<PAGE> 1
As filed with the Securities and Exchange Commission on April 5, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE MEN'S WEARHOUSE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TEXAS 5600 74-1790172
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GARY CKODRE
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
MICHAEL W. CONLON DAVID M. CARTER
FULBRIGHT & JAWORSKI L.L.P. HUNTON & WILLIAMS
1301 MCKINNEY NATIONSBANK PLAZA
HOUSTON, TEXAS 77010 SUITE 4100
(713) 651-5427 600 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 888-4246
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger of K&G Men's Center, Inc. ("K&G") with a subsidiary of
Registrant pursuant to the Agreement and Plan of Merger dated as of March 3,
1999, described in the proxy statement/prospectus contained herein have been
satisfied. If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_| If this form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. |_| If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) REGISTRATION FEE
- --------------------------- --------------------------- -------------------------- -------------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share............. 4,650,000 N/A $100,611,158 $27,970
</TABLE>
<PAGE> 2
(1) Represents the maximum number of shares of common stock of the Registrant to
be issued in the Merger to holders of common stock of K&G determined in
accordance with the terms of the Agreement and Plan of Merger (0.43 shares
of common stock of the Registrant for each outstanding share of common stock
of K&G) and based on the number of shares of common stock of K&G outstanding
on April 1, 1999.
(2) Reflects the market price of the common stock of K&G to be exchanged for
common stock of the Registrant in connection with the Merger described in
this Registration Statement computed in accordance with Rule 457(c) and Rule
457(f)(1) under the Securities Act of 1933, as amended, based upon the
average of the high and low prices of the common stock of K&G as reported by
the Nasdaq National Market System on April 1, 1999 ($9.813). The proposed
maximum aggregate offering price is estimated solely to determine the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
K&G MEN'S CENTER, INC.
1225 CHATTAHOOCHEE AVENUE, NW
ATLANTA, GEORGIA 30318
PHONE: (404) 351-7987
April , 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of K&G Men's Center, Inc. ("K&G"), which will be held at on , ,
1999 at K&G's headquarters at 1225 Chattahoochee Avenue, NW, Atlanta, Georgia.
The principal business of the meeting will be to consider and vote upon
a proposal to approve an Agreement and Plan of Merger, dated March 3, 1999, by
and among The Men's Wearhouse, Inc. ("TMW"), TMW Combination Company, a newly
formed wholly owned subsidiary of TMW ("Merger Sub"), and K&G, under which TMW
will acquire K&G through a merger of Merger Sub with and into K&G. The merger
agreement provides that, upon completion of the merger, K&G shareholders will
receive between 0.4 and 0.43 of a share (the "Exchange Ratio") of TMW common
stock, par value $.01 per share, for each outstanding share of K&G common stock,
par value $.01 per share. We will determine the final Exchange Ratio by
computing the average closing price per share of TMW common stock, as reported
on the Nasdaq National Market System, for the 15 trading days ending on the
third trading day before the closing date of the merger. If the average closing
price is $32.50 or more, the Exchange Ratio will be 0.4. If the average closing
price is $27.50 or less, the Exchange Ratio will be 0.43. If the average closing
price is between $27.50 and $32.50, the Exchange Ratio will be appropriately
prorated to be between 0.4 and 0.43. If the Exchange Ratio was determined using
the closing price for TMW common stock on April , 1999 (the last practicable
trading day for which information was available prior to the date of this proxy
statement/prospectus), K&G shareholders would receive of a share of TMW common
stock for each share of K&G common stock. As a result, TMW would issue an
aggregate of approximately shares of TMW common stock in exchange for the
outstanding shares of K&G common stock (representing approximately % of the
outstanding shares of TMW common stock) and TMW would reserve approximately
million additional shares of TMW common stock for issuance for outstanding stock
options issued to employees of K&G. After the merger, K&G will be a wholly owned
subsidiary of TMW and TMW shareholders will continue to hold their shares of TMW
common stock. Other business of the meeting will be (i) to elect K&G's Class I
directors to serve a three-year term expiring in 2002 in accordance with K&G's
Articles of Incorporation, (ii) to ratify the appointment of Arthur Andersen LLP
by the board of directors of K&G as the independent public accountants of K&G
and (iii) to transact such other business as may come before the meeting.
A summary of the basic terms and conditions of the merger, certain
financial and other information relating to TMW and K&G and a copy of the merger
agreement are set forth in the enclosed proxy statement/prospectus. Also
enclosed are copies of K&G's annual report on Form 10-K for the year ended
January 31, 1999 and TMW's annual report on Form 10-K for the year ended January
30, 1999. Please review and consider the enclosed materials carefully.
The board of directors of K&G has unanimously approved the merger
agreement and the related transactions. THE BOARD OF DIRECTORS OF K&G BELIEVES
THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF K&G AND THE SHAREHOLDERS OF
K&G AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ITS APPROVAL, AND "FOR" EACH
OF THE OTHER PROPOSALS INCLUDED HEREIN.
<PAGE> 4
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED AND VOTED. ACCORDINGLY, WE ASK THAT YOU MARK, DATE,
SIGN AND RETURN YOUR PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU HAVE
MULTIPLE SHAREHOLDER ACCOUNTS AND RECEIVE MORE THAN ONE SET OF THESE MATERIALS,
PLEASE BE SURE TO VOTE EACH PROXY AND RETURN IT IN THE RESPECTIVE POSTAGE-PAID
ENVELOPE PROVIDED.
Thank you for your continued interest and cooperation.
Very truly yours,
Stephen H. Greenspan
Chairman of the Board, President and Chief Executive
Officer
<PAGE> 5
K&G MEN'S CENTER, INC.
1225 CHATTAHOOCHEE AVENUE, NW
ATLANTA, GEORGIA 30318
PHONE: (404) 351-7987
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 1999 Annual Meeting of Shareholders of K&G Men's Center, Inc.
("K&G") will be held at on , , 1999 at K&G's
headquarters at 1225 Chattahoochee Avenue, NW, Atlanta, Georgia 30318.
The meeting is called for the following purposes:
(1) To consider and vote upon a proposal to approve an Agreement and
Plan of Merger, dated March 3, 1999, by and among The Men's
Wearhouse, Inc. ("TMW"), TMW Combination Company, a newly formed
wholly owned subsidiary of TMW ("Merger Sub"), and K&G. Under the
merger agreement, TMW will acquire K&G through a merger of Merger
Sub with and into K&G. The merger agreement provides that, upon
completion of the merger, K&G shareholders will receive a
fraction of a share of TMW common stock in exchange for each
outstanding share of K&G common stock.
(2) To elect K&G's Class I directors to serve a three-year term
expiring in 2002 in accordance with K&G's Articles of
Incorporation;
(3) To ratify the appointment of Arthur Andersen LLP by the board of
directors of K&G as the independent public accountants of K&G;
and
(4) To transact such other business as may properly come before the
meeting.
THE BOARD OF DIRECTORS OF K&G HAS CAREFULLY CONSIDERED THE TERMS OF THE
MERGER AGREEMENT AND THE MERGER AND BELIEVES THAT THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, K&G AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS OF K&G
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER, AND FOR EACH OF
THE OTHER PROPOSALS INCLUDED HEREIN.
<PAGE> 6
The board of directors has fixed the close of business on April 20,
1999, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the annual meeting or any adjournment or postponement
thereof. Only shareholders of record at the close of business on the record date
are entitled to notice of and to vote at the annual meeting. A complete list of
shareholders will be available for examination at the annual meeting and at
K&G's offices at 1225 Chattahoochee Avenue, N.W., Atlanta, Georgia, during
ordinary business hours, after , 1999, for the examination by any K&G
shareholder for any purpose related to the annual meeting
By Order of the Board of Directors,
John C. Dancu, Assistant Secretary
April , 1999
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN
IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 7
THE MEN'S WEARHOUSE, INC.
(COMMON STOCK, PAR VALUE $.01 PER SHARE)
PROSPECTUS
K&G MEN'S CENTER, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD , 1999
This proxy statement/prospectus relates to the 1999 Annual Meeting of
Shareholders of K&G Men's Center, Inc., a Georgia corporation ("K&G") at which
K&G's shareholders will be asked to consider, among other things, a proposed
merger pursuant to the terms of an Agreement and Plan of Merger, dated March 3,
1999, by and among The Men's Wearhouse, Inc., a Texas corporation ("TMW"), TMW
Combination Company, a Georgia corporation and a wholly owned subsidiary of TMW
("Merger Sub"), and K&G. Under the merger agreement, each shareholder of K&G
will receive between 0.4 and 0.43 of a share of TMW common stock in exchange for
each share of K&G common stock that they own on the record date. In the merger,
Merger Sub will be merged into K&G. K&G will survive and become a wholly owned
subsidiary of TMW.
TMW has filed a registration statement on Form S-4 under the Securities
Act of 1933, as amended, covering the number of shares of TMW common stock that
TMW will need to issue to shareholders of K&G in the merger (between
approximately 4.1 million shares and 4.3 million shares with an approximate
aggregate market value of between $ and $ ). This proxy
statement/prospectus constitutes the prospectus that TMW files as part of its
registration statement and also constitutes the proxy statement that K&G
furnishes to its shareholders in connection with the solicitation of proxies by
the board of directors of K&G for use at the Annual Meeting of the Shareholders
of K&G scheduled to be held on , 1999, or at any adjournment or postponement of
that meeting.
This proxy statement/prospectus and the accompanying form of proxy,
along with the enclosed copies of K&G's 1999 Annual Report to Shareholders and
TMW's annual report on Form 10-K for the year ended January 30, 1999, are first
being mailed to shareholders of K&G on or about , 1999.
On , 1999, the closing price of TMW common stock on the Nasdaq
National Market System was $ per share and the closing price of K&G
common stock on Nasdaq was $ o per share. The equivalent value of the K&G common
stock (derived by multiplying the closing price of TMW common stock by an
exchange ratio of [0.415]) was $ on that date.
AN INVESTMENT IN TMW COMMON STOCK AFTER THE MERGER INVOLVES RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER AND THE SHARES OF TMW
COMMON STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this proxy statement/prospectus is April , 1999.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION.............................................................. iii
SUMMARY.......................................................................................... 1
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION SOURCES OF
INFORMATION...................................................................................... 7
TMW Summary Consolidated Financial and Operating Information..................................... 8
K&G Selected Consolidated Financial Data......................................................... 10
Summary Unaudited Pro Forma Combined Financial Information....................................... 12
RISK FACTORS..................................................................................... 13
QUESTIONS AND ANSWERS ABOUT THE MERGER FOR K&G SHAREHOLDERS...................................... 20
COMPARATIVE PER SHARE DATA....................................................................... 23
MARKET PRICES AND DIVIDEND INFORMATION........................................................... 24
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS........................................ 25
THE COMPANIES.................................................................................... 26
TMW and its Subsidiaries......................................................................... 26
Merger Sub....................................................................................... 28
K&G.............................................................................................. 28
THE ANNUAL MEETING OF K&G SHAREHOLDERS........................................................... 30
Time, Date and Place............................................................................. 30
Purpose of the Annual Meeting.................................................................... 30
Record Date; Voting Rights; Vote Required for Approval........................................... 30
Proxies.......................................................................................... 30
Availability of Accountants...................................................................... 32
THE MERGER AND RELATED TRANSACTIONS.............................................................. 32
The Merger....................................................................................... 32
Background of the Merger......................................................................... 33
K&G's Reasons for the Merger..................................................................... 35
Recommendation of the K&G Board of Directors..................................................... 36
Opinion of NationsBanc to the Directors of K&G................................................... 36
Interests of Certain Persons in the Merger....................................................... 43
Certain United States Federal Income Tax Consequences............................................ 44
Accounting Treatment............................................................................. 46
Governmental and Regulatory Matters.............................................................. 46
No Appraisal Rights.............................................................................. 47
Federal Securities Law Consequences; Resale Restrictions......................................... 47
CERTAIN TERMS OF THE MERGER AGREEMENT............................................................ 47
The Merger....................................................................................... 47
Certain Covenants................................................................................ 48
Certain Representations and Warranties........................................................... 50
Conditions to the Merger......................................................................... 50
Termination of the Merger Agreement.............................................................. 52
Expenses......................................................................................... 53
Amendments....................................................................................... 53
TMW SELECTED CONSOLIDATED FINANCIAL INFORMATION.................................................. 54
K&G SELECTED CONSOLIDATED FINANCIAL DATA......................................................... 56
PRO FORMA COMBINED FINANCIAL STATEMENTS BASIS OF PRESENTATION.................................... 58
</TABLE>
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<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Unaudited Pro Forma Combined Balance Sheet, January 30, 1999................................................. 60
Unaudited Pro Forma Combined Statement of Earnings for the Year Ended January 30, 1999....................... 61
Unaudited Pro Forma Combined Statement of Earnings for the Year Ended January 31, 1998....................... 62
Unaudited Pro Forma Combined Statement of Earnings for the Year Ended February 1, 1997....................... 63
Notes to Pro Forma Combined Financial Statements............................................................. 64
DESCRIPTION OF TMW CAPITAL STOCK............................................................................. 66
Common Stock................................................................................................. 66
Preferred Stock.............................................................................................. 66
Limitation of Director Liability............................................................................. 67
Transfer Agent and Registrar................................................................................. 67
Comparative Rights of TMW and K&G Shareholders............................................................... 67
TMW MANAGEMENT INFORMATION................................................................................... 70
Board of Directors........................................................................................... 70
Executive Officers........................................................................................... 71
Executive Compensation....................................................................................... 72
Certain Relationships and Related Transactions............................................................... 77
Security Ownership of Certain Beneficial Owners and Management of TMW........................................ 78
K&G ADDITIONAL PROPOSALS AND MANAGEMENT INFORMATION.......................................................... 81
PROPOSAL - ELECTION OF DIRECTORS............................................................................. 81
Nominee for Election - Term Expiring 2002 - Class I.......................................................... 81
Additional Information Concerning the Board of Directors..................................................... 82
Executive Officers........................................................................................... 84
Employment Agreements........................................................................................ 84
Compliance with Section 16(a) of the Securities Exchange Act of 1934......................................... 85
Beneficial Ownership of K&G Common Stock..................................................................... 86
Security Ownership of Certain Beneficial Owners and Management of K&G........................................ 86
Executive Compensation....................................................................................... 87
Report on Executive Compensation............................................................................. 87
Compensation Committee Interlocks and Insider Participation.................................................. 89
Certain Relationships and Related Transactions............................................................... 89
Table I - Summary Compensation Table......................................................................... 90
Table II - Option Grants in Fiscal 1998...................................................................... 90
Table III - Option Exercises in Fiscal 1998 and Fiscal 1998 Year-End Option Values........................... 91
Performance Graph............................................................................................ 91
PROPOSAL - RATIFICATION OF APPOINTMENT OF K&G'S INDEPENDENT PUBLIC
ACCOUNTANTS.................................................................................................. 92
SHAREHOLDER PROPOSALS........................................................................................ 92
ANNUAL REPORT................................................................................................ 92
LEGAL MATTERS................................................................................................ 92
EXPERTS...................................................................................................... 92
ANNEX A - Agreement and Plan of Merger....................................................................... A-i
ANNEX B - Opinion of NationsBanc Montgomery Securities LLC................................................... B-1
</TABLE>
- ii -
<PAGE> 10
WHERE YOU CAN FIND MORE INFORMATION
TMW and K&G are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance with the Exchange
Act file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information TMW and K&G file at the SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, New York, New York 10048 and 500 West Madison, 14th Floor,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC- 0300 for further
information on the public reference rooms. TMW and K&G SEC filings also are
available to the public from commercial document retrieval services and at the
world wide web site maintained by the SEC at http://www.sec.gov. You may also
inspect such reports, proxy statements and other information concerning TMW and
K&G at the offices of the Nasdaq National Market, 9801 Washingtonian Boulevard,
Gaithersburg, Maryland, 20898.
TMW has filed the TMW Registration Statement on Form S-4 with the SEC
to register the TMW common stock to be issued in the merger. This proxy
statement/prospectus will be a part of the TMW Registration Statement and will
constitute a prospectus of TMW in addition to being a proxy statement of K&G for
the annual meeting.
As allowed by SEC rules, this proxy statement/prospectus does not
contain all the information you can find in the TMW Registration Statement or
the exhibits to the TMW Registration Statement.
The SEC allows TMW and K&G to "incorporate by reference" information
into this proxy statement/prospectus. This means that TMW and K&G can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this proxy statement/prospectus, except for any information
superseded by information in this proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below.
TMW or K&G has previously filed these documents with the SEC. These documents
contain important information about TMW or K&G, as applicable.
The following documents filed by TMW with the SEC (File No. 0-20036)
are incorporated herein by this reference:
o TMW's Annual Report on Form 10-K for the year ended January 30, 1999,
a copy of which is enclosed with this proxy statement/prospectus;
o TMW's Current Reports on Form 8-K, which were filed with the SEC on
February 25, 1999 and March 5, 1999;
o TMW's Definitive Proxy Statement for the Annual Meeting held June 24,
1998, which was filed with the SEC on May 19, 1998 as part of
Schedule 14A; and
o The description of TMW's common stock contained in its Form 8-A,
dated April 3, 1993.
The following documents filed by K&G with the SEC (File No.0-27348) are
incorporated herein by this reference:
- iii -
<PAGE> 11
o K&G's Annual Report on Form 10-K for the year ended January 31,
1999; and
o K&G's Current Report on Form 8-K which was filed with the SEC on
March 10, 1999.
TMW and K&G also are incorporating by reference all additional
documents that either files with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act between the date of this proxy statement/prospectus
and the date of the annual meeting.
If you are a shareholder of TMW or K&G, you may have already received
some of the documents incorporated by reference, but you can obtain any of them
from TMW or K&G, as applicable, or the SEC. Documents incorporated by reference
are available from TMW or K&G, as applicable, without charge, excluding exhibits
unless those exhibits are specifically incorporated by reference as an exhibit
in this proxy statement/prospectus. Shareholders may obtain documents that are
referred to or that are incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone at the
following addresses:
If from TMW: If from K&G:
5803 Glenmont Drive 1225 Chattahoochee Avenue, N.W.
Houston, Texas 77081 Atlanta, Georgia 30318
Attn: Investor Relations Department Attn: Investor Relations Department
Tel: (713) 592-7200 Tel: (404) 351-7987
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY , 1999
TO RECEIVE THEM BEFORE THE ANNUAL MEETING.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH DECIDING YOUR
VOTE UPON THE APPROVAL OF THE MERGER AGREEMENT AND THE MERGER. NEITHER TMW NOR
K&G HAS AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS
IS DATED , 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO
SHAREHOLDERS NOR THE ISSUANCE OF TMW COMMON STOCK IN THE MERGER SHALL CREATE
ANY IMPLICATION TO THE CONTRARY.
- iv -
<PAGE> 12
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger and related transactions more fully,
you should carefully read this entire document and the documents referred to
under the caption "Where You Can Find More Information" on page iii.
THE COMPANIES (SEE PAGE 26)
TMW. The Men's Wearhouse, Inc. is a Texas corporation organized in
1974. As used in this proxy statement/prospectus, "TMW" means The Men's
Wearhouse, Inc., and the "Company" means TMW and its subsidiaries, including
Value Priced Clothing, Inc. ("VPC") and Moores Retail Group Inc. and its
subsidiaries ("Moores"). The Company is one of the largest off-price specialty
retailers of men's tailored business attire in North America. Its principal
executive offices are located at:
THE MEN'S WEARHOUSE, INC. THE MEN'S WEARHOUSE, INC.
40650 Encyclopedia Circle 5803 Glenmont Drive
Fremont, California 94538 Houston, Texas 77081
(510) 657-9821 (713) 592-7200
The Company operates its stores in the United States in two formats.
The first format, Men's Wearhouse stores, targets middle and upper middle income
men by offering quality merchandise at everyday low prices. At March 26, 1999,
TMW operated 413 Men's Wearhouse stores in 40 states and the District of
Columbia. These stores are referred to as "Men's Wearhouse stores" or
"traditional stores".
The Company launched the second format, VPC, in late 1996 to address
the market for a more price sensitive customer. VPC operates stores under the
names "C&R", "SuitMax" and "Suit Warehouse". The stores operated by VPC are
referred to in this document as "VPC stores". At March 26, 1999, the Company
operated 17 VPC stores in five states, including one C&R store which will be
converted to a SuitMax store and excluding three C&R stores that the Company is
in the process of closing.
On February 10, 1999, TMW acquired Moores for securities exchangeable
for an aggregate of 2.5 million shares of TMW common stock. Moores stores offer
quality men's tailored clothing at everyday low prices. At March 26, 1999,
through its subsidiary, Moores The Suit People Inc., Moores operated 109 stores
throughout Canada. In addition, Golden Brand Clothing (Canada) Ltd., a wholly
owned subsidiary of Moores, operates a manufacturing facility in Montreal,
Canada which manufactures nearly all of the tailored clothing offered for sale
in the Moores stores. Moores also operated eight stores in the United States;
however, the Company expects to close seven of these stores and to convert the
eighth store to a Men's Wearhouse store to eliminate duplicate store sites in
existing Men's Wearhouse markets. The Company expects to incur costs of
approximately $3 million in connection with the closing of these stores.
In this document, Moores Retail Group Inc. and its wholly owned
subsidiaries are collectively referred to as "Moores". The Canadian stores
operated by Moores are referred to as "Moores stores".
K&G. K&G was incorporated in Georgia in 1990. K&G is a superstore
retailer of men's apparel and accessories to more price sensitive customers.
Thus, K&G is more similar to VPC than to Men's Wearhouse. Its principal
executive offices are located at:
-1-
<PAGE> 13
K&G MEN'S CENTER, INC.
1225 Chattahoochee Avenue, N.W.
Atlanta, Georgia 30318
(404) 351-7987
THE MERGER AND RELATED TRANSACTIONS (SEE PAGE 32)
Merger Sub will be merged into K&G. K&G will be the surviving
corporation and will become a wholly owned subsidiary of TMW.
The merger agreement that provides for the merger and related
transactions is attached as Annex A to this proxy statement/prospectus. We
encourage you to read carefully that document in its entirety.
WHAT K&G SHAREHOLDERS WILL RECEIVE
If the merger is completed, K&G shareholders will receive between 0.4
and 0.43 of a share of TMW common stock for each share of K&G common stock that
they own. The exact exchange ratio will depend on the average trading price for
the TMW common stock during a 15 trading day period ending on the third trading
day before the merger.
Set forth below is a table showing a range of prices of TMW common
stock, along with entries showing the corresponding exchange ratios and
corresponding valuations of a share of K&G common stock. The table also
highlights the minimum and maximum Exchange Ratios and the point at which K&G's
right to elect not to proceed with the merger ("walk-away right") would be
effective:
<TABLE>
<CAPTION>
Average
Closing Price Value of a
of TMW Exchange Share of K&G
Common Stock Ratio Common Stock
------------- -------- -------------
<S> <C> <C> <C>
$36.00 .4 $14.40
34.00 .4 13.60
Exchange
Ratio >> 32.50 .4 13.00
Limitation
30.00 .415 12.45
28.00 .427 11.96
Exchange
Ratio >> 27.50 .43 11.83
Limitation
26.00 .43 11.18
24.00 .43 10.32
22.00 .43 9.46
Walk
Away >> 20.00 .43 8.60
Right
</TABLE>
For a shareholder who owns 100 shares of K&G common stock, if the
exchange ratio was .427, for example, this would translate into 42.7 shares of
TMW common stock. Since cash will be paid instead
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<PAGE> 14
of fractional shares, that K&G shareholder would receive 42 shares of TMW common
stock and a check in the amount equal to the fractional share multiplied by
TMW's closing market price on the trading day before completion of the merger.
The method for calculating the exchange ratio is explained in more
detail in "The Merger and Related Transactions-The Merger" beginning on page 32.
K&G SHAREHOLDERS' APPROVAL
The K&G shareholders will be asked to approve the merger agreement and
the merger. Approval requires the favorable vote of holders of a majority of the
outstanding shares of K&G common stock.
VOTING BY K&G DIRECTORS AND EXECUTIVE OFFICERS
On the record date, the directors and executive officers of K&G,
including their affiliates, had voting power with respect to a total of
2,242,549 shares of K&G common stock, or approximately 22% of the shares of K&G
common stock outstanding at that date.
K&G currently expects that its directors and executive officers will
vote their shares of K&G common stock FOR the proposal to approve the merger
agreement.
RECOMMENDATION TO K&G SHAREHOLDERS
The board of directors of K&G believes the merger is in the best
interests of K&G and its shareholders and recommends that you vote "FOR" the
merger proposal.
In reaching its recommendation in favor of the merger, the K&G board of
directors considered the opportunities for K&G as a separate company and as
combined with TMW, as well as other factors, which are discussed in "The Merger
and Related Transactions-K&G's Reasons for the Merger" beginning on page 35.
OPINION OF NATIONSBANC TO THE DIRECTORS OF K&G (SEE PAGE 36)
In deciding to approve the merger, the board of directors of K&G
received and considered the opinion of NationsBanc Montgomery Securities LLC
(NationsBanc) as to the fairness, from a financial point of view, of the merger
consideration as of March 3, 1999, the date the board of directors of K&G
considered and approved the TMW merger proposal. The opinion of NationsBanc was
addressed solely to the directors of K&G. The opinion contains certain important
qualifications and a description of assumptions made, matters considered, areas
of reliance on others and limitations on the review undertaken by NationsBanc. A
copy of the opinion is attached as Annex B to this proxy statement/prospectus. A
summary of that opinion is set forth on page 36.
ADDITIONAL CONSIDERATIONS FOR K&G SHAREHOLDERS
Interests of K&G Officers and Directors in the Merger (see page 43).
When considering the recommendations of the board of directors of K&G, you
should be aware that officers and directors of K&G have interests and
arrangements that may be different from your interests as shareholders:
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<PAGE> 15
o If the merger closes as currently expected, TMW has agreed to name
Mr. Greenspan Chief Executive Officer of the combined businesses of
K&G and VPC pursuant to an employment agreement with an initial term
of three years. Mr. Greenspan's annual base salary would be $250,000.
o If the merger closes as currently expected, TMW intends to elect
Mr. Greenspan to its board of directors.
o Pursuant to a termination agreement between K&G, TMW and Mr. Dancu,
Mr. Dancu is entitled to be paid $400,000 by K&G if the merger closes
as expected.
o Certain unvested stock options held by directors of K&G will vest
upon consummation of the merger.
CONDITIONS TO THE MERGER AND RELATED TRANSACTIONS (SEE PAGE 50)
We will complete the merger and related transactions only if certain
conditions, including the following, are satisfied or waived:
o The K&G shareholders approve the merger.
o Nasdaq approves for trading the shares of TMW common stock to be
issued in the merger.
o We receive all material governmental and other consents and approvals
required (including those under the Hart-Scott-Rodino Antitrust
Improvements Act).
o We receive favorable letters from the respective independent
accountants of TMW and K&G to the effect that the merger qualifies to
be accounted for as a pooling-of-interests.
o We receive favorable tax opinions from the respective counsel of TMW
and K&G.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 52)
We may mutually agree to terminate the merger agreement without
completing the merger. The merger agreement may also be terminated in certain
other circumstances, including the following:
o Either TMW or K&G may terminate the merger agreement if (i) the
shareholders of K&G do not vote to approve the merger, (ii) a court
or government authority has acted to prevent the merger or (iii) the
merger has not been completed by August 31, 1999.
o K&G may terminate the merger agreement if the average closing price
of TMW common stock for the 15 trading days ending on the third
trading day before the closing date of the merger is less than $20.00
and K&G pays TMW $750,000. This is sometimes referred to as K&G's
walk away right.
o K&G may terminate the merger agreement if it receives another
proposal to acquire all of the K&G common stock or all of the assets
of K&G and K&G's board of directors determines in good faith that the
other proposal is more favorable to K&G shareholders than the merger.
-4-
<PAGE> 16
o TMW may terminate the merger agreement if the K&G board of directors
withdraws or modifies its recommendation of the merger agreement or
approves or recommends that K&G shareholders approve another proposal
to acquire a 10% or greater equity interest in K&G.
TERMINATION FEE (SEE PAGE 53)
If the merger agreement is terminated for certain reasons, as explained
on page 53, K&G must pay TMW a termination fee of $3 million.
REGULATORY APPROVALS (SEE PAGE 46)
We have made filings and taken other actions necessary to obtain
approvals from certain regulatory authorities, including antitrust authorities,
in connection with the merger. The initial filings under the Hart-Scott-Rodino
Antitrust Improvements Act were made on March 31, 1999. We expect to obtain all
necessary regulatory approvals before the annual meeting. However, it is not
certain that we will obtain all required regulatory approvals by then. Any
approvals that we receive may be subject to conditions that could be detrimental
to TMW or K&G.
ACCOUNTING TREATMENT AND CONSIDERATIONS (SEE PAGE 46)
We expect to account for the merger as a "pooling-of-interests." As a
result, the historical financial statements for periods prior to the merger will
be restated as though TMW and K&G had been combined from inception.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 44)
The merger is conditioned on the receipt of opinions from legal counsel
that, among other things:
o The merger qualifies as a tax-free reorganization.
o No gain or loss will be recognized by K&G's shareholders in
connection with the merger, except with respect to cash received
instead of fractional shares.
Tax matters are complicated, and the tax consequences of the proposed
transactions to you will depend on the facts of your own situation. You should
consult your own tax advisors for a full understanding of the tax consequences
to you of the merger.
NO APPRAISAL RIGHTS (SEE PAGE 47)
Under Georgia law, K&G shareholders will not have any right to an
appraisal of the value of their shares in connection with the merger.
K&G MARKET PRICE INFORMATION (SEE PAGE 24)
K&G common stock is listed on the Nasdaq National Market System. On
March 3, 1999, the last full trading day prior to the public announcement of the
proposed merger, K&G common stock closed at $8.38 per share. On March 31, 1999,
K&G common stock closed at $9.94 per share.
-5-
<PAGE> 17
TMW MARKET PRICE INFORMATION (SEE PAGE 24)
TMW common stock is listed on the Nasdaq National Market System. On
March 3, 1999, the last full trading day prior to the public announcement of the
proposed merger, TMW common stock closed at $26.75 per share. On March 31, 1999,
TMW common stock closed at $28.88 per share.
LISTING OF TMW COMMON STOCK (SEE PAGE 50)
We will apply to list on Nasdaq the TMW common stock to be delivered to
K&G shareholders under the merger agreement. The ticker symbol for the TMW
common stock on Nasdaq is "SUIT".
ANNUAL MEETING (SEE PAGE 30)
At the Annual Meeting, K&G shareholders are being asked to elect
directors and ratify the appointment of independent public accountants, in
addition to voting on the merger.
-6-
<PAGE> 18
SUMMARY HISTORICAL AND
PRO FORMA FINANCIAL INFORMATION
SOURCES OF INFORMATION
TMW and K&G are providing the following summary financial information
to help you in your analysis of the financial aspects of the proposed merger.
TMW and K&G derived this information from the audited historical and the
unaudited pro forma combined financial statements for the periods presented. The
information is only a summary and you should read it in conjunction with the
financial information included or incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page iii,
"TMW Selected Consolidated Financial Information" on page 54, "K&G Selected
Consolidated Financial Data" on page 56 and "Pro Forma Combined Financial
Statements" on page 58.
On February 10, 1999, TMW acquired Moores Retail Group Inc., a New
Brunswick, Canada corporation ("Moores"), in exchange for securities
exchangeable for an aggregate of 2.5 million shares of TMW common stock. Moores
operated 107 men's tailored clothing stores in Canada and eight stores in the
United States as of that date. Moores also operates a manufacturing facility in
Montreal, Canada, which manufactures nearly all the tailored clothing offered
for sale in the Moores stores.
In connection with the closing of the Moores transaction, TMW repaid
approximately US $59 million of Moores' existing indebtedness. At the same time
TMW closed the Moores combination, TMW entered into two new Canadian credit
facilities for CAN $105 million (US $70 million) to fund the repayment of
Moores' debt and to provide working capital for the ongoing needs of Moores.
PREPARATION OF THE SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined financial information is presented to
show you how TMW might have looked if the companies had been combined for the
periods presented. TMW and K&G prepared the pro forma financial information
using the pooling-of-interests method of accounting. See "The Merger and Related
Transactions-Accounting Treatment" on page 46.
If the companies had been combined in the past, they might have
performed differently. You should not rely on the pro forma financial
information as an indication of the results that TMW would have achieved if the
merger had taken place earlier or the future results that TMW will experience
after the merger.
MERGER-RELATED EXPENSES
TMW and K&G estimate that the merger and related transactions will
result in fees and expenses totaling approximately $1.7 million, net of income
tax benefit of $0.3 million, which will be expensed upon closing of the merger.
After the merger, TMW may incur charges and expenses relating to integrating the
operations of K&G. We did not adjust the summary pro forma information for these
charges and expenses or for operating efficiencies that TMW may realize as a
result of the merger.
-7-
<PAGE> 19
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION OF
THE MEN'S WEARHOUSE, INC.
