well as the
refinancing of the Moores debt.
On August 14, 1998, the Company gave notice to the holders of its
outstanding 5 1/4% Convertible Subordinated Notes (the "Notes") that the Company
would redeem the Notes on September 14, 1998. As a result, $36,753,000 principal
amount of the Notes was converted into 1.6 million shares of Men's Wearhouse
common stock and $20,747,000 principal amount was redeemed for an aggregate of
$21,473,145.
In connection with the Company's direct sourcing program, the Company may
enter into purchase commitments that are denominated in a foreign currency. The
Company generally enters into forward exchange contracts to reduce the risk of
currency fluctuations related to such commitments. The majority of the forward
exchange contracts are with one financial institution. Therefore, the Company is
exposed to credit risk in the event of nonperformance by this party. However,
due to the creditworthiness of this major financial institution, full
performance is anticipated. The Company may also be exposed to market risk as a
result of changes in foreign exchange rates. This market risk should be
substantially offset by changes in the valuation of the underlying transactions
being hedged.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which requires that an entity recognize all derivative instruments as
either assets or liabilities on its balance sheet at their fair value. Gains and
losses
25
<PAGE> 27
resulting from changes in the fair value of derivatives are recorded each period
in current earnings or comprehensive earnings, depending on whether a derivative
is designated as part of a hedge transaction, and, if it is, the type of hedge
transaction. Gains and losses on derivative instruments reported in
comprehensive earnings will be reclassified as earnings in the period in which
earnings are affected by the hedged item. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company is currently evaluating the impact,
if any, of SFAS 133 on its financial position and results of operations.
FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases by
the Company contain "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements may include, but are not limited to, future
capital expenditures, acquisitions (including the amount and nature thereof),
future sales, earnings, margins, costs, number and costs of store openings,
demand for men's clothing, market trends in the retail men's clothing business,
currency fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including but not limited to, the Management's Discussion and Analysis of
Financial Condition and Results of Operations section and other sections of the
Company's filings with the SEC under the Securities Exchange Act of 1934 and the
Securities Act of 1933, incorporated by reference herein.
Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, domestic and international
economic activity and inflation, the Company's successful execution of internal
operating plans and new store and new market expansion plans, performance issues
with key suppliers, foreign currency fluctuations, government export and import
policies and legal proceedings. Future results will also be dependent upon the
ability of the Company to continue to identify and complete successful
expansions and penetrations into existing and new markets and its ability to
integrate such expansions with the Company's existing operations.
26
<PAGE> 28
BUSINESS
The Company's net sales have increased from $240.4 million in 1993 to
$631.1 million in 1997. As of November 28, 1998, the Company operated 418 stores
in 40 states and the District of Columbia, including 18 VPC stores in five
states, with approximately 33% of its locations in California and Texas. At
present, the Company plans to open approximately 45 new Men's Wearhouse stores
and four new SuitMax stores in 1998, to open an additional 40 to 45 new Men's
Wearhouse stores and 5 to 10 new SuitMax stores in 1999, and to continue its
store expansion in subsequent years. See "Acquisition of Moores", "Financing and
Capital Resources", "-- Business Strategy" and "-- Expansion Strategy".
INDUSTRY OVERVIEW
Men's Wearhouse has developed its approach to merchandising and marketing
by considering the buying patterns and perceived needs of its targeted customer.
The Company believes that most men consider a suit to be a major purchase, and,
accordingly, they generally shop for suits relatively infrequently and on an as
needed basis. The Company believes that it appeals to this type of customer by
offering a combination of service and value in Men's Wearhouse stores that may
not be consistently available at other stores selling men's tailored business
attire.
The Company also believes that the primary shopping options available to
men looking for business attire include specialty men's clothing stores,
traditional department stores, off-price retailers and manufacturer-owned and
independently-owned outlet stores.
Although specialty stores may carry higher quality and more expensive
designer and brand name suits, sport coats and slacks than Men's Wearhouse, the
breadth of selection may be limited. These stores usually offer the customer a
high degree of personal service. However, the merchandise at specialty stores
tends to be more expensive. In addition, these stores often lack the buying
power enjoyed by apparel chains that purchase in volume, and tailoring costs are
generally included in the price of each garment irrespective of the amount of
tailoring needed.
Department stores can offer greater breadth of selection and may offer
lower prices at certain times than specialty men's clothing stores. However, the
Company considers department stores to be less focused than the Company because
their men's departments often allocate relatively less selling space and sales
personnel to tailored business attire. In addition, menswear departments in
department stores tend to be highly promotional, and prices on a particular
piece of clothing can vary greatly throughout a selling season. Department
stores may have centralized tailoring facilities that are not located in the
store, which tends to delay the tailoring process and the ultimate delivery of
product to the customer.
Many off-price retailers and outlet stores offer low prices, but the
quality and depth of their menswear selection may be inconsistent. As with
department stores, there may be less focus on men's business attire since some
off-price retailers may also carry women's and children's merchandise and
certain outlet stores also carry sportswear. Customer service in these stores is
viewed by the Company as limited, with patrons often being required to help
themselves in locating the desired style, color and size, and in some instances
return policies are inflexible.
Men's Wearhouse has always attempted to distinguish itself by providing
what it believes to be the best features of each competing alternative.
BUSINESS STRATEGY
The Company, through Men's Wearhouse, seeks to be the premier off-price
specialty retailer of men's tailored business attire, catering to value-seeking
customers by offering a broad selection of quality apparel at everyday low
prices and by providing superior customer service in the Men's Wearhouse stores.
Management believes that the Company's growth is the result of its ability to
distinguish itself from its competitors and that its distinguishing features
include merchandise selection, customer service, expansion strategy and
corporate culture.
27
<PAGE> 29
Merchandising. The Company strives to associate Men's Wearhouse with
consistent product availability and value. Accordingly, in each Men's Wearhouse
store, the Company offers a broad selection of designer, brand name and private
label clothing, including a consistent stock of core items (such as navy
blazers, tuxedos and basic suits). Men's Wearhouse stores consistently provide
recognizable, quality merchandise at prices, in the case of suits, ranging
generally from $199 to $599. The Company does not purchase significant
quantities of merchandise overruns or closeouts.
Customer Service. In Men's Wearhouse stores, the Company attempts to
provide a level of service that is superior in its industry and differentiates
Men's Wearhouse from its competition. A "do whatever it takes" attitude toward
customer service is encouraged throughout the Company, with multiple programs
designed to provide customer convenience, promote customer satisfaction and
loyalty and increase the likelihood of current and future sales.
Expansion Strategy. The Company's expansion strategy is to continue to open
traditional stores in new and existing markets and to increase net sales and
profitability of existing markets. The Company anticipates that the addition of
new traditional stores will be a significant part of its future expansion. The
Company also anticipates further expansion in the more price sensitive market
through its VPC division. The Company may also seek to expand through
acquisition opportunities that may arise out of the continued consolidation of
the men's tailored clothing industry. See "Acquisition of Moores", "-- VPC
Operations" and "-- Expansion Strategy".
Company Culture. The Company recognizes that even the best strategies can
be unsuccessful if implemented without the employees' commitment. The Company
takes great pride in its corporate culture and believes its culture has promoted
a heightened sense of employee commitment and loyalty to the Company's long-term
goal of continued profitable growth.
MERCHANDISING
Men's Wearhouse stores offer a broad selection of designer, brand name and
private label men's business attire, including a consistent stock of core items
(such as navy blazers, tuxedos and basic suits) and considers its merchandise
conservative. Although basic styles are emphasized, each season's merchandise
does reflect current fabric and color trends, and a small percentage of
inventory, accessories in particular, is usually more fashion oriented. The
broad merchandise selection creates increased sales opportunities by permitting
a customer to purchase substantially all of his tailored wardrobe and accessory
requirements, including shoes, at a Men's Wearhouse store. Within its tailored
clothing, Men's Wearhouse offers an assortment of styles from a variety of
manufacturers and maintains a broad selection of fabrics and colors. The Company
believes that the depth of selection it offers at Men's Wearhouse provides it
with an advantage over most of its competitors.
In 1995, Men's Wearhouse expanded its inventory mix to include "business
casual" merchandise designed to meet increased demand for such product resulting
from the trend toward more relaxed dress codes in the workplace. The added
merchandise consists of tailored and non-tailored clothing that complements the
existing product mix and provides opportunity for enhanced sales without
significant inventory risk. The expanded inventory includes, among other things,
more sports coats, casual slacks, knits and woven sports shirts, sweaters and
casual shoes.
The Company believes its Men's Wearhouse stores differ from most other
off-price retailers in that the Company does not purchase significant quantities
of merchandise overruns or close-outs. Men's Wearhouse stores provide
recognizable quality merchandise at consistent prices that assist the customer
in identifying the value available at Men's Wearhouse. The Company believes that
the merchandise at the Men's Wearhouse stores is generally offered 20% to 30%
below traditional department and specialty store regular prices. Men's Wearhouse
affixes a ticket to each item, which displays the Men's Wearhouse selling price
alongside the price the Company regards as the regular retail price of the item.
At the check-out counter, the customer's receipt reflects the savings from what
the Company considers the regular retail price.
By targeting men's tailored business attire, a category of men's clothing
characterized by infrequent and more predictable fashion changes, the Company
believes it is not as exposed to trends typical of more fashion-
28
<PAGE> 30
forward apparel retailers. This allows Men's Wearhouse stores to carry basic
merchandise over to the following season and reduces the need for markdowns; for
example, a navy blazer or gray business suit may be carried over to the next
season. Men's Wearhouse has a once-a-year sale after Christmas and runs through
the month of January, during which prices on many items are reduced 20% to 50%
off the everyday low prices. This sale reduces stock at year-end and prepares
for the arrival of the new season's merchandise.
During 1995, 1996 and 1997, 74%, 72% and 71%, respectively, of the
Company's net sales were attributable to tailored clothing (suits, sport coats
and slacks), and 26%, 28% and 29%, respectively, were attributable to casual
attire, sportswear, shoes, shirts, ties, outerwear and other accessories.
In addition to accepting cash, checks or nationally recognized credit
cards, beginning on October 27, 1998 the Company started offering its own
private label credit card to customers. The private label credit card offers the
customer a discount based on sales volume -- for every $500 purchased on the
credit card during a specified period, the customer receives a gift certificate
for $50 that is valid for six months. The Company has contracted with a
third-party vendor to provide all necessary servicing, processing, and to assume
all credit risks associated with its private label credit card program. The
Company believes that the private label credit card provides the Company with an
important tool for targeted marketing and presents an excellent opportunity to
communicate with its customers via monthly statements and possibly over time to
increase the average dollar amount per transaction and the frequency of shopping
visits.
CUSTOMER SERVICE AND MARKETING
Men's Wearhouse sales personnel are trained as clothing consultants to
provide customers with assistance and advice on their apparel needs, including
product style, color coordination, fabric and garment fit. Clothing consultants
attend an intensive training program at the Company's training facility in
Fremont, California, which is further supplemented with weekly store meetings,
periodic merchandise meetings, and frequent interaction with multi-unit managers
and merchandise managers.
Men's Wearhouse encourages its clothing consultants to be friendly and
knowledgeable and to promptly greet each customer entering the store. The
consultants are encouraged to offer guidance to the customer at each stage of
the decision-making process, making every effort to earn the customer's
confidence and to create a professional relationship that will continue beyond
the initial visit. Clothing consultants are also encouraged to contact customers
after the purchase or pick-up of tailored clothing to determine whether
customers are satisfied with their purchases and, if necessary, to take
corrective action. Store personnel have full authority to respond to customer
complaints and reasonable requests, including the approval of returns,
exchanges, refunds, re-alterations and other special requests, all of which the
Company believes helps promote customer satisfaction and loyalty.
Each Men's Wearhouse store provides on-site tailoring services to
facilitate timely alterations at a reasonable cost to customers. Tailored
clothing purchased at a Men's Wearhouse store will be pressed and re-altered (if
the alterations were performed at a Men's Wearhouse store) free of charge for
the life of the garment.
Because management believes that men prefer direct and easy store access,
the Company attempts to locate Men's Wearhouse stores in neighborhood strip and
specialty retail centers or in free standing buildings to enable customers to
park near the entrance of the store.
The Company's annual advertising expenditures, which were $27.4 million,
$31.0 million and $38.0 million in 1995, 1996 and 1997, respectively, are
significant. However, the Company believes that once it attracts prospective
customers, the experience of shopping in its stores will be the primary factor
encouraging subsequent visits. Men's Wearhouse advertises principally on
television and radio, which it considers the most effective means of attracting
and reaching potential customers, and its advertising campaign is designed to
reinforce its image of providing value and customer service. "I guarantee it" is
a long standing phrase associated with Men's Wearhouse and its advertising
campaign. In the advertisements, the Company's Chief Executive Officer and
co-founder guarantees customer satisfaction with the apparel purchased, the
quality of tailoring and the total shopping experience.
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VPC OPERATIONS
The Company launched VPC in late 1996 to address the market for a more
price sensitive customer. The Company believes that VPC's more basic,
value-oriented approach appeals to certain customers in the men's tailored
clothing market. VPC offers a selection of brand names and private label
merchandise that the Company believes is typically 30% to 50% below the regular
retail prices of traditional department store and specialty store prices. The
prices of suits generally range from $99 to $199.
VPC operates stores under the names "C&R", "SuitMax" and "Suit Warehouse".
At November 28, 1998, the Company operated 18 VPC stores in five states, which
consist of 10 SuitMax stores, four Suit Warehouse stores and four C&R stores.
The Company has begun a process to integrate and develop the VPC operations
into a similar format and focus. This process will include a move toward a
common average store size, ranging from 10,000 to 15,000 square feet and hours
of operation from Friday through Sunday only in most markets. To build brand
awareness with customers, these stores will be operated under the name SuitMax.
To achieve this similar format, the Company has closed most of the existing
C&R stores, and it is anticipated that by the end of the first quarter of 1999
all C&R locations will be closed. In some cases, Men's Wearhouse stores are
being relocated to C&R locations. Management expects that estimated closing
costs related to the closure of the remaining C&R stores will not have a
material effect on its operations. The four Suit Warehouse stores will continue
to operate in Detroit, Michigan. The main focus of the VPC operations will be
the SuitMax stores. In addition to the 12 SuitMax stores expected to be in
operation at the end of 1998, the Company plans to add approximately 5 to 10 new
SuitMax stores in 1999 and to continue the expansion of the SuitMax stores in
subsequent years. The Company expects that it will experience lesser operating
margins from VPC as it makes substantial advertising expenditures to gain market
identity and rationalizes acquired assets to meet the new SuitMax format.
PURCHASING AND DISTRIBUTION
The Company purchases merchandise from approximately 200 vendors. In 1997,
one vendor accounted for 10% of purchases in 1997; however, management does not
believe that the loss of such vendor or any other vendor would significantly
impact the Company. While the Company has no material long-term contracts with
its vendors, the Company believes that it has developed an excellent
relationship with its vendors, which is supported by consistent purchasing
practices.
The Company believes it obtains favorable buying opportunities relative to
many of its competitors. The Company does not request cooperative advertising
support from manufacturers, which reduces the manufacturers' costs of doing
business and enables them to offer lower prices to the Company. Further, the
Company believes it obtains better discounts by entering into purchase
arrangements that provide for limited return policies, although the Company
always retains the right to return goods that are damaged upon receipt or
determined to be improperly manufactured. Finally, volume purchasing of
specifically planned quantities purchased well in advance of the season enables
more efficient production runs by manufacturers, who, in turn, are provided the
opportunity to pass some of the cost savings back to the Company.
During 1993, the Company expanded its inventory sourcing capabilities by
implementing a direct sourcing program. Under this program, the Company
purchases fabric from mills and contracts with certain factories for the
assembly of the end product (suits, sport coats or slacks). Such arrangements
for fabric and assembly have been with both domestic and foreign mills and
factories. Previous purchases from such mills and factories had been through
other suppliers. Product acquired during 1995, 1996 and 1997 through the direct
sourcing program represented approximately 20%, 28% and 31%, respectively, of
total inventory purchases, and the Company expects that purchases through such
program will represent approximately 35% of total purchases in 1998.
To protect against currency exchange risks associated with certain firmly
committed and certain other probable, but not firmly committed, inventory
transactions denominated in a foreign currency, the Company
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enters into forward exchange contracts. In addition, many of the purchases from
foreign vendors are financed by letters of credit.
In 1995, the Company entered into license agreements with a limited number
of parties under which the Company is entitled to use designer labels, such as
"Vito Rufolo", and nationally recognized brand labels such as "Botany" and
"Botany 500", in return for royalties paid to the licensor based on the costs of
the relevant product. These license agreements generally limit the use of the
individual label to products of a specific nature (such as men's suits, men's
formal wear or men's shirts). The labels licensed under these agreements will
continue to be used in connection with a portion of the purchases under the
direct sourcing program described above, as well as purchases from other
vendors. The Company monitors the performance of these licensed labels compared
to their cost and may elect to selectively terminate any license. During 1996,
the Company purchased several trademarks, including "Cricketeer", "Joseph &
Feiss International", "Baracuta" and "Country Britches", which will be used
similarly to the Company's licensed labels. Because of the continued
consolidation in the men's tailored clothing industry, the Company may be
presented with opportunities to acquire or license other designer or nationally
recognized brand labels.
All merchandise is received into the Company's central warehouses located
in Houston, Texas. Once received, merchandise is arranged by size. The computer
generates bar-coded garment tags and labels and recommends distribution of the
merchandise on the basis of each store's past performance with similar
merchandise and existing inventory levels. This distribution is reviewed by a
member of the merchandise staff and any necessary changes are made. Merchandise
for a store is picked and then moved to the appropriate staging area for
shipping. In addition to the central distribution centers in Houston, the
Company has additional space within certain Men's Wearhouse stores in the
majority of its markets which functions as redistribution facilities for their
respective areas.
The Company leases and operates 35 long-haul tractors and 55 trailers,
which, together with common carriers, ship merchandise from the vendors to the
Company's distribution facilities and from the distribution facilities to
centrally located stores within each market. The Company also leases or owns 73
smaller van-like trucks, which are used to ship merchandise locally or within a
given geographic region.
EXPANSION STRATEGY
The Company has experienced significant growth in recent years both from
new store openings and increased sales in existing stores. The Company opened
its first store in Houston, Texas in 1973 and, as of November 28, 1998, operated
418 stores in 40 states and the District of Columbia, including 18 VPC stores.
Net sales have increased from $240.4 million in 1993 to $631.1 million in 1997,
a compound annual growth rate of approximately 27%. During this same period, net
earnings increased from $8.7 million in 1993 to $28.9 million in 1997, a
compound annual growth rate of 35%.
A significant part of the Company's future growth is expected to come from
opening additional traditional stores in new and existing markets and increasing
its productivity and profitability in its existing markets. Because the Company
initially attracts customers within new markets through television advertising,
the Company classifies a market as new when it is within a new television
market. During 1996 and 1997, the Company opened 50 new stores in each year, and
entered 10 and 14 new markets, respectively. At present, the Company plans to
open approximately 45 new Men's Wearhouse stores and four new SuitMax stores in
1998, of which 32 Men's Wearhouse stores and two SuitMax stores were open as of
November 28, 1998. In addition, the Company plans to open an additional 40 to 45
Men's Wearhouse stores and 5 to 10 new SuitMax stores in 1999, to remodel and
relocate existing stores and to continue expansion in subsequent years.
Expansion within existing markets enables the Company to achieve additional
economies of scale primarily with regard to advertising, and is generally
continued within a given market as long as management believes such market will
provide profitable incremental sales volume. The Company believes that its
ability to increase the number of traditional stores in the United States above
500 will be limited. However, the Company believes that additional growth
opportunities exist through selectively expanding existing stores, improving and
diversifying the merchandise mix, relocating stores and expanding its VPC
operations.
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The Company enters a new market after management has reviewed the
competition, decided that the Company has a reasonable opportunity to establish
a market presence and determined that acceptable store locations will be
available. In selecting a new market, the Company typically analyzes such
criteria as the average household income as well as average household clothing
expenditures.
Depending upon the market, the Company may enter new markets by opening
several stores at the same time, thereby leveraging certain operating expenses.
In addition, the Company's advertising, which publicizes the Men's Wearhouse
name, merchandise and customer services, benefits multiple stores in the same
market. Historically, new multi-store markets have been profitable in the year
of entry (before any allocation of corporate overhead, advertising or
depreciation) and have experienced sales growth and increased profitability in
the first full year of operation.
In addition to its traditional means of opening new stores, the Company has
acquired a limited number of local menswear retailers in both new and existing
markets. The Company believes that the men's tailored clothing industry is
experiencing a consolidation as a result of the historical decline in sales of
men's tailored clothing. The Company also believes this consolidation presents
opportunities for the Company to increase its market share as financially weaker
retailers cease operations or consolidate. The Company has been and expects to
continue to be presented with opportunities in its industry, including, but not
limited to, increased direct sourcing of merchandise, acquisitions of menswear
retailers and the acquisition or licensing of national brands or designer
labels.
Since 1992, the Company has closed 22 stores, including 16 stores in the
nine months ended October 31, 1998, and expects to close approximately five
stores in 1999. Thirteen of the stores closed in 1998 and four of the stores
expected to be closed in 1999 are C&R stores that were or will be closed in
connection with the Company's process of integrating and developing the VPC
operations. See "-- VPC Operations". In general, in determining whether to close
a store, the Company considers such store's historical and projected performance
and the continued desirability of the store's location. Store performance is
continually monitored and, occasionally, as neighborhoods and shopping areas
change, management may determine that it is in the best interest of the Company
to close or relocate a store.
There can be no assurance that the Company will be able to accomplish its
planned expansion program or that new stores will be profitable. The Company's
ability to continue to expand will be dependent, among other things, upon
general economic and business conditions affecting consumer spending, the
availability of desirable locations and financing and the negotiation of
acceptable lease terms for new locations.
COMPANY CULTURE
The stated mission of Men's Wearhouse is "to maximize sales, provide value
to our customers and deliver top quality customer service while still having fun
and maintaining our values. These values include nurturing creativity, growing
together, admitting to our mistakes, promoting a happy and healthy lifestyle,
enhancing a sense of community and striving toward becoming self actualized
people."
The Company believes that its employees are stakeholders in the Company and
that the employment experience provided should result in a quality relationship
with the Company. The Company's goal has been to create and maintain an
environment where each person can enhance personal skills and enjoy the time
spent on the job, thereby increasing his or her productivity. The Company
attempts to provide educational and training benefits to employees and strives
to treat all employees with respect. The Company believes that this commitment
to employees results in loyalty to the Company and a shared participation in the
Company's goals and values.
The Company is committed to its customers, works to constantly improve its
customer relations and seeks to provide outstanding customer service. To further
this commitment, management stands behind the employees' judgment in their
efforts to satisfy their customers. Men's Wearhouse encourages customers to
communicate their feelings regarding their experience at Men's Wearhouse stores
and provides a toll free telephone number for such purpose. Messages are
received directly by the Company's Chief Executive Officer and the Chief
Executive Officer or a designated member of the Company provides a prompt
response.
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The Company has had long-term relationships with many of its suppliers.
Since its inception, the Company has attempted to deal honestly with its vendors
and believes it has established a reputation for honoring its covenants and
promises to vendors.
Every Men's Wearhouse store is located within a community and the Company
recognizes that it relies on the support of that community for its success.
Therefore, the Company has developed a sense of commitment to the communities in
which it does business. Whether it participates in civic organizations, supports
community charitable organizations or lends a hand in an emergency, the Company
tries to involve itself and its employees in selected projects that provide
social benefits to the communities in which it does business.
The Company's commitment to operate a growing, profitable and socially
responsible company is a commitment of which its shareholders can be proud. The
Company seeks to adhere to its culture, not only as a means for achieving
economic success, but because adherence is a worthwhile goal in and of itself.
EMPLOYEE TRAINING AND BENEFITS
The Company believes that knowledgeable and loyal employees are critical to
maintaining the level of customer service and employee integrity that the
Company has enjoyed. To further these beliefs, management has established
programs that are intended to motivate its employees.
The Company has several programs designed to train and educate its
employees in areas of customer service and product knowledge. Men's Wearhouse
clothing consultants are brought into the Company's California headquarters to
attend an orientation and training course at Suits University. Over several
days, these employees are instructed in the general corporate culture,
operational procedures and product knowledge. The Company believes that,
although this program has increased training costs each year, the Company
benefits from the increasing productivity of its clothing consultants through
increased sales of multiple units of suits, sport coats and slacks.
After graduation from Suits University, formal training continues in the
stores through video training, interaction with multi-unit management personnel,
merchandise personnel and field operations trainers. All field management
personnel are brought into regular contact with senior corporate staff at
semi-annual retreats. These retreats last from one to four days, are held in
environments conducive to training and building employee camaraderie and are
each focused on improving the educational program or achieving a corporate goal.
The Company believes it has designed incentive programs that support the
Company culture and believes that the employee benefits offered by the Company
are attractive relative to the benefits offered by others in the retail
industry. In addition to medical and dental insurance plans, employees may
participate in a diversified 401(k) plan and a medical and childcare spending
plan. Since the retail environment generally requires long working hours, the
Company attempts to promote a sense of family participation and involvement in
the Company among its employees.
The Company attempts to increase the longevity of employment of its
employees, which it believes contributes to the building of relationships with
its customers and repeat sales. With the exception of certain financial,
accounting and information technology personnel, the majority of upper and
middle management started their careers on the sales floor. The Company strongly
believes in promoting from within, which, given its emphasis on service, the
Company believes ultimately provides a benefit to the customers. Generally,
management personnel with several years of tenure have a better understanding of
the corporate culture and values of the Company and, therefore, are more likely
to provide new employees with consistent messages of corporate philosophy. As
the Company expands into new markets, it intends, where possible, to utilize its
existing management personnel.
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THE MEN'S WEARHOUSE STORES
As of November 28, 1998, the Company operated 418 stores in 40 states and
the District of Columbia. The following table sets forth the location, by state,
of these Company stores:
<TABLE>
<CAPTION>
MEN'S
WEARHOUSE VPC
--------- ---
<S> <C> <C>
California.................................................. 82 6
Texas....................................................... 42 6
Florida..................................................... 25 --
Michigan.................................................... 18 4
Illinois.................................................... 18 --
Ohio........................................................ 15 --
Pennsylvania................................................ 14 --
Washington.................................................. 13 --
North Carolina.............................................. 12 --
Virginia.................................................... 12 --
Georgia..................................................... 11 1
Colorado.................................................... 10 --
Maryland.................................................... 9 --
Massachusetts............................................... 9 --
Minnesota................................................... 9 --
New York.................................................... 9 --
Arizona..................................................... 8 --
Indiana..................................................... 8 --
Missouri.................................................... 7 --
Tennessee................................................... 7 --
Connecticut................................................. 6 --
Oregon...................................................... 6 --
Wisconsin................................................... 6 --
New Jersey.................................................. 5 --
Utah........................................................ 5 --
Nevada...................................................... 4 --
South Carolina.............................................. 4 --
Alabama..................................................... 3 --
Kentucky.................................................... 3 --
Louisiana................................................... 3 1
New Hampshire............................................... 3 --
Oklahoma.................................................... 3 --
Kansas...................................................... 2 --
Nebraska.................................................... 2 --
Delaware.................................................... 1 --
District of Columbia........................................ 1 --
Idaho....................................................... 1 --
Iowa........................................................ 1 --
Mississippi................................................. 1 --
New Mexico.................................................. 1 --
Rhode Island................................................ 1 --
</TABLE>
Men's Wearhouse stores vary in size from approximately 2,800 to 10,800
total square feet (average square footage at November 28, 1998 was 4,826 square
feet). Men's Wearhouse stores are primarily located in middle and upper middle
income neighborhood strip and specialty retail shopping centers. The Company
believes its customers generally prefer to limit the amount of time they spend
shopping for men's tailored clothing and seek easily accessible store sites.
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Men's Wearhouse stores are designed to further the Company's strategy of
facilitating sales while making the shopping experience pleasurable. Men's
Wearhouse attempts to create a specialty store atmosphere through effective
merchandise presentation and sizing, attractive in-store signs and efficient
check-out procedures. Most of the traditional stores have similar floor plans
and merchandise presentation to facilitate the shopping experience and sales
process. Designer, brand name and private label garments are intermixed, and
emphasis is placed on the fit of the garment rather than on a particular label
or manufacturer. Each store is staffed with clothing consultants and sales
associates and has a tailoring facility with at least one tailor.
The SuitMax and Suit Warehouse stores vary in size from approximately 5,400
to 30,700 total square feet (average square footage at November 28,1998 was
13,718 square feet).
MANAGEMENT INFORMATION AND TELECOMMUNICATION SYSTEMS
The Company has aggressively pursued the implementation of technology which
provides the opportunity for competitive advantage and which leverages human
resources. By implementing a sophisticated management information system, and by
integrating it with a highly functional telecommunication system, the Company
has effectively managed the operation of its business and its inventory while
experiencing substantial growth.
The Company's inventory control systems, including purchase order
management, automatic replenishment of basic items, and real-time point of sale,
have contributed to enhanced performance and profitability and to achieving
inventory shrinkage rates that are consistently below industry averages. The use
of Electronic Data Interchange with several suppliers combined with the use of
data warehousing and decision support technologies have substantially leveraged
the efforts of the merchandising team, allowing them to reallocate time from
simple and repetitive tasks to those requiring more analytical skills.
The Company's voice mail system has not only enhanced internal
communication capabilities, it also has provided an actively used channel for
improving customer service and it has contributed to the Company's advertising
efforts, giving the Company access to unsolicited customer testimonials.
Due to the dramatic changes in state of the art information technology,
both in general and with regard to the retail industry, in mid-1997, the Company
commenced an enterprise-wide project to upgrade its information technology by
acquiring products that are generally available and field tested and are
designed to increase the efficiency and the future productivity of its
operations. The Company has benefited significantly from investment in
technology in the past, and it is anticipated that these modifications will
further increase the benefit that the Company derives from technology, both in
the near term and in the future. In completing these modifications, the Company
expects to achieve Year 2000 date conversion compliance. Capital expenditures
related to the project are anticipated to be between approximately $12.0 million
and $20.0 million. The amount of expenditures related specifically to Year 2000
date conversion compliance are not separable from this amount. The Company
expects that all of its business systems will be Year 2000 compliant by
mid-1999. The Company does not anticipate that the cost will have a material
effect on the Company's consolidated financial position or results of operations
in any given year. However, no assurances can be given that the Company will be
able to completely identify or address all Year 2000 compliance issues, or that
third parties with whom the Company does business will not experience system
failures as a result of the Year 2000 issue, nor can the Company fully predict
the consequences of noncompliance.
The Company employs technology in several other areas of its operations and
intends to continue its pursuit of technologies that will favorably impact
performance and/or the delivery of customer service.
As part of its assessment of the Year 2000 issue, the Company has completed
an inventory of its hardware and software systems, including the embedded
systems in the Company's buildings, property and equipment. The Company is
presently in the process of implementing converted and replacement systems for
all of its non-compliant hardware and software systems to ensure that the
operation of such systems will not be materially adversely affected by the Year
2000 date change. The Company estimates that its efforts to make all internal
systems Year 2000 compliant are approximately 70% complete.
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To date, the Company has made expenditures of approximately $500,000
related to its telephone and security systems specifically to address the Year
2000 issue. The Company does not anticipate that it will incur any additional
material expenditures beyond those associated with the updating and upgrading of
the information systems discussed above to address the Year 2000 issue.
In many cases the Company has received written responses from its vendors
and suppliers confirming that the vendor or supplier is Year 2000 compliant. The
Company will continue to monitor those vendors and suppliers, as well as those
that have not provided written assurance.
Assuming no general failure of utilities to provide basic services over
large geographic areas or of the banking systems generally to conduct business
substantially as usual, or of the credit card systems to confirm credit
generally, the Company believes that at the store level, the worst case scenario
for the Company would require the processing of credit approval by telephone and
the ordering and allocation of inventory by telephone. While each of these
scenarios would increase the cost of doing business and may result in the loss
of some sales, the Company does not believe that either of these situations
would have a material adverse effect on the Company's results of operations.
If the Company is unable to purchase or receive inventory, or is unable to
arrange for the manufacture of piece goods acquired by the Company into tailored
clothing, such failure, depending on how extensive, could have a material
adverse effect on the operations of the Company. However, no vendor or supplier
accounts for more than 10% of the inventory purchased by the Company and in most
cases alternative suppliers are available.
The Company does anticipate that it will increase its inventory for
approximately one month prior to the Year 2000 to insure that it has adequate
inventory to cover possible disruptions associated with the Year 2000 date
change.
The Company has not developed a contingency plan at present. However, the
Company will adopt such a plan, if necessary, in mid-1999 to address any
unresolved issues or risks that may exist at that time.
The statements included in this section are intended to be and are
designated "Year 2000 Readiness Disclosure" statements within the meaning of the
Year 2000 Information and Readiness Disclosure Act.
COMPETITION
The Company believes that the unit demand for men's tailored clothing has
declined. The Company's primary competitors include specialty men's clothing
stores, traditional department stores, off-price retailers and
manufacturer-owned and independently-owned outlet stores. Over the past several
years market conditions have resulted in consolidation of the industry. The
Company believes that the principal competitive factors in the men's tailored
clothing market are merchandise assortment, quality, price, garment fit,
merchandise presentation, store location and customer service. The Company
attempts to distinguish itself from its competitors by providing what it
believes are the best features of each competing shopping alternative.
The Company believes that strong vendor relationships, its direct sourcing
program and the buying power of the Company are the principal factors enabling
it to obtain quality merchandise at attractive prices. The Company believes that
its vendors rely on the Company's predictable payment record and on the
Company's history of honoring all promises, including the Company's promise not
to advertise names of labeled and unlabeled designer merchandise, when
requested. Certain of the Company's competitors (principally department stores)
are larger and have substantially greater financial, marketing and other
resources than the Company and there can be no assurance that the Company will
be able to compete successfully with them in the future.
SEASONALITY
Like most retailers, the Company's business is subject to seasonal
fluctuations. Historically, over 30% of the Company's net sales and
approximately 50% of its net earnings have been generated during the fourth
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quarter of each year. Because of the seasonality of the Company's business,
results for any quarter are not necessarily indicative of the results that may
be achieved for the full year.
TRADEMARKS AND SERVICE MARKS
The Company is the owner in the United States of the trademark and service
mark, "The Men's Wearhouse(R)", and of federal registrations therefor expiring
in 2009 and 2002, respectively, subject to renewal. The Company has also been
granted registrations for that trademark and service mark in 36 states
(including Texas and California) of the 37 states, plus the District of
Columbia, in which it does business and has used those marks. Applications for
the most recent states entered are in process. The Company's rights in the "The
Men's Wearhouse" mark are a significant part of the Company's business, as the
mark has become well known through the Company's television and radio
advertising campaigns. Accordingly, the Company intends to maintain its mark and
the related registrations.
The Company is also the owner in the United States of the service marks
"C&R", "C&R Clothiers", "Walter Pye's", "NAL", "Suit Warehouse" and "SuitMax".
Such marks are used to identify the retail store services of and are the
tradenames utilized by the retail clothing stores operated by VPC.
In addition to The Men's Wearhouse, C&R Clothiers and NAL
trademarks/service marks, the Company owns or licenses numerous other trademarks
and service marks used in the business, principally in connection with
advertising and the labeling of product purchased through the direct sourcing
program.
LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings, including
ongoing litigation, incidental to the conduct of its business. Management
believes that none of these matters will have a material adverse effect on the
financial condition or results of operations of the Company.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, par value $.01 per share, and 2,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). At December 29, 1998,
34,845,126 shares of common stock were outstanding and held by approximately
1,100 holders of record and no shares of Preferred Stock were outstanding. A
total of 3,582,049 shares of common stock are reserved for future issuance of
which (i) 666,220 shares are reserved for issuance upon the exercise of options
granted under the Company's 1992 Stock Option Plan, (ii) 1,105,880 shares are
reserved for issuance upon the exercise of options granted under the Company's
1996 Stock Option Plan, (iii) 750,000 shares are reserved for issuance upon the
exercise of options granted under the Company's 1998 Key Employee Stock Option
Plan, (iv) 938,449 shares are reserved for issuance upon the exercise of options
granted under the Company's Employee Stock Discount Plan, (v) 67,500 shares are
reserved for issuance upon the exercise of options granted under the Company's
Non-Employee Director Stock Option Plan and (vi) 54,000 shares are reserved for
issuance upon the exercise of options granted under miscellaneous employee stock
option agreements. In connection with the consummation of the Moores
acquisition, one share of Preferred Stock, to which voting rights attach for the
benefit of the holders of the Exchangeable Shares, will be issued to a voting
trustee to be designated by the Company.
COMMON STOCK
Holders of shares of Men's Wearhouse common stock are entitled to one vote
per share in the election of directors and on all other matters submitted to a
vote of shareholders. Such holders do not have the right to cumulate their votes
in the election of directors. Holders of Men's Wearhouse common stock have no
redemption or conversion rights and no preemptive or other rights to subscribe
for securities of the Company. In the event of a liquidation, dissolution or
winding up of the Company, holders of Men's Wearhouse common stock are entitled
to share equally and ratably in all of the assets remaining, if any, after
satisfaction of all debts and liabilities of the Company, and the preferential
rights of any series of Preferred Stock then outstanding. The shares of Men's
Wearhouse common stock outstanding are fully paid and non-assessable.
Holders of Men's Wearhouse common stock have an equal and ratable right to
receive dividends, when, as and if declared by the Board of Directors out of
funds legally available therefor and only after payment of, or provision for,
full dividends on all outstanding shares of any series of Preferred Stock and
after the Company has made provision for any required sinking or purchase funds
for any series of Preferred Stock. The Company's Credit Agreement prohibits the
payment of cash dividends on the Men's Wearhouse common stock.
PREFERRED STOCK
The Preferred Stock may be issued, from time to time in one or more series,
and the Board of Directors, without further approval of the shareholders, is
authorized to fix the dividend rights and terms, redemption rights and terms,
liquidation preferences, conversion rights, voting rights and sinking fund
provisions applicable to each such series of Preferred Stock. If the Company
issues a series of Preferred Stock in the future that has voting rights or
preference over the Men's Wearhouse common stock with respect to the payment of
dividends and upon the Company's liquidation, dissolution or winding up, the
rights of the holders of the Men's Wearhouse common stock offered hereby may be
adversely affected. The issuance of shares of Preferred Stock could be utilized,
under certain circumstances, in an attempt to prevent an acquisition of the
Company. The Company has no present intention to issue any shares of Preferred
Stock other than the one share of Preferred Stock to be issued in connection
with the Moores acquisition.
Upon the consummation of the Moores acquisition, the Company will issue one
share of Preferred Stock to be designated "Series A Special Voting Preferred
Stock". The holder of this share of Series A Special Voting Preferred Stock will
be entitled to vote on all matters on which the holders of Men's Wearhouse
common stock vote and will be entitled to that number of votes as are equal to
the number of Exchangeable Shares then outstanding. In the event of a
liquidation, dissolution or winding up of the Company, the holder of the one
share of Series A Special Voting Preferred Stock will be entitled to receive
$0.01, after satisfaction of
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all debts and liabilities of the Company and the preferential rights of any
other series of Preferred Stock then outstanding. The holder of the Series A
Special Voting Preferred Stock shall have no rights as to the payment of
dividends nor shall the holder thereof be entitled to convert the Series A
Special Voting Preferred Stock into Men's Wearhouse common stock.
LIMITATION OF DIRECTOR LIABILITY
The Restated Articles of Incorporation of the Company contain a provision
that limits the liability of the Company's directors as permitted under Texas
law. The provision eliminates the liability of a director to the Company or its
shareholders for monetary damages for negligent or grossly negligent acts or
omissions in the director's capacity as a director. The provision does not
affect the liability of a director (i) for breach of his duty of loyalty to the
Company or to shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for acts or
omissions for which the liability of a director is expressly provided by an
applicable statute, or (iv) in respect of any transaction from which a director
received an improper personal benefit. Pursuant to the Restated Articles of
Incorporation, the liability of directors will be further limited or eliminated
without action by shareholders if Texas law is amended to further limit or
eliminate the personal liability of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Men's Wearhouse common stock is
American Stock Transfer & Trust Company.
LEGAL MATTERS
Fulbright & Jaworski L.L.P., Houston, Texas has passed upon certain legal
matters with respect to the Men's Wearhouse common stock for the Company.
Michael W. Conlon, a partner in the firm of Fulbright & Jaworski L.L.P., is the
Secretary of the Company.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K, as amended by Form
10-K/A, for the year ended January 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Moores as at January 31, 1998
included in this prospectus have been audited by Ernst & Young LLP, independent
auditors and have been so included in reliance upon their report given upon
their authority as experts in accounting and auditing.
39
<PAGE> 41
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MOORES RETAIL GROUP INC.
Auditors' Report.......................................... F-2
Consolidated Balance Sheet................................ F-3
Consolidated Statement of Income and Comprehensive
Income................................................. F-4
Consolidated Statement of Stockholders' Equity............ F-5
Consolidated Statement of Cash Flows...................... F-6
Notes to Consolidated Financial Statements................ F-7
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
Pro Forma Combined Financial Statements -- Basis of
Presentation........................................... F-20
Pro Forma Combined Balance Sheet.......................... F-21
Pro Forma Combined Statements of Net Earnings:
For the Year Ended January 31, 1998.................... F-22
For the Nine Months Ended October 31, 1998............. F-23
For the Nine Months Ended November 1, 1997............. F-24
Notes to Pro Forma Combined Financial Statements.......... F-25
</TABLE>
F-1
<PAGE> 42
AUDITORS' REPORT
To the Directors of
MOORES RETAIL GROUP INC.
We have audited the consolidated balance sheet of MOORES RETAIL GROUP INC.
as at January 31, 1998 and the consolidated statements of income and
comprehensive income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at January 31, 1998 and the
results of its operations and the changes in its cash flows for the year then
ended in accordance with accounting principles generally accepted in the United
States.
Montreal, Canada,
March 20, 1998 Chartered Accountants
[except note 15, which is as of November 18, 1998
and notes 6 and 8, which are as of December 30, 1998].
F-2
<PAGE> 43
MOORES RETAIL GROUP INC.
(INCORPORATED UNDER THE LAWS OF NEW BRUNSWICK, CANADA)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS (NOTES 6 AND 8)
CURRENT
Cash........................................................ 1,696 54
Accounts receivable (note 13)............................... 719 702
Inventories (note 3)........................................ 38,482 33,184
Prepaid expenses............................................ 500 724
Deferred income taxes....................................... 1,838 1,284
------ ------
TOTAL CURRENT ASSETS........................................ 43,235 35,948
------ ------
Property, plant and equipment (note 4)...................... 10,430 9,033
Other assets (note 5)....................................... 25,109 28,044
------ ------
78,774 73,025
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness and revolving credit facility (note 6).... 7,941 3,294
Revolving credit facility due to significant stockholder
(note 6).................................................. 2,580 --
Accounts payable and accrued liabilities (notes 7, 11 and
13)....................................................... 14,123 10,963
Income taxes payable........................................ 660 1,532
Current portion of long-term debt (note 8).................. 2,552 2,319
Current portion of long-term debt payable to significant
stockholders (note 8)..................................... 851 1,050
------ ------
TOTAL CURRENT LIABILITIES................................... 28,707 19,158
------ ------
Deferred income taxes....................................... 264 280
Long-term debt (note 8)..................................... 14,341 17,261
Long-term debt payable to significant stockholders (note
8)........................................................ 30,331 32,834
------ ------
73,643 69,533
------ ------
STOCKHOLDERS' EQUITY
Capital stock (note 9)
Preferred shares, no par value, issuable in series,
unlimited shares authorized,
none issued............................................. -- --
Common shares, no par value, unlimited shares authorized,
30,000 shares issued and outstanding.................... 732 732
Class B common shares, no par value, 70,000 shares
authorized, issued and outstanding...................... 976 976
Class C common shares, no par value, 122,222 shares
authorized, 100,000 shares issued and outstanding....... -- --
Class D common shares, no par value, 135,000 shares
authorized, issued and outstanding...................... -- --
Class E common shares, no par value, 66,000 shares
authorized, none issued................................. -- --
Class F common shares, no par value, 6,698 shares
authorized, none issued................................. -- --
Retained earnings........................................... 3,786 1,972
Accumulated comprehensive loss.............................. (363) (188)
------ ------
TOTAL STOCKHOLDERS' EQUITY.................................. 5,131 3,492
------ ------
78,774 73,025
====== ======
</TABLE>
Commitments and contingencies (note 11)
See accompanying notes
F-3
<PAGE> 44
MOORES RETAIL GROUP INC.
CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH YEAR
PERIOD ENDED PERIOD ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31,
1998 1997 1998
$ $ $
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET SALES................................................. 94,682 92,402 131,414
COST OF SALES, INCLUDING STORE OCCUPANCY COSTS............ 59,002 58,129 82,751
------ ------ -------
GROSS PROFIT.............................................. 35,680 34,273 48,663
------ ------ -------
Selling, general and administrative expenses (note 9)..... 25,863 24,184 33,775
------ ------ -------
INCOME BEFORE THE UNDERNOTED ITEMS........................ 9,817 10,089 14,888
------ ------ -------
Transaction costs (note 14)............................... -- -- 1,521
Interest (note 12)........................................ 5,310 5,478 7,234
------ ------ -------
INCOME BEFORE INCOME TAXES................................ 4,507 4,611 6,133
Provision for income taxes (note 10)...................... 2,693 2,550 4,065
------ ------ -------
NET INCOME FOR THE PERIOD................................. 1,814 2,061 2,068
Foreign currency translation adjustment................... (175) (121) (212)
------ ------ -------
COMPREHENSIVE INCOME...................................... 1,639 1,940 1,856
====== ====== =======
Related party transactions (note 12)
</TABLE>
See accompanying notes
F-4
<PAGE> 45
MOORES RETAIL GROUP INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS)
FOR THE NINE-MONTH PERIOD ENDED OCTOBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS B CLASS C
COMMON SHARES COMMON SHARES COMMON SHARES ACCUMULATED
--------------- --------------- ---------------- RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS LOSS TOTAL
# $ # $ # $ $ $ $
------ ------ ------ ------ ------- ------ -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31,
1998..................... 30,000 732 70,000 976 100,000 -- 1,972 (188) 3,492
Net income................. -- -- -- -- -- -- 1,814 -- 1,814
Foreign currency
translation adjustment... -- -- -- -- -- -- -- (175) (175)
------ --- ------ --- ------- --- ----- ---- -----
BALANCE AT OCTOBER 31,
1998..................... 30,000 732 70,000 976 100,000 -- 3,786 (363) 5,131
====== === ====== === ======= === ===== ==== =====
</TABLE>
FOR THE NINE-MONTH PERIOD ENDED OCTOBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS B CLASS C
COMMON SHARES COMMON SHARES COMMON SHARES ACCUMULATED
--------------- --------------- ---------------- RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS INCOME (LOSS) TOTAL
# $ # $ # $ $ $ $
------ ------ ------ ------ ------- ------ -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31,
1997..................... 30,000 732 70,000 976 -- -- (96) 24 1,636
Net income................. -- -- -- -- -- -- 2,061 -- 2,061
Pro-rata distribution of
Class C common shares
(note 9)................. -- -- -- -- 100,000 -- -- -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- -- (121) (121)
------ --- ------ --- ------- --- ----- ---- -----
BALANCE AT OCTOBER 31,
1997..................... 30,000 732 70,000 976 100,000 -- 1,965 (97) 3,576
====== === ====== === ======= === ===== ==== =====
</TABLE>
FOR THE YEAR ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
CLASS B CLASS C
COMMON SHARES COMMON SHARES COMMON SHARES ACCUMULATED
--------------- --------------- ---------------- RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS INCOME (LOSS) TOTAL
# $ # $ # $ $ $ $
------ ------ ------ ------ ------- ------ -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31,
1997..................... 30,000 732 70,000 976 -- -- (96) 24 1,636
Net income................. -- -- -- -- -- -- 2,068 -- 2,068
Pro-rata distribution of
Class C common shares
(note 9)................. -- -- -- -- 100,000 -- -- -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- -- (212) (212)
------ --- ------ --- ------- --- ----- ---- -----
BALANCE AT JANUARY 31,
1998..................... 30,000 732 70,000 976 100,000 -- 1,972 (188) 3,492
====== === ====== === ======= === ===== ==== =====
</TABLE>
There were no changes in preferred shares and Class D, E and F common
shares during the nine-month periods ended October 31, 1998 and 1997 and for the
year ended January 31, 1998.
See accompanying notes
F-5
<PAGE> 46
MOORES RETAIL GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH YEAR
PERIOD ENDED PERIOD ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31,
1998 1997 1998
$ $ $
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ 1,814 2,061 2,068
Items not affecting cash
Depreciation of property, plant and equipment........... 1,628 1,633 2,252
Amortization of goodwill and deferred financing fees.... 1,535 1,639 2,166
Interest expense related to amortization of debt
discount (note 9).................................... 132 141 185
Deferred income taxes recovered......................... (680) (513) (256)
Decrease (increase) in accounts receivable................ (59) 313 (34)
Increase in inventories................................... (7,506) (4,120) (4,072)
Decrease (increase) in prepaid expenses................... 192 (436) (200)
Increase (decrease) in accounts payable and accrued
liabilities............................................. 3,954 (123) 1,034
Increase (decrease) in income taxes payable............... (821) 715 1,369
------ ------ ------
CASH PROVIDED BY OPERATING ACTIVITIES..................... 189 1,310 4,512
------ ------ ------
FINANCING ACTIVITIES
Bank indebtedness and revolving credit facility........... 7,754 (855) (4,421)
Capitalized interest on long-term debt.................... -- 2,620 3,124
Proceeds from (repayment of) long-term debt............... (2,239) 905 649
Deferred merger costs and other........................... (256) (284) (40)
------ ------ ------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES........... 5,259 2,386 (688)
------ ------ ------
INVESTING ACTIVITIES
Other..................................................... -- 680 674
Additions to property, plant and equipment................ (3,624) (2,261) (3,184)
------ ------ ------
CASH USED IN INVESTING ACTIVITIES......................... (3,624) (1,581) (2,510)
------ ------ ------
Effect of foreign exchange rate changes on cash........... (182) (1,685) (2,109)
------ ------ ------
INCREASE (DECREASE) IN CASH POSITION...................... 1,642 430 (795)
Cash position, beginning of period........................ 54 849 849
------ ------ ------
CASH POSITION, END OF PERIOD.............................. 1,696 1,279 54
====== ====== ======
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash interest paid........................................ 4,592 4,240 5,747
Cash income taxes paid.................................... 4,245 2,374 3,030
</TABLE>
See accompanying notes
F-6
<PAGE> 47
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
INFORMATION AS AT OCTOBER 31, 1998 AND FOR THE NINE-MONTH PERIODS ENDED
OCTOBER 31, 1998 AND 1997 IS UNAUDITED. [ALL TABULAR AMOUNTS ARE EXPRESSED IN
THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED.]
