<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): FEBRUARY 10, 1999
THE MEN'S WEARHOUSE, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
TEXAS 000-20036 74-1790172
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
</TABLE>
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 592-7200
================================================================================
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 10, 1999, The Men's Wearhouse, Inc., a Texas corporation
(the "Company"), effected the acquisition of Moores Retail Group Inc., a New
Brunswick, Canada corporation ("Moores"), through the combination (the
"Combination") of Golden Moores Company, a Nova Scotia unlimited liability
company and wholly owned subsidiary of the Company ("Canco"), with Moores. The
Combination was effected pursuant to a Combination Agreement dated November 18,
1998 (the "Combination Agreement"), by and between the Company, Canco, Moores
and the shareholders of Moores signatory thereto (collectively, the
"Shareholders"). The Shareholders and employees of Moores who hold certain
options to purchase a class of Moores capital stock (collectively, the
"Optionholders") will receive 2.5 million shares of the Company's common stock,
par value $0.01 per share (the "Company Common Stock"), upon exchange of the
Exchangeable Shares of Moores which they received in the Combination, as
discussed below. The number of shares to be issued in the Combination was based
on arms-length negotiations between the parties. The Combination will be
accounted for as a pooling of interests.
Pursuant to the Combination Agreement, Moores has been restructured so
that Canco now owns the only outstanding common stock of Moores. The
Shareholders and Optionholders exchanged 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 one share of the Company
Common Stock and to receive dividends on the Exchangeable Shares in an amount
equal to dividends, if any, paid on the Company Common Stock. Each Exchangeable
Share has the right pursuant to a Voting Trust Agreement dated February 10,
1999, by and between the Company, Canco, Moores and The Trust Company of Bank of
Montreal (the "Voting Trustee") to cast a vote equivalent to the vote of one
share of the Company Common Stock on each matter submitted to the holders of the
Company Common Stock for a vote. The Voting Trustee will cast such votes on
behalf of the holders of the Exchangeable Shares under the terms of the one
share of Series A Special Voting Preferred Stock, par value $0.01per share,
issued by the Company to the Voting Trustee.
In connection with the closing of the Combination, Moores' existing
indebtedness of approximately $85 million (Canadian dollars) was repaid. The
Company, through Golden Moores Finance Company, a Nova Scotia unlimited
liability company and wholly owned subsidiary of the Company ("Finco"), entered
into a five-year term loan in the amount of Canadian $75,000,000 which was used
to refinance the Moores' indebtedness. Following the closing of the Combination,
Moores entered into a five year revolving credit facility in the amount of
Canadian $30,000,000 which will be used to provide working capital, capital
expenditures and other ongoing financing needs of Moores. Terms and conditions
are substantially similar to those contained in the Company's Credit Agreement
which was amended and restated in connection with the closing of the Combination
to adjust certain covenants to take into consideration the Combination, to
extend the maturity date and to provide for additional lenders.
Page 2
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Moores, through its subsidiaries, operates 115 men's apparel stores,
107 stores in Canada and 8 stores in the United States, and an integrated
manufacturing facility in Montreal, Quebec, capable of producing approximately
500,000 jackets and one million pair of pants annually. The Company intends to
continue to operate the business of Moores and integrate Moores' operations with
the Company's existing men's retail operations.
A copy of the press release announcing the closing of the Combination
is filed as Exhibit 99.1 and is hereby incorporated herein by reference. A copy
of the press release announcing the completion of the financing transactions is
filed as Exhibit 99.2 and is hereby incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The following financial statements of Moores Retail Group Inc.
are included in Appendix A hereto and filed herewith:
Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Income and Comprehensive
Income
Consolidated Statement of Stockholders' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(b) Pro forma financial information.
The following pro forma financial information is included in
Appendix B hereto and filed herewith:
Pro Forma Combined Financial Statements - Basis of
Presentation
Pro Forma Combined Balance Sheet at October 31, 1998
Pro Forma Combined Statements of Net Earnings:
For the Year Ended January 31, 1998
For the Nine Months Ended October 31, 1998
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<PAGE> 4
For the Nine Months Ended November 1, 1997
Notes to Pro Forma Combined Financial Statements
(c) Exhibits.
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 (incorporated by reference
from Exhibit 2.1 to the Company's Registration Statement
on Form S-3 (Registration No. 333-69979)).