The following summary of TMW historical consolidated financial
information is derived from and should be read in conjunction with TMW's
consolidated financial information incorporated by reference herein. References
herein to years are to TMW's 52- or 53-week fiscal year, which ends on the
Saturday nearest January 31 in the following calendar year. For example,
references to "1998" mean the fiscal year ended January 30, 1999. All fiscal
years for which financial information of TMW is included in this proxy
statement/prospectus had 52 weeks, except for 1995, which had 53 weeks.
The table below also includes TMW/Moores pro forma summary consolidated
financial information in order to give effect to TMW's combination on a
pooling-of-interests basis with Moores Retail Group Inc. ("Moores") on February
10, 1999. The TMW/Moores pro forma statement of earnings and operating
information assumes the combination of the two entities occurred at the
beginning of fiscal 1997 and that 2.5 million shares of TMW common stock were
issued at that time. No information is presented for prior years as Moores
commenced operations on December 23, 1996. Moores' operating results for the
40-day period in fiscal 1996 were not significant. The TMW/Moores pro forma
balance sheet information assumes that TMW and Moores were combined on January
30, 1999 and reflects adjustments that give effect to nonrecurring charges
directly attributable to the combination, as well as to the effects of
refinancing approximately US $59 million of Moores' existing indebtedness at the
date of the combination. See "Unaudited Pro Forma Combined Financial Statements"
on page 60.
<TABLE>
<CAPTION>
TMW/MOORES
TMW HISTORICAL PRO FORMA
YEAR YEAR
1994 1995 1996 1997 1998 1997 1998
-------- --------- -------- --------- --------- --------- ---------
(Dollars and shares in thousands, except per share and per square foot data.)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales $317,127 $ 406,343 $483,547 $ 631,110 $ 767,922 $ 762,524 $ 898,597
Gross margin 121,878 157,615 188,366 242,593 299,735 291,256 348,927
Operating income 22,375 30,606 38,134 51,530 71,682 64,897 85,711
Net earnings before extraordinary item 12,108 16,508 21,143 28,883 40,920 30,951 43,913
Basic earnings per share of common stock(1) $ 0.43 $ 0.55 $ 0.67 $ 0.89 $ 1.21 $ 0.89 $ 1.21
Diluted earnings per share of common stock(1) $ 0.42 $ 0.54 $ 0.67 $ 0.87 $ 1.17 $ 0.87 $ 1.17
Weighted average shares outstanding(1) 28,216 29,821 31,354 32,343 33,849 34,843 36,349
Weighted average shares outstanding
plus dilutive potential common shares(1) 28,744 30,339 34,101 35,384 36,075 37,884 38,575
OPERATING INFORMATION:
Percentage increase in comparable
store sales(2):
TMW 8.4% 6.8% 3.9% 8.5% 10.4% 8.5% 10.4%
Moores 4.5% 2.2%
Average square footage - all stores(3):
TMW 4,553 4,687 4,863 5,097 5,297 5,097 5,297
Moores 5,997 5,973
Average sales per square foot of selling
space(4):
TMW $ 406 $ 416 $ 413 $ 420 $ 437 $ 420 $ 437
Moores $ 228 $ 234
Number of stores:
Open at beginning of period 183 231 278 345 396 443 501
Opened 48 48 50 50 47 57 57
Acquired -- -- 17 6 4 6 4
Closed -- (1) -- (5) (16) (5) (16)
Open at end of period 231 278 345 396 431 501 546
Capital expenditures $ 23,736 $ 22,538 $ 26,222 $ 27,380 $ 46,247 $ 30,564 $ 50,050
</TABLE>
-8-
<PAGE> 20
<TABLE>
<CAPTION>
Jan. 28, Feb. 3, Feb. 1, Jan. 31, Jan. 30, Jan. 30,
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital $ 68,078 $ 88,798 $136,837 $182,561 $174,055 $198,208
Total assets 160,494 204,105 295,478 379,415 403,732 473,549
Long-term debt(5) 24,575 4,250 57,500 57,500 -- 56,326
Shareholders' equity 84,944 136,961 159,129 220,048 298,218 297,763
</TABLE>
(1) All periods have been adjusted to give effect to a 50% stock dividend
effected on November 15, 1995 and a 50% stock dividend effected on June
19, 1998. Basic and diluted earnings per share are based on net
earnings before extraordinary item.
(2) Comparable store sales data is calculated by excluding the net sales of
a store for any month of one period if the store was not open
throughout the same month of the prior period.
(3) Average square footage for all stores is calculated by dividing the
total square footage for all stores open at the end of the period by
the number of stores open at the end of such period.
(4) Average sales per square foot of selling space is calculated by
dividing total selling square footage for all stores open the entire
period into total sales for those stores. All amounts presented for
Moores have been translated from Canadian dollars at the average
exchange rate for the 1998 fiscal year.
(5) February 1, 1997 and January 31, 1998 balances represent the 5 1/4%
Convertible Subordinated Notes Due 2003. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations Liquidity
and Capital Resources" in the TMW Annual Report on Form 10-K which is
incorporated by reference herein and has been mailed herewith for a
discussion of the redemption of the Notes.
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<PAGE> 21
K&G MEN'S CENTER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The selected consolidated financial data below should be read in
conjunction with K&G's Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein from K&G's Annual Report on Form
10-K for the year ended January 31, 1999. The statement of earnings and balance
sheet data set forth below for the years ended February 2, 1997 (fiscal 1996),
February 1, 1998 (fiscal 1997) and January 31,1999 (fiscal 1998), and as of
those dates have been derived from K&G's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, K&G's independent public
accountants. All of the share and per share information set forth below has been
retroactively adjusted to give effect to a 3-for-2 stock split effected April
25, 1997.
<TABLE>
<CAPTION>
Year
-------
1994 1995 1996 1997 1998
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales $ 49,801 $60,027 $88,104 $112,795 $139,234
Gross margin 11,557 14,433 20,760 26,282 32,153
Operating income 3,722 5,138 7,008 9,607 9,536
Net earnings 2,298 3,186 4,584 6,383 6,229
Basic earnings per share of common stock $ 0.32 $ 0.40 $ 0.47 $ 0.63 $ 0.61
Diluted earnings per share of common stock $ 0.32 $ 0.40 $ 0.47 $ 0.63 $ 0.61
Weighted average shares outstanding 7,245 7,875 9,682 10,118 10,207
Weighted average shares outstanding plus dilutive
potential common shares 7,245 7,875 9,787 10,211 10,207
OPERATING INFORMATION:
Percentage increase in comparable store sales (1) 17.2% 11.9% 12.4% 13.0% 5.7%
Average square footage - all stores (2) 16,966 17,000 17,207 17,543 17,839
Average sales per square foot of selling space (3) $ 539 $ 517 $ 436 $ 404 $ 363
Number of stores:
Open at beginning of period 7 9 11 17 25
Opened 2 3 6 8 8
Closed (1)
Open at end of period 9 11 17 25 33
Capital expenditures $ 367 $ 885 $ 1,128 $ 1,261 $ 3,424
BALANCE SHEET INFORMATION(4):
Working capital $ 5,601 $ 7,813 $29,305 $ 35,025 $ 41,359
Total assets 12,464 17,203 42,384 47,931 57,230
Long-term debt 895 205 205 205 205
Shareholders' equity 6,188 2,643 31,280 37,817 46,797
</TABLE>
(1) New stores become comparable stores beginning in their fourteenth full
month of operation.
(2) Average square footage for all stores is calculated by dividing the total
square footage for all stores open at the end of the period by the number
of stores open at the end of such period.
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<PAGE> 22
(3) Average sales per square foot of selling area is calculated by dividing
selling square footage for all stores open the entire period into net sales
for those stores. Selling area excludes administrative, storage,
alterations and fitting areas.
(4) K&G effected its initial public offering on January 24, 1996 (before fiscal
1995 year end). This transaction closed on January 30, 1996 (after year
end). The transaction has not been reflected in K&G's financial statements
as of January 28, 1996.
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<PAGE> 23
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary unaudited pro forma combined financial
information of TMW and K&G is presented to give effect to the merger under the
pooling-of-interests accounting method and assumes that the merger had occurred
at the beginning of the earliest period presented for the statement of earnings
information and as of the end of each period for the balance sheet information.
The pro forma information presented for 1997 and 1998 also gives effect to the
February 10, 1999 combination of TMW and Moores on a pooling-of-interests basis.
See "Summary Historical and Pro Forma Financial Information Sources of
Information" on page 7. The unaudited pro forma combined financial information
has been derived from and should be read in conjunction with the TMW and K&G
historical consolidated financial information and unaudited pro forma combined
financial statements included elsewhere or incorporated by reference in this
proxy statement/prospectus.
The summary unaudited pro forma combined financial information is not
necessarily an indication of the results TMW would have achieved if the merger
had taken place on the assumed dates or of the future results that TMW will
experience after the merger.
<TABLE>
<CAPTION>
YEAR
--------------------------------
1996 1997 1998(2)
-------- -------- ----------
<S> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION
Net sales $571,651 $875,319 $1,037,831
Gross margin 206,908 314,819 377,381
Operating income 45,142 74,504 95,247
Net earnings before extraordinary item 25,727 37,334 50,142
Basic earnings per share of common stock(1) $ 0.72 $ 0.95 $ 1.23
Diluted earnings per share of common stock(1) 0.72 0.93 1.19
Weighted average shares outstanding(1) 35,517 39,194 40,738
Weighted average shares outstanding plus dilutive potential
common shares(1) 38,309 42,275 42,964
BALANCE SHEET INFORMATION
Working capital $166,142 $234,376 $ 237,892
Total assets 337,862 500,371 531,104
Long-term debt 57,705 107,800 56,531
</TABLE>
(1) Basic and diluted earnings per share are based on net earnings before
extraordinary item and are computed using the number of shares of TMW
common stock that would have been outstanding in each year based on the
maximum Exchange Ratio of 0.43. Data for 1997 and 1998 also gives effect to
the issuance of 2.5 million shares of TMW common stock issuable upon
exchange of certain exchangeable securities of Moores issued in the
February 10, 1999 combination of TMW and Moores.
(2) Balance sheet information presented as of year end 1998 gives effect to
nonrecurring charges and the refinancing of approximately US $59 million of
Moores indebtedness in connection with the February 10, 1999 combination of
TMW and Moores and to nonrecurring charges in connection with the merger of
TMW and K&G. See "Pro Forma Combined Financial Statements" on page 58.
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<PAGE> 24
RISK FACTORS
An investment in the TMW common stock offered by this proxy
statement/prospectus involves a high degree of risk. Before you decide to invest
in the TMW common stock offered by this proxy statement/prospectus, you should
carefully consider the following risk factors, together with the other
information contained or incorporated by reference in this proxy
statement/prospectus.
COMBINATIONS WITH MOORES AND K&G
On February 10, 1999, TMW combined with Moores. Moores operated 107
men's tailored clothing stores in Canada and eight stores in the United States
as of that date. Moores also operates a manufacturing facility in Montreal,
Canada, which manufactures men's suits, sport coats and pants. The combination
of both Moores and K&G with TMW will require our management to focus
considerable attention on integration of their operations with the Company. This
will temporarily divert some of our management's attention from normal
day-to-day business. Also, combining personnel with different business
backgrounds and locations and combining companies with different corporate
cultures could be difficult. This is especially true with respect to Moores
since we have not previously had any operations outside the United States and
have not previously engaged in manufacturing. We cannot assure you that we will
be able to integrate both K&G and Moores with TMW on a timely or profitable
basis. While we believe that both K&G's and Moores' employees are well
qualified, we cannot assure you that key employees will continue to work for us.
EXCHANGE RATE FLUCTUATIONS
Moores conducts most of its business in Canadian dollars. The exchange
rate between Canadian dollars and U.S. dollars has fluctuated over the last ten
years. If the value of the Canadian dollar against the U.S. dollar weakens, then
the revenues and earnings of the Company's Canadian operations will be reduced
when they are translated to U.S. dollars. Also, the value of the Company's
Canadian net assets in U.S. dollars may decline.
The Company and K&G use direct sourcing programs for inventory
purchases. Some of these transactions are denominated in foreign currencies,
primarily the Italian lira, which create currency exchange risks. Forward
exchange contracts are used to protect against these risks, but the Company
cannot assure you that currency exchange losses will not occur.
MANUFACTURING RISKS
Moores, through its wholly owned subsidiary, Golden Brand Clothing
(Canada) Ltd., manufactures nearly all of the tailored clothing offered for sale
by Moores stores. Prior to the combination with Moores, the Company did not own
any manufacturing facilities. A large part of Moores' growth and profitability
has resulted from the ability of Golden Brand to manufacture high quality
clothes in an efficient and timely manner. A long interruption in Golden Brand's
ability to manufacture tailored clothing could have a material negative impact
on the Moores operations.
There are a variety of risks associated with the manufacturing business
including:
o labor,
o machinery,
o maintenance,
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<PAGE> 25
o product scheduling and delivery systems, and
o obtaining raw materials on a timely basis.
The Company could experience shortages in men's tailored clothing to
sell in its Moores stores if Golden Brand fails to meet its production goals for
any reasons, including:
o labor disputes,
o delays in production, or
o machinery breakdowns or repair problems.
Golden Brand's principal raw material is fabric. Many of Golden Brand's
suppliers have supplied fabric to Golden Brand for more than ten years. If one
of the current suppliers is unable or unwilling to provide fabric, we believe
that there are other suppliers of fabric who could supply fabric to Golden
Brand, although we cannot assure you that it would be at comparable cost. As is
normal in the industry, most of Golden Brand's supply contracts are seasonal.
There could be a negative effect on the ability of Golden Brand to meet its
production goals if any of the following occurred:
o an unexpected loss of a supplier of fabric,
o a long interruption in shipments from any fabric supplier,
o an unexpected loss of any of the suppliers of raw materials other
than fabric or other finished goods, or
o a long interruption in the shipment of raw materials or finished
goods.
The negative effect would be particularly noticeable with regard to
Golden Brand's seasonal or time-sensitive products.
EXPANSION STRATEGY
A large part of the Company's growth has resulted from the addition of
new Men's Wearhouse stores and the increased sales volume and profitability
provided by these stores. The Company will continue to depend on adding new
stores to increase its sales volume and profitability. The Company believes that
its ability to increase the number of traditional stores in the United States
above 500 will be limited. However, the Company anticipates that additional
growth opportunities exist through the VPC operations. When the Company enters
new markets, it has to:
o obtain suitable store locations,
o hire personnel,
o establish distribution methods, and
o advertise its name and its distinguishing characteristics to
consumers who may not be familiar with them.
The Company cannot assure you that it will be able to open and operate
new Men's Wearhouse or VPC stores on a timely and profitable basis. The costs
associated with opening new stores may negatively affect the
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<PAGE> 26
Company's profitability. The Company's expansion strategy may also be negatively
affected by conditions in the commercial real estate market existing at the time
it seeks to expand.
In addition to its growth through adding new stores, the Company,
excluding Moores, has experienced increases in U.S. store sales over the
previous year for each of the past five years. Comparable store sales increased:
o 3.9% for 1996,
o 8.5% for 1997, and
o 10.4% for 1998.
Comparable store sales increases for Moores during the same periods
were:
o 4.5% for 1997, and
o 2.2% for 1998.
The Company cannot assure you that it will experience similar rates of
comparable store sales growth in future periods.
The Company is also focused on integrating and developing operations
that target the more price sensitive clothing customers. The combination with
K&G is part of this focus. VPC acquired 17 C&R stores, six NAL stores and four
Suit Warehouse stores to begin this process. The Company has closed most of the
C&R locations and anticipates that all C&R locations will be closed by the end
of the first quarter of 1999. In some cases, the Company relocated Men's
Wearhouse stores to old C&R store locations. SuitMax stores are being opened to
replace C&R stores. However, in connection with the combination with K&G, VPC is
re-evaluating its store branding opportunities. VPC will incur substantial
advertising expenditures to gain and expand market identity once it has selected
its store branding approach. At least temporarily, these expenditures will lower
operating margins. The Company cannot assure you that its expansion into the
more price sensitive market will be successful.
After the closing of this transaction, the Company's management intends
to evaluate the K&G operations with regard to duplicate facilities within
existing markets. This could result in store modifications, relocations or
closures of certain of the Company's stores or K&G's stores. Management is not
able to estimate at this time the costs, if any, that may be incurred for such
modifications, relocations or closures.
SEASONALITY AND GENERAL ECONOMIC CONDITIONS
Like K&G and most other retail businesses, the Company's business is
seasonal. Historically, over 30% of the Company's net sales and approximately
50% of its net earnings have been made during November, December and January.
Like other retail businesses, our operations may be negatively affected by
local, regional or national economic downturns. Any economic downturn affecting
us might cause consumers to reduce their spending, which would affect our sales.
We cannot assure you that a long economic downturn would not have a noticeable
negative effect on us.
DECLINING UNIT SALES OF MEN'S TAILORED CLOTHING
According to industry sources, sales in the men's tailored clothing
market generally have declined over the past several years. We believe that this
decline is attributable primarily to: (1) men allocating less of their income to
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<PAGE> 27
tailored clothing and (2) certain employers relaxing their dress codes. We
believe that this decrease in sales has contributed, and will continue to
contribute, to a consolidation among retailers of men's tailored clothing.
Despite this overall decline, the Company has been able to increase its share of
the men's tailored clothing market. Although the Company believes it is in a
consolidating segment of the retailing industry, the Company cannot assure you
that it will continue to be able to expand its sales volume or maintain its
profitability within that segment of the industry.
COMPETITION
The men's tailored clothing market is fragmented, and the Company faces
intense competition for:
o customers,
o access to quality merchandise, and
o suitable store locations.
The Company competes with:
o specialty men's clothing stores,
o traditional department stores,
o other off-price retailers and manufacturer-owned stores,
o independently owned outlet stores,
o discount operators, and
o three-day stores.
Several of these competitors are part of large department store chains
that have much greater financial, marketing and other resources than the Company
has available. The Company cannot assure you that it will be able to compete
successfully with its competitors in the future.
POSSIBLE FLUCTUATIONS IN STOCK PRICE
The market price of TMW common stock has fluctuated in the past and may
change rapidly in the future depending on news announcements and changes in
general market conditions. See "Market Prices and Dividend Information" on page
24. The following factors, among others, may cause significant fluctuations in
TMW's stock price:
o news announcements regarding quarterly or annual results of
operations,
o monthly comparable store sales,
o acquisitions,
o competitive developments,
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<PAGE> 28
o litigation affecting the Company, or
o market views as to the prospects of retailing generally.
In addition, the shares of TMW common stock issuable as a result of the
Moores transaction and the shares of TMW common stock to be issued in the merger
will represent between approximately 15.9% and 16.5% of the outstanding shares
of TMW common stock. If the holders of a significant amount of those shares
decide to sell at about the same time, the price of TMW common stock could
decline significantly as a result.
CONTROL OF TMW
After the shares of K&G common stock are exchanged for TMW common stock
in the merger, TMW's executive officers and directors, excluding Mr. Greenspan
who will own between 1.2% and 1.3%, will own between approximately 21.6% and
21.4% of the outstanding shares of TMW common stock. Because the executive
officers and directors own such a large percentage of the outstanding shares of
TMW common stock, if they act together, they could exercise substantial control
over:
o the election of all of the directors,
o the approval of any sale of assets, merger or consolidation, and
o the outcome of all of the matters submitted to TMW's shareholders
for a vote.
RELIANCE ON KEY PERSONNEL
Mr. George Zimmer has been very important to the Company's success.
Mr. Zimmer is the Company's Chairman of the Board, Chief Executive Officer and
primary advertising spokesman. The loss of Mr. Zimmer's services could have a
significant negative effect on the Company.
Also, the Company's continued success and the achievement of its
expansion goals are dependent upon its ability to attract and retain additional
qualified employees as it expands.
PREFERRED STOCK AUTHORIZED FOR ISSUANCE
TMW has available for issuance 1,999,999 shares of preferred stock, par
value $.01 per share. TMW's board of directors is authorized to issue any or all
of this preferred stock, in one or more series, without any further action on
the part of shareholders. Your rights as a holder of TMW common stock may be
negatively affected if TMW issues a series of preferred stock in the future that
has preference over TMW common stock with respect to the payment of dividends or
distribution upon TMW's liquidation, dissolution or winding up. See "Description
of Capital Stock - Preferred Stock" on page 66.
YEAR 2000 RISKS
In mid-1997, the Company began a company-wide project to upgrade its
information technology. This information technology is designed to increase the
efficiency and the future productivity of the Company's operations. By
completing these changes, the Company expects its computer systems to properly
recognize and use dates beyond December 31, 1999. The costs related to the
project are expected to be between $20.0 million and $25.0 million, including
past and future expenditures. The costs related specifically to Year 2000 issues
cannot be separated from this amount. The Company expects all of its business
systems to be Year 2000 compliant by mid-
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<PAGE> 29
1999. The Company does not anticipate that the cost will have a material effect
on its consolidated financial position or results of operations in any given
year. However, the Company may not identify or be able to address all Year 2000
compliance issues. Also, the Company also cannot assure you that third parties
with whom it does business will not experience system failures as a result of
the Year 2000 issue. The Company cannot predict the consequences of
noncompliance. For additional information concerning the Company's response to
the year 2000 issues and the risk associated therewith, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Year
2000 Risks" in TMW's Annual Report on Form 10-K for the year ended January 30,
1999.
The statements included in this section "Year 2000 Risks" are intended
to be and are designated "Year 2000 Readiness Disclosure" statements within the
meaning of the Year 2000 Information and Readiness Disclosure Act.
FORWARD-LOOKING STATEMENTS
Certain statements made in this proxy statement/prospectus and in other
public filings and releases by TMW and K&G contain "forward-looking" information
(as defined in the Private Securities Litigation Reform Act of 1995) that
involve risk and uncertainty. These forward-looking statements may include, but
are not limited to:
o future capital expenditures,
o acquisitions (including the amount and nature thereof),
o future sales,
o earnings,
o margins,
o costs,
o number and costs of store openings,
o demand for men's clothing,
o market trends in the retail men's clothing business,
o currency fluctuations,
o inflation, and
o various economic and business trends.
Management may make forward-looking statements orally or in writing,
including but not limited to, this proxy statement/prospectus and other of our
filings with the SEC under the Securities Exchange Act of 1934 and the
Securities Act of 1933.
In connection with such forward-looking statements, you should consider
that they involve known and unknown risks, uncertainties and other factors that
are, in some cases, beyond our control. You are cautioned that any such
statements are not guarantees of future performance and that actual results and
trends in the future may differ materially. Differences may result from a
variety of factors including, but not limited to:
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<PAGE> 30
o success in integrating K&G and Moores with existing operations,
o U.S. and international economic activity and inflation,
o success in execution of internal operating plans,
o success in execution of new store and new market expansion plans,
o performance issues with key suppliers,
o foreign currency fluctuations,
o government export and import policies,
o legal proceedings,
o our ability to continue to identify and complete successful
expansions into existing markets, and
o our ability to continue to identify and complete successful
penetrations into new markets.
-19-
<PAGE> 31
QUESTIONS AND ANSWERS ABOUT THE MERGER FOR K&G SHAREHOLDERS
The following questions and answers highlight selected information
regarding the merger and related transactions described in this proxy
statement/prospectus and may not contain all information that is important to
you as you consider the merits of the merger. For a more complete description of
the terms of the merger and the related transactions, please read this entire
proxy statement/prospectus and the documents we refer to. See also "Where You
Can Find More Information" on page iii.
In this proxy statement/prospectus:
o We refer to The Men's Wearhouse, Inc., a Texas corporation, as
"TMW".
o We refer to TMW and its subsidiaries as the "Company".
o We refer to TMW Combination Company, a Georgia corporation and a
newly formed subsidiary of TMW, as "Merger Sub".
o We refer to K&G Men's Center, Inc., a Georgia corporation, as "K&G".
o We refer to the merger of Merger Sub into K&G as the "merger".
o We refer to the agreement between TMW, Merger Sub and K&G concerning
the merger as the "merger agreement".
Q: PLEASE BRIEFLY DESCRIBE THE PROPOSED MERGER AND THE RELATED TRANSACTIONS.
A: Merger Sub, a newly formed, wholly owned subsidiary of TMW, will be
merged into K&G, with K&G being the surviving corporation and becoming
a wholly owned subsidiary of TMW.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: As a K&G shareholder, you will receive between 0.4 and 0.43 of a share
of TMW common stock in exchange for each share of K&G common stock that
you own. We will determine the final Exchange Ratio based on an average
closing price per share of TMW common stock, as reported on Nasdaq, for
the 15 trading days ending on the third trading day before the closing
date of the merger. You will receive only whole shares of TMW common
stock. We will pay you cash for any fractional shares you would
otherwise receive in the exchange.
Q: WHY IS THE BOARD OF DIRECTORS OF K&G RECOMMENDING THAT I VOTE IN FAVOR OF
THE MERGER?
A: In the opinion of K&G's board of directors, the merger is in the best
interests of K&G and its shareholders. For the merger to occur, the
holders of a majority of K&G's outstanding common stock must approve
the merger. A more detailed description of the background and reasons
for the merger appears on pages 33 and 35, respectively.
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<PAGE> 32
Q: HOW MANY SHARES OF TMW COMMON STOCK WILL BE OUTSTANDING AFTER THE MERGER?
A: When the merger is completed, we expect that there will be between
approximately 41.5 million shares and 41.8 million shares of TMW common
stock outstanding, approximately 9.9% to 10.6% of which will be held by
former shareholders of K&G.
Q: WHAT DIVIDENDS WILL I RECEIVE IN THE FUTURE?
A: TMW has not paid any cash dividends on the TMW common stock and for the
foreseeable future TMW intends to retain all of its earnings for the
future operation and expansion of its business. TMW's credit agreement
prohibits the payment of cash dividends on TMW common stock.
Q: WHERE WILL THE SHARES OF TMW COMMON STOCK BE LISTED?
A: The shares of TMW common stock to be delivered in the merger will be
listed on the Nasdaq National Market System.
Q: WHAT ARE THE TAX CONSEQUENCES TO K&G SHAREHOLDERS OF THE MERGER?
A: TMW and K&G believe the merger will be tax-free to the shareholders of
K&G for U.S. federal income tax purposes, except for cash received
instead of fractional shares. A more detailed description of the U.S.
federal income tax consequences of the merger appears on page 44.
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: TMW and K&G expect that the merger will be completed promptly after the
annual meeting and receipt of governmental approvals, including
antitrust clearance. TMW and K&G anticipate closing the transaction
late in the second quarter of 1999.
Q: WHAT SHOULD I DO NOW?
A: After reading this document carefully, you should complete and sign
your proxy card and mail it in the enclosed return envelope as soon as
possible, so that your shares may be represented at the annual meeting.
The K&G board of directors recommends voting for adoption of the merger
agreement and the merger.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, TMW will send you instructions for
exchanging your shares of K&G common stock for shares of TMW common
stock.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: With respect to the merger, your broker will vote your shares only if
you provide instructions on how to vote. You should follow the
directions provided by your broker regarding how to instruct your
broker to vote your shares.
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<PAGE> 33
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote by sending in a later-dated, signed proxy
card to K&G's Secretary before the annual meeting or by attending the
annual meeting and voting in person.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE ANNUAL MEETING?
A: You will be asked to vote to elect two members of K&G's board of
directors, to ratify the appointment of Arthur Andersen LLP by the K&G
board of directors and to transact such other business as may properly
come before the meeting.
Q: MUST I VOTE ON THE MERGER TO VOTE ON THE OTHER MATTERS?
A: No. You may vote, or withhold your vote, on each matter.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have any questions about the merger, or if you would like copies
of any of the documents referred to or incorporated by reference in
this proxy statement/prospectus, please call: (i) Gary G. Ckodre , Vice
President - Finance of TMW, at (713) 592-7200; or (ii) John C. Dancu,
Chief Operating Officer of K&G, at (404) 351-7987. See also "Where You
Can Find More Information" on page iii.
Q: WHAT WILL HAPPEN IN THE MERGER TO EMPLOYEE STOCK OPTIONS HELD BY K&G
EMPLOYEES?
A: Each outstanding option to purchase K&G common stock, whether vested or
unvested, will be converted into an option to purchase TMW common
stock. TMW will adjust the exercise prices of those options and the
number of shares of TMW common stock covered by those options using
formulas designed to maintain the approximate economic value of the K&G
options at the time of the merger. For this purpose, the number of
shares of K&G common stock that may be acquired by exercising options
will be multiplied by the Exchange Ratio and the exercise price per
share will be divided by the Exchange Ratio.
Q: MAY I EXERCISE STOCK OPTIONS AND SELL SHARES OF K&G COMMON STOCK BETWEEN
NOW AND THE COMPLETION OF THE MERGER?
A: Yes, unless you are subject to limitations on trading by persons
defined as K&G "affiliates" and other restrictions on "insider trading"
under securities laws. The limitations on "affiliates" are described
beginning on page 47.
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<PAGE> 34
COMPARATIVE PER SHARE DATA
The following table compares certain historical and pro forma earnings
per share and book value per share data for TMW and K&G. The table also includes
TMW/Moores pro forma data in order to give effect to TMW's combination on a
pooling-of-interests basis with Moores on February 10, 1999. The TMW/K&G pro
forma combined and equivalent data has been computed using the historical K&G
and the TMW/Moores pro forma data and is presented for the minimum and maximum
Exchange Ratios of 0.4 and 0.43. No cash dividends were paid by TMW or K&G
during any of the periods presented. You should read the table in conjunction
with the financial information for TMW and K&G included or incorporated by
reference in this proxy statement/prospectus. You should not rely on the pro
forma financial information as an indication of the results that TMW would have
achieved if the merger had taken place earlier or of the results of TMW after
the merger.
<TABLE>
<CAPTION>
TMW/K&G PRO FORMA (UNAUDITED)
-----------------------------
COMBINED(3) EQUIVALENT(4)
------------------------- --------------------------
HISTORICAL TMW/MOORES HISTORICAL EXCHANGE EXCHANGE EXCHANGE EXCHANGE
TMW(1) PRO FORMA(1)(2) K&G(1) RATIO - 0.4 RATIO - 0.43 RATIO - 0.4 RATIO - 0.43
---------- --------------- ---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per
share from earnings
before extraordinary
item:
Fiscal year 1998 1.21 1.21 0.61 1.24 1.23 0.50 0.53
Fiscal year 1997 0.89 0.89 0.63 0.96 0.95 0.38 0.41
Fiscal year 1996 0.67 0.67 0.47 0.73 0.72 0.29 0.31
Diluted earnings per
share from earnings
before extraordinary
item:
Fiscal year 1998 1.17 1.17 0.61 1.20 1.19 0.48 0.51
Fiscal year 1997 0.87 0.87 0.63 0.94 0.93 0.37 0.40
Fiscal year 1996 0.67 0.67 0.47 0.72 0.72 0.29 0.31
Book value per share
at fiscal 1998 year
end 8.55 7.97 4.56 8.27 8.21 3.31 3.53
</TABLE>
- ----------
(1) Basic earnings per share is computed based on the weighted average number
of common shares outstanding. Diluted earnings per share is computed based
on the same weighted average shares plus the dilutive effect of options and
convertible securities for each period. Book value per share is computed by
dividing shareholders' equity at year end by the number of common shares
outstanding at year end.
(2) The TMW/Moores pro forma earnings per share data assumes the combination of
the two entities occurred at the beginning of fiscal 1997 and that 2.5
million shares of TMW common stock were issued at that time. The 1996 data
reflects TMW only since operating results for Moores in 1996 were not
significant. The book value per share assumes that TMW and Moores were
combined on January 30, 1999 and reflects adjustments to shareholders'
equity that give effect to nonrecurring charges and to the refinancing of
the approximately US $59 million of Moores' existing indebtedness at the
date of the combination. See "Unaudited Pro Forma Combined Financial
Statements" on page 58.
(3) The TMW/K&G pro forma combined data assumes the merger is completed on a
pooling-of-interests basis and is presented using the number of shares of
TMW common stock that would have been outstanding in each year based on the
minimum and maximum Exchange Ratios of 0.4 and 0.43.
(4) The TMW/K&G pro forma equivalent data is computed by multiplying the
TMW/K&G pro forma combined data by the minimum and maximum Exchange Ratios
of 0.4 and 0.43.
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<PAGE> 35
MARKET PRICES AND DIVIDEND INFORMATION
TMW common stock is traded on Nasdaq under the symbol "SUIT". K&G
common stock is traded on Nasdaq under the symbol "MENS". The following table
sets forth the high and low quoted sales prices of TMW common stock and K&G
common stock as reported by Nasdaq for the periods indicated, during which
neither TMW nor K&G paid cash dividends. The quotations are as reported in
published financial sources. Also presented are the high and low equivalent
sales prices for K&G common stock calculated by multiplying the quoted sales
prices of TMW common stock for each of the periods presented by the minimum and
maximum Exchange Ratios of 0.4 and 0.43.