The consolidated financial statements of the Company have been prepared by
management in accordance with accounting principles generally accepted in the
United States, including the rules and regulations adopted by the United States
Securities and Exchange Commission ["the SEC"]. The consolidated financial
statements have, in management's opinion, been properly prepared using careful
judgment within reasonable limits of materiality and within the framework of the
accounting policies summarized in note 2.
The accompanying financial statements have been prepared in connection with
the merger transaction referred to in note 15 and present the financial position
of the Company as at October 31, 1998 and January 31, 1998 and the results of
operations and changes in cash flow and stockholders' equity for the nine-month
periods ended October 31, 1998 and 1997 and for the year ended January 31, 1998.
1. DESCRIPTION OF BUSINESS
Moores Retail Group Inc. ["the Company"] is a holding company with three
wholly owned operating subsidiaries: Moores The Suit People Inc. ["Moores"],
Golden Brand Clothing (Canada) Ltd. ["Golden Brand"] and Moores The Suit People
U.S. Inc. ["Moores U.S."]. Moores U.S. commenced commercial operations during
the year ended January 31, 1998.
The Company is a Canadian specialty retailer of men's tailored clothing,
with approximately 115 retail outlets. The Company is integrated and
manufactures virtually all of its tailored clothing, which includes men's suits,
sports coats and dress pants.
The Company's merchandise also includes dress shirts, sportswear, outerwear
and accessories which are not manufactured in-house.
The Company was incorporated on December 9, 1996 under the laws of New
Brunswick, Canada as Zorro Holding Corp. By way of a resolution of the Board of
Directors dated September 26, 1997, the name of the Company was changed to
Moores Retail Group Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Golden Brand, Moores and Moores U.S. In
preparing the consolidated financial statements, all intercompany balances and
transactions have been eliminated.
(B) INVENTORY VALUATION
Raw materials are valued at the lower of cost and replacement cost.
Work-in-process is valued at the lower of cost and net realizable value.
Finished goods are valued at the lower of cost and net realizable value,
using the retail inventory method for retail inventories.
The above costs are determined on an average cost basis.
(C) REVENUE RECOGNITION
Revenue is recognized at the time of sale for retail goods. Wholesale
revenues are recognized at the time of shipment.
F-7
<PAGE> 48
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(D) USE OF ESTIMATES
The preparation of the Company's financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results could differ materially from
these estimates.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and is depreciated over their estimated useful lives on a declining
balance basis as follows:
<TABLE>
<S> <C>
Furniture, fixtures and computer equipment.................. 20%-30%
Machinery and equipment..................................... 20%
Rolling stock............................................... 30%
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
terms of the leases.
(F) GOODWILL
Goodwill is amortized on a straight-line basis over its estimated useful
life of 20 years. On an ongoing basis, management reviews the valuation and
amortization of goodwill, taking into consideration any events or circumstances
which might have impaired the carrying value. The amount of goodwill impairment,
if any, is measured based on future cash flows.
(G) DEFERRED FINANCING COSTS
Deferred financing costs are amortized as interest expense, on a
straight-line basis over the term of the related long-term debt. Substantially
all of the deferred financing costs are being amortized over a five-year period.
(H) FOREIGN CURRENCY TRANSLATION
These financial statements are displayed in U.S. dollars. The functional
currency of the Company is the Canadian dollar. As such, the assets and
liabilities of the Company have been translated into U.S. dollars at the
exchange rates in effect at each balance sheet date. Stockholders' equity has
been translated into U.S. dollars at applicable historical exchange rates.
Revenues, expenses and cash flows are translated at weighted average rates of
exchange.
Gains or losses resulting from foreign currency transactions are included
in income, while those resulting from the translation of the financial
statements are included as a separate component of stockholders' equity.
The relevant foreign exchange rates, expressed as the foreign currency
equivalent of one Canadian dollar to one U.S. dollar, used in the preparation of
these financial statements are 0.6481 and 0.6870 as at October 31, 1998 and
January 31, 1998, respectively, and 0.6779, 0.7244 and 0.7182 for the nine-month
periods ended October 31, 1998 and 1997 and for the year ended January 31, 1998,
respectively.
(I) INCOME TAXES
The Company accounts for income taxes using the asset and liability
approach in accordance with Financial Accounting Standards Board ("FASB")
Statement No. 109. Under the asset and liability approach, deferred income taxes
are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
F-8
<PAGE> 49
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense consists of both the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
(J) ADVERTISING AND STORE OPENING COSTS
Advertising and store opening costs are expensed as incurred. Total
advertising expenses are approximately $9,004,000, $8,223,000 and $11,178,000
for the nine-month periods ended October 31, 1998 and 1997 and the year ended
January 31, 1998, respectively.
(K) STOCK OPTIONS
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for stock options. Accordingly, compensation expense has been
recognized in these financial statements in connection with certain stock
options granted at less than fair market value.
(L) COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December 15, 1997.
FASB Statement No. 130 establishes standards for reporting and displaying
comprehensive income and its components in financial statements. This
pronouncement has been applied retroactively in these financial statements.
(M) DEFERRED MERGER COSTS
The costs incurred by the Company to October 31, 1998 related to the merger
transaction set out in note 15 have been deferred and will be recorded as an
expense in the period in which the merger transaction is consummated.
(N) RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Company is required to adopt
this standard in the first quarter of the fiscal year ending January 31, 2000.
The Company is currently assessing the impact that this standard will have on
its financial position and results of operations.
3. INVENTORIES
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
----------- -----------
(UNAUDITED)
<S> <C> <C>
Raw materials............................................... 2,219 2,226
Work-in-process............................................. 2,117 1,830
Finished goods.............................................. 4,720 9,455
Retail inventories.......................................... 29,426 19,673
------ ------
38,482 33,184
====== ======
</TABLE>
F-9
<PAGE> 50
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
------ ------------ --------
<S> <C> <C> <C>
OCTOBER 31, 1998 (UNAUDITED)
Leasehold improvements...................................... 10,903 6,045 4,858
Furniture, fixtures and computer equipment.................. 7,021 3,893 3,128
Machinery and equipment..................................... 7,284 4,867 2,417
Rolling stock............................................... 133 106 27
------ ------ ------
25,341 14,911 10,430
====== ====== ======
JANUARY 31, 1998
Leasehold improvements...................................... 9,751 5,612 4,139
Furniture, fixtures and computer equipment.................. 7,114 4,184 2,930
Machinery and equipment..................................... 6,184 4,256 1,928
Rolling stock............................................... 141 105 36
------ ------ ------
23,190 14,157 9,033
====== ====== ======
</TABLE>
5. OTHER ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
------ ------------ --------
<S> <C> <C> <C>
OCTOBER 31, 1998 (UNAUDITED)
Goodwill.................................................... 24,148 2,227 21,921
Deferred financing costs and debt discount.................. 4,648 1,706 2,942
Deferred merger costs....................................... 246 -- 246
------ ----- ------
29,042 3,933 25,109
====== ===== ======
JANUARY 31, 1998
Goodwill.................................................... 25,596 1,399 24,197
Deferred financing costs and debt discount.................. 4,927 1,080 3,847
------ ----- ------
30,523 2,479 28,044
====== ===== ======
</TABLE>
6. BANK INDEBTEDNESS AND REVOLVING CREDIT FACILITY
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
----------- -----------
(UNAUDITED)
<S> <C> <C>
(a) Revolving credit facility............................... 10,317 3,294
(b) Bank indebtedness....................................... 204 --
------ -----
10,521 3,294
====== =====
</TABLE>
(A) REVOLVING CREDIT FACILITY
The revolving credit facility represents funds advanced to the Company
under a portion of the credit facility referred to in note 8(a) to fund working
capital needs. This portion of the facility bears interest at the rate of either
2% above the Canadian prime rate or the Canadian banker's acceptance rate plus
3%, at the option of the Company. The Company's effective borrowing rate in
respect of this indebtedness approximated 9% at October 31, 1998.
F-10
<PAGE> 51
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Canadian prime rate was 7% and 6.5% at October 31, 1998 and January 31,
1998, respectively. The Canadian banker's acceptance rate was 5.21% and 4.56% at
October 31, 1998 and January 31, 1998, respectively.
Loans to the Company under the revolving credit facility are limited to
certain percentages of accounts receivable and inventories (as defined in the
loan agreement). The maximum available credit under this portion of the facility
is Canadian $20,000,000.
As at October 31, 1998, the Company had approximately $1,842,000 remaining
undrawn against this credit facility. This amount is subject to a standby fee of
1% per annum.
The revolving credit facility is collateralized as described in note 8(a).
A portion of this indebtedness is held by a significant stockholder.
(B) BANK INDEBTEDNESS
The bank indebtedness at October 31, 1998 relates primarily to cheques in
circulation.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
------------ -----------
(UNAUDITED)
<S> <C> <C>
Trade accounts payable...................................... 7,784 5,315
Wages and benefits.......................................... 2,208 1,931
Other accrued liabilities and provisions.................... 4,131 3,717
------ ------
14,123 10,963
====== ======
</TABLE>
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
------------ -----------
(UNAUDITED)
<S> <C> <C>
(a) Loan payable............................................ 22,522 26,106
(b) Subordinated loan payable to significant stockholders... 22,311 23,923
(c) Notes payable to companies controlled by a significant
stockholder............................................... 3,242 3,435
------ ------
48,075 53,464
Less current portion........................................ 3,403 3,369
------ ------
44,672 50,095
====== ======
</TABLE>
(A) LOAN PAYABLE
The loan bears interest at the rate of either 2% above the Canadian prime
rate or the Canadian banker's acceptance rate plus 3%, at the Company's option.
The Company's effective borrowing rate in respect of this indebtedness
approximated 9% at October 31, 1998.
The funds for this loan, as well as for the revolving credit facility
referred to in note 6(a), were obtained from the proceeds of a credit facility
aggregating Canadian $60,000,000. This portion of the credit facility is
repayable in varying quarterly installments up to January 31, 2002, at which
time a final installment of Canadian $16,000,000 will be due.
F-11
<PAGE> 52
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A fixed and floating first charge covering substantially all of the assets
and undertakings of the Company serves to collateralize this indebtedness.
The credit facility contains numerous restrictive covenants including
limitations on the sale of assets, the payment of dividends or redemption of
stock, the repayment of the loans referred to in (b) and (c) below and the level
of permitted capital expenditures.
The credit facility also provides for certain financial covenants that must
be met on a consolidated basis [as defined in the loan agreement] including the
maintenance of specified levels of working capital, fixed charge coverage and
debt-to-earnings ratios.
As at October 31, 1998, the Company was in default in respect of the above
financial covenants. Subsequent to October 31, 1998, waivers and covenant
modifications were obtained from the lenders in question, allowing the related
debt to be classified as non-current.
A portion of this indebtedness is held by a significant stockholder.
(B) SUBORDINATED LOAN PAYABLE TO SIGNIFICANT STOCKHOLDERS
The subordinated loan, from significant stockholders, represents a Canadian
$30,000,000 credit facility advanced jointly to Golden Brand and Moores. The
loan carries a coupon interest rate of 13%. The coupon interest rate in respect
of the one-year period ended December 23, 1997 was 15%, with interest
capitalized to the loan balance for this one-year period only. As set out in
note 9, the effective interest rate in respect of this loan approximates 15.7%.
As at December 23, 1997, approximately $3,300,000 of interest had been
capitalized in respect of this loan.
The loan principal is due in one payment on February 28, 2002. The
capitalized interest accumulated to December 23, 1997 is repayable out of excess
cash flow (as defined in the loan agreement). The first mandatory payment out of
excess cash flow in the approximate amount of $278,000 was made on May 31, 1998.
Subsequent payments are due on May 31 of each fiscal year until the earlier of
the repayment of the capitalized interest or the maturity date of the loan.
The loan is collateralized by a fixed and floating second charge on all of
the assets and undertakings of the Company.
This facility contains numerous restrictive covenants including limitations
on the sale of assets, the payment of dividends or redemption of stock, the
repayment of the loan referred to in (c) below and the level of permitted
capital expenditures. With the exception of the mandatory repayments based on
excess cash flow, the credit facility has been subordinated in favour of the
credit facilities referred to in (a) above and in note 6(a).
The credit facility also provides for certain financial covenants that must
be met on a consolidated basis [as defined in the agreement] including the
maintenance of specified levels of working capital, fixed charge coverage and
debt-to-earnings ratios.
As at October 31, 1998, the Company was in default in respect of the above
financial covenants. Subsequent to October 31, 1998, waivers and covenant
modifications were obtained from the lenders in question, allowing the related
debt to be classified as non-current.
(C) NOTES PAYABLE TO COMPANIES CONTROLLED BY A SIGNIFICANT STOCKHOLDER
The notes bear interest at the rate of 10% and mature on March 31, 2002.
The notes call for mandatory early repayments to the extent that excess cash
flow (as defined in the notes payable) is available after repayment of the
capitalized interest referred to in note 8(b) above.
F-12
<PAGE> 53
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
With the exception of the mandatory repayment in respect of excess cash
flow, these notes are subordinated in favour of the loans referred to in (a)
above and in note 6(a).
Principal payments on the Company's long-term debt are due in the following
approximate amounts for years ending January 31:
<TABLE>
<CAPTION>
$
------
<S> <C>
1999........................................................ 3,403
2000........................................................ 3,565
2001........................................................ 4,213
2002........................................................ 13,935
2003........................................................ 22,959
------
48,075
======
</TABLE>
9. CAPITAL STOCK AND STOCK OPTIONS
(A) CAPITAL STOCK
Each of the stockholders of the Class D common shares has granted a proxy
over a portion of their Class D shares to the remaining stockholders such that
the voting power of each stockholder is in accordance with its holdings of
common and Class B common shares. The proxy is revocable upon an event of
default under the loan agreements described in notes 8(a) and 8(b). In
connection with the defaults referred to in note 8, this proxy was not revoked.
The 70,000 Class B common shares were issued for nominal consideration in
connection with the advance to the Company of the Canadian $30 million credit
facility described in note 8(b). The fair value on the date of issue was
determined to be approximately $976,000 and the corresponding debt discount is
being amortized as interest expense, as an adjustment to the interest rate on
the credit facility. The effective interest rate over the life of the facility,
including this adjustment, is approximately 15.7%.
The amortization of debt discount is approximately $132,000, $141,000 and
$185,000 for the nine-month periods ended October 31, 1998 and 1997 and for the
year ended January 31, 1998, respectively.
(B) STOCK OPTION PLAN
On March 5, 1997 the Company granted 10,000 stock options [of a maximum
authorized number of 11,111] to purchase Class C common shares to certain
employees and a director of the Company, under an employee and executive stock
option plan (the "Stock Option Plan"]. As a result of the pro-rata distribution
of shares to stockholders on May 28, 1997, the number of shares subject to the
options and the exercise price were adjusted proportionately in accordance with
the provisions of the Stock Option Plan, resulting in 20,000 Class C common
shares being subject to granted options (of a maximum authorized number of
22,222]. The stock options vest fully on March 4, 2005, based solely on
continued employment with the Company, and are exercisable at a price of
Canadian $16.67 per Class C common shares [after the adjustment on May 28, 1997
is taken into account].
Pursuant to a directors' resolution dated February 24, 1998, an additional
1,839 options were granted at an exercise price of Canadian $389.43. These
options vest fully on March 4, 2006, based solely on continued employment with
the Company.
The Stock Option Plan provides for accelerated vesting based on the
achievement of certain financial performance targets as established by the Board
of Directors.
The provisions of the Stock Option Plan call for the number of options to
be granted under the Stock Option Plan to be adjusted proportionately for
certain share reorganizations.
F-13
<PAGE> 54
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions of the Stock Option Plan also provide that any options
forfeited upon the departure of an employee are available for grant to other
employees of the Company. As at October 31, 1998, 12,949 stock options are
outstanding, 2,222 stock options have vested based on financial performance,
8,890 options had been forfeited upon employee departures, 10,727 options remain
unvested and 9,273 options remain available for grant. The 10,727 unvested
options potentially vest on an accelerated basis as follows:
<TABLE>
<CAPTION>
NUMBER OF STOCK
ACCELERATION BASED ON FINANCIAL OPTIONS VESTING ON
PERFORMANCE OF FISCAL YEAR ENDING AN ACCELERATED BASIS
--------------------------------- --------------------
<S> <C>
January 31, 1999............................................ 2,590
January 31, 2000............................................ 2,590
January 31, 2001............................................ 2,590
January 31, 2002............................................ 2,590
January 31, 2003............................................ 367
</TABLE>
The options vest on an accelerated basis on the May 31 immediately
following each January 31 period referred to above. The option rights pursuant
to the Stock Option Plan expire 10 years from March 5, 1997.
(C) COMPENSATION EXPENSE
The fair value of the Class C common shares exceeded the exercise price of
the options on the grant dates. The aggregate excess of fair market value
approximated $2,305,000.
Following the departure of two employees and the cumulative amortization of
the excess of fair market value as compensation expense, an amount of
approximately $1,000,000 remains to be amortized as expense at October 31, 1998.
Compensation expense has been included in selling, general and
administrative expenses as follows:
<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH YEAR
PERIOD ENDED PERIOD ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31,
1998 1997 1998
$ $ $
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
117 161 211
</TABLE>
(D) SUPPLEMENTARY INFORMATION ON STOCK-BASED COMPENSATION
As described in note 2(k), the Company applies APB 25 in accounting for
stock options. Had the Company used the alternative method set forth under FASB
Statement No. 123, net income would have been reduced. The impact of FASB
Statement No. 123 may not be representative of the effect on income in future
years because options vest based on the financial performance of the Company and
additional option grants may be made each year.
Pro-forma information regarding net income is required by FASB Statement
No. 123 and has been determined as if the Company had accounted for the Stock
Option Plan using the minimum value method (excluding the effects of
volatility). The fair value for these options was estimated at the date of grant
with the following assumptions: risk-free interest rates of 6.6%, dividend yield
of 0%, and a weighted-average expected life of the options of 5.4 years.
The Company's pro-forma net income would be reduced by approximately $8,000
to $2,060,000 for the year ended January 31, 1998 if FASB Statement No. 123 were
applied.
The weighted average fair value of the options granted during the year
ending January 31, 1998 was $103.44 per share, which is net of the discounted
exercise price. The weighted average remaining contractual life is 8 years.
F-14
<PAGE> 55
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
The income tax provision reported differs from the amount computed by
applying Canadian federal and Quebec provincial rates to income before taxes.
The reasons for the differences and the related tax effects are as follows:
<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH YEAR
PERIOD ENDED PERIOD ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31,
1998 1997 1998
$ $ $
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Earnings before income taxes.................... 4,507 4,611 6,133
Statutory income tax rate....................... 38% 38% 38%
----- ----- -----
Statutory income tax expense.................... 1,713 1,752 2,331
Increase (decrease) in tax expense related to:
Non-deductible goodwill amortization............ 360 385 504
Non-deductible compensation expense related to
stock options................................. 44 61 80
Non-deductible interest expense related to the
amortization of debt discount................. 50 53 70
Non-deductible transaction costs................ -- -- 578
Manufacturing and processing tax credit......... (438) (400) (437)
Unrecognized tax benefits of operating losses of
U.S. subsidiary............................... 765 218 456
Higher provincial income tax rates in provinces
other than Quebec............................. 247 268 339
Other........................................... (48) 213 144
----- ----- -----
PROVISION FOR INCOME TAXES...................... 2,693 2,550 4,065
===== ===== =====
</TABLE>
The composition of the income tax provision is as follows:
<TABLE>
<S> <C> <C> <C>
Current......................................... 3,373 3,063 4,321
Deferred........................................ (680) (513) (256)
----- ----- -----
PROVISION FOR INCOME TAXES...................... 2,693 2,550 4,065
===== ===== =====
</TABLE>
F-15
<PAGE> 56
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities is as follows:
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1998 1998
$ $
----------- -----------
(UNAUDITED)
<S> <C> <C>
DEFERRED TAX ASSETS
Excess of tax basis of inventory over accounting value...... 1,838 1,284
Net operating losses of U.S. subsidiary..................... 1,015 346
------ -----
2,853 1,630
Valuation allowance......................................... (1,015) (346)
------ -----
TOTAL DEFERRED TAX ASSETS................................... 1,838 1,284
====== =====
DEFERRED TAX LIABILITIES
Excess of accounting value of capital assets over tax
basis..................................................... 264 280
------ -----
TOTAL DEFERRED TAX LIABILITIES.............................. 264 280
====== =====
</TABLE>
As at October 31, 1998, the Company has net operating loss carryforwards
relating to its U.S. subsidiary of approximately $2.6 million which expire
between 2013 and 2019.
11. COMMITMENTS AND CONTINGENCIES
(A) LEASES
The minimum rental payments under long-term operating leases, exclusive of
certain operating costs for which the Company is responsible, approximate the
following for the years ending January 31:
<TABLE>
<CAPTION>
$
------
<S> <C>
1999........................................................ 7,304
2000........................................................ 6,940
2001........................................................ 6,172
2002........................................................ 5,399
2003........................................................ 4,427
Thereafter.................................................. 9,148
------
39,390
======
</TABLE>
Certain of the lease agreements provide for additional annual rental
payments based on sales. These contingent rental payments are not significant
for any of the periods presented.
(B) LETTERS OF CREDIT
As at October 31, 1998, the Company had open letters of credit of
approximately $804,000 collateralized under the credit facility referred to in
note 8(a) above.
In addition, accounts payable and accrued liabilities at October 31, 1998
include approximately $380,000, the payment of which is guaranteed by accepted
letters of credit. Those amounts are collateralized as noted above.
F-16
<PAGE> 57
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(C) LETTERS OF GUARANTEE
As at October 31, 1998, the Company had letters of guarantee outstanding
amounting to approximately $519,000.
(D) CONTINGENCIES
The Company, in the normal course of operations, is subject to certain
litigation. Management is of the opinion that the outcome of this litigation
will not have a material impact on the Company.
(E) YEAR 2000
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in errors when information using
Year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the Company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 issue affecting the
Company including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12. RELATED PARTY TRANSACTIONS
(A) RENT EXPENSE
Rent expense paid to a significant stockholder is as follows:
<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH YEAR
PERIOD ENDED PERIOD ENDED ENDED
OCTOBER 31, OCTOBER 31, JANUARY 31,
1998 1997 1998
$ $ $
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
281 326 414
</TABLE>
The rent expense was recorded at the exchange amount, this being the amount
agreed upon by the related parties in question.
(B) INTEREST EXPENSE
Interest expense on loans from related parties approximated $2,995,000,
$3,268,000 and $4,298,000 for the nine-month periods ended October 31, 1998 and
1997 and the year ended January 31, 1998, respectively. The interest expense was
recorded at the exchange amount, this being the amount determined by the related
parties in question.
13. FINANCIAL INSTRUMENTS
CREDIT AND CURRENCY RISK
Accounts payable and accrued liabilities
Approximately $710,000 and $543,000 of the Company's accounts payable and
accrued liabilities were denominated in U.S. dollars as at October 31, 1998 and
January 31, 1998, respectively.
F-17
<PAGE> 58
MOORES RETAIL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Forward contracts
From time to time, the Company enters into foreign exchange forward
contracts to buy U.S. dollars at specified dates in the future. This activity is
carried out in an attempt to manage the currency risk associated with U.S.
dollar purchases and accounts payable.
The Company is exposed to credit-related losses in the event of
nonperformance by the counterparty to these foreign exchange forward contracts,
but it does not expect the counterparty to fail to meet its obligations. The
credit exposure of forward contracts is represented by the fair value of
contracts with a positive fair value at the reporting date.
Details of foreign exchange forward contracts outstanding as at October 31,
1998 are as follows:
<TABLE>
<CAPTION>
CANADIAN
DOLLAR CANADIAN CANADIAN
SPOT PRICE DOLLAR DOLLAR
OCTOBER 31, CONTRACT UNREALIZED
NOMINAL 1998 PRICE GAIN
AMOUNT (000'S) (000'S) (000'S)
MATURITY DATE $ $ $ $
- ------------- ------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
November 30, 1998 U.S. dollar........ 1,000 1,543 1,506 37
December 31, 1998 U.S. dollar........ 1,000 1,543 1,506 37
----- ----- --
3,086 3,012 74
===== ===== ==
</TABLE>
No forward contracts were outstanding as at January 31, 1998.
14. TRANSACTION COSTS
Transaction costs relate to professional fees, regulatory filing fees and
other costs in respect of a withdrawn financing initiative.
15. SUBSEQUENT EVENTS
On November 18, 1998, the Company signed a definitive merger agreement with
The Men's Wearhouse, Inc. ("Men's Wearhouse") whereby the outstanding stock of
each class of capital stock of the Company, including all stock options, will be
exchanged for a maximum of 2.75 million shares of common stock of Men's
Wearhouse.
At the consummation of the above transaction, the Company will record as a
charge to income certain costs related to the transaction. These include the
following:
(a) The write-off of the deferred merger costs set out in note 5 to
the financial statements;
(b) An investment advisory fee of approximately Canadian $1.5 million;
(c) Additional professional fees in the approximate amount of Canadian
$710,000;
(d) Termination payments to certain officers and directors of the
Company approximating Canadian $740,000;
(e) The recognition of approximately $1,000,000 of compensation
expense related to the write-off of the unamortized balance of the excess
of the fair market value over the exercise price at the grant date of
certain stock options (see note 9).
F-18
<PAGE> 59
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
F-19
<PAGE> 60
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(UNAUDITED, IN THOUSANDS)
The unaudited pro forma combined financial statements give effect to the
proposed combination of The Men's Wearhouse, Inc. (Men's Wearhouse) and Moores
Retail Group Inc. (Moores) under the pooling of interests method of accounting.
The unaudited pro forma combined financial statements should be read in
conjunction with the historical consolidated financial statements and the notes
thereto of Men's Wearhouse, which are incorporated by reference in this
Prospectus, and of Moores, which are included elsewhere in this Prospectus. The
unaudited pro forma combined balance sheet assumes that the proposed combination
was consummated on October 31, 1998 and combines the Men's Wearhouse and Moores
October 31, 1998 consolidated balance sheets. The unaudited pro forma combined
balance sheet includes adjustments which give effect to events that are directly
attributable to the transaction. The unaudited pro forma combined statements of
earnings for the nine months ended October 31, 1998 and November 1, 1997 and for
the year ended January 31, 1998 assume that the proposed combination was
consummated on February 2, 1997 and have been prepared by combining the
historical results of Men's Wearhouse and Moores for such periods. Moores
commenced operations on December 23, 1996 and reported a net loss of U.S. $96
for the 40 day period from December 23, 1996 to January 31, 1997. No pro forma
combined statements of earnings have been presented for years prior to fiscal
1997 because the effect of the proposed combination on such statements is not
significant.
Nonrecurring charges totaling $4,927, net of a $219 tax benefit, which
result directly from the transaction and which are expected to be included in
the results of operations of Men's Wearhouse within the twelve months succeeding
the transaction have been excluded from the unaudited pro forma combined
statements of earnings. In addition, an extraordinary charge of approximately
$3,058, net of a $1,534 tax benefit, relating to refinancing certain Moores debt
has not been reflected. The effect of these nonrecurring and extraordinary
charges have, however, been reflected in the pro forma adjustments to retained
earnings in the pro forma combined balance sheet.
The historical consolidated financial statements of Moores included in the
pro forma combined balance sheets and statements of earnings are stated in
United States dollars and have been prepared in accordance with generally
accepted accounting principles in the United States. The exchange rates used in
translating the historical Canadian currency financial statements of Moores
reflect the current exchange rate as of the balance sheet date and the weighted
average exchange rates for the periods presented in the statements of earnings.
The cumulative translation adjustments are reported as a separate component of
shareholders' equity. The historical statements of earnings for Moores included
in the pro forma combined statements of earnings do not reflect earnings per
share data since Moores, as a privately owned company, has not reported such
data.
All share and per share data reflected in the historical Men's Wearhouse
statements of earnings have been adjusted to give effect to a 50% stock dividend
effected on June 2, 1998.
The preparation of unaudited pro forma combined financial statements
requires management to make estimates and assumptions based on information
currently available. The pro forma adjustments made in connection with the
development of the pro forma information are preliminary and have been made
solely for purposes of developing such pro forma information for illustrative
purposes necessary to comply with the disclosure requirements of the Securities
and Exchange Commission. The unaudited pro forma combined financial statements
do not purport to be indicative of the results of operations for future periods
or the combined financial positions or the results that actually would have been
realized had the entities been a single entity during the periods presented.
Under the terms of the proposed combination, Men's Wearhouse will be
required to issue 2,500,000 shares of its common stock to the existing
shareholders and optionholders of Moores. However, depending on the market price
of Men's Wearhouse common stock for a specified period prior to closing, the
number of shares to be issued may increase to a maximum of 2,750,000.
F-20
<PAGE> 61
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
OCTOBER 31, 1998
(UNAUDITED -- IN THOUSANDS)
<TABLE>
<CAPTION>
AS REPORTED
------------------------------- ADJUSTMENTS ADJUSTED
MEN'S PRO FORMA PRO FORMA FOR PRO FORMA
WEARHOUSE MOORES TOTAL ADJUSTMENTS COMBINED REFINANCING COMBINED
--------- -------- -------- ----------- --------- ----------- ------------
(U.S. $)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................ $ 5,910 $ 1,696 $ 7,606 $ $ 7,606 $ $ 7,606
Inventories................. 275,215 38,482 313,697 313,697 313,697
Other current assets........ 13,596 3,057 16,653 16,653 (2) 511 17,164
-------- ------- -------- ------- -------- -------- --------
Total current
assets.............. 294,721 43,235 337,956 337,956 511 338,467
PROPERTY AND EQUIPMENT, NET... 96,434 10,430 106,864 106,864 106,864
OTHER ASSETS, NET............. 24,683 25,109 49,792 (1) (246) 49,546 (2) (2,941) 46,605
-------- ------- -------- ------- -------- -------- --------
TOTAL................. $415,838 $78,774 $494,612 $ (246) $494,366 $ (2,430) $491,936
======== ======= ======== ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving debt.............. $ $10,521 $ 10,521 $ $ 10,521 (2) $(10,521) $
Current portion of long-term
debt...................... 3,403 3,403 3,403 (2) (3,403)
Accounts payable and accrued
expenses.................. 96,054 14,123 110,177 (1) (314) 109,863 109,863
Income taxes payable........ 837 660 1,497 (1) (219) 1,278 1,278
-------- ------- -------- ------- -------- -------- --------
Total current
liabilities......... 96,891 28,707 125,598 (533) 125,065 (13,924) 111,141
LONG-TERM DEBT................ 32,750 44,672 77,422 (1) 3,912 81,334 (2) 15,575 96,909
OTHER LIABILITIES............. 7,089 264 7,353 7,353 (2) (1,023) 6,330
-------- ------- -------- ------- -------- -------- --------
Total liabilities..... 136,730 73,643 210,373 3,379 213,752 628 214,380
-------- ------- -------- ------- -------- -------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock.............
Common stock................ 348 1,708 2,056 (3) (1,683) 373 373
Capital in excess of par.... 148,264 148,264 (1)(3) 2,985 151,249 151,249
Retained earnings........... 131,490 3,786 135,276 (1) (4,927) 130,349 (2) (3,058) 127,291
-------- ------- -------- ------- -------- -------- --------
Total................. 280,102 5,494 285,596 (3,625) 281,971 (3,058) 278,913
Currency translation
adjustment................ (363) (363) (363) (363)
Treasury stock, at cost..... (994) (994) (994) (994)
-------- ------- -------- ------- -------- -------- --------
Total shareholders'
equity.............. 279,108 5,131 284,239 (3,625) 280,614 (3,058) 277,556
-------- ------- -------- ------- -------- -------- --------
TOTAL................. $415,838 $78,774 $494,612 $ (246) $494,366 $ (2,430) $491,936
======== ======= ======== ======= ======== ======== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
F-21
<PAGE> 62
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED JANUARY 31, 1998
(UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED
-------------------------------
MEN'S PRO FORMA PRO FORMA
WEARHOUSE MOORES TOTAL ADJUSTMENTS COMBINED
--------- -------- -------- ----------- ---------
(U.S. $)
<S> <C> <C> <C> <C> <C>
Net sales................................. $631,110 $131,414 $762,524 $762,524
Cost of goods sold, including buying and
occupancy costs......................... 388,517 82,751 471,268 471,268
-------- -------- -------- ---------- --------
Gross margin.............................. 242,593 48,663 291,256 291,256
Selling, general and administrative
expenses................................ 191,063 35,296 226,359 226,359
-------- -------- -------- ---------- --------
Operating income.......................... 51,530 13,367 64,897 64,897
Interest expense, net..................... 2,366 7,234 9,600 9,600
-------- -------- -------- ---------- --------
Earnings before income taxes.............. 49,164 6,133 55,297 55,297
Provision for income taxes................ 20,281 4,065 24,346 24,346
-------- -------- -------- ---------- --------
Net earnings.............................. $ 28,883 $ 2,068 $ 30,951 $ 30,951
======== ======== ======== ========== ========
Assuming issuance of 2,500 shares:
- ------------------------------------------
Net earnings per share --
Basic................................... $ 0.89 $ 0.89 $ 0.89
======== ======== ========
Diluted................................. $ 0.87 $ 0.87 $ 0.87
======== ======== ========
Weighted average shares outstanding --
Basic................................... 32,345 32,345 (4) 2,500 34,845
======== ======== ========== ========
Diluted................................. 35,384 35,384 (4) 2,500 37,884
======== ======== ========== ========
Assuming issuance of 2,750 shares:
- ------------------------------------------
Net earnings per share --
Basic................................... $ 0.89 $ 0.89 $ 0.88
======== ======== ========
Diluted................................. $ 0.87 $ 0.87 $ 0.86
======== ======== ========
Weighted average shares outstanding --
Basic................................... 32,345 32,345 (4) 2,750 35,095
======== ======== ========== ========
Diluted................................. 35,384 35,384 (4) 2,750 38,134
======== ======== ========== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
F-22
<PAGE> 63
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED
-------------------------------
MEN'S PRO FORMA PRO FORMA
WEARHOUSE MOORES TOTAL ADJUSTMENTS COMBINED
--------- -------- -------- ----------- ---------
(U.S. $)
<S> <C> <C> <C> <C> <C>
Net sales................................. $504,450 $ 94,682 $599,132 $599,132
Cost of goods sold, including buying and
occupancy costs......................... 311,432 59,002 370,434 370,434
-------- -------- -------- ---------- --------
Gross margin.............................. 193,018 35,680 228,698 228,698
Selling, general and administrative
expenses................................ 153,910 25,863 179,773 179,773
-------- -------- -------- ---------- --------
Operating income.......................... 39,108 9,817 48,925 48,925
Interest expense, net..................... 1,674 5,310 6,984 6,984
-------- -------- -------- ---------- --------
Earnings before income taxes.............. 37,434 4,507 41,941 41,941
Provision for income taxes................ 15,442 2,693 18,135 18,135
-------- -------- -------- ---------- --------
Net earnings before extraordinary item.... $ 21,992 $ 1,814 $ 23,806 $ 23,806
======== ======== ======== ========== ========
Assuming issuance of 2,500 shares:
- ------------------------------------------
Net earnings before extraordinary item per
share --
Basic................................... $ 0.66 $ 0.66 $ 0.66
======== ======== ========
Diluted................................. $ 0.64 $ 0.64 $ 0.64
======== ======== ========
Weighted average shares outstanding --
Basic................................... 33,517 33,517 (4) 2,500 36,017
======== ======== ========== ========
Diluted................................. 36,261 36,261 (4) 2,500 38,761
======== ======== ========== ========
Assuming issuance of 2,750 shares:
- ------------------------------------------
Net earnings before extraordinary item per
share --
Basic................................... $ 0.66 $ 0.66 $ 0.66
======== ======== ========
Diluted................................. $ 0.64 $ 0.64 $ 0.64
======== ======== ========
Weighted average shares outstanding --
Basic................................... 33,517 33,517 (4) 2,750 36,267
======== ======== ========== ========
Diluted................................. 36,261 36,261 (4) 2,750 39,011
======== ======== ========== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
F-23
<PAGE> 64
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED NOVEMBER 1, 1997
(UNAUDITED -- IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED
-------------------------------
MEN'S PRO FORMA PRO FORMA
WEARHOUSE MOORES TOTAL ADJUSTMENTS COMBINED
--------- -------- -------- ----------- ---------
(U.S. $)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $410,867 $92,402 $503,269 $503,269
Cost of goods sold, including buying
and occupancy costs.................. 256,104 58,129 314,233 314,233
-------- ------- -------- ----- --------
Gross margin........................... 154,763 34,273 189,036 189,036
Selling, general and administrative
expenses............................. 127,508 24,184 151,692 151,692
-------- ------- -------- ----- --------
Operating income....................... 27,255 10,089 37,344 37,344
Interest expense, net.................. 1,824 5,478 7,302 7,302
-------- ------- -------- ----- --------
Earnings before income taxes........... 25,431 4,611 30,042 30,042
Provision for income taxes............. 10,490 2,550 13,040 13,040
-------- ------- -------- ----- --------
Net earnings........................... $ 14,941 $ 2,061 $ 17,002 $ 17,002
======== ======= ======== ===== ========
Assuming issuance of 2,500 shares:
- ---------------------------------------
Net earnings per share --
Basic................................ $ 0.47 $ 0.47 $ 0.49
======== ======== ========
Diluted.............................. $ 0.47 $ 0.47 $ 0.49
======== ======== ========
Weighted average shares outstanding --
Basic................................ 32,089 32,089 (4)2,500 34,589
======== ======== ===== ========
Diluted.............................. 35,123 35,123 (4)2,500 37,623
======== ======== ===== ========
Assuming issuance of 2,750 shares:
- ---------------------------------------
Net earnings per share --
Basic................................ $ 0.47 $ 0.47 $ 0.49
======== ======== ========
Diluted.............................. $ 0.47 $ 0.47 $ 0.49
======== ======== ========
Weighted average shares outstanding --
Basic................................ 32,089 32,089 (4)2,750 34,839
======== ======== ===== ========
Diluted.............................. 35,123 35,123 (4)2,750 37,873
======== ======== ===== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
F-24
<PAGE> 65
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
The pro forma combined financial statements as of October 31, 1998 and for
the nine months ended October 31, 1998 and November 1, 1997 and for the year
ended January 31, 1998 include the following adjustments to reflect the
combination as a pooling of interests and the concurrent debt refinancing:
1. To record the estimated transaction costs to complete the combination of
Men's Wearhouse and Moores under pooling of interests accounting. The
costs, which primarily relate to investment banking fees, professional
fees, contract termination payments and unamortized stock option
compensation expenses, are currently estimated to be approximately $4,927,
net of a tax benefit of $219, and are reflected as a reduction in retained
earnings in the accompanying balance sheet. These costs are not reflected
in the pro forma combined statements of earnings.
2. To adjust the pro forma combined balance sheet for the effects of
refinancing approximately $60 million of existing Moores debt as of October
31, 1998 as follows:
<TABLE>
<S> <C>
Revolving debt refinanced with long-term debt............... $10,521
Current portion of long-term debt refinanced with long-term
debt...................................................... 3,403
Prepayment penalty from early retirement of long-term
debt...................................................... 1,651
-------
Addition to long-term debt.................................. $15,575
=======
Write off of Moores historical deferred financing costs, net
of tax of $907............................................ $ 2,034
Prepayment penalty from early retirement of long-term debt,
net of tax of $627........................................ 1,024
-------
Adjustment to retained earnings............................. $ 3,058
=======
</TABLE>
The effects of the refinancing are not reflected in the pro forma combined
statements of earnings.
3. To adjust common stock and capital in excess of par value to reflect the
issuance of 2,500,000 shares of Men's Wearhouse common stock to Moores
shareholders and optionholders.
4. Pro forma basic earnings per share is computed based on the weighted
average number of common shares outstanding. Pro forma diluted earnings per
share is computed based on the weighted average number of common shares
plus the dilutive impact of options and convertible securities for each
period after giving effect to the combination on a pooling of interests
basis. Pro forma shares and earnings per share data is presented to reflect
the issuance of a minimum of 2,500,000 shares and a maximum of 2,750,000
shares of Men's Wearhouse common stock.
F-25
<PAGE> 66
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION OR REPRESENTATIONS PROVIDED IN THIS
PROSPECTUS. WE HAVE AUTHORIZED NO ONE TO PROVIDE INFORMATION OTHER THAN THAT
PROVIDED IN THIS PROSPECTUS. WE HAVE AUTHORIZED NO ONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THE DOCUMENT.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information.. 2
Prospectus Summary................... 3
Risk Factors......................... 7
Acquisition of Moores................ 13
Business of Moores................... 14
Use of Proceeds...................... 20
Selling Shareholders................. 20
Plan of Distribution................. 22
Price Range of Common Stock.......... 23
Dividend Policy...................... 23
Selected Consolidated Financial
Information........................ 24
Financing and Capital Resources...... 25
New Accounting Pronouncements........ 25
Forward-Looking Statements........... 26
Business............................. 27
Description of Capital Stock......... 38
Legal Matters........................ 39
Experts.............................. 39
</TABLE>
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
2,750,000 SHARES
[THE MENS WEARHOUSE LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
DECEMBER , 1998
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this Offering are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 20,833
Nasdaq Listing Fee.......................................... 17,500
Legal Fees and Expenses..................................... 40,000
Accounting Fees and Expenses................................ 300,000
Blue Sky Fees and Expenses (including legal fees)........... 2,500
Printing Expenses........................................... 50,000
Transfer Agent and Registrar Fees........................... 5,000
Miscellaneous............................................... 3,000
--------
TOTAL............................................. $438,833
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act provides that any
director or officer of a Texas corporation may be indemnified against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by him
in connection with or in defending any action, suit or proceeding in which he is
a party by reason of his position. With respect to any proceeding arising from
actions taken in his official capacity as a director or officer, he may be
indemnified so long as it shall be determined that he conducted himself in good
faith and that he reasonably believed that such conduct was in the corporation's
best interests. In cases not concerning conduct in his official capacity as a
director or officer, a director may be indemnified as long as he reasonably
believed that his conduct was not opposed to the corporation's best interests.
In the case of any criminal proceeding, a director or officer may be indemnified
if he had no reasonable cause to believe his conduct was unlawful. If a director
or officer is wholly successful, on the merits or otherwise, in connection with
such a proceeding, such indemnification is mandatory. The Registrant's Bylaws
provide for indemnification of its present and former directors and officers to
the fullest extent provided by Article 2.02-1.
The Registrant's Bylaws further provide for indemnification of officers and
directors against reasonable expenses incurred in connection with the defense of
any such action, suit or proceeding in advance of the final disposition of the
proceeding.
The Registrant's Articles of Incorporation were amended on September 6,
1991, to eliminate or limit liabilities of directors for breaches of their duty
of care. The amendment does not limit or eliminate the right of the Registrant
or any shareholder to pursue equitable remedies such as an action to enjoin or
rescind a transaction involving a breach of a director's duty of care, nor does
it affect director liability to parties other than the Registrant or its
shareholders. In addition, directors will continue to be liable for (i) breach
of their duty of loyalty, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law, (iii)
declaring an illegal dividend or stock repurchase, (iv) any transaction in which
the directors received an improper personal benefit, or (v) acts or omissions
for which the liability of directors is expressly provided by statute. In
addition, the amendment applies only to claims under Texas law against a
director arising out of his role as a director and not, if he is also an
officer, his role as an officer or in any other capacity and does not limit a
director's liability under any other law, such as federal securities law.
Texas corporations are also authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The
Registrant currently has in effect a director's and officer's liability
insurance policy, which provides coverage in the maximum amount of $15,000,000,
subject to a $500,000 deductible.
II-1
<PAGE> 68
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*2.1 -- Combination Agreement dated November 18, 1998, by and
between The Men's Wearhouse, Inc., Golden Moores Company,
Moores Retail Group Inc. and the Shareholders of Moores
Retail Group Inc. signatory thereto. Pursuant to Item
601(b)(2) of Regulation S-K, schedules and similar
attachments to the Combination Agreement have not been
filed with this exhibit. The MG Disclosure Letter and the
TMW Disclosure Letter contain information relating to the
representations and warranties contained in Article II
and III, respectively, of the Combination Agreement. The
Registrant agrees to furnish supplementally any omitted
schedule to the Securities and Exchange Commission upon
request.
3.1 -- Restated Articles of Incorporation (incorporated by
reference from Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 30, 1994).
3.2 -- By-laws of the Company, as amended (incorporated by
reference from Exhibit 3.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year Ended February 1,
1997).
4.1 -- Restated Articles of Incorporation (included as Exhibit
3.1).
4.2 -- By-laws, as amended (included as Exhibit 3.2).
4.3 -- Form of Common Stock certificate (incorporated by
reference from Exhibit 4.3 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-45949)).
4.4 -- Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab, including the
First Amendment thereto dated as of September 30, 1991
(incorporated by reference from Exhibit 4.4 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.5 -- Second Amendment effective as of January 1, 1993, to
Employment Agreement dated as of January 31, 1991, by and
between the Company and David H. Edwab (incorporated by
reference from Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
4.6 -- Second [sic] Amendment dated as of April 12, 1994, to
Employment Agreement dated as of January 31, 1991
(incorporated by reference to Exhibit 4.6 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended January 28, 1995).
4.7 -- Option Issuance Agreement dated as of September 30, 1991,
by and between the Company and David H. Edwab
(incorporated by reference from Exhibit 4.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.8 -- First Amendment to Option Issuance Agreement dated April
22, 1992, but effective as of September 30, 1991
(incorporated by reference from Exhibit 4.7 to the
Registrant's Registration Statement on Form S-8
(Registration No. 33-48109)).
4.9 -- Second Amendment to Option Issuance Agreement dated
effective as of January 1, 1993 (incorporated by
reference from Exhibit 4.8 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-60516)).
4.10 -- First [sic] Amendment to Option Issuance Agreement dated
as of April 12, 1994 (incorporated by reference to
Exhibit 4.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1995).
4.11 -- Indenture dated March 1, 1996, between the Company and
Texas Commerce Bank National Association, as trustee
including Form of Note (incorporated by reference from
Exhibit 4.1 to the Registrant's Quarterly Report on Form
10-Q for the Quarter ended May 4, 1996).
</TABLE>
II-2
<PAGE> 69
<TABLE>
<C> <S>
4.12 -- Revolving Credit Agreement dated as of June 2, 1997, by
and among the Company, NationsBank of Texas, N.A. and the
Banks listed therein, including form of Revolving Note
(incorporated by reference from Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the
Quarter ended May 3, 1997).
*4.13 -- Registration Rights Agreement dated as of November 18,
1998, by and among The Men's Wearhouse, Inc. and Marpro
Holdings, Inc., MGB Limited Partnership, Capital
D'Amerique CDPQ Inc., Cerberus International, Ltd., Ultra
Cerberus Fund, Ltd., Styx International Ltd., The Long
Horizons Overseas Fund Ltd., The Long Horizons Fund, L.P.
and Styx Partners, L.P.
*5.1 -- Opinion of Fulbright & Jaworski L.L.P.
*23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
*23.2 -- Consent of Deloitte & Touche LLP.
*23.3 -- Consent of Ernst & Young LLP.
*24.1 -- Powers of Attorney from certain members of the Board of
Directors of the Company (contained on page II-5 of this
Registration Statement).
</TABLE>
- ---------------
* Included herein.
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Registrant and its subsidiaries
because the total amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of any such
agreement to the Commission upon request.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
II-3
<PAGE> 70
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on December 30, 1998.
THE MEN'S WEARHOUSE, INC.
By: /s/ GEORGE ZIMMER
----------------------------------
George Zimmer
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints George Zimmer, David Edwab and Gary G.
Ckodre, or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
and all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and any of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or any of them, or his
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE ZIMMER Chairman of the Board, Chief December 30, 1998
- ----------------------------------------------------- Executive Officer and
George Zimmer Director (Principal
Executive Officer)
/s/ DAVID EDWAB President and Director December 30, 1998
- -----------------------------------------------------
David Edwab
/s/ GARY G. CKODRE Vice President--Finance and December 30, 1998
- ----------------------------------------------------- Principal Financial and
Gary G. Ckodre Accounting Officer
(Principal Financial and
Accounting Officer)
/s/ RICHARD E. GOLDMAN Executive Vice President and December 30, 1998
- ----------------------------------------------------- Director
Richard E. Goldman
</TABLE>
II-5
<PAGE> 72
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT E. ZIMMER Senior Vice December 30, 1998
- ----------------------------------------------------- President -- Real Estate
Robert E. Zimmer and Director
/s/ JAMES E. ZIMMER Senior Vice President -- December 30, 1998
- ----------------------------------------------------- Merchandising and Director
James E. Zimmer
/s/ HARRY M. LEVY Executive Vice President -- December 30, 1998
- ----------------------------------------------------- Planning and Systems,
Harry M. Levy Chief Information Officer
and Director
/s/ RINALDO BRUTOCO Director December 30, 1998
- -----------------------------------------------------
Rinaldo Brutoco
/s/ MICHAEL L. RAY Director December 30, 1998
- -----------------------------------------------------
Michael L. Ray
/s/ SHELDON I. STEIN Director December 30, 1998
- -----------------------------------------------------
Sheldon I. Stein
</TABLE>
II-6
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
2.1 Combination Agreement dated November 18, 1998, by and
between The Men's Wearhouse, Inc., Golden Moores Company,
Moores Retail Group Inc. and the Shareholders of Moores
Retail Group signatory thereto. Pursuant to Item 601(b)(2)
of Regulation S-K, schedules and similar attachments
described in the Combination Agreement have not been filed
with this exhibit. The MG Disclosure Letter and the TMW
Disclosure Letter contain information relating to the
representations and warranties contained in Article II and
Article III, respectively, of the Combination Agreement. The
Registrant agrees to furnish supplementally any omitted
schedule to the Securities and Exchange Commission upon
request.