4.1 - 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. (incorporated by reference from
Exhibit 4.13 to the Company's Registration Statement on
Form S-3 (Registration No. 333-69979)).
4.2 - Support Agreement dated February 10, 1999, between The
Men's Wearhouse, Inc., Golden Moores Company, Moores
Retail Group 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.
9.1 - Voting Trust Agreement dated February 10, 1999, by and
between The Men's Wearhouse, Inc., Golden Moores Company,
Moores Retail Group Inc. and The Trust Company of Bank of
Montreal.
23.1 - Consent of Ernst & Young LLP.
99.1 - Press Release of the Company dated February 10, 1999,
announcing the closing of the Combination.
99.2 - Press Release of the Company dated February 10, 1999,
announcing the completion of the financing transactions.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE MEN'S WEARHOUSE, INC.
Dated: February 25, 1999 /s/ GARY CKODRE
-----------------------------------------
Gary Ckodre
Vice President - Finance
Page 5
<PAGE> 6
Appendix A
----------
Moores Retail Group, Inc.
Consolidated Financial Statements
A-1
<PAGE> 7
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].
A-2
<PAGE> 8
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
A-3
<PAGE> 9
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
====== ====== =======
</TABLE>
Related party transactions (note 12)
See accompanying notes
A-4
<PAGE> 10
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
A-5
<PAGE> 11
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
A-6
<PAGE> 12
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.
A-7
<PAGE> 13
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
A-8
<PAGE> 14
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>
A-9
<PAGE> 15
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.
A-10
<PAGE> 16
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.
A-11
<PAGE> 17
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.
A-12
<PAGE> 18
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.
A-13
<PAGE> 19
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.
A-14
<PAGE> 20
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
===== ===== =====
The composition of the income tax provision is as follows:
Current......................................... 3,373 3,063 4,321
Deferred........................................ (680) (513) (256)
----- ----- -----
PROVISION FOR INCOME TAXES...................... 2,693 2,550 4,065
===== ===== =====
</TABLE>
A-15
<PAGE> 21
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.
A-16
<PAGE> 22
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.
A-17
<PAGE> 23
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).
A-18
<PAGE> 24
Appendix B
----------
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
B-1
<PAGE> 25
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 pro forma combined earnings per share reflect the
2,500,000 shares of common stock that Men's Wearhouse will be required to
ultimately issue to the existing shareholders and optionholders of Moores.
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.
B-2
<PAGE> 26
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.
B-3
<PAGE> 27
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
======== ======== ========== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
B-4
<PAGE> 28
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
======== ======== ========== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
B-5
<PAGE> 29
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
======== ======== ===== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
B-6
<PAGE> 30
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 2,500,000 shares of Men's Wearhouse common stock.
B-7
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
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 (incorporated
by reference from Exhibit 2.1 to the Company's
Registration Statement on Form S-3 (Registration No.
333-69979)).
4.1 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. (incorporated by
reference from Exhibit 4.13 to the Company's
Registration Statement on Form S-3 (Registration No.
333-69979)).
4.2 Support Agreement dated February 10, 1999, between The
Men's Wearhouse, Inc., Golden Moores Company, Moores
Retail Group 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.
9.1 Voting Trust Agreement dated February 10, 1999, by and
between The Men's Wearhouse, Inc., Golden Moores
Company, Moores Retail Group Inc. and The Trust Company
of Bank of Montreal.
23.1 Consent of Ernst & Young LLP.
99.1 Press Release of the Company dated February 10, 1999,
announcing the closing of the Combination.
99.2 Press Release of the Company dated February 10, 1999,
announcing the completion of the financing
transactions.
</TABLE>
<PAGE> 1
EXHIBIT 4.2
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of February 10, 1999, 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 18,
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 hundred issued and
outstanding Common Shares.
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.
<PAGE> 2
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.
-2-
<PAGE> 3
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
-3-
<PAGE> 4
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.
-4-
<PAGE> 5
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
-5-
<PAGE> 6
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
-6-
<PAGE> 7
(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
-7-
<PAGE> 8
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> 9
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> 10
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: 212.626.4120
if to the Shareholders:
c/o Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Thomas J. Drago
Facsimile 212.626.4120
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<PAGE> 11
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.