<TABLE>
<CAPTION>
K&G COMMON STOCK
----------------------------------------------------------------------------
TMW COMMON STOCK Equivalent Price
-------------------- ------------------------------------------------
Quoted Sales Price Quoted Sales Price Exchange Ratio - 0.4 Exchange Ratio - 0.43
------------------- ------------------- -------------------- ----------------------
High Low High Low High Low High Low
------ ------ ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
First Quarter $20.67 $15.33 $20.08 $16.25 $8.27 $ 6.13 $ 8.89 $ 6.59
Second Quarter 25.08 16.75 23.25 14.75 10.03 6.70 10.78 7.20
Third Quarter 27.50 22.33 23.00 18.25 11.00 8.93 11.83 9.60
Fourth Quarter 26.50 20.00 21.50 18.25 10.60 8.00 11.40 8.60
1998
First Quarter $29.67 $22.33 $25.00 $17.88 $11.87 $ 8.93 $12.76 $ 9.60
Second Quarter 36.88 26.67 28.00 21.50 14.75 10.67 15.86 11.47
Third Quarter 34.63 14.00 23.50 4.00 13.85 5.60 14.89 6.02
Fourth Quarter 32.50 22.00 10.25 7.50 13.00 8.80 13.98 9.46
1999
First Quarter
(through
March 31, 1999) $34.94 $21.63 $10.44 $6.75 $13.98 $ 8.65 $15.02 $ 9.30
</TABLE>
On March 3, 1999, the last full trading day prior to the joint public
announcement by TMW and K&G of the signing of the merger agreement, the closing
sale prices per share of TMW common stock and K&G common stock as reported by
Nasdaq were $26.75 and $8.38, respectively, and the equivalent per share prices
of K&G common stock calculated by multiplying the closing sale price of TMW
common stock by the minimum and maximum Exchange Ratios of 0.4 and 0.43 were
$10.70 and $11.50, respectively. On March 31, 1999, the closing sale prices per
share of TMW common stock and K&G common stock as reported by Nasdaq were $28.88
and $9.94, respectively, and, consequently, given an exchange ratio of 0.42175,
the equivalent per share price of K&G common stock would be $12.18.
Following the merger, TMW common stock will continue to be traded on
Nasdaq and K&G common stock will cease to be traded on Nasdaq and will represent
only the right to obtain TMW common stock under the merger agreement.
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<PAGE> 36
TMW has not paid any cash dividends on TMW common stock and for the
foreseeable future TMW intends to retain all of its earnings for the future
operation and expansion of its business. TMW's credit agreement prohibits the
payment of cash dividends on TMW common stock.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made herein and in other public filings and releases
by both TMW and K&G contain "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995) that involve risk and
uncertainty. These forward-looking statements may include, but are not limited
to, future capital expenditures, acquisitions (including the amount and nature
thereof), future sales, earnings, margins, costs, number and costs of store
openings, demand for men's clothing, market trends in the retail men's clothing
business, currency fluctuations, inflation and various economic and business
trends. You can identify forward-looking statements by the use of words such as
"expect," "estimate," "project," "budget," "forecast," "anticipate," "plan" and
similar expressions. Forward-looking statements include all statements regarding
expected financial position, results of operations, cash flows, dividends,
financing plans, business strategies, operating efficiencies or synergies,
budgets, capital and other expenditures, competitive positions, growth
opportunities for existing products, plans and objectives of management, and
markets for stock of TMW and K&G. TMW and K&G caution you not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. TMW and K&G undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Forward-looking statements may be made by management orally
or in writing, including but not limited to, the Management's Discussion and
Analysis of Financial Condition and Results of Operations section and other
sections of TMW's and K&G's filings with the SEC under the Securities Exchange
Act of 1934 and the Securities Act of 1933, incorporated by reference herein.
Actual results and trends in the future may differ materially depending
on a variety of factors including, but not limited to, domestic and
international economic activity and inflation, successful execution of internal
operating plans and new store and new market expansion plans, performance issues
with key suppliers, foreign currency fluctuations, government export and import
policies and legal proceedings. Future results will also be dependent upon the
ability of TMW and K&G to continue to identify and complete successful
expansions and penetrations into existing and new markets and their ability to
integrate such expansions with TMW's and K&G's existing operations.
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<PAGE> 37
THE COMPANIES
TMW AND ITS SUBSIDIARIES
The Company is one of the largest off-price specialty retailers of
men's tailored business clothing in North America. At March 26, 1999, the
Company operated 548 stores in 40 states, the District of Columbia and Canada.
The Company operates nearly all its stores in the following three
formats:
MEN'S WEARHOUSE. TMW targets middle and upper middle income men by
offering quality merchandise at everyday low prices. In addition to value, TMW
provides a superior level of customer service. Men's Wearhouse stores offer a
broad selection of designer, brand name and private label merchandise at prices
TMW believes are typically 20% to 30% below the regular prices found at
traditional department and specialty stores. The prices of suits in Men's
Wearhouse stores generally range from $199 to $599. TMW considers its
merchandise to be conservative. Merchandise in Men's Wearhouse stores includes
suits, sport coats, slacks, business casual, sportswear, outerwear, dress
shirts, shoes and accessories. TMW concentrates on tailored business attire that
is characterized by infrequent and more predictable fashion changes. Therefore,
TMW believes it is not as exposed to trends typical of more fashion-forward
apparel retailers, where significant markdowns and promotional pricing are more
common. At March 26, 1999, TMW operated 413 Men's Wearhouse stores in 40 states
and the District of Columbia with approximately 30% of those locations in Texas
and California. These stores are referred to as "Men's Wearhouse stores" or
"traditional stores".
VALUE PRICED CLOTHING. The Company launched Value Priced Clothing in
late 1996 to address the market for a more price sensitive customer. The Company
believes VPC's more basic, value-oriented approach appeals to certain customers
in the men's tailored clothing market. VPC offers a selection of brand names and
private label merchandise that the Company believes to be typically 30% to 50%
below the regular prices of traditional department stores and specialty stores.
The prices of suits at these stores generally range from $99 to $199. VPC
operates stores under the names "C&R", "SuitMax" and "Suit Warehouse". At March
26, 1999, the Company operated 17 VPC stores in five states, including one C&R
store which will be converted to a SuitMax store and excluding three C&R stores
that the Company is in the process of closing.
MOORES RETAIL GROUP INC. On February 10, 1999, TMW acquired Moores for
securities exchangeable for an aggregate of 2.5 million shares of TMW common
stock. Moores is one of Canada's leading specialty retailers of men's tailored
clothing and offers its customer conservative, basic tailored apparel. Moores
distinguishes itself from other Canadian retailers of men's tailored clothing by
manufacturing virtually all of the tailored clothing offered for sale in its
stores. As a result, Moores achieves certain cost savings compared to other
retailers and is able to provide greater value to its customer by offering a
broad selection of quality merchandise at everyday low prices, which the Company
believes typically range from 20% to 30% below traditional Canadian department
and specialty stores. The prices of suits at the Moores stores generally range
from Can $149 to Can $299. At March 26, 1999, the Company operated 109 Moores
stores in the ten Canadian provinces. Moores also operated eight stores in the
United States; however, the Company expects to close seven of these stores and
to convert the eighth store to a Men's Wearhouse store to eliminate duplicate
store sites in existing Men's Wearhouse markets. The Company expects to incur
costs of approximately $3 million in connection with the closing of these
stores.
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<PAGE> 38
Golden Brand Clothing (Canada) Ltd., a wholly owned subsidiary of
Moores, operates a tailored clothing manufacturing facility in Montreal, Quebec.
This facility includes a cutting room, fusing department, pant shop and coat
shop. At full capacity, the coat shop can produce 12,000 units per week and the
pant shop can produce 25,000 units per week.
EXPANSION STRATEGY
The Company's expansion strategy includes:
o opening additional Men's Wearhouse stores in new and existing
markets,
o increasing the size of certain existing Men's Wearhouse stores,
o increasing productivity and profitability in its existing markets,
o developing the VPC store format in new and existing markets,
o identifying strategic acquisition opportunities, and
o testing expanded merchandise categories in selected stores.
In general terms, the Company considers a geographic area served by a
common group of television stations as a single market.
On a limited basis, the Company has acquired store locations,
inventories, customer lists, trademarks and tradenames from existing menswear
retailers in both new and existing markets. The Company may do so again in the
future. During 1998, the Company opened 43 new Men's Wearhouse stores and four
new SuitMax stores. The Company also plans to open an additional 40 to 45 new
Men's Wearhouse stores and 5 to 10 new SuitMax stores in 1999, to close
approximately five stores in 1999, to remodel and relocate existing stores and
to continue expansion in subsequent years. The Company believes that its ability
to increase the number of traditional stores in the United States above 500 will
be limited. However, the Company believes that additional growth opportunities
exist through selectively expanding existing stores, improving and diversifying
the merchandise mix, relocating stores and expanding our VPC operations.
The Company has focused on acquiring and growing its VPC store format.
The Company completed three acquisitions between January 1997 and February 1998.
These acquisitions included:
o the January 1997 acquisition of C&R Clothiers, a privately held
retailer of 17 men's tailored clothing stores in Southern
California,
o the May 1997 acquisition of Walter Pye's Men's Shops, Inc. ("NAL"),
which operated four stores in the greater Houston area and one in
each of San Antonio, Texas and New Orleans, Louisiana, and
o the February 1998 acquisition of T.H.C., Inc. ("Suit Warehouse")
operating four stores in metropolitan Detroit.
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The Company is integrating these acquired operations to create a
similar store format and focus. In the process, the Company has closed most of
the C&R stores. To achieve this format and focus, the Company intends to:
o close the remaining four C&R stores in early 1999, with one being
converted to a SuitMax store, and
o open new stores under a common format.
In connection with the combination with K&G, the Company intends to
re-evaluate the store branding opportunities for VPC. Once a decision is made
with respect to VPC store branding, the Company anticipates that it will embark
on an advertising campaign to gain and expand market identity for the VPC store
format.
As a result of the consolidation of the men's tailored clothing
industry, the Company has been and expects to continue to be presented with
significant opportunities for growth within its industry. Such opportunities may
include, but are not limited to:
o increased direct sourcing of merchandise, including possible
ventures with apparel manufacturers,
o acquisitions of menswear retailers,
o the acquisition or licensing of designer or nationally recognized
brand labels,
o expansion and remodeling of certain existing stores,
o testing of new product categories, and
o enhancing our website to allow the sale of merchandise over the
internet.
MERGER SUB
Merger Sub is a newly formed, wholly owned subsidiary of TMW. Merger
Sub has transacted no business to date other than in connection with the merger
agreement. Merger Sub is a Georgia corporation that was incorporated in 1999.
K&G
K&G is a superstore retailer of men's apparel and accessories. K&G's
stores offer first-quality, current-season men's apparel and accessories
comparable in quality to that of traditional department and fine specialty
stores, at everyday low prices 30% to 70% below retail prices typically charged
by such stores. K&G's merchandising strategy emphasizes broad and deep
assortments across all major menswear categories, including tailored clothing,
casual sportswear, dress furnishings, footwear and accessories. This dominant
merchandise selection, which includes brand name as well as private label
merchandise, positions K&G to attract a wide range of menswear customers in each
of its markets. In addition, K&G's philosophy of delivering everyday value
distinguishes K&G from other retailers that adopt a more promotional pricing
strategy.
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K&G's 33 stores operating in 16 states are "destination" stores located
primarily in low-cost warehouses and secondary strip shopping centers easily
accessible from major highways and thoroughfares. K&G's stores are open for
business on Fridays, Saturdays and Sundays only, typically for a total of 24
hours per week. K&G pioneered the weekend strategy in menswear retailing as a
means of responding to its customers' shopping habits and creating a sense of
urgency to purchase, while facilitating cost control and inventory
replenishment. This strategy is an integral element of K&G's retail formula that
emphasizes low operating costs, low mark-ups and high inventory turnover to
produce attractive store-level economics.
K&G's 33 stores are located in Atlanta (4); Baltimore; Boston (2);
Charlotte; Cincinnati; Cleveland; Dallas (3); Denver (2); Houston (2);
Indianapolis; Long Island (2); Los Angeles; Minneapolis; Philadelphia (3);
Seattle (2); Washington, D.C. (2); Kansas City, Kansas; Rahway, New Jersey;
Fairfield, New Jersey; and Columbus, Ohio.
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THE ANNUAL MEETING OF K&G SHAREHOLDERS
This proxy statement/prospectus is furnished in connection with the
solicitation of proxies from the holders of K&G common stock by the K&G board of
directors for use at the 1999 annual meeting of shareholders. This proxy
statement/prospectus and accompanying form of proxy are first being mailed to
the shareholders of K&G beginning on or about , 1999.
TIME, DATE AND PLACE
The annual meeting will be held at , , on
, , 1999, at K&G's headquarters at 1225 Chattahoochee Avenue,
N.W., Atlanta, Georgia.
PURPOSE OF THE ANNUAL MEETING
At the annual meeting (and any adjournment or postponement thereof),
K&G's shareholders will be asked to consider and vote upon (i) a proposal to
approve the merger and the merger agreement, (ii) the election of K&G's Class I
directors to serve a three-year term expiring in 2002 in accordance with K&G's
Articles of Incorporation, (iii) the ratification of the appointment by the K&G
board of directors of Arthur Andersen LLP to serve as K&G's independent public
accountants and (iv) such other matters as may properly be brought before the
annual meeting.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
K&G's board of directors has fixed the close of business on April 20,
1999 (the "K&G Record Date") as the record date for K&G's shareholders entitled
to notice of and to vote at the annual meeting.
Only holders of record of shares of K&G common stock on the K&G Record
Date are entitled to notice of and to vote at the annual meeting. Each holder of
record of K&G common stock as of the K&G Record Date is entitled to cast one
vote per share on all matters submitted to K&G's shareholders.
At the close of business on April 20, 1999, there were [10,252,844]
shares of K&G common stock outstanding and entitled to vote at the annual
meeting.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of K&G common stock entitled to vote is necessary to
constitute a quorum at the annual meeting. The affirmative vote of the holders
of a majority of the outstanding shares of K&G common stock is required to
approve and adopt the merger proposal.
The directors and executive officers of K&G beneficially own
approximately 23% of the outstanding K&G common stock. For additional
information on the ownership of K&G common stock by K&G directors and executive
officers, see "Security Ownership of Certain Beneficial Owners and Management of
K&G" on page 87.
PROXIES
All shares of K&G common stock represented by properly executed proxies
received prior to or at the annual meeting, and not revoked, will be voted in
accordance with the instructions indicated in those proxies. If no instructions
are indicated on a properly executed returned proxy, such proxy will be voted
"FOR" the approval of the merger proposal.
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Abstentions may be specified with respect to any of the proposals being
considered at the annual meeting. A properly executed proxy marked "ABSTAIN"
will be counted as present for purposes of determining whether there is a quorum
and for purposes of determining the aggregate voting power and number of shares
represented and entitled to vote at the meeting. Because the affirmative vote of
a majority of the outstanding shares of K&G common stock is required for
approval of the merger proposal, a proxy marked "ABSTAIN" with respect to the
merger proposal will have the effect of a vote against the merger proposal. In
addition, the failure of a shareholder of K&G to return a proxy will have the
effect of a vote against the merger proposal. Under Nasdaq rules, brokers who
hold shares in street name for customers have the authority to vote on certain
"routine" proposals when they have not received instructions from beneficial
owners. Under Nasdaq rules, such brokers are precluded from exercising their
voting discretion with respect to proposals for non-routine matters such as the
merger proposal. Thus, absent specific instructions from the beneficial owner of
such shares, brokers are not empowered to vote such shares with respect to the
approval and adoption of the merger proposal (i.e., "broker non-votes"). Since
the affirmative votes described above are required for approval of the merger
proposal, a "broker non-vote" with respect to the merger proposal will have the
effect of a vote against the merger proposal. In addition, with regard to the
other matters to be voted on at the annual meeting, a proxy marked "ABSTAIN"
will have the same effect as a vote against a proposal, or in the case of the
election of directors, as shares to which voting power has been withheld. Under
Georgia law, directors are elected by the affirmative vote, in person or by
proxy, of a plurality of the shares entitled to vote in the election at a
meeting at which a quorum is present. Only votes actually cast will be counted
for the purpose of determining whether a particular nominee received more votes
than the persons, if any, nominated for the same seat on the K&G board of
directors.
A shareholder may revoke his or her proxy at any time prior to its use
by delivering to the Secretary of K&G a signed notice of revocation or a
later-dated, signed proxy, or by attending the annual meeting and voting in
person. Attendance at the meeting will not in itself constitute the revocation
of a proxy.
The cost of solicitation of proxies will be paid by K&G. In addition to
solicitation by mail, arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send the proxy materials to beneficial
owners; and K&G will, upon request, reimburse such brokerage houses and
custodians for their reasonable expenses in so doing. K&G does not expect to
engage a firm to aid in the solicitation of proxies; however, should it be
determined necessary at a later date, K&G estimates that related fees will not
exceed $5,000 (plus expenses). To the extent necessary in order to ensure
sufficient representation at its annual meeting, K&G or its proxy solicitor may
request the return of proxy cards by personal interview, mail, telephone,
facsimile or other means of electronic transmission. The extent to which this
will be necessary depends entirely upon how promptly proxy cards are returned.
Shareholders are urged to send in their proxies without delay.
Shareholders should not send in any stock certificates with their proxy
cards. As soon as practicable after the consummation of the merger, a
transmittal form will be sent to former shareholders of K&G with instructions
for receiving TMW common stock.
As of the date of this proxy statement/prospectus, the K&G board of
directors does not know of any business to be presented at the annual meeting
other than the proposals set forth above. If any other matters should properly
come before the meeting, it is intended that the shares represented by proxies
will be voted with respect to such matters in accordance with the judgment of
the persons voting such proxies. Proxies voted "against" the merger proposal
will not be used to vote for any adjournment pursuant to this authority.
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AVAILABILITY OF ACCOUNTANTS
A representative of Arthur Andersen LLP, K&G's independent public
accountants, is expected to be present at the annual meeting and to be available
to respond to appropriate questions. Such representative will have the
opportunity to make a statement at the annual meeting if he or she so desires.
THE MERGER AND RELATED TRANSACTIONS
The discussion in this proxy statement/prospectus of the merger and the
principal terms of the merger agreement is subject to, and qualified in its
entirety by reference to, the merger agreement, which is attached to this proxy
statement/prospectus as Annex A and is incorporated herein by reference.
THE MERGER
Pursuant to the terms and conditions of the merger agreement, including
approval by the shareholders of K&G, Merger Sub will be merged with and into
K&G, with K&G being the surviving corporation and becoming a wholly owned
subsidiary of TMW. In connection with the merger, each shareholder of K&G will
receive between 0.4 and 0.43 of a share (the "Exchange Ratio") of TMW common
stock for each outstanding share of K&G common stock. We will determine the
final Exchange Ratio by computing the average of the closing prices per share of
TMW common stock, as reported on Nasdaq, for the 15 trading days ending on the
third trading day before the closing date of the merger. If the average closing
price is $32.50 or more, the Exchange Ratio will be 0.4. If the average closing
price is $27.50 or less, the Exchange Ratio will be 0.43. If the average closing
price is between $27.50 and $32.50, the Exchange Ratio will be the sum of .4
plus a decimal, calculated to four decimal places, equal to .03 times a fraction
with a numerator equal to the difference between $32.50 and the average
described above and a denominator of $5.00. For example, if the average closing
price is $30.00, then the Exchange Ratio will be equal to .4 + .03 [(32.50 -
30.00) / 5)], which equals .4 + (.03)(.5), which equals .415. Therefore, each
shareholder of K&G would receive 0.415 of a share of TMW common stock in
exchange for each share of K&G common stock held. Cash will be paid instead of
issuing fractional shares of TMW common stock. At the effective time of the
merger, each outstanding option of K&G will be converted into an option to
acquire the number of shares of TMW common stock equal to the Exchange Ratio
times the number of shares of K&G common stock issuable under the old option at
a per share price equal to the exercise price under the old option divided by
the Exchange Ratio.
Following the merger, the former shareholders of K&G will hold between
approximately 4.1 million shares and 4.3 million shares of TMW common stock or
between approximately 9.9% and 10.6% of the outstanding shares of TMW common
stock. In addition, approximately 231,000 shares of TMW common stock will be
subject to the converted K&G options.
The merger will become effective when a Certificate of Merger is duly
filed with the Secretary of State of the State of Georgia or at such other time
as will be specified in the Certificate of Merger (the "Effective Time"). The
closing of the merger (the "Closing") will occur on the date of the annual
meeting or as soon as practicable after the last condition in the merger
agreement has been satisfied or waived, unless the parties agree otherwise. TMW
and K&G expect the Closing to occur promptly after the annual meeting if all
governmental approvals have been received at that time.
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BACKGROUND OF THE MERGER
The retail men's clothing industry has become increasingly competitive
over time. Demand for tailored menswear has undergone a downward trend due to a
number of factors, including employers' increased acceptance of casual work
clothing and men allocating less of their income to tailored clothing. This
decrease in demand has contributed, and will likely continue to contribute, to a
consolidation among retailers of men's tailored clothing. Larger chains enjoy
economies of scale from improved vendor purchasing power, more efficient
marketing and advertising programs and improved access to capital markets.
Recognizing these trends, the K&G board of directors has occasionally considered
whether a business combination that would enhance K&G's competitive position as
a leading retailer of value-priced men's clothing would be in the best interests
of shareholders.
In October 1998, David Edwab, President of TMW, called Stephen
Greenspan, President of K&G, to advise Mr. Greenspan that Mr. Edwab would be in
Atlanta for TMW's regular annual Atlanta area holiday party in late November,
and requested the opportunity to meet with Mr. Greenspan at that time. On
November 21, 1998, Mr. Edwab and Rich Goldman, Executive Vice President of TMW,
met with Mr. Greenspan and John Dancu, Chief Operating Officer of K&G, in
Atlanta. At that time, Messrs. Greenspan and Dancu showed Messrs. Edwab and
Goldman certain of K&G's operations in the Atlanta area. During the course of
the meeting, Mr. Edwab indicated that TMW was interested in a possible
transaction with K&G subject to further due diligence. Messrs. Greenspan and
Dancu indicated that while they might have some interest, further discussion
would be subject to TMW giving K&G some indication of the possible price and to
entering into a confidentiality agreement.
No further substantive discussions regarding a possible transaction
occurred until January 1999, when Mr. Greenspan met with George Zimmer, Chairman
and Chief Executive Officer of TMW, and Mr. Edwab at TMW's offices in Fremont,
California, to discuss the possibility of a business combination. These
discussions were informal in nature, but Messrs. Greenspan, Zimmer and Edwab
acknowledged that the possibility of a business combination was worth exploring
further.
In February 1999, K&G and TMW entered into more formal discussions
regarding a possible business combination. On February 18, 1999, Messrs.
Greenspan and Dancu met with Mr. Edwab and legal counsel and accountants of TMW
in Houston regarding a possible business combination, with K&G's legal counsel
participating in part of the meeting by telephone. At the meeting, TMW and K&G
agreed to, and executed, mutual confidentiality agreements. This meeting
included due diligence presentations by both TMW and K&G, and resulted in Mr.
Edwab making an offer for TMW to exchange between 4,200,000 and 4,500,000 shares
of TMW common stock for all of the outstanding shares of K&G common stock and
all outstanding options to purchase K&G common stock issued by K&G. Mr. Edwab's
offer included a proposed exchange ratio based on the average trading price of
TMW common stock.
Later in the day on February 18, 1999, and during the day of February
19, further discussions with advisors led TMW to conclude that offering TMW
common shares in exchange for cancellation of outstanding options would be
impractical. As a result, TMW modified its offer on February 19 by offering to
exchange between .4 and .43 shares of TMW common stock for each share of K&G
common stock. TMW also offered to issue substitute options to the existing
holders of options to purchase K&G common stock issued by K&G. Messrs. Greenspan
and Dancu advised Mr. Edwab that they would discuss the matter with K&G's board
of directors. The parties then discussed conducting further due diligence
assuming the board of directors of K&G was willing to accept the financial terms
offered by Mr. Edwab.
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On February 19, 1999, the K&G board of directors held a special meeting
at which Messrs. Greenspan and Dancu discussed the Houston meeting and explained
the TMW offer to the K&G board. The K&G board inquired as to the mechanics of
the exchange ratio, the role of investment bankers and legal advisors, the
effect of a merger on employees and holders of options to purchase K&G common
stock, and other aspects of the proposed merger. While the discussions at this
meeting were general in nature, the board indicated the desire that Messrs.
Greenspan and Dancu pursue further the TMW offer. The board then agreed that K&G
should seek to engage NationsBanc, as investment bankers, to review the proposed
merger from a financial point of view and to provide an opinion and financial
analysis to the K&G board members regarding such terms for use by the board
members in connection with their consideration of the merits of the proposed
merger.
On February 22, 1999, the K&G board of directors held a special meeting
to consider whether to proceed with formal negotiations with TMW regarding the
merger. At this meeting, NationsBanc representatives discussed their preliminary
valuation analysis of K&G and their preliminary assessment of the proposed
exchange ratio with the K&G directors. The board considered whether K&G could
negotiate a higher exchange ratio, a "walk-away" right for K&G in the event of a
significant decline in the market price of TMW's common stock, and a reduced
"break-up" fee to be paid by K&G in the event K&G received a superior proposal
(TMW's initial offer included a "break-up" fee of $4,000,000). The K&G board of
directors was not, and is not, aware of any other company with an interest in
completing a business combination with K&G that is comparable to the interest
expressed by TMW prior to this February 22 meeting. Nevertheless, the K&G board
of directors remained interested in and open to any alternative proposals from
other companies.
From February 22 to March 3, 1999, representatives of both companies
and their legal and other advisors performed due diligence and negotiated the
terms of the definitive agreements in connection with the merger. As part of the
due diligence review, TMW's advisors performed a due diligence review of K&G at
the offices of K&G's legal counsel, Hunton & Williams, Atlanta, representatives
of K&G senior management and K&G's advisors performed a due diligence review of
TMW at TMW's corporate offices, and the parties exchanged business, financial
and other information.
At a meeting of TMW's board of directors on March 1, 1999, TMW's senior
management and legal advisors updated the TMW directors on the status of the
negotiations and informed them that most substantive issues had been resolved.
Prior to the meeting, TMW's legal counsel had provided to TMW's directors copies
and a summary of the merger agreement and the other definitive agreements. Such
counsel reviewed the principle terms of the agreements with TMW's directors at
the meeting. TMW's board of directors, by unanimous vote, determined that the
merger was in the best interests of TMW, and approved and adopted the terms of
the merger agreement and the other definitive agreements contemplated by that
agreement and authorized their execution.
At a special meeting of the K&G board held March 3, 1999, K&G's senior
management and legal advisors updated the K&G directors on the status of
negotiations and informed the directors that all substantive issues had been
resolved. K&G's senior management and legal counsel reviewed in detail the terms
of the merger agreement and the other definitive agreements. NationsBanc
presented its financial analysis of the terms of the proposed merger and
rendered its opinion to the members of K&G's board of directors to the effect
that, as of the date of the meeting and subject to the conditions, limitations,
qualifications, assumptions and other matters contained in its opinion, the
aggregate consideration to be received by K&G shareholders in the merger was
fair to K&G shareholders from a financial point of view. The K&G board of
directors, by unanimous vote, determined that the merger was in the best
interests of
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K&G and its shareholders, and approved and adopted the terms of the merger
agreement and the other definitive agreements contemplated by that agreement and
authorized their execution.
On the evening of March 3, 1999, K&G and TMW executed and delivered the
merger agreement and other definitive agreements. On the morning of March 4,
1999, K&G and TMW publicly announced the signing of the merger agreement.
K&G'S REASONS FOR THE MERGER
In reaching its decision to approve the merger, the K&G board of
directors consulted with K&G senior management about both long and short term
strategic and operational matters. K&G also sought the advice of its legal
counsel and independent accountants regarding (1) the legal duties of the K&G
board of directors, (2) regulatory, tax and accounting matters, (3) the terms of
the merger agreement, (4) the other definitive agreements contemplated by that
agreement and (5) other relevant matters. The K&G board of directors also
consulted with NationsBanc regarding the overall fairness from a financial point
of view of the aggregate consideration to be received by K&G shareholders
pursuant to the merger agreement. While the K&G board of directors did not
assign any relative weight to the various factors it considered, some of the
more important factors considered by K&G's board of directors in approving the
merger were the following:
o the fact that the exchange ratio contained in the merger agreement
would enable K&G shareholders to realize a premium of approximately
36% over the last reported sales price of K&G common stock on March
2, 1999;
o the opinion of NationsBanc that as of March 3, 1999, the date the
merger agreement was executed, the merger consideration was fair to
K&G shareholders from a financial point of view. A copy of that
opinion, which set forth certain important qualifications,
assumptions made, matters considered, areas of reliance on others
and limitations is attached as Annex B, and a summary description is
included in "-- Opinion of NationsBanc to the Directors of K&G";
o the value of K&G continuing as a stand-alone entity compared to the
prospects for a combined company constituting one of the largest
retailers of value-priced men's clothing, in light of the current
economic and business environment and taking into account recent
trends regarding men's clothing in particular and tailored clothing
in general. In this context, the following factors were particularly
compelling: (1) the merger offered a strategic fit between K&G and
TMW's Value Priced Clothing Division, and the combined company would
operate the Value Priced Clothing Division with Stephen Greenspan as
Chief Executive Officer of the Division; and (2) the merger would
afford K&G shareholders the chance, as equity holders of TMW, to
participate in the continued growth of a larger and more
geographically diverse retailer having greater financial resources,
competitive strengths, business opportunities and expansion
potential than would be possible for K&G as an independent company;
o recent and historical market prices of K&G common stock and TMW
common stock;
o the merger agreement allows K&G and its board of directors to
terminate the merger if the K&G board of directors receives what it
deems to be a "superior proposal" as that term is defined in the
merger agreement. However, the K&G board of directors also
considered that under the merger agreement K&G is prohibited from
soliciting, as opposed to responding to, other competing offers for
K&G and that under certain circumstances K&G may be required to pay
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TMW a termination fee of $3,000,000 if a competing bid is approved
or recommended by the K&G board of directors. The K&G board of
directors did not view the termination fee provision of the merger
agreement as unreasonably impeding any interested third party from
proposing a superior transaction. See "Certain Terms of the Merger
Agreement--Certain Covenants--No Solicitation" and "--Termination of
the Merger Agreement--Termination Fees Payable by K&G";
o the merger agreement contains a "walk-away" right by which K&G may
terminate the merger and pay a reasonable termination fee ($750,000)
upon a significant drop in the price of TMW's common stock (if the
average closing price per share of TMW common stock, as reported on
Nasdaq, for the 15 trading days ending on the third trading day
before the closing date of the merger is below $20.00);
o the likelihood that the merger will be completed, including the
likelihood of obtaining the regulatory approvals required pursuant
to, and the other conditions to completion of, the merger, the
experience, reputation and financial condition of TMW and the risks
to K&G if the merger is not completed;
o the other terms and attributes of the merger, including the tax-free
nature of the transaction with respect to K&G shareholders; and
o the expectation that the merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles.
The foregoing discussion of the information and factors considered by
the K&G board of directors is not intended to be exhaustive but is believed to
include all material factors considered by the K&G board of directors.
RECOMMENDATION OF THE K&G BOARD OF DIRECTORS
The K&G board of directors has unanimously approved and adopted the
merger agreement. The K&G board of directors believes that the merger agreement
and the transactions related to it are in the best interests of K&G and its
shareholders, and unanimously recommends that K&G shareholders vote FOR approval
of the merger agreement. In approving the merger agreement, the K&G board of
directors took into account the potential conflicts of interest of Mr. Greenspan
and Mr. Dancu resulting from their employment and termination agreements,
respectively. See "--Interests of Certain Persons in the Merger."
OPINION OF NATIONSBANC TO THE DIRECTORS OF K&G
Pursuant to an engagement letter dated February 22, 1999, the board of
directors of K&G retained NationsBanc to review the merger and render an opinion
as investment bankers to K&G's directors as to whether the aggregate
consideration to be received by K&G's shareholders pursuant to the merger is
fair to such shareholders from a financial point of view. NationsBanc was not
retained to act as financial advisor to K&G or the board of directors of K&G in
connection with the merger, and NationsBanc was not retained or requested to
consider any strategic or financial alternatives to the merger or to seek
indications of interest from other potential buyers in connection with rendering
its opinion. K&G selected and retained NationsBanc for this assignment on the
basis of NationsBanc's experience and expertise in transactions similar to the
merger, and its reputation in the retail and investment communities. NationsBanc
is a nationally recognized investment banking and financial advisory firm and,
as part of its activities, is
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regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In connection with the consideration by K&G's board of directors of the
merits of the merger, NationsBanc was asked to perform various financial
analyses and deliver to K&G's board of directors its opinion based on its
analyses. These analyses are described below. At the March 3, 1999 meeting of
K&G's board of directors, NationsBanc delivered its oral opinion to K&G's board
of directors. This opinion was subsequently confirmed in writing as of such date
and is also described below. THE OPINION OF NATIONSBANC WAS DIRECTED SOLELY TO
K&G'S BOARD OF DIRECTORS FOR ITS CONSIDERATION IN CONNECTION WITH THE MERGER,
AND IS NOT A RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER THE MERGER IS IN
SUCH SHAREHOLDER'S BEST INTERESTS OR AS TO WHETHER K&G'S SHAREHOLDERS SHOULD
VOTE FOR OR AGAINST THE MERGER. ADDITIONALLY, THE OPINION ADDRESSES ONLY THE
FINANCIAL FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY K&G'S SHAREHOLDERS
PURSUANT TO THE MERGER AND DOES NOT ADDRESS THE RELATIVE MERITS OF THE MERGER OR
ANY ALTERNATIVES TO THE MERGER, THE UNDERLYING DECISION OF THE K&G BOARD OF
DIRECTORS TO PROCEED WITH OR EFFECT THE MERGER OR ANY OTHER ASPECT OF THE
MERGER. THE FULL TEXT OF NATIONSBANC'S OPINION IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS ANNEX B, AND SETS FORTH CERTAIN IMPORTANT
QUALIFICATIONS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AREAS OF RELIANCE ON
OTHERS, AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH
OPINION.