4.13 Registration Rights Agreement dated as of November 18, 1998,
by and among The Men's Wearhouse, Inc. and Marpro Holdings,
Inc., MGB Limited Partnership, Capital D'Amerique CDPQ Inc.,
Cerberus International, Ltd., Ultra Cerberus Fund, Ltd.,
Styx International Ltd., The Long Horizons Overseas Fund
Ltd., The Long Horizons Fund, L.P. and Styx Partners, L.P.
5.1 Opinion of Fulbright & Jaworski L.L.P.
23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit
5.1)
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Ernst & Young LLP.
24.1 Powers of Attorney from certain members of the Board of
Directors of the Company (contained on page II-5).
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
COMBINATION AGREEMENT
BY AND BETWEEN
THE MEN'S WEARHOUSE, INC. ("TMW")
AND
GOLDEN MOORES COMPANY ("CANCO"),
A WHOLLY OWNED SUBSIDIARY OF TMW,
AND
MOORES RETAIL GROUP INC. ("MG")
AND
THE SHAREHOLDERS OF MG
NOVEMBER 18, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.
SHARE RESTRUCTURING PLAN.................................................................................1
1.1 SHARE RESTRUCTURING PLAN........................................................................1
1.2 DETERMINATION OF EXCHANGE RATIO.................................................................2
1.3 OTHER EFFECTS OF THE SHARE RESTRUCTURING........................................................3
1.4 CURRENCY........................................................................................3
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF MG.....................................................................3
2.1 ORGANIZATION AND STANDING.......................................................................3
2.2 AGREEMENT AUTHORIZED AND ITS EFFECT ON OTHER OBLIGATIONS........................................4
2.3 GOVERNMENTAL CONSENTS...........................................................................4
2.4 CAPITALIZATION..................................................................................5
2.5 FINANCIAL STATEMENTS............................................................................5
2.6 LIABILITIES.....................................................................................6
2.7 INFORMATION SUPPLIED............................................................................6
2.8 NO DEFAULTS.....................................................................................7
2.9 LITIGATION; INVESTIGATIONS......................................................................7
2.10 ABSENCE OF CERTAIN CHANGES AND EVENTS...........................................................7
2.11 ADDITIONAL MG INFORMATION.......................................................................8
2.12 CERTAIN AGREEMENTS..............................................................................9
2.13 EMPLOYEE BENEFIT PLANS..........................................................................9
2.14 INTELLECTUAL PROPERTY..........................................................................11
2.15 TITLE TO AND CONDITION OF PROPERTIES...........................................................11
2.16 FACTORY OPERATIONS AND CAPACITY................................................................12
2.17 ENVIRONMENTAL MATTERS..........................................................................12
2.18 COMPLIANCE WITH OTHER LAWS.....................................................................14
2.19 TAXES..........................................................................................14
2.20 INVENTORY......................................................................................15
2.21 CREDIT ITEMS...................................................................................15
2.22 VOTE REQUIRED..................................................................................15
2.23 POOLING MATTERS................................................................................15
2.24 BROKERS AND FINDERS............................................................................15
2.25 DISCLOSURE.....................................................................................15
2.26 POOLING OPINION................................................................................15
2.27 RESTRICTIONS ON BUSINESS ACTIVITIES............................................................15
2.28 [INTENTIONALLY OMITTED]........................................................................16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE II-B
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS......................................................16
2.29 NO LIENS.......................................................................................16
2.30 EFFECT OF AGREEMENT ON SHAREHOLDERS............................................................16
2.31 AUTHORIZATION..................................................................................16
2.32 NO UNTRUE STATEMENTS...........................................................................17
2.33 BROKERS........................................................................................17
2.34 NO AFFILIATE OBLIGATIONS.......................................................................17
2.35 INVESTMENT PURPOSE; ACCREDITED INVESTOR........................................................17
2.36 INDEBTEDNESS AND AGREEMENTS....................................................................17
2.37 POOLING MATTERS................................................................................17
2.38 RESIDENCE......................................................................................18
2.39 CAPITAL PROPERTY...............................................................................18
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TMW...................................................................18
3.1 ORGANIZATION AND STANDING......................................................................18
3.2 AGREEMENT AUTHORIZED AND ITS EFFECTS ON OTHER OBLIGATIONS......................................19
3.3 GOVERNMENTAL CONSENTS..........................................................................19
3.4 CAPITALIZATION.................................................................................20
3.5 LITIGATION; INVESTIGATIONS.....................................................................20
3.6 VOTE REQUIRED..................................................................................20
3.7 BROKERS AND FINDERS............................................................................20
3.8 INFORMATION SUPPLIED...........................................................................21
3.9 AUTHORIZATION FOR TMW COMMON STOCK.............................................................21
3.10 SEC DOCUMENTS..................................................................................21
3.11 DISCLOSURE.....................................................................................21
3.12 POOLING MATTERS................................................................................21
3.13 POOLING OPINION................................................................................22
3.14 NO DEFAULTS....................................................................................22
ARTICLE IV.
OBLIGATIONS PENDING EFFECTIVE DATE......................................................................22
4.1 AGREEMENTS OF TMW, CANCO AND MG................................................................22
4.2 ADDITIONAL AGREEMENTS OF MG....................................................................23
4.3 ADDITIONAL AGREEMENTS OF TMW...................................................................26
4.4 REGISTRATION STATEMENT.........................................................................26
4.5 PUBLIC ANNOUNCEMENTS...........................................................................27
4.6 COMFORT LETTERS................................................................................28
4.7 EXPENSES.......................................................................................28
4.8 ADDITIONAL AGREEMENTS BY SHAREHOLDERS..........................................................28
4.9 INVENTORY RECONCILIATION.......................................................................28
4.10 DEBT REPAYMENT.................................................................................28
4.11 CERTAIN LEASES.................................................................................29
4.12 MG DISCLOSURE LETTER...........................................................................29
</TABLE>
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<TABLE>
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4.13 OPTIONHOLDERS AGREEMENT TO EXCHANGE OPTIONS....................................................29
4.14 TAX CERTIFICATES...............................................................................29
ARTICLE V.
CONDITIONS PRECEDENT TO OBLIGATIONS.....................................................................30
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY..............................................30
(a) Consents of Certain Parties in Privity................................................30
(b) No Legal Action.......................................................................30
(c) Commissions, etc......................................................................30
(d) SEC Matters...........................................................................30
(e) Listings..............................................................................30
(f) Optionholders.........................................................................30
(g) Tax Certificates......................................................................30
(h) Authorization for Exchangeable Shares.................................................31
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF MG AND THE SHAREHOLDERS.................................31
(a) Representations and Warranties........................................................31
(b) Covenants.............................................................................31
(c) Certificate...........................................................................31
(d) Opinion of TMW Counsel................................................................32
(e) Affiliates Agreements.................................................................32
(f) Certificates and Resolutions..........................................................32
(g) Aggregate Value.......................................................................32
(h) Termination of Employment Agreements..................................................32
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF TMW.....................................................32
(a) Representations and Warranties........................................................32
(b) Covenants.............................................................................32
(c) Certificate...........................................................................32
(d) Opinion of MG Counsel.................................................................32
(e) Pooling Matters.......................................................................33
(f) Agreed Upon Procedures Report and Comfort Letter......................................33
(g) Affiliates Agreements.................................................................33
(h) Options Exchanged.....................................................................33
(i) Amounts to be Paid by Zelnik and Kreisler.............................................33
(j) Certificate of the Chief Financial Officer............................................33
(k) Letter Regarding Debt Referred to in Section 2.2(b)...................................33
(l) Certificates and Resolutions..........................................................33
(m) [Intentionally Omitted]...............................................................34
(n) Termination Agreements................................................................34
(o) Resignations..........................................................................34
(p) Non-Competition and Confidentiality Agreements........................................34
(q) Accounts Payable......................................................................34
(r) Repayment of Debt.....................................................................34
(s) Release of Liens......................................................................34
(t) Lease Consents........................................................................34
(u) Union Negotiations....................................................................34
(v) Share Allocation......................................................................35
</TABLE>
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<TABLE>
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(w) Furman Selz Letter....................................................................35
(x) Inventory Levels......................................................................35
(y) Hazardous Materials...................................................................35
(z) Termination of Certain Employees......................................................35
ARTICLE VI.
OBLIGATIONS OF PARTIES AFTER CLOSING....................................................................35
6.1 POST-CLOSING CONFIDENTIALITY...................................................................35
6.2 NO SOLICITATION OF EMPLOYEES...................................................................35
ARTICLE VII.
TERMINATION.............................................................................................36
7.1 TERMINATION....................................................................................36
7.2 NOTICE OF TERMINATION..........................................................................37
7.3 EFFECT OF TERMINATION..........................................................................37
ARTICLE VIII.
ADDITIONAL AGREEMENTS...................................................................................37
8.1 THE CLOSING....................................................................................37
8.2 ANCILLARY DOCUMENTS/RESERVATION OF SHARES......................................................37
8.3 AFFILIATE AGREEMENTS...........................................................................38
8.4 SAFE INCOME CALCULATION........................................................................38
ARTICLE IX.
MISCELLANEOUS...........................................................................................38
9.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................................................38
9.2 NOTICES........................................................................................39
9.3 ARBITRATION....................................................................................40
9.4 INTERPRETATION.................................................................................42
9.5 KNOWLEDGE......................................................................................42
9.6 WAIVER AND AMENDMENT...........................................................................42
9.7 GOVERNING LAW; LANGUAGE........................................................................42
9.8 SEVERABILITY...................................................................................42
9.9 COUNTERPARTS...................................................................................43
9.10 NUMBER AND GENDER..............................................................................43
9.11 MISCELLANEOUS..................................................................................43
9.12 DIVISIONS, HEADINGS, ETC.......................................................................43
9.13 DATE OF ANY ACTION.............................................................................43
</TABLE>
LIST OF EXHIBITS
- ----------------
Exhibit A -- Share Restructuring Plan
Exhibit B -- MG Comfort Letter
Exhibit C -- Agreement to Exchange Options
Exhibit D -- Optionholder Agreement
Exhibit E -- Termination Agreement (Michel Zelnik)
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<PAGE> 6
Exhibit F -- Termination Agreement (Stuart Kreisler)
Exhibit G -- Non-Competition and Confidentiality Agreement (Michel Zelnik)
Exhibit H -- Non-Competition and Confidentiality Agreement (Stuart Kreisler)
Exhibit I -- Non-Competition and Confidentiality Agreement (Pat De Marco)
Exhibit J -- Non-Competition and Confidentiality Agreement (David Starrett)
Exhibit K -- Non-Competition and Confidentiality Agreement (Mario Parzialie)
Exhibit L -- Non-Competition and Confidentiality Agreement (Martin Prosserman)
Exhibit M -- Termination Agreement (Pearl Chang)
Exhibit N -- Support Agreement
Exhibit O -- Voting Trust Agreement
Exhibit P -- MG Affiliate Agreement
Exhibit Q -- TMW Affiliate Agreement
-v-
<PAGE> 7
DEFINITIONS
<TABLE>
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Acquisition Proposal....................................................................................Section 4.2
Affiliate ............................................................................................. Section 8.3
Agreement ................................................................................................ Recitals
Agreement to Exchange Options..........................................................................Section 4.13
Applicable Environmental Laws ........................................................................ Section 2.17
Anpro..................................................................................................Section 2.37
Association............................................................................................Section 2.13
Average TMW Stock Price ............................................................................... Section 1.2
Balance Sheet Date .................................................................................... Section 2.5
Business Day...........................................................................................Section 9.13
Can $...................................................................................................Section 1.2
Canco .................................................................................................... Recitals
CDPQ....................................................................................................Section 2.2
Closing ............................................................................................... Section 8.1
Closing Date .......................................................................................... Section 8.1
Code ..................................................................................................... Recitals
Collective Bargaining Plans............................................................................Section 2.13
Confidentiality Agreement ............................................................................. Section 6.2
Credit Agreement.......................................................................................Section 4.10
D&T .................................................................................................. Section 3.13
Disruption..............................................................................................Section 5.3
dollars or $ .......................................................................................... Section 1.4
E&Y .................................................................................................. Section 2.26
Effective Date ........................................................................................ Section 1.1
Effective Time ........................................................................................ Section 1.1
Encumbrance ........................................................................................... Section 2.1
ERISA ................................................................................................ Section 2.13
Exchange Rate ......................................................................................... Section 1.2
Exchangeable Shares.....................................................................................Section 1.2
Financial Statements....................................................................................Section 2.5
Governmental Entity ................................................................................... Section 2.3
Gronbri ..............................................................................................Section 2.37
ITA ...................................................................................................... Recitals
Junior Debt.............................................................................................Section 2.2
Junior Debt Fair Value..................................................................................Section 2.2
Junior Lenders..........................................................................................Section 2.2
Junior Loan Agreement...................................................................................Section 2.2
knowledge ............................................................................................. Section 9.5
Letter Agreement.......................................................................................Section 2.37
Marpro.................................................................................................Section 2.37
material ............................................................................................... Article II
Material Adverse Effect ................................................................................ Article II
MG ....................................................................................................... Recitals
</TABLE>
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Definitions (Cont'd)
<TABLE>
<S> <C>
MG Class B Shares ..................................................................................... Section 2.4
MG Class C Shares ..................................................................................... Section 2.4
MG Class D Shares ..................................................................................... Section 2.4
MG Class E Shares ..................................................................................... Section 2.4
MG Class F Shares ..................................................................................... Section 2.4
MG Comfort Letter ..................................................................................... Section 4.6
MG Common Shares ...................................................................................... Section 2.4
MG Disclosure Letter ................................................................................... Article II
MG Intellectual Property ............................................................................. Section 2.14
MG Plan .............................................................................................. Section 2.13
MG Pooling Opinion ................................................................................... Section 2.26
MG Preferred Shares ................................................................................... Section 2.4
MG Shares ............................................................................................. Section 1.2
MG Subsidiaries ....................................................................................... Section 2.1
NASDAQ ................................................................................................ Section 1.2
NBBCA...................................................................................................Section 1.1
Optionholder Agreement..................................................................................Section 5.1
Optionholders...........................................................................................Section 1.2
Options ............................................................................................... Section 1.2
Option Shares..........................................................................................Section 4.13
Option Value............................................................................................Section 1.2
Prosserman Note 1......................................................................................Section 4.10
Prosserman Note 2......................................................................................Section 4.10
Prosserman Notes.......................................................................................Section 4.10
Reference Balance Sheet ............................................................................... Section 2.5
Registration Statement ................................................................................ Section 4.4
Representatives ........................................................................................Section 4.2
Revised MG Disclosure Letter...........................................................................Section 4.12
Safe Income.............................................................................................Section 8.4
Safe Income Determination Time..........................................................................Section 8.4
SEC ................................................................................................... Section 3.3
SEC Documents ........................................................................................ Section 3.10
Securities Act ....................................................................................... Section 2.35
Securityholders .......................................................................................... Recitals
Share Restructuring.....................................................................................Section 1.1
Share Restructuring Plan .............................................................................. Section 1.1
Shareholders ............................................................................................. Recitals
Societe Generale........................................................................................Section 1.2
Tax .................................................................................................. Section 2.19
TMW ...................................................................................................... Recitals
TMW Common Stock ...................................................................................... Section 3.4
TMW Disclosure Letter ................................................................................. Article III
</TABLE>
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Definitions (Cont'd)
<TABLE>
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TMW Pooling Opinion .................................................................................. Section 3.13
TMW Preferred Stock ................................................................................... Section 3.4
TMW Subsidiaries ...................................................................................... Section 3.1
Union..................................................................................................Section 2.13
</TABLE>
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<PAGE> 10
COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT dated as of November 18, 1998 (this
"Agreement"), is made and entered into by and between THE MEN'S WEARHOUSE, INC.,
a Texas corporation ("TMW"), GOLDEN MOORES COMPANY, a Nova Scotia unlimited
liability company and wholly owned subsidiary of TMW ("Canco"), MOORES RETAIL
GROUP INC., a New Brunswick corporation ("MG"), and MARPRO HOLDINGS INC., MGB
LIMITED PARTNERSHIP, CAPITAL D'AMERIQUE CDPQ INC., CERBERUS INTERNATIONAL, LTD.,
ULTRA CERBERUS FUND, LTD., STYX INTERNATIONAL LTD, THE LONG HORIZONS OVERSEAS
FUND LTD., THE LONG HORIZONS FUND, L.P. AND STYX PARTNERS, L.P.
(collectively, the "Shareholders" and each a "Shareholder").
WHEREAS, the respective boards of directors of TMW and MG each deem it
advisable and in the best interests of their respective stockholders to combine
their respective businesses by TMW acquiring shares in the capital stock of MG
through Canco pursuant to this Agreement and the Share Restructuring Plan (as
hereinafter defined).
WHEREAS, in furtherance of such combination, the respective boards of
directors of TMW and MG have approved the transactions contemplated by this
Agreement and the board of directors of MG has submitted the Share Restructuring
Plan and the other transactions contemplated hereby to its shareholders and
optionholders (together, "Securityholders") for approval.
WHEREAS, the respective boards of directors of TMW, Canco and MG have
approved and adopted this Agreement and the Share Restructuring Plan as a plan
of reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"), and as a reorganization of capital of MG under Section
86 of the Income Tax Act (Canada) (the "ITA") for those MG shareholders who hold
MG Shares (as hereinafter defined) on capital account.
WHEREAS, it is intended that the transactions contemplated hereby will
be treated as a "pooling of interests" in accordance with accounting principles
generally accepted in the United States.
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Share Restructuring (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto hereby agree as follows:
ARTICLE I.
SHARE RESTRUCTURING PLAN
1.1 SHARE RESTRUCTURING PLAN. As soon as practicable after all of the
conditions precedent set forth in Article V have been satisfied or effectively
waived pursuant to the terms hereof, MG shall cause the Share Restructuring Plan
in the form of Exhibit A attached hereto (the "Share Restructuring Plan") to be
filed with the Director under the Business Corporations Act (New
<PAGE> 11
Brunswick) (the "NBBCA"). At 12:01 a.m. (the "Effective Time") on the date (the
"Effective Date") shown on the Certificate of Amendment giving effect to the
share restructuring contemplated by the Share Restructuring Plan (the "Share
Restructuring"), the reorganization of capital and other transactions set out in
clauses (a) through (j), inclusive, of Section 2.1 of the Share Restructuring
Plan shall occur and shall be deemed to occur without any further act or
formality in the order set forth therein.
1.2 DETERMINATION OF EXCHANGE RATIO.
(a) At the Effective Time, the outstanding shares of each
class of capital stock of MG (the "MG Shares") and Options (as defined below)
will be converted into Exchangeable Shares (as defined in the Share
Restructuring Plan) of MG as follows:
The aggregate number of Exchangeable Shares to be issued with respect
to the outstanding capital stock of MG and the Options shall be 2.5 million
shares; provided, however, that if the Average TMW Stock Price (as defined
below) is below U.S. $20.00, then the aggregate number of Exchangeable Shares to
be issued shall be equal to that number of shares of TMW Common Stock (as
defined herein) which has a market value of U.S. $50 million (based on the
Average TMW Stock Price), but not to exceed 2.75 million shares in any case.
(b) Not later than two business days prior to the Effective
Date, Societe Generale (Canada) Ltd. ("Societe Generale") shall determine the
option value (the "Option Value") of each of the options (the "Options") to
purchase capital stock of MG listed on Schedule 1.2(b). The Option Value shall
be determined in Canadian dollars ("Can $") and in accordance with the
procedures and methodology in the draft report of Societe Generale dated
November 17, 1998 which has been provided to MG and TMW. Subject to Section
4.13, each holder of an Option (collectively, the "Optionholders") shall be
entitled to receive a number of Exchangeable Shares equal to the Option Value of
such holder's Option divided by the average of the closing price for the Common
Stock of TMW on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for each of the ten trading days ending on the third
trading day prior to the Closing Date (the "Average TMW Stock Price") converted
to Can $ at the Exchange Rate. The "Exchange Rate" for purposes of this
Agreement shall be the exchange rate on the date hereof, which is 0.6460 U.S.
dollars to each Can $.
(c) At the Effective Time, the outstanding MG Shares shall be
exchanged for an aggregate number of Exchangeable Shares equal to the number of
Exchangeable Shares to be issued in accordance with Section 1.2(a) minus the
number of Exchangeable Shares issuable in respect of the Options in accordance
with Section 1.2(b) whether or not Exchangeable Shares are actually issued
pursuant to Section 1.2(b). The Exchangeable Shares to be issued to the holders
of MG Shares shall be allocated among the classes of capital stock as follows:
one Exchangeable Share shall be issued in respect of the MG Class D Shares and
the remaining Exchangeable Shares to be issued in respect of the MG Shares shall
be allocated 15.33% to the MG Common Shares, 35.78% to the MG Class B Shares and
48.89% to the MG Class C Shares (each as hereinafter defined). The number of
Exchangeable Shares allocated to each class of MG Shares shall be allocated
within such class pro rata based on the number of MG Shares in such class.
2
<PAGE> 12
(d) No certificate or scrip representing a fractional share of
an Exchangeable Share shall be issued and no dividend or other distribution
shall relate to any fractional security. In lieu of a fractional share, MG shall
pay to a Securityholder who would otherwise be entitled to a fractional share an
amount in cash equal to such fraction multiplied by the closing price on the
trading day prior to the Effective Date of the shares of Common Stock of TMW on
NASDAQ.
1.3 OTHER EFFECTS OF THE SHARE RESTRUCTURING. At the Effective Time:
(a) the directors of MG will be George Zimmer, David Edwab, Richard E. Goldman
and Pat De Marco; (b) the officers of MG will be as designated by the board of
directors of MG immediately after the Effective Time, subject to later removal
and appointment of other officers; (c) each MG Share and each Option outstanding
immediately prior to the Effective Time will be exchanged as provided in Section
1.2; and (d) the Share Restructuring will, from and after the Effective Time,
have all of the effects provided by applicable law, including the NBBCA.
1.4 CURRENCY. Unless otherwise specified, all references in this
Agreement to "dollars" or "$" shall mean Canadian dollars.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF MG
In this Agreement, the term "Material Adverse Effect" or "material"
used with respect to any party means any event, change or effect that could
reasonably be expected to result in loss, damage, liabilities, cost or other
expenses to such party and its subsidiaries aggregating on a cumulative basis
$1,600,000 or more or to reduce cash flow or net income of such party and its
subsidiaries by $500,000 or more in either of the next two fiscal years.
Except as set forth in a letter dated the date of this Agreement and
delivered by MG to TMW concurrently herewith (the "MG Disclosure Letter"), MG
hereby represents and warrants to, and agrees with, TMW that:
2.1 ORGANIZATION AND STANDING. MG and each body corporate, partnership,
joint venture, association or other business entity of which more than 50% of
the total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by MG
(the "MG Subsidiaries"), is an entity duly incorporated and organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has full requisite power and authority to carry
on its business as it is currently conducted, and to own, lease and operate the
properties currently owned, leased and operated by it, and is duly qualified or
licensed to do business and is in good standing in all jurisdictions in which
the character of the properties owned or leased or the nature of the business
conducted by it would make such qualification or licensing necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on MG. The MG Disclosure Letter sets forth (i) a complete list of
the MG Subsidiaries, (ii) the percentage of each subsidiary's outstanding
capital stock or other ownership interest owned by MG or another MG Subsidiary,
(iii) a description of any lien, charge, mortgage, hypothec, security interest,
option, preferential purchase right or other right or interest of any other
person (collectively, an "Encumbrance") on such stock or other ownership
interest, (iv) a list
3
<PAGE> 13
identifying the ownership interest therein of any person other than MG or any MG
Subsidiary and (v) a complete list of each jurisdiction in which each of MG and
the MG Subsidiaries is duly qualified and in good standing to do business.
2.2 AGREEMENT AUTHORIZED AND ITS EFFECT ON OTHER OBLIGATIONS.
(a) MG has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder and to
consummate the Share Restructuring and the other transactions contemplated by
this Agreement. All necessary approvals of the Securityholders of MG for the
execution of this Agreement and the consummation of the transactions
contemplated hereby have been obtained. The execution and delivery of this
Agreement by MG and the consummation by MG of the Share Restructuring and the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of MG. This Agreement has been duly
executed and delivered by MG and is the valid and binding obligation of MG,
enforceable in accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) Neither the execution, delivery or performance of this
Agreement or the Share Restructuring Plan by MG, nor the consummation of the
transactions contemplated hereby or thereby by MG nor compliance with the
provisions hereof or thereof by MG will: (i) conflict with, or result in any
violations of, the articles of incorporation or bylaws of MG or any equivalent
document of any of the MG Subsidiaries, or (ii) result in any breach of or cause
a default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, amendment, cancellation or acceleration of any
obligation contained in, or the loss of any benefit under, or create any penalty
payment or other obligations under, or result in the creation of any Encumbrance
upon any of the properties or assets of MG or any of the MG Subsidiaries under,
any term, condition or provision of any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to MG or any of the MG
Subsidiaries or their respective properties or assets. MG has received a letter
dated November 10, 1998 from Madeleine L.L.C. and Capital D'Amerique CDPQ
("CDPQ", and together with Madeleine L.L.C., the "Junior Lenders") pursuant to
which the Junior Lenders have consented to the prepayment of the junior loan
(the "Junior Debt") provided for in that certain Loan Agreement entered into on
December 23, 1996 among GB/B Acquisition Corp. and M Acquisition Corp., as
Borrowers, and MG (formerly Zorro Holding Corp.) and the Junior Lenders (the
"Junior Loan Agreement"), at "fair value" which has been determined and agreed
to be the principal amount of Junior Debt plus accrued interest thereon through
the date of such prepayment (the "Junior Debt Fair Value").
2.3 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (each a "Governmental Entity"), is required to be obtained
by MG or any of the MG Subsidiaries in connection with the execution and
delivery of this Agreement or the Share Restructuring Plan or the consummation
of the transactions contemplated hereby or thereby, except for certain
post-signing filings to be made under the
4
<PAGE> 14
Investment Canada Act and/or certain consents to be obtained from the Canadian
securities regulatory authorities.
2.4 CAPITALIZATION.
(a) The authorized capital stock of MG consists of: (1) an
unlimited number of MG common shares, without par value ("MG Common Shares"),
(2) 70,000 Class B Shares, without par value ("MG Class B Shares"), (3) 122,222
Class C Shares, without par value ("MG Class C Shares"), (4) 135,000 Class D
Shares, without par value ("MG Class D Shares"), (5) 66,000 Class E Shares,
without par value ("MG Class E Shares"), (6) 6,698 Class F Shares, without par
value ("MG Class F Shares") and (7) an unlimited number of Preferred Shares,
without par value, issuable in series ("MG Preferred Shares"). As of the date
hereof, 30,000 MG Common Shares were issued and outstanding, 70,000 MG Class B
Shares were issued and outstanding, 100,000 MG Class C Shares were issued and
outstanding and 135,000 MG Class D Shares were issued and outstanding. As of the
date hereof, no MG Shares are held by MG in its treasury. As of the date hereof,
an aggregate of 12,949 MG Class C Shares were reserved for issuance upon the
exercise of stock options then outstanding under MG's stock option plans and
9,273 shares of MG Class C Shares were reserved for future issuance of options
under MG's stock option plans. Prior to the date hereof, 2,222 of the Options
have vested in accordance with their terms and 10,727 remain unvested. No MG
Class E Shares, MG Class F Shares or MG Preferred Shares are issued or
outstanding. All of the issued and outstanding MG Shares have been duly
authorized and validly issued, are fully paid and non-assessable, were not
issued in violation of the terms of any agreement or other understanding binding
upon MG and were issued in compliance with all applicable charter documents of
MG and all applicable federal, provincial and foreign securities laws, rules and
regulations. There are, and have been, no preemptive rights with respect to the
issuance of the MG Shares or any other capital stock of MG. The MG Disclosure
Letter contains a true and correct list of all record holders of MG Shares or
Options indicating the MG Shares or Options held by each of such persons.
(b) Except for the Options, there are no outstanding
subscriptions, options, warrants, convertible securities, calls, commitments,
agreements or rights (contingent or otherwise) of any character to purchase or
otherwise acquire from MG or any MG Subsidiary any shares of, or any securities
convertible into, the capital stock of MG or any MG Subsidiary nor are there any
rights to payments or benefits based on the price or market value of any shares
of capital stock of MG or any MG Subsidiary.
2.5 FINANCIAL STATEMENTS.
(a) MG has delivered to TMW copies of the (1) audited
consolidated financial statements for the year ended January 31, 1998, (2)
unaudited MG July 31, 1998 consolidated balance sheet (the "Reference Balance
Sheet") and (3) unaudited consolidated statements of income and cash flow for
the six-month periods ended on July 31, 1997 and July 31, 1998 (such latter date
being hereinafter referred to as the "Balance Sheet Date"), each of which was
prepared in accordance with Canadian generally accepted accounting principles,
and which fairly represent the financial condition and results of operations of
MG and the MG Subsidiaries on a consistent basis, as of and for the periods
presented, subject, in the case of the unaudited statements, to normal year end
5
<PAGE> 15
adjustments, which in the aggregate are not material, copies of which are
included in Section 2.5 of the MG Disclosure Letter (the "Financial
Statements").
(b) Since December 23, 1996, there has been no change in MG's
accounting policies or the methods of making accounting estimates or changes in
estimates that are material to such financial statements, except as described in
the notes thereto and to the knowledge of the chief financial officer of MG
there has been no change in MG's accounting policies or the method of making
accounting estimates or changes in estimates since December 31, 1995.
(c) To the knowledge of MG, the MG Disclosure Letter
accurately sets forth the sales, retail gross margin and lease expense by store
for each of the retail stores operated by MG or the MG Subsidiaries for the
fiscal year ended January 31, 1998 and for the six months ended July 31, 1998.
(d) The books, records and accounts of MG and the MG
Subsidiaries (i) since December 23, 1996 have been maintained in accordance with
good business practices on a basis consistent with prior years, (ii) are stated
in reasonable detail and accurately and fairly reflect in all material respects
the transactions and dispositions of the assets of MG and the MG Subsidiaries
since December 23, 1996 and (iii) accurately and fairly reflect in all material
respects the basis for the MG financial statements for the periods beginning
since December 23, 1996. MG has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; and (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with Canadian generally
accepted accounting principles and (B) to maintain accountability for assets.
(e) MG has delivered to TMW the unaudited balance sheet and
related unaudited statement of income and retained earnings for Moores The Suit
People Inc. and Moores The Suit People U.S., Inc. for the months ending August
31, 1998 and September 30, 1998, which were prepared in accordance with Canadian
generally accepted accounting principles, and which fairly represent the
financial condition and results of operations of Moores The Suit People Inc. and
Moores The Suit People U.S., Inc., as of and for the periods presented, subject
to normal year end adjustments, which in the aggregate are not material, copies
of which are included in Section 2.5 of the MG Disclosure Letter (the "Financial
Statements").
2.6 LIABILITIES. Except as set forth in the Reference Balance Sheet,
neither MG nor any MG Subsidiary has any liabilities or obligations, either
accrued, absolute, contingent or otherwise, or has any knowledge of any
potential liabilities or obligations which could have a Material Adverse Effect,
other than those incurred in the ordinary course of business consistent with
past practices since July 31, 1998. Neither MG nor any of the MG Subsidiaries
has incurred any indebtedness for borrowed money since July 31, 1998.
2.7 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by MG for inclusion or incorporation by reference in the Registration
Statement (as defined in Section 4.4) will at the time the Registration
Statement is declared effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
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2.8 NO DEFAULTS. Neither MG nor any MG Subsidiary is, or has received
notice that it would be with the passage of time, in default or violation of any
term, condition or provision of (a) its charter documents or bylaws; (b) any
judgment, decree or order applicable to it; or (c) any loan or credit agreement,
note, bond, mortgage, indenture, contract, agreement, lease, license or other
instrument to which MG or any MG Subsidiary is now a party or by which it or any
of its properties or assets may be bound and neither MG nor any MG Subsidiary
has any knowledge that any other party to any such agreements or instruments is
in default with respect thereto.
2.9 LITIGATION; INVESTIGATIONS. There is no claim, action, suit or
proceeding pending, or to the knowledge of MG threatened against MG or any of
the MG Subsidiaries, which would, if adversely determined, individually or in
the aggregate, have a Material Adverse Effect on MG, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against MG or any of the MG Subsidiaries having, or which, insofar
as reasonably can be foreseen, in the future could have, a Material Adverse
Effect. There is no investigation pending, or to the knowledge of MG threatened,
against MG or any of the MG Subsidiaries before any Governmental Entity.
2.10 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since January 31, 1998,
there has not been:
(a) Any material adverse change in the financial condition,
operations, assets, liabilities or business of MG and the MG Subsidiaries, taken
as a whole;
(b) Any material damage, destruction, or loss to the business,
properties or assets of MG and the MG Subsidiaries, taken as a whole, whether or
not covered by insurance;
(c) Any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of MG, or any direct or
indirect redemption, purchase or any other acquisition by MG of any such stock;
(d) Any change in the capital stock or in the number of shares
or classes of MG's authorized or outstanding capital stock as described in
Section 2.4 nor any grant or issuance of any options or other rights with
respect to the capital stock of MG or any MG Subsidiary;
(e) Any material labor dispute or charge of unfair labor
practice (other than routine individual grievances), or, to the knowledge of MG,
any activity or proceeding by a labor union or by a representative thereof to
organize any employees of MG or any MG Subsidiary or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union;
(f) Any change in compensation or benefits payable or to
become payable to any employee except in the ordinary course of business
consistent with past practices; or
(g) Any other event or condition known to MG pertaining to and
adversely affecting the operations, assets or business of MG or any of the MG
Subsidiaries (other than events or conditions which are of a general or
industry-wide nature and of general public knowledge) which would constitute a
Material Adverse Effect on MG.
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2.11 ADDITIONAL MG INFORMATION. The MG Disclosure Letter contains true,
complete and correct lists of the following items with respect to MG and each of
the MG Subsidiaries, and MG has furnished or made available to TMW true,
complete and correct copies of all documents referred to in such lists:
(a) Each parcel of real property owned, or subject to a
contract of purchase and sale with a description of the nature and amount of any
Encumbrance thereon, each parcel of real property leased, or subject to a lease
commitment with a description of the landlord, base rent, any percentage rent,
any triple net or CAM charges, term of lease, go dark provisions, renewal
options, and, with respect to each parcel of real property leased in the United
States or subject to a lease which purports to restrict business activities in
the United States any radius restriction and each parcel of real property with
respect to which MG or an MG Subsidiary is in discussions with respect to the
leasing thereof;
(b) All insurance policies or bonds currently maintained,
including those covering properties, buildings, machinery, equipment, fixtures,
employees and operations, as well as a listing of any premiums, audit
adjustments or retroactive adjustments due or pending on such policies or any
predecessor policies;
(c) Each contract which involves, or may involve, aggregate
payments by any party thereto of $100,000 or more and all contracts involving
less than $100,000 but more than $10,000 to the extent all such contracts
involve payments aggregating $250,000, which are to be performed in whole or in
part after the Effective Time;
(d) All MG Plans (as defined in Section 2.13(a));
(e) Any collective bargaining agreements with any labor union
or other representative of employees, including all amendments and supplements,
and all employment and consulting agreements;
(f) All patents, trademarks, copyrights and other intellectual
property rights owned, licensed or used and all applications therefor;
(g) All trade names and fictitious names used or held, whether
and where such names are registered and where used;
(h) All material long-term and short-term promissory notes,
installment contracts, loan agreements, credit agreements, operating and finance
leases, and any other agreements relating thereto or with respect to collateral
securing the same;
(i) All indebtedness, liabilities and commitments of third
parties (other than MG Subsidiaries) and as to which MG or one or more of the MG
Subsidiaries is a guarantor, endorser, co-maker, surety or accommodation maker,
or is contingently liable therefor (excluding liabilities as an endorser of
checks and the like in the ordinary course of business) or has otherwise
provided any form of financial assistance and all letters of credit, whether
stand-by or documentary, issued by any third party;
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(j) The name and title of all directors and officers of MG or
any MG Subsidiary;
(k) All bank accounts and safety deposit arrangements of MG or
any MG Subsidiary;
(l) All persons to whom MG or any MG Subsidiary has given a
currently effective power of attorney;
(m) The aggregate amount of capital contributions by MG in,
and indebtedness owed to MG by, any MG Subsidiary;
(n) All outstanding letters of credit; and
(o) All principal and accrued interest outstanding under any
term debt or revolving credit debt of MG or any MG Subsidiary as of October 31,
1998.
2.12 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will,
alone or in conjunction with another event (such as termination of employment),
(a) result in any payment (including severance, unemployment compensation,
parachute payment, bonus or otherwise) becoming due to any director, employee or
independent contractor of MG or any of the MG Subsidiaries under any MG Plan (as
hereinafter defined) or otherwise, (b) increase any benefits otherwise payable
under any MG Plan or otherwise or (c) result in the acceleration of the time of
payment or vesting of any such benefits. There are no agreements, arrangements
or understandings between MG, any MG Subsidiary or any Shareholder of MG on the
one hand and any officer, director or employee of MG relating to the management
or operation of any business of MG or any MG Subsidiary.
2.13 EMPLOYEE BENEFIT PLANS.
(a) For purposes of Section 2.12 and this Section 2.13, MG
Subsidiaries shall include any enterprise which, with MG, forms or formed a
controlled group of corporations, a group of trades or business under common
control or an affiliated service group, within the meaning of Section 414(b),
(c) or (m) of the Code and shall include any person related to MG within the
meaning of Section 251 of the ITA. For purposes of Section 2.11(d), Section 2.12
and this Section 2.13, "MG Plan" means any written or oral understanding,
program or arrangement that provides retirement income, medical, surgical,
health, or hospital care benefits or benefits in the event of sickness,
accident, disability, death or unemployment, deferred compensation, performance
incentive benefits, bonuses, stock options, stock awards, share purchase, stock
appreciation, phantom stock, profit sharing, golden parachute benefits,
severance or termination pay, dependent care assistance benefits, employee
assistance benefits, education scholarships, tuition reimbursement benefits,
retention incentive benefits, vacation benefits, and other similar plans,
agreements and arrangements that is sponsored, maintained, or contributed to, by
MG or an MG Subsidiary for the benefit of any present or former employees or
directors of MG or an MG Subsidiary, or their spouses or dependents or with
respect to which MG or an MG Subsidiary may have any liability, except the
Retirement Fund and the Insurance Fund referred to in the collective bargaining
agreement effective as of December 1, 1995, between the Associated Clothing
Manufacturers of the Province of Quebec, Inc. (the
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"Association"), Montreal Clothing Contractors Association, Inc., The Quebec
Council of Odd Pants Employers, Rainwear & Sports wear Manufacturers Association
and The Canadian Trimmings Manufacturers Association and Montreal Joint Board,
Union of Needletrades, Industrial and Textile Employees (the "Union")(QFL-CLC)
(the "Collective Bargaining Plans") shall not be considered to be MG Plans.
(b) MG has delivered to TMW, as applicable, true, complete and
correct copies of the following with respect to each MG Plan:
(i) the plan documents (or, in the case of any
unwritten MG Plans, descriptions thereof);
(ii) the most recent summary description of the plan
provided to present or former employees;
(iii) each trust agreement, insurance contract or
funding vehicle for the plan; and
(iv) all material correspondence to and from
governmental or regulatory bodies during the three-year period ending
on the Closing Date, including annual reports.
(c) (1) each MG Plan has been maintained and administered in
material compliance with its terms and, to the extent required by applicable law
or contract is fully funded; (2) all required employer contributions and
employees contributions, as the case may be, under each MG Plan have been made
and the applicable funds have been funded in accordance with the terms of such
MG Plan; (3) each MG Plan that is required or intended to be qualified under
applicable law or registered or approved by a governmental agency or authority
has been so qualified, registered or approved by the appropriate governmental
agency or authority (including registration with the relevant tax authorities
where such registration is required to qualify for tax exemption or other
beneficial tax status), and nothing has occurred since the date of the last
qualification, registration or approval to adversely affect, or cause, the
appropriate governmental agency or authority to revoke such qualification,
registration or approval; (4) there are no pending or, to the knowledge of MG,
anticipated material claims against or otherwise involving any of the MG Plans
and no suit, action or other litigation (excluding claims for benefits incurred
in the ordinary course of MG Plan activities) has been brought against or with
respect to any MG Plan; (5) no event has occurred and there has been no failure
to act on the part of MG or any MG Subsidiary, any funding agent or any
administrator of any of the MG Plans that could subject MG, any MG Subsidiary,
any officer or director or either of them, or the fund of any MG Plan to the
imposition of any material tax, penalty or other liability with respect to any
such plan, whether by way of indemnity or otherwise; (6) no MG Plan constitutes
a "multiemployer pension plan", within the meaning of Section 4001(a)(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (7) there
has been no amendment to, written interpretation of or announcement by MG or any
MG Subsidiary relating to, or change in employee participation or coverage under
any MG Plan that would increase materially the expense of maintaining such MG
Plan above the level of expense incurred in respect thereof for the fiscal year
ended January 31, 1998; and (8) neither MG nor any MG Subsidiary has any
obligations for retiree health and life benefits under any MG Plan, and there
are no restrictions on the rights of MG or any
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of the MG Subsidiaries to amend or terminate any such MG Plan without incurring
any liability thereunder. With respect to the Collective Bargaining Plans (1) MG
has delivered to TMW all of the plan documents which it has received in
connection with such plans, and, to the knowledge of MG, such documents
represent all of the documents comprising such plans, (2) all required
contributions of MG and the MG Subsidiaries to such plans have been made, (3) to
the knowledge of MG, there are no pending anticipated material claims against or
otherwise involving such plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of such plans'
activities) has been brought against or with respect to such plans.
(d) To the extent applicable, (1) the MG Plans comply, in all
material respects, with the requirements of all applicable laws, rules and
regulations in Canada, the United States and every political subdivision
thereof, including, without limitation, ERISA, the Code and any other applicable
tax and other laws, and any MG Plan intended to be qualified under Section
401(a) of the Code has been determined by the United States Internal Revenue
Service to be so qualified and nothing has occurred to cause the loss of such
qualified status; (2) no MG Plan is a defined benefit plan within the meaning of
Section 3(35) of ERISA (without regard to whether such plan is subject to
ERISA); (3) neither MG nor any MG Subsidiary has incurred or reasonably expects
to incur any material liability under Title IV of ERISA with respect to any
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by MG, any MG Subsidiary or any entity which is
or was considered one employer with MG under Section 4001(a)(14)(A) and (B) of
ERISA; and (4) neither MG nor any MG Subsidiary has incurred or reasonably
expects to incur any withdrawal liability under Title IV of ERISA with respect
to any "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA.
2.14 INTELLECTUAL PROPERTY. MG or the MG Subsidiaries own or possess
licenses to use all patents, patent applications, trademarks and service marks
(including registrations and applications therefor), trade names, copyrights and
written know-how, trade secrets and all other similar proprietary data and the
goodwill associated therewith (collectively, the "MG Intellectual Property")
that are either material to the business of MG or any MG Subsidiary or that are
necessary for the manufacture, use, license or sale of any services or products
manufactured, used, licensed or sold by MG and the MG Subsidiaries. The MG
Disclosure Letter contains a complete and accurate list of the MG Intellectual
Property material to the conduct of the business. The MG Intellectual Property
is owned or licensed by MG or the MG Subsidiaries free and clear of any
Encumbrance. Neither MG nor any of the MG Subsidiaries has granted to any other
person any license to use any MG Intellectual Property. Neither MG nor any of
the MG Subsidiaries has received any notice of infringement, misappropriation or
conflict with, the intellectual property rights of others in connection with the
use by MG and the MG Subsidiaries of the MG Intellectual Property.
2.15 TITLE TO AND CONDITION OF PROPERTIES. Except for goods and other
property sold, used or otherwise disposed of since January 31, 1998, in the
ordinary course of business and consistent with past practices for fair value,
MG has good and marketable title to all its properties, interests in properties
and assets, real and personal, immovable or movable, reflected in its January
31, 1998 financial statements, free and clear of any Encumbrance, except (a)
Encumbrances reflected in the balance sheet of MG as of January 31, 1998, (b)
liens for current taxes not yet due and payable and (c) such imperfections of
title, easements and Encumbrances, if any, as are not substantial in character,
amount or extent and do not and will not materially detract from the value, or
interfere
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with the present use, of the property subject thereto or affected thereby, or
otherwise impair business operations. All leases pursuant to which MG or any MG
Subsidiary leases (whether as lessee or lessor) any real or personal, immovable
or movable, property are in good standing, valid, and effective; and there is
not, under any such leases, any existing or prospective default or event of
default or event which with notice or lapse of time, or both, would constitute a
default, by MG or any MG Subsidiary, or, to the knowledge of MG or a MG
Subsidiary, any other party thereto. The buildings and premises of MG and each
of the MG Subsidiaries that are used in its business are structurally sound with
no known defects and in good operating condition and in a state of good
maintenance and repair, normal wear and tear excepted, and are adequate and
suitable for the purpose for which they are currently being used, have access to
adequate water, electric, gas and sewage service and all other utility services
necessary for the conduct of the business of each retail store and at the
manufacturing facility. All items of operating equipment of MG and the MG
Subsidiaries are in good operating condition and in a state of reasonable
maintenance and repair, ordinary wear and tear excepted, and are free from any
known defects except as may be repaired by routine maintenance and such minor
defects as do not substantially interfere with the continued use thereof in the
conduct of normal operations. MG and the MG Subsidiaries have performed all
maintenance required to maintain all warranties with respect to all of the plant
and equipment used by them and have conducted all maintenance at the
manufacturing facility which a reasonably prudent operator thereof would have
performed. No material tenant repairs are required with respect to any leased
stores other than normal and routine repairs consistent with past practice.
There has been no violation of zoning laws or other similar restrictions, and MG
is not aware of any zoning law changes or similar restrictions that would impact
any of the stores or the manufacturing facility operated by MG or any of the MG
Subsidiaries.
2.16 FACTORY OPERATIONS AND CAPACITY. During the twelve month period
ended October 31, 1998, the manufacturing facility has averaged production of
10,078 jackets and 20,079 pairs of dress pants per week calculated on the basis
of the 47 weeks within such 12 month period in which the manufacturing facility
was in operation. To the knowledge of MG, MG does not anticipate that there will
be any interruptions in the production at the manufacturing facility during the
next twelve months and neither MG nor any MG Subsidiary is aware of any basis
for any such interruption or any threat thereof for the foreseeable future,
except that no representation is made relating to the Union contract which
terminates in November 1998 or any negotiations with the Union relating to such
Union contract.
2.17 ENVIRONMENTAL MATTERS.
(a) There are no environmental conditions or circumstances,
such as the presence or release of any hazardous substance, on any property
presently or, to the knowledge of MG, previously owned or leased by MG or any of
the MG Subsidiaries that could reasonably be expected to result in a Material
Adverse Effect on MG;
(b) MG and the MG Subsidiaries have in full force and effect
all material environmental permits, licenses, approvals and other authorizations
required to conduct their operations and are operating in material compliance
thereunder;
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(c) MG's and the MG Subsidiaries' operations and the use of
their assets do not violate any applicable United States or Canadian or other
federal, provincial, state or local law, statute, ordinance, rule, regulation,
order, policy, guideline or notice requirement pertaining to (i) the condition
or protection of air, groundwater, surface water, soil, or other environmental
media, (ii) the environment, including natural resources or any activity which
affects the environment, (iii) the regulation of any pollutants, contaminants,
waste or other substances (whether or not hazardous or toxic) or (iv)
occupational health and safety, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act 42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 1609 et
seq.) the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (17 U.S.C. Section 2601
et seq.), the Safe Drinking Water Act (42 U.S.C. Section 201 and Section 300f et
seq.), the Rivers and Harbors Act (33 U.S.C. Section 401 et seq.), the Oil
Pollution Act (33 U.S.C. Section 2701 et seq.) and analogous Canadian, foreign,
provincial, state and local provisions, including the Canadian Environmental
Protection Act (Canada), the Environmental Quality Act (Quebec), the Act
Respecting Occupational Health and Safety (Quebec), the Politique de protection
des sols et de rehabilitation des terrains contamines (Quebec), the
Environmental Protection Act (Ontario) and the Occupational Health and Safety
Act (Ontario), as any of the foregoing may have been amended or supplemented
from time to time (collectively, the "Applicable Environmental Laws"), except
for violations which, either singly or in the aggregate, would not result in a
Material Adverse Effect on MG;
(d) None of the operations or assets of MG or any MG
Subsidiary has ever been conducted or used by MG or any MG Subsidiary in such a
manner as to constitute a violation of any of the Applicable Environmental Laws,
except for violations which, either singly or in the aggregate, would not result
in a Material Adverse Effect on MG;
(e) No written notice has been served on MG or any MG
Subsidiary from any entity, governmental agency or individual regarding any
existing, pending or threatened investigation or inquiry related to alleged
violations under any Applicable Environmental Laws, or regarding any claims for
remedial obligations or contribution under any Applicable Environmental Laws,
other than any of the foregoing which, either singly or in the aggregate, would
not result in a Material Adverse Effect on MG;
(f) MG does not know of any reason that would preclude it or
TMW from renewing or obtaining a reissuance of the material permits, licenses or
other authorizations required pursuant to any Applicable Environmental Laws to
operate and use any of MG's or the MG Subsidiaries' assets for their current
purposes and uses;
(g) MG does not currently own nor has MG ever owned any real
or immovable property other than those properties disclosed on the MG Disclosure
Letter; and
(h) To the knowledge of MG, none of the buildings or premises
owned or leased by MG contain asbestos, urea formaldehyde, polychlorinated
biphenyls (PCB's) or other hazardous materials.