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.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 12
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: /s/ GARY CKODRE
---------------------------------
Name: Gary Ckodre
Title: Vice President - Finance
GOLDEN MOORES COMPANY
By: /s/ GARY CKODRE
---------------------------------
Name: Gary Ckodre
Title: Chief Accounting Officer
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
MGB LIMITED PARTNERSHIP
By: /s/ MICHEL ZELNIK
---------------------------------
Name: Michel Zelnik
Title: President
<PAGE> 13
CAPITAL D'AMERIQUE CDPQ INC.
By: /s/ NORMAND PROVOST
---------------------------------
Name: Normand Provost
Title: President
By: /s/ GINETTE DEPELTEAU
---------------------------------
Name: Ginette Depelteau
Title: Corporate Secretary - Director
CERBERUS INTERNATIONAL, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Manager
ULTRA CERBERUS FUND, LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Manager
STYX INTERNATIONAL LTD.
By: Partridge Hill Overseas Management Ltd.
(Investment Manager)
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Manager
<PAGE> 14
THE LONG HORIZONS OVERSEAS FUND LTD.
By: Old Stand Management L.L.C.
(Investment Manager)
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Managing Member
THE LONG HORIZONS FUND, L.P.
By: Old Stand Associates L.L.C.
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Managing Member
STYX PARTNERS, L.P.
By: Styx Associates, L.L.C.
By: /s/ STEPHEN FEINBERG
---------------------------------
Name: Stephen A. Feinberg
Title: Managing Member
<PAGE> 1
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT (this "Agreement") is entered into as of
February 10, 1999, 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 18,
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 hundred issued and outstanding MG Common Shares.
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> 2
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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<PAGE> 3
"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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<PAGE> 4
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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<PAGE> 5
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:
-5-
<PAGE> 6
(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.
-6-
<PAGE> 7
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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<PAGE> 11
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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<PAGE> 12
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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<PAGE> 13
(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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<PAGE> 16
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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<PAGE> 19
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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<PAGE> 20
(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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<PAGE> 21
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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<PAGE> 22
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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<PAGE> 23
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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<PAGE> 24
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: /s/ GARY CKODRE
------------------------------
Name: Gary Ckodre
Title: Vice President - Finance
GOLDEN MOORES COMPANY
By: /s/ GARY CKODRE
------------------------------
Name: Gary Ckodre
Title: Chief Accounting Officer
MOORES RETAIL GROUP INC.
By: /s/ MICHEL ZELNIK
------------------------------
Name: Michel Zelnik
Title: Chief Executive Officer
THE TRUST COMPANY OF BANK OF
MONTREAL
By: /s/ MARCIA REDWAY
------------------------------
Name: Marcia Redway
Title: Sr. Trust Officer
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent 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 this Form 8-K.
Montreal, Canada /s/ ERNST & YOUNG LLP
February 25, 1999 Chartered Accountants
<PAGE> 1
EXHIBIT 99.1
MEN'S WEARHOUSE COMPLETES ACQUISITION OF
MOORES RETAIL GROUP OF CANADA
FREMONT, Calif. -- (BUSINESS WIRE) -- Feb. 10, 1999 -- Men's Wearhouse, Inc.
(NASDAQ National Market System Symbol: SUIT) today announced that it has
completed the acquisition of Moores Retail Group of Canada.
This acquisition positions Men's Wearhouse as a leading retailer of men's
tailored clothing in North America and gives the company 546 stores throughout
the U.S. and Canada.
The acquisition includes Moores the Suit People, Inc., a chain of approximately
115 men's stores, and Golden Brand Clothing (Canada) Ltd., an integrated
manufacturing facility capable of producing approximately 500,000 jackets and
one million pair of pants annually. This acquisition is expected to add
approximately $125-130 million (U.S.) In sales to The Men's Wearhouse annualized
revenues. The combined workforce will approximate 8,500 people, the consolidated
store count will be 546 and consolidated sales are anticipated to approximate $1
billion (U.S.) in fiscal 1999. The transaction, before transaction costs and
other one-time costs, consists of long-term debt of $85 million (Canadian) and
the issuance of 2.5 million shares of Men's Wearhouse common stock. The
transaction will be accounted for as a pooling of interest.