The summary description of NationsBanc's opinion set forth below is
qualified in its entirety by the full text of the opinion attached hereto as
Annex B.
In connection with its opinion, NationsBanc among other things:
o reviewed certain publicly available financial and other data with
respect to K&G and TMW, including the consolidated financial
statements of K&G and TMW for recent years, consolidated financial
statements of K&G for interim periods to November 1, 1998,
consolidated financial statements of TMW for interim periods to
October 31, 1998, pro forma combined financial statements of TMW and
Moores contained in TMW's Current Reports on Form 8-K filed through
February 25, 1999 and certain other relevant financial and operating
data relating to K&G and TMW made available to it from published
sources and from the internal records of K&G and TMW;
o reviewed the financial terms and conditions of the merger agreement;
o reviewed certain publicly available information concerning the
trading of, and the trading market for, K&G's common stock and TMW's
common stock;
o compared K&G and TMW from a financial point of view with certain
other companies in the apparel industry which NationsBanc deemed to
be relevant;
o considered the financial terms, to the extent publicly available, of
selected recent business combinations involving companies in the
retail industry which NationsBanc deemed to be comparable, in whole
or in part, to the merger;
o reviewed and discussed with representatives of the management of K&G
and TMW certain information of a business and financial nature
regarding K&G and TMW furnished by K&G and
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<PAGE> 49
TMW to NationsBanc, including financial forecasts and related
assumptions of K&G and TMW;
o made inquiries regarding and discussed the merger, the merger
agreement and other matters related thereto with K&G's counsel; and
o performed such other analyses and examinations as NationsBanc deemed
appropriate.
Based upon its review of the foregoing, but subject to the limitations
set forth below and in reliance upon the assumptions set forth below,
NationsBanc provided K&G's board of directors with its opinion as investment
bankers that as of March 3, 1999, the date of its opinion, the aggregate
consideration to be received by K&G's shareholders pursuant to the merger
agreement was fair to such shareholders from a financial point of view. The
terms of the merger and the amount of the consideration to be received by K&G's
shareholders under the merger agreement was determined pursuant to negotiations
between K&G and TMW and not pursuant to recommendations of NationsBanc. No
limitations were imposed by K&G on NationsBanc with respect to the
investigations made or procedures followed in rendering its opinion.
In connection with its review, NationsBanc did not assume any
obligation to independently verify the information reviewed by NationsBanc, and
NationsBanc relied on the information being accurate and complete in all
material respects. With the consent of K&G's board of directors, NationsBanc
assumed for purposes of its opinion that:
o the financial forecasts for K&G and TMW provided by their respective
managements had been reasonably prepared on bases reflecting the
best available estimates and judgments of their respective
managements as to the future financial performance of K&G and TMW;
o the financial forecasts provided a reasonable basis upon which
NationsBanc could form its opinion;
o there had been no material changes in K&G's or TMW's assets,
financial condition, results of operations, business or prospects
since the respective dates of their last financial statements made
available to NationsBanc; and
o the merger will be consummated in a manner that complies in all
respects with the applicable provisions of the Securities Act of
1933, the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations.
K&G's representatives informed NationsBanc, and NationsBanc assumed
without verification and with the consent of K&G's board of directors, that:
o the merger would be treated as a pooling-of-interests under
Accounting Principles Board Opinion No. 16; and
o the merger would be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
NationsBanc did not assume responsibility for making an independent
evaluation, appraisal or physical inspection of any of the assets or liabilities
(contingent or otherwise) of K&G or TMW, nor was NationsBanc furnished with any
such appraisals. Additionally, NationsBanc relied on advice of the
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<PAGE> 50
counsel and the independent accountants to K&G as to all legal, tax and
financial reporting matters with respect to K&G, TMW, the merger and the merger
agreement. Finally, NationsBanc's opinion was based on economic, monetary,
market and other conditions as in effect on, and the information made available
to NationsBanc as of, March 3, 1999. Accordingly, although subsequent
developments may affect its opinion, NationsBanc did not assume any obligation
to update, revise or reaffirm its opinion.
NationsBanc further assumed with the consent of K&G's board of
directors that the merger would be completed in accordance with the terms
described in the merger agreement, without any amendments and without waiver by
K&G of any of the conditions to its obligations under the merger agreement. The
full text of the merger agreement is attached as Annex A and the terms described
in the merger agreement and the conditions to K&G's obligations under the merger
agreement should be reviewed and understood by K&G's shareholders in connection
with their consideration of the merger.
Finally, NationsBanc did not and could not express any opinion
regarding the price at which TMW's common stock may trade at any future time.
The aggregate consideration to be received by K&G's shareholders pursuant to the
merger is based upon an exchange ratio which will be determined from the average
of the daily closing prices for the TMW common stock for the 15 consecutive
trading days ending three trading days prior to the consummation of the merger
and the market price of the TMW common stock at the time of the merger. The
exchange ratio becomes fixed if such average of the closing prices for TMW
common stock is below $27.50 or above $32.50, and between $27.50 and $32.50 the
exchange ratio varies as and to the extent described in the summary section.
Accordingly, the market value of the consideration received by K&G's
shareholders, if and when the proposed merger is consummated, could vary
significantly from what the shareholders would have received if the merger had
been completed on March 3, 1999 when NationsBanc presented its analyses and
delivered its opinion to K&G's board of directors.
Set forth below is a brief summary of the report presented by
NationsBanc to K&G's board of directors on March 3, 1999 in connection with its
opinion.
Comparable Public Company Analysis. Using public and other available
information, NationsBanc calculated a range of implied values for K&G's common
stock based on a comparison of the last 12 months' revenues ("LTM Revenues"),
last 12 months' earnings before interest, taxes, depreciation and amortization
("LTM EBITDA"), last 12 months' earnings before interest and taxes ("LTM EBIT"),
estimated 1998 earnings per share ("EPS") and estimated 1999 EPS of five
publicly traded men's suit retail companies and six publicly traded off-price
apparel retail companies. The publicly traded suit retail companies used in this
analysis were:
o Burlington Coat Factory Warehouse Corporation
o S&K Famous Brands, Inc.
o Jos. A. Bank Clothiers, Inc.
o Syms Corp
o The Men's Wearhouse, Inc.
The publicly traded off-price apparel retail companies used in this analysis
were:
o Burlington Coat Factory Warehouse Corporation
o The Dress Barn, Inc.
o Filene's Basement Corp.
o Stein Mart, Inc.
o Ross Stores, Inc.
o The TJX Companies, Inc.
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<PAGE> 51
The February 26, 1999 stock prices of all these suit retail companies
and the off-price apparel retail companies identified by NationsBanc, when
considered together, reflected the following average multiples:
<TABLE>
<CAPTION>
LTM Revenues LTM EBITDA LTM EBIT
------------ ---------- --------
<S> <C> <C> <C>
For aggregate value
(equity value plus net debt) 0.6x 7.1x 9.4x
</TABLE>
<TABLE>
<CAPTION>
Estimated 1998 EPS Estimated 1999 EPS
------------------ ------------------
<S> <C> <C>
For equity value 14.6x 11.8x
</TABLE>
NationsBanc applied the average multiples for the suit retail companies
and the off-price apparel retail companies to the applicable results and
forecasts for K&G and, where applicable, made adjustments by adding $16.2
million from the results to adjust for K&G's net debt as of October 31, 1998, to
determine the implied equity value of K&G. The range of values produced from
these calculations for the implied equity value of K&G was between $7.68 and
$10.60 per share of K&G's common stock. NationsBanc then weighted the results to
reflect its assessment of the appropriate reasonable range for the implied
equity value of K&G, which was between $8.00 and $10.00 per share based on this
analysis.
Comparable Merger and Acquisition Transaction Analysis. NationsBanc
reviewed the consideration paid in 94 retail merger and acquisition transactions
that have been completed since January 1996. Of these 94 retail merger and
acquisition transactions, 23 transactions involved apparel or department stores.
NationsBanc analyzed the consideration paid in these transactions as a multiple
of equity value plus net debt to the target companies' LTM Revenues, LTM EBITDA,
and LTM EBIT. Such analysis yielded the following average multiples:
<TABLE>
<CAPTION>
LTM Revenues LTM EBITDA LTM EBIT
------------ ---------- --------
<S> <C> <C> <C>
All retail transactions 0.7x 10.0x 15.3x
Apparel and department store transactions 0.6x 8.1x 12.2x
</TABLE>
The transactions reviewed by NationsBanc included acquisitions of
privately owned companies, and in certain cases complete financial data was not
available, publicly or otherwise, to NationsBanc for its analysis. The following
table presents the number of transactions considered by NationsBanc where the
required LTM Revenues, LTM EBITDA and LTM EBIT data were fully available to
NationsBanc.
<TABLE>
<CAPTION>
LTM Revenues LTM EBITDA LTM EBIT
------------ ---------- --------
<S> <C> <C> <C>
All retail transactions 79 53 60
Apparel and department store transactions 18 13 13
</TABLE>
NationsBanc then applied the foregoing multiples to K&G's estimated
1998 Revenues, estimated 1998 EBITDA and estimated 1998 EBIT, and added $16.2
million from the results to adjust for K&G's net debt as of October 31, 1998 to
determine the implied equity value of K&G. The range of values produced from
these calculations indicated an implied equity value of K&G of between $9.68 and
$15.78 per share. This range of values was then weighted and narrowed by
NationsBanc to reflect its assessment of the appropriate reasonable range for
the implied equity value of K&G, which was between $10.00 and $12.00 per share
based on this analysis.
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<PAGE> 52
Premiums Paid Analysis. NationsBanc reviewed the consideration paid in
U.S. acquisitions involving consideration of between $75 million and $250
million that have been announced since January 1996. Of these acquisitions,
certain involved stock-for-stock transactions. NationsBanc calculated the
premiums paid in these transactions over the applicable stock prices of the
target companies one day, one week and 30 days prior to the announcement of the
acquisition, and then calculated the average of those premiums. Such analysis
yielded the following average premiums:
<TABLE>
<CAPTION>
One Day One Week 30 Days
------- -------- -------
<S> <C> <C> <C>
All transactions 25.6% 31.2% 40.2%
Stock-for-stock transactions 24.0% 28.5% 37.0%
</TABLE>
NationsBanc then applied the average premiums so derived to K&G's
closing stock price on February 26, 1999, which was $8.19. Based on this
analysis, an application of the average premiums to the closing stock price of
K&G's common stock indicated an implied equity value of K&G of between $9.63 and
$12.09 per share. This range of values was then weighted and narrowed by
NationsBanc to reflect its assessment of the appropriate reasonable range for
the implied equity value of K&G, which was between $10.00 and $12.00 per share
based on this analysis.
No company or transaction used in the comparable company analysis, the
comparable transactions analysis or the premiums paid analysis as a comparison
is identical to K&G or the merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value of
the companies to which K&G and the merger are being compared.
Discounted Cash Flow Analysis. NationsBanc performed a discounted cash
flow analysis based on financial forecasts for 1999 through 2003 provided by
K&G's management. In conducting this discounted cash flow analysis, NationsBanc
first calculated the estimated future streams of free cash flows that K&G would
produce through 2003 and then applied a range of exit multiples from 6.0x to
8.0x K&G's estimated EBITDA in 2003. Such cash flow streams and terminal values
were discounted to present values using discount rates ranging from 14.0% to
16.0%, chosen to reflect reasonable ranges of K&G's cost of capital. This
analysis indicated an implied equity value of K&G of between $10.41 and $15.38
per share. This range of values was then weighted and narrowed by NationsBanc to
reflect its assessment of the appropriate reasonable range for the implied
equity value of K&G, which was between $11.50 and $13.50 per share based on this
analysis.
Pro Forma Merger Analysis. Holders of K&G's common stock will receive
TMW's common stock in the merger. NationsBanc reviewed and analyzed the pro
forma financial impact of the merger on TMW's projected earnings per share for
TMW's 1999 fiscal year, assuming a Base Period Trading Price of $29.38. Assuming
the accuracy of the financial forecasts used for K&G and TMW, and without giving
effect to any operating synergies that might be realized following the merger,
this analysis indicated that the merger should be slightly accretive to TMW's
anticipated 1999 earnings per share.
Pro Forma Contribution Analysis. Assuming an exchange ratio of 0.42
shares of TMW's common stock for each share of K&G's common stock (i.e., that
the Base Period Trading Price is $29.38), K&G's current shareholders would have
an aggregate ownership interest in TMW of approximately 10.3% after the
consummation of the merger. On a pro forma basis, assuming the accuracy of the
financial forecasts used for K&G and TMW, K&G would contribute to the combined
operations of TMW, after giving effect to the
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<PAGE> 53
merger, the following: 13.4% of estimated 1998 revenues, 8.4% of estimated 1998
EBITDA, 10.0% of estimated 1998 EBIT and 12.1% of estimated 1998 net income.
While the foregoing summary describes all analyses and examinations
that NationsBanc deemed material to the preparation of its opinion to K&G's
board of directors, it is not a comprehensive description of all analyses and
examinations actually conducted by NationsBanc. The preparation of a fairness
opinion necessarily is not susceptible to partial analysis or summary
description. NationsBanc believes that its analysis and the summary set forth
above must be considered as a whole, and that selecting portions of the analyses
and of the factors considered by NationsBanc, without considering all analyses
and factors, would create an incomplete view of the process underlying the
analyses set forth in the presentation of NationsBanc to K&G's board of
directors on March 3, 1999. In addition, NationsBanc may have given some
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions. Accordingly, the
ranges of valuations resulting from any particular analysis described above
should not be taken to be NationsBanc's view of the actual value of K&G or K&G's
common stock. To the contrary, NationsBanc expressed no opinion on the actual
value of K&G or K&G's common stock, and its opinion, which is addressed and
limited to K&G's board of directors, extends only to the belief expressed by
NationsBanc that the immediate value to K&G's shareholders, from a financial
point of view under the merger, is within the range of values that might fairly
be ascribed to K&G's common stock as of March 3, 1999, the date of the opinion
of NationsBanc.
In performing its analyses, NationsBanc made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of K&G and TMW. The analyses
performed by NationsBanc are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
those suggested by these analyses. These analyses were prepared solely as part
of NationsBanc's analysis of the fairness of the aggregate consideration to be
received by K&G's shareholders pursuant to the merger from a financial point of
view, and were provided solely to K&G's board of directors in connection with
the delivery of NationsBanc's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which any company might actually be sold
or the prices at which any securities may trade at any time in the future.
NationsBanc used in its analyses various projections of future performance
prepared or adopted by the managements of K&G and TMW. The projections are based
on numerous variables and assumptions which are inherently unpredictable and in
large part are beyond the control of K&G and its advisors. Accordingly, actual
results could vary significantly from those set forth in the projections used by
NationsBanc in its analyses, and none of K&G, NationsBanc or any other person
assumes any responsibility if future results are later found to be materially
different from the results contained in these projections.
As described above, the opinion of NationsBanc and the presentation to
K&G's board of directors summarized above were among the many factors taken into
consideration by K&G's board of directors in making its determination to approve
and to recommend that its shareholders approve the merger agreement.
NationsBanc, however, does not make any recommendation to K&G's shareholders (or
to any other person or entity) as to whether the merger is in a shareholder's
best interest.
In accordance with its engagement letter, the opinion of NationsBanc is
addressed solely to K&G's board of directors for the use of the directors in
their capacity as members of K&G's board of directors in connection with their
review and evaluation of the merger. Neither the opinion nor NationsBanc's
underlying financial analysis may be relied upon by any person other than the
directors in their capacity as members of K&G's board of directors without the
prior written consent of NationsBanc. Accordingly, under the terms of the
engagement letter and the NationsBanc opinion letter prepared pursuant to the
engagement letter, no K&G shareholder may rely or allege any reliance on
NationsBanc's opinion or
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<PAGE> 54
analysis in connection with the shareholder's consideration of the merits of the
merger or otherwise. It is NationsBanc's position that its duties in connection
with its fairness opinion are solely to K&G's board of directors, and that it
has no legal responsibility to any other persons, including K&G's shareholders,
under New York state law, the governing law of the engagement letter.
NationsBanc would likely assert the substance of this disclaimer as a defense to
claims, if any, that might be brought against it by K&G's shareholders with
respect to its fairness opinion. However, since no New York court has definitely
ruled on the availability to a financial advisor of this defense to shareholder
liability with respect to its fairness opinion, this issue necessarily would
have to be resolved by a court of competent jurisdiction. Furthermore, there can
be no assurance that a court of competent jurisdiction would apply New York
state law to the resolution of this issue if it were ever to be presented. In
any event, the availability or non-availability of this defense will have no
effect on NationsBanc's rights and responsibilities under the federal securities
laws, or the rights and responsibilities of K&G's board of directors under
governing state law or under the federal securities laws.
As set forth in NationsBanc's opinion attached to this proxy
statement/prospectus as Annex B, NationsBanc consented to the reproduction of
its opinion letter in this proxy statement/prospectus for the limited purpose of
allowing K&G to comply with its disclosure obligations under the Exchange Act.
NationsBanc has also consented to the summary description of the opinion letter
that is included in this section of the proxy statement/prospectus. In
furnishing its consent to the inclusion of its opinion letter and a summary in
this proxy statement/prospectus, NationsBanc did not admit that it is an expert
for the purposes of, and within the meaning of the term "expert" as used in, the
Securities Act, nor did it admit that its opinion constitutes a report or
valuation within the meaning of the Securities Act. Statements to this effect
are included in the NationsBanc opinion.
Pursuant to the terms of the engagement letter, NationsBanc was
entitled to a $250,000 fee upon the delivery of its opinion, plus reasonable
out-of-pocket costs and expenses. NationsBanc's fee for delivering the above
described opinion was not conditioned on the outcome of the opinion, or whether
such opinion was deemed favorable or unfavorable by K&G or its Board of
Directors. Pursuant to a separate letter agreement, K&G has agreed to indemnify
NationsBanc and its affiliates against certain liabilities, including
liabilities under the federal securities laws, relating to or arising out of
NationsBanc's engagement.
In the past, NationsBanc has provided financial advisory and investment
banking services to K&G and has received customary fees for the rendering of
such services. During the past two years, these fees totaled $1.03 million. In
the ordinary course of its business, NationsBanc actively trades the equity
securities of K&G for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Additionally, an affiliate of NationsBanc is currently a lender to TMW, and
NationsBanc or its affiliates may participate in arranging, underwriting or
providing debt or equity financing to TMW in the future.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the K&G board of directors with
respect to the merger, K&G's shareholders should be aware that certain members
of the K&G board of directors and certain officers of K&G have interests in
respect of the merger separate from their interests as holders of K&G common
stock. In connection with their approval of the merger agreement and the
transactions contemplated by that agreement, the K&G board of directors and the
TMW board of directors considered the interests of K&G management and the
directors described below.
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<PAGE> 55
Greenspan Employment Agreement. In connection with the merger
agreement, K&G and Mr. Greenspan agreed to enter into an amended and restated
employment agreement upon the closing of the proposed merger. Under the amended
agreement, K&G would employ Mr. Greenspan as Chief Executive Officer. Mr.
Greenspan's initial term of employment would be three years, and would
automatically renew from year to year until terminated. Mr. Greenspan would
receive an annual base salary of $250,000 during the term of the agreement,
would be reimbursed for expenses incurred while conducting business for the
Company, and would be eligible to participate in employee benefit plans and
bonus programs including incentive compensation and stock option plans on a
comparable basis with other senior executives of TMW. The employment agreement
also contains a severance package for Mr. Greenspan equal to 100% of his then
current annual salary if his employment is terminated without cause.
Additionally, the agreement contains restrictive covenants that, for five years
from the date the merger is consummated, or for three years after the
termination of his employment, whichever is longer, would prevent Mr. Greenspan
from competing in certain respects with K&G and from hiring any employees of
K&G. Finally, the agreement provides that Mr. Greenspan will not use or disclose
any confidential information related to K&G during his employment or for a
period of two years after the termination of his employment.
Greenspan's Election to the TMW Board of Directors. Upon the
effectiveness of the merger, the board of directors of TMW shall increase the
number of its directors by one and shall elect Mr. Greenspan as a director to
serve until the next annual meeting of the shareholders of TMW. The board of
directors shall also include Mr. Greenspan in its nominees for election at the
1999 Annual Meeting of Shareholders of TMW.
Dancu Termination Agreement. In connection with the merger agreement,
K&G, TMW and Mr. Dancu agreed to enter into a Termination Agreement upon the
closing of the proposed merger that would terminate Mr. Dancu's employment with
K&G as of the closing date of the merger. Pursuant to the Termination Agreement,
Mr. Dancu will receive a payment of $400,000 from K&G upon consummation of the
merger. In addition, pursuant to the Termination Agreement, Mr. Dancu has agreed
not to compete against K&G or solicit employees from K&G for a period of 24
months after his employment is terminated, and Mr. Dancu has agreed not to use
or disclose confidential information about K&G at any time during his employment
with K&G or thereafter.
Vesting of Certain Director Options. As of March 29, 1999, there were
options to purchase 37,500 shares of K&G common stock outstanding under the K&G
Men's Center Director Stock Option Plan. On the completion of the merger, the
10,000 outstanding options that are not currently vested would vest immediately.
The shares of K&G common stock subject to all of the options would then be
converted into shares of TMW common stock pursuant to the merger agreement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain U.S. Federal income tax
consequences of the merger which are generally applicable to holders of K&G
common stock under the Internal Revenue Code of 1986, as amended (the "Code").
Tax consequences which are different from or in addition to those described
herein may apply to K&G shareholders who are subject to special treatment under
the U.S. federal income tax laws, such as non-U.S. persons, tax exempt
organizations, financial institutions, insurance companies, broker-dealers, K&G
shareholders who hold their K&G common stock as part of a hedge, straddle, wash
sale, synthetic security, conversion transaction, or other integrated investment
comprised of K&G common stock and one or more other investments, persons who
acquired their shares in compensatory transactions, and any K&G shareholder who,
after the merger, owns 5% or more of either the total voting power or the
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<PAGE> 56
total value of the stock of TMW. The discussion does not address non-U.S. or
state or local tax considerations.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX
CONSEQUENCES OF THE MERGER TO A K&G SHAREHOLDER. EACH K&G SHAREHOLDER SHOULD
CONSULT A TAX ADVISER REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND NON-
U.S. TAX CONSEQUENCES OF THE MERGER IN LIGHT OF SUCH SHAREHOLDER'S OWN
SITUATION.
It is a condition precedent to the closing of the merger that opinions
of counsel (the "Opinions") be delivered to the effect that, among other
things, the merger qualifies as a reorganization under section 368(a) of the
Code. The Opinions will be subject to certain qualifications and assumptions
as noted therein and will rely upon certain representations of TMW and K&G
provided to counsel as a basis for the Opinions, including the representation
that no consideration other than TMW common stock (and cash for fractional
shares) will be delivered in exchange for K&G common stock. The Opinions will
be based upon counsel's interpretation of the Code, applicable Treasury
regulations, judicial authority and administrative rulings and practice, all as
of the date of the Opinions. There can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the conclusions set forth herein. The
Opinions will not be binding upon the Internal Revenue Service (the "Service"),
and the Service will not be precluded from adopting a contrary position.
Assuming the merger qualifies as a reorganization under Section 368(a)
of the Code, the U.S. Federal income tax consequences will include the
following:
o No gain or loss will be recognized by TMW or K&G as a result of
the merger.
o No gain or loss will be recognized by holders of K&G common stock
solely upon their receipt in the merger of TMW common stock in
exchange therefor.
o The tax basis of the shares of TMW common stock received by a K&G
shareholder in the merger (including any fractional share not
actually received) will be the same as the tax basis of the K&G
common stock surrendered in exchange therefor.
o The holding period of the shares of TMW common stock received by
a K&G shareholder in the merger will include the holding period
of the shares of K&G common stock surrendered in exchange
therefor, provided that such shares of K&G common stock are held
as capital assets at the effective time of the merger.
o A cash payment in lieu of a fractional share will be treated as
if a fractional share of TMW common stock had been received in
the merger and then redeemed by TMW. Such redemption should
qualify as a distribution in full payment in exchange for the
fractional share rather than as a distribution of a dividend.
Accordingly, a K&G shareholder receiving cash in lieu of a
fractional share will recognize gain or loss upon such payment in
an amount equal to the difference, if any, between such
shareholder's basis in the fractional share and the amount of
cash received. Such gain or loss will be a capital gain or loss
if the K&G common stock is held as a capital asset at the
effective time of the merger.
In the event that the merger were held not to qualify as a
reorganization under Section 368(a) of the Code, a K&G shareholder would
recognize gain or loss in an amount equal to the difference between the
shareholder's basis in his or her shares and the fair market value, as of the
effective date of the merger, of
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the TMW common stock received in exchange therefor. In such event, the
shareholder's basis in the TMW common stock so received would be equal to its
fair market value as of the effective date of the merger, and the holding
period for such stock would begin on the day after the effective date of the
merger.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR
GENERAL INFORMATION ONLY. EACH K&G SHAREHOLDER SHOULD CONSULT A TAX ADVISER AS
TO THE PARTICULAR CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH
SHAREHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL, NON-U.S. AND OTHER
FEDERAL TAX LAWS.
ACCOUNTING TREATMENT
TMW and K&G intend to account for the merger using the pooling-of-
interests method of accounting pursuant to Opinion No. 16 of the Accounting
Principles Board. The pooling-of-interests method of accounting assumes that
the combining companies have been merged from inception, and the historical
financial statements for periods prior to consummation of the merger are
restated as though the companies had been combined from inception. The
restated financial statements are adjusted to conform the accounting policies
of the companies, if necessary.
The merger is conditioned on the receipt of favorable letters from the
independent public accountants of each of TMW and K&G to the effect that, in
accordance with generally accepted accounting principles and the applicable
rules and regulations of the Securities and Exchange Commission, TMW and K&G
are each eligible to be a party to a merger accounted for as a pooling-of-
interests.
GOVERNMENTAL AND REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act"),
the merger may not be consummated until notifications have been given and
certain information has been furnished to the Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Antitrust Division") and specified waiting period requirements have been
satisfied. TMW and K&G filed the required notification and report forms under
the HSR Act with the FTC and the Antitrust Division on March 31, 1999.
Each state in which the Company or K&G has operations also may review
the merger under state antitrust laws.
At any time before the Effective Time, the Justice Department, the FTC,
a state or non-U.S. governmental authority or a private person or an entity
could seek under the antitrust laws, among other things, to enjoin the merger
or to cause TMW to divest itself, in whole or in part, of businesses conducted
by K&G or of other businesses conducted by the Company. There can be no
assurance that a challenge to the merger will not be made, or that, if such a
challenge is made, TMW and K&G will prevail. The obligations of TMW and K&G to
consummate the merger are subject to the condition that there be no temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the merger. Each party has agreed to use
reasonable efforts to have any such injunction, order, restraint or prohibition
vacated.
TMW and K&G believe that they will obtain all material required
regulatory approvals prior to the annual meeting. However, it is not certain
that all such approvals will be received by such time, or at all, and
governmental authorities may impose unfavorable conditions for granting the
required approvals.
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NO APPRAISAL RIGHTS
K&G is a Georgia corporation. Article 13 of the Georgia Business
Corporation Code provides dissenters' rights (sometimes referred to as
"appraisal rights") to shareholders of a Georgia corporation that is involved
in a merger under certain circumstances. However, Article 13 appraisal rights
are not available to shareholders of a corporation whose securities are listed
on a national securities exchange and whose shareholders are not required to
accept in exchange for their stock anything other than stock of another
corporation listed on a national securities exchange and cash in lieu of
fractional shares. Because K&G common stock is traded on Nasdaq, and because
K&G's shareholders will receive only TMW common stock (which is also traded on
Nasdaq) and cash in lieu of fractional shares in the merger, shareholders of
K&G will not have appraisal rights with respect to the merger.
FEDERAL SECURITIES LAW CONSEQUENCES; RESALE RESTRICTIONS
All shares of TMW common stock that will be distributed to shareholders
of K&G in the merger will be freely transferable, except for certain
restrictions applicable to "affiliates" of K&G. Shares of TMW common stock
received by persons who are deemed to be affiliates of K&G may be resold by
them only in transactions permitted by the resale provisions of Rule 145 or as
otherwise permitted under the Securities Act of 1933, as amended (the
"Securities Act"). Persons who may be deemed to be affiliates of K&G generally
include certain officers, directors and significant shareholders of K&G. The
merger agreement requires K&G to cause each of its affiliates to execute a
written agreement to the effect that such persons will not sell or dispose of
any of the shares of TMW common stock issued to them in the merger unless such
sale or disposition has been registered under the Securities Act, is in
conformity with Rule 145 or is otherwise exempt from the registration
requirements under the Securities Act.
Under generally accepted accounting principles, the sale of TMW common
stock or K&G common stock by an affiliate of either TMW or K&G within 30 days
prior to the Effective Time or thereafter prior to publication of financial
results that include at least 30 days of combined operations of TMW and K&G
after the Effective Time could preclude pooling-of-interests accounting
treatment for the merger. The merger is conditioned on each of K&G's
affiliates delivering a written undertaking that they will not transfer any of
the TMW common stock received or to be received by them pursuant to the merger
until final results of operations of TMW covering at least 30 days of combined
operations of TMW and K&G have been published. Additionally, each of TMW's
affiliates must deliver a written undertaking that they will not transfer TMW
common stock they own until final results of operations of TMW covering at
least 30 days of combined operations of TMW and K&G have been published.
CERTAIN TERMS OF THE MERGER AGREEMENT
This section describes the material provisions of the merger agreement.
This description does not purport to be complete and is qualified in its
entirety by reference to the merger agreement, a copy of which is attached
hereto as Annex A, and which is incorporated herein by reference. All
shareholders are urged to read the merger agreement carefully in its entirety.
THE MERGER
Structure. In the merger, Merger Sub, a wholly owned subsidiary of TMW,
will be merged into K&G, with K&G being the surviving corporation. As a
result, K&G will become a wholly owned subsidiary of TMW.
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<PAGE> 59
Effective Time. The merger will become effective when a certificate of
merger relating to the merger is duly filed with the Secretary of State of the
State of Georgia (the "Effective Time"), which is expected to occur as soon as
practicable after the shareholders of K&G have approved the merger and all of
the other conditions set forth in the merger agreement have been satisfied or
waived. TMW and K&G anticipate that the Effective Time will occur late in the
second quarter of 1999.
Share Conversion. Under the terms and subject to the conditions of the
merger agreement, each share of K&G common stock outstanding immediately prior
to the Effective Time will be converted into the number of shares of TMW
common stock equal to the Exchange Ratio, which will be from 0.4 to 0.43. We
will determine the final Exchange Ratio by computing the average of the closing
prices per share of TMW common stock, as reported on Nasdaq, for the 15 trading
days ending on the third trading day before the closing date of the merger. If
the average closing price is $32.50 or more, the Exchange Ratio will be 0.4.
If the average closing price is $27.50 or less, the Exchange Ratio will be
0.43. If the average closing price is between $27.50 and $32.50, the Exchange
Ratio will be the sum of .4 plus a decimal, calculated to four decimal places,
equal to .03 times a fraction with a numerator equal to the difference between
$32.50 and the average described above and a denominator of $5.00. For
example, if the average closing price is $30.00, the Exchange Ratio will be
equal to .4 + .03 [(32.50 - 30.00) / 5)], which equals .4 + (.03)(.5), which
equals .415. Therefore, each shareholder of K&G would receive 0.415 of a share
of TMW common stock in exchange for each share of K&G common stock held. Cash
will be paid instead of issuing fractional shares of TMW common stock. All
shares of K&G common stock that are owned by K&G or its subsidiaries or TMW or
its subsidiaries, if any, will, at the Effective Time, be canceled and retired
and will cease to exist, without any payment for those shares.
K&G Stock Options. Each outstanding option to purchase K&G common stock
as of the Effective Time will become an option to acquire a number of shares of
TMW common stock equal to the number of shares purchasable under the K&G option
multiplied by the Exchange Ratio at a per share price equal to the exercise
price under the K&G option divided by the Exchange Ratio. If the conversion in
the previous sentence would otherwise result in an optionholder's being
entitled to a fractional share of TMW common stock, that optionholder will
receive cash in lieu of that fractional share when the option is fully
exercised as set forth in the merger agreement.