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2.18 COMPLIANCE WITH OTHER LAWS. Neither MG nor any MG Subsidiary is in
violation of or in default with respect to, or in alleged violation of or
alleged default with respect to any other applicable law or any applicable rule
or regulation, or any writ or decree of any court or any governmental
commission, board, bureau, agency or instrumentality, or delinquent with respect
to any report required to be filed with any Governmental Entity, except for
violations and delinquencies which, either singly or in the aggregate, do not
and are not expected to result in a Material Adverse Effect on MG.
2.19 TAXES. Except with respect to failures which, in the aggregate,
would not result in a Material Adverse Effect on MG or the MG Subsidiaries taken
as a whole, proper, complete and accurate federal, provincial, state, local and
foreign income (including net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings or profits), capital,
withholding, environmental, commodity, ad valorem, value added, sales, use,
license, goods and services, franchise, gross revenue or gross receipt, gains,
turnover, transfer, excise, payroll, unemployment, disability, social security
(or similar), property, occupation, employment, stamp, customs duties, workers'
compensation, unemployment insurance or compensation, premium, windfall profits
taxes, alternative or add-on minimum taxes, fees, imposts, assessments or
charges of any kind whatsoever, together with any interest and any penalties or
additional amounts imposed by any taxing authority and any and all other tax
returns, declarations, reports, information returns, statements and estimates
have been filed with appropriate governmental agencies, domestic and foreign, by
MG and each of the MG Subsidiaries for each period for which any returns,
declarations, reports, information returns, statements or estimates were due
(taking into account any extensions of time to file before the date hereof)(the
"Tax" or "Taxes"); all Taxes shown by such returns, declarations, reports,
information returns, or statements to be payable and any other Taxes due and
payable have been paid other than those being contested in good faith by MG or a
MG Subsidiary and indicated in the MG Disclosure Letter; and the tax provision
reflected in MG's financial statements is adequate, in accordance with Canadian
or United States (as the case may be) generally accepted accounting principles,
to cover liabilities of MG and the MG Subsidiaries for all unpaid Taxes,
including any interest, penalties and additions to taxes of any character
whatsoever applicable to MG and the MG Subsidiaries or their assets or
businesses. MG and the MG Subsidiaries have not received any notice of
reassessment or any other notification of Taxes from Revenue Canada or any other
taxing authority and no material Tax liability has been assessed, proposed to be
assessed, incurred or accrued, and no deficiencies or adjustments in respect of
Taxes payable by MG and the MG Subsidiaries have been claimed, proposed,
assessed, or, in the best of MG's knowledge, threatened. There is no material
difference between the amounts of the book basis and the tax basis of any assets
of MG and the MG Subsidiaries that is not reflected in an appropriate accrual of
deferred tax liability on the books of MG and the MG Subsidiaries. The MG
Disclosure Letter accurately sets forth the last year for which MG's and the MG
Subsidiaries' federal, provincial and state income tax returns, respectively,
have been assessed, reassessed or audited and any years which are the subject of
a pending audit by the Internal Revenue Service, Revenue Canada, Revenue Quebec
and any applicable foreign, federal, provincial, state or local agencies. No
waiver of any statute of limitations executed by MG or a MG Subsidiary with
respect to any Tax is in effect for any period. There are no Tax liens on any
assets of MG or the MG Subsidiaries except for Taxes not yet currently due and
those which could not reasonably be expected to result in a Material Adverse
Effect on MG. MG and the MG Subsidiaries withheld all Taxes required to be
withheld in the course of their businesses, in respect of wages, salaries and
other payments to all employees, officers and directors,
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and in respect of payments to any person that is not a resident of the country
of the payor and timely paid all such amounts withheld to the proper taxing
authority.
2.20 INVENTORY. The retail and finished inventory of MG and all of its
piece goods, work in progress and other unfinished inventory will be, at the
time of Closing, in all material respects of the same quality, style, condition
and saleability as on November 5, 1998. MG has piece goods and purchase
commitments and piece goods on hand sufficient to provide inventory to meet the
business plan of MG and the MG Subsidiaries for at least the next five months.
2.21 CREDIT ITEMS. The aggregate of all credit slips, due bills, gift
certificates and other credit items of MG outstanding as of the date hereof does
not exceed Can $550,000. The aggregate of all layaway transactions or
uncompleted transactions outstanding on the date hereof does not exceed Can
$25,000.
2.22 VOTE REQUIRED. This Agreement, the Share Restructuring and the
consummation of the transactions contemplated hereby have been approved by the
required vote of the Securityholders of MG.
2.23 POOLING MATTERS. To the best knowledge of MG's executive,
financial and accounting officers, prior to the date hereof, neither MG nor any
of the MG Subsidiaries has taken any action that (without giving effect to any
action taken or agreed to be taken by TMW or the TMW Subsidiaries) would
jeopardize the treatment of the business combination to be effected by the Share
Restructuring Plan as a pooling of interests for accounting purposes.
2.24 BROKERS AND FINDERS. Other than CIBC Wood Gundy Securities Inc.,
in accordance with the terms of its engagement letter dated April 21, 1998, none
of MG or any of the MG Subsidiaries nor any of their respective directors,
officers or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement.
2.25 DISCLOSURE. No representation or warranty made by MG in this
Agreement or the MG Disclosure Letter, nor any document, written information,
statement, financial statement, certificate or Exhibit prepared and furnished or
to be prepared and furnished by MG or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains or contained (as of the date made) any untrue statement of a material
fact when made, or omits or omitted (as of the date made) to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were made.
2.26 POOLING OPINION. MG's board of directors has received a written
opinion from Ernst & Young LLP ("E&Y") dated August 4, 1998 and updated as of
November 10, 1998, relating to the eligibility of MG to be a party to a Share
Restructuring Plan accounted for as a "pooling of interests" (the "MG Pooling
Opinion").
2.27 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement, judgment, injunction, order or court decree binding upon MG or any MG
Subsidiary that has or could
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reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of MG or any MG Subsidiary, any acquisition of property by
MG or any MG Subsidiary or the conduct of any business by MG or any MG
Subsidiary as currently conducted.
2.28 [INTENTIONALLY OMITTED].
ARTICLE II-B
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the MG Disclosure Letter, each Shareholder,
severally and not jointly, represents and warrants to TMW pursuant to Sections
2.29 through 2.39, solely as to itself and not as to any other Shareholder,
that:
2.29 NO LIENS. The shares of MG Common Stock owned by such Shareholder
is set forth beside such Shareholder's name on Section 2.4 of the MG Disclosure
Letter, and such Shareholder owns all of such shares of MG Common Stock free and
clear of all liabilities, liens, hypothecs, encumbrances, pledges, trusts,
voting trusts or stockholders' agreements, equities, charges, options,
conditional sale or title retention agreements, covenants, restrictions,
reservations, commitments, obligations or other burdens or encumbrances of any
nature whatsoever.
2.30 EFFECT OF AGREEMENT ON SHAREHOLDERS. The execution and delivery of
this Agreement by such Shareholder and the consummation of the Share
Restructuring and the transactions contemplated hereby will not (i) result in
any breach of any of the terms or conditions of, or constitute a default under
any commitment, mortgage, hypothec, note, bond, debenture, deed of trust,
contract, agreement, license or other instrument or obligation to which such
Shareholder is now a party or by which such Shareholder or any of such
Shareholder's properties or assets may be bound or affected and which breach or
default could have an adverse effect on the Shareholders' ability to vote to
approve the Share Restructuring; (ii) result in any violation of any
governmental requirement applicable to such Shareholder; or (iii) to the best of
such Shareholder's knowledge, cause any person who normally does business with
MG not to continue to do so on the same basis as before.
2.31 AUTHORIZATION.
(a) Such Shareholder has all requisite legal right, power,
capacity and authority to execute and deliver this Agreement and to perform
fully such Shareholder's obligations hereunder. This Agreement has been duly
executed by such Shareholder and constitutes the legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity.
(b) No consent, approval, authorization, declaration, filing
or registration with any Governmental Entity or any other person is required to
be made or obtained by such Shareholder in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
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2.32 NO UNTRUE STATEMENTS. The statements, representations and
warranties of each such Shareholder set forth in Sections 2.29 through 2.39 of
this Agreement and the Exhibits hereto and in all other documents and
information furnished to TMW and Canco and their representatives by each such
Shareholder in respect of such Shareholder in connection herewith do not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements, representations and warranties set forth in
Sections 2.29 through 2.39 not misleading.
2.33 BROKERS. No broker or finder has acted for such Shareholder in
connection with this Agreement or the transactions contemplated by this
Agreement and no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of such Shareholder.
2.34 NO AFFILIATE OBLIGATIONS. MG and the MG Subsidiaries do not have
any obligations or liabilities to such Shareholder or any Affiliate (as defined
in Section 8.3) of such Shareholder, except for obligations and liabilities that
will be released in full at no cost to MG and the MG Subsidiaries on or prior to
the Closing Date.
2.35 INVESTMENT PURPOSE; ACCREDITED INVESTOR. Each Shareholder (i) is
an accredited investor as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and (ii) is
acquiring the TMW Common Stock for its own account, for investment purposes and
not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act, except pursuant to a
valid registration statement under the Securities Act declared effective by the
SEC (as hereinafter defined) or pursuant to a valid exemption from registration
under the Securities Act. Each Shareholder (i) is a "sophisticated purchaser" as
that term is defined in sections 43 and 44 of the Securities Act (Quebec) or
similar provisions of the securities acts of the other provinces of Canada, and
(ii) is acquiring the Exchangeable Shares for its own account and pursuant to
prospectus and registration exemptions under the Securities Act (Quebec) or
similar provisions of the securities acts of the other provinces of Canada.
2.36 INDEBTEDNESS AND AGREEMENTS. Immediately subsequent to the
Effective Time, neither MG nor any MG Subsidiary will have any indebtedness
outstanding that is payable to such Shareholder or any of its Affiliates.
Immediately subsequent to the Effective Time, except for this Agreement, there
will be no agreements, contracts, leases, arrangements or other understandings
(either written or oral) between such Shareholder and MG or any MG Subsidiary.
2.37 POOLING MATTERS. Since March 1, 1998, no such Shareholder nor any
of its affiliates have taken or agreed to take any action, except as
contemplated in this Agreement, that has reduced or could reduce such
Shareholder's aggregate interest in the equity of MG or would reduce the number
of Exchangeable Shares that such Shareholder is intended to receive pursuant to
the transactions contemplated hereby. Except as contemplated hereby, such
Shareholder is not aware of any plan, arrangement, understanding or agreement
pursuant to which such Shareholder will receive anything of value for such
Shareholder's interest in the equity of MG. On August 4, 1998, Marpro Holdings
Inc. (formerly known as 3323412 Canada Inc.)("Marpro"), Anpro Holdings Inc.
(formerly known as 96570 Canada Inc.)("Anpro") and Gronbri Holdings Inc.
(formerly known as 3230074 Canada Inc.)("Gronbri") confirmed an undertaking by
Martin Prosserman that, in
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connection with a certain Letter Agreement (the "Letter Agreement") dated
December 23, 1996 among MGB Limited Partnership, Anpro and Gronbri, and upon,
subject to certain conditions set forth in the letter, the consummation of the
acquisition of MG by TMW on or prior to December 31, 1998, the Letter Agreement
would be null and void. By letter dated November 10, 1998 signed by each of
Marpro, Anpro and Gronbri, the date by which the Acquisition must be
accomplished was extended from December 31, 1998 to February 28, 1999.
2.38 RESIDENCE. Each Shareholder respectively represents and warrants,
solely as to itself and not as to any other Shareholder, in respect of its
residence status for purposes of the ITA and the Taxation Act (Quebec), that:
(a) Marpro is a corporation and is not a non-resident of
Canada;
(b) MGB Limited Partnership is a partnership all the members
of which are non-residents of Canada and at least one member of which is not an
individual;
(c) CDPQ is a corporation and is not a non-resident of Canada;
(d) Cerberus International, Ltd. is a corporation and is a
non-resident of Canada;
(e) Ultra Cerberus Fund, Ltd. is a corporation and is a
non-resident of Canada;
(f) Styx International Ltd. is a corporation and is a
non-resident of Canada;
(g) The Long Horizons Overseas Fund Ltd. is a corporation and
is a non-resident of Canada;
(h) The Long Horizons Fund, L.P. is a partnership all the
members of which are non-residents of Canada and at least one member of which is
not an individual; and
(i) Styx Partners, L.P. is a partnership all the members of
which are non-residents of Canada and at least one member of which is not an
individual.
2.39 CAPITAL PROPERTY. Each Shareholder, other than CDPQ, respectively
represents and warrants, solely as to itself and not as to any other
Shareholder, that such Shareholder holds its MG Shares as "capital property"
within the meaning of the ITA.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TMW
Except as set forth in a letter dated the date of this Agreement and
delivered by TMW to MG concurrently herewith (the "TMW Disclosure Letter"), TMW
hereby represents and warrants to, and agrees with, MG that:
3.1 ORGANIZATION AND STANDING. TMW and each body corporate,
partnership, joint venture, association or other business entity of which more
than 50% of the total voting power of
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shares of stock or units of ownership or beneficial interest entitled to vote in
the election of directors (or members of a comparable governing body), including
Canco, is owned or controlled, directly or indirectly, by TMW (the "TMW
Subsidiaries"), is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has full requisite power and authority to carry on its business as
it is currently conducted, and to own, lease and operate the properties
currently owned, leased and operated by it, and is duly qualified or licensed to
do business and is in good standing in all jurisdictions in which the character
of the properties owned or leased or the nature of the business conducted by it
would make such qualification or licensing necessary, except where the failure
to be so qualified or licensed would not have a Material Adverse Effect on TMW.
3.2 AGREEMENT AUTHORIZED AND ITS EFFECTS ON OTHER OBLIGATIONS.
(a) TMW and Canco have all requisite corporate power and
authority to enter into this Agreement and to perform their respective
obligations hereunder and to consummate the Share Restructuring and the other
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by TMW and Canco and the consummation by TMW and Canco of the Share
Restructuring and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of TMW and Canco. This
Agreement has been duly executed and delivered by TMW and Canco and is the valid
and binding obligation of TMW and Canco, enforceable in accordance with its
terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) Neither the execution, delivery or performance of this
Agreement or the Share Restructuring by TMW and Canco, nor the consummation of
the transactions contemplated hereby or thereby by TMW and Canco nor compliance
with the provisions hereof or thereof by TMW and Canco will: (i) conflict with,
or result in any violations of, the Articles of Incorporation or bylaws of TMW
or any equivalent document of any of the TMW Subsidiaries, or (ii) result in any
breach of or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material benefit
under, or result in the creation of any Encumbrance upon any of the material
properties or assets of TMW or any of the TMW Subsidiaries under, any term,
condition or provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to TMW or any of the TMW Subsidiaries
or their respective properties or assets.
3.3 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity, is
required to be obtained by TMW or any of the TMW Subsidiaries in connection with
the execution and delivery of this Agreement or the Share Restructuring Plan or
the consummation of the transactions contemplated hereby or thereby, except for:
(i) the filing with the United States Securities and Exchange Commission (the
"SEC") of the Registration Statement (as hereinafter defined), (ii) certain
post-signing filings to be made under the Investment Canada Act and/or certain
consents to be obtained from the Canadian securities regulatory authorities and
(iii) where the failure to obtain such consents, approvals, etc., would not
prevent or delay the consummation of the Share Restructuring or otherwise
prevent TMW
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from performing its obligations under this Agreement and would not reasonably be
expected to have a Material Adverse Effect on TMW.
3.4 CAPITALIZATION. The authorized capital stock of TMW consists of
50,000,000 common shares, $.01 par value ("TMW Common Stock") and 2,000,000
shares of preferred stock, par value $.01 per share ("TMW Preferred Stock"). As
of October 31, 1998, 34,836,409 shares of TMW Common Stock were issued and
outstanding and 71,384 shares of TMW Common Stock were held by TMW in its
treasury. As of October 31, 1998, 1,700,191 shares of TMW Common Stock were
reserved for issuance upon the exercise of stock options then outstanding under
TMW's stock option plans and 956,123 shares of TMW Common Stock were reserved
for future issuance of options under TMW's stock option plans, excluding TMW's
Employee Stock Discount Plan. Additionally, as of October 31, 1998, 938,449
shares of TMW Common Stock were reserved for future issuance under TMW's
Employee Stock Discount Plan. No shares of TMW Preferred Stock are issued or
outstanding. All of the issued and outstanding TMW Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, were not issued
in violation of the terms of any agreement or other understanding binding upon
TMW and were issued in compliance with all applicable charter documents of TMW
and all applicable federal, state and foreign securities laws, rules and
regulations. There are, and have been, no preemptive rights with respect to the
issuance of the TMW Common Stock or any other capital stock of TMW. Except as
described in the SEC Documents (as defined in Section 3.10), there are no
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or rights (contingent or otherwise) of any character to
purchase or otherwise acquire from TMW or any TMW Subsidiary any shares of, or
securities convertible into, the capital stock of TMW or any TMW Subsidiary nor
are there any rights to payments or benefits based on the price or market value
of any shares of capital stock of TMW or any TMW Subsidiary.
3.5 LITIGATION; INVESTIGATIONS. There is no claim, action, suit or
proceeding pending, or to the knowledge of TMW threatened against TMW or any of
the TMW Subsidiaries, which would, if adversely determined, individually or in
the aggregate, have a Material Adverse Effect on TMW, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against TMW or any of the TMW Subsidiaries having, or which, insofar
as reasonably can be foreseen, in the future could have, any such effect. There
is no investigation pending, or to the knowledge of TMW threatened, against TMW
or any of the TMW Subsidiaries before any Governmental Entity.
3.6 VOTE REQUIRED. No vote of the holders of shares of the capital
stock of TMW is necessary to approve this Agreement and the Share Restructuring.
3.7 BROKERS AND FINDERS. Other than Bear, Stearns & Co. Inc. in
accordance with the terms of its engagement letter dated September 9, 1998, a
copy of which has previously been provided to MG, none of TMW or any of the TMW
Subsidiaries nor any of their respective directors, officers or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by this Agreement.
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3.8 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by TMW for inclusion or incorporation by reference in the Registration
Statement will, at the time the Registration Statement is declared effective
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading.
3.9 AUTHORIZATION FOR TMW COMMON STOCK. TMW has taken all necessary
action to permit it to issue the number of shares of TMW Common Stock required
to be issued pursuant to the terms of the Share Restructuring Plan, this
Agreement and the Support Agreement. The shares of TMW Common Stock issued
pursuant to the terms of the Share Restructuring Plan, this Agreement and the
Support Agreement will, when issued, be validly issued, fully paid and
nonassessable and not subject to preemptive rights.
3.10 SEC DOCUMENTS. TMW has provided to MG copies of its filings with
the SEC since December 31, 1996 (the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the United States Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a 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. The consolidated
financial statements of TMW included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of TMW
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. Except as
set forth in the SEC Documents, no event has occurred since the date of filing
of such that would constitute a Material Adverse Effect with respect to TMW.
3.11 DISCLOSURE. No representation or warranty made by TMW in this
Agreement or the TMW Disclosure Letter, nor any document, written information,
statement, financial statement, certificate or Exhibit prepared and furnished or
to be prepared and furnished by TMW or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains or contained (as of the date made) any untrue statement of a material
fact when made, or omits or omitted (as the case may be) to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were made.
3.12 POOLING MATTERS. To the best knowledge of TMW's executive,
financial and accounting officers, prior to the date hereof, neither TMW nor any
of the TMW Subsidiaries has taken any action that (without giving effect to any
action taken or agreed to be taken by MG or the MG Subsidiaries) would
jeopardize the treatment of the business combination to be effected by the Share
Restructuring Plan as a pooling of interests for accounting purposes.
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3.13 POOLING OPINION. TMW's board of directors has received a written
opinion from Deloitte & Touche LLP ("D&T") dated July 24, 1998 and updated as of
November 11, 1998, relating to the eligibility of TMW to be a party to a Share
Restructuring Plan accounted for as a "pooling of interests" (the "TMW Pooling
Opinion").
3.14 NO DEFAULTS. Neither TMW nor any TMW Subsidiary is, or has
received notice that it would be with the passage of time, in material default
or material violation of any term, condition or provision of (a) its charter
documents or bylaws; (b) any judgment, decree or order applicable to it; or (c)
any loan or credit agreement, note, bond, mortgage, indenture, contract,
agreement, lease, license or other instrument to which TMW or any TMW Subsidiary
is now a party or by which it or any of its properties or assets may be bound,
and neither TMW nor any TMW Subsidiary has any knowledge that any other party to
any such agreements or instruments is in material default with respect thereto.
ARTICLE IV.
OBLIGATIONS PENDING EFFECTIVE DATE
4.1 AGREEMENTS OF TMW, CANCO AND MG. TMW, Canco and MG agree to take
the following actions after the date hereof:
(a) Each party will promptly execute and file or join in the
execution and filing of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of
any Governmental Entity which may be reasonably required, or which the
other party may reasonably request, in connection with the consummation
of the transactions contemplated by this Agreement. Each party will use
its reasonable best efforts to promptly obtain such authorizations,
approvals and consents;
(b) MG will allow TMW and its agents access to the files,
books, records, offices and employees (including access on a
confidential basis) of itself and its subsidiaries, including any and
all information relating to MG's tax matters, contracts, leases,
licenses and real, personal and intangible property and financial
condition. MG will cause its accountants to cooperate with TMW in
making available to TMW all financial information reasonably requested,
including the right to examine all working papers pertaining to tax
matters and financial statements prepared or audited by such
accountants;
(c) TMW shall furnish to MG copies of the SEC Documents, and
make available for review but not reproduction copies of its budget and
forecasts for fiscal 1998 and forecasts for 1999. TMW shall provide MG
and its accountants and attorneys the opportunity to meet with
executive officers of TMW and its outside accountants to discuss the
business and prospects of TMW and will authorize its outside
accountants to allow MG's outside accountants to review the working
papers of D&T pertaining to tax matters or financial statements
prepared or audited by D&T subject to customary conditions.
(d) TMW and MG shall cooperate in the preparation and prompt
filing of the Registration Statement with the SEC and all notices,
documents, information with the
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Commission des valeurs mobilieres du Quebec and other securities
commissions or regulatory authorities in Canada;
(e) Each of TMW and MG will promptly notify the other in
writing (i) of any event occurring subsequent to the date of this
Agreement which would render any representation and warranty of such
party contained in this Agreement untrue or inaccurate in any material
respect, (ii) of any Material Adverse Effect on such party and (iii) of
any breach by such party of any material covenant or agreement
contained in this Agreement; and
(f) During the period from the date hereof through the
Effective Date, unless the parties shall otherwise agree in writing,
neither MG nor TMW or any of their respective Subsidiaries shall take
or fail to take any reasonable action which action or failure to act
would knowingly jeopardize the treatment of MG's combination with TMW
and Canco as a pooling of interests for accounting purposes and each of
MG and TMW will take all reasonable steps to permit the Share
Restructuring to be treated as a pooling of interest for accounting
purposes.
(g) During the term of this Agreement, each of TMW and MG will
use its reasonable best efforts to satisfy or cause to be satisfied all
the conditions precedent that are set forth in Article V hereof, and
each of TMW and MG will use its reasonable commercial efforts to cause
the Share Restructuring and the other transactions contemplated by this
Agreement to be consummated on or prior to January 15, 1999.
4.2 ADDITIONAL AGREEMENTS OF MG. MG agrees that, except as expressly
contemplated by this Agreement or as otherwise agreed to in writing by TMW or as
set forth in the MG Disclosure Letter, from the date hereof to the Effective
Date it will, and will cause each of the MG Subsidiaries to:
(a) Operate its business only in the usual, regular and
ordinary manner so as to maintain the goodwill it now enjoys and, to
the extent consistent with such operation, use all commercially
reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and
employees, and preserve its relationships with customers, suppliers,
distributors and others having business dealings with it;
(b) Continue the same kind and level of advertising in the
ordinary course of business consistent with past practice;
(c) Accrue and properly reflect in its books all accounts
payable including all commitments of any kind to purchase inventory or
other goods required by generally accepted accounting principles in
Canada to be reflected in its books and not pay such payables in
advance of the normal time for such payment consistent with past
practices;
(d) Maintain all of its property and assets in customary
repair, order, and condition, reasonable wear and use and damage by
fire or unavoidable casualty excepted;
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(e) Maintain its books of account and records in the usual,
regular and ordinary manner, in accordance with generally accepted
accounting principles applied on a consistent basis;
(f) Duly comply in all material respects with all laws
applicable to it and to the conduct of its business;
(g) Not (i) enter into any contracts of employment which (A)
cannot be terminated on notice of 14 days or less or (B) provide for
any severance payments or benefits covering a period beyond the
termination date of such employment contract, except as may be required
by law or (ii) amend any employee benefit plan or stock option plan,
except as may be required for compliance with this Agreement or
applicable law;
(h) Not incur any borrowings except borrowings under its
existing revolving credit facilities consistent with past practices and
not make any payments of principal or interest with respect to any debt
except required regular installment payments set forth in the agreement
relating to such debt as in effect on the date hereof;
(i) Advise TMW in writing of any commitments to make capital
expenditures (including any store remodeling projects) in excess of
$25,000 or which cumulatively exceed $100,000 which are not disclosed
in the MG Disclosure Letter;
(j) Advise TMW in writing of any sale, disposition or
encumbrance of any property or assets with a value in excess of
$25,000, other than the sale of inventory in the ordinary course of
business consistent with past practices and sales disposition or
encumbrances described in the MG Disclosure Letter;
(k) Not conduct any unusual liquidation of inventory or going
out of business sale or any discount or other sale other than in the
ordinary course of business consistent with past practices as to time
of year, pricing, location and goods sold;
(l) Advise TMW in writing of any contract, commitment or
series of related contracts or commitments, for the purchase of
inventory (other than piece goods) in excess of $100,000, and all such
contracts and commitments less than or equal to $100,000 to the extent
they aggregate more than $200,000, except for any contract or
commitment disclosed in the MG Disclosure Letter;
(m) Maintain insurance upon all its properties and with
respect to the conduct of its business of such kinds and in such
amounts as is currently in effect;
(n) Not amend its charter documents or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or
the character of its business;
(o) Not issue or sell, or issue options or rights to subscribe
to, or enter into any contract or commitment to issue or sell, any
shares of its capital stock or subdivide or in any
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way reclassify any shares of its capital stock, or acquire, or agree to
acquire, any shares of its capital stock;
(p) Not declare or pay any dividend on shares of its capital
stock or make any other distribution of assets to the holders thereof;
(q) Deliver to TMW, within 30 days after the end of each
fiscal quarter beginning with the quarter ended October 31, 1998, (i) a
consolidated balance sheet and related unaudited statement of income,
retained earnings and cash flow and (ii) the corresponding
consolidating information each as of the end of each fiscal quarter of
MG and each of its Subsidiaries and, and as of the corresponding fiscal
quarter of the previous fiscal year. MG hereby represents and warrants
that such unaudited consolidated financial statements shall (i) be
complete in all material respects except for the omission of notes and
schedules contained in audited financial statements, (ii) present
fairly in all material respects the financial condition of MG as at the
dates indicated and the results of operations for the respective
periods indicated, (iii) have been prepared in accordance with Canadian
generally accepted accounting principles applied on a consistent basis,
except as noted therein and (iv) contain all adjustments which MG
considers necessary for a fair presentation of its results for each
respective fiscal period;
(r) Without the prior written consent of TMW, from and after
the date hereof, MG and the MG Subsidiaries will not, and will not
authorize and will use their reasonable best efforts not to permit any
of their officers, directors, employees, financial advisors,
representatives and agents ("Representatives") to, directly or
indirectly, solicit, initiate or encourage (including by way of
furnishing information) or take any other action to facilitate any
inquiries or the making of any proposal which constitutes or may
reasonably be expected to lead to the acquisition of all or any
significant part of the assets of MG or of in excess of 20% of the
capital stock of MG (an " Acquisition Proposal") from any person, or
engage in any discussion or negotiations relating thereto or accept any
Acquisition Proposal;
(s) Not change, and not permit any MG Subsidiary to change,
its officers, directors or banking arrangements without written
disclosure to TMW;
(t) Provide to TMW copies of all financial statements and
reports provided to any creditor of MG or any MG Subsidiary at the same
time they are provided to such creditor;
(u) Provide to TMW all tax returns, reports, notifications and
information statements filed with or received from any taxation
authority together with all other information regarding taxation
reasonably requested by TMW;
(v) To the extent not prohibited by applicable laws or the
terms of any collective bargaining or other agreement with any union,
permit one representative of TMW (who shall be one of David Edwab, Gary
Ckodre, Eric Lane or Michael Conlon) to attend, but not participate in,
MG's weekly business planning meetings and all management meetings
pertaining to the production at the facility operated by MG and to
attend, but not participate in, all meetings held by management of MG
with the union that represents the employees at
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the factory; provided, that MG represents that it is not aware of any
such prohibitions. In addition, MG shall provide TMW a status report as
to any meetings held with any industry association of which it is a
member or such union and will provide copies of all information given
to MG by any industry association of which it is a member or such union
within 48 hours of the receipt of such materials by MG;
(w) Provide TMW with at least 48 hours notice of any meeting
described in subsection (v) above, unless such meeting is called on an
emergency basis, in which case MG shall provide TMW notice of such
meeting at the time any such emergency meeting is called;
(x) Provide to TMW on Tuesday of each week a report indicating
the status of attempts to obtain any consent necessary to permit MG and
the MG Subsidiaries the right to retain the benefits of all contracts,
agreements and permits, including reports with respect to the landlords
of the store leases;
(y) Permit the representatives of TMW to contact directly all
third parties whose consents are necessary to assure that MG and the MG
Subsidiaries will retain the benefit of all contracts, agreements and
permits; provided, however, that MG shall first have a reasonable
opportunity to obtain such consents;
(z) Provide TMW with the information set forth on Schedule
4.2; and
(aa) Permit the representatives of TMW to contact directly
each of the landlords of the Canadian and U.S. leases to discuss such
leases; provided, however, that TMW shall provide reasonable prior
written notice of any such contact or discussions to MG, MG shall have
the right to have one representative present for any such discussion
and TMW shall not contact the landlords of the Canadian leases until
after the Registration Statement has been filed in accordance with
Section 4.4 hereof.
4.3 ADDITIONAL AGREEMENTS OF TMW. TMW agrees that from the date hereof
to the Effective Date it will, and will cause each of the TMW Subsidiaries to
use its reasonable best efforts to, cause the shares of TMW Common Stock to be
issued from time to time after the Effective Time upon exchange of the
Exchangeable Shares to be listed on NASDAQ upon the Closing.
4.4 REGISTRATION STATEMENT.
(a) Pursuant to a Registration Rights Agreement by and among
TMW and the Shareholders signatory thereto dated as of the date hereof,
TMW has agreed that within 15 business days of the date upon which TMW
receives the Revised MG Disclosure Letter (as defined herein), TMW
shall use its reasonable best efforts to file a registration statement
on Form S-3 (the "Registration Statement") with the SEC and use its
reasonable best efforts to cause the Registration Statement to become
effective prior to the Effective Date that would allow the Shareholders
to sell the shares of TMW Common Stock into which the Exchangeable
Shares may be exchanged in accordance with the methods of distribution
specified by the Securityholders including pursuant to brokers
transactions within the meaning of Rule 144 of the Securities Act, the
writing of options thereon and pursuant to an
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underwritten public offering and, if necessary, TMW shall maintain the
effectiveness of such registration for so long as any of the
Exchangeable Shares remain outstanding and not owned by TMW or any
affiliate of TMW. However, TMW shall be under no obligation to maintain
the effectiveness of such registration if it shall have determined
based upon a written opinion from outside counsel that the
Securityholders may sell shares of TMW Common Stock without such
registration without regard to the volume limitations set forth in
Rules 144 and 145; provided, however, that each Securityholder is
furnished with a copy of such written opinion of counsel and such
opinion states that each such Securityholder may rely upon it.
Additionally, TMW shall not be required to take any actions under this
Section 4.4 until TMW has received the letters provided for in Section
5.3(k) and (v) hereof;
(b) Each party shall promptly furnish to the other party all
information concerning such party and its Securityholders as may be
reasonably required in connection with any action contemplated by this
Section 4.4. The Registration Statement shall comply in all material
respects with all applicable requirements of law. Each of TMW and MG
will notify the other promptly of the receipt of any comments from the
SEC and of any request by the SEC for amendments or supplements to the
Registration Statement, if required, or for additional information, and
will supply the other with copies of all correspondence with the SEC
with respect to the Registration Statement, if required. Whenever any
event occurs which should be set forth in an amendment or supplement to
the Registration Statement, if required, TMW or MG, as the case may be,
shall promptly inform the other of such occurrence and cooperate in
filing such amendment or supplement with the SEC;
(c) MG shall provide to, and shall arrange for its independent
public accountants to provide to, TMW all financial information and
statements, including audited financial statements for the period
beginning December 23, 1996 and ending January 31, 1997, the year ended
January 31, 1998, and interim financial statements for the period ended
July 31, 1998, and if requested by TMW to comply with the Rules and
Regulations of the SEC interim financial statements for the period
ended October 31, 1998, with respect to MG, with such accountants
reports thereon, as TMW shall deem necessary or advisable to comply
with the Securities Act or the U.S. Securities Exchange Act of 1934. MG
shall also arrange for such accountants to consent to the inclusion of
such reports and to a reference to them as experts in the Registration
Statement; and
(d) TMW and MG shall take any action required to be taken
under any applicable provincial or state securities laws (including
"blue sky" laws) in connection with the issuance of the TMW Common
Stock and the Share Restructuring; provided, however, that with respect
to the blue sky and Canadian provincial qualifications, neither TMW nor
MG shall be required to register or qualify as a foreign corporation or
reporting issuer where any such entity is not now so registered or
qualified except as to matters and transactions arising solely from the
offer and sale of the TMW Common Stock or the issuance of the
Exchangeable Shares.
4.5 PUBLIC ANNOUNCEMENTS. Neither TMW nor MG, nor any of their
respective affiliates, shall issue or cause the publication of any press release
or other public announcement with respect to this Agreement, the Share
Restructuring or the other transactions contemplated hereby
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without the prior consent of the other party, except as may be required by law
or by any listing agreement with a national securities exchange and, provided
that, the party making such announcement shall give prior notice to the other
party.
4.6 COMFORT LETTERS. MG shall use its reasonable best efforts to cause
to be delivered to TMW a letter (the "MG Comfort Letter") of E&Y substantially
in the form of Exhibit B addressed to TMW and dated as of a date within five
days before the date on which the Registration Statement shall become effective,
in form and substance reasonably satisfactory to TMW and customary in scope and
substance for "comfort" letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
4.7 EXPENSES. Whether or not the Share Restructuring is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses; provided, however, that if this Agreement shall have been terminated
pursuant to Section 7.1 as a result of the willful breach by a party of any of
its representations, warranties, covenants, or agreements set forth in this
Agreement, such breaching party shall pay the direct out-of-pocket costs and
expenses of the other parties in connection with the transactions contemplated
by this Agreement.
4.8 ADDITIONAL AGREEMENTS BY SHAREHOLDERS.
(a) Each of the Shareholders agrees to promptly notify TMW in
writing if such Shareholder becomes aware of (i) any event occurring
subsequent to date of this Agreement which would render any
representation or warranty of MG given in this Agreement untrue or
inaccurate in any material respect or (ii) any breach by MG of any
material covenant or agreement contained in this Agreement; and
(b) Each of the Shareholders agrees that such Shareholder will
not transfer any Exchangeable Shares held by such Shareholder unless
such transfer shall be in compliance with all related U.S. and Canadian
securities, prospectus and registration requirements or unless such
Shareholder shall receive a no action letter or similar advice from all
appropriate U.S. and Canadian securities authorities or a written
opinion from securities counsel reasonably acceptable to TMW to the
effect that such transfer may be effected without delivery of a
prospectus and registration under all applicable U.S. and Canadian
laws.
4.9 INVENTORY RECONCILIATION. MG shall permit TMW to conduct a test
inventory of the MG stores and the manufacturing facility and MG shall cooperate
with TMW and shall cause MG's independent accountants to cooperate with TMW to
allow TMW to test MG and the MG Subsidiaries' inventory to reconcile the
physical inventory to MG's books and records.
4.10 DEBT REPAYMENT. TMW agrees to cause MG to prepay on the Effective
Date the principal and accrued interest owing under (i) the Junior Loan
Agreement; (ii) a note in the amount of Can $3,333,333.00 made by GB/B
Acquisition Corp. (now known as Golden Brand Clothing (Canada) Ltd.) in favor of
3230074 Canada Inc. (now known as Gronbri Holdings Inc.), which note is
guaranteed by Zorro Holding Corp. (now known as MG) and M-Acquisition Corp. (now
known as Moores The Suit People Inc.) ("Prosserman Note 1"); (iii) a note in the
amount of Can
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$1,666,667.00 made by M Acquisition Corp. in favor of 96570 Canada Inc. (now
known as Ampro Holdings Inc.), which note is guaranteed by Zorro Holding Corp.
(now known as MG) and GB/B Acquisition Corp. (now known as Golden
Brand)("Prosserman Note 2" and together with Prosserman Note 1, the "Prosserman
Notes"); and (iv) Can $60,000,000 Credit Agreement among Zorro Holding Corp.
(now known as MG), as Borrower, and Societe Generale and Caisse de Depot et
Placement du Quebec, as Lenders, with Societe Generale, as Administrative Agent,
dated December 20, 1996, as amended by a First Amending Agreement to Credit
Agreement dated as of March 4, 1997 (as amended, the "Credit Agreement"), and
any penalty arising in connection with prepayment of the Credit Agreement. In
connection with any such repayment of debt to a party who is not a resident of
Canada, MG will withhold any and all appropriate withholding taxes and shall
remit such withholding taxes to Revenue Canada.
4.11 CERTAIN LEASES. TMW shall continue to provide Michel Zelnik and
Stuart Kreisler the opportunity to use their respective automobiles and
apartments in Montreal and Toronto currently provided by MG for a period of ten
days following the Closing Date.
4.12 MG DISCLOSURE LETTER. Within five business days of the date
hereof, MG shall provide TMW with a revised disclosure letter (the "Revised MG
Disclosure Letter"). TMW shall have five business days from the date of its
receipt of the Revised MG Disclosure Letter to object to any of the information
set forth therein which differs from the information contained in the MG
Disclosure Letter by providing written notice of any such objection to MG which
notice shall contain a description of the items in respect of which TMW objects.
Within three business days of the delivery of written notice of any objection by
TMW to MG, MG shall have the right to remove the objectionable information or to
terminate the Agreement. If no such written notice is provided to MG by TMW
during the five business days following the delivery of the Revised MG
Disclosure Letter by MG to TMW, then the Revised MG Disclosure Letter shall be
deemed to have been provided as of the date hereof and shall replace and
supercede the MG Disclosure Letter provided to TMW on the date hereof and all
references herein to the MG Disclosure Letter shall thereafter be deemed
references to the Revised MG Disclosure Letter.
4.13 OPTIONHOLDERS AGREEMENT TO EXCHANGE OPTIONS. Within 15 business
days of the date upon which TMW receives the Revised MG Disclosure Letter, each
Optionholder shall have entered into an agreement in the form of Exhibit C (the
"Agreement to Exchange Options") to exchange such Optionholders' Options in
accordance with this Agreement; provided, however, that if any Optionholder does
not enter into such Agreement to Exchange Options, then at the Effective Time,
each Optionholder shall receive an amendment to such Optionholder's Option which
shall adjust the "Option Shares" which are subject to such Option in accordance
with Section 6 and Section 9(h) of the agreement creating such Option so that
such Option Shares shall become a number of Exchangeable Shares equal to the
number of Exchangeable Shares exchangeable for each MG Class C Share pursuant to
Section 1.2(c) times the number of MG Class C Shares covered by such Option. The
aggregate option price under such Option shall remain unchanged and shall be
appropriately allocated to the Exchangeable Shares subject to such Option.
4.14 TAX CERTIFICATES. Each of the Shareholders, except CDPQ and
Marpro, agree to use reasonable best efforts to obtain the tax certificates
referred to in Section 5.1(g) hereof.
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ARTICLE V.
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY. The obligations
of each party to consummate and effect the transactions contemplated hereunder
shall be subject to the satisfaction or waiver before the Effective Date of the
following conditions:
(a) Consents of Certain Parties in Privity. Except as provided
in Section 5.3 and as to leases, TMW and MG shall have received all
written consents, assignments, waivers, authorizations or other
certificates necessary to provide for the continuation in full force
and effect of all their contracts and leases and for them to consummate
the transactions contemplated hereby, except when the failure to
receive such consents or other certificates would not have a Material
Adverse Effect on TMW or MG;
(b) No Legal Action. No order shall have been entered and
remain in effect in any action or proceeding before any Governmental
Entity that would prevent or make illegal the consummation of the Share
Restructuring;
(c) Commissions, etc. All necessary orders shall have been
obtained from the relevant United States and Canadian securities
regulatory authorities in connection with the Share Restructuring;
(d) SEC Matters. The Registration Statement shall have been
declared effective under the Securities Act on or before the Effective
Date, and at its effective date and on the Closing Date the
Registration Statement shall not be the subject of any stop-order;
(e) Listings. The TMW Common Stock to be issued from time to
time after the Effective Time upon exchange of the Exchangeable Shares
shall have been approved for listing on NASDAQ, subject only to notice
of issuance;
(f) Optionholders. Each Optionholder shall have (i) entered
into an agreement in the form of Exhibit D (an "Optionholder
Agreement"); (ii) delivered to MG and TMW a certificate confirming
whether such Optionholder is a resident or non-resident of Canada for
the purposes of the ITA; (iii) in the case of an Optionholder who is a
non-resident of Canada for the purposes of the ITA, delivered to MG a
certificate reasonably satisfactory to MG and TMW, issued pursuant to
subsection 116(2) of the ITA, with respect to the Options disposed of,
and having as "certificate limit", as defined in subsection 116(2) of
the ITA, an amount equal to or greater than the cost to MG of the
Options; and (iv) in the case of an Optionholder who is not an
individual and is a non-resident of Canada for the purposes of the ITA,
delivered to MG a certificate reasonably satisfactory to MG and TMW,
issued pursuant to Section 1098 of the Taxation Act (Quebec), with
respect to the Options disposed of, and having as "certificate limit"
as defined in Section 1098 of the Taxation Act (Quebec), an amount
equal to or greater than the purchase price for MG of the Options;
(g) Tax Certificates. Each Shareholder, except CDPQ and
Marpro, shall have delivered to MG either (i)(A) in the case of a
partnership that is a Shareholder, a certificate
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confirming the name and address of each member thereof and the
percentage of partnership interest held by each member; (B) a
certificate reasonably satisfactory to MG and TMW, issued pursuant to
subsection 116(2) of the ITA, with respect to the MG Shares disposed
of, and having as "certificate limit", as defined in subsection 116(2)
of the ITA, an amount equal to or greater than the greater of the cost
to MG of the MG Shares and the proceeds of disposition to the
Shareholder or the member, as the case may be, of its MG Shares; and
(C) except in the case of a member of a partnership who is an
individual, a certificate reasonably satisfactory to MG and TMW, issued
pursuant to Section 1098 of the Taxation Act (Quebec), with respect to
the MG Shares disposed of, and having as "certificate limit" as defined
in Section 1098 of the Taxation Act (Quebec), an amount equal to or
greater than the greater of the cost to MG of the MG Shares and the
proceeds of disposition to the Shareholder or the member, as the case
may be, of its MG Shares or (ii) a certificate issued pursuant to
Subsection 116(2) of the ITA and Section 1098 of the Taxation Act
(Quebec) reasonably satisfactory to MG and TMW to the same effect as
(i)(B) and (C) above issued to a partnership that is a Shareholder
which covers the partners in that partnership; and
(h) Authorization for Exchangeable Shares. MG shall have taken
all necessary action to permit it to issue the number of Exchangeable
Shares required to be issued pursuant to the terms of the Share
Restructuring Plan, this Agreement and the Support Agreement. The
Exchangeable Shares issued pursuant to the terms of the Share
Restructuring Plan, this Agreement and the Support Agreement will, when
issued, be validly issued, fully paid and nonassessable.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF MG AND THE SHAREHOLDERS. The
obligations of MG and the Shareholders to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction or waiver on or
before the Effective Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of TMW contained in this Agreement shall be true and correct
on the date hereof and (except to the extent such representations and
warranties speak as of a date earlier than the date hereof) shall also
be true and correct on and as of the Effective Date, with the same
force and effect as if made on and as of the Effective Date, unless the
failure or failures of such representations and warranties to be so
true and correct (without regard to materiality qualifiers contained
therein), individually or in the aggregate, does not result or would
not reasonably be expected to result in a Material Adverse Effect on
TMW and the TMW Subsidiaries taken as a whole;
(b) Covenants. TMW shall have performed and complied with all
covenants required by this Agreement to be performed or complied with,
in all material respects, by TMW on or before the Effective Date;
(c) Certificate. TMW shall have delivered to MG a certificate,
dated the Effective Date and signed by its president and its vice
president-finance, to the effect set forth in Sections 5.2(a) and (b);
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(d) Opinion of TMW Counsel. MG shall have received opinions,
dated as of the Effective Date, from Fulbright & Jaworski L.L.P.,
United States counsel for TMW, and from Byers Casgrain, Canadian
counsel for TMW, each in form and substance reasonably satisfactory to
MG;
(e) Affiliates Agreements. TMW shall have furnished copies to
MG of the TMW affiliates agreements referred to Section 8.3(b);
(f) Certificates and Resolutions. MG shall have received such
other certificates and resolutions of TMW as may be reasonably required
in connection with the consummation of the transactions contemplated by
this Agreement;
(g) Aggregate Value. The number of Exchangeable Shares to be
issued pursuant to Section 1.2(a) shall not exceed 2.75 million and,
when multiplied by the Average Stock Price, shall equal at least U.S.
$50 million; and
(h) Termination of Employment Agreements. Each of Messrs.
Michel Zelnik and Stuart Kreisler shall have received from TMW, on
behalf of MG, Can $300,000, less applicable withholding taxes, in cash
or immediately available funds in full satisfaction of all amounts
owing to each of them under his current employment agreement with MG
and such employment agreements shall have been terminated.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF TMW. The obligations of TMW
to consummate and effect the transactions contemplated hereunder shall be
subject to the satisfaction or waiver on or before the Effective Date of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of MG and the Shareholders contained in this Agreement shall
be true and correct on the date hereof and (except to the extent such
representations and warranties speak as of a date earlier than the date
hereof) shall also be true and correct on and as of the Effective Date,
with the same force and effect as if made on and as of the Effective
Date, unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality
qualifiers contained therein), individually or in the aggregate, does
not result or would not reasonably be expected to result in a Material
Adverse Effect on MG and the MG Subsidiaries taken as a whole;
(b) Covenants. MG and the Shareholders shall have performed
and complied with all covenants required by this Agreement to be
performed or complied with, in all material respects, by MG and the
Shareholders on or before the Effective Date;
(c) Certificate. MG and the Shareholders shall have delivered
to TMW a certificate, dated the Effective Date and signed by its chief
executive officer and its chief financial officer, to the effect set
forth in Sections 5.3(a) and (b);
(d) Opinion of MG Counsel. TMW shall have received opinions,
dated as of the Effective Date, from Coudert Brothers, United States
counsel for MG, and from Coudert
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Freres, Canadian counsel for MG, each in form and substance reasonably
satisfactory to TMW;
(e) Pooling Matters. TMW shall not have been advised by D&T or
E&Y that the transaction may not be accounted for as a pooling of
interest and the SEC shall not have advised or otherwise indicated to
TMW that TMW may not account for the transaction as a pooling of
interest, and (i) TMW shall have received an opinion from D&T updating
the TMW Pooling Opinion as of the Closing Date and (ii) MG shall have
received an opinion from E&Y updating the MG Pooling Opinion as of the
Closing Date, a copy of which shall have been provided to D&T, each to
the effect that the transactions contemplated hereby are poolable;
(f) Agreed Upon Procedures Report and Comfort Letter. TMW
shall have received the MG Comfort Letter and an additional letter from
E&Y, dated the Effective Date, in form and substance reasonably
satisfactory to TMW, stating that nothing has come to their attention,
as of a date no earlier than five days prior to the Effective Date,
which would require any change in the MG Comfort Letter if it were
required to be dated and delivered on the Effective Date and TMW and MG
shall have received the agreed upon procedures report from E&Y as
contemplated by the Confidentiality Agreement (as hereinafter defined);
(g) Affiliates Agreements. MG shall have furnished copies to
TMW of the MG affiliates agreements referred to Section 8.3(a);
(h) Options Exchanged. All Options held by the Optionholders
shall have been exchanged in accordance with Section 1.2 and Section
4.13;
(i) Amounts to be Paid by Zelnik and Kreisler. Each of Michel
Zelnik and Stuart Kreisler shall have paid to MG all advances made by
MG or any MG Subsidiary to him net of any salary owed plus any
withholding tax MG or an MG Subsidiary is required to remit;
(j) Certificate of the Chief Financial Officer. TMW shall have
received a certificate signed by the chief financial officer of MG
certifying as to the fact that (1) inventory levels, (2) sales of
inventory, (3) collection of accounts receivable, (4) payments of
accounts payable, including all commitments to purchase inventory or
other goods, (5) borrowings incurred and (6) banking arrangements have,
for the period between January 31, 1998 and the Closing Date, remained
consistent in all material respects with the usual, regular and
ordinary manner of business of MG and the MG Subsidiaries consistent
with past practices;
(k) Letter Regarding Debt Referred to in Section 2.2(b). MG
shall have provided TMW a letter from the Junior Lenders to the effect
that the Junior Debt can be prepaid by MG at the Junior Debt Fair
Value;
(l) Certificates and Resolutions. TMW shall have received such
other certificates and resolutions of MG as may be reasonably required
in connection with the consummation of this Agreement;
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(m) [Intentionally Omitted];
(n) Termination Agreements. Michel Zelnik and Stuart Kreisler
shall have entered into termination agreements with MG, in the form of
Exhibits E and F, respectively and the existing employment agreements
of Michael Zelnik and Stuart Kreisler shall have been terminated
accordingly.