In a separate news release, the company said it had completed three financing
transactions, including an extension of its existing $125 million (U.S.)
revolving credit facility. The other two transactions, designed to support the
company's Canadian business operations, include $75 million (Canadian) term loan
and a $30 million (Canadian) revolving credit facility.
David Edwab, president of Men's Wearhouse, commented, "We are excited about this
opportunity and welcome the employees of Moores into the Men's Wearhouse family.
Our cultures will complement each other and the management team is focused on a
timely integration. We believe our ability to execute will provide us the
opportunity to capitalize on our combined operating synergies. As a company, we
will continue to focus on identifying strategies and opportunities that will
maximize shareholder value. This is a very special time in our company's history
as we enter the millennium."
Founded in 1961, Moores Retail Group operates an integrated manufacturing
facility of men's jackets and pants and 115 retail stores in 10 Canadian
provinces and in the states of Illinois and Ohio.
Founded in 1973, Men's Wearhouse is one of the largest specialty retailers of
men's tailored clothing in North America. Prior to the transaction, the company
was operating 431 stores in 40 states, including stores in its Value Priced
Clothing division. The company reported sales of $767.9 million in fiscal 1998.
<PAGE> 2
For more information on Men's Wearhouse, contact the company on the World Wide
Web at www.menswearhouse.com.
This press release contains forward looking information. The forward looking
statements are made pursuant to the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
include the company's future growth strategy and may be significantly impacted
by various factors, including unfavorable local, regional and national economic
developments, severe weather conditions, aggressive advertising or marketing
activities of competitors and other factors described herein and in the
company's annual report on Form 10-K for the year ended Jan. 31, 1998 and Form
10-Q for the quarter ended Oct. 31, 1998.
- ---------------
Contact:
The Men's Wearhouse
Neill Davis, 713/592-7200
<PAGE> 1
EXHIBIT 99.2
MEN'S WEARHOUSE ANNOUNCES THREE FINANCING TRANSACTIONS
FREMONT, Calif. -- (BUSINESS WIRE) -- Feb. 10, 1999 -- Men's Wearhouse (Nasdaq
NMS:SUIT - news) today announced the completion of three financing transactions.
These transactions closed in conjunction with the company completing its
acquisition of Moores Retail Group of Canada. Moores operates Moores the Suit
People, Inc., a chain of approximately 115 men's stores, and Golden Brand
Clothing (Canada) Ltd., an integrated manufacturing facility.
The three financing transactions include an extension of the company's existing
$125 million (U.S.) revolving credit facility and two new financings to support
the company's Canadian operations, including a new $75 million (Canadian) term
loan and a new $30 million (Canadian) revolving credit facility.
The $125 million (U.S.) facility, which was originally executed in June 1997,
has been extended until February 2004. In addition, two new banks -- Chase Bank
and First Union Bank -- have joined the original syndicate. This group included
Bank of America (formerly NationsBank) serving as the agent, along with Wells
Fargo Bank, Union Bank of California, Bank of Montreal and Bank of Boston.
The same syndicate executed the new $75 million (Canadian) term loan, while the
new $30 million (Canadian) revolving credit facility has been executed with Bank
of America and Bank of Montreal.
"This involvement by many of North America's leading financial institutions is a
strong endorsement for both our current market position and ongoing growth
strategy, such as the Moores acquisition", said David Edwab, president of Men's
Wearhouse.
"These financings provide us the resources and flexibility to pursue strategies
that will further enhance shareholder value", he continued.
Founded in 1973, Men's Wearhouse is one of North America's largest specialty
retailers of men's tailored business attire. With the completion of the Moores
transaction, the company operates 546 stores in the U.S. and Canada. The stores
carry a full selection of designer, brand name and private label suits, sport
coats, furnishings and accessories.
For more information on Men's Wearhouse, contact the company on the World Wide
Web at www.menswearhouse.com.
This press release contains forward looking information. The forward looking
statements are made pursuant to the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
include the company's future growth strategy and may be
<PAGE> 2
significantly impacted by various factors, including unfavorable local, regional
and national economic developments, severe weather conditions, aggressive
advertising or marketing activities of competitors and other factors described
herein and in the company's annual report on Form 10-K for the year ended Jan.
31, 1998 and Form 10-Q for the quarter ended Oct. 31, 1998.
- ---------------
Contact:
The Men's Wearhouse
Neill Davis, 713/592-7200