CERTAIN COVENANTS
Interim Operations. From the date of signing the merger agreement until
the Effective Time, K&G and its subsidiaries are required to conduct their
businesses in the ordinary course consistent with past practice, to use all
commercially reasonable efforts to preserve their business organizations
intact, to keep available the services of their current officers and employees
and to preserve their relationships with customers, suppliers and others with
whom they do business. In addition, K&G and its subsidiaries may not, subject
to certain limited exceptions, take certain other actions during this period,
including the following:
o declare or pay any dividends;
o split, combine or reclassify any of its capital stock;
o purchase, redeem or otherwise acquire any shares of K&G's capital
stock;
o issue, deliver, sell or pledge any of their securities;
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<PAGE> 60
o amend their articles of incorporation or bylaws;
o acquire or agree to acquire any business or entity;
o borrow money or issue letters of credit, except for borrowings
and letters of credit under its existing credit facility that
would not result in K&G's total indebtedness exceeding $8
million; or
o sell, lease, mortgage, pledge or otherwise encumber or dispose of
any assets except for sales of inventory in the ordinary course
of business consistent with past practice and other dispositions
not aggregating more than $500,000.
No Solicitation. K&G may not, directly or indirectly, solicit, initiate
or encourage any Takeover Proposal (as defined below) nor may it engage in any
discussions or negotiations relating to a Takeover Proposal. K&G may, however,
engage in discussions with a party making an unsolicited Takeover Proposal for
the limited purpose of determining whether that proposal is a Superior Proposal
(as defined below).
Notwithstanding these restrictions, until the K&G shareholders have
approved the merger, K&G may furnish information (pursuant to confidentiality
arrangements) in response to an unsolicited written request from a proposed
bidder if the K&G Board of Directors concludes, based on the written advice of
outside counsel, that the failure to do so would breach the fiduciary duties of
the K&G board of directors. K&G has agreed to promptly notify TMW of the
pendency of any negotiations respecting, or the receipt of, any Takeover
Proposal.
If the board of directors of K&G receives a Takeover Proposal that it
believes is a Superior Proposal before the shareholders of K&G have approved
the merger, K&G may terminate the merger agreement and pay a $3 million
Termination Fee. See "-Termination of the Merger Agreement".
"Takeover Proposal" means any proposal or offer for a merger, share
exchange or other business combination involving, or a purchase of a greater
than 10% equity interest in or a material amount of the assets of K&G and its
subsidiaries.
A "Superior Proposal" means any bona fide Takeover Proposal to acquire,
directly or indirectly, all of the outstanding K&G common stock or all of the
assets of K&G and its subsidiaries and otherwise on terms which the board of
directors of K&G determines in its good faith judgment, based on the written
advice of a nationally recognized financial advisor, to be more favorable to
the K&G shareholders than the merger.
Shareholders Meeting. K&G has agreed to call, give notice of and hold
the shareholders meeting as promptly as practicable for the purpose of voting
upon the adoption of the merger agreement and any related matters.
Mutual Covenants. K&G and TMW have agreed, among other things, not to
take any action or to fail to take any action that (i) is reasonably likely to
breach their respective representations and warranties or (ii) would knowingly
jeopardize the merger as a pooling-of-interests for accounting purposes.
Certain Other Covenants. K&G and TMW agreed to certain other customary
covenants in the merger agreement, including covenants relating to obtaining
necessary consents and approvals; cooperating with each other to obtain
antitrust clearances; providing access to and furnishing information; providing
notices of certain events and consulting with each other regarding public
statements and filings; obtaining
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<PAGE> 61
agreements from affiliates relating to stock trading; certain employee matters;
and mutually defending any claims or actions questioning the validity or
legality of the transactions contemplated by the merger agreement.
CERTAIN REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations
and warranties by TMW and K&G as to the following, among other things:
capitalization; due organization and good standing; corporate authorization to
effect the merger; governmental approvals required in connection with the
merger; absence of certain undisclosed litigation; accuracy of its public
filings; absence of certain changes or events; absence of certain undisclosed
liabilities; absence of defaults under certain agreements; compliance with
applicable laws; tax matters; employee benefit matters; labor matters;
environmental matters; and brokerage fees.
In addition, K&G has made certain additional representations and
warranties to TMW and Merger Sub in the merger agreement with respect to, among
other things: opinion of financial advisor; antitakeover statutes; and
inventory.
The representations and warranties in the merger agreement do not
survive the Effective Time.
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligations. The obligations of K&G, TMW and
Merger Sub to consummate the merger are subject to the satisfaction of the
following conditions:
o the receipt of approval of the shareholders of K&G;
o the approval for trading on Nasdaq of the shares of TMW common
stock to be issued in the merger;
o the expiration or termination of the applicable waiting period
under the HSR Act and receipt of all governmental and other
consents and approvals required in connection with the
consummation of the merger;
o the absence of any temporary restraining order, preliminary or
permanent injunction or other legal restraint or prohibition
preventing the consummation of the merger;
o the effectiveness of this Registration Statement, with no stop
order suspending its effectiveness and no proceedings seeking a
stop order;
o receipt of letters from their respective independent accountants
to the effect that TMW and K&G are each eligible to be a party to
a merger accounted for as a pooling-of-interests.
Additional Conditions to Obligations of TMW. The obligations of TMW to
consummate the merger are subject to the satisfaction or waiver by TMW at or
prior to the Closing Date of the following additional conditions:
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<PAGE> 62
o the representations and warranties of K&G in the merger agreement
must be true in all material respects as of the date of the
merger agreement, other than representations and warranties as of
a specific date, as of the Closing Date as though made on and as
of the Closing Date;
o the performance in all material respects by K&G of its
obligations under the merger agreement required to be performed
at or prior to the Closing Date;
o the receipt from K&G's directors and executive officers who are
affiliates of K&G of their agreements not to sell their stock for
a certain period of time;
o the receipt of a favorable tax opinion from
Fulbright & Jaworski L.L.P., counsel to TMW;
o the receipt of certain customary certificates, opinions and other
closing documents;
o the failure of NationsBanc to revoke or modify its opinion in a
materially adverse manner;
o the existing employment agreement with Stephen Greenspan shall
have been amended;
o the receipt by TMW of written resignations from all officers and
directors of K&G and its subsidiaries; and
o the receipt of an executed Termination Agreement from John Dancu,
Chief Operating Officer of K&G.
As previously reported in K&G's filings with the SEC, on June 4, 1998, a
former employee of K&G filed a complaint in California Superior Court against
K&G and an officer and director of K&G relating to the plaintiff's employment
relationship with K&G. The several causes of action stated in the complaint
relate primarily to an alleged employment agreement between the plaintiff and
K&G and K&G's alleged breach thereof. The plaintiff is seeking approximately
$10 million plus punitive damages. While K&G believes that it has valid
defenses to the plaintiff's claims, TMW required that the litigation be settled
on terms no less favorable to K&G than those set forth below as a condition to
closing of the merger. Accordingly, K&G entered into a settlement agreement
with the plaintiff effective April 5, 1999. Under the settlement agreement,
upon closing of the merger, the plaintiff would receive a payment of $1.9
million in exchange for a complete release of all claims against K&G and the
other defendants. K&G's employment practices liability insurer would pay $1
million of this $1.9 million obligation. In the event the merger does not
close, K&G has no obligation to settle this claim.
Additional Conditions to Obligations of K&G. The obligations of K&G to
consummate the merger are subject to the satisfaction or waiver by K&G at or
prior to the Closing Date of the following additional conditions:
o the representations and warranties of TMW in the merger agreement
must be true and correct in all material respects as of the date
of the merger agreement and, other than representations and
warranties as of a specific date, as of the Closing Date as
though made on and as of the Closing Date;
o the performance in all material respects by TMW of its
obligations under the merger agreement required to be performed
at or prior to the Closing Date;
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<PAGE> 63
o the receipt of a favorable tax opinion from Hunton & Williams,
counsel to K&G;
o the receipt of certain customary certificates, opinions and other
closing documents;
o the failure of NationsBanc to revoke or modify its opinion in a
materially adverse manner; and
o the receipt from K&G's directors and executive officers who are
affiliates of K&G of their agreements not to sell their stock for
a certain period of time;
o TMW causing K&G to honor certain existing employment contracts
after the merger; and
o the receipt of an executed Termination Agreement from TMW with
respect to John Dancu.
TERMINATION OF THE MERGER AGREEMENT
Rights to Terminate. At any time prior to the Effective Time, the
merger agreement may be terminated and the transactions contemplated may be
abandoned as follows (any of the following rights to terminate may be waived by
the party possessing the right):
o by the mutual written consent of each party to the merger
agreement;
o by either K&G or TMW if:
o any required approval of the shareholders of K&G shall not
have been obtained by reason of the failure to obtain the
required vote;
o any court or other governmental authority has issued an
order, decree or ruling permanently enjoining, restraining
or otherwise prohibiting the merger; or
o the merger shall not have been consummated by August 31,
1999, unless the failure to consummate the merger is the
result of a material breach of the merger agreement by the
party seeking to terminate the merger agreement.
o by TMW if:
o K&G breaches in any material respects any of its
representations or warranties, or fails to perform any of
its agreements, under the merger agreement, provided that
breach has not been cured within 30 days following receipt
by K&G of notice of the breach;
o the Board of Directors of K&G or any committee thereof:
(i) withdraws or modifies its recommendation of the merger
agreement or the merger in a manner adverse to TMW or (ii)
approves or recommends, or proposes to approve or
recommend, any Superior Proposal and K&G pays TMW the
Termination Fee (described below).
o by K&G if:
o TMW breaches in any material respects any of its
representations or warranties, or fails to perform any of
its agreements, under the merger agreement, provided that
breach has not been cured within 30 days following receipt
by TMW of notice of the breach;
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<PAGE> 64
o prior to approval of the merger and the merger agreement
by the shareholders of K&G, K&G receives a Superior
Proposal and pays TMW the Termination Fee (described
below); or
o the average closing price of TMW common stock, as computed
for purposes of the Exchange Ratio, is less than $20 and
K&G pays TMW $750,000.
If the merger agreement is terminated pursuant to its terms, no
provision of the merger agreement will survive (other than the provisions
relating to confidentiality), and termination will be without any liability on
the part of any party, other than liability for which the Termination Fee is
the sole remedy or liability for an intentional breach of the merger agreement.
Termination Fees Payable by K&G. K&G has agreed to pay TMW $3 million
in immediately available funds (the "Termination Fee") if the merger agreement
is terminated:
o by K&G because it receives a Superior Proposal prior to receiving
shareholder approval of the merger and the merger agreement;
o by TMW because the K&G Board of Directors approves or recommends,
or proposes to approve or recommend, to K&G shareholders any
Takeover Proposal;
o by TMW because the K&G Board of Directors withdraws or modifies
its recommendation of the merger agreement or the merger in an
adverse manner and K&G consummates the alternative transaction on
or before the date that is 12 months after the date of
termination of the merger agreement, in which case the
termination fee will be payable upon consummation of that
transaction; or
o because an alternate Acquisition Proposal is made and publicly
announced, the shareholders of K&G do not approve the merger, and
K&G consummates a transaction pursuant to the alternate
Acquisition Proposal on or prior to the date that is 12 months
after the date of termination of the merger agreement, in which
case the Termination Fee will be payable upon consummation of
that transaction.
EXPENSES
Whether or not the merger or other transactions contemplated by the
merger agreement are consummated, all costs and expenses incurred in connection
with the merger agreement and the transactions contemplated thereby will be
paid by the party incurring such costs or expenses. However, TMW and K&G will
each be responsible for 50% of the registration fees and printing costs
incurred in connection with this proxy statement/prospectus.
AMENDMENTS
The merger agreement may be amended by TMW and K&G by written instrument
at any time before or after adoption of the merger agreement by the
shareholders of K&G. However, after adoption by the K&G shareholders, no
amendment may be made that by law requires further approval by those
shareholders without that further approval.
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THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected statement of earnings and balance sheet
information for the fiscal years indicated has been derived from the Company's
consolidated financial information. The Company's consolidated financial
statements as of January 31,1998 and January 30, 1999 and for each of the three
years in the period ended January 30, 1999 were audited by Deloitte & Touche
LLP, independent auditors, whose report thereon is incorporated by reference
herein. The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto of the Company incorporated
by reference herein. References herein to years are to the Company's 52- or
53-week fiscal year, which ends on the Saturday nearest January 31 in the
following calendar year. For example, references to "1998" mean the fiscal
year ended January 30, 1999. All fiscal years for which financial information
is included in this proxy statement/prospectus had 52 weeks, except for 1995
which had 53 weeks.
The table below also includes TMW/Moores pro forma selected consolidated
financial information in order to give effect to TMW's combination on a
pooling-of-interests basis with Moores on February 10, 1999. The TMW/Moores
pro forma statement of earnings and operating information assumes the
combination of the two entities occurred at the beginning of fiscal 1997 and
that 2.5 million shares of TMW common stock were issued at that time. No
information is presented for prior years as Moores commenced operations on
December 23, 1996. Moores' operating results for the 40-day period in fiscal
1996 were not significant. The TMW/Moores pro forma balance sheet information
assumes that TMW and Moores were combined on January 30, 1999 and reflects
adjustments that give effect to nonrecurring charges directly attributable to
the combination, as well as to the effects of refinancing approximately US $59
million of Moores' existing indebtedness at the date of the combination. See
"Unaudited Pro Forma Combined Financial Statements" on page 58.
<TABLE>
<CAPTION>
TMW/MOORES
----------
TMW HISTORICAL PRO FORMA
-------------- ---------
YEAR YEAR
-------- --------- -------- --------- --------- ----------------------
1994 1995 1996 1997 1998 1997 1998
-------- --------- -------- --------- --------- --------- ---------
(Dollars and shares in thousands, except per share and per square foot data.)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales $317,127 $ 406,343 $483,547 $ 631,110 $ 767,922 $ 762,524 $ 898,597
Gross margin 121,878 157,615 188,366 242,593 299,735 291,256 348,927
Operating income 22,375 30,606 38,134 51,530 71,682 64,897 85,711
Net earnings before extraordinary item 12,108 16,508 21,143 28,883 40,920 30,951 43,913
Basic earnings per share of common stock(1) $ 0.43 $ 0.55 $ 0.67 $ 0.89 $ 1.21 $ 0.89 $ 1.21
Diluted earnings per share of
common stock(1) $ 0.42 $ 0.54 $ 0.67 $ 0.87 $ 1.17 $ 0.87 $ 1.17
Weighted average shares outstanding(1) 28,216 29,821 31,354 32,343 33,849 34,843 36,349
Weighted average shares outstanding plus
dilutive potential common shares(1) 28,744 30,339 34,101 35,384 36,075 37,884 38,575
OPERATING INFORMATION:
Percentage increase in comparable
store sales(2):
TMW 8.4% 6.8% 3.9% 8.5% 10.4% 8.5% 10.4%
Moores 4.5% 2.2%
Average square footage - all stores(3):
TMW 4,553 4,687 4,863 5,097 5,297 5,097 5,297
Moores 5,997 5,973
Average sales per square foot of
selling space(4):
TMW $ 406 $ 416 $ 413 $ 420 $ 437 $ 420 $ 437
Moores $ 228 $ 234
Number of stores:
Open at beginning of period 183 231 278 345 396 443 501
Opened 48 48 50 50 47 57 57
Acquired -- -- 17 6 4 6 4
Closed -- (1) -- (5) (16) (5) (16)
Open at end of period 231 278 345 396 431 501 546
Capital expenditures $ 23,736 $ 22,538 $ 26,222 $ 27,380 $ 46,247 $ 30,564 $ 50,050
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
Jan. 28, Feb. 3, Feb. 1, Jan. 31, Jan. 30, Jan. 30,
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital $ 68,078 $ 88,798 $136,837 $182,561 $174,055 $198,208
Total assets 160,494 204,105 295,478 379,415 403,732 473,549
Long-term debt(5) 24,575 4,250 57,500 57,500 -- 56,326
Shareholders' equity 84,944 136,961 159,129 220,048 298,218 297,763
</TABLE>
- --------
(1) All periods have been adjusted to give effect to a 50% stock
dividend effected on November 15, 1995 and a 50% stock dividend
effected on June 19, 1998. Basic and diluted earnings per share
are based on net earnings before extraordinary item.
(2) Comparable store sales data is calculated by excluding the net
sales of a store for any month of one period if the store was not
open throughout the same month of the prior period.
(3) Average square footage for all stores is calculated by dividing
the total square footage for all stores open at the end of the
period by the number of stores open at the end of such period.
(4) Average sales per square foot of selling space is calculated by
dividing total selling square footage for all stores open the
entire period into total sales for those stores. The amounts
presented for Moores have been translated from Canadian dollars
at the average exchange rate for the 1998 year.
(5) February 1, 1997 and January 31, 1998 balances represent the 5
1/4% Convertible Subordinated Notes Due 2003. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations- Liquidity and Capital Resources" in the TMW Annual
Report on Form 10-K which is incorporated by reference herein and
has been mailed herewith for a discussion of the redemption of
the Notes.
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<PAGE> 67
K&G MEN'S CENTER, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The selected consolidated financial data below should be read in
conjunction with K&G's Consolidated Financial Statements and Notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" incorporated by reference herein from K&G's Annual Report on
Form 10-K for the year ended January 31, 1999. The statement of earnings and
balance sheet data set forth below for the years ended February 2, 1997 (fiscal
1996), February 1, 1998 (fiscal 1997) and January 31,1999 (fiscal 1998), and as
of those dates have been derived from K&G's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, K&G's independent public
accountants. All of the share and per share information set forth below has
been retroactively adjusted to give effect to a 3-for-2 stock split effected
April 25, 1997.
<TABLE>
<CAPTION>
Year
----
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS INFORMATION:
Net sales $ 49,801 $ 60,027 $ 88,104 $112,795 $139,234
Gross margin 11,557 14,433 20,760 26,282 32,153
Operating income 3,722 5,138 7,008 9,607 9,536
Net earnings 2,298 3,186 4,584 6,383 6,229
Basic earnings per share of common stock $ 0.32 $ 0.40 $ 0.47 $ 0.63 $ 0.61
Diluted earnings per share of common stock $ 0.32 $ 0.40 $ 0.47 $ 0.63 $ 0.61
Weighted average shares outstanding 7,245 7,875 9,682 10,118 10,207
Weighted average shares outstanding plus dilutive
potential common shares 7,245 7,875 9,787 10,211 10,207
OPERATING INFORMATION:
Percentage increase in comparable store sales (1) 17.2% 11.9% 12.4% 13.0% 5.7%
Average square footage - all stores (2) 16,966 17,000 17,207 17,543 17,839
Average sales per square foot of selling space (3) $ 539 $ 517 $ 436 $ 404 $ 363
Number of stores:
Open at beginning of period 7 9 11 17 25
Opened 2 3 6 8 8
Closed (1)
Open at end of period 9 11 17 25 33
Capital expenditures $ 367 $ 885 $ 1,128 $ 1,261 $ 3,424
BALANCE SHEET INFORMATION(4):
Working capital $ 5,601 $ 7,813 $ 29,305 $ 35,025 $ 41,359
Total assets 12,464 17,203 42,384 47,931 57,230
Long-term debt 895 205 205 205 205
Shareholders' equity 6,188 2,643 31,280 37,817 46,797
</TABLE>
(1) New stores become comparable stores beginning in their fourteenth full
month of operation.
(2) Average square footage for all stores is calculated by dividing the
total square footage for all stores open at the end of the period by the
number of stores open at the end of such period.
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<PAGE> 68
(3) Average sales per square foot of selling area is calculated by dividing
selling square footage for all stores open the entire period into net
sales for those stores. Selling area excludes administrative, storage,
alterations and fitting areas.
(4) K&G effected its initial public offering on January 24, 1996 (before
fiscal 1995 year end). This transaction closed on January 30, 1996
(after year end). The transaction has not been reflected in K&G's
financial statements as of January 28, 1996.
-57-
<PAGE> 69
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 of The Men's
Wearhouse, Inc. ("TMW") give effect to (a) the February 10, 1999 combination on
a pooling-of-interests basis of TMW with Moores Retail Group Inc. ("Moores")
and (b) the proposed combination of TMW and K&G Men's Center, Inc. ("K&G")
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 TMW and K&G, which
are incorporated by reference in this proxy statement/prospectus. The
unaudited pro forma combined balance sheet as of January 30, 1999 first assumes
that the February 10, 1999 combination of TMW and Moores was consummated on
January 30, 1999 and combines the TMW and Moores consolidated balance sheets as
of January 30, 1999 ("TMW/Moores Pro Forma"), then assumes that the proposed
combination of TMW and K&G was consummated on January 30, 1999 and combines the
TMW/Moores Pro Forma January 30, 1999 and K&G January 31, 1999 consolidated
balance sheets. The unaudited pro forma combined balance sheet includes
adjustments which give effect to events that are directly attributable to the
transactions.
TMW/Moores Pro Forma. With respect to the February 10, 1999 combination
of TMW with Moores, the unaudited pro forma combined statements of earnings
assume that the combination was consummated at the beginning of fiscal 1997 and
combine the historical results of TMW and Moores for fiscal 1997 and 1998. The
historical results of Moores for fiscal 1996 have not been combined with TMW's
fiscal 1996 historical results as Moores commenced operations on December 23,
1996 and its reported net loss of $96 for the 40 day period from December 23,
1996 to January 31, 1997 is not significant. Nonrecurring charges totaling
$5,261, net of a $291 tax benefit, which resulted directly from the combination
and will be included in TMW's fiscal 1999 results of operations have been
excluded from the unaudited pro forma combined statements of earnings. In
addition, an extraordinary charge of $2,913, net of a $1,355 tax benefit,
relating to the refinancing of the February 10, 1999 outstanding debt of Moores
has not been reflected. The effects of these nonrecurring and extraordinary
charges have, however, been reflected in the pro forma adjustments to retained
earnings for TMW/Moores Pro Forma in the pro forma combined balance sheet.
The historical consolidated financial statements of Moores included in
the pro forma combined balance sheet 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. The TMW/Moores Pro Forma earnings per share in the pro
forma combined statements of earnings reflect the 2.5 million shares of TMW
common stock that TMW will ultimately issue to the former shareholders and
option holders of Moores as a result of the February 10, 1999 combination of
TMW and Moores.
TMW/K&G Pro Forma Combined. With respect to the proposed combination of
TMW and K&G, the unaudited pro forma combined statements of earnings assume
that the proposed combination was consummated at the beginning of fiscal 1996
and have been prepared by combining the historical results of K&G with the
historical results of TMW for fiscal 1996 and with the TMW/Moores pro forma
combined results for fiscal 1997 and 1998.
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<PAGE> 70
Nonrecurring charges totaling $1,675, net of a $325 tax benefit, which result
directly from the transaction and which are expected to be included in the
results of operations of TMW within the twelve months succeeding the
transaction have been excluded from the unaudited pro forma combined statements
of earnings. The effect of these nonrecurring charges has, however, been
reflected in the pro forma adjustments to retained earnings for TMW/K&G Pro
Forma Combined in the pro forma combined balance sheet.
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.
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<PAGE> 71
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
JANUARY 30, 1999
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
As Reported
-------------------------- Pro Forma TMW/Moores
TMW Moores Adjustments Pro Forma
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 19,651 $ 19,651
Inventories 236,105 $ 35,841 271,946
Marketable securities --
Other current assets 14,740 2,108 $ 784(5)(6) 17,632
---------- ---------- ---------- ----------
Total current assets 270,496 37,949 784 309,229
PROPERTY AND EQUIPMENT, net 107,889 10,296 118,185
OTHER ASSETS, net 25,347 25,869 (5,081)(5)(6) 46,135
---------- ---------- ---------- ----------
Total assets $ 403,732 $ 74,114 $ (4,297) $ 473,549
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 89,316 $ 10,952 $ 569(5) $ 100,837
Short-term borrowings 7,568 (7,568)(6) --
Current portion of long-term debt 3,644 (1,160)(6) 2,484
Income taxes payable 7,125 575 7,700
---------- ---------- ---------- ----------
Total current liabilities 96,441 22,739 (8,159) 111,021
LONG-TERM DEBT 44,665 11,661(5)(6) 56,326
OTHER LIABILITIES 9,073 270 (904)(6) 8,439
---------- ---------- ---------- ----------
Total liabilities 105,514 67,674 2,598 175,786
---------- ---------- ---------- ----------
MINORITY INTEREST
SHAREHOLDERS' EQUITY:
Common stock 349 1,708 (1,683)(7) 374
Capital in excess of par 148,446 2,920(5)(7) 151,366
Retained earnings 150,418 4,965 (8,132)(5)(6) 147,251
---------- ---------- ---------- ----------
299,213 6,673 (6,895) 298,991
Currency translation adjustment (233) (233)
Treasury stock, at cost (995) (995)
---------- ---------- ---------- ----------
Total shareholders' equity 298,218 6,440 (6,895) 297,763
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity $ 403,732 $ 74,114 $ (4,297) $ 473,549
========== ========== ========== ==========
<CAPTION>
As Reported TMW/K&G
----------- Pro Forma Pro Forma
K&G Adjustments Combined
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 11,361 $ 31,012
Inventories 30,771 302,717
Marketable securities 6,025 6,025
Other current assets 3,030 $ 325(1) 20,987
---------- ---------- ----------
Total current assets 51,187 325 360,741
PROPERTY AND EQUIPMENT, net 5,586 123,771
OTHER ASSETS, net 457 46,592
---------- ---------- ----------
Total assets $ 57,230 $ 325 $ 531,104
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 8,358 $ 2,000(1) $ 111,195
Short-term borrowings --
Current portion of long-term debt 2,484
Income taxes payable 1,470 9,170
---------- ---------- ----------
Total current liabilities 9,828 2,000 122,849
LONG-TERM DEBT 205 56,531
OTHER LIABILITIES 8,439
---------- ---------- ----------
Total liabilities 10,033 2,000 187,819
---------- ---------- ----------
MINORITY INTEREST 400 400
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock 103 $ (59)(3) 418
Capital in excess of par 27,931 59 (3) 179,356
Retained earnings 18,763 (1,675)(1) 164,339
---------- ---------- ----------
46,797 (1,675) 344,113
Currency translation adjustment (233)
Treasury stock, at cost (995)
---------- ---------- ----------
Total shareholders' equity 46,797 (1,675) 342,885
---------- ---------- ----------
Total liabilities and shareholders' equity $ 57,230 $ 325 $ 531,104
========== ========== ==========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
-60-
<PAGE> 72
THE MEN'S WEARHOUSE, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED JANUARY 30, 1999
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
As Reported As Reported
------------------------- Pro Forma TMW/Moores
TMW Moores Adjustments Pro Forma K&G
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 767,922 $ 130,675 $ 898,597 $ 139,234
Cost of goods sold, including buying and
occupancy costs 468,187 81,483 549,670 107,081
----------- ----------- ----------- ----------- -----------
Gross margin 299,735 49,192 -- 348,927 32,153
Selling, general and administrative expenses 228,053 35,163 263,216 22,617
----------- ----------- ----------- ----------- -----------
Operating income 71,682 14,029 -- 85,711 9,536
Other income -- 1,061
Interest expense, net (2,032) (6,993) (9,025) (29)
----------- ----------- ----------- ----------- -----------
Earnings before income taxes 69,650 7,036 -- 76,686 10,568
Provision for income taxes (28,730) (4,043) (32,773) (4,137)
----------- ----------- ----------- ----------- -----------
Earnings before minority interest 40,920 2,993 -- 43,913 6,431
Minority interest -- -- (202)
----------- ----------- ----------- ----------- -----------
Net earnings before extraordinary item $ 40,920 $ 2,993 -- $ 43,913 $ 6,229
=========== =========== =========== =========== ===========
Assuming Exchange Ratio of 0.4:
Net earnings before extraordinary item per share:
Basic $ 1.21 $ 1.21 $ 0.61
Diluted 1.17 1.17 0.61
Weighted average shares outstanding:
Basic 33,849 2,500(7) 36,349 10,207
Diluted 36,075 2,500(7) 38,575 10,207
Assuming Exchange Ratio of 0.43:
Net earnings before extraordinary item per share:
Basic $ 1.21 $ 1.21 $ 0.61
Diluted 1.17 1.17 0.61
Weighted average shares outstanding:
Basic 33,849 2,500(7) 36,349 10,207
Diluted 36,075 2,500(7) 38,575 10,207
<CAPTION>
TMW/K&G
Pro Forma Pro Forma
Adjustments Combined
----------- -----------
<S> <C> <C>
Net sales $ 1,037,831
Cost of goods sold, including buying and
occupancy costs $ 3,699 (2) 660,450
----------- -----------
Gross margin (3,699) 377,381
Selling, general and administrative expenses (3,699)(2) 282,134
----------- -----------
Operating income -- 95,247
Other income 1,061
Interest expense, net (9,054)
----------- -----------
Earnings before income taxes -- 87,254
Provision for income taxes (36,910)
----------- -----------
Earnings before minority interest -- 50,344
Minority interest (202)
----------- -----------
Net earnings before extraordinary item -- $ 50,142
=========== ===========
Assuming Exchange Ratio of 0.4:
Net earnings before extraordinary item per share:
Basic $ 1.24
Diluted 1.20
Weighted average shares outstanding:
Basic (6,124)(4) 40,432
Diluted (6,124)(4) 42,658
Assuming Exchange Ratio of 0.43:
Net earnings before extraordinary item per share:
Basic $ 1.23
Diluted 1.19
Weighted average shares outstanding:
Basic (5,818)(4) 40,738
Diluted (5,818)(4) 42,964
</TABLE>
See Notes to Pro Forma Combined Financial Statements
-61-
<PAGE> 73
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 TMW/K&G
--------------------- Pro Forma TMW/Moores As Reported Pro Forma Pro Forma
TMW Moores Adjustments Pro Forma K&G Adjustments Combined
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 631,110 $ 131,414 $ 762,524 $ 112,795 -- $ 875,319
Cost of goods sold, including buying and
occupancy costs 388,517 82,751 471,268 86,513 $ 2,719(2) 560,500
--------- --------- --------- --------- --------- --------- ---------
Gross margin 242,593 48,663 -- 291,256 26,282 (2,719) 314,819
Selling, general and administrative
expenses 191,063 35,296 226,359 16,675 (2,719)(2) 240,315
--------- --------- --------- --------- --------- --------- ---------
Operating income 51,530 13,367 -- 64,897 9,607 -- 74,504
Other income -- 1,166 1,166
Interest expense, net (2,366) (7,234) (9,600) (29) (9,629)
--------- --------- --------- --------- --------- --------- ---------
Earnings before income tax 49,164 6,133 -- 55,297 10,744 -- 66,041
Provision for income taxes (20,281) (4,065) (24,346) (4,189) (28,535)
--------- --------- --------- --------- --------- --------- ---------
Earnings before minority interest 28,883 2,068 -- 30,951 6,555 -- 37,506
Minority interest -- (172) (172)
--------- --------- --------- --------- --------- --------- ---------
Net earnings before extraordinary item $ 28,883 $ 2,068 -- $ 30,951 $ 6,383 -- $ 37,334
========= ========= ========= ========= ========= ========= =========
Assuming Exchange Ratio of 0.4:
Net earnings before extraordinary item per
share:
Basic $ 0.89 $ 0.89 $ 0.63 $ 0.96
Diluted $ 0.87 0.87 0.63 0.94
Weighted average shares outstanding:
Basic 32,343 2,500(7) 34,843 10,118 (6,071)(4) 38,890
Diluted 35,384 2,500(7) 37,884 10,211 (6,127)(4) 41,968
Assuming Exchange Ratio of 0.43:
Net earnings before extraordinary item per
share:
Basic $ 0.89 $ 0.89 $ 0.63 $ 0.95
Diluted 0.87 0.87 0.63 0.93
Weighted average shares outstanding:
Basic 32,343 2,500(7) 34,843 10,118 (5,767)(4) 39,194
Diluted 35,384 2,500(7) 37,884 10,211 (5,820)(4) 42,275
</TABLE>
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<PAGE> 74
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 TMW/K&G
--------------------------- Pro Forma Pro Forma
TMW K&G Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 483,547 $ 88,104 $ 571,651
Cost of goods sold, including buying and
occupancy costs 295,181 67,344 $ 2,218(2) 364,743
------------ ------------ ------------ ------------
Gross margin 188,366 20,760 (2,218) 206,908
Selling, general and administrative expenses 150,232 13,752 (2,218)(2) 161,766
------------ ------------ ------------ ------------
Operating income 38,134 7,008 -- 45,142
Other income 735 735
Interest expense, net (2,146) (43) (2,189)
------------ ------------ ------------ ------------
Earnings before income taxes 35,988 7,700 -- 43,688
Provision for income taxes (14,845) (2,991) (17,836)
------------ ------------ ------------ ------------
Earnings before minority interest 21,143 4,709 -- 25,852
Minority interest (125) (125)
------------ ------------ ------------ ------------
Net earnings before extraordinary item $ 21,143 $ 4,584 -- $ 25,727
============ ============ ============ ============
Assuming Exchange Ratio of 0.4:
Net earnings before extraordinary item per share:
Basic $ 0.67 $ 0.47 $ 0.73
Diluted 0.67 0.47 0.72
Weighted average shares outstanding:
Basic 31,354 9,682 (5,810)(4) 35,226
Diluted 34,101 9,787 (5,872)(4) 38,016
Assuming Exchange Ratio of 0.43:
Net earnings before extraordinary item per share:
Basic $ 0.67 $ 0.47 $ 0.72
Diluted 0.67 0.47 0.72
Weighted average shares outstanding:
Basic 31,354 9,682 (5,519)(4) 35,517
Diluted 34,101 9,787 (5,579)(4) 38,309
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
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<PAGE> 75
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 January 30, 1999 and
for the years ended January 30, 1999, January 31, 1998 and February 1, 1997
include the following adjustments to reflect the combination of TMW and K&G as
a pooling-of-interests:
1. To record the estimated transaction costs to complete the
combination of TMW and K&G under pooling-of-interests accounting.