(o) Resignations. All officers and directors of MG and the MG
Subsidiaries designated by TMW shall have submitted written
resignations;
(p) Non-Competition and Confidentiality Agreements. Michel
Zelnik, Stuart Kreisler, Pat De Marco, David Starrett, Mario Parzialie
and Martin Prosserman shall have executed Non-Competition and
Confidentiality Agreements in the form of Exhibits G, H, I, J, K and L
hereto;
(q) Accounts Payable. MG shall have delivered to TMW a list of
accounts payable of MG and the MG Subsidiaries dated as of the end of
the calendar month immediately preceding the Effective Date certified
by the President and the Chief Financial Officer of MG as to its
accuracy and completeness and setting forth as of such date each
account payable of MG and the MG Subsidiaries, except accounts payable
which individually do not exceed $1,000 and collectively do not exceed
$100,000, which list shall indicate the date the related liability was
incurred, the date of the invoice and the payment due date;
(r) Repayment of Debt. The Junior Lenders shall not have
revoked or modified their consent referred to in Section 2.2(b);
(s) Release of Liens. Societe Generale (CANADA), Caisse de
Depot et Placement du Quebec, Madeleine L.L.C. and CDPQ shall have made
arrangements satisfactory to TMW for the release of all liens with
respect to MG or any MG Subsidiary or any of their property upon
payment of all amounts owing to such parties;
(t) Lease Consents. The landlords with respect to each store
located in Canada, where required, shall have consented to the change
of control of MG; provided, however, that if consents have not been
obtained for stores which had sales in fiscal year ended January 31,
1998 aggregating less than 10% of sales in fiscal year ended January
31, 1998 for all Canadian stores, and provided that consents have been
obtained for the West-Ottawa, Markham, Toronto Downtown and
Scarborough-East stores, any other leases controlled by Martin
Prosserman and seven out of the nine leases entered into after January
31, 1997, then TMW shall be deemed to have waived this requirement as
to obtaining the remaining consents prior to Closing;
(u) Union Negotiations. Either a new union contract acceptable
to the Association shall have been executed by all parties and shall
not discriminate against MG or, if a new union contract has not been
entered into, there shall exist no strike or other work stoppage, or
the announcement thereof, against or at MG (a "Disruption"); provided,
however, if this condition cannot be met due to the existence of a
Disruption, TMW may
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postpone the Closing for up to 60 calendar days, or if the condition is
met within the 60 calendar days until such date as the condition is
met, and if the condition is not met within such 60 calendar days TMW
may waive this condition or may terminate the Agreement; and further
provided, notwithstanding anything herein to the contrary, that any
such Disruption shall not be deemed "material" or to have a "Material
Adverse Effect" for purposes of this Agreement;
(v) Share Allocation. TMW shall have received a letter from
CIBC Wood Gundy Securities Inc., concurred in by Bear Stearns & Co.
Inc., to the effect that the allocation of the Exchangeable Shares to
the Optionholders and to each class of capital stock of MG is based on
the relative fair value of each class of capital stock of MG and the
fair value of the Options;
(w) Furman Selz Letter. TMW shall have received an updated
letter from ING Baring Furman Selz LLC, dated within two business days
of Closing, reconfirming its previous letter dated August 28, 1998 and
updated as of November 16, 1998, with regard to the ability of MG to
obtain high yield financing;
(x) Inventory Levels. The inventory levels at the stores
operated by Moores The Suit People U.S., Inc. shall not exceed an
aggregate book value of $3.9 million; provided, however, that if the
Closing shall occur after December 25, 1998 then such inventory levels
shall not exceed an aggregate book value of $3.5 million;
(y) Hazardous Materials. None of the buildings or premises
owned or leased by MG shall contain asbestos, urea formaldehyde,
polychlorinated biphenyls (PCB's) or other hazardous materials the
presence of which would reasonably be expected to result in a Material
Adverse Effect on MG and the MG Subsidiaries taken as a whole; and
(z) Termination of Certain Employees. Pearl Chang shall have
entered into a termination agreement with MG in the form of Exhibit M
and her existing employment with MG shall have been terminated
accordingly.
ARTICLE VI.
OBLIGATIONS OF PARTIES AFTER CLOSING
6.1 POST-CLOSING CONFIDENTIALITY. After the Closing, the Shareholders
and their Affiliates shall maintain as confidential information all material,
non-public information in their possession regarding TMW or its business or
assets, and shall not disclose any of such information to any person except as
may be required to comply with any governmental requirement.
6.2 NO SOLICITATION OF EMPLOYEES. To induce TMW to complete the
transactions contemplated herein and to effect the Share Restructuring, each
Shareholder, other than CDPQ, of MG and each Affiliate (as hereinafter defined)
thereof shall not (i) for a two year period commencing on the Effective Date
solicit for employment by any person Pat De Marco, David Starrett or Mario
Parzialie, and (ii) for a one year period commencing on the Effective Date,
solicit for employment by any person any employee of MG or any of the MG
Subsidiaries listed on Exhibit A to Confidentiality
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Agreement dated August 3, 1998, between TMW and MG (the "Confidentiality
Agreement") and will not permit, for the two year and one year periods as
applicable, any of the above-mentioned individuals to be hired in any business
in which such Shareholder is an officer or director or in which such Shareholder
owns more than a 5% interest.
ARTICLE VII.
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the transactions
contemplated hereby by the Securityholders of MG entitled to vote, as follows:
(a) by mutual agreement of MG and TMW;
(b) by MG, if there has been a breach by TMW of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of TMW, or if any representation or warranty of TMW shall have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on TMW, and which TMW fails to cure within 15 business
days after written notice thereof from MG (except that no cure period shall be
provided for a breach by TMW which by its nature cannot be cured);
(c) by TMW, if there has been a breach by MG of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of MG, or if any representation or warranty of MG shall have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on MG, and which MG fails to cure within 15 business
days after written notice thereof from TMW (except that no cure period shall be
provided for a breach by MG which by its nature cannot be cured);
(d) by either party, if all the conditions set forth in
Article V hereof shall not have been satisfied or waived on or before 5:00 p.m.,
Montreal, Canada time on February 28, 1999, other than as a result of a breach
of this Agreement by the terminating party;
(e) by either party if a final and non-appealable order shall
have been entered in any action or proceeding before any Governmental Entity
that prevents or makes illegal the consummation of the Share Restructuring;
(f) by MG, if TMW shall have approved, or agreed to or
announced any agreement to effect, any transaction that would result in any
person, who is not currently a TMW stockholder, acquiring beneficial ownership
of more than 50% of the issued and outstanding capital stock of TMW or any
person who is not currently a TMW stockholder acquires beneficial ownership of
more than 50% of the issued and outstanding capital stock of TMW; and
(g) by MG, if the Registration Statement shall not have been
filed with the SEC within 30 business days of the date hereof.
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<PAGE> 46
7.2 NOTICE OF TERMINATION. Any termination of this Agreement under
Section 7.1 above will be effected by the delivery of written notice by the
terminating party to the other party hereto.
7.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either MG or TMW pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, and there shall be no liability or
obligation on the part of TMW or MG or their respective officers or directors,
except that (i) the provisions of the Confidentiality Agreement shall survive
any such termination and abandonment, and (ii) no party shall be released or
relieved from any liability arising from the willful breach by such party of any
of its representations, warranties, covenants or agreements as set forth in this
Agreement.
ARTICLE VIII.
ADDITIONAL AGREEMENTS
TMW and MG each agree to take the following actions after the execution
of this Agreement.
8.1 THE CLOSING. Subject to the termination of this Agreement as
provided in Article VII, the Closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Coudert Freres in
Montreal, Quebec on a date (the "Closing Date") and at a time to be mutually
agreed upon by the parties, which date shall be no later than the first business
day after all conditions to Closing set forth herein shall have been satisfied
or waived, unless another place, time and date is mutually selected by MG and
TMW. Concurrently with the Closing, the Articles of Amendment giving effect to
the Share Restructuring Plan will be filed with the Director under the NBBCA.
8.2 ANCILLARY DOCUMENTS/RESERVATION OF SHARES.
(a) Provided all other conditions of this Agreement have been
satisfied or waived, MG shall, on the Closing Date, file the Articles of
Amendment giving effect to the Share Restructuring Plan pursuant to the NBBCA,
such Share Restructuring Plan to contain share conditions for Exchangeable
Shares substantially in the form of those contained in Exhibit A.
(b) On the Effective Date:
(i) TMW shall execute and deliver a Support
Agreement substantially in the form of
Exhibit N, together with such other terms
and conditions as may be agreed to by the
parties hereto acting reasonably; and
(ii) TMW, MG and a Canadian trust company to be
mutually agreeable to TMW and MG, acting
reasonably, shall execute and deliver a
Voting Trust Agreement substantially in the
form of Exhibit O, together with such other
terms and conditions as may be agreed to by
the parties hereto acting reasonably.
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<PAGE> 47
(c) On or before the Effective Date, TMW will reserve for
issuance such number of shares of TMW Common Stock as shall be necessary to give
effect to the exchanges or exchanges of options contemplated hereby.
8.3 AFFILIATE AGREEMENTS.
(a) To ensure that the Share Restructuring will be accounted
for as a "pooling of interests" and to ensure compliance with Rule 145 of the
rules and regulations promulgated by the SEC and the Securities Act, on or
before the Closing Date MG will use its reasonable best efforts to have its
Affiliates sign and deliver to TMW the MG affiliate agreements in the form of
Exhibit P. For purposes of this Agreement, an "Affiliate" shall have the meaning
referred to in Rule 145 under the Securities Act.
(b) To ensure that the Share Restructuring will be accounted
for as a "pooling of interests" on or before the Closing Date TMW will use its
reasonable best efforts to have its Affiliates sign and deliver to TMW the TMW
Affiliate Agreements in the form of Exhibit Q.
(c) As soon as practicable after the Effective Date but in no
event later than 60 days after the end of the calendar month in which the
Closing occurs, unless the Closing occurs in December, in which case no later
than 90 days after the end of the calendar month in which the Closing occurs,
TMW shall publish in the form of a Current Report on Form 8-K or a press release
which is generally disseminated, the consolidated results of operations of TMW,
the TMW Subsidiaries, MG and the MG Subsidiaries for a period of at least 30
days after the Effective Date in order for the Securityholders to be able to
sell the shares of TMW Common Stock into which the Exchangeable Shares are
exchangeable without affecting the accounting of the Share Restructuring as a
"pooling of interests" under U.S. generally accepted accounting principles.
8.4 SAFE INCOME CALCULATION. MG shall cause as soon as reasonably
practical, but in all events not later than sixty (60) days from the Effective
Date, E&Y, Toronto head office, to calculate for each of the Shareholders its
respective share of MG's Safe Income (as the term "Safe Income" is commonly used
and applied in the context of subsection 55(2) of the ITA by Canadian income tax
counsel generally) before the Safe Income Determination Time (as the term "Safe
Income Determination Time" is defined in subsection 55(1) of the ITA) in respect
of the transactions contemplated by this Agreement and to provide each of the
Shareholders with a copy of such calculation together with sufficient details
thereof so as to enable their Canadian income tax counsel to understand the
basis of such calculation.
ARTICLE IX.
MISCELLANEOUS
9.1 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. With the exception
of the representations and warranties given by the Shareholders in Article II-B
(excluding the representation contained in Sections 2.32 and 2.35) which shall
remain in effect until the earlier of (i) the completion of the first audit of
the combined companies subsequent to closing (for those matters expected to be
resolved in an audit) or (ii) one year following the Closing for all other
matters, all representations
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<PAGE> 48
and warranties of the parties contained in this Agreement will remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of the parties to this Agreement, until the earlier of the valid
termination of this Agreement or the Closing Date, whereupon such
representations and warranties will expire and be of no further force or effect.
All agreements and covenants of the parties shall survive the Closing Date,
except as otherwise set forth in this Agreement. TMW hereby agrees that all
causes of action which it may have had against MG, any Shareholder or any MG
Subsidiary or any of their respective officers, directors, partners,
shareholders, members, affiliates and successors in respect of any breach of
representation or warranty contained herein by MG or any Shareholder are hereby
waived by TMW (a) in the case of representations and warranties which do not
survive the Closing, effective at the Closing; and (b) to the extent any other
representations and warranties shall survive the Closing for any period,
effective at the end of such period; provided that a claim made prior to the
termination of a representation or warranty shall remain in effect until such
claim is finally resolved.
9.2 NOTICES. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in person or by courier, (ii) sent by facsimile transmission, answer back
requested, or (iii) mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:
if to MG:
Moores Retail Group Inc.
5800, Rue St. Denis, Suite 900
Montreal, Quebec H2S 3L5
Attn: Michel Zelnik
Facsimile: 514.274.4177
with a copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Thomas J. Drago
Facsimile: 212.626.4120
if to TMW or Canco:
The Men's Wearhouse, Inc.
40650 Encyclopedia Circle
Fremont, California 94538
Attn: David Edwab
Facsimile: 713.657.0872
and
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<PAGE> 49
The Men's Wearhouse, Inc.
5803 Glenmont
Houston, Texas 77081
Attn: Gary Ckodre
Facsimile: 713.664.7140
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas, U.S.A. 77010-3095
Attn: Michael W. Conlon
Facsimile: 713.651.5246
and
Byers Casgrain
1 Place Ville-Marie, Suite 3900
Montreal, Quebec, Canada H3B 4M7
Attn: Allan A. Mass
Facsimile: 514.866.2241
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 9.2. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by facsimile transmission, when the answer back
is received, or (iii) if mailed, upon the earlier of five days after deposit in
the mail and the date of delivery as shown by the return receipt therefor.
9.3 ARBITRATION.
(a) Subject to the limitations set forth herein with respect
to the parties' rights to make claims hereunder, including, but not
limited to, the limitations set forth in Sections 7.3 and 9.1, any
dispute, controversy, or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity hereof, including
claims for tortious interference or other tortious or statutory claims
arising before, during or after termination, providing only that such
claim touches upon matters covered by this contract, shall be finally
settled by arbitration pursuant to the Arbitration Act, 1991, Ontario,
as amended or substituted from time to time as presently in force,
except as modified by the specific provisions of this Agreement. The
parties expressly agree that nothing in this Agreement shall prevent
the parties from applying to a court that would otherwise have
jurisdiction over the parties for provisional or interim measures,
including injunctive relief. After the arbitration panel is empaneled,
it shall have sole jurisdiction to hear such applications, except that
the parties agree that any measures ordered by the arbitrators may be
immediately and specifically enforced by a court otherwise having
jurisdiction over the parties. The parties agree that judgment on the
arbitration award may be entered by any court having jurisdiction
thereof.
40
<PAGE> 50
(b) The parties agree that the federal and province courts
located in Toronto, Ontario shall have exclusive jurisdiction over an
action brought to enforce the rights and obligations created in or
arising from this agreement to arbitrate, and each of the parties
hereto irrevocably submits to the jurisdiction of said courts.
Notwithstanding the above, application may be made by a party to any
court of competent jurisdiction wherever situated for enforcement of
any judgment and the entry of whatever orders are necessary for such
enforcement. Process in any action arising out of or relating to this
agreement may be served on any party to the agreement anywhere in the
world by delivery in person against receipt or by registered or
certified mail, return receipt requested.
(c) The arbitration shall be conducted before a tribunal
composed of three arbitrators. If the panel is selected prior to
Closing, MG and TMW shall each select an arbitrator. If the arbitration
panel is selected after Closing, the Shareholders to which the
arbitration relates, on the one hand, and TMW on the other shall each
select an arbitrator. In either case, the two arbitrators so selected
shall select a third arbitrator within 10 days of selection of the two
arbitrators. If the two arbitrators are unable to agree on a third
arbitrator, either party may petition the Ontario Court, General
Division to appoint the third arbitrator. In addition, if any one of
the parties fails to appoint the arbitrator which it is responsible for
appointing within 10 days of the request of the other party, then such
other party may petition the Ontario Court, General Division to appoint
the first party's arbitrator. Prior to his or her formal appointment,
each arbitrator shall disclose to the parties and to the other members
of the tribunal, any financial, fiduciary, kinship or other
relationship between that arbitrator and any party or its counsel, or
between that arbitrator and any individual or entity with any
financial, fiduciary, kinship or other relationship with any party. Any
award or portion thereof, whether preliminary or final, shall be in a
written opinion containing findings of fact and conclusions of law
signed by each arbitrator. The arbitrator dissenting from an award or
portion thereof shall issue a dissent from the award or portion thereof
in writing, stating the reasons for his dissent. The arbitrators shall
hear and determine any preliminary issue of law asserted by a party to
be dispositive of any claim, in whole or part, in the manner of a court
hearing a motion to dismiss for failure to state a claim or for summary
judgment, pursuant to such terms and procedures as the arbitrators deem
appropriate.
(d) It is the intent of the parties that, barring
extraordinary circumstances, any arbitration hearing shall be concluded
within two months of the date the third arbitrator is appointed. Unless
the parties otherwise agree, once commenced, hearings shall be held 5
days a week, with each hearing day to begin at 9:00 A.M. and to
conclude at 5:00 P.M. The parties may upon agreement extend these time
limits, or the chairman of the panel may extend them if he determines
that the interests of justice otherwise requires. The arbitrators shall
use their best efforts to issue the final award or awards within a
period of 30 days after closure of the proceedings. Failure to do so
shall not be a basis for challenging the award. The parties and
arbitrators shall treat all aspects of the arbitration proceedings,
including without limitation, discovery, testimony, and other evidence,
briefs and the award, as strictly confidential. The place of
arbitration shall be Toronto unless otherwise agreed by the parties.
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<PAGE> 51
(e) The parties agree that discovery shall be limited and
shall be handled expeditiously. Discovery procedures available in
litigation before the courts shall not apply in an arbitration
conducted pursuant to this agreement. However, each party shall produce
relevant and non-privileged documents or copies thereof requested by
the other parties within the time limits set and to the extent required
by order of the arbitrators. All disputes regarding discovery shall be
promptly resolved by the arbitrators. No witness or party may be
required to waive any privilege recognized at law. The parties hereby
waive any claim to any damages in the nature of punitive, exemplary, or
statutory damages in excess of compensatory damages, or any form of
damages in excess of compensatory damages, and the arbitration tribunal
is specially divested of any power to award any damages in the nature
of punitive, exemplary, or statutory damages in excess of compensatory
damages, or any form of damages in excess of compensatory damages. The
party prevailing on substantially all of its claims shall be entitled
to recover its costs, including attorneys' fees, for the arbitration
proceedings, as well as for any ancillary proceeding, including a
proceeding to compel arbitration, to request interim measures, or to
confirm or set aside an award. Notwithstanding anything to the contrary
contained in this Agreement, the parties hereby waive any claim to
damages in the nature of consequential damages.
9.4 INTERPRETATION. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used therein shall be deemed in each case to be followed by the
words "without limitation".
9.5 KNOWLEDGE. As used in this agreement, the words "knowledge", "best
knowledge", "awareness", "know", "known" and words of similar meaning of a
person shall mean the actual knowledge of such person and, with respect to MG
and the MG Subsidiaries, the actual knowledge of Michel Zelnik, Stuart Kreisler,
Pat De Marco, David Starrett and Mario Parzialie and, with respect to TMW, the
actual knowledge of George Zimmer, David Edwab, Eric Lane and Gary Ckodre.
9.6 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is, or whose shareholders are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any time,
except by an instrument in writing signed on behalf of each party hereto. The
waiver by any party hereto of any condition or of a breach of another provision
of this Agreement shall not operate or be construed as a waiver of any other
condition or subsequent breach. The waiver by any party hereto of any of the
conditions precedent to its obligations under this Agreement shall not preclude
it from seeking redress for breach of this Agreement other than with respect to
the condition so waived.
9.7 GOVERNING LAW; LANGUAGE. All questions arising out of this
Agreement and the rights and obligations created herein, or its validity,
existence, interpretation, performance or breach shall be governed by the laws
of the Province of Ontario. The parties confirm their wish that this agreement
and all documents and notices relating hereto be drawn up in English.
9.8 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms,
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<PAGE> 52
provision, covenants and restrictions of this Agreement shall continue in full
force and effect and shall in no way be affected, impaired or invalidated.
9.9 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
9.10 NUMBER AND GENDER. In this Agreement, words importing the singular
number only shall include the plural and vice versa, and words importing any
gender shall include all genders.
9.11 MISCELLANEOUS. This Agreement, which includes the MG Disclosure
Letter, the TMW Disclosure Letter and the Exhibits hereto, the Confidentiality
Agreement, and any other documents referred to herein or contemplated hereby (a)
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
9.12 DIVISIONS, HEADINGS, ETC.. Division of this Agreement into
articles, sections, subsections and paragraphs and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation hereof. The terms "herein", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular article, section,
subsection, paragraph or other portion hereof and include any exhibits or
appendices hereto and any agreement or instruments supplementary or ancillary
hereto.
9.13 DATE OF ANY ACTION. In the event that any date on which an action
is required or permitted to be taken hereunder is not a Business Day, such
action shall be required or permitted to be taken on or by the next succeeding
day that is a Business Day. For purposes of this Agreement, "Business Day" shall
mean any day on which companies are generally open for business in Montreal,
Quebec; Toronto, Ontario and Houston, Texas.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 53
IN WITNESS WHEREOF, each of the parties caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
THE MEN'S WEARHOUSE, INC.
By /s/ DAVID H. EDWAB
----------------------------------
Name: David H. Edwab
Title: President
GOLDEN MOORES COMPANY
By /s/ DAVID H. EDWAB
----------------------------------
Name: David H. Edwab
Title: President
MOORES RETAIL GROUP INC.
By /s/ MICHEL ZELNIK
----------------------------------
Name: Michel Zelnik
Title: CEO
THE SHAREHOLDERS
MARPRO HOLDINGS INC.
By /s/ MARTIN PROSSERMAN
----------------------------------
Name: Martin Prosserman
Title: President
44
<PAGE> 54
MGB LIMITED PARTNERSHIP
By /s/ MICHEL ZELNIK
----------------------------------
Name: Michel Zelnik
Title: President
CAPITAL D'AMERIQUE CDPQ INC.
By /s/ NORMAND PROVOST
----------------------------------
Name: Normand Provost
Title: President
By /s/ LUC HOULE
----------------------------------
Name: Luc Houle
Title: Vice-President
CERBERUS INTERNATIONAL, LTD.
By: Partridge Hill Overseas
Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
ULTRA CERBERUS FUND, LTD.
By: Partridge Hill Overseas
Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
45
<PAGE> 55
STYX INTERNATIONAL LTD.
By: Partridge Hill Overseas
Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
THE LONG HORIZONS OVERSEAS FUND LTD.
By: Old Stand Management L.L.C.
(Investment Manager)
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
THE LONG HORIZONS FUND, L.P.
By: Old Stand Associates L.L.C.
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
STYX PARTNERS, L.P.
By: Styx Associates, L.L.C.
By /s/ KEVIN GENDA
----------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
46
<PAGE> 56
EXHIBIT A
SHARE RESTRUCTURING PLAN
<PAGE> 57
SHARE RESTRUCTURING PLAN
AND
EXCHANGEABLE SHARE PROVISIONS
<PAGE> 58
SHARE RESTRUCTURING PLAN
INVOLVING AND AFFECTING MOORES RETAIL GROUP INC.
AND THE HOLDERS OF ITS COMMON SHARES, CLASS B SHARES,
CLASS C SHARES, CLASS D SHARES, OPTIONS AND SHAREHOLDER RIGHTS
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions. In this Share Restructuring Plan unless there is
something in the subject matter or context inconsistent therewith, the following
terms shall have the respective meanings set out below and grammatical
variations of such terms shall have corresponding meanings:
"Automatic Redemption Date" has the meaning provided in the
Exchangeable Share Provisions;
"Business Day" has the meaning provided in the Exchangeable Share
Provisions;
"Canco" means Golden Moores Company, an unlimited liability company
existing under the laws of Nova Scotia and a wholly owned subsidiary of TMW;
"Class A Preferred Share" means the one authorized Class A Preferred
Share of MG having the rights, privileges, restrictions and conditions set out
in Appendix C annexed hereto;
"Closing Price" means the closing price (computed and rounded to the
third decimal point) of shares of TMW Common Stock on the Nasdaq on the last
trading day prior to the Effective Date;
"Combination Agreement" means the agreement by and among TMW, Canco, MG
and the Shareholders of MG signatory thereto, dated as of November ___, 1998, as
amended and restated from time to time, providing for, among other things, this
Share Restructuring Plan and the Share Restructuring;
"Common Shares" means the authorized Common Shares of MG having the
rights, privileges, restrictions and conditions set out in Appendix A annexed
hereto;
"Depositary" means _______________________________________________;
"Effective Date" means the date shown on the Certificate of Amendment
giving effect to this Share Restructuring Plan issued by the Director under the
NBBCA;
"Effective Time" means 12:01 a.m. on the Effective Date;
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions;
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"Exchangeable Share Consideration" has the meaning provided in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning provided in the Exchangeable
Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, which are set
forth in Appendix B hereto;
"Exchangeable Shares" means the Exchangeable Shares in the capital of
MG provided for in this Share Restructuring Plan;
"Liquidation Call Purchase Price" has the meaning provided in Section
4.1;
"Liquidation Call Right" has the meaning provided in Section 4.1;
"Liquidation Date" has the meaning provided in the Exchangeable Share
Provisions;
"MG" means Moores Retail Group Inc., a corporation existing under the
laws of New Brunswick;
"MG Shares" means the MG Common Shares, the MG Class B Shares, the MG
Class C Shares and the MG Class D Shares (each as defined in the Combination
Agreement);
"Nasdaq" means National Association of Securities Dealers Automated
Quotation System;
"NBBCA" means the Business Corporations Act (New Brunswick);
"Options" has the meaning set forth in the Combination Agreement;
"Option Agreement" shall have the meaning set forth in the Combination
Agreement;
"Option Value" has the meaning set forth in the Combination Agreement;
"Redemption Call Purchase Price" has the meaning provided in Section
4.2;
"Redemption Call Right" has the meaning provided in Section 4.2;
"Share Restructuring" means the share restructuring on the terms and
subject to the conditions set out in this Share Restructuring Plan, subject to
any amendments thereto made in accordance with Section 5.1 hereof;
"Subsidiary" has the meaning provided in the Exchangeable Share
Provisions;
"TMW" means The Men's Wearhouse, Inc., a corporation existing under the
laws of Texas;
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<PAGE> 60
"TMW Common Stock" has the meaning provided in the Exchangeable Share
Provisions;
"Transfer Agent" means the duly appointed transfer agent for the time
being of the Exchangeable Shares, and if there is more than one such agent then
the principal Canadian agent; and
"Voting Trust Agreement" means the agreement so entitled between TMW,
Canco, MG and the Trustee named therein to be dated as of the Effective Date and
provided for in the Combination Agreement, as amended from time to time.
SECTION 1.2 Sections, Headings and Appendices. The division of this Share
Restructuring Plan into sections and the insertion of headings are for reference
purposes only and shall not affect the interpretation of this Share
Restructuring Plan. Unless otherwise indicated, any reference in this Share
Restructuring Plan to a section or an Appendix refers to the specified section
of or Appendix to this Share Restructuring Plan. The Appendices are incorporated
herein and are part hereof.
SECTION 1.3 Number, Gender and Persons. In this Share Restructuring Plan, unless
the context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, bodies corporate, partnerships,
associations, trusts, unincorporated organizations, governmental bodies and
other legal or business entities of any kind.
SECTION 1.4 Date for any Action. In the event that any date on or by which any
action is required or permitted to be taken hereunder is not a Business Day,
such action shall be required or permitted to be taken on or by the next
succeeding day which is a Business Day.
SECTION 1.5 Currency. Unless otherwise expressly stated herein, all references
to currency and payments in cash or money in this Share Restructuring Plan are
to Canadian dollars.
SECTION 1.6 Statutory References. Any reference in this Share Restructuring Plan
to a statute includes such statute as amended, consolidated or re-enacted from
time to time, all regulations made thereunder, all amendments to such
regulations from time to time, and any statute or regulation which supersedes
such statute or regulations.
ARTICLE 2
SHARE RESTRUCTURING
SECTION 2.1 Share Restructuring. At the Effective Time on the Effective Date,
the following reorganization of capital and other transactions shall occur and
shall be deemed to occur in the following order without any further act or
formality:
(a) The Articles of Incorporation of MG shall be amended to create
and authorize an unlimited number of Exchangeable Shares and
one Class A Preferred Share.
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<PAGE> 61
(b) MG shall issue to Canco one Class A Preferred Share in
consideration of the delivery to MG of $1,000. The stated
capital of the Class A Preferred Share shall be $1,000. No
certificate shall be issued in respect of the Class A
Preferred Share.
(c) Each MG Share will be exchanged for a number of Exchangeable
Shares determined in accordance with the provisions of the
Combination Agreement, and each such holder thereof will
receive a whole number of Exchangeable Shares resulting
therefrom. In lieu of fractional Exchangeable Shares, each
such holder who otherwise would be entitled to receive a
fraction of an Exchangeable Share on the exchange shall be
paid by MG an amount, in cash, determined as set forth in
Section 3.3.
(d) In consideration for the exchange of the Options held by a
holder of one or more Options, the holder shall be entitled to
receive a number of Exchangeable Shares determined in
accordance with the provisions of the Combination Agreement,
and each such holder thereof will receive a whole number of
Exchangeable Shares resulting therefrom. In lieu of fractional
Exchangeable Shares, each such holder who otherwise would be
entitled to receive a fraction of an Exchangeable Share on the
exchange shall be paid by MG an amount, in cash, determined as
set forth in Section 3.3.
(e) Upon the exchange referred to in subsections (c) and (d)
above, each such holder of a MG Share shall cease to be such a
holder, shall have his name removed from the register of
holders of MG Shares and shall become a holder of the number
of fully paid Exchangeable Shares to which he is entitled as a
result of the exchange referred to in subsection (c), and such
holder's name shall be added to the register of holders of
Exchangeable Shares accordingly. Each holder of an Option
shall cease to hold such Option, shall become a holder of the
number of fully paid Exchangeable Shares to which he is
entitled as a result of the exchange referred to in subsection
(d) and such holder's name shall be added to the register of
holders of Exchangeable Shares accordingly.
(f) The aggregate stated capital of the Exchangeable Shares will
be equal to the aggregate stated capital immediately prior to
the Effective Date of the MG Shares which are exchanged
pursuant to such subsection 2.1(c) above, thereby excluding
the stated capital attributable to the fractional shares for
which payment is made, in cash, as contemplated in subsection
(c) above.
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<PAGE> 62
(g) The Articles of Incorporation of MG shall be amended to change
the number of authorized MG Shares to an unlimited number of
Common Shares and to delete the MG Class B Shares, the MG
Class C Shares, the MG Class D Shares, the MG Class E Shares
and the MG Class F Shares (each as defined in the Combination
Agreement) and the rights, privileges, restrictions and
conditions attaching to the Common Shares shall be as set
forth in Appendix A.
(h) The one outstanding Class A Preferred Share will be exchanged
for one fully-paid and non-assessable Common Share and the
holder thereof shall cease to be a holder of the Class A
Preferred Share, shall have its name removed from the register
of holders of Class A Preferred Shares and shall become a
holder of the Common Share to which it is entitled as a result
of the exchange referred to in this subsection (h), and such
holder's name shall be added to the register as holder of the
Common Share accordingly.
(i) The stated capital of the one Common Share shall be equal to
the stated capital of the one Class A Preferred Share
immediately prior to the exchange contemplated in subsection
(h).
(j) The Articles of Incorporation of MG shall be amended to delete
the Class A Preferred Share from the authorized share capital
so that, after giving effect to the foregoing provisions of
this section 2.1, the authorized capital of MG shall consist
of an unlimited number of Exchangeable Shares having the
rights, privileges, restrictions and conditions set forth in
Appendix B hereto and an unlimited number of Common Shares
having the rights, privileges, restrictions and conditions set
forth in Appendix A hereto.
ARTICLE 3
CERTIFICATES AND FRACTIONAL SHARES
SECTION 3.1 Issuance of Certificates Representing Exchangeable Shares. At the
Effective Time, MG shall make available to the holders of MG Shares and the
holders of Options exchanged pursuant to subsections 2.1(c) and (d),
certificates representing the Exchangeable Shares issued pursuant to subsections
2.1(c) and (d) upon the exchange. Upon surrender to MG of a certificate which
immediately prior to the Effective Time represented outstanding MG Shares
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the NBBCA and the by-laws of MG in the case of the MG Shares and surrender
of the agreement creating the Options in the case of the Options and such
additional documents and instruments as MG may reasonably require, the holder of
such surrendered certificate or Option Agreements shall be entitled to receive
in exchange therefor, and MG shall
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deliver to such holder, a certificate representing that number (rounded down to
the nearest whole number) of Exchangeable Shares which such holder has the right
to receive (together with any dividends or distributions with respect thereto
pursuant to Section 3.2 and any cash in lieu of fractional Exchangeable Shares
pursuant to Section 3.3), and the certificate or Option Agreement so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of MG
Shares which is not registered in the transfer records of MG, a certificate
representing the proper number of Exchangeable Shares may be issued to a
transferee if the certificate representing such MG Shares is presented to MG,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this Section 3.1, each certificate which
immediately prior to the Effective Time represented outstanding MG Shares, shall
be deemed at any time after the Effective Time, but subject to Section 3.5, to
represent only the right to receive upon such surrender (a) the certificate
representing Exchangeable Shares as contemplated by this Section 3.1, (b) a cash
payment in lieu of any fractional Exchangeable Shares as contemplated by Section
3.3 and (c) any dividends or distributions with a record date after the
Effective Time theretofore paid or payable with respect to Exchangeable Shares
as contemplated by Section 3.2.
SECTION 3.2 Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to Exchangeable Shares with a record date after the Effective Time shall
be paid to the holder of any formerly outstanding MG Shares or any Options which
were exchanged pursuant to Section 2.1, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 3.3,
unless and until the certificate representing such shares or the agreement
creating such Options, as the case may be, shall be surrendered in accordance
with Section 3.1. Subject to applicable law and to Section 3.5, at the time of
such surrender of any such certificate or Option Agreement (or, in the case of
clause (c) below, at the appropriate payment date), there shall be paid to the
holder of the Exchangeable Shares resulting from exchange, in all cases without
interest, (a) the amount of any cash payable in lieu of a fractional
Exchangeable Share to which such holder is entitled pursuant to Section 3.3, (b)
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such Exchangeable Shares, and
(c) the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such Exchangeable Shares.
SECTION 3.3 No Fractional Shares. No certificates or scrip representing
fractional Exchangeable Shares shall be issued upon the surrender for exchange
of certificates or Option Agreements pursuant to Section 3.1, and such
fractional interests shall not entitle the owner thereof to vote or to possess
or exercise any rights as a security holder of MG. In lieu of any such
fractional interests, each person entitled thereto will receive an amount of
cash (rounded to the nearest whole cent), without interest, equal to the product
of (a) such fractional interest, multiplied by (b) the Closing Price, such
amount to be provided to the Depositary by MG upon request.
SECTION 3.4 Lost Certificates. If any certificate which immediately prior to the
Effective Time represented outstanding MG Shares which were exchanged pursuant
to Section 2.1 has been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed, the Depositary will issue in exchange for such lost, stolen
or destroyed certificate, certificates representing Exchangeable Shares (and any
dividends or
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distributions with respect thereto and any cash pursuant to Section 3.3)
deliverable in respect thereof as determined in accordance with Section 2.1.
When authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the person to whom certificates representing Exchangeable Shares
are to be issued shall, as a condition precedent to the issuance thereof, give a
bond satisfactory to MG, TMW and the Transfer Agent, as the case may be, in such
sum as MG may direct or otherwise indemnify MG or TMW in a manner satisfactory
to MG and the Transfer Agent against any claim that may be made against MG, TMW
or the Transfer Agent with respect to the certificate alleged to have been lost,
stolen or destroyed.
SECTION 3.5 Extinguishment of Rights. Any certificate evidencing Exchangeable
Shares relating to any certificate which immediately prior to the Effective Time
represented outstanding MG Shares which were exchanged pursuant to Section 2.1
which has not been deposited, with all other instruments required by Section
3.1, on or prior to the fifth anniversary of the Effective Date shall be turned
over to the appropriate state or province in accordance with the applicable
state and province laws regarding escheat and abandoned property, together with
all entitlements to dividends, distributions and interest thereon held for such
former registered holder and the name of the former registered holder shall be
removed from the register of holders of such Exchangeable Shares.
ARTICLE 4
CERTAIN RIGHTS AND OBLIGATIONS OF TMW AND
CANCO TO ACQUIRE EXCHANGEABLE SHARES
SECTION 4.1 TMW and Canco Liquidation Call Right.
(a) TMW and Canco shall have the overriding right (the
"Liquidation Call Right"), in the event of and notwithstanding
the proposed liquidation, dissolution or winding-up of MG as
referred to in Article 5 of the Exchangeable Share Provisions,
to purchase from all but not less than all of the holders
(other than TMW and any Subsidiary thereof) of Exchangeable
Shares on the Liquidation Date all but not less than all of
the Exchangeable Shares held by such holders on payment by TMW
or Canco to each holder of the Exchangeable Share Price
applicable on the last Business Day prior to the Liquidation
Date (the "Liquidation Call Purchase Price"). In the event of
the exercise of the Liquidation Call Right by either TMW or
Canco, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to either TMW or Canco,
as the case may be, on the Liquidation Date on payment by TMW
or Canco to the holder of the Liquidation Call Purchase Price
for each such share.
(b) To exercise the Liquidation Call Right, either TMW or Canco
must notify MG's Transfer Agent, as agent for the holders of
Exchangeable Shares, and MG, in writing of either TMW's or
Canco's intention to exercise such right at least 90 days
before the Liquidation Date in the
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case of a voluntary liquidation, dissolution or winding-up of
MG and as soon as practicable, but in no event less than five
Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding-up of MG. MG
will cause the Transfer Agent to notify the holders of
Exchangeable Shares as to whether or not either TMW or Canco
has exercised the Liquidation Call Right forthwith after the
expiry of the date by which the same may be exercised by
either TMW or Canco. If either TMW or Canco exercises the
Liquidation Call Right, on the Liquidation Date it will
purchase and the holders will sell all of the Exchangeable
Shares then outstanding for a price per share equal to the
Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right,
either TMW or Canco shall deposit with the Transfer Agent, on
or before the Liquidation Date, the Exchangeable Share
Consideration representing the total Liquidation Call Purchase
Price. Provided that such Exchangeable Share Consideration has
been so deposited with the Transfer Agent, on and after the
Liquidation Date the right of each holder of Exchangeable
Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase
Price payable by either TMW or Canco without interest upon
presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder and
the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the
TMW Common Stock delivered to it as part of the Liquidation
Call Purchase Price. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
NBBCA and the by-laws of MG and such additional documents and
instruments as the Transfer Agent may reasonably require, the
holder of such surrendered certificate or certificates shall
be entitled to receive in exchange therefor, and MG shall
cause the Transfer Agent on behalf of either TMW or Canco to
deliver to such holder, the Exchangeable Share Consideration
to which the holder is entitled. If neither TMW nor Canco
exercises the Liquidation Call Right in the manner described
above and the holders of the Exchangeable Shares Provisions
have not exercised their put rights in the manner described in
Section 4.3 below, on the Liquidation Date the holders of the
Exchangeable Shares will be entitled to receive in exchange
therefor the liquidation price otherwise payable by MG in
connection with the liquidation, dissolution or winding-up of
MG pursuant to Article 5 of the Exchangeable Share Provisions.
Notwithstanding the foregoing,
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until such Exchangeable Share Consideration is delivered to
the holder, the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting Trust Agreement.
SECTION 4.2 TMW and Canco Redemption Call Right.
(a) TMW and Canco shall have the overriding right (the "Redemption
Call Right"), notwithstanding the proposed redemption of the
Exchangeable Shares by MG pursuant to Article 7 of the
Exchangeable Share Provisions, to purchase from all but not
less than all of the holders (other than TMW or any Subsidiary
thereof) of Exchangeable Shares on the Automatic Redemption
Date all but not less than all of the Exchangeable Shares held
by each such holder on payment by either TMW or Canco of the
Exchangeable Share Price applicable on the last Business Day
prior to the Automatic Redemption Date to the holder (the
"Redemption Call Purchase Price"). In the event of the
exercise of the Redemption Call Right by either TMW or Canco,
each holder shall be obligated to sell all the Exchangeable
Shares held by the holder to either TMW or Canco, as the case
may be, on the Automatic Redemption Date on payment by it to
the holder of the Redemption Call Purchase Price for each such
share.
(b) To exercise the Redemption Call Right, TMW and Canco must
notify the Transfer Agent, as agent for the holders of
Exchangeable Shares, and MG, in writing of TMW's and Canco's
intention to exercise such right not later than the date by
which MG is required to give notice of the Automatic
Redemption Date. If either TMW or Canco exercises the
Redemption Call Right, on the Automatic Redemption Date it
will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share
equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call Right,
either TMW or Canco, as the case may be, shall deposit with
the Transfer Agent, on or before the Automatic Redemption
Date, the Exchangeable Share Consideration representing the
total Redemption Call Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with
the Transfer Agent, on and after the Automatic Redemption Date
the rights of each holder of Exchangeable Shares will be
limited to receiving such holder's proportionate part of the
total Redemption Call Purchase Price payable by TMW or Canco
upon presentation and surrender by the holder of certificates
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representing the Exchangeable Shares held by such holder and
the holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of the
TMW Common Stock delivered to such holder as part of the
Redemption Call Purchase Price. Upon surrender to the Transfer
Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the NBBCA and the by-laws of either
TMW or Canco, as the case may be, and such additional
documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange
therefor, and MG shall cause the Transfer Agent on behalf of
TMW or Canco to deliver to such holder, the Exchangeable Share
Consideration to which the holder is entitled. If neither TMW
nor Canco exercises the Redemption Call Right in the manner
described above and the holders of the Exchangeable Shares
have not exercised their Exchange Put Rights in the manner
described in Section 4.3 below, on the Automatic Redemption
Date the holders of the Exchangeable Shares will be entitled
to receive in exchange therefor the redemption price otherwise
payable by MG in connection with the redemption of the
Exchangeable Shares pursuant to Article 7 of the Exchangeable
Share Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder,
the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting Trust Agreement.
SECTION 4.3 Exchange Put Right. Upon and subject to the terms and conditions
contained in the Exchangeable Share Provisions:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require Canco to purchase
all or any part of the Exchangeable Shares of the holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to Canco, and Canco shall be
required to purchase from the holder, no later than the time
or times prescribed therefor herein or in the Exchangeable
Share Provisions, that number of Exchangeable Shares in
respect of which the Exchange Put Right is exercised, in
consideration of the payment by Canco of the Exchangeable
Share Price applicable thereto and delivery by or on behalf of
Canco of the Exchangeable Share Consideration representing the
total applicable Exchangeable Share Price.
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ARTICLE 5
AMENDMENT
SECTION 5.1 Share Restructuring Plan Amendment. MG reserves the right to amend,
modify and/or supplement this Share Restructuring Plan at any time and from time
to time provided that any such amendment, modification, or supplement must be
contained in a written document that is agreed to by TMW.
Any amendment, modification or supplement to this Share Restructuring
Plan shall be effective only (a) if it is consented to by MG, (b) if it is
consented to by TMW and (c) if it is consented to by the holders of MG Shares or
Exchangeable Shares in accordance with the provisions of Section 11.1 of the
Exchangeable Share Provisions.
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APPENDIX A TO THE
SHARE RESTRUCTURING PLAN
PROVISIONS ATTACHING TO THE COMMON SHARES
The Common Shares in the capital of the Corporation shall have attached
thereto the following rights, privileges, restrictions and conditions:
DIVIDENDS
The holders of the Common Shares, subject to the rights, if any, of any
class of shares ranking in priority to the Common Shares, shall be entitled to
receive dividends and the Corporation shall pay dividends thereon if, as and
when declared by the board of directors of the Corporation, out of the monies of
the Corporation properly applicable to the payment of dividends in any financial
year, such dividends in any financial year as the board of directors may by
resolution determine. A cheque for the amount of the dividend less any required
deduction shall be mailed by first class mail to the address of the registered
holder thereof.
DISSOLUTION
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs, the holders of the Common Shares shall be entitled to receive,
subject to the rights, if any, of any class of shares ranking in priority to the
Common Shares, all of the remaining property and assets of the Corporation.
VOTING RIGHTS
The holder of a Common Share shall be entitled to one vote for each
Common Share held at any meeting of shareholders of the Corporation other than
meetings of the holders of another class or series.
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APPENDIX B TO THE
SHARE RESTRUCTURING PLAN OF MG
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have
the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
For the purposes of these rights, privileges, restrictions and
conditions:
1.1 "ACT" means the Business Corporations Act (New Brunswick), as amended,
consolidated or reenacted from time to time.
"AGGREGATE EQUIVALENT VOTE AMOUNT" means, with respect to any matter,
proposition or question on which holders of TMW Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of shares of
Exchangeable Shares then issued and outstanding and held by holders other than
TMW and its Subsidiaries multiplied by (ii) the number of votes to which a
holder of one share of TMW Common Stock is entitled with respect to such matter,
proposition or question.
"AUTOMATIC EXCHANGE RIGHTS" MEANS the benefit of the obligation of
Canco to effect the automatic exchange of shares of TMW Common Stock for
Exchangeable Shares pursuant to Section 9.7 hereof.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption
by the Corporation of Exchangeable Shares pursuant to Article 7 of these share
provisions, which date shall be the first to occur of (a) the fifth anniversary
of the Effective Date of the Share Restructuring, (b) the date selected by the
Board of Directors at a time when less than 15% of the Exchangeable Shares
issuable on the Effective Date (other than Exchangeable Shares held by TMW and
its Subsidiaries and as such number of shares may be adjusted as deemed
appropriate by the Board of Directors to give effect to any subdivision or
consolidation of or stock dividend on the Exchangeable Shares, any issuance or
distribution of rights to acquire Exchangeable Shares or securities exchangeable
for or convertible into or carrying rights to acquire Exchangeable Shares, any
issue or distribution of other securities or rights or evidences of indebtedness
or assets, or any other capital reorganization or other transaction involving or
affecting the Exchangeable Shares) are outstanding, (c) the Business Day prior
to the record date for any meeting or vote of the shareholders of the
Corporation to consider any matter on which the holders of Exchangeable Shares
would be entitled to vote as shareholders of the Corporation, but excluding any
meeting or vote as described in clause (d) below or (d) the Business Day
following the day on which the holders of Exchangeable Shares fail to take the
necessary action at a meeting or other vote of holders of Exchangeable Shares,
if and to the extent such action is required, to approve or disapprove, as
applicable, any change to, or in the rights of the
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holders of, Exchangeable Shares, if the approval or disapproval, as applicable,
of such change would be required to maintain the economic and legal equivalence
of the Exchangeable Shares and the TMW Common Stock.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation
and any committee thereof acting within its authority.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
when banks are not open for business in one or more of Houston, Texas and
Montreal, Canada.
"CALL NOTICE" has the meaning provided in Section 6.3.
"CANCO" means Golden Moores Company, an unlimited liability company
existing under the laws of Nova Scotia and a wholly owned subsidiary of TMW.
"CANCO EXCHANGE RIGHT" has the meaning provided in Section 9.1 hereof.
"CLASS A PREFERRED SHARE" means the Class A Preferred Share in the
capital of the Corporation.
"COMMON SHARES" means the common shares in the capital of the
Corporation.
"CORPORATION" or "MG" means Moores Retail Group Inc., a corporation
existing under the laws of the Province of New Brunswick and includes any
successor corporation.
"EFFECTIVE DATE" has the meaning provided in the Share Restructuring
Plan.
"EXCHANGE PUT RIGHT" has the meaning provided in Article 8.
"EXCHANGE RIGHTS" has the meaning provided in Section 9.1 hereof.
"Exchangeable Share Consideration" means, for any acquisition of or
redemption of or distribution of assets of the Corporation in respect of or
purchase pursuant to these Provisions Attaching to Exchangeable Shares, the
Share Restructuring Plan, the Support Agreement or the Voting Trust Agreement:
(a) certificates representing the aggregate number of shares of
TMW Common Stock deliverable in connection with such action;
(b) a cheque or cheques payable at par at any branch of the
bankers of the payor in the amount of all declared and unpaid
and undeclared but payable cash dividends deliverable in
connection with such action; and
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(c) such stock or property constituting any declared and unpaid
and undeclared but payable non-cash dividends deliverable in
connection with such action;
provided that (i) that part of the consideration which consists of TMW Common
Stock shall be fully paid and satisfied by the delivery of certificates
representing such shares of TMW Common Stock, (ii) that part of the
consideration which represents non-cash dividends remaining unpaid shall be
fully paid and satisfied by delivery of such non-cash items, (iii) any such
stock shall be duly issued as fully paid and non-assessable and any such
property shall be delivered free and clear of any lien, claim, encumbrance,
security interest or adverse claim or interest and (iv) such consideration shall
be paid less any tax required to be deducted and withheld therefrom and without
interest.
"EXCHANGEABLE SHARE PRICE" means, for each Exchangeable Share, an
amount equal to the aggregate, without duplication, of:
(a) one share of TMW Common Stock; plus
(b) an additional amount equal to the full amount of all cash
dividends declared and unpaid or undeclared but payable on
such Exchangeable Share; plus
(c) an additional amount equal to all dividends declared on TMW
Common Stock which have not been declared or paid on
Exchangeable Shares in accordance herewith; plus
(d) an additional amount representing non-cash dividends declared
and unpaid or undeclared but payable on such Exchangeable
Share.
"EXCHANGEABLE SHARES" means the Exchangeable Shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein.
"INSOLVENCY EVENT" means, with respect to MG or Canco, the institution
by MG or Canco, as the case may be, of any proceeding to be adjudicated a
bankrupt or insolvent or to be dissolved or wound-up, or the consent of MG or
Canco, as the case may be, to the institution of bankruptcy, insolvency,
dissolution or winding-up proceedings against it, or the filing of a petition,
answer or consent seeking dissolution or winding-up under any bankruptcy,
insolvency or analogous laws, including without limitation the Companies
Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act
(Canada), and the failure by MG or Canco, as the case may be, to contest in good
faith any such proceedings commenced in respect of MG or Canco, as the case may
be, within 15 days of becoming aware thereof, or the consent by MG or Canco, as
the case may be, to the filing of any such petition or to the appointment of a
receiver, or the making by MG or Canco, as the case may be, of a general
assignment for the benefit of creditors, or the admission in writing by MG or
Canco, as the case may be, of its inability to pay its debts generally as they
become due, or MG or Canco, as the case may be, not being permitted, pursuant to
liquidity or solvency requirements or other provisions of applicable law or
pursuant to any obligation (contractual or otherwise) applicable
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to MG or Canco, to redeem, repurchase or purchase any Exchangeable Shares
pursuant to the Exchangeable Share Provisions.
"LIQUIDATION AMOUNT" has the meaning provided in Section 5.1.
"LIQUIDATION CALL RIGHT" has the meaning provided in the Share
Restructuring Plan.
"LIQUIDATION DATE" has the meaning provided in Section 5.1.
"LIQUIDATION EVENT" has the meaning provided in Section 9.5 hereof.
"LIQUIDATION EVENT EFFECTIVE TIME" has the meaning provided in Section
9.7 hereof.
"MG EXCHANGE RIGHT" has the meaning provided in Section 9.1 hereof.
"MG SHARES" means the MG Common Shares, the MG Class B Shares, the MG
Class C Shares and the MG Class D Shares (each as defined in the Combination
Agreement) of the Corporation.
"PURCHASE PRICE" has the meaning provided in Section 6.3.
"REDEMPTION CALL PURCHASE PRICE" has the meaning provided in the Share
Restructuring Plan.
"REDEMPTION CALL RIGHT" has the meaning provided in the Share
Restructuring Plan.
"REDEMPTION PRICE" has the meaning provided in Section 7.1.
"RETRACTED SHARES" has the meaning provided in subsection 6.1(i).
"RETRACTION CALL RIGHT" has the meaning provided in subsection
6.1(iii).
"RETRACTION DATE" has the meaning provided in subsection 6.1(ii).
"RETRACTION PRICE" has the meaning provided in Section 6.1.
"RETRACTION REQUEST" has the meaning provided in Section 6.1.
"SHARE RESTRUCTURING PLAN" means the Share Restructuring Plan in
respect of the MG Shares, to which Share Restructuring Plan these share
provisions are an appendix.
"SUBSIDIARY", in relation to any person, means any body corporate,
partnership, joint venture, association or other entity of which more than 50%
of the total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
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"SUPPORT AGREEMENT" means the Support Agreement between TMW, Canco and
the Corporation made as of the Effective Date.
"TMW" means The Men's Wearhouse, Inc., a corporation existing under the
laws of the State of Texas.
"TMW COMMON STOCK" means the shares of common stock of TMW, with a par
value of U.S. $0.01 per share, having voting rights of one vote per share, and
any other securities resulting from the application of Section 3.7 of the
Support Agreement.
"TMW DIVIDEND DECLARATION DATE" means the date on which the board of
directors of TMW declares any dividend on the TMW Common Stock.
"TRANSFER AGENT" means the duly appointed transfer agent for the time
being of the Exchangeable Shares, and if there is more than one such agent then
the principal Canadian agent.
"VOTING TRUST AGREEMENT" means the Voting Trust Agreement between the
Corporation, TMW and the Trustee made as of the Effective Date.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank junior to the Class A Preferred
Share, shall rank equally or pari passu with the Common Shares with respect to
the payment of dividends pursuant to Section 3.1 hereof and the distribution of
assets in the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, on each TMW Dividend
Declaration Date, declare a dividend on each Exchangeable Share (a) in the case
of a cash dividend declared on the TMW Common Stock, in an amount in cash for
each Exchangeable Share equal to the cash dividend declared on each share of TMW
Common Stock or (b) in the case of a stock dividend declared on the TMW Common
Stock to be paid in TMW Common Stock, in such number of Exchangeable Shares for
each Exchangeable Share as is equal to the number of shares of TMW Common Stock
to be paid on each share of TMW Common Stock or (c) in the case of a dividend
declared on the TMW Common Stock in property other than cash or TMW Common
Stock, in such type and amount of property for each Exchangeable Share as is the
same as the type and amount of property declared as a dividend on each share of
TMW Common Stock. Such dividends shall be paid out of money, assets or property
of the Corporation properly applicable to the payment of dividends, or out of
authorized but unissued shares
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of the Corporation. A dividend payable pursuant to (a) above shall be payable in
Canadian dollars based on the spot exchange rate as of 12 o'clock noon on the
dividend payment date determined by the Bank of Canada.
3.2 Cheques of the Corporation payable at par at any branch of the bankers
of the Corporation shall be issued in respect of any cash dividends contemplated
by subsection 3.1(a) hereof and the sending of such a cheque to each holder of
an Exchangeable Share (less any tax required to be deducted and withheld from
such dividends paid or credited by the Corporation) shall satisfy the cash
dividends represented thereby unless the cheque is not paid on presentation.
Certificates registered in the name of the registered holder of Exchangeable
Shares shall be issued or transferred in respect of any stock dividends
contemplated by subsection 3.1(b) hereof and the sending of such a certificate
to each holder of an Exchangeable Share shall satisfy the stock dividend
represented thereby. Such other type and amount of property in respect of any
dividends contemplated by subsection 3.1(c) hereof shall be issued, distributed
or transferred by the Corporation in such manner as it shall determine and the
issuance, distribution or transfer thereof by the Corporation to each holder of
an Exchangeable Share shall satisfy the dividend represented thereby. In all
cases any such dividends shall be subject to any reduction or adjustment for tax
required to be deducted and withheld from such dividends paid or credited by the
Corporation. No holder of an Exchangeable Share shall be entitled to recover by
action or other legal process against the Corporation any dividend which is
represented by a cheque that has not been duly presented to the Corporation's
bankers for payment or which otherwise remains unclaimed for a period of six
years from the date on which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on the TMW Common Stock.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends which remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.5 Except as provided in Section 3.1, the holders of Exchangeable Shares
shall not be entitled to receive dividends in respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
11.1 of these share provisions:
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(a) pay any dividends on the Common Shares or any other shares of
the Corporation ranking equally with the Exchangeable Shares
with respect to the payment of dividends or the payment of any
liquidation distribution, or any shares ranking junior to the
Exchangeable Shares, other than stock dividends payable in any
such other shares ranking junior to the Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect
of Common Shares or any other shares of the Corporation
ranking equally with the Exchangeable Shares with respect to
the payment of dividends or the payment of any liquidation
distribution or any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends
or the payment of any liquidation distribution;
(c) issue any additional Common Shares;
(d) issue any further Exchangeable Shares (other than pursuant to
Section 3.1(b) hereof) or any capital stock ranking superior
to the Exchangeable Shares;
(e) amend the articles or by-laws of the Corporation, in either
case in any manner that would affect the rights of the holders
of the Exchangeable Shares; or
. (f) take any action to cause the voluntary liquidation of the
Corporation.
The restrictions in subsections 4.1(a), 4.1(b), and 4.1(c) above shall not apply
if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared with a record date on or following the effective date of the
Share Restructuring Plan on the TMW Common Stock shall have been declared on the
Exchangeable Shares and paid in full (either prior to such payment on the Common
Shares or simultaneously with such payment on the Common Shares).
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date of such liquidation, dissolution or winding-up (the
"Liquidation Date"), simultaneously with any distribution in respect of the
Common Shares, an amount equal to the Exchangeable Share Price applicable on the
last Business Day prior to the Liquidation Date (the "Liquidation Amount"). In
connection with payment of the Liquidation Amount, the Corporation shall be
entitled to liquidate
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some of the TMW Common Stock which would otherwise be deliverable to the
particular holder of Exchangeable Shares in order to fund any statutory
withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by TMW and Canco of the Liquidation Call Right, the Corporation shall cause to
be delivered to the holders of the Exchangeable Shares the Liquidation Amount
for each such Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to the holders
of the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of Exchangeable Shares, on
behalf of the Corporation of the Exchangeable Share Consideration representing
the total Liquidation Amount. On and after the Liquidation Date, the holders of
the Exchangeable Shares shall cease to be holders of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Liquidation Amount, unless payment of the total Liquidation Amount for such
Exchangeable Shares shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Liquidation Amount
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time on or after the Liquidation Date to deposit or cause to be
deposited the Exchangeable Share Consideration in respect of the Exchangeable
Shares represented by certificates that have not at the Liquidation Date been
surrendered by the holders thereof in a custodial account or for safe keeping,
in the case of non-cash items, with any chartered bank or trust company in
Canada. Upon such deposit being made, the rights of the holders of Exchangeable
Shares after such deposit shall be limited to receiving their proportionate part
of the total Liquidation Amount for such Exchangeable Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon such payment or
deposit of such Exchangeable Share Consideration, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be the holders of the TMW Common Stock delivered to them. Notwithstanding the
foregoing, until such payment or deposit of such Exchangeable Share
Consideration, the holder shall be deemed to still be a holder of Exchangeable
Shares for purposes of all voting rights with respect thereto under the Voting
Trust Agreement. The Corporation shall be entitled to liquidate some of the TMW
Common Stock that would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable Share, such
holders shall not be entitled to share in any further distribution of the assets
of the Corporation.
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ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time subject
to the exercise by TMW and Canco of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount equal to the Exchangeable Share Price applicable on the
last Business Day prior to the Retraction Date (the "Retraction Price"). In
connection with payment of the Retraction Price, the Corporation shall be
entitled to liquidate some of the TMW Common Stock that would otherwise be
deliverable to the particular holder of Exchangeable Shares in order to fund any
statutory withholding tax obligation. To effect such redemption, the holder
shall present and surrender at the registered office of the Corporation or at
any office of the Transfer Agent as may be specified by the Corporation in
Schedule A hereto or by notice to the holders of Exchangeable Shares the
certificate or certificates representing the Exchangeable Shares which the
holder desires to have the Corporation redeem, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, and together with a duly executed statement (the "Retraction Request")
in the form of Schedule A hereto or in such other form as may be acceptable to
the Corporation:
(i) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by
such certificate or certificates (the "Retracted Shares")
redeemed by the Corporation;
(ii) stating the Business Day on which the holder desires to have
the Corporation redeem the Retracted Shares (the "Retraction
Date"), provided that the Retraction Date shall be not less
than three Business Days nor more than 10 Business Days after
the date on which the Retraction Request is received by the
Corporation and further provided that, in the event that no
such Business Day is specified by the holder in the Retraction
Request, the Retraction Date shall be deemed to be the tenth
Business Day after the date on which the Retraction Request is
received by the Corporation; and
(iii) acknowledging the overriding right (the "Retraction Call
Right") of TMW and Canco to purchase all but not less than all
the Retracted Shares directly from the holder and that the
Retraction Request shall be deemed to be a revocable offer by
the holder to sell the Retracted Shares in accordance with the
Retraction Call Right on the terms and conditions set out in
Section 6.3 below.
6.2 Subject to the exercise by TMW and Canco of the Retraction Call Right,
upon receipt by the Corporation or the Transfer Agent in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the
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Corporation redeem, together with a Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Corporation shall redeem the Retracted Shares effective at the
close of business on the Retraction Date and shall cause to be delivered to such
holder the total Retraction Price with respect to such shares in accordance with
Section 6.4 hereof. If only a part of the Exchangeable Shares represented by any
certificate are redeemed or purchased by TMW and Canco pursuant to the
Retraction Call right, a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify TMW and Canco thereof. In order to exercise
the Retraction Call Right, TMW or Canco must notify the Corporation in writing
of its determination to do so (the "Call Notice") within two Business Days of
such notification. If neither TMW nor Canco notifies the Corporation within two
Business Days, the Corporation will notify the holder as soon as possible
thereafter that neither TMW nor Canco will exercise the Retraction Call Right.
If either TMW or Canco delivers the Call Notice within such two Business Days,
and provided that the Retraction Request is not revoked by the holder in the
manner specified in Section 6.7, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the Retracted Shares to
either TMW or Canco in accordance with the Retraction Call Right. In such event,
the Corporation shall not redeem the Retracted Shares and TMW or Canco as set
forth in the Call Notice shall purchase from such holder and such holder shall
sell to either TMW or Canco on the Retraction Date the Retracted Shares for a
purchase price (the "Purchase Price") per share equal to the Retraction Price
per share. For the purposes of completing a purchase pursuant to the Retraction
Call Right, TMW or Canco shall deposit with the Transfer Agent, on or before the
Retraction Date the Exchangeable Share Consideration representing the total
Purchase Price. Provided that such Exchangeable Share Consideration has been so
deposited with the Transfer Agent, the closing of the purchase and sale of the
Retracted Shares pursuant to the Retraction Call Right shall be deemed to have
occurred as at the close of business on the Retraction Date and, for greater
certainty, no redemption by the Corporation of such Retracted Shares shall take
place on the Retraction Date. In the event that neither TMW nor Canco delivers a
Call Notice within two Business Days or otherwise comply with these Exchangeable
Share provisions with respect thereto, and provided that Retraction Request is
not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares on the Retraction Date and in the
manner otherwise contemplated in this Article 6.
6.4 The Corporation or either TMW or Canco, as the case may be, shall
deliver or cause the Transfer Agent to deliver to the relevant holder, at the
address of the holder recorded in the securities register of the Corporation for
the Exchangeable Shares or at the address specified in the holder's Retraction
Request or, if requested by the holder, by holding for pick up by the holder at
the registered office of the Corporation or at any office of the Transfer Agent
as may be specified by the Corporation by notice to the holders of Exchangeable
Shares, the Exchangeable Share Consideration representing the total Retraction
Price or the total Purchase Price, as the case may be, and such delivery of such
Exchangeable Share Consideration to the Transfer Agent shall be deemed to be
payment of and shall satisfy and discharge all liability for the total
Retraction Price or total Purchase Price, as the case may be, except as to any
cheque included therein which is not paid on due presentation.
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6.5 On and after the close of business on the Retraction Date, the holder
of the Retracted Shares shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive his proportionate
part of the total Retraction Price or total Purchase Price, as the case may be,
unless upon presentation and surrender of certificates in accordance with the
foregoing provisions, payment of the total Retraction Price or the total
Purchase Price, as the case may be, shall not be made, in which case the rights
of such holder shall remain unaffected until the Exchangeable Share
Consideration representing the total Retraction Price or the total Purchase
Price, as the case may be, has been paid in the manner hereinbefore provided. On
and after the close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the Exchangeable Share
Consideration representing the total Retraction Price or the total Purchase
Price, as the case may be, has been made in accordance with the foregoing
provisions, the holder of the Retracted Shares so redeemed by the Corporation or
purchased by either TMW or Canco shall thereafter be considered and deemed for
all purposes to be a holder of the TMW Common Stock delivered to it.
Notwithstanding the foregoing, until payment of such Exchangeable Share
Consideration to the holder, the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with respect thereto under
the Voting Trust Agreement.
6.6 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to liquidity or solvency requirements or other provisions of
applicable law. If the Corporation believes that on any Retraction Date it would
not be permitted by any of such provisions to redeem the Retracted Shares
tendered for redemption on such date, and provided that neither TMW nor Canco
has exercised the Retraction Call Right with respect to the Retracted Shares,
the Corporation shall only be obligated to redeem Retracted Shares specified by
a holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to liquidity or solvency
requirements or other provisions of applicable law, the Corporation shall redeem
Retracted Shares in accordance with Section 6.2 of these share provisions on a
pro rata basis and shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to Section 6.2 hereof. Provided
that the Retraction Request is not revoked by the holder in the manner specified
in Section 6.7, the holder of any such Retracted Shares not redeemed by the
Corporation pursuant to Section 6.2 of these share provisions as a result of
liquidity or solvency requirements or applicable law shall be deemed by giving
the Retraction Request to require Canco to purchase such Retracted Shares from
such holder on the Retraction Date or as soon as practicable thereafter on
payment by Canco to such holder of the Purchase Price for each such Retracted
Share, all as more specifically provided in Article 9 hereof.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to either TMW or Canco shall be deemed to have been revoked.
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ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law, and if neither TMW nor Canco exercises the
Redemption Call Right and the holder does not exercise its Exchange Put Right,
the Corporation shall on the Automatic Redemption Date redeem the whole of the
then outstanding Exchangeable Shares for an amount equal to the Exchangeable
Share Price applicable on the last Business Day prior to the Automatic
Redemption Date (the "Redemption Price"). In connection with payment of the
Redemption Price, the Corporation shall be entitled to liquidate some of the TMW
Common Stock which would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this Article
7, the Corporation, or the Transfer Agent on behalf of the Corporation, shall,
at least 45 days before an Automatic Redemption Date or before a possible
Automatic Redemption Date which may result from a failure of the holders of
Exchangeable Shares to take necessary action as described in clause (d) of the
definition of Automatic Redemption Date, send or cause to be sent to each holder
of Exchangeable Shares a notice in writing of the redemption or possible
redemption by the Corporation or the purchase by TMW and Canco under the
Redemption Call Right, as the case may be, of the Exchangeable Shares held by
such holder. Such notice shall set out the formula for determining the
Redemption Price or the Redemption Call Purchase Price, as the case may be, the
Automatic Redemption Date and, if applicable, particulars of the Redemption Call
Right. In the case of any notice given in connection with a possible Automatic
Redemption Date, such notice will be given contingently and will be withdrawn if
the contingency does not occur.
7.3 On or after the Automatic Redemption Date and subject to the exercise
by TMW or Canco of the Redemption Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share upon presentation and
surrender at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such notice of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require. Payment of the total Redemption Price for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register or at any office of the Transfer Agent as may be
specified by the Corporation in such notice, on behalf of the Corporation of the
Exchangeable Share Consideration representing the total Redemption Price. On and
after the Automatic Redemption Date, the holders of the Exchangeable Shares
called for redemption shall cease to be holders of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Redemption Price, unless payment of the total Redemption Price for such
Exchangeable Shares shall not be made upon presentation and surrender of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Redemption Price
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time after the
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sending of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the Exchangeable Share
Consideration with respect to the Exchangeable Shares so called for redemption,
or of such of the said Exchangeable Shares represented by certificates that have
not at the date of such deposit been surrendered by the holders thereof in
connection with such redemption, in a custodial account or for safe keeping, in
the case of non-cash items, with any chartered bank or trust company in Canada
named in such notice. Upon the later of such deposit being made and the
Automatic Redemption Date, the Exchangeable Shares in respect whereof such
deposit shall have been made shall be redeemed and the rights of the holders
thereof after such deposit or Automatic Redemption Date, as the case may be,
shall be limited to receiving their proportionate part of the total Redemption
Price for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of such Exchangeable
Share Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the TMW Common Stock
delivered to them as part of the Exchangeable Share Consideration.
Notwithstanding the foregoing, until such payment or deposit of such
Exchangeable Share Consideration is made, the holder shall be deemed to still be
a holder of Exchangeable Shares for purposes of all voting rights with respect
thereto under the Voting Trust Agreement.
ARTICLE 8
EXCHANGE PUT RIGHT
8.1 Upon and subject to the terms and conditions contained herein:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require Canco to purchase
all or any part of the Exchangeable Shares of the holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to Canco, and Canco shall be
required to purchase from the holder, that number of
Exchangeable Shares in respect of which the Exchange Put Right
is exercised, in consideration of the payment by Canco of the
Exchangeable Share Price applicable thereto (which shall be
the Exchangeable Share Price applicable on the Exchange Put
Date, as defined below) and delivery by or on behalf of Canco
of the Exchangeable Share Consideration representing the total
applicable Exchangeable Share Price. In connection with
payment of the Exchangeable Share Consideration, Canco shall
be entitled to liquidate some of the TMW Common Stock which
would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding
tax obligation.
8.2 The Exchange Put Right provided in Section 4.3 of the Share
Restructuring Plan and Section 8.1 hereof may be exercised at any time by notice
in writing given by the holder to and received by Canco (the date of such
receipt, the "Exchange Put Date") accompanied by presentation and
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surrender of the certificates representing such Exchangeable Shares, together
with such documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as Canco may reasonably require, at the
principal offices of the Corporation in Toronto. Such notice may be (i) in the
form of the panel, if any, on the certificates representing Exchangeable Shares,
(ii) in the form of the notice and election contained in any letter of
transmittal distributed or made available by the Corporation for that purpose,
or (iii) in other form satisfactory to the Corporation (or such other persons
aforesaid), shall stipulate the number of Exchangeable Shares in respect of
which the right is exercised (which may not exceed the number of shares
represented by certificates surrendered to Canco), shall be irrevocable unless
the exchange is not completed in accordance herewith and shall constitute the
holder's authorization to the Corporation (and such other persons aforesaid) to
effect the exchange on behalf of the holder.
8.3 The completion of the sale and purchase referred to in section 8.1
shall be required to occur, and Canco shall be required to take all actions on
its part necessary to permit it to occur, not later than the close of business
on the third Business Day following the Exchange Put Date.
8.4 The surrender by the holder of Exchangeable Shares under section 8.2
shall constitute the representation, warranty and covenant of the holder that
the Exchangeable Shares so purchased are sold free and clear of any lien,
encumbrance, security interest or adverse claim or interest.
8.5 If a part only of the Exchangeable Shares represented by any
certificate is to be sold and purchased pursuant to the exercise of the Exchange
Put Right, a new certificate for the balance of such Exchangeable Shares shall
be issued to the holder at the expense of the Corporation.
8.6 Upon receipt by Canco of the notice, certificates and other documents
or instruments required by section 8.2, Canco shall deliver or cause to be
delivered to the relevant holder at the address of the holder specified in the
notice or, if requested by the holder, by holding for pick-up by the holder at
the registered office of the Corporation the Exchangeable Share Consideration
representing the total applicable Exchangeable Share Price, within the time
stipulated in section 8.3. Delivery by Canco of such Exchangeable Share
Consideration to the holder shall be deemed to be payment of and shall satisfy
and discharge all liability for the total applicable Exchangeable Share Price,
except as to any cheque included therein which is not paid on due presentation.
8.7 On and after the close of business on the Exchange Put Date, the holder
of the Exchangeable Shares in respect of which the Exchange Put Right is
exercised shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the total applicable
Exchangeable Share Price, unless upon presentation and surrender of certificates
in accordance with the foregoing provisions, payment of the Exchangeable Share
Consideration shall not be made, in which case the rights of such holder shall
remain unaffected until such payment has been made. On and after the close of
business on the Exchange Put Date provided that presentation and surrender of
certificates and payment of the Exchangeable Share Consideration has been made
in accordance with the foregoing provisions, the holder of the Exchangeable
Shares so purchased by Canco shall thereafter be considered and deemed for all
purposes to be a holder of the TMW Common Stock delivered to it. Notwithstanding
the foregoing, until payment of the Exchangeable Share
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Consideration to the holder, the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with respect thereto under
the Voting Trust Agreement.
ARTICLE 9
EXCHANGE RIGHTS
9.1 Upon and subject to the terms and conditions contained herein:
(a) a holder of Exchangeable Shares shall have the right (the "MG
Exchange Right"), upon the occurrence of an Insolvency Event
with respect to MG, to require Canco to purchase from such
holder all or any part of the Exchangeable Shares held by such
holder;
(b) a holder of Exchangeable Shares shall have the right (the
"Canco Exchange Right" and together with the MG Exchange
Right, the "Exchange Rights"), upon the occurrence of an
Insolvency Event with respect to Canco, to require TMW to
purchase from such holder all or any part of the Exchangeable
Shares held by such holder;
(c) upon the exercise by the holder of an Exchange Right, the
holder shall be required to sell to either TMW or Canco, and
either TMW or Canco shall be required to purchase from the
holder, that number of Exchangeable Shares in respect of which
the Exchange Right is exercised, in consideration of the
payment by either TMW or Canco of the Exchangeable Share Price
on the last Business Day prior to the date of closing of the
purchase and sale of such Exchangeable Shares under the
Exchange Rights, and delivery by and on behalf of either TMW
or Canco of the Exchangeable Share Consideration representing
the total applicable Exchangeable Share Price; provided, that
in connection with payment of the Exchangeable Share
Consideration, TMW or Canco shall be entitled to liquidate
some of the TMW Common Stock which would otherwise be
deliverable to the particular holder of Exchangeable Shares in
order to fund any statutory withholding tax obligation; and
(d) a holder of Exchangeable Shares shall have the Automatic
Exchange Right.
9.2 The purchase price payable for each Exchangeable Share to be purchased
by Canco under the MG Exchange Right and by TMW under the Canco Exchange Right
shall be an amount equal to the Exchangeable Share Price on the last Business
Day prior to the day of closing of the purchase and sale of such Exchangeable
Share under the MG Exchange Right or the Canco Exchange Right, as the case may
be.
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9.3 The Exchange Rights provided for in Section 9.1 may be exercised by a
holder upon the occurrence and during the continuance of an Insolvency Event
with respect to MG or Canco, by notice in writing given to TMW or Canco, as the
case may be, accompanied by presentation and surrender of the certificates
representing the Exchangeable Shares which such holder desires TMW or Canco, as
the case may be, to purchase, duly endorsed in blank, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of MG and such additional
documents and instruments as TMW or Canco, as the case may be, may reasonably
require and:
(a) a duly completed form of notice of exercise of the applicable
Exchange Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating:
(i) that the holder thereby exercises the applicable
Exchange Right so as to require Canco or TMW, as
applicable, to purchase from the holder the number of
Exchangeable Shares specified therein,
(ii) that such holder has good title to and owns all such
Exchangeable Shares to be acquired by Canco or TMW,
as applicable, free and clear of all liens, claims,
encumbrances, security interests and adverse claims
or interests,
(iii) the names in which the certificates representing TMW
Common Stock issuable in connection with the exercise
of such Exchange Right are to be issued, and
(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered;
and
(b) payment (or evidence satisfactory to TMW, Canco and MG of
payment) of the taxes (if any) payable as contemplated by
Section 9.8.
If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to Canco or TMW are to be purchased by
Canco or TMW under such Exchange Right, a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of MG.
9.4 Promptly after receipt of the certificates representing the
Exchangeable Shares which the holder desires Canco or TMW to purchase under the
Exchange Rights (together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Right), duly endorsed
for transfer to Canco or TMW, as the case may be, Canco or TMW, as the case may
be, shall immediately thereafter deliver or cause to be delivered to the holder
of such Exchangeable Shares (or to such other persons, if any, properly
designated by such holder), the Exchangeable Share Consideration deliverable in
connection with the exercise of the Exchange Right; provided, however,
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that no such delivery shall be made unless and until the holder requesting the
same shall have paid (or provided evidence satisfactory to TMW, Canco and MG of
the payment of) the taxes (if any) payable as contemplated by Section 9.8.
Immediately upon the giving of notice by the holder to Canco or TMW, as the case
may be, of the exercise of the Exchange Right, (a) the closing of the
transaction of purchase and sale contemplated by the Exchange Right shall be
deemed to have occurred, (b) Canco or TMW, as the case may be, shall be required
to take all action necessary to permit it to occur, including delivery to the
holder (or such other persons, if any, properly designated by such holder) of
the relevant Exchangeable Share Consideration, no later than the close of
business on the third Business Day following the receipt by TMW or Canco, as the
case may be, of notice, certificates and other documents as aforesaid and (c)
the holder of such Exchangeable Shares shall be deemed to have transferred to
Canco or TMW, as the case may be, all of its right, title and interest in and to
such Exchangeable Shares, shall cease to be a holder of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Exchangeable Share Consideration, unless such Exchangeable Share Consideration
is not delivered by Canco or TMW, as the case may be, to the holder (or such
other persons, if any, properly designated by such holder) by the date specified
above, in which case the rights of the holder shall remain unaffected until such
Exchangeable Share Consideration is delivered by Canco or TMW, as the case may
be, and any cheque included therein is paid. Concurrently with such holder
ceasing to be a holder of Exchangeable Shares, the holder shall be considered
and deemed for all purposes to be the holder of the shares of TMW Common Stock
delivered to it pursuant to the Exchange Right. Notwithstanding the foregoing
until the Exchangeable Share Consideration is delivered to the holder, the
holder shall be deemed to still be a holder of the sold Exchangeable Shares for
purposes of voting rights with respect thereto under the Voting Trust Agreement.
9.5 (a) In the event that a holder has exercised its right under
Article 6 of the Exchangeable Share Provisions to require MG
to redeem any or all of the Exchangeable Shares held by the
holder (the "Retracted Shares") and is notified by MG that MG
will not be permitted as a result of an Insolvency Event to
redeem all such Retracted Shares, subject to receipt by the
holder of written notice to that effect from MG and provided
that Canco shall not have exercised the Retraction Call Right
with respect to the Retracted Shares and that the holder has
not revoked the retraction request delivered by the holder to
MG pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be
deemed to constitute notice from the holder to Canco of its
exercise of the MG Exchange Right with respect to those
Retracted Shares which MG is unable to redeem and Canco will
purchase such shares in accordance with this Article 9.
(b) In the event that a holder has exercised its right under
Article 6 of the Exchangeable Share Provisions to require MG
to redeem any or all of the Retracted Shares and is notified
by MG that MG will not be permitted as a result of an
Insolvency Event to redeem all such Retracted Shares, and
Canco shall notify the holders that it will not be permitted
as a result of an Insolvency Event to purchase any Retracted
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Shares pursuant to Section 9.5(a), subject to receipt by the
holder of written notice to that effect from Canco and
provided that TMW shall not have exercised the Retraction Call
Right with respect to the Retracted Shares and that the holder
has not revoked the retraction request delivered by the holder
to MG pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be
deemed to constitute notice from the holder to TMW of its
exercise of the Canco Exchange Right with respect to those
Retracted Shares which Canco is unable to repurchase and TMW
will purchase such shares in accordance with this Article 9.
9.6 Immediately upon the occurrence of an Insolvency Event with respect to
MG or Canco or any event which with the giving of notice or the passage of time
or both would be an Insolvency Event with respect to MG or Canco, MG and TMW
shall give written notice thereof to each holder of Exchangeable Shares, which
notice shall contain a brief statement of the right of the holders with respect
to the applicable Exchange Right.
9.7 (a) TMW will give each holder of Exchangeable Shares written
notice of each of the following events at the time set forth below:
(i) in the event of any determination by the board of
directors of TMW to institute voluntary liquidation,
dissolution or winding-up proceedings with respect to
TMW or to effect any other distribution of assets of
TMW among its stockholders for the purpose of winding
up its affairs, at least 60 days prior to the
proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by TMW
of notice of and (B) TMW's otherwise becoming aware
of any threatened or instituted claim, suit, petition
or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of TMW or to
effect any other distribution of assets of TMW among
its stockholders for the purpose of winding up its
affairs.
(b) In order that the holders of Exchangeable Shares will be able
to participate on a pro rata basis with the holders of TMW
Common Stock in the distribution of assets of TMW in
connection with any event contemplated by Section 9.7(a) above
(a "Liquidation Event"), immediately prior to the effective
time (the "Liquidation Event Effective Time") of a Liquidation
Event, all of the then outstanding Exchangeable Shares shall
be automatically exchanged for shares of TMW Common Stock. To
effect such automatic exchange, Canco shall be deemed to have
purchased each Exchangeable Share
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outstanding immediately prior to the Liquidation Event
Effective Time and each holder shall be deemed to have sold
the Exchangeable Shares held by it at such time, for a
purchase price per share equal to the Exchangeable Share Price
applicable at such time.
(c) The closing of the transaction of purchase and sale
contemplated by Section 9.7(b) above shall be deemed to have
occurred immediately prior to the Liquidation Event Effective
Time, and each holder of Exchangeable Shares shall be deemed
to have transferred to Canco all of the holder's right, title
and interest in and to such Exchangeable Shares and shall
cease to be a holder of such Exchangeable Shares, and Canco
shall deliver to the holder the Exchangeable Share
Consideration deliverable upon the automatic exchange of
Exchangeable Shares. Concurrently with such holder's ceasing
to be a holder of Exchangeable Shares, the holder shall be
considered and deemed for all purposes to be the holder of the
shares of TMW Common Stock issued to it pursuant to the
automatic exchange of Exchangeable Shares for TMW Common
Stock, and the certificates held by the holder previously
representing the Exchangeable Shares exchanged by the holder
with Canco pursuant to such automatic exchange shall
thereafter be deemed to represent the shares of TMW Common
Stock issued to the holder by Canco pursuant to such automatic
exchange. Upon the request of a holder and the surrender by
the holder of Exchangeable Share certificates deemed to
represent shares of TMW Common Stock, duly endorsed in blank
and accompanied by such instruments of transfer as Canco may
reasonably require, Canco shall deliver or cause to be
delivered to the holder certificates representing the shares
of TMW Common Stock of which the holder is the holder.
Notwithstanding the foregoing, until each holder is actually
entered on the register of holders of TMW Common Stock, such
holder shall be deemed to still be a holder of the transferred
Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting Trust Agreement.
9.8 Upon any sale of Exchangeable Shares to TMW, Canco or MG, as the case
may be, pursuant to these Exchangeable Share Provisions or the Share
Restructuring Plan, the share certificate or certificates representing TMW
Common Stock to be delivered in connection with the payment of the total
purchase price therefor shall be issued in the name of the holder of the
Exchangeable Shares so sold or in such names as such holder may otherwise direct
in writing without charge to the holder of the Exchangeable Shares so sold,
provided, however, that such holder:
(a) in the case where such holder or, in the case of a partnership
that is a holder, a member thereof, is a non-resident for the
purposes of the Income Tax Act (Canada), shall have delivered
to TMW, Canco or MG, as the case may be, (i) either (A) such
certificates reasonably
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satisfactory to TMW, Canco and MG, issued pursuant to
subsection 116(2) of the Income Tax Act (Canada) and Section
1098 of the Taxation Act (Quebec), and having as "certificate
limit", as defined in subsection 116(2) of the Income Tax Act
(Canada) and Section 1098 of the Taxation Act (Quebec), an
amount equal to or greater than the greater of the cost to
TMW, Canco or MG, as the case may be, of the Exchangeable
Shares and the proceeds of disposition to such holder or
member, as the case may be, of the Exchangeable Shares or (B)
a certificate issued pursuant to Subsection 116(2) of the ITA
and Section 1098 of the Taxation Act (Quebec) reasonably
satisfactory to TMW, Canco and MG to the same effect as (i)(A)
above issued to a partnership that is a holder which covers
the partners in that partnership; and (ii) any other similar
certificate under any applicable legislation;
(b) in the case of a partnership that is a holder, a certificate
confirming the name and address of each member thereof and the
percentage of partnership interest held by each member; and
(c) (i) shall pay (and neither TMW, Canco nor MG shall be
required to pay) any documentary, stamp, transfer or
other similar taxes that may be payable in respect of
any transfer involved in the issuance or delivery of
such shares to a person other than such holder; or
(ii) shall have established to the satisfaction of TMW,
Canco and MG that such taxes, if any, have been paid.
ARTICLE 10
VOTING RIGHTS
10.1 Except as required by applicable law and the provisions hereof, the
holders of the Exchangeable Shares shall not be entitled as such to receive
notice of or to attend any meeting of the shareholders of the Corporation or to
vote at any such meeting.
ARTICLE 11
AMENDMENT AND APPROVAL
11.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
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11.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than 75% of the votes cast on such resolution by persons represented in
person or by proxy at a meeting of holders of Exchangeable Shares duly called
and held at which the holders of at least 75% of the outstanding Exchangeable
Shares at that time are present or represented by proxy (excluding Exchangeable
Shares beneficially owned by TMW or its Subsidiaries). If at any such meeting
the holders of at least 75% of the outstanding Exchangeable Shares at that time
are not present or represented by proxy within one-half hour after the time
appointed for such meeting then the meeting shall be adjourned to such date not
less than 10 days thereafter and to such time and place as may be designated by
the Chairman of such meeting. At such adjourned meeting the holders of
Exchangeable Shares present or represented by proxy thereat may transact the
business for which the meeting was originally called and a resolution passed
thereat by the affirmative vote of not less than 75% of the votes cast on such
resolution by persons represented in person or by proxy at such meeting shall
constitute the approval or consent of the holders of the Exchangeable Shares.
For the purposes of this section, any spoiled votes, illegible votes, defective
votes and abstinences shall be deemed to be votes not cast.
ARTICLE 12
RECIPROCAL CHANGES, ETC. IN RESPECT OF
TMW COMMON STOCK
12.1 (a) Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that TMW will not:
(i) issue or distribute shares of TMW Common Stock (or
securities exchangeable for or convertible into or
carrying rights to acquire shares of TMW Common
Stock) to the holders of all or substantially all of
the then outstanding shares of TMW Common Stock by
way of stock dividend or other distribution; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then
outstanding shares of TMW Common Stock entitling them
to subscribe for or to purchase shares of TMW Common
Stock (or securities exchangeable for or convertible
into or carrying rights to acquire shares of TMW
Common Stock); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of
TMW Common Stock (A) shares or securities of TMW of
any class other than TMW Common Stock (other than
shares convertible into or
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exchangeable for or carrying rights to acquire TMW
Common Stock), (B) rights, options or warrants other
than those referred to in subsection 12.1(a)(ii)
above, (C) evidences of indebtedness of TMW or (D)
assets of TMW;
unless (A) one or both of the Corporation and TMW is permitted under applicable
law, and not prohibited by any agreement applicable to the Corporation or TMW,
to issue or distribute the economic equivalent on a per share basis of such
rights, options, warrants, securities, shares, evidences of indebtedness or
assets and (B) the items referred to in clauses (i), (ii) and (iii) above, as
applicable, are issued or distributed simultaneously to holders of Exchangeable
Shares.
(b) Each holder of an Exchangeable Share acknowledges that the
Support Agreement further provides, in part, that TMW will not:
(i) subdivide, redivide or change the then outstanding
shares of TMW Common Stock into a greater number of
shares of TMW Common Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of TMW Common Stock into a lesser
number of shares of TMW Common Stock; or
(iii) reclassify or otherwise change the shares of TMW
Common Stock or effect an amalgamation, merger,
reorganization or other transaction involving or
affecting the shares of TMW Common Stock;
unless (A) the Corporation is permitted under applicable law, and not prohibited
by any agreement applicable to the Corporation or TMW, to simultaneously make
the same or an economically equivalent change to, or in the rights of the
holders of, the Exchangeable Shares and (B) the same or an economically
equivalent change is simultaneously made to, or in the rights of the holders of,
the Exchangeable Shares.
The Support Agreement further provides, in part, that, with the
exception of certain ministerial amendments, the aforesaid provisions of the
Support Agreement shall not be changed without the approval of the holders of
the Exchangeable Shares given in accordance with Section 11.1 of these share
provisions.
ARTICLE 13
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
13.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by TMW and Canco with all provisions hereof and of
the Share Restructuring Plan, the Support Agreement, the
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Voting Trust Agreement and TMW's Restated Articles of Incorporation applicable
to the Corporation and TMW, respectively, in accordance with the terms thereof
including, without limitation, taking all such actions and doing all such things
as shall be necessary or advisable to enforce to the fullest extent possible for
the direct benefit of the Corporation all rights and benefits in favour of the
Corporation under or pursuant thereto.
13.2 The Corporation shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement, the Voting Trust Agreement or TMW's Restated Articles of
Incorporation without the approval of the holders of the Exchangeable Shares
given in accordance with Section 11.1 of these share provisions other than such
amendments, waivers and/or forgiveness as may be necessary or advisable for the
purpose of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders
of Exchangeable Shares; provided that the Board of Directors
shall be of the opinion, after receipt of a written opinion of
outside counsel, that such provision and modification are not
prejudicial to the interest of the holders of the Exchangeable
Shares; or
(b) making such provisions or modifications not inconsistent with
such agreement or certificate as may be necessary or desirable
with respect to matters or questions arising thereunder which,
in the opinion of the Board of Directors, it may be expedient
to make, provided that the Board of Directors shall be of the
opinion, after receipt of a written opinion of outside
counsel, that such provisions and modifications will not be
prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes in or corrections to such agreement or
certificate which, on the receipt of a written opinion of
outside counsel to the Corporation, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error contained therein, provided that the Board of
Directors shall be of the opinion, after receipt of a written
opinion of outside counsel, that such changes or corrections
will not be prejudicial to the interests of the holders of
the Exchangeable Shares.
The Corporation shall send a written notice to the holders of the Exchangeable
Shares notifying them of any amendment made pursuant to clause (a), (b) or (c)
of this Section 13.2 and a copy of any written opinion of counsel received in
connection with any such amendment.
ARTICLE 14
LEGEND
14.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support
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Agreement, the provisions of the Share Restructuring Plan relating to the
Liquidation Call Right, the Retraction Call Right and the Redemption Call Right,
and the provisions hereof relating to the MG Exchange Right, the Canco Exchange
Right, the Automatic Exchange Rights and the Exchange Put Right and the Voting
Trust Agreement (including the provisions with respect to the voting rights
thereunder).
ARTICLE 15
MISCELLANEOUS
15.1 Any notice, request or other communication to be given to the
Corporation by a holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Corporation and addressed to the
attention of the President. Any such notice, request or other communication, if
given by mail, telecopy or delivery, shall only be deemed to have been given and
received upon actual receipt thereof by the Corporation.
15.2 Any presentation and surrender by a holder of Exchangeable Shares to
the Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction, redemption or exchange of Exchangeable Shares
shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation or to such office of the Transfer Agent as
may be specified by the Corporation, in each case addressed to the attention of
the President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent, as the case may
be, and the method of any such presentation and surrender of certificates shall
be at the sole risk of the holder.
15.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be or
intended to be taken by the Corporation.
15.4 For greater certainty, the Corporation shall not be required for any
purpose under these share provisions to recognize or take account of persons who
are not so recorded in such securities register.
15.5 All Exchangeable Shares acquired by the Corporation upon the redemption
or retraction thereof shall be canceled.
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SCHEDULE "A"
NOTICE OF RETRACTION
To the Corporation and Golden Moores Company ("Canco"):
This notice is given pursuant to Article 6 of the provisions (the
"Share Provisions") attaching to the Exchangeable Shares of the Corporation and
all capitalized words and expressions used in this notice which are defined in
the Share Provisions have the meaning attributed to such words and expressions
in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by the accompanying certificate; or
[ ] __________ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction
Date shall be _____________.
NOTE: The Retraction Date must be a Business Day and
must not be less than three Business Days nor more
than 10 Business Days after the date upon which this
notice and the accompanying shares are received by
the Corporation. In the event that no such business
day is correctly specified above, the Retraction
Date shall be deemed to be the tenth Business Day
after the date on which this notice is received by
the Corporation.
The undersigned acknowledges the Retraction Call Right of TMW and Canco
to purchase all but not less than all the Retracted Shares from the undersigned
and that this notice shall be deemed to be a revocable offer by the undersigned
to sell the Retracted Shares to either TMW or Canco in accordance with the
Retraction Call Right on the Retraction Date for the Retraction Price and on the
other terms and conditions set out in Section 6.3 of the Share Provisions. If
either TMW or Canco determines not to exercise the Retraction Call Right, the
Corporation will notify the undersigned of such fact as soon as possible. This
notice of retraction, and offer to sell the Retracted Shares to either TMW or
Canco, may be revoked and withdrawn by the undersigned by notice in writing
given to the Corporation at any time before the close of business on the
Business Date immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of an Insolvency
Event, the Corporation is unable to redeem all Retracted Shares, the undersigned
will be deemed to have exercised the Exchange Right (as defined in the Share
Provisions) so as to require either TMW or Canco to purchase the unredeemed
Retracted Shares.
<PAGE> 95
The undersigned hereby represents and warrants to the Corporation, TMW
and Canco that the undersigned has good title to, and owns, the share(s)
represented by the accompanying certificate free and clear of all liens, claims,
encumbrances, security interests and adverse claims or interests.
- ----------------- ------------------------ -----------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the legal or beneficial owner of the Retracted
Shares is a non-resident of Canada.
[ ] Please check box if the securities and any cheque(s) or other
non-cash assets resulting from the retraction of the Retracted Shares
are to be held for pick-up by the shareholder at the principal transfer
office of American Stock Transfer & Trust Company (the "TRANSFER
AGENT") in New York, New York, failing which the securities and any
cheque(s) or other non-cash assets will be delivered to the shareholder
in accordance with the share provisions.
NOTE: This panel must be completed and the accompanying certificate,
together with such additional documents as the Transfer Agent
may require, must be deposited with the Transfer Agent at its
principal transfer office in New York, New York. The
securities and any cheque(s) or other non-cash assets
resulting from the retraction or purchase of the Retracted
Shares will be issued and registered in, and made payable to,
or transferred into, respectively, the name of the
shareholder as it appears on the register of the Corporation
and the securities, cheque(s) and other non-cash assets
resulting from such retraction or purchase will be delivered
to the shareholder in accordance with the Share Provisions.
- ----------------------------------------------------- -----------------------
Name of Person in Whose Name Securities or Cheque(s) Date
or Other Non-cash Assets Are To Be Registered, Issued
or Delivered (please print)
- ---------------------------------------------- -----------------------
Street Address or P.O. Box Signature of Shareholder
- ---------------------------------------------- -----------------------
City, Province Signature Guaranteed by
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NOTE: If the notice of retraction is for less than all of the share(s)
represented by the accompanying certificate, a certificate
representing the remaining shares of the Corporation will be
issued and registered in the name of the shareholder as it
appears on the register of the Corporation or its lawful
transferee.
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APPENDIX C TO THE SHARE
RESTRUCTURING PLAN OF MG
PROVISIONS ATTACHING TO THE CLASS A PREFERRED SHARE
The Class A Preferred Share in the capital of the Corporation shall
have attached thereto the following rights, privileges, restrictions and
conditions:
DIVIDENDS
Subject to the prior rights of the holders of any shares ranking senior
to the Class A Preferred Share with respect to priority in the payment of
dividends, the holder of the Class A Preferred Share shall be entitled to
receive dividends and the Corporation shall pay dividends thereon, as and when
declared by the board of directors of the Corporation as cumulative dividends in
the amount of $1.00 per share per annum payable annually on December 31 in each
year in arrears. Such dividends shall accrue from the date of issue to and
including the date to which the computation of dividends is to be made. A cheque
for the amount of the dividend less any required deduction shall be mailed by
first class mail to the address of the registered holder thereof.
DISSOLUTION
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs, subject to the prior rights of the holders of any shares ranking
senior to the Class A Preferred Share with respect to priority in the
distribution of assets upon liquidation, dissolution or winding-up, the holder
of the Class A Preferred Share shall be entitled to receive an amount equal to
the stated capital in respect of the Class A Preferred Share and dividends
remaining unpaid, including all cumulative dividends, whether or not declared.
After payment to the holder of the Class A Preferred Share of such amounts, such
holder shall not be entitled to share in any further distribution of the assets
of the Corporation.
VOTING RIGHTS
The holder of the Class A Preferred Share shall be entitled to one vote
at any meeting of the shareholders of the Corporation other than meetings of the
holders of another class or series.
<PAGE> 98
EXHIBIT N
SUPPORT AGREEMENT
<PAGE> 99
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of ____________, 1998,
between The Men's Wearhouse, Inc., a Texas corporation ("TMW"), Golden Moores
Company, a Nova Scotia unlimited liability company and wholly owned subsidiary
of TMW ("Canco"), and Moores Retail Group Inc., a New Brunswick corporation
("MG"), and MARPRO Holdings, Inc., MGB Limited Partnership, Capital D'Amerique
CDPQ Inc., Cerberus International, Ltd., Ultra Cerberus Fund, Ltd., Styx
International Ltd, The Long Horizons Overseas Fund Ltd., The Long Horizons Fund,
L.P. and Styx Partners, L.P. (collectively, the "Shareholders" and each a
"Shareholder").
RECITALS
WHEREAS, pursuant to a Combination Agreement dated as of November __,
1998, by and between TMW, Canco, MG and the Shareholders (such agreement as it
may be amended or restated is hereinafter referred to as the "Combination
Agreement") the parties agreed that on the Effective Date (as defined in the
Combination Agreement), TMW, Canco and MG would execute and deliver a Support
Agreement containing the terms and conditions set forth in Exhibit N to the
Combination Agreement together with such other terms and conditions as may be
agreed to by the parties to the Combination Agreement acting reasonably.
WHEREAS, pursuant to a share restructuring (the "Share Restructuring")
effected by a share restructuring plan (the "Share Restructuring Plan") filed
pursuant to the Business Corporations Act (New Brunswick) (or any successor or
other corporate statute by which MG may in the future be governed) (the "Act")
each issued and outstanding Common Share, Class B Share, Class C Share and Class
D Share of MG (the "MG Shares") and each option to purchase MG Shares (the
"Options") was exchanged for issued and outstanding Exchangeable Shares of MG
(the "Exchangeable Shares"), and thereafter, MG's sole issued and outstanding
Preferred Share was exchanged by the holder thereof for one issued and
outstanding Common Share.
WHEREAS, the above-mentioned Share Restructuring Plan sets forth the
rights, privileges, restrictions and conditions (collectively the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares.
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby TMW and Canco will take certain actions and make
certain payments and deliveries necessary to ensure that TMW and Canco will be
able to make certain payments and to deliver or cause to be delivered shares of
TMW Common Stock in satisfaction of the obligations of TMW and Canco under the
Exchangeable Share Provisions.