The costs, which primarily relate to investment banking fees,
professional fees and contract termination payments, are
currently estimated to be approximately $1,675, net of a tax
benefit of $325, 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 reclassify certain K&G buying and occupancy expenses to cost
of sales to conform with classifications used by TMW.
3. To adjust common stock and capital in excess of par value to
reflect the issuance of 4.4 million shares of TMW common stock to
K&G shareholders based on an Exchange Ratio of 0.43.
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 TMW common stock based on the minimum and maximum
Exchange Ratios of 0.4 and 0.43.
The pro forma combined financial statements as of January 30, 1999 and
for the years ended January 30, 1999 and January 31, 1998 include the following
adjustments to reflect the February 10, 1999 combination of TMW and Moores as a
pooling-of-interests and the concurrent debt refinancing:
5. To record the transaction costs incurred in the combination of
TMW 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, totaled approximately $5,261, net of a tax
benefit of $291, 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.
6. To adjust the pro forma combined balance sheet for the effects of
refinancing approximately US $59 million of existing Moores debt
as follows:
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<PAGE> 76
<TABLE>
<S> <C>
Revolving debt refinanced with long-term debt .................................. $ 7,568
Current portion of long-term debt refinanced with long-term debt ............... 3,644
Prepayment penalty from early retirement of long-term debt ..................... 1,496
-------
Addition to long-term debt ..................................................... $12,708
=======
Write off of Moores historical deferred financing costs, net of tax of $814 .... $ 1,958
Prepayment penalty from early retirement of long-term debt, net of tax of $541 . 955
-------
Adjustment to retained earnings ................................................ $ 2,913
=======
</TABLE>
7. To adjust common stock and capital in excess of par value to
reflect the issuance of 2.5 million shares of TMW common stock
issuable to Moores shareholders and option holders upon exchange
of certain exchangeable securities of Moores issued in the
February 10, 1999 combination of TMW and Moores.
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<PAGE> 77
DESCRIPTION OF TMW CAPITAL STOCK
The authorized capital stock of TMW consists of 50,000,000 shares of TMW
common stock, par value $.01 per share, and 2,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). At March 26, 1999,
34,897,464 shares of TMW common stock were outstanding and held by
approximately 1,100 holders of record and one share of Preferred Stock was
outstanding. A total of 6,501,874 shares of TMW common stock are reserved for
future issuance of which (i) 647,787 shares are reserved for issuance upon the
exercise of options granted under TMW's 1992 Stock Option Plan, (ii)1,101,129
shares are reserved for issuance upon the exercise of options granted under
TMW's 1996 Stock Option Plan, (iii) 746,925 shares are reserved for issuance
upon the exercise of options granted under TMW's 1998 Key Employee Stock Option
Plan, (iv) 1,403,412 shares are reserved for issuance under TMW's Employee
Stock Discount Plan, (v) 67,500 shares are reserved for issuance upon the
exercise of options granted under TMW's Non-Employee Director Stock Option
Plan, (vi) 57,000 shares are reserved for issuance upon the exercise of options
granted under miscellaneous employee stock option agreements and (vii)
2,478,121 shares are reserved for issuance upon the exchange of Exchangeable
Shares issued by Moores. In connection with the consummation of the Moores
combination, one share of Preferred Stock, to which voting rights attach for
the benefit of the holders of the Exchangeable Shares, was issued to a voting
trustee designated by TMW.
COMMON STOCK
Holders of shares of TMW common stock are entitled to one vote per share
in the election of directors and on all other matters submitted to a vote of
shareholders. Such holders do not have the right to cumulate their votes in
the election of directors. Holders of TMW common stock have no redemption or
conversion rights and no preemptive or other rights to subscribe for securities
of TMW. In the event of a liquidation, dissolution or winding up of TMW,
holders of TMW common stock are entitled to share equally and ratably in all of
the assets remaining, if any, after satisfaction of all debts and liabilities
of TMW, and the preferential rights of any series of Preferred Stock then
outstanding. The shares of TMW common stock outstanding are fully paid and
non-assessable.
Holders of TMW common stock have an equal and ratable right to receive
dividends, when, as and if declared by the TMW board of directors out of funds
legally available therefor and only after payment of, or provision for, full
dividends on all outstanding shares of any series of Preferred Stock and after
TMW has made provision for any required sinking or purchase funds for any
series of Preferred Stock. TMW's Credit Agreement prohibits the payment of
cash dividends on TMW common stock.
PREFERRED STOCK
The Preferred Stock may be issued, from time to time in one or more
series, and the TMW board of directors, without further approval of the
shareholders, is authorized to fix the dividend rights and terms, redemption
rights and terms, liquidation preferences, conversion rights, voting rights and
sinking fund provisions applicable to each such series of Preferred Stock. If
TMW issues a series of Preferred Stock in the future that has voting rights or
preference over TMW common stock with respect to the payment of dividends and
upon TMW's liquidation, dissolution or winding up, the rights of the holders of
TMW common stock offered hereby may be adversely affected. The issuance of
shares of Preferred Stock could be utilized, under certain circumstances, in an
attempt to prevent an acquisition of TMW. TMW has no present intention to
issue any shares of Preferred Stock other than the one share of Preferred Stock
issued in connection with the Moores combination.
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<PAGE> 78
One share of Preferred Stock, designated "Series A Special Voting
Preferred Stock", was issued in connection with the Moores transaction. The
holder of this share of Series A Special Voting Preferred Stock is entitled to
vote on all matters on which the holders of TMW common stock vote and is
entitled to that number of votes as are equal to the number of Exchangeable
Shares then outstanding. The trustee who holds the one share of Series A
Special Voting Preferred Stock must vote such share in accordance with
instructions from the holders of Exchangeable Shares. In the event of a
liquidation, dissolution or winding up of TMW, the holder of the one share of
Series A Special Voting Preferred Stock will be entitled to receive $0.01,
after satisfaction of all debts and liabilities of TMW and the preferential
rights of any other series of Preferred Stock then outstanding. The holder of
the Series A Special Voting Preferred Stock shall have no rights as to the
payment of dividends nor shall the holder thereof be entitled to convert the
Series A Special Voting Preferred Stock into TMW common stock.
LIMITATION OF DIRECTOR LIABILITY
The Restated Articles of Incorporation of TMW contain a provision that
limits the liability of TMW's directors as permitted under Texas law. The
provision eliminates the liability of a director to TMW or its shareholders for
monetary damages for negligent or grossly negligent acts or omissions in the
director's capacity as a director. The provision does not affect the liability
of a director (i) for breach of his duty of loyalty to TMW or to shareholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) for acts or omissions for which
the liability of a director is expressly provided by an applicable statute, or
(iv) in respect of any transaction from which a director received an improper
personal benefit. Pursuant to the Restated Articles of Incorporation, the
liability of directors will be further limited or eliminated without action by
shareholders if Texas law is amended to further limit or eliminate the personal
liability of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the TMW common stock is American
Stock Transfer & Trust Company.
COMPARATIVE RIGHTS OF TMW AND K&G SHAREHOLDERS
General. As a result of the merger, holders of K&G common stock will
become shareholders of TMW, and the rights of the former shareholders of K&G
will thereafter be governed by the TMW Articles of Incorporation, as amended,
the TMW Bylaws and the Texas Business Corporation Act (the "TBCA"). The rights
of K&G shareholders are currently governed by the K&G Articles of
Incorporation, the K&G Bylaws and the Georgia Business Corporation Code
("Georgia Law"). The following summarizes certain differences between the
rights of K&G shareholders and the rights of TMW shareholders.
Shareholder Meetings. Pursuant to the Amended and Restated Bylaws of
K&G, the annual shareholders meeting shall be held within 120 days following
the close of K&G's fiscal year. TMW's By-laws require that its annual meeting
be held at such date and time as shall be designated by TMW's board of
directors. Under K&G's Amended and Restated Bylaws, special meetings of the
shareholders can be called at any time by K&G's board of directors, chairman of
the board, president or upon the written request of the holders of 40% of all
the votes entitled to be cast on any issue or issues to be considered at such
meeting. TMW's By-laws provide that special meetings of shareholders may be
called at the request of the chairman of the board or the president, at the
request in writing of a majority of the TMW board of directors or at the
request in writing of shareholders owning at least ten percent of all the
shares entitled to vote at meetings.
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<PAGE> 79
Shareholder Action By Written Consent. TMW's By-laws provide that
shareholders may act by written consent provided that the consent is signed by
the holder or holders of all of the shares entitled to vote on the action which
is the subject of the consent. Georgia Law provides that K&G shareholders may
act by written consent of all of the shareholders entitled to vote on the
action, provided that each consenting shareholder has been furnished, or has
waived the right to be furnished, the same material that would have been
required to be sent to shareholders in a notice of a meeting at which the
proposed action would have been submitted to the shareholders for action.
Board of Directors. TMW's entire board of directors stands for
reelection each year. Directors are elected by a plurality of the votes cast
by the holders of shares entitled to vote in the election of directors at a
meeting of shareholders at which a quorum is present. Under both the TBCA and
TMW's By-laws, vacancies, whether by resignation, death or removal or by reason
of an increase in the size of the board, may be filled by the remaining members
of the board of directors. The number of vacancies that may be filled by action
of the TMW board of directors where the vacancy is created through an increase
in the size of the board is limited to two persons during the period between
any two successive annual meetings. In addition, under the TBCA the term of
office of a director elected by reason of an increase in the number of
directors will expire no later than the next election of directors by the
shareholders. TMW's By-laws provide that directors may be removed for cause
by the vote of a majority of the shares entitled to vote at an election of
directors.
K&G has a classified board structure under which one-third of its
directors stand for election each year. Directors are elected by a plurality
of the votes cast by the shares entitled to vote in the election at a meeting
at which a quorum is present. Under K&G's Amended and Restated Articles of
Incorporation, any vacancy, whether the result of death, resignation,
retirement, disqualification, removal from office for cause or an increase in
the number of directors, shall be filled by a majority of the board of
directors then in office, though less than a quorum, or by the sole remaining
director. The term of any director elected to fill a vacancy shall be the same
remaining term as that of his or her predecessor, except that the term of a
director elected to fill a vacancy resulting from an increase in the number of
directors shall expire at the next election of directors by the shareholders.
Georgia Law provides that directors who have staggered terms, as K&G's
directors do, may only be removed for cause by the vote of a plurality of the
shares voting at a meeting called for the purpose of removing a director, and
only if the notice of the meeting stated that one of the purposes of the
meeting was to remove one of the directors.
Indemnification of Officers and Directors. The TBCA permits
corporations to indemnify their directors and officers for liabilities incurred
by them by reason of serving as directors or officers of their corporations or
of other corporations and entities at the request of their corporations. The
TBCA does not generally restrict the scope of indemnification for officers and
permits broader indemnification of directors and officers if the
indemnification arrangement is approved by shareholders. TMW's Articles of
Incorporation, in the case of directors, and TMW's By-laws, in the case of both
officers and directors, provide that the officers and directors of TMW shall be
indemnified to the fullest extent permitted or required by the TBCA or any
other applicable Texas statute.
Georgia Law permits corporations to indemnify their directors and
officers for liabilities incurred by them by reason of serving as directors or
officers of their corporations or of other corporations and entities at the
request of their corporations. K&G's Amended and Restated Articles of
Incorporation and bylaws, in the case of both officers and directors, provide
that the officers and directors of K&G shall be indemnified to the fullest
extent permitted or required by Georgia Law.
Under the terms of the merger agreement, for six years after the
effective time of the merger, the surviving corporation shall maintain in
effect K&G's current director and officer liability insurance on terms
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<PAGE> 80
and in an amount no less favorable than those contained in the policy currently
in effect. See Section 5.6(c) of the merger agreement which is attached to
this proxy statement/prospectus as Annex A.
Certain Transactions. Under the TBCA, an amendment to TMW's articles of
incorporation requires the affirmative vote of two-thirds of the outstanding
shares entitled to vote thereon unless any class or series of shares is
entitled to vote thereon as a class, in which event the proposed amendment
shall be adopted upon receiving the affirmative vote of the holders of at least
two-thirds of the shares within each class or series of outstanding shares
entitled to vote thereon as a class and of at least two-thirds of the total
outstanding shares entitled to vote thereon. Also, under the TBCA, unless
otherwise provided in the articles of incorporation, a plan of merger or
exchange must be approved by the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the corporation entitled to vote
thereon and the affirmative vote of the holders of at least two-thirds of the
outstanding shares within each class or series of shares entitled to vote
thereon as a class, unless the board of directors conditions its submission to
shareholders of a plan of merger or exchange by requiring a greater vote or a
vote by class or series. Under the TBCA, the same two-thirds approval is
required if the corporation wishes to dissolve by act of the corporation.
TMW's By-laws may be amended only by a vote of a majority of the board of
directors.
Under Georgia Law, an amendment to K&G's Amended and Restated Articles
of Incorporation requires the affirmative vote of a majority of the votes
entitled to be cast on the amendment by each voting group entitled to vote on
the amendment. Also, under Georgia Law, a plan of merger or share exchange
must be approved by a majority of all the votes entitled to be cast on the plan
by all shares entitled to vote on the plan, voting as a single voting group,
unless the articles of incorporation or the board of directors in its
submission of the plan require a greater vote. The same majority vote approval
is required if the corporation wishes to dissolve. K&G's bylaws may be amended
by a vote of the majority of either the board of directors or the shareholders.
Shareholder Access to Information. Under the TBCA, any shareholder who
holds at least 5% of all of the outstanding shares of a corporation or that has
held his shares for at least six months will have the right to examine at any
reasonable time, for any proper purpose, the relevant books and records of
account, minutes and share transfer records of the corporation. Under Georgia
Law and K&G's bylaws, shareholders who own at least two percent of the total
shares of the corporation have the right to inspect K&G's books and records.
The K&G board of directors has the right to determine whether to make books and
records of the corporation available for inspection by shareholders who own
less than two percent of the total outstanding shares of K&G.
Special Vote Required for Certain Combinations with Interested
Shareholders. Part Thirteen ("Part Thirteen") of the TBCA imposes a special
voting requirement for the approval of certain business combinations and
related party transactions between public corporations and affiliated
shareholders unless the transaction or the acquisition of shares by the
affiliated shareholder is approved by the board of directors of the corporation
prior to the affiliated shareholder becoming an affiliated shareholder. Part
Thirteen prohibits certain mergers, sales of assets, reclassifications and
other transactions (defined as business combinations) between shareholders
beneficially owning 20% or more of the outstanding stock of a Texas public
corporation (such shareholders being defined as affiliated shareholders) for a
period of three years following the shareholder acquiring shares representing
20% or more of the corporation's voting power unless two-thirds of the
unaffiliated shareholders approve the transaction at a meeting held no earlier
than six months after the shareholder acquires that ownership. The provisions
requiring such a vote of shareholders do not apply to any transaction with an
affiliated shareholder if the transaction or the purchase of shares by the
affiliated shareholder is approved by the board of directors before the
affiliated shareholder acquires beneficial ownership of 20% of the shares or if
the affiliated shareholder was an affiliated shareholder prior to December 31,
1996, and continued as such through the date of the transaction.
Georgia Law permits, but does not require, a corporation to impose
restrictions on the corporation's ability to transact business with interested
shareholders. K&G's bylaws do not impose any such restrictions.
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<PAGE> 81
THE MEN'S WEARHOUSE, INC.
MANAGEMENT INFORMATION
For a discussion of the business of the Company, please see TMW's Annual
Report on Form 10-K for the year ended January 30, 1999, a copy of which is
enclosed with this proxy statement/prospectus.
BOARD OF DIRECTORS
The following table lists the name, age, current position and period of
service with TMW of each director of TMW. All directors of TMW hold office
until the next annual meeting of shareholders or until their respective
successors are elected and qualified or their earlier resignation or removal.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH TMW SINCE
- ------------------- ----- ------------------------------------------ -------
<S> <C> <C> <C>
George Zimmer 50 Chairman of the Board and Chief Executive 1974
Officer
David Edwab 44 President and Director 1991
Richard E. Goldman 48 Executive Vice President and Director 1975
Harry M. Levy 50 Executive Vice President -- Planning and 1991
Systems and Director
Robert E. Zimmer 75 Senior Vice President -- Real Estate and 1974
Director
James E. Zimmer 47 Senior Vice President -- Merchandising 1975
and Director
Rinaldo Brutoco 52 Director 1992
Michael L. Ray 60 Director 1992
Sheldon I. Stein 45 Director 1995
</TABLE>
George Zimmer, together with Robert E. Zimmer and Harry M. Levy, founded
The Men's Wearhouse as a partnership in 1973. Mr. Zimmer has served as
Chairman of the Board of TMW since its incorporation in 1974. George Zimmer
served as President from 1974 until February 1997 and has served as Chief
Executive Officer of TMW since 1991.
David Edwab joined TMW in February 1991 and was elected Senior Vice
President, Treasurer and Chief Financial Officer of TMW. In February 1993 he
was elected Chief Operating Officer of TMW. In February 1997 Mr. Edwab was
elected President of TMW. He was elected a director of TMW in 1991.
Richard E. Goldman joined The Men's Wearhouse in 1973 shortly after its
inception and has served as Executive Vice President and a director of TMW
since 1975. Mr. Goldman is responsible for overall marketing and advertising
for the Company.
Harry M. Levy served as a Vice President of TMW from December 1979 to
February 1992, at which time he was elected Senior Vice President and Chief
Information Officer of TMW. In May 1998, Mr. Levy was named Executive Vice
President. He was elected a director of TMW in November 1991.
Robert E. Zimmer has served as Senior Vice President and a director of
TMW since its incorporation in 1974 and is primarily responsible for new store
site selection and arrangements.
James E. Zimmer has served as Senior Vice President and a director of
TMW since 1975 and works primarily with the Chief Operating Officer in
coordinating the Company's merchandising function.
Rinaldo Brutoco is and has been since 1981, President and Chief
Executive Officer of Dorason Corporation, a privately held consulting and
merchant banking concern. In addition, through October 1998,
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<PAGE> 82
Mr. Brutoco served as the Chief Executive Officer and a director of Red Rose
Collection, Inc., a San Francisco-based mail order catalog and retail company.
Michael L. Ray has been on the faculty at Stanford University since 1967
and is currently the John G. McCoy -- Banc One Corporation Professor of
Creativity and Innovation and of Marketing at Stanford University's Graduate
School of Business. Professor Ray is a social psychologist with training and
extensive experience in advertising and marketing management and has served as
a private consultant to numerous companies since 1967. He is also a director
of Gardenburger, Inc.
Sheldon I. Stein is a Senior Managing Director of Bear, Stearns & Co.
Inc. ("Bear Stearns") and oversees its United States regional investment
banking offices. Mr. Stein joined Bear Stearns in August 1986. He is a director
of CellStar Corporation, Home Interiors & Gifts, Inc., Fresh America Corp.,
Precept Business Services, Inc. and Tandycrafts, Inc. He is also a Trustee of
the Greenhill School in Dallas and Brandeis University.
George Zimmer and James E. Zimmer are brothers, and Robert E. Zimmer is
their father.
EXECUTIVE OFFICERS
The following table lists the name, age, current position and period of
service with TMW of each executive officer of TMW. Each executive officer of
TMW was elected by the board of directors of TMW and will hold office until the
next annual meeting of the board of directors or until his successor shall have
been elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH TMW SINCE
- --------------------- ------- ------------------------------------------------ ----------
<S> <C> <C> <C>
George Zimmer 50 Chairman of the Board and Chief Executive Officer 1974
David Edwab 44 President 1991
Eric J. Lane 39 Chief Operating Officer 1993
Richard E. Goldman 48 Executive Vice President 1975
Bruce Hampton 44 Executive Vice President 1992
Charles Bresler, Ph.D. 49 Executive Vice President 1993
Harry M. Levy 50 Executive Vice President -- Planning and Systems 1991
Robert E. Zimmer 75 Senior Vice President -- Real Estate 1974
James E. Zimmer 47 Senior Vice President -- Merchandising 1975
Theodore T. Biele, Jr. 48 Senior Vice President -- Store Operations 1996
Gary G. Ckodre 49 Vice President -- Finance 1992
Neill P. Davis 42 Vice President and Treasurer 1997
</TABLE>
See the table under "Board of Directors" for the past business
experience of Messrs. George Zimmer, Edwab, Goldman, Robert E. Zimmer, James E.
Zimmer and Levy.
Eric J. Lane joined TMW in 1988. From 1991 to 1993 he served as Vice
President -- Store Operations and in 1993 he was named Senior Vice President --
Merchandising. In February 1997 Mr. Lane became Chief Operating Officer of TMW.
Bruce Hampton joined TMW in 1980. From 1991 to 1992 he served as Vice
President -- Store Operations and in 1992 he was named Senior Vice President --
Store Operations. In 1995 he was named Executive Vice President.
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<PAGE> 83
Charles Bresler, Ph.D. joined TMW in 1993. From 1993 to 1998 he served
as Senior Vice President -- Human Development. In February 1998 he was named
Executive Vice President.
Theodore T. Biele Jr. joined TMW in 1983. Since 1990 he served in
various management capacities within store operations. From 1994 to 1996 he
served as Vice President -- Store Operations and in 1996 he was named Senior
Vice President -- Store Operations.
Gary G. Ckodre joined TMW in 1992. Since 1992 he served as the Chief
Accounting Officer and in February 1997 he was named Vice President -- Finance
and Principal Financial and Accounting Officer.
Neill P. Davis joined TMW in 1997. Since 1997 he served as Vice
President and Treasurer. Before joining TMW he served as Senior Vice President
and Manager in the Global Corporate Group of NationsBank since 1987. He has 17
years of corporate banking experience, all with NationsBank and its
predecessors.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information regarding cash compensation paid for services rendered during the
last three fiscal years to each of TMW's five most highly compensated executive
officers, including the Chief Executive Officer:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -------------- ------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(5) OPTIONS(9) ($)(6)
- --------------------------- ---- ---------- --------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
George Zimmer, Chairman of 1998 420,000 87,500(1) -- -- 66,489(7)
the Board and Chief 1997 420,000 87,500(2) -- -- 62,038(7)
Executive Officer 1996 420,000 50,000(3) -- -- 69,403(7)
David Edwab, President 1998 405,000 87,500(1) -- -- 9,619(8)
1997 350,000 332,575(4) -- 150,000 8,617(8)
1996 298,000 313,825(4) -- 75,000 8,908(8)
Eric Lane, 1998 258,000 43,750(1) -- -- 933
Chief Operating Officer 1997 247,553 35,000(2) -- 7,500 506
1996 164,000 18,000(3) -- 26,250 1,338
Richard E. Goldman, 1998 270,000 35,000(1) -- -- 933
Executive Vice President 1997 270,000 35,000(2) -- -- 506
1996 281,000 24,000(3) -- -- 1,338
James E. Zimmer, 1998 360,000 52,500(1) -- -- 933
Senior Vice President -- 1997 356,000 52,500(2) -- -- 506
Merchandising 1996 336,000 30,000(3) -- -- 1,338
</TABLE>
- ----------
(1) Represents bonus paid in April 1999 relating to services performed in
1998. [Bonus amounts represent estimates of bonus to be paid in April
1999 - to be finalized prior to distribution of proxy
statement/prospectus]
(2) Represents bonus paid in April 1998 relating to services performed in
1997.
(3) Represents bonus paid in April 1997 relating to services performed in
1996.
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<PAGE> 84
(4) Represents (i) the cash amount of $288,825 and $288,825 paid to Mr.
Edwab during 1997 and 1996, respectively, pursuant to his Employment
Agreement with TMW upon the exercise of his option to acquire 110,654
shares and 110,652 shares, respectively, of TMW common stock, which
amounts were used to fund the purchase price thereof (see "-- Employment
Agreement and Stock Options") and (ii) a bonus of $43,750 and $25,000
paid in April 1998 and 1997, respectively, relating to services
performed in the preceding fiscal year.
(5) Excludes perquisites and other benefits because the aggregate amount of
such compensation was the lesser of $50,000 or 10% of the total annual
salary and bonus reported for the named executive officer.
(6) Represents the amount of TMW's contribution to the ESP allocated in the
indicated year to the account of the named executive officer.
(7) Also includes $65,556, $61,532 and $68,065 in 1998, 1997 and 1996,
respectively, for the allocated dollar value of the benefits to Mr.
George Zimmer of life insurance premiums paid on his behalf, subject to
certain split-dollar provisions in favor of TMW.
(8) Also includes $8,683, $8,111, and $7,570 in 1998, 1997, and 1996,
respectively, for the allocated dollar value of the benefit to Mr. Edwab
of life insurance premiums paid on his behalf, subject to certain split-
dollar provisions in favor of TMW.
(9) All share amounts have been adjusted to reflect a 50% stock dividend
effected in June 1998.
Employment Agreement and Stock Options. To induce David Edwab to leave
his employment and join the Company, TMW entered into an Employment Agreement
with Mr. Edwab effective January 31, 1991 (as amended, the "Employment
Agreement") for an initial term beginning February 25, 1991 and extending
through February 24, 1999. Under the Employment Agreement TMW agreed, among
other things, to:
o pay Mr. Edwab an annual base salary of $226,000, plus
$12,000 per year for reimbursement of automobile and club
membership expenses;
o pay Mr. Edwab a cash amount (net of state and federal
taxes) sufficient to fund the payment of the purchase
price for any option shares acquired upon any exercise of
the option granted to Mr. Edwab under his Employment
Agreement;
o pay the premiums on $3,000,000 in life insurance policies
to be owned by a trust established by Mr. Edwab and
payable to beneficiaries designated by him (subject to
certain split-dollar provisions in favor of TMW). To
secure the repayment of the premiums, the Trust has
assigned the policies to TMW as collateral; and
o provide disability and medical insurance coverage and
certain other benefits provided to other employees (other
than participation in stock option plans).
Pursuant to the Employment Agreement, TMW granted Mr. Edwab an option to
purchase 796,705 shares of TMW common stock at $1.57 per share until the later
of the termination of Mr. Edwab's employment and January 31, 2011. The option
was immediately exercisable with respect to 33.3% of the option shares. Since
that time the remaining 66.7% of the option shares have become fully
exercisable and the option has been exercised as to all of the option shares.
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<PAGE> 85
TMW may terminate Mr. Edwab's employment under the Employment Agreement
for "cause" (as defined in the Employment Agreement). If that happens, TMW
must pay all compensation and benefits due Mr. Edwab under the Employment
Agreement to the date of termination, which will satisfy all of TMW's
obligations under the Employment Agreement.
Effective September 30, 1991, TMW entered into an Option Issuance
Agreement with Mr. Edwab pursuant to which he was granted the right to purchase
additional shares of TMW common stock on the same basis and subject to the same
terms as the option shares under the Employment Agreement in the event TMW
issues any shares of TMW common stock or any warrants, options, convertible
securities or other rights to acquire TMW common stock (collectively, "Rights")
during the term of the Option Issuance Agreement. At the same time, the
Employment Agreement was amended to eliminate certain anti-dilution provisions
that provided him with protection in the event of future issuances of TMW
common stock by TMW. Should TMW issue any such shares or Rights, excluding the
option shares issuable under the Employment Agreement, Mr. Edwab would
automatically have the right to purchase a number of shares of TMW common stock
equal to .030928 times the number of shares so issued or issuable upon exercise
of the Rights. The purchase price would be equal to the price per share paid
to TMW for the TMW common stock so issued or, in the case of Rights, for the
Rights plus the exercise price per share of TMW common stock issuable
thereunder.
Mr. Edwab waived his right to receive additional options under the
Option Issuance Agreement in connection with:
o options granted under TMW's option plans;
o the issuance of 2,531,250 shares of TMW common stock
pursuant to a public offering consummated in April 1992;
o the issuance of 1,423,125 shares of TMW common stock
pursuant to a public offering consummated in April 1993;
and
o the issuance of TMW common stock upon conversion of TMW's
5 1/4% Convertible Subordinated Notes due 2003.
In April 1994, the Option Issuance Agreement was amended to provide that
no options would be granted to Mr. Edwab thereunder in connection with
underwritten public offerings of equity securities by TMW. As amended, both the
Employment Agreement and the Option Issuance Agreement provide that Mr. Edwab
may satisfy his obligation to pay withholding tax relating to his exercise of
any options thereunder by having TMW withhold a number of shares of TMW common
stock that would have been issued upon such exercise equal in value to the
amount of such tax owed.
Split-Dollar Life Insurance Agreement. The George Zimmer 1988 Living
Trust is presently the owner of 4,097,783 shares of TMW common stock. TMW has
been advised that on the demise of George Zimmer, his estate may be required to
publicly sell all or substantially all of such shares to satisfy estate tax
obligations. The public sale of such number of shares in all probability would
destabilize the market for TMW's publicly traded stock. Accordingly, in
November 1994, an agreement was entered into (commonly known as split-dollar
life insurance agreement) under the terms of which TMW makes advances of a
portion of the premiums for certain life insurance policies on the life of
George Zimmer with an aggregate face value of $25,500,000 purchased by a trust
established by Mr. Zimmer. To secure the repayment of the advances, the trust
has assigned the policies to TMW as collateral. In addition, a second split-
dollar life insurance agreement with essentially the same terms as the existing
agreement was entered into relating to a life
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<PAGE> 86
insurance policy on the life of George Zimmer with a face value of $1,000,000
purchased by a second trust established by Mr. Zimmer. The trusts have assigned
the additional policies to TMW as collateral.
Employee Stock Option Plans. TMW maintains The Men's Wearhouse, Inc.
1992 Stock Option Plan (the "1992 Option Plan"), 1996 Stock Option Plan (the
"1996 Option Plan"), and 1998 Key Employee Stock Option Plan (the "1998 Option
Plan") (collectively, the "Plans") for the benefit of its full-time key
employees. Under the 1992 Option Plan, options to purchase up to 1,071,507
shares of TMW common stock may be granted. Under the 1996 Option Plan, options
to purchase up to 1,125,000 shares of TMW common stock may be granted.
Additionally, under the 1998 Option Plan, options to purchase up to 750,000
shares of TMW common stock may be granted. As of March 26, 1999, of the
1,071,507 shares of TMW common stock initially reserved for issuance pursuant
to the 1992 Option Plan, only 1,847 shares of TMW common stock remained
available for issuance pursuant to such plan.
The Plans are administered by the Stock Option Committee of the TMW
board of directors which consists of George Zimmer and Richard Goldman. The
individuals eligible to participate in the Plans are such full-time key
employees, including officers and employee directors, of the Company as the
Stock Option Committee may determine from time to time. However:
o George Zimmer, Richard E. Goldman, Robert E. Zimmer and
James E. Zimmer are not eligible to participate in any of
the Plans;
o David Edwab may not participate in the 1992 Option Plan;
and
o no executive officers of TMW may participate in the 1998
Option Plan.
The Stock Option Committee may grant either (i) incentive stock options
within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended, or (ii) non-statutory stock options. 500,000 shares of TMW common
stock is the maximum number of shares subject to options that may be awarded
under the 1996 Option Plan or the 1998 Option Plan to any employee during any
consecutive three-year period. The purchase price of shares subject to an
option granted under the Plans is determined by the Stock Option Committee at
the time of grant. The purchase price may not be less than 50% of the fair
market value of the shares of TMW common stock on the date of grant. Options
granted under the Plans must be exercised within ten years from the date of
grant. Unless otherwise provided by the Stock Option Committee, the options
vest with respect to one-third of the shares covered thereby on each of the
first three anniversaries of the date of grant. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of TMW or its parent or
subsidiaries, (i) the option price of any incentive stock option granted may
not be less than 110% of the fair market value of the TMW common stock on the
date of grant, and (ii) the exercisable period may not exceed five years from
date of grant.
Options granted under the Plans terminate on the earlier of (i) the
expiration date of the option or (ii) one day less than one month after the
date the holder of the option terminated his or her employment with the Company
for any reason other than the death, disability or retirement of such holder.
During such one-month period, the holder may exercise the option in respect of
the number of shares that were vested on the date of such severance of
employment. In the event of severance because of the disability of a holder
before the expiration date of the option, the option terminates on the earlier
of such (i) expiration date or (ii) one year following the date of severance.
During this period the holder may exercise the option in respect of the number
of shares that were vested on the date of severance because of disability. In
the event of the death or retirement of a holder, the option terminates on the
earlier of (i) the expiration date of the option or (ii) one year following the
date of death or retirement.
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<PAGE> 87
Option Grants. No options were granted to the named executive officers
during the fiscal year ended January 30, 1999.