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby TMW and Canco will take certain actions and make
certain payments and deliveries necessary to ensure that MG will be able to make
certain payments and to deliver or cause to be delivered shares of TMW Common
Stock in satisfaction of the obligations of MG under the Exchangeable Share
Provisions.
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<PAGE> 100
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial capital letters
and not otherwise defined herein shall have the meaning attributed thereto in
the Exchangeable Share Provisions, unless the context requires otherwise.
1.2 Interpretation Not Affected by Headings, Etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 Date for Any Action. If any date on which any action is required to
be taken under this agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE II.
Covenants of TMW and Canco
2.1 Delivery by TMW. TMW hereby agrees that it will provide directly to
the Shareholders or to Canco, as required by the Exchangeable Share Provisions
or the Share Restructuring Plan, out of TMW's authorized and unissued capital
stock such number of shares of TMW Common Stock (or other shares or securities
into which TMW Common Stock may be reclassified or changed as contemplated by
section 3.7 hereof) (a) as is equal to the sum of the number of Exchangeable
Shares issued and outstanding from time to time and (b) as are now and may
hereafter be required to enable and permit TMW, Canco or MG, as applicable, to
meet their obligations hereunder, under the Combination Agreement, the Share
Restructuring Plan, the Exchangeable Share Provisions or any other related
document.
2.2 Delivery by Canco. Canco hereby agrees to deliver to the
Shareholders or MG, as required by the Exchangeable Share Provisions or the
Share Restructuring Plan, such shares of TMW Common Stock as they may become
entitled to under the provisions hereof or of the Combination Agreement, the
Share Restructuring Plan, the Exchangeable Share Provisions or any other related
document.
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ARTICLE III.
Covenants of TMW, Canco and MG
3.1 Covenants of TMW and Canco Regarding Exchangeable Shares. So long
as any Exchangeable Shares are outstanding, TMW will or will cause Canco and
Canco will or will cause MG, as the case may be, to:
(a) not declare or pay any dividend on TMW Common Stock
unless (A) MG will have sufficient assets, funds and
other property available to enable the due
declaration and the due and punctual payment in
accordance with applicable law of an equivalent
dividend on the Exchangeable Shares and (B)
subsection 3.1(b) shall be complied with in
connection with such dividend;
(b) cause MG to declare simultaneously with the
declaration of any dividend on TMW Common Stock an
equivalent dividend on the Exchangeable Shares and,
when such dividend is paid on TMW Common Stock, cause
MG to pay simultaneously therewith such equivalent
dividend on the Exchangeable Shares, in each case in
accordance with the Exchangeable Share Provisions;
(c) advise MG sufficiently in advance of the declaration
by TMW of any dividend on TMW Common Stock and take
all such other actions as are necessary, in
cooperation with MG, to ensure that the respective
declaration date, record date and payment date for a
dividend on the Exchangeable Shares shall be the same
as the record date, declaration date and payment date
for the corresponding dividend on TMW Common Stock;
(d) ensure that the record date for any dividend declared
on TMW Common Stock is not less than ten Business
Days after the declaration date for such dividend;
(e) take all such actions and do all such things as are
necessary or desirable to enable and permit MG, in
accordance with applicable law, to pay and otherwise
perform its obligations with respect to the
satisfaction of the Liquidation Amount in respect of
each issued and outstanding Exchangeable Share upon
the liquidation, dissolution or winding-up of MG or
any other distribution of the assets of MG for the
purpose of winding up its affairs, including without
limitation all such actions and all such things as
are necessary or desirable to enable and permit MG to
cause to be delivered shares of TMW Common Stock to
the holders of Exchangeable Shares in accordance with
the provisions of Article 5 of the Exchangeable Share
Provisions;
(f) take all such actions and do all such things as are
necessary or desirable to enable and permit MG, in
accordance with applicable law, to pay and otherwise
perform its obligations with respect to the
satisfaction of the
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<PAGE> 102
Retraction Price and the Redemption Price, including
without limitation all such actions and all such
things as are necessary or desirable to enable and
permit MG to cause to be delivered shares of TMW
Common Stock to the holders of Exchangeable Shares,
upon the retraction or redemption of the Exchangeable
Shares in accordance with the provisions of Article 6
or Article 7 of the Exchangeable Share Provisions, as
the case may be;
(g) take all such actions and do all such things as are
necessary or desirable to enable and permit TMW and
Canco, in accordance with applicable law and any
contractual obligation of TMW, Canco and MG, to, and
TMW and Canco shall, pay and perform their
obligations to purchase Exchangeable Shares,
including without limitation all such actions and all
such things as are necessary or desirable to enable
and permit TMW and Canco to deliver shares of TMW
Common Stock to the holder of Exchangeable Shares, in
accordance with Article 6, Article 8 or Article 9 of
the Exchangeable Share Provisions and Sections 4.1,
4.2 and 4.3 of the Share Restructuring Plan; and
(h) cause the Transfer Agent to take all actions to be
taken by the Transfer Agent to carry out the terms of
the Exchangeable Share Provisions and the Share
Restructuring Plan.
3.2 Segregation of Funds. TMW will or will cause Canco and Canco will
or will cause MG, as required by the Exchangeable Share Provisions or the Share
Restructuring Plan, to deposit a sufficient amount of funds in a separate
account and segregate a sufficient amount of such assets and other property as
is necessary to enable TMW, Canco and MG to pay or otherwise satisfy their
obligations under the Exchangeable Share Provisions or the Share Restructuring
Plan to deliver and pay the Exchangeable Share Consideration and the
Exchangeable Share Price, in each case for the benefit of holders from time to
time of the Exchangeable Shares, and TMW, Canco and MG will use such funds,
assets and other property so segregated exclusively for the payment of dividends
and the payment or other satisfaction of the Exchangeable Share Consideration
and the Exchangeable Share Price, net of any corresponding withholding tax
obligations and for the remittance of such withholding tax obligations.
3.3 Reservation of Shares of TMW Common Stock. TMW hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from pre-emptive and other rights, out of TMW's
authorized and unissued capital stock such number of shares of TMW Common Stock
(or other shares or securities into which TMW Common Stock may be reclassified
or changed as contemplated by section 3.7 hereof) (a) as is equal to the sum of
the number of Exchangeable Shares issued and outstanding from time to time and
(b) as are now and may hereafter be required to enable and permit TMW, Canco and
MG to meet their obligations hereunder, under the Combination Agreement, the
Share Restructuring Plan, the Voting Trust Agreement, the Exchangeable Share
Provisions and any other related document pursuant to which TMW, MG or Canco may
now or hereafter be required to deliver shares of TMW Common Stock to the
holders of Exchangeable Shares.
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<PAGE> 103
3.4 Notification of Certain Events. In order to assist TMW and Canco to
comply with their obligations hereunder, MG will give TMW and Canco notice of
each of the following events at the time set forth below:
(a) immediately, in the event of any determination by the
Board of Directors of MG to take any action which
would require a vote of the holders of Exchangeable
Shares for approval;
(b) immediately, upon the earlier of (A) receipt by MG of
notice of, and (B) MG otherwise becoming aware of,
any threatened or instituted claim, suit, petition or
other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of MG or to
effect any other distribution of the assets of MG
among its shareholders for the purpose of winding-up
its affairs;
(c) immediately, upon receipt by MG of a Retraction
Request (as defined in the Exchangeable Share
Provisions);
(d) at least 130 days prior to any Automatic Redemption
Date determined by the Board of Directors of MG in
accordance with clause (b) of the definition of
Automatic Redemption Date in the Exchangeable Share
Provisions; and
(e) as soon as practicable upon the issuance by MG of any
Exchangeable Shares or rights to acquire Exchangeable
Shares.
3.5 Delivery of Shares of TMW Common Stock. In furtherance of its
obligations hereunder, upon notice of any event which requires MG to cause to be
delivered shares of TMW Common Stock to any holder of Exchangeable Shares, TMW
shall deliver to Canco and Canco shall forthwith deliver or TMW shall be
entitled to deliver directly the requisite shares of TMW Common Stock to or to
the order of the former holder of the surrendered Exchangeable Shares, as MG
shall direct. All such shares of TMW Common Stock shall be duly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim or interest.
3.6 Qualification of Shares of TMW Common Stock. TMW covenants that if
any shares of TMW Common Stock to be issued and delivered hereunder or under the
Combination Agreement, the Share Restructuring Plan or the Exchangeable Share
Provisions require registration or qualification with or approval of or the
filing of any document including any prospectus or similar document the taking
of any proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or United States
federal, provincial or state law or regulation or pursuant to the rules and
regulations of any regulatory authority, or the fulfillment of any other legal
requirement (collectively, the "Applicable Laws") before such shares may be
delivered to the initial holder thereof or in order that such shares may be
freely traded thereafter (other than any restrictions on transfer by reason of a
holder being a "control person" of TMW for purposes of Canadian federal or
provincial securities law or an "affiliate" of TMW for purposes of United States
federal or state securities law), TMW will in good faith expeditiously take all
such actions and do all such things as are necessary to cause such shares of TMW
Common Stock to be
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<PAGE> 104
and remain duly registered, qualified or approved. TMW represents and warrants
that it has in good faith taken all actions and done all things as are necessary
under Applicable Laws as they exist on the date hereof to cause the shares of
TMW Common Stock to be issued and delivered hereunder or under the Combination
Agreement, the Share Restructuring Plan or the Exchangeable Share Provisions to
be freely tradeable thereafter (other than restrictions on transfer by reason of
a holder being a "control person" of TMW for the purposes of Canadian federal
and provincial securities law or an "affiliate" of TMW for purposes of United
States federal or state securities law). TMW will in good faith expeditiously
take all such actions and do all such things as are necessary to cause all
shares of TMW Common Stock to be delivered hereunder or under the Combination
Agreement, the Share Restructuring Plan or the Exchangeable Share Provisions to
be listed, quoted or posted for trading on all stock exchanges and quotation
systems on which such shares are listed, quoted or posted for trading at such
time.
3.7 Equivalence.
(a) TMW will not:
(i) issue or distribute shares of TMW Common
Stock (or securities exchangeable for or
convertible into or carrying rights to
acquire shares of TMW Common Stock) to the
holders of all or substantially all of the
then outstanding shares of TMW Common Stock
by way of stock dividend or other
distribution; or
(ii) issue or distribute rights, options or
warrants to the holders of all or
substantially all of the then outstanding
shares of TMW Common Stock entitling them to
subscribe for or to purchase shares of TMW
Common Stock (or securities exchangeable for
or convertible into or carrying rights to
acquire shares of TMW Common Stock); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding
shares of TMW Common Stock (A) shares or
securities of TMW of any class other than
TMW Common Stock (other than shares
convertible into or exchangeable for or
carrying rights to acquire shares of TMW
Common Stock), (B) rights, options or
warrants other than those referred to in
subsection 3.7(a)(ii) above, (C) evidences
of indebtedness of TMW or (D) assets of TMW;
unless
(iv) one or all of TMW, Canco and MG is permitted
under applicable law and any contractual
obligations of TMW, Canco and MG to issue or
distribute the economic equivalent on a per
share basis of such rights, options,
warrants, securities, shares, evidences of
indebtedness or other assets to holders of
the Exchangeable Shares; and
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<PAGE> 105
(v) one or all of TMW, Canco and MG shall issue
or distribute such rights, options,
warrants, securities, shares, evidences of
indebtedness or other assets simultaneously
to holders of the Exchangeable Shares.
(b) TMW will not:
(i) subdivide, redivide or change the then
outstanding shares of TMW Common Stock into
a greater number of shares of TMW Common
Stock; or
(ii) reduce, combine or consolidate or change the
then outstanding shares of TMW Common Stock
into a lesser number of shares of TMW Common
Stock; or
(iii) reclassify or otherwise change the shares of
TMW Common Stock or effect an amalgamation,
merger, reorganization or other transaction
affecting the shares of TMW Common Stock;
unless
(iv) MG is permitted under applicable law and any
contractual obligation of MG to
simultaneously make the same or an
economically equivalent change to, or in the
rights of holders of, the Exchangeable
Shares; and
(v) the same or an economically equivalent
change is made to, or in the rights of the
holders of, the Exchangeable Shares.
(c) TMW will ensure that the record date for any event
referred to in section 3.7(a) or 3.7(b) above, or (if
no record date is applicable for such event) the
effective date for any such event, is not less than
10 Business Days after the date on which such event
is declared or announced by TMW (with simultaneous
notice thereof to be given by TMW to MG).
3.8 Tender Offers, Etc. In the event that a tender offer, share
exchange offer, issuer bid, take-over bid, merger, business combination or
similar transaction with respect to TMW Common Stock (an "Offer") is proposed by
TMW or is proposed to TMW or its shareholders and is recommended by the Board of
Directors of TMW, or is otherwise effected or to be effected with the consent or
approval of the Board of Directors of TMW, TMW shall, in good faith, take all
such actions and do all such things as are necessary or desirable to enable and
permit holders of Exchangeable Shares to participate in such Offer to the same
extent and on an equivalent basis as the holders of shares of TMW Common Stock,
without discrimination, including, without limiting the generality of the
foregoing, TMW will use its good faith efforts expeditiously to (and shall, in
the case of a transaction proposed by TMW or where TMW is a participant in the
negotiation thereof) ensure that holders of Exchangeable Shares may participate
in all such Offers without being required to retract Exchangeable Shares as
against MG (or, if so required, to ensure that any such retraction shall
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<PAGE> 106
be effective only upon, and shall be conditional upon, the closing of the Offer
and only to the extent necessary to tender or deposit to the Offer).
3.9 Ownership of Outstanding Shares. Without the prior approval of MG
and the prior approval of the holders of the Exchangeable Shares given in
accordance with Section 11.1 of the Exchangeable Share Provisions, TMW covenants
and agrees in favor of MG that, as long as any outstanding Exchangeable Shares
are owned by any person or entity other than TMW or any of its Subsidiaries, TMW
will be and remain the direct or indirect beneficial owner of all issued and
outstanding MG Common Shares and of at least 50.1% of all other securities of MG
carrying or entitled to voting rights in any circumstances generally for the
election of directors, in each case other than the Exchangeable Shares.
3.10 TMW to Vote Exchangeable Shares Proportionately. TMW covenants and
agrees that it will appoint and cause to be appointed proxy holders with respect
to all Exchangeable Shares held by TMW and its Subsidiaries for the sole purpose
of attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. TMW further covenants and
agrees that it will, and will cause its Subsidiaries to, exercise any voting
rights which may be exercisable by holders of Exchangeable Shares from time to
time pursuant to the Exchangeable Share Provisions or pursuant to the provisions
of the Act with respect to any Exchangeable Shares held by it or by its
Subsidiaries in respect of any matter considered at any meeting of holders of
Exchangeable Shares in the same proportion as the Exchangeable Shares not held
by TMW and its Subsidiaries are voted by the holders thereof; provided, however,
that any such obligation of TMW and its Subsidiaries to vote Exchangeable Shares
proportionately shall only apply to matters of MG with respect to which the
Exchangeable Shares are entitled to vote.
3.11 Due Performance. On and after the Effective Date, TMW and Canco
shall duly and timely perform all of their obligations provided for in the Share
Restructuring Plan, including any obligations that may arise upon the exercise
of TMW's or Canco's rights under the Exchangeable Share Provisions.
3.12 Automatic Redemption Date. Each of TMW, Canco and MG agrees that
it will not take any action which would cause an Automatic Redemption Date to
occur under clause (c) of the definition thereof under the Exchangeable Share
Provisions.
ARTICLE IV.
GENERAL
4.1 Term. This agreement shall come into force and be effective as of
the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any party other than TMW and any of its Subsidiaries.
4.2 Changes in Capital of TMW and MG. Notwithstanding the provisions of
section 4.4 hereof, at all times after the occurrence of any event effected
pursuant to section 3.7 or 3.8 hereof,
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<PAGE> 107
as a result of which either TMW Common Stock or the Exchangeable Shares or both
are in any way changed, this agreement shall forthwith be amended and modified
as necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which TMW Common Stock or the Exchangeable
Shares or both are so changed, and the parties hereto shall execute and deliver
an agreement in writing giving effect to and evidencing such necessary
amendments and modifications.
4.3 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
4.4 Amendments, Modifications, Etc. This agreement may not be amended,
modified or waived except by an agreement in writing executed by TMW, Canco and
MG and approved by the holders of the Exchangeable Shares in accordance with
Section 11.1 of the Exchangeable Share Provisions.
4.5 Ministerial Amendments. Notwithstanding the provisions of Section
4.4, TMW, Canco and MG may in writing, at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
provided, that the Board of Directors shall be of the
opinion, after receipt of a written opinion of outside
counsel, that such covenants are not prejudicial to the
interests of the holders of the Exchangeable Shares; or
(b) making such amendments or modifications not inconsistent
with this agreement as may be necessary or desirable with
respect to matters or questions which, in the opinion of
the board of directors of each of TMW, Canco and MG, it
may be expedient to make, provided that each such board of
directors shall be of the opinion, after receipt of a
written opinion of outside counsel, that such amendments
or modifications will not be prejudicial to the interests
of the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on receipt of a
written opinion of outside counsel to TMW, Canco and MG,
are required for the purpose of curing or correcting any
ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the
boards of directors of each of TMW, Canco and MG shall be
of the opinion, after receipt of a written opinion of
outside counsel, that such changes or corrections will not
be prejudicial to the interests of the holders of the
Exchangeable Shares.
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<PAGE> 108
The Corporation shall send a written notice to the holders of the Exchangeable
Shares notifying them of any amendment made pursuant to clause (a), (b) or (c)
of this Section 4.5 and a copy of any written opinion of counsel received in
connection with any such amendment.
4.6 Meeting to Consider Amendments. MG, at the request of TMW or Canco,
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval of such shareholders. Any such meeting or meetings shall be called and
held in accordance with the by-laws of MG, the Exchangeable Share Provisions and
all applicable laws.
4.7 Amendments Only in Writing. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by both of the parties
hereto.
4.8 Inurement; Third Party Beneficiaries. This agreement shall be
binding upon and inure to the benefit of the parties hereto and the holders,
from time to time, of Exchangeable Shares and each of their respective heirs,
successors and assigns.
4.9 Notices to Parties. All notices and other communications between
the parties shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for either such party as shall be specified
in like notice):
if to MG:
Moores Retail Group Inc.
5800, Rue St. Denis, Suite 900
Montreal, Quebec H2S 3L5
Attn: Michel Zelnik
Facsimile: 514.274.4177
with a copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Thomas J. Drago
Facsimile: 212.616.4120
if to the Shareholders:
------------------
------------------
------------------
Attn:
-------------
Facsimile
---------
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<PAGE> 109
with a copy to:
------------------
------------------
------------------
Attn:
-------------
Facsimile
---------
if to TMW or Canco:
The Men's Wearhouse, Inc.
40650 Encyclopedia Circle
Fremont, California 94538
Attn: David Edwab
Facsimile: 713.657.0872
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas, U.S.A. 77010-3095
Attn: Michael W. Conlon
Facsimile: 713.651.5246
and
Byers Casgrain
1 Place Ville-Marie, Suite 3900
Montreal, Quebec, Canada H3B 4M7
Attn: Allan A. Mass
Facsimile: 514.866.2241
Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof and if given by telecopy
shall be deemed to have been given and received on the date of confirmed receipt
thereof, unless such day is not a Business Day, in which case it shall be deemed
to have been given and received upon the immediately following Business Day.
4.10 Counterparts. This agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
4.11 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario.
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<PAGE> 110
4.12 Attornment. TMW and Canco agree that any action or proceeding
arising out of or relating to this agreement may be instituted in the courts of
Ontario, waive any objection which they may have now or hereafter to the venue
of any such action or proceeding, irrevocably submits to the non-exclusive
jurisdiction of such courts in any such action or proceeding, agrees to be bound
by any judgment of such courts and not to seek, and hereby waives, any review of
the merits of any such judgment by the courts of any other jurisdiction, and TMW
hereby appoints Canco at its registered office in the Province of Ontario as
TMW's attorney for service of process.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THE MEN'S WEARHOUSE, INC.
By
-------------------------------------
David Edwab
President
GOLDEN MOORES COMPANY
By
-------------------------------------
[name]
[title]
MOORES RETAIL GROUP INC.
By
-------------------------------------
[name]
[title]
THE SHAREHOLDERS
MARPRO HOLDINGS, INC.
By
-------------------------------------
Name:
Title:
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<PAGE> 111
MGB LIMITED PARTNERSHIP
By
-------------------------------------
Name:
Title:
CAPITAL D'AMERIQUE CDPQ INC.
By
-------------------------------------
Name:
Title:
CERBERUS INTERNATIONAL, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By
-------------------------------------
Name:
Title:
ULTRA CERBERUS FUND, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By
-------------------------------------
Name:
Title:
STYX INTERNATIONAL LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By
-------------------------------------
Name:
Title:
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<PAGE> 112
THE LONG HORIZONS OVERSEAS FUND LTD.
By: Old Stand Management L.L.C.
(Investment Manager)
By
------------------------------------
Name:
Title:
THE LONG HORIZONS FUND, L.P.
By: Old Stand Associates L.L.C.
By
------------------------------------
Name:
Title:
STYX PARTNERS, L.P.
By: Styx Associates, L.L.C.
By
------------------------------------
Name:
Title:
-15-
<PAGE> 113
EXHIBIT O
VOTING TRUST AGREEMENT
<PAGE> 114
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT (this "Agreement") is entered into as of
___________________, 1998, by and between The Men's Wearhouse, Inc., a Texas
corporation ("TMW"), Golden Moores Company, a Nova Scotia unlimited liability
company and wholly owned subsidiary of TMW ("Canco"), Moores Retail Group Inc.,
a New Brunswick corporation ("MG"), and The Trust Company of Bank of Montreal, a
Canadian trust company ("Trustee").
WHEREAS, pursuant to a Combination Agreement dated as of November __,
1998, by and between TMW, Canco, MG and the Shareholders of MG signatory thereto
(collectively, the "Shareholders") (such agreement as it may be amended or
restated is hereinafter referred to as the "Combination Agreement") the parties
agreed that on the Effective Date (as defined in the Combination Agreement), TMW
and MG would execute and deliver a Voting Trust Agreement containing the terms
and conditions set forth in Exhibit O to the Combination Agreement together with
such other terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably.
WHEREAS, pursuant to a share restructuring (the "Share Restructuring")
effected by an Article of Amendment giving effect to the share restructuring
plan (the "Share Restructuring Plan") filed pursuant to the Business
Corporations Act (New Brunswick) (or any successor or other corporate statute by
which MG may in the future be governed) (the "Act"), each issued and outstanding
Common Share, Class B Share, Class C Share and Class D Share of MG (a "MG Common
Share") and each option to purchase MG Shares was exchanged for issued and
outstanding Exchangeable Shares of MG (the "Exchangeable Shares"), and
thereafter, MG's sole issued and outstanding Preferred Share was exchanged by
the holder thereof for one issued and outstanding MG Common Share.
WHEREAS, the above-mentioned Share Restructuring Plan sets forth the
rights, privileges, restrictions and conditions attaching to the Exchangeable
Shares (collectively, the "Exchangeable Share Provisions").
WHEREAS, TMW is to provide voting rights in TMW to each holder (other
than TMW and its Subsidiaries) from time to time of Exchangeable Shares, such
voting rights per Exchangeable Share to be equivalent to the voting rights per
share of TMW Common Stock.
WHEREAS, the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in TMW shall be exercisable by
holders (other than TMW and its Subsidiaries) from time to time of Exchangeable
Shares by and through the Trustee, which will hold legal title to one share of
TMW Series A Special Voting Preferred Stock (the "TMW Series A Special Voting
Preferred Stock") to which voting rights attach for the benefit of such holders.
WHEREAS, these recitals and any statements of fact in this Agreement
are made by TMW, Canco and MG and not by the Trustee.
<PAGE> 115
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Agreement, the following terms shall have the
following meanings:
"AGGREGATE EQUIVALENT VOTE AMOUNT" means, with respect to any matter,
proposition or question on which holders of TMW Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of Exchangeable
Shares issued and outstanding and held by Holders multiplied by (ii) the number
of votes to which a holder of one share of TMW Common Stock is entitled with
respect to such matter, proposition or question.
"AUTHORIZED PERSONS" has the meaning provided in Section 7.20 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of MG.
"BUSINESS DAY" has the meaning provided in the Exchangeable Share
Provisions;
"EQUIVALENT VOTE AMOUNT" means, with respect to any matter, proposition
or question on which holders of TMW Common Stock are entitled to vote, consent
or otherwise act, the number of votes to which a holder of one share of TMW
Common Stock is entitled with respect to such matter, proposition or question.
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided in the
Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning provided in the
recitals hereto.
"EXCHANGEABLE SHARES" has the meaning provided in the recitals hereto.
"HOLDER VOTES" has the meaning provided in Section 4.2 hereof.
"HOLDERS" means the registered holders from time to time of
Exchangeable Shares, other than TMW and its Subsidiaries.
"LIST" has the meaning provided in Section 4.6 hereof.
"MG COMMON SHARES" has the meaning provided in the recitals hereto.
"NOTICE EVENT" has the meaning provided in Section 7.17 hereof.
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"OFFICER'S CERTIFICATE" means, with respect to TMW, Canco or MG, as the
case may be, a certificate signed by any one of the Chairman of the Board, the
Vice-Chairman of the Board (if there be one), the President or any
Vice-President of TMW, Canco or MG, as the case may be.
"PERSON" includes an individual, body corporate, partnership, limited
liability partnership, company, limited liability company, unincorporated
syndicate or organization, trust, trustee, executor, administrator and other
legal representative.
"SHARE RESTRUCTURING" has the meaning provided in the recitals hereto.
"SHARE RESTRUCTURING PLAN" has the meaning provided in the recitals
hereto.
"SUBSIDIARY" has the meaning provided in the Exchangeable Share
Provisions.
"SUPPORT AGREEMENT" means that certain support agreement made as of
even date hereof by and between TMW, Canco, MG and the Shareholders signatory
thereto.
"TMW COMMON STOCK" has the meaning provided in the Exchangeable Share
Provisions.
"TMW CONSENT" has the meaning provided in Section 4.2 hereof.
"TMW MEETING" has the meaning provided in Section 4.2 hereof.
"TMW SERIES A SPECIAL VOTING PREFERRED STOCK" has the meaning provided
in the recitals hereto.
"TMW SUCCESSOR" has the meaning provided in subsection 11.1(a) hereof.
"TRUST" means the trust created by this Agreement.
"TRUST ESTATE" means the Voting Share, any other securities and any
money or other property which may be held by the Trustee from time to time
pursuant to this Agreement.
"TRUSTEE" means The Trust Company of Bank of Montreal and, subject to
the provisions of Article X hereof, includes any successor trustee or permitted
assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one share of TMW Series A Special Voting
Preferred Stock, U.S. $0.01 par value, issued by TMW to and deposited with the
Trustee, which entitles the holder of record to a number of votes at meetings of
holders of TMW Common Stock equal to the Aggregate Equivalent Vote Amount.
1.2 Interpretation Not Affected by Headings, Etc. The division of this
Agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
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1.3 Number, Gender, Etc. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 Date for Any Action. If any date on which any action is required to
be taken under this Agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE II
PURPOSE OF AGREEMENT
The purpose of this Agreement is to create the Trust for the benefit of
the Holders, as herein provided. The Trustee will hold the Voting Share in order
to enable the Trustee to exercise the Voting Rights, as trustee for and on
behalf of the Holders as provided in this Agreement.
ARTICLE III
VOTING SHARE
3.1 Issuance and Ownership of the Voting Share. TMW hereby issues to
and deposits with the Trustee the Voting Share to be hereafter held of record by
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Holders and in accordance with the provisions of this Agreement. TMW hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Holders of good and valuable consideration (and the adequacy thereof) for the
issuance of the Voting Share by TMW to the Trustee. During the term of the Trust
and subject to the terms and conditions of this Agreement, the Trustee shall
possess and be vested with full legal ownership of the Voting Share and shall be
entitled to exercise all of the rights and powers of an owner with respect to
the Voting Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as
trustee solely for the use and benefit of the Holders in
accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have
no power or authority to sell, transfer, vote or otherwise
deal in or with the Voting Share, and the Voting Share
shall not be used or disposed of by the Trustee for any
purpose other than the purposes for which this Trust is
created pursuant to this Agreement.
3.2 Legended Share Certificates. MG will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of their right to instruct the Trustee with respect to the exercise of
the Holder Votes.
3.3 Safe Keeping of Certificate. The certificate representing the
Voting Share shall at all times be held in safe keeping by the Trustee or its
agent.
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ARTICLE IV
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights. The Trustee, as the holder of record of the Voting
Share, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Share, on any matter,
question or proposition whatsoever that may properly come before the
stockholders of TMW at a TMW Meeting or in connection with a TMW Consent (in
each case, as hereinafter defined). The Voting Rights shall be and remain vested
in and exercised by the Trustee. Subject to Section 7.15 hereof, the Trustee
shall exercise the Voting Rights only on the basis of instructions received
pursuant to this Article IV from Holders entitled to instruct the Trustee as to
the voting thereof at the time at which a TMW Consent is sought or a TMW Meeting
is held. To the extent that no instructions are received from a Holder with
respect to the Holder Votes to which such Holder is entitled, the Trustee shall
not exercise or permit the exercise of such Holder Votes.
4.2 Number of Votes. With respect to all meetings of stockholders of
TMW at which holders of shares of TMW Common Stock are entitled to vote (a "TMW
Meeting") and with respect to all written consents sought by TMW from its
stockholders, including the holders of shares of TMW Common Stock (a "TMW
Consent"), each Holder shall be entitled to instruct the Trustee to cast and
exercise, in the manner instructed, a number of votes equal to the Equivalent
Vote Amount for each Exchangeable Share owned of record by such Holder on the
record date established by TMW or by applicable law for such TMW Meeting or TMW
Consent, as the case may be (the "Holder Votes"), in respect of each matter,
question or proposition to be voted on at such TMW Meeting or to be consented to
in connection with such TMW Consent.
4.3 Mailings to Shareholders. With respect to each TMW Meeting and TMW
Consent, the Trustee will mail or cause to be mailed (or otherwise communicate
in the same manner as TMW utilizes in communications to holders of TMW Common
Stock, subject to the Trustee's ability to provide such method of communication
and upon being advised in writing of such method) to each of the Holders named
in the List on the same day as the initial mailing or notice (or other
communication) with respect thereto is given by TMW to its stockholders:
(a) a copy of such notice, together with any proxy or
information statement and related materials to be provided
to stockholders of TMW;
(b) a statement that such Holder is entitled to instruct the
Trustee as to the exercise of the Holder Votes with
respect to such TMW Meeting or TMW Consent, as the case
may be, or, pursuant to Section 4.7 hereof, to attend such
TMW Meeting and to exercise personally the Holder Votes
thereat;
(c) a statement as to the manner in which such instructions
may be given to the Trustee, including an express
indication that instructions may be given to the Trustee
to give:
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(i) a proxy to such Holder or his designee to
exercise personally the Holder Votes; or
(ii) a proxy to a designated agent or other
representative of the management of TMW to
exercise such Holder Votes;
(d) a statement that if no such instructions are received
from the Holder, the Holder Votes to which such
Holder is entitled will not be exercised;
(e) a form of direction whereby the Holder may so direct
and instruct the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such
instructions must be received by the Trustee in order
to be binding upon it, which in the case of a TMW
Meeting shall not be earlier than the close of
business on the second Business Day prior to such
meeting, and (ii) the method for revoking or amending
such instructions.
The materials referred to above are to be provided by TMW to the
Trustee, but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder is
entitled in respect of any such TMW Meeting or TMW Consent, the number of
Exchangeable Shares owned of record by the Holder shall be determined at the
close of business on the record date established by TMW or by applicable law for
purposes of determining stockholders entitled to vote at such TMW Meeting or to
give written consent in connection with such TMW Consent. TMW will notify the
Trustee in writing of any decision of the board of directors of TMW with respect
to the calling of any such TMW Meeting or the seeking of any such TMW Consent
and shall provide all necessary information and materials to the Trustee in each
case promptly and in any event in sufficient time to enable the Trustee to
perform its obligations contemplated by this Section 4.3.
4.4 Copies of Stockholder Information. TMW will deliver to the Trustee
copies of all proxy materials, (including notices of TMW Meetings, but excluding
proxies to vote shares of TMW Common Stock), information statements, reports
(including without limitation all interim and annual financial statements) and
other written communications that are to be distributed from time to time to
holders of TMW Common Stock in sufficient quantities and in sufficient time so
as to enable the Trustee to send those materials to each Holder at the same time
as such materials are first sent to holders of TMW Common Stock (but in any
event, no later than one Business Day before the day on which materials are
first sent to holders of TMW Common Stock). The Trustee will mail or otherwise
send to each Holder, at the expense of TMW, copies of all such materials (and
all materials specifically directed to the Holders or to the Trustee for the
benefit of the Holders by TMW) received by the Trustee from TMW at the same time
as such materials are first sent to holders of TMW Common Stock. The Trustee
will make copies of all such materials available for inspection by any Holder at
the Trustee's principal corporate trust office in the city of Toronto.
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4.5 Other Materials. Immediately after receipt by TMW or any
stockholder of TMW of any material sent or given generally to the holders of TMW
Common Stock by or on behalf of a third party, including without limitation
dissident proxy and information circulars (and related information and material)
and tender and exchange offer circulars (and related information and material),
TMW shall use all reasonable commercial efforts to obtain and deliver to the
Trustee copies thereof in sufficient quantities so as to enable the Trustee to
forward such material (unless the same has been provided directly to Holders by
such third party) to each Holder as soon as possible thereafter. As soon as
practicable after receipt thereof, the Trustee will mail or otherwise send to
each Holder, at the expense of TMW, copies of all such materials received by the
Trustee from TMW. The Trustee will also make copies of all such materials
available for inspection by any Holder at the Trustee's principal corporate
trust office in the city of Toronto. It shall be a condition precedent to the
Trustee's obligations under this Agreement including, in particular, under
Sections 4.3, 4.4 and 4.9, that TMW or MG, as the case may be, prepare the
applicable material, List and mailing labels and provide the Trustee with a
sufficient quantity thereof in a timely fashion.
4.6 List of Persons Entitled to Vote. MG shall, (i) prior to each
annual, general and special TMW Meeting or the seeking of any TMW Consent and
(ii) forthwith upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and addresses of
the Holders arranged in alphabetical order and showing the number of
Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a TMW Meeting or a TMW Consent,
at the close of business on the record date established by TMW or pursuant to
applicable law for determining the holders of TMW Common Stock entitled to
receive notice of and/or to vote at such TMW Meeting or to give consent in
connection with such TMW Consent. Each such List shall be delivered to the
Trustee promptly after receipt by MG of such request or the record date for such
meeting or seeking of consent, as the case may be, and in any event within
sufficient time as to enable the Trustee to perform its obligations under this
Agreement. TMW agrees to give MG written notice (with a copy to the Trustee) of
the calling of any TMW Meeting or the seeking of any TMW Consent, together with
the record dates therefor, sufficiently prior to the date of the calling of such
meeting or seeking of such consent so as to enable MG to perform its obligations
under this Section 4.6.
4.7 Entitlement to Direct Votes. Any Holder named in a List prepared in
connection with any TMW Meeting or any TMW Consent will be entitled (i) to
instruct the Trustee in the manner described in Section 4.3 hereof with respect
to the exercise of the Holder Votes to which such Holder is entitled or (ii) to
attend such meeting and personally to exercise thereat (or to exercise with
respect to any written consent), as the proxy of the Trustee, the Holder Votes
to which such Holder is entitled; provided, that such Holder has obtained a
valid proxy from the Trustee to vote the Holder Votes which the Holder desires
to vote by proxy.
4.8 Voting by Trustee, and Attendance of Trustee Representative, at
Meeting.
(a) In connection with each TMW Meeting and TMW Consent,
the Trustee shall exercise, either in person or by
proxy, in accordance with the instructions received
from a Holder pursuant to Section 4.3 hereof, the
Holder Votes as to which such Holder is entitled to
direct
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the vote (or any lesser number thereof as may be set
forth in the instructions); provided, however, that
such written instructions are received by the Trustee
from the Holder prior to the time and date fixed by
it for receipt of such instructions in the notice
given by the Trustee to the Holder pursuant to
Section 4.3 hereof.
(b) The Trustee shall cause such representatives as are
empowered by it to sign and deliver, on behalf of the
Trustee, proxies for Voting Rights to attend each TMW
Meeting. Upon submission by a Holder (or its
designee) of identification satisfactory to the
Trustee's representatives, and at the Holder's
request, such representatives shall sign and deliver
to such Holder (or its designee) a proxy to exercise
personally the Holder Votes as to which such Holder
is otherwise entitled hereunder to direct the vote,
if such Holder either:
(i) has not previously given the Trustee
instructions pursuant to Section 4.3 hereof
in respect of such meeting, or
(ii) submits to the Trustee's representatives
written revocation of any such previous
instructions.
At such meeting, the Holder exercising such Holder Votes pursuant to a
proxy provided in accordance with Section 4.8(b) shall have the same rights as
the Trustee to speak at the meeting in respect of any matter, question or
proposition, to vote by way of ballot at the meeting in respect of any matter,
question or proposition and to vote at such meeting by way of a show of hands in
respect of any matter, question or proposition.
4.9 Distribution of Written Materials. Any written materials to be
distributed by the Trustee to the Holders pursuant to this Agreement shall be
delivered or sent by mail (or otherwise communicated in the same manner as TMW
utilizes in communications to holders of TMW Common Stock) to each Holder at its
address as shown on the books of MG. MG shall provide or cause to be provided to
the Trustee for this purpose, on a timely basis and without charge or other
expense:
(a) current lists of the Holders; and
(b) mailing labels to enable the Trustee to carry out its
duties under this Agreement.
The materials referred to above are to be provided by MG to the
Trustee, but shall be subject to review and comment by the Trustee.
4.10 Termination of Voting Rights. Except as otherwise provided herein
or in the Exchangeable Share Provisions, all of the rights of a Holder with
respect to the Holder Votes exercisable in respect of the Exchangeable Shares
held by such Holder, including the right to instruct the Trustee as to the
voting of or to vote personally such Holder Votes, shall be deemed to be
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surrendered by the Holder to TMW, and such Holder Votes and the Voting Rights
represented thereby shall cease immediately, upon the delivery by such Holder to
TMW, Canco or MG of the certificates representing such Exchangeable Shares in
connection with the exchange of Exchangeable Shares for shares of TMW Common
Stock pursuant to the Share Restructuring Plan, the Exchangeable Share
Provisions or the Support Agreement (unless in any case TMW, Canco or MG shall
not have delivered the Exchangeable Share Consideration deliverable in exchange
therefor to the Holders).
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
RESTRICTIONS ON ISSUANCE OF TMW SERIES A
SPECIAL VOTING PREFERRED STOCK
During the term of this Agreement, TMW will not issue any shares of TMW
Series A Special Voting Preferred Stock in addition to the Voting Share.
ARTICLE VII
CONCERNING THE TRUSTEE
7.1 Powers and Duties of the Trustee. The rights, powers and
authorities of the Trustee under this Agreement, in its capacity as trustee of
the Trust, shall include:
(a) receipt and holding of the Voting Share from TMW as
trustee for and on behalf of the Holders in
accordance with the provisions of this Agreement;
(b) granting proxies and distributing materials to
Holders as provided in this Agreement;
(c) voting the Holder Votes in accordance with the
provisions of this Agreement;
(d) holding title to the Trust Estate;
(e) taking action at the direction of a Holder or Holders
to enforce the obligations of TMW, Canco and MG under
this Agreement; and
(f) taking such other actions and doing such other things
as are specifically provided in this Agreement.
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In the exercise of such rights, powers and authorities the Trustee
shall have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of the Trust.
Any exercise of such discretionary rights, powers and authorities by the Trustee
shall be final, conclusive and binding upon all persons. For greater certainty,
the Trustee shall have only those duties as are set out specifically in this
Agreement. In particular, the Trustee shall have no liability or responsibility
arising under any agreement or instrument, including the Exchangeable Share
Provisions or any other agreement or instrument referred to in this Agreement,
to which the Trustee is not a party and shall not be bound by any notice of a
claim or demand with respect thereto. The Trustee in exercising its rights,
powers, duties and authorities hereunder shall act honestly and in good faith
with a view to the best interests of the Holders and shall exercise the care,
diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. The Trustee shall not be bound to give any notice or
do or take any act, action or proceeding by virtue of the powers conferred on it
hereby unless and until it shall be specifically required to do so under the
terms hereof; nor shall the Trustee be required to take any notice of, or to do
or to take any act, action or proceeding as a result of any default or breach of
any provision hereunder, unless and until notified in writing of such default or
breach, which notices shall distinctly specify the default or breach desired to
be brought to the attention of the Trustee and in the absence of such notice the
Trustee may for all purposes of this Agreement conclusively assume that no
default or breach has been made in the observance or performance of any of the
representations, warranties, covenants, agreements or conditions contained
herein.
7.2 No Conflict of Interest. The Trustee represents to MG and TMW that
at the date of execution and delivery of this Agreement there exists no material
conflict of interest in the role of the Trustee as a fiduciary hereunder and the
role of the Trustee in any other capacity. The Trustee shall, within 90 days
after it becomes aware that such a material conflict of interest exists, either
eliminate such material conflict of interest or resign in the manner and with
the effect specified in Article X hereof. If, notwithstanding the foregoing
provisions of this Section 7.2, the Trustee has such a material conflict of
interest, the validity and enforceability of this Agreement shall not be
affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this Section 7.2, any interested party may apply to the superior
court of the province in which MG has its registered office for an order that
the Trustee be replaced as trustee hereunder.
7.3 Dealings with Transfer Agents, Registrars, Etc. TMW, Canco and MG
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the
respective registrars and transfer agents, and with
any such subsequent registrar or transfer agent, of
the Exchangeable Shares and TMW Common Stock; and
(b) requisition, from time to time, from any such
registrar or transfer agent any information readily
available from the records maintained by it which the
Trustee may reasonably require for the discharge of
its duties and responsibilities under this Agreement.
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MG and TMW irrevocably authorize their respective registrars and
transfer agents to comply with all such requests.
7.4 Books and Records. The Trustee shall keep available for inspection
by TMW and MG, at the Trustee's principal corporate trust office in Toronto,
correct and complete books and records of account relating to the Trustee's
actions under this Agreement, including without limitation all information
relating to mailings and instructions to and from Holders and all transactions
pursuant to the Voting Rights for the term of this Agreement. On or before March
31, 1999, and on or before March 31 in every year thereafter, so long as the
Voting Share is on deposit with the Trustee, the Trustee shall transmit to TMW
and MG a brief report, dated as of the preceding December 31, with respect to:
(a) property and funds comprising the Trust Estate as of
that date; and
(b) all other actions taken by the Trustee in the
performance of its duties under this Agreement which
it had not previously reported.
7.5 [Intentionally Omitted].
7.6 Indemnification Prior to Certain Actions by Trustee. The Trustee
shall exercise any or all of the rights, duties, powers or authorities vested in
it by this Agreement at the request, order or direction of any Holder upon such
Holder's furnishing to the Trustee reasonable funding, security and indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby; provided that no Holder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the exercise
by the Trustee of any of its rights, duties, powers and authorities with respect
to the Voting Share pursuant to Article IV hereof, subject to Section 7.15
hereof. None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities unless
funded, given funds, security and indemnified as aforesaid.
7.7 Actions by Holders. No Holder shall have the right to institute any
action, suit or proceeding or to exercise any other remedy authorized by this
Agreement for the purpose of enforcing any of its rights or for the execution of
any trust or power hereunder unless the Holder has requested the Trustee to take
or institute such action, suit or proceeding and furnished the Trustee with the
funding, security and indemnity referred to in Section 7.6 hereof and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Holder shall be entitled to take proceedings in any
court of competent jurisdiction such as the Trustee might have taken; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or under the Voting Rights
except subject to the conditions and in the manner herein provided, and that all
powers and trusts hereunder shall be exercised and all proceedings at law shall
be instituted, had and maintained by the Trustee, except only as herein
provided, and in any event for the equal benefit of all Holders.
7.8 Reliance upon Declarations. The Trustee shall not be considered to
be in contravention of any of its rights, powers, duties and authorities
hereunder if, when required, it acts
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and relies in good faith upon lists, mailing labels, notices, statutory
declarations, certificates, opinions, reports or other papers or documents
furnished pursuant to the provisions hereof or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and authorities
hereunder, and such lists, mailing labels, notices, statutory declarations,
certificates, opinions, reports or other papers or documents comply with the
provisions of Section 7.9 hereof, if applicable, and with any other applicable
provisions of this Agreement.
7.9 Evidence and Authority to Trustee. TMW, Canco and/or MG shall
furnish to the Trustee evidence of compliance with the conditions provided for
in this Agreement relating to any action or step required or permitted to be
taken by TMW, Canco and/or MG or the Trustee under this Agreement or as a result
of any obligation imposed under this Agreement, including, without limitation,
in respect of the Voting Rights and the taking of any other action to be taken
by the Trustee at the request of or on the application of TMW, Canco and/or MG
forthwith if and when:
(a) such evidence is required by any other section of
this Agreement to be furnished to the Trustee in
accordance with the terms of this Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers,
duties and authorities under this Agreement, gives
TMW, Canco and/or MG written notice requiring it to
furnish such evidence in relation to any particular
action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of TMW, Canco
and/or MG or a statutory declaration or a certificate made by persons entitled
to sign an Officer's Certificate stating that any such condition has been
complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights
and except as otherwise specifically provided herein, such evidence may consist
of a report or opinion of any solicitor, auditor, accountant, appraiser, valuer,
engineer or other expert or any other person whose qualifications give authority
to a statement made by him, provided that if such report or opinion is furnished
by a director, officer or employee of TMW, Canco and/or MG it shall be in the
form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to
the Trustee as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the evidence:
(i) declaring that he has read and understands the
provisions of this Agreement relating to the
condition in question;
(ii) describing the nature and scope of the examination or
investigation upon which he based the statutory
declaration, certificate, statement or opinion; and
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(iii) declaring that he has made such examination or
investigation as he believes is necessary to enable
him to make the statements or give the opinions
contained or expressed therein.
7.10 Experts, Advisers and Agents. The Trustee may:
(a) in relation to these presents act and rely on the
opinion or advice of or information obtained from or
prepared by any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by TMW, Canco and/or MG or
otherwise, and may employ such assistants as may be
necessary to the proper determination and discharge
of its powers and duties and determination of its
rights hereunder and may pay proper and reasonable
compensation for all such legal and other advice or
assistance as aforesaid; and
(b) employ such agents and other assistants as it may
reasonably require for the proper determination and
discharge of its powers and duties hereunder, and may
pay reasonable remuneration for all services
performed for it (and shall be entitled to receive
reasonable remuneration for all services performed by
it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and
expenses made or incurred by it in the determination
and discharge of its duties hereunder and in the
management of the Trust.
7.11 [Intentionally Omitted].
7.12 Trustee Not Required to Give Security. The Trustee shall not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this Agreement or otherwise in respect
of the premises.
7.13 Trustee Not Bound to Act on Request. Except as in this Agreement
otherwise specifically provided, the Trustee shall not be bound to act in
accordance with any direction or request of TMW, Canco and/or MG or of the
directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to the
Trustee, and the Trustee shall be empowered to act and rely upon any such copy
purporting to be authenticated and believed by the Trustee to be genuine.
7.14 Authority to Carry on Business. The Trustee represents to TMW,
Canco and MG that at the date of execution and delivery by it of this Agreement
it is authorized to carry on the business of a trust company in the Province of
Ontario but if, notwithstanding the provisions of this Section 7.14, it ceases
to be so authorized to carry on business, the validity and enforceability of
this Agreement and the Voting Rights shall not be affected in any manner
whatsoever by reason only of such event; provided, however, the Trustee shall,
within 90 days after ceasing to be authorized to carry on the business of a
trust company in the Province of Ontario, either become so authorized or resign
in the manner and with the effect specified in Article X hereof.
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7.15 Conflicting Claims. If conflicting claims or demands are made or
asserted with respect to any interest of any Holder in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights subject
to such conflicting claims or demands and, in so doing, the Trustee shall not be
or become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee shall
be entitled to continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to
the Voting Rights subject to such conflicting claims
or demands have been adjudicated by a final judgment
of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights
subject to such conflicting claims or demands have
been conclusively settled by a valid written
agreement binding on all such adverse claimants, and
the Trustee shall have been furnished with an
executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate fully to indemnify it as between all
conflicting claims or demands.
7.16 Acceptance of Trust. The Trustee hereby accepts the Trust created
and provided for by and in this Agreement and agrees to perform the same upon
the terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Holders, subject to all the terms and conditions herein set
forth.
7.17 Notice to Trustee. The Trustee shall not be bound to give any
notice or do or take any act, action or proceeding by virtue of the powers
conferred on it hereby unless and until it shall have been required so to do
under the terms of this Agreement; nor shall the Trustee be required to take
notice of, be deemed to have actual or constructive notice or knowledge of any
matter under this Agreement, or take any action in connection with any notice of
any TMW Meeting or the seeking of any TMW Consent (each a "Notice Event"),
unless and until notified in writing of such Notice Event in accordance with
section 14.3 hereof which notice shall distinctly specify the Notice Event
desired to be brought to the attention of the Trustee and in the absence of any
such notice the Trustee may for all purposes of this Agreement conclusively
assume that no such Notice Event has occurred.
7.18 Merger or Consolidation of Trustee. Any corporation into or with
which the Trustee may be merged or consolidated or amalgamated, or any
corporation resulting therefrom to which the Trustee shall be a party, or any
corporation succeeding to the trust business of the Trustee shall be the
successor to the Trustee under this Agreement without any further act on its
part or any of the
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parties hereto, provided that such corporation would be eligible for appointment
as a successor trustee under the provisions of this Agreement.
7.19 No Personal Liability. In the exercise of the powers, authorities
or discretion conferred upon the Trustee under this Agreement, the Trustee is
and shall be conclusively deemed to be acting as trustee of the Trust and shall
not be subject to any personal liability for any liabilities, obligations,
claims, demands, judgments, costs or expenses against or with respect to the
Trust.
7.20 Incumbency Certificate. Each of TMW, Canco and MG shall file with
the Trustee a certificate of incumbency setting forth the names of the
individuals authorized to give instructions, directions or other instruments to
the Trustee ("Authorized Persons") together with specimen signatures of such
persons, and the Trustee shall be entitled to rely on the latest certificate of
incumbency filed with it unless it receives notice of a change in Authorized
Persons with updated specimen signatures.
ARTICLE VIII
COMPENSATION
TMW, Canco and MG jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under this
Agreement and will reimburse the Trustee for all reasonable expenses (including
but not limited to taxes, compensation paid to experts, agents and advisors and
travel expenses) and disbursements, including the cost and expense of any suit
or litigation of any character and any proceedings before any governmental
agency, reasonably incurred by the Trustee in connection with its rights and
duties under this Agreement; provided that TMW, Canco and MG shall have no
obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted in bad faith or with negligence or willful
misconduct.
ARTICLE IX
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Trustee. TMW, Canco and MG jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this Agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable expenses
(including reasonable expenses of the Trustee's legal counsel) which, without
fraud, negligence, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by
reason of or as a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this Agreement, or any
written or oral instructions delivered to the Trustee by TMW, Canco or MG
pursuant hereto. In no case shall TMW, Canco or MG be liable under this
indemnity for any claim against any of the Indemnified Parties unless TMW, Canco
and MG shall be notified by the Trustee of the written assertion of a claim or
of any action commenced against the Indemnified Parties, promptly after any of
the Indemnified Parties shall have received any such written assertion of a
claim or shall have been served with a summons or other first
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legal process giving information as to the nature and basis of the claim.
Subject to (i) below, TMW, Canco and MG shall be entitled to participate at
their own expense in the defense and, if TMW, Canco or MG so elect at any time
after receipt of such notice, either of them may assume the defense of any suit
brought to enforce any such claim. The Trustee shall have the right to employ
separate counsel in any such suit and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by TMW, Canco or
MG; or (ii) the named parties to any such suit include both the Trustee and TMW,
Canco or MG and the Trustee shall have been advised by counsel acceptable to
TMW, Canco or MG that there may be one or more legal defenses available to the
Trustee that are different from or in addition to those available to TMW, Canco
or MG and that an actual or potential conflict of interest exists (in which case
TMW, Canco and MG shall not have the right to assume the defense of such suit on
behalf of the Trustee, but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee). This indemnity shall survive the
termination of this Agreement or the resignation or replacement of the Trustee.
9.2 Limitation of Liability. The Trustee shall not be held liable for
any loss which may occur by reason of depreciation of the value of any part of
the Trust Estate or any loss incurred on any investment of funds pursuant to
this Agreement, except to the extent that such loss is attributable to the
fraud, negligence, willful misconduct or bad faith on the part of the Trustee.
ARTICLE X
CHANGE OF TRUSTEE
10.1 Resignation. The Trustee, or any trustee hereafter appointed, may
at any time resign by giving written notice of such resignation to TMW, Canco
and MG specifying the date on which it desires to resign, provided that such
notice shall never be given less than 60 days before such desired resignation
date unless TMW, Canco and MG otherwise agree and provided further that such
resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, TMW, Canco and MG shall
promptly appoint a successor trustee by written instrument in duplicate, one
copy of which shall be delivered to the resigning trustee and one copy to the
successor trustee. Failing acceptance by a successor trustee, a successor
trustee may be appointed by an order of the superior court of the province in
which MG has its registered office upon application of one or more of the
parties hereto.
10.2 Removal. The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by written
instrument executed by TMW, Canco and MG, in duplicate, one copy of which shall
be delivered to the trustee so removed and one copy to the successor trustee,
provided that, in connection with such removal, provision is made for a
replacement trustee similar to that contemplated in Section 10.1.
10.3 Successor Trustee. Any successor trustee appointed as provided
under this Agreement shall execute, acknowledge and deliver to TMW, Canco and MG
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed
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or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of TMW, Canco and MG or of the successor trustee, the trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the provisions of
this Agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, TMW, Canco, MG and such predecessor
trustee shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers.
10.4 Notice of Successor Trustee. Upon acceptance of appointment by a
successor trustee as provided herein, TMW, Canco and MG shall cause to be mailed
notice of the succession of such trustee hereunder to each Holder specified in a
List. If TMW, Canco or MG shall fail to cause such notice to be mailed within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of TMW, Canco and
MG.
ARTICLE XI
TMW SUCCESSORS
11.1 Certain Requirements in Respect of Combination, Etc. TMW shall not
enter into any transaction (whether by way of reconstruction, reorganization,
consolidation, merger, transfer, sale, lease or otherwise) whereby all or
substantially all of its undertaking, property and assets would become the
property of any other Person or, in the case of a merger, of the continuing
corporation resulting therefrom, but may do so if:
(a) such other Person or continuing corporation (the "TMW
Successor"), by operation of law, becomes, without
more, bound by the terms and provisions of this
Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such
transaction an agreement supplemental hereto and such
other instruments (if any) as are satisfactory to the
Trustee and in the opinion of legal counsel to the
Trustee are necessary or advisable to evidence the
assumption by the TMW Successor of liability for all
moneys payable and property deliverable hereunder,
the covenant of such TMW Successor to pay and deliver
or cause to be delivered the same and its agreement
to observe and perform all the covenants and
obligations of TMW under this Agreement; and
(b) such transaction shall, to the reasonable
satisfaction of the Trustee and in the opinion of
legal counsel to the Trustee, be upon such terms
which substantially preserve and do not impair in any
material respect any of the rights, duties, powers
and authorities of the Trustee or of the Holders
hereunder.
11.2 Vesting of Powers in Successor. Whenever the conditions of Section
11.1 hereof have been duly observed and performed, the Trustee, if required by
Section 11.1 hereof, the TMW
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Successor and MG shall execute and deliver the supplemental agreement provided
for in Article XII hereof, and thereupon the TMW Successor shall possess and
from time to time may exercise each and every right and power of TMW under this
Agreement in the name of TMW or otherwise and any act or proceeding by any
provision of this Agreement required to be done or performed by the board of
directors of TMW or any officers of TMW may be done and performed with like
force and effect by the directors or officers of such TMW Successor.
11.3 Wholly owned Subsidiaries. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly owned subsidiary of TMW with
or into TMW.
ARTICLE XII
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
12.1 Amendments, Modifications, Etc. Subject to Section 12.4, this
Agreement may not be amended, modified or waived except by an agreement in
writing executed by TMW, Canco, MG and the Trustee and approved by the Holders
in accordance with Section 11.1 of the Exchangeable Share Provisions. No
amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
12.2 Ministerial Amendments. Notwithstanding the provisions of Section
12.1 hereof, the parties to this Agreement may in writing, at any time and from
time to time, without the approval of the Holders, amend or modify this
Agreement for the purposes of:
(a) adding to the covenants of any or all of the parties
hereto for the protection of the Holders hereunder;
provided that the Board of Directors shall be of the
opinion, after receipt of a written opinion of
outside counsel, that such covenants are not
prejudicial to the interests of the holders of the
Exchangeable Shares; or
(b) making such amendments or modifications not
inconsistent with this Agreement as may be necessary
or desirable with respect to matters or questions
which, in the opinion of the board of directors of
each of TMW, Canco and MG and in the opinion of the
Trustee and its counsel, having in mind the best
interests of the Holders as a whole, it may be
expedient to make; provided that such boards of
directors and the Trustee and its counsel shall be of
the opinion, after receipt of a written opinion of
outside counsel, that such amendments and
modifications will not be prejudicial to the
interests of the Holders as a whole; or
(c) making such changes or corrections which, on the
advice of counsel to TMW, Canco, MG and the Trustee,
are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error;
provided
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that the Trustee and its counsel and the board of
directors of each of TMW, Canco and MG shall be of
the opinion, after receipt of a written opinion of
outside counsel, that such changes or corrections
will not be prejudicial to the interests of the
Holders as a whole.
MG shall send a written notice to the Holders notifying them of any
amendment made pursuant to this Section 12.2 and a copy of any written opinion
of counsel received in connection with any such amendment.
12.3 Meeting to Consider Amendments. MG, at the request of TMW or
Canco, shall call a meeting or meetings of the Holders for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings shall be called and held in accordance with
the by-laws of MG, the Exchangeable Share Provisions and all applicable laws.
12.4 Changes in Capital of TMW and MG. At all times after the
occurrence of any event effected pursuant to the Support Agreement, as a result
of which either TMW Common Stock or the Exchangeable Shares or both are in any
way changed, this Agreement shall forthwith be amended and modified as necessary
in order that it shall apply with full force and effect, mutatis mutandis, to
all new securities into which TMW Common Stock or the Exchangeable Shares or
both are so changed, and the parties hereto shall execute and deliver a
supplemental agreement giving effect to and evidencing such necessary amendments
and modifications.
12.5 Execution of Supplemental Agreements. From time to time MG (when
authorized by a resolution of its Board of Directors), TMW (when authorized by a
resolution of its board of directors), Canco (when authorized by a resolution of
its board of directors) and the Trustee may, subject to the provisions of these
presents, and they shall, when so directed by these presents, execute and
deliver by their proper officers, agreements or other instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(a) evidencing the succession of any TMW Successors to
TMW and the covenants of and obligations assumed by
each such TMW Successor in accordance with the
provisions of Article XI and the successor of any
successor trustee in accordance with the provisions
of Article X;
(b) making any additions to, deletions from or
alterations of the provisions of this Agreement or
the Voting Rights which, in the opinion of the Board
of Directors of each of TMW, Canco and MG and in the
opinion of the Trustee and its counsel, after receipt
of a written opinion of outside counsel, will not be
prejudicial to the interests of the Holders as a
whole or are in the written opinion of counsel to the
Trustee necessary or advisable in order to
incorporate, reflect or comply with any legislation
the provisions of which apply to TMW, Canco, MG, the
Trustee or this Agreement; and
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(c) for any other purposes not inconsistent with the
provisions of this Agreement, including without
limitation to make or evidence any amendment or
modification to this Agreement as contemplated
hereby, provided that, in the opinion of the Board of
Directors of each of TMW, Canco and MG and in the
opinion of the Trustee and its counsel, after receipt
of a written opinion of outside counsel, the rights
of the Trustee and the Holders as a whole will not be
prejudiced thereby.
ARTICLE XIII
TERMINATION
13.1 Term. The Trust created by this Agreement shall continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a
Holder;
(b) each of TMW, Canco and MG elects in writing to
terminate the Trust and such termination is approved
by the Holders of the Exchangeable Shares in
accordance with Section 11.1 of the Exchangeable
Share Provisions and notice of such termination is
provided to the Trustee; and
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King George VI of the
United Kingdom of Great Britain and Northern Ireland
living on the date of the creation of the Trust.
13.2 Survival of Agreement. This Agreement shall survive any
termination of the Trust and shall continue until there are no Exchangeable
Shares outstanding held by a Holder; provided, however, that the provisions of
Articles VIII and IX hereof shall survive any such termination of this
Agreement.
ARTICLE XIV
GENERAL
14.1 Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this Agreement shall not in any way be affected or impaired
thereby, and the Agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
14.2 Inurement; Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns and to the benefit of the Holders. The parties
hereto acknowledge and agree that the holders of the Exchangeable Shares are
intended to be third party beneficiaries of this Agreement and shall be
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entitled to all rights and benefits provided hereunder which affect such holders
and shall be entitled to enforce such rights and benefits as if they were a
party hereto.
14.3 Notices to Parties. All notices and other communications between
the parties hereunder shall be in writing and shall be deemed to have been given
if delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
if to MG:
Moores Retail Group Inc.
5800, Rue St. Denis, Suite 900
Montreal, Quebec H2S 3L5
Attn: Michael Zelnik
Facsimile: 514.274.4177
with a copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Thomas J. Drago
Facsimile: 212.616.4120
if to TMW or Canco:
The Men's Wearhouse, Inc.
40650 Encyclopedia Circle
Fremont, California 94538
Attn: David Edwab
Facsimile: 713.657.0872
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas, U.S.A. 77010-3095
Attn: Michael W. Conlon
Facsimile: 713.651.5246
and
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Byers Casgrain
1 Place Ville-Marie, Suite 3900
Montreal, Quebec, Canada H3B 4M7
Attn: Allan Mass
Facsimile: 514.866.2241
If to the Trustee:
The Trust Company of Bank of Montreal
Suite 5104, First Canadian Place
Toronto, Ontario M5X 1A1
Attn: Senior Trust Officer
Facsimile: 416.867.6264
Any notice or other communication given personally shall be deemed to
have been given and received upon delivery thereof, and if given by telecopy
shall be deemed to have been given and received on the date of receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
14.4 Notice to Holders. Any and all notices to be given and any
documents to be sent to any Holders may be given or sent to the address of such
Holder shown on the register of Holders of Exchangeable Shares in any manner
permitted by the Exchangeable Share Provisions and shall be deemed to be
received (if given or sent in such manner) at the time specified in such
Exchangeable Share Provisions, the provisions of which Exchangeable Share
Provisions shall apply mutatis mutandis to notices or documents as aforesaid
sent to such Holders.
14.5 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Holder by the Trustee, by MG or by TMW of Canco
or by such Holder to the Trustee or to TMW, Canco or MG, the making of such
payment or sending of such document sent through the post shall be at the risk
of TMW, Canco or MG in the case of payments made or documents sent by the
Trustee or TMW, Canco or MG, and the Holder, in the case of payments made or
documents sent by the Holder.
14.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
14.7 Jurisdiction. This Agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
14.8 Attornment. TMW agrees that any action or proceeding arising out
of or relating to this Agreement may be instituted in the courts of Ontario,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of such courts in
any such action or proceeding, agrees to be bound by any judgment of such courts
and agrees not to seek, and hereby waives, any review of the merits of any such
judgment by the
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courts of any other jurisdiction and TMW hereby appoints Canco at its registered
office in the Province of Ontario as TMW's attorney for service of process.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed as of the date first above written.
THE MEN'S WEARHOUSE, INC.
By:
------------------------------------
David Edwab
President
GOLDEN MOORES COMPANY
By:
------------------------------------
David Edwab
President
MOORES RETAIL GROUP INC.
By:
------------------------------------
Name:
Title:
THE TRUST COMPANY OF BANK OF
MONTREAL
By:
------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.13
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 18, 1998
(this"Agreement"), is entered into by and among THE MEN'S WEARHOUSE, INC., a
Texas corporation (the "Company"), and MARPRO HOLDINGS, INC., MGB LIMITED
PARTNERSHIP, CAPITAL D'AMERIQUE CDPQ INC., CERBERUS INTERNATIONAL, LTD., ULTRA
CERBERUS FUND, LTD., STYX INTERNATIONAL LTD, THE LONG HORIZONS OVERSEAS FUND
LTD., THE LONG HORIZONS FUND, L.P. AND STYX PARTNERS, L.P. (collectively, the
"Shareholders" and each a "Shareholder").
RECITALS
WHEREAS, the Company, Golden Moores Company, a Nova Scotia unlimited
liability company, Moores Retail Group Inc. ("MG") and the Shareholders have
entered into a Combination Agreement, dated November 18, 1998 (the "Combination
Agreement"), providing that, among other things, each issued and outstanding
Common Share, Class B Share, Class C Share and Class D Share of MG (a "MG
Share") and each option to purchase MG Shares shall be exchanged for issued and
outstanding Exchangeable Shares of MG (the "Exchangeable Shares") which shall
have the rights, privileges, restrictions and conditions described in the
Exchangeable Share Provisions (as defined in the Share Restructuring Plan); and
WHEREAS, this Agreement is being entered into simultaneously with the
execution of the Combination Agreement;
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
a. "Closing Date" shall mean the Effective Date of the Share
Restructuring Plan as defined in the Combination Agreement.
b. "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
c. "Common Stock" means the Common Stock, par value $.01 per share, of
the Company, and any other securities of the Company or any successor which may
be issuable upon conversion of the Exchangeable Shares pursuant to the Share
Restructuring Plan and Exchangeable Share Provisions.
d. "Effective Time" shall mean the date on which the Commission
declares the Registration Statement effective or on which the Registration
Statement otherwise becomes effective.
<PAGE> 2
e. "Effectiveness Period" shall have the meaning assigned thereto in
Section 2 of this Agreement.
f. "Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
g. "Exchangeable Shares" shall have the meaning assigned to such term
in the Recitals to this Agreement.
h. The term "holder" shall mean any person that is the record owner of
Registrable Securities or any person that has a beneficial interest in an
Exchangeable Share convertible into Registrable Securities or any person who
shall, on the Closing Date, have a beneficial interest in an Exchangeable Share
convertible into Registrable Securities.
i. The term "managing underwriter or underwriters" shall mean the
person or persons selected pursuant to Section 7(a) of this Agreement to manage
an underwritten offering of Registrable Securities.
j. The term "person" shall include an individual, body corporate,
partnership, company, limited liability company, limited liability partnership,
unincorporated syndicate or organization, trust, trustee, executor,
administrator or other legal representative.
k. "Prospectus" shall mean the prospectus (including any preliminary
prospectus and any final prospectus) included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such prospectus
and all documents filed after the date of such prospectus by the Company under
the Exchange Act and incorporated by reference therein.
l. "Registrable Securities" shall mean all or any portion of the Common
Stock issuable upon exchange of the Exchangeable Shares; provided, however, that
a security ceases to be a Registrable Security when it is no longer a Restricted
Security.
m. "Registration Expenses" shall have the meaning assigned thereto in
Section 4 of this Agreement.
n. "Registration Statement" shall mean a "shelf" registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act and/or any similar rule
that may be adopted by the Commission, filed by the Company pursuant to the
provisions of Section 2 of this Agreement, including the Prospectus contained
therein, any amendments and
2
<PAGE> 3
supplements to such registration statement, including post-effective amendments,
and all exhibits and all material incorporated by reference in such registration
statement.
o. "Restricted Security" shall mean any security or share of Common
Stock issuable upon conversion or exchange thereof unless or until (i) it has
been effectively registered under the Securities Act and sold in a manner
contemplated by the Registration Statement or (ii) it has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto).
p. "Rules and Regulations" shall mean the published rules and
regulations of the Commission promulgated under the Securities Act or the
Exchange Act, as in effect at any relevant time.
q. "Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor thereto, as the same shall be amended from time to time.
r. "Share Restructuring Plan" shall have the meaning assigned to such
term in Section 1.1 of the Combination Agreement.
s. The term "underwriter" shall hereinafter mean any underwriter of an
underwritten offering of Registrable Securities.
2. REGISTRATION UNDER THE SECURITIES ACT.
a. The Company shall, at its expense, subject to Sections 5.3(k) and
5.3(v) of the Combination Agreement, within 15 business days of the date upon
which the Company receives the Revised MG Disclosure Letter (as defined in the
Combination Agreement), file with the Commission a Registration Statement with
respect to the Registrable Securities and thereafter shall use its reasonable
best efforts to cause such Registration Statement to be declared effective by
the Commission under the Securities Act prior to the Closing Date.
b. Subject to Section 2(c) hereof, the Company shall use its reasonable
best efforts, and will file such supplements or amendments to the Registration
Statement as may be necessary or appropriate, to keep the Registration Statement
continuously effective under the Securities Act and usable by holders for
resales of Registrable Securities for so long as any of the Exchangeable Shares
remain outstanding and not owned by the Company or any affiliate of the Company
or, such shorter period that will terminate when, in the written opinion of
Fulbright & Jaworski L.L.P. or other independent counsel to the Company
addressed to and delivered to the holders of Registrable Securities, all
outstanding Registrable Securities may be sold without registration pursuant to
Rules 144 and 145 under the Securities Act without regard to the volume
limitations contained in Rules 144 and 145 (the "Effectiveness Period").
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c. i. If the Company determines in its good faith judgment that the
filing of any supplement or amendment to the Registration Statement to
keep such Registration Statement continuously effective under the
Securities Act during the Effectiveness Period and usable by holders
for resales of Registrable Securities, would require the disclosure of
material information that the Company has a bona fide business purpose
for preserving as confidential or the disclosure of which would
materially adversely affect the Company's ability to consummate a
significant transaction, upon written notice of such determination by
the Company to the holders of the Registrable Securities, the
obligation of the Company to supplement or amend the Registration
Statement (including any action contemplated by Section 3 hereof) will
be suspended until the Company notifies the holders in writing that the
reasons for suspension of such obligations on the part of the Company
as set forth in this Section 2(c)(i) no longer exist; provided,
however, that no such suspension shall be called by the Company during
the 30 days following the publication of the consolidated results of
operations of TMW, the TMW Subsidiaries, MG and the MG Subsidiaries as
provided in Section 8.3(c) of the Combination Agreement nor shall any
suspension last more than 45 consecutive days. If the Company calls a
suspension, the Company shall not call another suspension for at least
45 days after the date on which the Company notifies the holders in
writing as provided in the previous sentence that the reasons for the
prior suspension no longer exist.
ii. If the Company initiates and is in good faith pursuing an
underwritten primary offering of equity securities (as defined in Rule
405 under the Securities Act) (which primary offering may also include
secondary sales of securities of the Company) on a registration
statement (other than any registration by the Company on Form S-8, or a
successor or substantially similar form, of an employee stock option,
stock purchase or compensation plan or of securities issued or issuable
pursuant to any such plan), upon written notice thereof by the Company
to the holders the obligation of the Company to supplement or amend the
Registration Statement shall be suspended during the period commencing
on the effective date of the registration statement relating to such
underwritten primary offering and ending 90 days thereafter; provided,
however, that the Company agrees that it shall not cause any such
registration statement to become effective prior to or during the 30
days following the publication of the consolidated results of
operations of the Company, the TMW Subsidiaries (as defined in the
Combination Agreement), MG and the MG Subsidiaries (as defined in the
Combination Agreement) as provided in Section 8.3(c) of the Combination
Agreement.
d. Notwithstanding the provisions of Section 2(c) hereof, the aggregate
number of days (whether or not consecutive) during which the Company may delay
the filing of any such supplement or amendment shall in no event exceed 90 days
during any period of 12 consecutive months.
3. REGISTRATION PROCEDURES.
a. In connection with the Company's obligations with respect to the
Registration Statement, the Company shall use its reasonable best efforts to
effect or cause the Registration
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<PAGE> 5
Statement to permit the sale of the Registrable Securities by the holders
thereof in accordance with the intended method or methods of distribution
thereof described in the Registration Statement; provided, however, that such
method or methods of distribution may take the form of an underwritten offering
of the Registrable Securities only as provided in Section 7 hereof. In
connection therewith, the Company shall, as promptly as practicable:
i. before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, including documents incorporated by
reference in the Registration Statement, provide to the holders of the
Registrable Securities covered by such Registration Statement and the
managing underwriter or underwriters, if any, of Registrable Securities
being sold in an underwritten offering copies of all such documents
proposed to be filed, together with copies of documents previously
filed with the Commission and proposed to be incorporated by reference
in the Registration Statement, which Registration Statement or
Prospectus or any supplement or amendment thereto (but not any document
incorporated by reference therein) will be subject to the review of
such holders and managing underwriter or underwriters, and the Company
will not file the Registration Statement or any amendment thereto or
any Prospectus or any supplement thereto (including documents filed
with the Commission under the Exchange Act after the initial filing of
the Registration Statement and incorporated by reference in the
Registration Statement) to which any of the Shareholders or, if none of
the Shareholders is a selling holder, the holders of at least 20% of
the Registrable Securities covered by such Registration Statement or
the managing underwriter or underwriters, if any, shall reasonably
object; provided, however, that the Company may assume, for the
purposes of this subparagraph (i), that objections to the inclusion of
information specifically requested to be included in the Registration
Statement or other documents by the staff of the Commission, or in the
opinion of counsel to the Company required to be in the Registration
Statement or other documents, or specifically required by the
Securities Act or the Rules and Regulations, shall not be deemed to be
reasonable;
ii. for a reasonable period prior to the filing of the
Registration Statement and throughout the period specified in Section
2(b) hereof, make available for inspection (solely for the purpose of
verifying the accuracy of information contained in the Registration
Statement) by a representative or representatives of the Shareholders
or, if none of the Shareholders is then a holder, the holders of not
less than 20% of the Registrable Securities, any underwriter
participating in any disposition pursuant to a Registration Statement,
and any attorney or accountant retained by any of the Shareholders or
such selling holders or underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and agents,
including independent public accounts and counsel, to supply all
information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records,
information or documents that are designated by the Company in writing
as confidential shall be kept confidential by such persons unless
disclosure of such records, information or documents is required by
court or administrative order;
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<PAGE> 6
iii. subject to the provisions of Section 2(c) above, prepare
and file with the Commission such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be required by the Rules and Regulations or the
instructions applicable to the registration form utilized by the
Company or by the Securities Act or otherwise necessary to keep the
Registration Statement effective for the period specified in Section
2(b) and cause the Prospectus as so supplemented to be filed pursuant
to Rule 424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the period
specified in Section 2(b) in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
iv. notify the selling holders of Registrable Securities and
the managing underwriter or underwriters, if any, promptly, and confirm
such advice in writing,
(1) when the Registration Statement, any
pre-effective amendment thereto, the Prospectus or any
prospectus supplement or post-effective amendment to the
Registration Statement has been filed, and, with respect to
the Registration Statement or any post-effective amendment,
when the same has become effective,
(2) of any comments by the Commission or the "Blue
Sky" or securities commissioners or regulator of any State
with respect to the Registration Statement, the Prospectus or
any prospectus supplement or any request by the Commission or
any securities commissioner or regulator for amendments or
supplements to the Registration Statement, the Prospectus or
any prospectus supplement or for additional information,
(3) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceedings
for that purpose,
(4) if at any time the representations and warranties
of the Company contemplated by subparagraph (xiv) below or
Section 5 hereof cease to be true and correct,
(5) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
Registrable Securities for sale under the securities or "Blue
Sky" laws of any jurisdiction or the initiation or threatening
of any proceeding for such purpose, and
(6) of the existence of any fact or the happening of
any event during the period (other than any suspension period
referred to in Section 2(c) hereof) during which the
Registration Statement is required hereunder to be effective
as a result of
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<PAGE> 7
which the Registration Statement, any amendment or
post-effective amendment thereto, the Prospectus, any
prospectus supplement, or any document incorporated therein by
reference contains an untrue statement of material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
v. use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at
the earliest possible moment;
vi. if requested by any managing underwriter or underwriters
or any holder of Registrable Securities being sold pursuant to an
underwritten offering, as soon as practicable incorporate in a
prospectus supplement or post-effective amendment to the Registration
Statement such information as is required by the applicable Rules and
Regulations and as the managing underwriter or underwriters or such
holder specifies should be included therein relating to the terms of
the sale of the Registrable Securities, including, without limitation,
information with respect to the principal amount or number of shares of
Registrable Securities being sold by such holder to any underwriter or
underwriters, the name and description of such holder or underwriter,
the offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of the underwritten offering
(including whether such underwriting commitment is on a firm commitment
or best efforts basis) of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement
or post-effective amendment promptly after being notified of the
matters to be incorporated in such prospectus supplement or
post-effective amendment;
vii. furnish to each selling holder of Registrable Securities
and each managing underwriter, if any, without charge, an executed copy
of the Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto and documents incorporated
by reference therein) and such number of copies of the Registration
Statement (including exhibits thereto and documents incorporated by
reference therein) as such persons may reasonably request in order to
facilitate the offering and disposition of the Registrable Securities;
viii. deliver to each selling holder of Registrable Securities
and each managing underwriter, if any, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto, and such other documents, as such
persons may reasonably request in order to facilitate the offering and
disposition of the Registrable Securities and to permit any of such
persons to satisfy the prospectus delivery requirements of the
Securities Act; the Company hereby consents to the use of the
Prospectus or any amendment or supplement thereto by each of the
selling holders of Registrable Securities and by each underwriter
thereof, if any, in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment
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<PAGE> 8
or supplement thereto; and as promptly as practicable after the filing
with the Commission of any document which is incorporated by reference
in the Prospectus (including each preliminary prospectus and any
amendment or supplement thereto) deliver a copy of such document to
each holder of Registrable Securities covered by the Registration
Statement who requests such documents in writing from the Company;
ix. prior to any public offering of Registrable Securities,
use reasonable efforts to (1) register or qualify the Registrable
Securities covered by the Registration Statement for offer and sale
under the securities or "Blue Sky" laws of such jurisdictions as any
selling holder or underwriter reasonably shall request, (2) keep such
registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in
such jurisdictions for so long as may be necessary (but not to exceed
the Effectiveness Period required by Section 2(b)) to enable any such
holder or underwriter to complete its distribution of Registrable
Securities pursuant to the Registration Statement and (3) take any and
all other actions as may be reasonably necessary or advisable to enable
the disposition in such jurisdictions of such Registrable Securities;
provided, however, that the Company shall not be required for any such
purpose to qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements
of this Section 3(a)(ix) or consent to general service of process in
any such jurisdiction;
x. cooperate with the selling holders of Registrable
Securities and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and which, if so required by any
securities exchange upon which any Registrable Securities are listed,
shall be penned, lithographed or engraved, or produced by any
combination of such methods, on steel engraved borders; and enable such
Registrable Securities to be in such denominations and registered in
such names as the selling holder or the managing underwriter or
underwriters, if any, may request at least two business days prior to
any delivery of Registrable Securities;
xi. use reasonable efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities (federal, state and
local) as may be necessary to enable the seller or sellers thereof or
the underwriter or underwriters, if any, to consummate the disposition
of such Registrable Securities;
xii. if any fact or event contemplated by subparagraph (iv)(6)
above shall exist or occur, prepare as promptly as practicable a
post-effective amendment or supplement to the Registration Statement or
the related Prospectus or any document incorporated therein by
reference or file any other required document so that the Prospectus,
as thereafter delivered to the Shareholders of the Registrable
Securities, will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
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<PAGE> 9
xiii. use its reasonable best efforts to cause the shares of
Common Stock constituting Registrable Securities covered by the
Registration Statement to be quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if the
Common Stock is not then quoted on NASDAQ, to be listed on such
securities exchanges as the Common Stock of the Company is then listed,
upon effectiveness of the Registration Statement;
xiv. enter into such customary agreements (including a
customary underwriting agreement with the underwriter or underwriters,
if any, which shall include only such "lock-up arrangements", if any,
as shall be agreeable to the Company and the underwriter or
underwriters) and take all such other actions reasonably necessary in
connection therewith in order to expedite or facilitate the disposition
of any Registrable Securities and, in such connection, whether or not
an underwriting agreement is entered into and whether or not the
Registrable Securities are to be sold in an underwritten offering:
(1) make such representations and warranties to the
holders of such Registrable Securities and the underwriter or
underwriters, if any, in form, substance and scope as are
customarily made in connection with primary underwritten
offerings of equity or convertible debt securities;
(2) cause to be delivered to the sellers of
Registrable Securities and the underwriter or underwriters, if
any, opinions of counsel to the Company, dated the effective
date of the Registration Statement and, in the case of an
underwritten offering, the date of delivery of any Registrable
Securities sold pursuant thereto (which counsel and opinions
(in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter or underwriters, if
any, and the appointed representative of or counsel to the
holders of at least 50% of the Registrable Securities being
registered (or, in the case of an underwritten offering,
sold)), addressed to each selling holder and each underwriter,
if any, covering the matters customarily covered in opinions
requested in primary underwritten offerings of equity and
convertible debt securities;
(3) cause to be delivered on the effective date of
the Registration Statement, the date of the Prospectus and the
effective date of the most recent post-effective amendment to
the Registration Statement, and at the time of the signing of
the underwriting or purchase agreement and at the time of
delivery of any Registrable Securities sold pursuant thereto,
letters from the Company's independent public accountants
addressed to each selling holder and each underwriter stating
that such accountants are independent public accountants
within the meaning of the Securities Act and the applicable
published Rules and Regulations thereunder, and otherwise in
customary form and covering such financial and accounting
matters as are customarily covered by letters of independent
certified public accountants
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<PAGE> 10
delivered in connection with primary underwritten public
offerings of convertible securities;
(4) if an underwriting agreement is entered into,
cause the same to set forth in full the indemnification
provisions and procedures of Section 6 hereof (or such other
provisions and procedures satisfactory to the managing
underwriter or underwriters and the Company) with respect to
all parties to be indemnified pursuant to said Section;
(5) deliver such documents and certificates as may be
reasonably requested by any holder of Registrable Securities
being sold or the managing underwriter or underwriters, if
any, to evidence the accuracy of the representations
contemplated by clause (1) above and compliance with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company in connection
with such offering;
xv. otherwise use its reasonable best efforts to comply with
all applicable Rules and Regulations, and make generally available to
its security holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act no later than 45 days after the end
of any 12-month period (or 90 days, if such period is a fiscal year)
(A) commencing at the end of any fiscal quarter in which the
Registrable Securities are sold in an underwritten offering, or, if not
sold in such an offering, (B) commencing with the first month of the
Company's first fiscal quarter commencing after the effective date of
the Registration Statement, which statements shall cover said 12-month
periods;
xvi. notify in writing each holder of Registrable Securities
of any proposal by the Company to amend or waive any provision of this
Agreement pursuant to Section 9(h) hereof and of any amendment or
waiver effected pursuant thereto, each of which notices shall contain
the text of the amendment or waiver proposed or effected, as the case
may be; and
xvii. in the event that any broker-dealer registered under the
Exchange Act shall be an "Affiliate" (as defined in Schedule E to the
By-Laws of the National Association of Securities Dealers, Inc.
("NASD")) of the Company or has a "Conflict of Interest" (as defined in
such Schedule) and such broker-dealer shall underwrite, participate as
a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of such Schedule) of any
Registrable Securities, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker
or dealer in respect thereof, or otherwise, assist such broker-dealer
in complying with the requirements of such Schedule, including, without
limitation, by (1) engaging a "qualified independent underwriter" (as
defined in such Schedule) to participate in the preparation of the
registration statement relating to such Registrable Securities, to
exercise usual standards of due diligence in respect thereto and to
recommend the public offering price of such Registrable Securities, (2)
indemnifying such qualified independent underwriter to the extent of
the indemnification of
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<PAGE> 11
underwriters provided in Section 6 hereof, and (3) providing such
information within the possession of the Company to such broker-dealer
as may be reasonably required in order for such broker-dealer to comply
with the requirements of the Rules of Fair Practice of the NASD.
b. The Company may require each selling holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such holder, the Registrable Securities held
by such holder, and the distribution of such Registrable Securities as the
Company may from time to time request in writing, but only to the extent that
such information shall be required by law or by the Commission in connection
with any registration. Each such holder agrees, by the acquisition of
Registrable Securities, to notify the Company as promptly as practicable of any
inaccuracy or change in information previously furnished by such holder to the
Company or of the occurrence of any event in either case as a result of which
any Prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such holder or such holder's intended
method of distribution of such Registrable Securities or omits to state any
material fact regarding such holder or such holder's intended method of
distribution of such Registrable Securities necessary to make the statements
therein, in light of the circumstances then existing, not misleading and
promptly to furnish to the Company any additional information required to
correct and update any previously furnished information or required so that such
Prospectus shall not contain, with respect to such holder or the distribution of
such Registrable Securities, an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances then existing, not misleading.
c. Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(a)(iv)(6) hereof or of
the commencement of any suspension period referred to in Section 2(c) hereof,
such holder will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement until such holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(a)(xii)
hereof, or until it is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by the Company, such holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
holder's possession of the Prospectus covering such Registrable Securities at
the time of receipt of such notice.
4. REGISTRATION EXPENSES. The Company agrees to bear and to pay or cause to be
paid promptly upon request being made therefor all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, (a) all Commission and any NASD registration and filing fees and
expenses, (b) all fees and expenses in connection with the registration or
qualification of the Registrable Securities for offering and sale under the
State securities and blue sky laws referred to in Section 3(a)(ix) hereof and
determines their eligibility for investment under the laws of such jurisdiction
as the managing underwriter or underwriters, if any, or the holders of such
Registrable Securities may designate, including reasonable fees and
disbursements, if any, of
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counsel for the selling holders or underwriters in connection with such
registrations or qualifications and determinations, (c) all expenses relating to
the preparation, printing, distribution and reproduction of the Registration
Statement required to be filed hereunder, each prospectus included therein or
prepared for distribution pursuant hereto, each amendment or supplement to the
foregoing, the expenses of preparing the Registrable Securities for delivery and
the expenses of reproducing any underwriting agreement(s), agreement(s) among
underwriters and "Blue Sky" memoranda, any selling agreements and all other
documents in connection with the offering, sale or delivery of Registrable
Securities to be disposed of, (d) fees and expenses of any Transfer Agent and
Registrar with respect to the Registrable Securities and any escrow agent or
custodian, (e) internal expenses of the Company (including, without limitation,
all salaries and expenses of the Company's officers and employees performing
legal or accounting duties), (f) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (g) fees, disbursements and expenses of one counsel
for the holders of Registrable Securities retained in connection with such
registration, as selected by the holders of at least 50% of the outstanding
Registrable Securities being registered, (h) fees, expenses and disbursements of
any other persons, including special experts, retained by the Company in
connection with such registration, (i) disbursements of any managing underwriter
or underwriters in connection with the offering and sale of Registrable
Securities under the Registration Statement (excluding commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals) and (j) all fees and expenses incurred in connection with the
qualification of the Registrable Securities for trading on NASDAQ, or the
listing of such shares on any other securities exchange, pursuant to Section
3(a)(xiii) (collectively, the "Registration Expenses"). To the extent that any
Registration Expenses are incurred, assumed or paid by any holder of Registrable
Securities or any underwriter thereof, the Company shall reimburse such person
for the full amount of the Registration Expenses so incurred, assumed or paid
promptly after receipt of a request therefor. Notwithstanding the foregoing, the
holders of the Registrable Securities being registered shall pay all agency fees
and commissions and underwriting discounts and commissions attributable to the
sale of such Registrable Securities and the fees and disbursements of any
counsel or other advisors or experts retained by such holders (severally or
jointly), other than the counsel and experts specifically referred to above, and
all fees, disbursements and expenses of any "qualified independent underwriters"
engaged pursuant to Section 3(a)(xvii).
5. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to, and
agrees with, the Shareholders and each of the holders from time to time of
Registrable Securities that:
a. Each Registration Statement and each Prospectus contained therein or
furnished pursuant to Sections 3(a)(vii) and 3(a)(viii) hereof and any further
amendments or supplements to any such Registration Statement or Prospectus, when
it becomes effective or is filed with the Commission, as the case may be, and,
in the case of an underwritten offering of Registrable Securities, at the time
of the closing under the underwriting agreement relating thereto, will conform
in all material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary
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to make the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
holders of Registrable Securities pursuant to Section 3(a)(iv)(6) hereof until
(ii) such time as the Company furnishes an amended or supplemented prospectus
pursuant to Section 3(a)(xii) hereof, the Registration Statement, and the
Prospectus (including any summary prospectus) contained therein or furnished
pursuant to Section 3(a)(vii) or 3(a)(viii) hereof, as then amended or
supplemented, will conform in all material respects to the requirements of the
Securities Act and will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances then existing, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by an underwriter in connection with an offering or a holder of
Registrable Securities expressly for use therein.
b. Any documents incorporated by reference in any Prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as applicable, and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
c. The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any
subsidiary thereof is a party or by which the Company or any subsidiary thereof
is bound or to which any of the property or assets of the Company or any
subsidiary thereof is subject, nor will such action result in any violation of
the provisions of the Restated Articles of Incorporation, as amended and
restated, or the Bylaws, as amended, of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any subsidiary thereof or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions contemplated by
this Agreement, except the registration under the Securities Act of the
Registrable Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities or
"Blue Sky" laws or foreign laws in connection with the offering and distribution
of the Registrable Securities.
d. This Agreement has been duly authorized, executed and delivered by
the Company and, when duly authorized, executed and delivered by the other
parties hereto, will constitute a valid and legally binding obligation of the
Company enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
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6. INDEMNIFICATION.
a. Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, and in consideration of the
agreements of the Shareholders contained herein and in the Combination
Agreement, and as an inducement to the Shareholders to enter into such
Agreements, the Company shall, and it hereby agrees to, indemnify and hold
harmless each of the holders of Registrable Securities to be included in such
registration, each underwriter, selling agent or placement agent with respect to
the Registrable Securities and each of their respective officers, directors,
employees and agents and each person who controls such holder or underwriter,
selling agent or placement agent within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person being
sometimes referred to as an "Indemnified Person") against any losses, claims,
damages or liabilities, joint or several, to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act, or any Prospectus contained
therein or furnished by the Company to any Indemnified Person, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company shall,
and it hereby agrees to, reimburse such Indemnified Person for any reasonable
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration furnished to the Company by or on
behalf of such Indemnified Person expressly for use therein.
b. Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities in
any Registration Statement filed pursuant to this Agreement and to entering into
any underwriting agreement with respect thereto, that the Company shall have
received an undertaking reasonably satisfactory to it from the holder of such
Registrable Securities and from each underwriter named in any such underwriting
agreement, severally and not jointly, to (i) indemnify and hold harmless the
Company, its directors, officers who sign any Registration Statement and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which the Company or such other persons may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement, or any Prospectus contained
therein or furnished by the Company to any such holder or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein
14
<PAGE> 15
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished in writing to the Company by or on behalf of such holder
or underwriter expressly for use therein, and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim.
c. Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof but only to the extent that the
indemnifying party is actually prejudiced in connection with the defense of such
action. In case any such action shall be brought against any indemnified party
and it shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such indemnified
party for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof unless, in such indemnified party's reasonable judgment based
upon written advice of counsel, a copy of which shall be provided to the
indemnifying party, a conflict of interest between such indemnified party and
the indemnifying party shall exist or arise in respect of the claim after the
assumption thereof which conflict renders the indemnifying party unable to
defend the interests of the indemnified party. No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act, by or on behalf of any indemnified party.
d. Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions which
15
<PAGE> 16
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or by such
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation (even if
the holders or any agents or underwriters or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the percentage of
principal amount of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
e. Notwithstanding any other provision of this Section 6, in no event
will any (i) holder be required to undertake liability to any person under this
Section 6 for any amounts in excess of the dollar amount of the proceeds to be
received by such holder from the sale of such holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to such registration and (ii) underwriter be required to undertake
liability to any person hereunder for any amounts in excess of the discount,
commission or other compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed to the public pursuant
to any such underwriting agreement.
f. The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person.
7. UNDERWRITTEN OFFERINGS.
a. Right to Effect Underwritten Offering. The holders of Registrable
Securities covered by the Registration Statement may sell such Registrable
Securities in an underwritten offering, provided that the holders of at least
20% of the Registrable Securities initially outstanding elect to participate in
such an offering and except that any such underwritten offering shall be
suspended during the periods specified in Section 2(c) hereof.
b. Selection of Underwriters. If any of the Registrable Securities
covered by the Registration Statement are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by the holders of at least 50% of the outstanding
16
<PAGE> 17
Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
c. Participation by Holders. Each holder of Registrable Securities
hereby agrees with the Company and each other such holder that no such holder
may participate in any underwritten offering hereunder unless such holder (i)
agrees to sell such holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. RULE 144. The Company covenants to the holders of Registrable Securities that
to the extent it shall be required to do so under the Exchange Act, the Company
shall timely file the reports required to be filed by it under the Exchange Act
or the Securities Act (including, but not limited to, the reports under Sections
13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
under the Securities Act) and the Rules and Regulations, and shall take such
further action as shall be necessary to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
9. MISCELLANEOUS.
a. No Inconsistent Agreements. The Company will not on or after the
date of this Agreement grant registration rights with respect to Registrable
Securities or any other securities, or enter into any agreement with respect to
its securities, which prevents the exercise of or otherwise conflicts with the
provisions hereof.
b. Specific Performance. The parties hereto acknowledge that there may
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Agreement
in accordance with the terms and conditions of this Agreement, in any court of
the United States or any State thereof having jurisdiction.
c. Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be given in the manner provided for in the
Indenture.
d. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and assigns
17
<PAGE> 18
of the parties hereto. In the event that any transferee of any holder of
Registrable Securities shall acquire Registrable Securities, in any manner,
whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be deemed a
party hereto for all purposes and such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registrable Securities such transferee shall be entitled to receive the benefits
of and be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement. If the Company shall so request,
any such successor, assign or transferee shall agree in writing to acquire and
hold the Registrable Securities subject to all of the terms hereof.
e. Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made pursuant
hereto shall remain in full force and effect regardless of any investigation (or
statement as to the results thereof) made by or on behalf of any holder of
Registrable Securities, any director, officer or partner of such holder, any
agent or underwriter or any director, officer or partner thereof, or any
controlling person of any of the foregoing, and shall survive delivery of and
payment for the Registrable Securities pursuant to the Combination Agreement and
the transfer and registration of Registrable Securities by such holder.
f. LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
g. Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
h. Amendments and Waivers. This Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a written
instrument duly executed by the Company and the holders of at least 75% of the
Registrable Securities at the time outstanding. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any amendment
or waiver effected pursuant to this Section 9(h), whether or not any notice,
writing or marking indicating such amendment or waiver appears on such
Registrable Securities or is delivered to such holder.
i. Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders of
Registrable Securities shall be made available upon reasonable prior written
notice for inspection and copying on any business day by any holder of
Registrable Securities at the offices of the Company at the address set forth in
the Combination Agreement.
j. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-18-
<PAGE> 19
k. Termination. This Agreement shall terminate automatically and be of
no further force or effect when all Registrable Securities are no longer
Restricted Securities.
[SIGNATURES ON FOLLOWING PAGE]
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first written above.
THE MEN'S WEARHOUSE, INC.
By /s/ DAVID H. EDWAB
-------------------------------------------
Name: David H. Edwab
Title: President
THE SHAREHOLDERS
MARPRO HOLDINGS, INC.
By /s/ MARTIN PROSSERMAN
-------------------------------------------
Name: Martin Prosserman
Title: President
MGB LIMITED PARTNERSHIP
By /s/ MICHEL ZELNIK
-------------------------------------------
Name: Michel Zelnik
Title: President
CAPITAL D'AMERIQUE CDPQ INC.
By /s/ LUC HOULE
-------------------------------------------
Name: Luc Houle
Title: Vice-President
By /s/ NORMAND PROVOST
-------------------------------------------
Name: Normand Provost
Title: President
-20-
<PAGE> 21
CERBERUS INTERNATIONAL, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
ULTRA CERBERUS FUND, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
STYX INTERNATIONAL LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
THE LONG HORIZONS OVERSEAS FUND LTD.
By: Old Stand Management L.L.C.
(Investment Manager)
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
-21-
<PAGE> 22
THE LONG HORIZONS FUND, L.P.
By: Old Stand Associates L.L.C.
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
STYX PARTNERS, L.P.
By: Styx Associates, L.L.C.
By /s/ KEVIN GENDA
-------------------------------------------
Name: Kevin Genda
Title: Attorney-in-Fact
-22-
<PAGE> 1
EXHIBIT 5.1
[FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD]
December 30, 1998
The Men's Wearhouse, Inc.
5803 Glenmont Drive
Houston, Texas 77081
Gentlemen:
We have acted as counsel for The Men's Wearhouse, Inc., a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 of 2,750,000 shares of the Company's common stock, $.01
par value (the "Shares"), to be offered upon the terms and subject to the
conditions set forth in a Combination Agreement dated November 18, 1998, by and
between the Company, Golden Moores Company, Moores Retail Group Inc. and the
Shareholders of Moores Retail Group Inc. signatory thereto (together with the
holders of options to purchase shares of Class C Common Stock of Moores Retail
Group Inc., the "Selling Shareholders").
In connection therewith, we have examined the Company's Registration
Statement on Form S-3 covering the Shares (the "Registration Statement") filed
with the Securities and Exchange Commission, originals or copies certified or
otherwise identified to our satisfaction of the Restated Articles of
Incorporation of the Company, the amended By-laws of the Company, the corporate
proceedings with respect to the offering of the Shares and such other documents
and instruments as we have deemed necessary or appropriate for the expression of
the opinions contained herein.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to us as copies, the authenticity and completeness of the originals of
those records, certificates and other instruments submitted to us as copies and
the correctness of all statements of fact contained in all records, certificates
and other instruments that we have examined.
Based on the foregoing, and having regard for such legal considerations
as we have deemed relevant, we are of the opinion that the 2,750,000 shares of
Common Stock proposed to be offered by the Selling Shareholders have been duly
and validly authorized for issuance and when issued in accordance with the terms
of the Exchangeable Shares, as defined in the Registration Statement, will be
duly and validly issued, fully paid and nonassessable.
The opinions expressed herein relate solely to, are based solely upon
and are limited exclusively to the laws of the State of Texas and the federal
laws of the United States of America, to the extent applicable.
<PAGE> 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included as part of the Registration Statement.
Very truly yours,
/s/ FULBRIGHT & JAWORSKI L.L.P.
Fulbright & Jaworski L.L.P.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration
Statement of The Men's Wearhouse, Inc. on Form S-3 of our report dated March 3,
1998, appearing in the Annual Report on Form 10-K, as amended by Form 10-K/A, of
The Men's Wearhouse, Inc. for the year ended January 31, 1998, and to the
references to us under the heading "Experts" and "Selected Consolidated
Financial Information" in this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Houston, Texas
December 30, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts"
and to the use of our report dated March 20, 1998 (except note 15, which is as
of November 18, 1998 and notes 6 and 8, which are as of December 30, 1998),
with respect to the consolidated financial statements of Moores Retail Group
Inc. included in the Registration Statement of The Men's Wearhouse, Inc. on
Form S-3 for the registration of 2,750,000 shares of common stock.
/s/ ERNST & YOUNG LLP
Montreal, Canada Chartered Accountants
December 30, 1998