Option Exercises. The following table sets forth the aggregate option
exercises during the last fiscal year and the value of options outstanding at
year-end held by certain executive officers:
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND OPTION VALUES AT JANUARY 30, 1999
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT YEAR END (#) AT YEAR END
NAME EXERCISE (#) REALIZED($) EXERCISABLE/UNEXERCISABLE ($)EXERCISABLE/UNEXERCISABLE
---- ------------ ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
George Zimmer -- -- -- --
David Edwab -- -- 45,000/180,000 538,000/1,721,000
Richard E. Goldman -- -- -- --
Eric Lane(1) 5,000 128,000 28,751/48,750 506,000/712,000
James E. Zimmer -- -- -- --
</TABLE>
(1) The options exercised were granted under the 1992 Option Plan.
Compensation of Directors. All directors of TMW who are also employees
of the Company do not receive fees for attending meetings of the TMW board of
directors. Each non-employee director of TMW receives a quarterly retainer of
$2,500. In addition, under TMW's 1992 Non-Employee Director Stock Option Plan
(the "Director Plan"), each person who is a non-employee director on the last
business day of each fiscal year of TMW is granted an option to acquire 2,000
shares of TMW common stock. All options granted permit the non-employee
director to purchase the option shares at the closing price on the date of
grant. All options granted under the Director Plan become exercisable one year
after the date of grant and must be exercised within 10 years of the date of
grant. Such options terminate on the earlier of (i) the expiration date of the
option or (ii) one day less than one month after the date the director ceases
to serve as a director of TMW for any reason other than death, disability or
retirement as a director.
On January 29, 1999, TMW granted each of Messrs. Brutoco, Stein and Ray
an option to purchase 2,000 shares of TMW common stock at $29.625 per share
pursuant to the Director Plan.
Compensation Committee Interlocks and Insider Participation. During
fiscal 1998, no member of the Compensation Committee of the board of directors
of TMW:
o was an officer or employee of TMW or any of its
subsidiaries;
o was formerly an officer of TMW or any of its subsidiaries;
or
o had any relationships requiring disclosure by TMW under
Item 404 of Regulation S-K.
During fiscal 1998, no executive officer of TMW served as:
o a member of the compensation committee (or other board
committee performing equivalent functions) of another
entity, one of whose executive officers served on the
Compensation Committee of the board of directors of TMW;
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<PAGE> 88
o a director of another entity, one of whose executive
officers served on the Compensation Committee of TMW; or
o a member of the compensation committee (or other board
committee performing equivalent functions) of another
entity, one of whose executive officers served as a
director of TMW.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TMW leases a warehouse facility in Houston, Texas from Zig Zag, a Texas
joint venture, in which George Zimmer, James E. Zimmer and Richard E. Goldman
are the sole and equal joint venturers. During 1998, TMW paid rentals of
$78,000 to Zig Zag. The lease expires on August 31, 2005.
TMW also leases the land underlying a store in Dallas, Texas (which
building is owned by TMW) from 8239 Preston Road, Inc., a Texas corporation.
George Zimmer, James E. Zimmer and Richard E. Goldman each own 20% of the
outstanding common stock of 8239 Preston Road, Inc. Laurie Zimmer, sister of
George and James Zimmer and daughter of Robert E. Zimmer, owns the remaining
40% of the outstanding common stock of that company. TMW paid 8239 Preston
Road, Inc. aggregate rentals on such property of $49,200 in 1998. The lease
expires April 30, 2004.
Management believes that the terms of the foregoing leasing arrangements
are comparable to what would have been available to TMW from unaffiliated third
parties at the time such leases were entered into.
8239 Preston Road, Inc. and Zig Zag each have loans with NationsBank of
Texas, N.A. ("NationsBank") and have agreed that a default by TMW under TMW's
Credit Agreement with NationsBank will constitute a default under the loan
agreements of such partnership or corporation with NationsBank. If for any
reason TMW's loan with NationsBank becomes due and payable or is paid, the
loans to such partnership or corporation from NationsBank will become
automatically due and payable. The loans from NationsBank to Zig Zag and 8239
Preston Road, Inc. mature in June 2000. The maximum principal amount
outstanding under the loans to Zig Zag during 1998 was $548,000. The maximum
principal amount outstanding under the loans to 8239 Preston Road, Inc. during
1998 was $365,000. With the exception of Laurie Zimmer, each of the partners
and shareholders of such partnership or corporation has personally guaranteed
the obligations of the respective entity under the loan agreements.
The Company has engaged Dorason Corporation to provide consulting
services, on a non-exclusive basis, to the Company with respect to general
business matters including, specifically, internet commerce for a fee of
$20,000 per month plus reimbursement of certain expenses. This engagement is
cancellable by either party on 60 days notice. Mr. Brutoco is the chairman and
chief executive officer, and, together with his wife, owns 100% of Dorason
Corporation.
The board of directors of TMW has authorized a corporate joint venture
to develop and implement certain retail store systems software to be used by
the Company and to be marketed to third parties. TMW will own a 50% interest
in the joint venture and Blue Water Resources LLC ("Blue Water") will own 50%.
Harry Levy, an officer and director TMW, will own a one-third interest in Blue
Water. The Company will fund the actual costs incurred by the joint venture to
develop and implement the software in the Company's operations. After
development and implementation of the software for the Company, the joint
venture will attempt to market the software to third parties.
In February 1998, Insight Out Collaborations LLC provided consulting and
training services to TMW for consideration of $69,000. Mr. Ray is an officer
and director of Insight Out Collaborations LLC and owns 10.8% of the
outstanding shares of stock of such company.
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<PAGE> 89
In December 1996, TMW advanced $166,000 to Mr. Lane to enable him to
purchase a residence. In 1998, Mr. Lane paid TMW $9,097 in interest on this
advance at an average rate of 5.5% per annum.
Bear Stearns acted as co-managing underwriter of TMW's public offering
of (i) 2,300,000 shares of TMW common stock in August 1995, (ii) $57,500,000
principal amount of 5 1/4% Convertible Subordinated Notes Due 2003 in March
1996 and (iii) 2,041,250 shares of TMW common stock in July 1997. In addition,
under the terms of an Engagement Letter dated September 9, 1998, Bear Stearns
served as TMW's financial advisor in connection with the Moores transaction.
Mr. Stein, a director of TMW, is a Senior Managing Director and head of the
Southwestern Corporate Finance Department for Bear Stearns.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TMW
The following table sets forth information, as of March 26, 1999, except
as noted in notes (1) and (2) below, with respect to the beneficial ownership
of TMW common stock by (i) each director, which includes each executive officer
named in the Summary Compensation Table, (ii) each shareholder known by TMW to
be the beneficial owner of more than 5% of the TMW common stock and (iii) all
executive officers and directors of TMW as a group. Unless otherwise indicated,
each person has sole voting power and investment power with respect to the
shares attributed to him or her.
<TABLE>
<CAPTION>
% OF
OUTSTANDING
NAME NUMBER OF SHARES SHARES
----------------------------------------------- ----------------------- ---------------
<S> <C> <C>
AMVESCAP PLC
11 Devonshire Square
London, England EC2M 4YR
-or-
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309 3,504,337 (1) 10.5
State Street Research & Management
Company
One Financial Center, 30th Floor
Boston, Massachusetts 02111-2690 1,889,874 (2) 5.1
George Zimmer(3) 4,141,542 (5)(6)(14) 11.1 (15)
Robert E. Zimmer(3) 1,331,034 (6)(7)(14) 3.5 (15)
Richard E. Goldman(3) 1,973,243 (14) 5.3 (15)
James E. Zimmer(4) 1,157,682 (8)(14) 3.1 (15)
David Edwab(3) 94,062 (6)(9)(14) * (15)
Harry M. Levy(4) 112,511 (19)(14) * (15)
Rinaldo Brutoco 21,750 (11) * (15)
Michael L. Ray 7,500 (11) * (15)
Sheldon I. Stein 18,561 (12) * (15)
All executive officers and directors as a 8,992,660 (13)(14) 23.9 (15)
group (15 persons)
- ----------
</TABLE>
- ---------------
* Less than 1%
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<PAGE> 90
(1) Based on a Schedule 13G filed February 11, 1999, AMVESCAP PLC, a
parent holding company, and certain of its subsidiaries, AVZ,
Inc., AIM Management Group Inc., AMVESCAP Group Services, Inc.,
INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO
Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management & Research, Inc., INVESCO Realty Advisers, Inc. and
INVESCO (NY) Asset Management, Inc., have shared voting and
dispositive powers with respect to these shares and hold these
shares on behalf of other persons who have the right to receive
or the power to direct the receipt of dividends from, or the
proceeds from the sale of such shares.
(2) Based on a Schedule 13G filed February 8, 1999, State Street
Research & Management Company, an investment advisor, has sole
voting and dispositive power with respect to these shares owned
by its clients and disclaims any beneficial interest in such
shares.
(3) The business address of the shareholder is 40650 Encyclopedia
Circle, Fremont, California 94538-2453.
(4) The business address of the shareholder is 5803 Glenmont Drive,
Houston, Texas 77081.
(5) All such shares are held by George Zimmer in his capacity as
trustee for the George Zimmer 1988 Living Trust.
(6) Excludes 231,724 shares held by The Zimmer Family Foundation with
respect to which this officer and director has shared voting and
dispositive power.
(7) Does not include the 31,666 shares of TMW common stock held by
Robert Zimmer's wife.
(8) Includes 1,117,899 shares held by James Zimmer in his capacity as
trustee for the James Edward Zimmer 1989 Living Trust and 8,199
shares held by Mr. Zimmer's wife and minor children.
(9) Includes 47,662 shares held by David Edwab in his capacity as
trustee of the David H. Edwab and Mary Margaret Edwab Family
Trust. Also includes 45,000 shares that may be acquired within 60
days upon exercise of stock options.
(10) Includes 43,437 shares that may be acquired within 60 days upon
the exercise of stock options and includes 300 shares held by Mr.
Levy's minor daughter.
(11) Represents shares that may be acquired within 60 days upon the
exercise of stock options.
(12) Includes 13,500 shares that may be acquired within 60 days upon
the exercise of stock options and includes 3,561 shares held by
Mr. Stein's minor sons.
(13) Includes 236,815 shares that may be acquired within 60 days upon
the exercise of stock options.
(14) Includes 43,759 shares, 2,696 shares, 39,942 shares, 31,584
shares, 1,400 shares, 17,172 shares and 156,983 shares,
respectively, allocated to the Employee Stock Plan (the "ESP")
accounts of Messrs. George Zimmer, Robert Zimmer, Goldman, James
Zimmer, Edwab and Levy and to all executive officers and
directors of TMW as a group, under The Men's
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<PAGE> 91
Wearhouse ESP. The ESP provides that participants have voting
power with respect to these shares but do not have investment
power over these shares.
(15) The number of total outstanding shares used in calculating the
percentage includes the 2.5 million shares to be issued in
connection with the February 10, 1999 combination of TMW and
Moores. The total outstanding shares does not include the shares
of TMW common stock to be issued in connection with the merger of
TMW and K&G.
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<PAGE> 92
K&G MEN'S CENTER, INC.
ADDITIONAL PROPOSALS AND MANAGEMENT INFORMATION
PROPOSAL - ELECTION OF DIRECTORS
Pursuant to K&G's Amended and Restated Articles of Incorporation, at the
Annual Meeting, each of the two members of Class I of the K&G board of
directors will be proposed for election for a three-year term expiring upon the
third annual meeting of shareholders following their election and upon the
election and qualification of their respective successors. It is a condition
to closing under the merger agreement that each of the directors of K&G resign
immediately prior to closing.
All shares of K&G common stock represented by properly executed proxies
received in response to this solicitation will be voted for the election of the
directors as specified therein by the shareholders. Unless otherwise specified
in the proxy, it is the intention of the persons named on the enclosed proxy
card to vote FOR the election of each of the nominees listed in this proxy
statement/prospectus to the K&G board of directors. Each nominee has consented
to serve as a director of K&G if elected. If at the time of the annual
meeting, the nominee is unable or declines to serve as a director, the
discretionary authority provided in the enclosed proxy card will be exercised
to vote for a substitute candidate designated by the K&G board of directors.
The K&G board of directors has no reason to believe that the nominee will be
unable or will decline to serve as a director. Shareholders may withhold their
votes from the nominee by so indicating in the space provided on the enclosed
proxy card.
Under Georgia law, directors are elected by the affirmative vote, in
person or by proxy, of a plurality of the shares entitled to vote in the
election at a meeting at which a quorum is present. Only votes actually cast
will be counted for the purpose of determining whether a particular nominee
received more votes than the persons, if any, nominated for the same seat on
the K&G board of directors.
Set forth below is certain information furnished to K&G by each director
nominee. Each nominee currently serves as a director of K&G.
NOMINEE FOR ELECTION - TERM EXPIRING 2002 - CLASS I
JAMES W. INGLIS
AGE: 55
JAMES W. INGLIS has been a director of K&G since March 1997. Mr. Inglis
is currently an independent business consultant. From 1996 to 1998, Mr. Inglis
served as the Chief Operating Officer, Senior Vice President and Director of
The Maxim Group, a publicly-held retailer of floor coverings. From 1983 to
1996, Mr. Inglis served in various capacities with The Home Depot, Inc.,
including most recently as its Executive Vice President of Strategic
Development and as a member of its board of directors.
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<PAGE> 93
CAMPBELL B. LANIER, III
AGE: 48
CAMPBELL B. LANIER, III has served as a director of K&G since May 1995.
Mr. Lanier serves as Chairman of the Board and Chief Executive Officer of ITC
Holding Company, Inc. ("ITC Holding") and has served as a director of ITC
Holding (or its predecessor companies) since K&G's inception in 1985. In
addition, Mr. Lanier is an officer and director of several ITC Holding
subsidiaries. Mr. Lanier also is a director of Innotrac Corporation, which
provides customized, technology-based marketing support services; Chairman of
the Board and a director of ITC DeltaCom, Inc., which provides retail and
wholesale telecommunications services; a director of MindSpring Enterprises,
Inc., an Internet access provider; a director of Vista Eyecare, Inc. (formerly
National Vision Associates, Ltd.), a full service optical retailer; and a
director of Powertel, Inc., a personal communications services company. Mr.
Lanier also is a special limited partner in the South Atlantic Venture Fund II,
Limited Partnership and South Atlantic Venture Fund III, Limited Partnership
and he is a Managing Director of South Atlantic Private Equity Fund IV, Limited
Partnership.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION AS A DIRECTOR OF EACH OF THE NOMINEES NAMED ABOVE.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
Other members of K&G's board of directors are listed below:
STEPHEN H. GREENSPAN
AGE: 58
STEPHEN H. GREENSPAN founded K&G in December 1989, and has served as its
Chairman of the Board, President and Chief Executive Officer since K&G's
incorporation. He has more than 31 years of experience in the apparel
industry. In addition to owning and operating K&G and other apparel retailers,
during his career as an entrepreneur in the apparel industry, Mr. Greenspan has
owned and operated companies that liquidated the remaining merchandise of
failing retail businesses, and he has also served as a manufacturer's
representative for various apparel lines.
W. PAUL RUBEN
AGE: 58
W. PAUL RUBEN has been a director and Secretary of K&G since its
incorporation in June 1990. Mr. Ruben is primarily a private investor.
JOHN C. DANCU
AGE: 39
JOHN C. DANCU has served as Chief Financial Officer of K&G since March
1995. Effective March 1997, he became K&G's Chief Operating Officer and a
director of K&G. Prior to joining K&G, from May 1986 to March 1995, Mr. Dancu
was an investment banker in the corporate finance department of The Robinson-
Humphrey Company, Inc., ultimately serving as a First Vice President. In this
capacity, Mr. Dancu was involved in numerous public and private financings and
merger and acquisition transactions involving companies in the retail industry.
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<PAGE> 94
DONALD W. BURTON
AGE: 55
DONALD W. BURTON has been a director of K&G since February, 1997. Since
1981, Mr. Burton has served as Chairman and Managing General Partner of South
Atlantic Venture Funds. Mr. Burton has been the general partner of The Burton
Partnership, Limited Partnership since January 1979. Mr. Burton serves on the
Board of Directors of ITC DeltaCom, Inc., Powertel, Inc. (each of which is
described above), KNOLOGY Holdings, Inc., a broadband communications services
company, The Heritage Group of Mutual Funds and several private companies. Mr.
Burton also serves as a director of the National Venture Capital Association.
Prior to founding the South Atlantic Venture Funds, Mr. Burton was a General
Partner of Fidelity Ventures, Limited, Boston, Massachusetts. See "-Beneficial
Ownership of Common Stock."
Committees of the K&G Board of Directors and Meeting Attendance. K&G's
board of directors held six meetings during the fiscal year ended January 30,
1999 ("fiscal 1998"). In contemplation of K&G's initial public offering, which
was completed in January 1996, the K&G board of directors formed an Audit
Committee and a Compensation Committee. The board has not established a
Nominating Committee. No director attended less than 75% of the aggregate
number of meetings of the board and the committees of the board on which he
served that were held during his term as a director of K&G.
The Audit Committee of the K&G board of directors is responsible for
reviewing and making recommendations regarding K&G's employment of independent
auditors, the annual audit of K&G's financial statements and K&G's internal
accounting practices and policies. It presently consists of Messrs. Lanier and
Burton, with Mr. Burton serving as Chairman. The Audit Committee met on
February 10, 1998 to discuss the progress of K&G's fiscal 1997 audit. The
Audit Committee also met on June 5, 1998 to discuss the final results of the
fiscal year 1997 audit. It is presently intended that Messrs. Lanier and
Burton will continue to serve on the Audit Committee after the Annual Meeting.
The Compensation Committee of the K&G board of directors is responsible
for making determinations regarding compensation arrangements for executive
officers and other members of management of K&G, including approving the annual
incentive compensation plans of K&G and K&G's awards to executive officers
under each incentive plan. It consists of Messrs. Lanier and Inglis, with Mr.
Lanier serving as Chairman. The Compensation Committee met five times during
fiscal 1998 to discuss various compensation issues, including compensation
payable to K&G's executive management for fiscal 1998 and the issuance of stock
options under the Plan. It is presently intended that Messrs. Lanier and
Inglis will continue to serve on the Compensation Committee after the Annual
Meeting.
K&G's board of directors is comprised of six members. K&G currently
does not pay director's fees, although it does reimburse directors for expenses
incurred in connection with attendance at meetings of the board of directors or
committees thereof. K&G has implemented a Director Stock Option Plan which
provides for automatic grants of options to purchase K&G common stock to be
made periodically to non-management directors.
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<PAGE> 95
EXECUTIVE OFFICERS
The executive officers of K&G serve at the discretion of the board of
directors and presently include Messrs. Greenspan, Dancu, Martin Schwartz,
George ("Skip") H. Briggs and R. Scott Saban. Set forth below is certain
information furnished by each of Messrs. Schwartz, Briggs and Saban. For
additional information concerning Messrs. Dancu and Greenspan, see "Additional
Information Concerning the Board of Directors".
MARTIN SCHWARTZ
AGE: 57
MARTIN SCHWARTZ has served as K&G's General Merchandising Manager since
he joined K&G in February 1991. Effective January 1996, he assumed the
additional title of Senior Vice President. Prior to joining K&G, from October
1986 to January 1991, Mr. Schwartz served as Senior Vice President, General
Merchandising Manager - Merchandising and Marketing for a division of Woolworth
& Co., and from May 1984 to September 1986, he served as Vice President and
General Merchandise Manager for the menswear and children's departments of
Montgomery Ward. Mr. Schwartz has over 31 years of experience in the retail
industry, and has also served in various merchandising capacities with Dayton
Hudson, Macy's, Federated and Rich's.
GEORGE ("SKIP") H. BRIGGS
AGE: 49
GEORGE ("SKIP") H. BRIGGS has served as K&G's Vice President of Store
Operations since he joined K&G in March 1998. Prior to joining K&G, from May
1995 to March 1998, Mr. Briggs served as a Management Consultant for The
Strategic Initiatives Group and KMR Management, Inc. From 1993 to 1995, he
served as a Vice President and later as Senior Vice President Store Operations
for Jos. A. Bank Clothiers. From 1979 to 1993 Mr. Briggs was President/CEO of
G. Briggs, a chain of men's and women's off-price apparel stores. Mr. Briggs
has 30 years of retail experience in merchandising, marketing and operations
capacities.
R. SCOTT SABAN
AGE 33
R. SCOTT SABAN served as the Vice President of Operations and Management
Information Systems of K&G from January 1995 to April 1998. Effective March
1998, Mr. Saban assumed the title and responsibilities of Vice President of
Management Information Systems and Store Construction. Prior to January 1995,
Mr. Saban served as K&G's Management Information Systems Director and as an
Assistant Store Manager. Mr. Saban is the son-in-law of Mr. Greenspan.
EMPLOYMENT AGREEMENTS
In May 1995, K&G entered into a five-year employment agreement with each
of Messrs. Greenspan and Schwartz. Under his agreement, K&G agreed to employ
Mr. Greenspan as its Chairman of the Board and its President at a salary of
$120,000 per year plus such other benefits as are made available to other
senior executives of K&G. The agreement provides that if Mr. Greenspan is
terminated by K&G other than for "cause," as defined in the agreement, he is
entitled to severance compensation equal to 100% of his then-current annual
salary. The agreement contains provisions that purport to restrict Mr.
Greenspan's ability to compete with K&G or solicit its employees for a
specified period following the termination of his employment. Mr. Schwartz'
employment agreement is similar in form except that it (i) provides for Mr.
Schwartz to be employed as K&G's General
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<PAGE> 96
Merchandising Manger at a salary of $114,000 per year plus such other benefits
as are made available to other senior executives of K&G, and (ii) entitles Mr.
Schwartz to severance compensation equal to 200% of his then-current annual
salary in the event of termination of his employment other than for "cause."
In March 1995, K&G entered into a two-year employment agreement with Mr.
Dancu under which he is employed as K&G's Chief Financial Officer. Effective
March 1997, Mr. Dancu assumed the additional duties of Chief Operating Officer
and his salary was set at $150,000 per year plus such other benefits as are
made available to other senior executives of K&G. Mr. Dancu's employment
agreement, pursuant to its terms was automatically extended for a year in March
1997 and March 1998, and his salary was set at $165,000 per year as of April 1,
1998. The agreement provides that if Mr. Dancu is terminated by K&G other than
for "cause," he is entitled to 50% of his then-current annual salary plus
amounts accrued to date to Mr. Dancu under any bonus or incentive compensation
programs then in effect. The agreement contains provisions that purport to
restrict Mr. Dancu's ability to compete with K&G or solicit its employees for a
specified period following the termination of his employment. In connection
with the execution of Mr. Dancu's employment agreement, each of K&G's then-
existing shareholders granted Mr. Dancu an option to purchase a number of
shares of K&G common stock equal to 4.5% of the respective stock holdings of
each such shareholder. These options, which relate to an aggregate of 354,373
shares and are exercisable at $2.54 per share, vested upon consummation of
K&G's initial public offering in January 1996. As of April 2, 1999, 254,373 of
these options to purchase shares remained outstanding and were unexercised.
In March 1998, K&G entered into a three-year employment agreement with
Mr. Briggs. Under this agreement, K&G agrees to employ Mr. Briggs as its Vice
President-Store Operations with a year 1 base salary of $110,000 and a
guaranteed bonus of $40,000. The base salary will increase to $121,000 in year
2, with a guaranteed bonus of $44,000, and $133,000 in year 3, with a
guaranteed bonus of $48,000. The agreement further provides that if Mr. Briggs
is terminated by K&G, for other than cause or nonperformance, after September
30, 1998 but before April 1, 2000, Mr. Briggs will be entitled to receive as
severance twelve monthly payments equal to one-twelfth of his then current
annual salary and bonus. If Mr. Briggs is terminated after April 1, 2001, he
will be entitled to receive as severance monthly payments equal to one-twelfth
of his then current annual salary and bonus through March 31, 2001.
As described above in "The Merger and Related Transactions - Interests
of Certain Persons in the Merger," Mr. Greenspan's and Mr. Dancu's employment
agreements would be amended upon consummation of the merger.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires K&G's directors, executive
officers and persons who own beneficially more than 10% of K&G's common stock
to file reports of ownership and changes in ownership of such stock with the
SEC and the National Association of Securities Dealers, Inc. Directors,
executive officers and greater than 10% shareholders are required by SEC
regulations to furnish K&G with copies of all such forms they file. To K&G's
knowledge, based solely on a review of the copies of such reports furnished to
K&G and written representations from such persons that no other reports were
required, its directors, executive officers and greater then 10% shareholders
complied during fiscal 1998 with all applicable Section 16(a) filing
requirements, except that a Form 5 was filed four days late on March 19, 1999,
in connection with a gift of 1,000 shares of K&G common stock made by Mr.
Greenspan to a charity.
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<PAGE> 97
BENEFICIAL OWNERSHIP OF K&G COMMON STOCK
The following table sets forth information concerning (i) those persons
known by K&G to own beneficially more then 5% of K&G's outstanding common
stock, (ii) the directors and executive officers of K&G and (iii) the directors
and executive officers of K&G as a group. Except as otherwise indicated in the
footnotes below, such information is provided as of March 26, 1999. According
to rules adopted by the SEC, a person is the "beneficial owner" of securities
if he or she has or shares the power to vote them or to direct their investment
or has the right to acquire beneficial ownership of such securities within 60
days through the exercise of an option, warrant or right, the conversion of a
security or otherwise. Except as otherwise noted, the indicated owners have
sole voting and investment power with respect to shares beneficially owned. An
asterisk in the percent of class column indicates beneficial ownership of less
than 1% of the outstanding K&G common stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF K&G
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
NAME OF BENEFICIAL OWNER Ownership Class
------------------------ ----------- -----------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Stephen H. Greenspan(1) ..................... 1,250,899 12.2%
W. Paul Ruben(2) ............................ 656,871 6.4%
John C. Dancu(3) ............................ 303,643 3.0%
Martin Schwartz ............................. 253,256 2.5%
R. Scott Saban .............................. 24,711 *
George ("Skip") H. Briggs ................... 4,950 *
James W. Inglis ............................. 13,900 *
Campbell B. Lanier, III(4) .................. 6,250 *
Donald W. Burton(5) ......................... 54,125 *
All executive officers and directors as a
group (9 persons) ......................... 2,376,299 23.0%
OTHER SHAREHOLDERS (6)
Northwestern Mutual Life Insurance Company .. 776,450 7.6%
Wasatch Advisors, Inc. ...................... 858,692 8.5%
Gilder, Gagnon, Howe & Co, LLC .............. 3,248,559 32.0%
</TABLE>
- ----------------
(1) Includes 835,431 shares owned of record by a partnership established for
Mr. Greenspan's family and 21,800 shares held in a foundation. Mr.
Greenspan's business address is that of K&G.
(2) Includes 520,966 shares owned of record by a partnership established for
Mr. Ruben's family. Mr. Ruben's business address is that of K&G.
(3) Includes 23,520 shares owned directly by Mr. Dancu and 254,373 shares
subject to options held by him to purchase outstanding shares of K&G common
stock. Mr. Dancu's options were granted to him prior to K&G's initial
public offering by K&G's shareholders at that time. Accordingly, Mr.
Dancu's share holdings relate to shares held by various shareholders,
including certain of the shareholders identified herein.
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<PAGE> 98
(4) The business address of ITC Holding Company ("ITC") is 1239 OG Skinner
Drive, P.O. Box 510, West Point, Georgia 31833.
(5) Includes 47,625 owned of record by The Burton Partnership, Limited
Partnership, of which Mr. Burton is the General Partner.
(6) Based on information contained in the most recent Schedule 13G filed by
such shareholders with the Securities and Exchange Commission.
EXECUTIVE COMPENSATION
Pursuant to SEC rules for proxy statement disclosure of executive
compensation, the Compensation Committee of the board of directors of K&G has
prepared the following Report on Executive Compensation. The Committee intends
that this report clearly describe the current executive compensation program of
K&G, including the underlying philosophy of the program and the specific
performance criteria on which executive compensation is based, including
compensation of K&G's Chief Executive Officer.
REPORT ON EXECUTIVE COMPENSATION
Until the establishment of the Compensation Committee in November 1995,
the K&G board of directors made decisions involving executive compensation
based primarily upon the recommendations of the Chairman of the Board,
President and Chief Executive Officer, Mr. Stephen H. Greenspan. Although
management continues to make initial recommendations concerning adjustments to
executive compensation, upon the establishment of the Compensation Committee,
that Committee became primarily responsible for establishing salaries, bonuses
and other compensation for K&G's executive officers for fiscal 1995 and
thereafter, as well as administering the 1995 Stock Option Plan for Employees
(the "Plan"). Each member of the Compensation Committee is a non-employee
director.
Compensation Policy. K&G's executive compensation policy is designed to
provide levels of compensation that integrate compensation with K&G's annual
and long-term performance goals and reward above-average corporate performance,
thereby allowing K&G to attract and retain qualified executives. Specifically,
K&G's executive compensation policy is intended to:
o Provide compensation levels that are consistent with K&G's
business plan, financial objectives and operating
performance;
o Reward performance that facilitates the achievement of
K&G's business plan goals;
o Motivate executives to achieve strategic operating
objectives; and
o Align the interest of executives with those of
shareholders and the long-term interests of K&G by
providing long-term incentive compensation in the form of
stock options.
In light of K&G's compensation policy, the components of its executive
compensation program for fiscal 1998 were base salaries, cash bonuses and stock
options.
Base Salary. Each executive officer's base salary (including the Chief
Executive Officer's base salary) is based upon a number of factors, including
the responsibilities borne by the executive officer and his or her length of
service to K&G. Each executive officer's base salary is reviewed annually and
occasionally adjusted to account for K&G's financial performance, any change in
the executive officer's
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<PAGE> 99
responsibilities and the executive officer's overall performance. Factors
considered in evaluating performance include financial results such as
increases in sales, net income before taxes and earnings per share, as well as
non-financial measures such as improvements in service and relationships with
suppliers and employees, and leadership and management development. These non-
financial measures are subjective in nature. No particular weight is given by
the Compensation Committee to any particular factor.
Cash Bonuses. Each executive officer, including the Chief Executive
Officer, is eligible to receive a discretionary annual cash bonus. In
determining the discretionary bonus payable to any particular executive
officer, the executive officer's performance during the preceding fiscal year
and the aggregate cash compensation (salary plus bonus) to be received by such
officer if K&G achieves its projected financial performance is evaluated, as
well as such other factors as are deemed relevant in calculating the officer's
bonus. Such other factors generally include the officer's level of
responsibility and length of service to K&G. No weight is given by the
Compensation Committee to any particular factor.
Stock Options. In November 1995, K&G adopted the Plan under which
executive officers, including the Chief Executive Officer, are eligible to
receive stock options. In general, stock option awards are granted as
warranted by K&G's growth and profitability.
Under the Plan, all stock options granted to date have been granted at
exercise prices no less than the fair market value of K&G's common stock on the
date of grant, although that is not a requirement of the Plan. All options
granted to date to employees become exercisable in varying increments over no
greater than a five-year period. The Compensation Committee believes that
these features serve to align the interests of the executives with those of
shareholders and the long-term interests of K&G.
In March 1998, Mr. Dancu received a grant of options to purchase 35,000
shares of K&G common stock, and Mr. Briggs received a grant to purchase 20,000
shares of K&G common stock. These options become exercisable in increments
over a five-year period. In the future, the amount of each executive officer's
grant of stock options will be based upon an evaluation of such executive
officer's responsibilities and performance, the desirability of long-term
service from the particular executive officer, the aggregate amount of stock or
stock options previously held by such executive officer and K&G's overall
financial performance. While the Compensation Committee has not established a
target level of stock ownership by K&G's executive officers, it does encourage
such ownership and intends to gradually increase the ownership of K&G common
stock by executive officers and other key employees through grants of options
to purchase such stock.
Compensation of Chief Executive Officer. As stated above, until the
establishment of the Compensation Committee in November 1995, the K&G board of
directors made decisions involving executive compensation based primarily upon
the recommendations of the Chairman of the Board, President and Chief Executive
Officer, Mr. Stephen H. Greenspan.
Mr. Greenspan's compensation for fiscal 1998 consisted of cash
compensation in the form of his salary.
Limitations on Deductibility of Compensation. Under the 1993 Omnibus
Budget Reconciliation Act, a portion of annual compensation payable after 1993
to any of K&G's five highest paid executive officers would not be deductible by
K&G for federal income tax purposes to the extent such officer's overall
compensation exceeds $1,000,000. Qualifying performance-based incentive
compensation, however, would be both deductible and excluded for purposes of
calculating the $1,000,000 base. Although the Compensation Committee does not
presently intend to award compensation in excess of the $1,000,000 cap,
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<PAGE> 100
it will address this issue when formulating compensation arrangements for K&G's
executive officers and will seek, where possible, to maintain the deductibility
of any such payments.
CAMPBELL B. LANIER, III
JAMES W. INGLIS
The Report on Executive Compensation of the Compensation Committee of
the K&G board of directors shall not be deemed to be incorporated by reference
as a result of any general incorporation by reference of this proxy
statement/prospectus or any part hereof in K&G's Annual Report to Shareholders
or its Annual Report on Form 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the K&G board of directors consists of
Messrs. Lanier and Burton. During fiscal 1998, the Compensation Committee did
not include any member of the K&G board of directors who at that time served as
an officer or employee of K&G, nor did any executive officer of K&G serve as a
member of the board of directors of any entity that had executive officers who
served on the K&G board of directors during that year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to K&G's initial public offering in January 1996, K&G was operated
as a privately-held business and as such entered into various transactions in
the ordinary course of business with certain entities affiliated with Messrs.
Greenspan, Ruben and Richard M. Vehon, Sr. Mr. Greenspan is the Chairman of
the Board, President and Chief Executive Officer of K&G, and also its principal
shareholder. Mr. Ruben is a director and Mr. Vehon was formerly a director of
K&G, and both of Messrs. Ruben and Vehon owned greater than 10% of the
outstanding K&G common stock prior to its initial public offering. Mr. Vehon
is now deceased. Management has sought to reduce the number and dollar volume
of related party transactions involving K&G. The Audit Committee of the K&G
board of directors is responsible for evaluating the appropriateness of any
future related party transactions.
K&G leases its Irving, Texas store from Messrs. Greenspan and Ruben and
the Estate of Mr. Vehon. Pursuant to this arrangement, K&G made lease payments
of $66,000 in fiscal 1998. The lease for this store currently provides that
K&G pay rent of $5,500 per month.
In fiscal 1995, Ellsworth Realty, L.L.C., a limited liability company
whose shareholders are Messrs. Greenspan, Ruben and Dancu, acquired a building
located across the street from K&G's original store in Atlanta. In February
1996, K&G relocated its original Atlanta store in this building. The lease for
the building provides for K&G to pay Ellsworth Realty a specified amount for
the warehouse and office space and a specified amount for the retail space plus
1% of the net sales of the store in excess of a certain threshold amount.
Pursuant to this arrangement, K&G paid or accrued to Ellsworth Realty
approximately $280,713 in fiscal 1998.
Management believes that the principal terms of all of the transactions
described above were no less favorable to K&G as could have been obtained from
unaffiliated third parties.
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<PAGE> 101
TABLE I - SUMMARY COMPENSATION TABLE
The following table presents certain information required by the SEC
relating to various forms of compensation awards to, earned by or paid to K&G's
Chief Executive Officer and the most highly compensated officers other than the
Chief Executive Officer who earned more than $100,000 during fiscal 1998 and
were serving in such capacities at the end of fiscal 1998. Such executive
officers are hereinafter referred to as K&G's "Named Executive Officers."
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (# OF SHARES) ($)(1)
--------------------------- ---- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Stephen H. Greenspan 1998 81,812 0 0 4,242
Chairman, President and Chief 1997 120,000 0 37,500 3,882
Executive Officer 1996 120,000 0 0 4,792
John C. Dancu 1998 149,595 35,000 35,000 6,079
Chief Operating Officer and Chief 1997 150,000 25,000 37,500 5,491
Financial Officer 1996 120,000 0 0 6,587
Martin Schwartz 1998 105,500 0 0 4,242
Senior Vice President and General 1997 114,000 0 37,500 3,882
Merchandising Manager 1996 114,000 0 0 4,736
R. Scott Saban 1998 93,231 6,000 0 5,968
Vice President of Management 1997 88,462 12,000 37,500 5,431
Information Systems and Store 1996 78,154 8,000 0 6,527
Construction
George ("Skip") H. Briggs 1998 93,500 0 20,000 5,189
Vice President - Store Operations 1997 0 0 0 0
1996 0 0 0 0
</TABLE>
(1) These figures represent premiums for K&G's medical and dental coverage
paid by K&G on behalf of the Named Executive Officers.
TABLE II - OPTION GRANTS IN FISCAL 1998
This table represents information regarding options to purchase shares
of K&G common stock granted to Named Executive Officers in Fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS VALUE AT ASSUMED ANNUAL
UNDERLYING GRANTED TO RATES OF STOCK APPRECIATION
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION FOR THE OPTION TERM (2)
NAME GRANTED(1) IN FISCAL 1998 ($/SH) DATE 5% 10%
- ---- ---------- -------------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mr. Dancu 35,000 31.0% $20.50 3/27/08 $0 $0
Mr. Briggs 20,000 17.7% $20.50 3/27/08 $0 $0
</TABLE>
- --------------
(1) Options vest 20% on each anniversary so that they are fully vested on
the fifth anniversary of the date of the grant.
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<PAGE> 102
(2) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the option term. These gains are based
on assumed rates of stock price appreciation of 5% and 10% compounded
annually from the option grant date to their expiration date based upon
a closing price of $7.875 per share, the closing price of K&G common
stock as of January 29, 1999, which was less than the option exercise
price. These assumptions are not intended to forecast or represent
future prices of K&G common stock. The potential realizable value
calculation does not take into account federal or state income tax
consequences.
TABLE III - OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998
YEAR-END OPTION VALUES
Mr. Dancu and Mr. Saban exercised options to purchase K&G common stock
during fiscal 1998. The shares acquired on exercise and the related value
received are shown in the following table. The following table also shows the
number of shares of K&G common stock subject to exercisable and unexercisable
stock options held by each of the Named Executive Officers as of January 31,
1999. The table also reflects the value of such options based on the positive
spread between the exercisable price of such options and $7.875, which was the
closing sale price of a share of K&G common stock reported in the Nasdaq
National Market on January 29, 1999 (the last trading day prior to the end of
K&G's fiscal year).
<TABLE>
<CAPTION>
SHARES NUMBER OF VALUE OF UNEXERCISED IN-THE-
ACQUIRED VALUE UNEXERCISED OPTIONS AT MONEY OPTIONS AT YEAR-
ON EXERCISE REALIZED YEAR-END (O) END(1)($)
NAME (O) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Greenspan 0 0 18,750 18,750 0 0
Mr. Schwartz 0 0 33,938 23,812 18,302 6,100
Mr. Dancu 100,000 $1,790,000 280,123 46,750 1,357,080 0
Mr. Saban 10,126 140,043 23,812 28,812 6,100 6,100
Mr. Briggs 0 0 0 20,000 0 0
</TABLE>
- ------------
(1) The value of unexercised in-the-money options at January 29, 1999 is
calculated as follows: [(Per Share Closing Sale Price on January 29,
1999) - (Per Share Exercise Price)] x Number of Shares Subject to
Unexercised Options. The closing sale price reported by the Nasdaq
National Market for K&G common stock on January 29, 1999 was $7.875 per
share.
PERFORMANCE GRAPH
The following indexed line graph indicates K&G's total return to
shareholders from January 24, 1996, the first day K&G common stock traded on
the Nasdaq National Market, to January 29, 1999, the last trading day prior to
the end of fiscal 1998, as compared to the total return for the Nasdaq
Composite Index and an index comprised of the Nasdaq Retail Trade Stock for the
same period. The calculations in the graph assume that $100 was invested on
January 24, 1996 in each of K&G common stock and each index and also assumes
dividend reinvestment. [GRAPH TO COME]
<TABLE>
<CAPTION>
1/24/96 1/26/96 1/31/97 1/30/98 1/29/99
<S> <C> <C> <C> <C> <C>
Nasdaq Comp. $100.00 $ 99.75 $132.45 $157.38 $245.60
Nasdaq Retail $100.00 $101.23 $126.73 $148.22 $180.65
K&G $100.00 $104.95 $279.91 $290.61 $118.07
</TABLE>
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<PAGE> 103
PROPOSAL - RATIFICATION OF APPOINTMENT OF K&G'S
INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors of K&G has appointed the firm of Arthur Andersen
LLP to serve as independent public accountants of K&G for the fiscal year
ending January 30, 2000, and has directed that such appointment be submitted to
shareholders of K&G for ratification at the Annual Meeting. Arthur Andersen
LLP has served as independent public accountants of K&G since 1994 and is
considered by management of K&G to be well qualified to serve in this capacity.
If the shareholders do not ratify the appointment of Arthur Andersen LLP, the
K&G board of directors will reconsider the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. They also will be available to respond to appropriate questions from
shareholders.
THE K&G BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF K&G.
SHAREHOLDER PROPOSALS
K&G will hold a 2000 annual meeting of K&G shareholders only if the
merger is not completed before the time of such meeting. In the event that
such a meeting is held, any proposals of K&G shareholders intended to be
presented at the 2000 annual meeting of K&G shareholders must have been
received by the Chief Operating Officer of K&G no later than , 1999 in
order to be considered for inclusion in the 2000 proxy materials for K&G.
ANNUAL REPORT
K&G's Annual Report to Shareholders for fiscal 1998 (which is not part
of K&G's proxy soliciting material) is being mailed to K&G's shareholders with
this proxy statement/prospectus.
LEGAL MATTERS
The validity of the shares of TMW common stock to be issued in
connection with the merger and certain tax consequences of the merger will be
passed on by Fulbright & Jaworski L.L.P., Houston, Texas. Michael W. Conlon, a
partner in the firm of Fulbright & Jaworski L.L.P., is the Secretary of TMW.
Certain tax consequences of the merger will be passed on for K&G by Hunton &
Williams, Atlanta, Georgia.
EXPERTS
The consolidated financial statements incorporated in this proxy
statement/prospectus by reference from the TMW Annual Report on Form 10-K for
the year ended January 30, 1999 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein
by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
K&G's consolidated financial statements incorporated in this proxy
statement/prospectus by reference from the K&G Annual Report on Form 10-K for
the year ended January 31, 1999 have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and is incorporated herein by reference in reliance upon the authority
of said firm as experts in giving said report.
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<PAGE> 104
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
THE MEN'S WEARHOUSE, INC.
AND
K&G MEN'S CENTER, INC.
DATED AS OF MARCH 3, 1999
The following reflects the merger agreement, as amended by Amendment No.
1 dated March 30, 1999, by and between The Men's Wearhouse, Inc., TMW
Combination Company and K&G Men's Center, Inc.
A-i
<PAGE> 105
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION 1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION 1.2. Effective Time . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION 1.3. Effects of the Merger . . . . . . . . . . . . . . . . . . . . A-2
SECTION 1.4. Articles of Incorporation and By-laws . . . . . . . . . . . . A-2
SECTION 1.5. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . A-2
SECTION 2.1. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . A-2
(a) Cancellation of Company and TMW Owned Stock . . . . . . . . A-2
(b) Conversion of Company Shares . . . . . . . . . . . . . . . . A-2
(c) No Fractional TMW Shares . . . . . . . . . . . . . . . . . . A-3
(d) Combination Company Stock . . . . . . . . . . . . . . . . . A-3
SECTION 2.2. Exchange of Certificates . . . . . . . . . . . . . . . . . . A-3
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . A-3
(b) Payment of Merger Consideration . . . . . . . . . . . . . . A-3
(c) Exchange Procedure . . . . . . . . . . . . . . . . . . . . . A-4
(d) Distributions with Respect to Unexchanged Company Shares . . A-4
(e) No Further Ownership Rights in Company Shares . . . . . . . A-4
(f) No Liability . . . . . . . . . . . . . . . . . . . . . . . . A-5
SECTION 2.3. Conversion of Stock Options . . . . . . . . . . . . . . . . . A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . A-6
SECTION 3.1. Representations and Warranties of the Company . . . . . . . . A-6
(a) Organization; Standing and Power . . . . . . . . . . . . . . A-6
(b) Subsidiaries; Other Investments . . . . . . . . . . . . . . A-6
(c) Capital Structure . . . . . . . . . . . . . . . . . . . . . A-6
(d) Authority; Non-contravention . . . . . . . . . . . . . . . . A-7
(e) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . A-8
(f) Information Supplied . . . . . . . . . . . . . . . . . . . . A-8
</TABLE>
A-ii
<PAGE> 106
<TABLE>
<S> <C> <C>
(g) Absence of Certain Changes or Events . . . . . . . . . . . . A-9
(h) State Takeover Statutes; Absence of Supermajority Provision A-9
(i) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . A-10
(k) Accounting Matters . . . . . . . . . . . . . . . . . . . . . A-10
(l) Employee Benefits Matters . . . . . . . . . . . . . . . . . A-10
(m) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
(n) No Excess Parachute Payments . . . . . . . . . . . . . . . . A-13
(o) Environmental Matters . . . . . . . . . . . . . . . . . . . A-13
(p) Compliance with Laws . . . . . . . . . . . . . . . . . . . . A-13
(q) Material Contracts and Agreements . . . . . . . . . . . . . A-13
(r) Title to and Conditions of Properties . . . . . . . . . . . A-14
(s) Intellectual Property . . . . . . . . . . . . . . . . . . . A-14
(t) Personnel Information; Labor Matters . . . . . . . . . . . . A-15
(u) No Default . . . . . . . . . . . . . . . . . . . . . . . . . A-16
(v) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . A-16
(w) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . A-16
(x) Certain Additional Information . . . . . . . . . . . . . . . A-16
(y) Credit Items . . . . . . . . . . . . . . . . . . . . . . . . A-17
(z) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . A-17
(aa) Y2K Readiness . . . . . . . . . . . . . . . . . . . . . . . A-17
(bb) Opinion of Financial Advisor . . . . . . . . . . . . . . . . A-17
(cc) Pooling Opinion . . . . . . . . . . . . . . . . . . . . . . A-17
(dd) Third Party Standstill Agreements . . . . . . . . . . . . . A-17
SECTION 3.2. Representations and Warranties of TMW . . . . . . . . . . . . A-17
(a) Organization; Standing and Power . . . . . . . . . . . . . . A-17
(b) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . A-18
(c) Capital Structure . . . . . . . . . . . . . . . . . . . . . A-18
(d) Authority; Non-contravention . . . . . . . . . . . . . . . . A-18
(e) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . A-19
(f) Information Supplied . . . . . . . . . . . . . . . . . . . . A-20
(g) Absence of Certain Changes or Events . . . . . . . . . . . . A-20
(h) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . A-20
(j) Accounting Matters . . . . . . . . . . . . . . . . . . . . . A-20
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
(l) Environmental Matters . . . . . . . . . . . . . . . . . . . A-21
(m) Compliance with Laws . . . . . . . . . . . . . . . . . . . . A-21
(n) No Default . . . . . . . . . . . . . . . . . . . . . . . . . A-21
(o) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . A-21
(p) Pooling Opinion . . . . . . . . . . . . . . . . . . . . . . A-22
(q) Board Recommendation . . . . . . . . . . . . . . . . . . . . A-22
(r) Y2K Readiness . . . . . . . . . . . . . . . . . . . . . . . A-22
(s) 1999 Financial Forecast . . . . . . . . . . . . . . . . . . A-22
</TABLE>
A-iii
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<TABLE>
<S> <C>
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . A-22
SECTION 4.1. Conduct of Business of the Company . . . . . . . . . . . . . A-22
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . A-22
(b) Changes in Employment Arrangements . . . . . . . . . . . . . A-24
(c) Severance Arrangements . . . . . . . . . . . . . . . . . . . A-24
(d) Other Actions . . . . . . . . . . . . . . . . . . . . . . . A-24
SECTION 4.2. Conduct of Business of TMW . . . . . . . . . . . . . . . . . A-24
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . A-24
(b) Other Actions . . . . . . . . . . . . . . . . . . . . . . . A-25
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . A-25
SECTION 5.1. Stockholder Approval; Preparation of Proxy Statement; Preparation
of Registration Statement . . . . . . . . . . . . . . . . . . A-25
SECTION 5.2. Letter of the Company's Accountants . . . . . . . . . . . . . A-26
SECTION 5.3. Letter of TMW's Accountants . . . . . . . . . . . . . . . . . A-26
SECTION 5.4. Access to Information . . . . . . . . . . . . . . . . . . . . A-26
SECTION 5.5. Reasonable Efforts; Notification . . . . . . . . . . . . . . A-27
SECTION 5.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . A-28
SECTION 5.7. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.8. Public Announcements . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.9. Accounting Matters . . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.10. Purchases of Common Stock of the Other Party . . . . . . . . A-29
SECTION 5.11. Agreement to Defend . . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.12. Accounting Matters . . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.13. Other Actions . . . . . . . . . . . . . . . . . . . . . . . A-29
SECTION 5.14. TMW Board of Directors . . . . . . . . . . . . . . . . . . . A-30
</TABLE>
A-iv
<PAGE> 108
<TABLE>
<S> <C>
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . A-30
SECTION 6.1. Conditions to Each Party's Obligation to Effect the Merger . A-30
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . A-30
(b) NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
(c) HSR Act; Other Approvals . . . . . . . . . . . . . . . . . . A-30
(d) No Injunctions or Restraints . . . . . . . . . . . . . . . . A-30
(e) Registration Statement Effectiveness . . . . . . . . . . . . A-30
(f) Blue Sky Filings . . . . . . . . . . . . . . . . . . . . . . A-30
SECTION 6.2. Conditions of TMW . . . . . . . . . . . . . . . . . . . . . . A-30
(a) Compliance . . . . . . . . . . . . . . . . . . . . . . . . . A-30
(b) Certifications and Opinion . . . . . . . . . . . . . . . . . A-31
(c) Representations and Warranties True . . . . . . . . . . . . A-31
(d) Company Affiliate Letters . . . . . . . . . . . . . . . . . A-32
(e) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . A-32
(f) Pooling Accounting . . . . . . . . . . . . . . . . . . . . . A-32
(g) Consents, etc. . . . . . . . . . . . . . . . . . . . . . . . A-32
(h) No Litigation . . . . . . . . . . . . . . . . . . . . . . . A-32
(i) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . A-33
(j) Employment Contracts; Covenants not to Compete . . . . . . . A-33
(k) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . A-33
(l) Resignations . . . . . . . . . . . . . . . . . . . . . . . . A-33
(m) Termination Agreement . . . . . . . . . . . . . . . . . . . A-33
SECTION 6.3. Conditions of the Company . . . . . . . . . . . . . . . . . . A-33
(a) Compliance . . . . . . . . . . . . . . . . . . . . . . . . . A-33
(b) Certifications and Opinion . . . . . . . . . . . . . . . . . A-33
(c) Representations and Warranties True . . . . . . . . . . . . A-34
(d) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . A-34
(e) Consents, etc. . . . . . . . . . . . . . . . . . . . . . . . A-34
(f) No Litigation . . . . . . . . . . . . . . . . . . . . . . . A-34
(g) Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . A-35
(h) TMW Affiliate Letters . . . . . . . . . . . . . . . . . . . A-35
(i) Employment Contracts . . . . . . . . . . . . . . . . . . . . A-35
(j) Termination Agreement . . . . . . . . . . . . . . . . . . . A-35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . A-35
SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . A-35
SECTION 7.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . A-36
SECTION 7.3. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
</TABLE>
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<TABLE>
<S> <C>
SECTION 7.4. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . A-36
SECTION 7.5. Procedure for Termination, Amendment, Extension or Waiver . . A-36
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS . . . . . . . . . . . . . A-36
SECTION 8.1. Takeover Defenses . . . . . . . . . . . . . . . . . . . . . . A-36
SECTION 8.2. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . A-37
SECTION 8.3. Fee and Expense Reimbursements . . . . . . . . . . . . . . . A-38
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . A-38
SECTION 9.1. Nonsurvival of Representations and Warranties . . . . . . . . A-38
SECTION 9.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
SECTION 9.3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . A-40
SECTION 9.4. Interpretation . . . . . . . . . . . . . . . . . . . . . . . A-40
SECTION 9.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . A-40
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries . . . . . . . A-40
SECTION 9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . A-41
SECTION 9.8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . A-41
SECTION 9.9. Enforcement of the Agreement . . . . . . . . . . . . . . . . A-41
SECTION 9.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . A-41
SECTION 9.11 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . A-41
</TABLE>
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AGREEMENT AND PLAN OF MERGER dated as of March 3, 1999, by and between
THE MEN'S WEARHOUSE, INC., a Texas corporation ("TMW"), TMW COMBINATION
COMPANY, a Georgia corporation ("Combination Company"), and K&G MEN'S CENTER,
INC., a Georgia corporation (the "Company").
WHEREAS, the respective Boards of Directors of TMW, Combination Company
and the Company have approved the merger of the Combination Company with and
into the Company (the "Merger"), upon the terms and subject to the conditions
of this Agreement and Plan of Merger (this "Agreement"), whereby each issued
and outstanding share of the Company's common stock, $.01 par value (a "Company
Share"), not owned by the Company, TMW or any wholly owned subsidiary of the
Company or TMW will be converted into a fraction of a share of TMW's common
stock, $.01 par value ("TMW Common Stock") as provided herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests; and
WHEREAS, TMW, Combination Company and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions
hereof and in accordance with the Georgia Business Corporation Code (the
"GBCC"), the Combination Company shall be merged with and into Company at the
Effective Time of the Merger (as hereinafter defined). Following the Merger,
the separate corporate existence of the Combination Company shall cease and
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company in accordance with the GBCC.
SECTION 1.2. Effective Time. As soon as practicable following the
satisfaction or, to the extent permitted hereunder, waiver of the conditions
set forth in Article VI, the Surviving Corporation shall file the certificate
of merger required by the GBCC with respect to the Merger and other appropriate
documents (the "Certificate of Merger") executed in accordance with the
relevant provisions of the GBCC. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Georgia Secretary of
State, or at such other time as TMW and the Company shall agree should be
specified in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time of the Merger"). The closing of the Merger (the
"Closing") shall take place at the offices of Fulbright & Jaworski L.L.P., in
Houston, Texas, on the date of the meeting of the Company's stockholders to
approve the Merger (the "Company Stockholders Meeting"), or, if any of the
conditions set forth in Article VI have not been satisfied, then as soon as
practicable thereafter, or at such other time and place or such other date as
TMW and the Company shall agree (the "Closing Date").
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SECTION 1.3. Effects of the Merger. The Merger shall have the effects
set forth in Section 14-2-1106 of the GBCC. If at any time after the Effective
Time of the Merger, the Surviving Corporation shall consider or be advised that
any further assignments or assurances in law or otherwise are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, all rights, title and interests in all real estate and other
property and all privileges, powers and franchises of the Company and the
Combination Company, the Surviving Corporation and its proper officers and
directors, in the name and on behalf of the Company and the Combination
Company, shall execute and deliver all such proper deeds, assignments and
assurances in law and do all things necessary and proper to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise to carry out the purpose of this Agreement, and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Company and the Combination Company or otherwise to take any and all such
action.
SECTION 1.4. Articles of Incorporation and By-laws.
(a) The Amended and Restated Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time of the Merger,
shall be amended and restated as of the Effective Time of the Merger to read as
set forth in Exhibit A hereto, and, as so amended, such Amended and Restated
Articles of Incorporation shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
(b) The By-laws of the Company, as in effect immediately prior to the
Effective Time of the Merger, shall be amended and restated as of the Effective
Time of the Merger to read as set forth in Exhibit B hereto, and, as so
amended, shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 1.5. Directors and Officers.
The directors and officers of Combination Company shall, from and after
the Effective Time, be the directors and officers of the Surviving Corporation
and shall serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
holder of any Company Shares or capital stock of Combination Company:
(a) Cancellation of Company and TMW Owned Stock. All Company Shares
that are owned by the Company, any wholly owned subsidiary of the Company and
any Company Shares owned by TMW or any wholly owned subsidiary of TMW shall be
canceled and no consideration shall be delivered in exchange therefor.
(b) Conversion of Company Shares. Subject to Sections 2.1(a) and
2.1(c), each issued and outstanding Company Share shall be converted into the
right to receive, upon the surrender of the certificate formerly representing
such Company Shares pursuant to Section 2.2, a fraction of a share of TMW
Common Stock (the "Merger Consideration") as follows:
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If the average of the closing prices of the TMW Common Stock on the
National Association of Securities Dealers Automated Quotation National
Market Systems ("NASDAQ NMS") (as reported in The Wall Street Journal
or, if not reported thereby, any other authoritative source selected by
TMW) for the 15 trading days ending on the third trading day before the
Closing Date is equal to or greater than $32.50, then each Company Share
shall be converted into the right to receive .4 of a share of TMW Common
Stock; if such average is equal to or less than $27.50, then each
Company Share shall be converted into the right to receive .43 of a
share of TMW Common Stock; if such average is between $32.50 and $27.50,
then each Company Share shall be converted into a fraction of a share of
TMW Common Stock equal to .4 plus a decimal, calculated to four decimal
places, equal to .03 times a fraction with a numerator equal to the
difference between $32.50 and such average and the denominator equal to
$5.00. For example, if such average is $30.00, then each Company Share
would be converted into .415 of a share of TMW Common Stock.
Such ratio of a fraction of a share of TMW Common Stock for each Company Share
is herein referred to as the "Exchange Ratio".
(c) No Fractional TMW Shares. No fractional shares of TMW Common
Stock shall be issued in the Merger. All fractional shares of TMW Common Stock
that a holder of Company Shares would otherwise be entitled to receive as a
result of the Merger shall be aggregated and if a fractional share of TMW
Common Stock results from such aggregation, such holder shall be entitled to
receive, in lieu thereof, an amount in cash determined by multiplying the
closing sale price per share of a share of TMW Common Stock on NASDAQ NMS on
the first trading day immediately preceding the Effective Time of the Merger by
the fraction of a share of TMW Common Stock to which such holder would
otherwise have been entitled. No such cash in lieu of fractional shares of TMW
Common Stock shall be paid to any holder of fractional TMW Common Stock until
that holder's Certificates (as defined in Section 2.2(c)) are surrendered and
exchanged in accordance with Section 2.2(c).
(d) Combination Company Stock. Each share of common stock, par value
$1.00 per share, of Combination Company issued and outstanding immediately
prior to the Effective Time will be converted into one share of common stock,
par value $.01 per share, of the Surviving Corporation, and the stock of the
Surviving Corporation issued on that conversion will constitute all of the
issued and outstanding shares of capital stock of the Surviving Corporation.
SECTION 2.2. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time of the Merger, TMW
shall engage American Stock Transfer & Trust Company or such other bank or
trust company reasonably acceptable to the Company, to act as exchange agent
(the "Exchange Agent") for the issuance of the Merger Consideration upon
surrender of Certificates.
(b) Payment of Merger Consideration. TMW shall deliver to
Combination Company or the Surviving Corporation, as applicable and cause
Combination Company or the Surviving Corporation to provide to the Exchange
Agent on a timely basis, as and when needed after the Effective Time of the
Merger, certificates for the TMW Common Stock to be issued upon the conversion
of the Company Shares pursuant to Section 2.1. The Surviving Corporation shall
timely make available to the Exchange Agent any cash necessary to make payments
in lieu of fractional shares.
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(c) Exchange Procedure. As soon as practicable after the Effective
Time of the Merger, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time of the
Merger represented outstanding Company Shares (the "Certificates"), other than
the Company, TMW and any wholly owned subsidiary of the Company or TMW, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in a form and have such
other provisions as TMW may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the certificates
representing the TMW Common Stock and any cash in lieu of a fractional share of
TMW Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of TMW Common Stock into which the Company Shares theretofore represented by
such Certificate shall have been converted pursuant to Section 2.1 and any cash
payable in lieu of a fractional share of TMW Common Stock, and the Certificate
so surrendered shall forthwith be canceled. If the shares of TMW Common Stock
are to be issued to a Person other than the Person in whose name the
Certificate so surrendered is registered, it shall be a condition of exchange
that such Certificate shall be properly endorsed or otherwise in proper form
for transfer and that the Person requesting such exchange shall pay any
transfer or other taxes required by reason of the exchange to a Person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time of the Merger
to represent only the right to receive, upon surrender of such Certificate, the
number of shares of TMW Common Stock and cash, if any, in lieu of a fractional
share of TMW Common Stock into which the Company Shares theretofore represented
by such Certificate shall have been converted pursuant to Section 2.1. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the TMW Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect thereto for the account of
Persons entitled thereto.
(d) Distributions with Respect to Unexchanged Company Shares. No
dividends or other distributions declared or made after the Effective Time of
the Merger with respect to the TMW Common Stock with a record date after the
Effective Time of the Merger shall be paid to the holder of any unsurrendered
Certificate with respect to the TMW Common Stock represented thereby and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.1(c) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the record
holder of the Certificates representing the TMW Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of TMW Common Stock to which
such holder is entitled pursuant to Section 2.1(c) and the amount of dividends
or other distributions with a record date after the Effective Time of the
Merger theretofore paid with respect to such whole share of TMW Common Stock,
as the case may be, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time of
the Merger but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole share of TMW Common Stock.
(e) No Further Ownership Rights in Company Shares. All shares of TMW
Common Stock issued upon the surrender of Certificates in accordance with the
terms of this Article II, together with any dividends payable thereon to the
extent contemplated by this Section 2.2, shall be deemed to have been exchanged
and paid in full satisfaction of all rights pertaining to the Company Shares
theretofore represented by such Certificates and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Company Shares that were outstanding immediately prior to
the Effective Time of the Merger. If, after
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the Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
(f) No Liability. Neither TMW nor the Company nor any of their
subsidiaries shall be liable to any holder of Company Shares or TMW Common
Stock, as the case may be, for such shares (or dividends or distributions with
respect thereto) or cash in lieu of fractional shares of TMW Common Stock
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
SECTION 2.3. Conversion of Stock Options.
(a) At the Effective Time, each option or other right to purchase
shares of Company Common Stock (as hereinafter defined) pursuant to stock
options (the "Company Options") granted by the Company under the Employee Stock
Option Plan and the Directors Stock Option Plan (the "Company Stock Plans"),
which is outstanding at the Effective Time, whether or not exercisable, shall
be converted into options and become rights with respect to TMW Common Stock,
and TMW shall assume each Company Option, in accordance with the terms of the
Company Stock Plans and stock option agreement by which it is evidenced, except
that from and after the Effective Time, (i) TMW and its Stock Option Committee
shall be substituted for the Company and the Committee of the Company's Board
of Directors (including, if applicable, the entire Board of Directors of the
Company) administering such Company Stock Plans, (ii) each Company Option
assumed by TMW may be exercised solely for shares of TMW Common Stock, (iii)
the number of shares of TMW Common Stock subject to such Company Option shall
be equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio and rounding up any fraction of a
cent to the nearest cent. Notwithstanding the provisions of clause (iii) of
the preceding sentence, TMW shall not be obligated to issue any fraction of a
share of TMW Common Stock upon exercise of Company Options and any fraction of
a share of TMW Common Stock that otherwise would be subject to a converted
Company Option shall represent the right to receive a cash payment upon
exercise of such converted Company Option equal to the product of such fraction
and the difference between the market value of one share of TMW Common Stock at
the time of exercise and the per share exercise price of such Option. The
market value of one share of TMW Common Stock at the time of exercise of an
Option shall be the closing price of such common stock on the NASDAQ NMS (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by TMW) on the last trading day preceding the
date of exercise. Each of the Company and TMW agrees to take all necessary
steps to effectuate the foregoing provisions of this Section 2.3, including
using its reasonable efforts to obtain from each holder of a Company Option any
consent or contract that may be deemed necessary or advisable in order to
effect the transactions contemplated by this Section 2.3.
(b) As soon as practicable after the Effective Time, TMW shall
deliver to the participants in each Company Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto, and the grants
subject to such Company Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 2.3(a) after
giving effect to the Merger). At or prior to the Effective Time, TMW shall
take all corporate action necessary to reserve for issuance sufficient shares
of TMW Common Stock for delivery upon exercise of Company Options assumed by it
in accordance with this Section 2.3. Within 10 business days after the
Effective Time, TMW shall file a registration statement on Form S-3, Form S-4/A
or Form S-8, as applicable (which shall include a re-offer prospectus, if
necessary), as the case may be (or any successor or other appropriate forms),
with respect to the shares of TMW Common Stock subject to such options and
shall use its reasonable efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as required to permit the
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issuance of TMW Common Stock upon exercise of options and the resale of the
shares acquired upon exercise of the options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, TMW and Combination
Company as follows, subject to any exceptions specified in the Disclosure
Letter of the Company provided to TMW on the date hereof (the "Company
Disclosure Letter") and except as expressly contemplated by this Agreement:
(a) Organization; Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure to
be so qualified to do business or in good standing (individually, or in the
aggregate) would not have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole.
(b) Subsidiaries; Other Investments. Except as set forth in Section
3.1(b) of the Company Disclosure Letter, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any Person.
Section 3.1(b) of the Company Disclosure Letter contains a complete and
accurate list of the Company's direct and indirect subsidiaries. The Company's
subsidiaries are all corporations and are duly organized, validly existing and
in good standing under the laws of their respective jurisdictions of
incorporation and have the requisite corporate power and authority to carry on
their respective businesses as they are now being conducted and to own, operate
and lease the assets they now own, operate or hold under lease. The Company's
subsidiaries are duly qualified to do business and are in good standing in each
jurisdiction in which the nature of their respective businesses or the
ownership or leasing of their respective properties makes such qualification
necessary, other than in such jurisdictions where the failure to be so
qualified or in good standing would not have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole. Except as set forth in Section
3.1(b) of the Company Disclosure Letter or in the Company SEC Documents, all
the outstanding shares of capital stock of the Company's subsidiaries are owned
by the Company or its subsidiaries and have been duly authorized and validly
issued and are fully paid and non-assessable and were not issued in violation
of any preemptive rights or other preferential rights of subscription or
purchase of any Person other than those that have been waived or otherwise
cured or satisfied. All such stock and ownership interests are owned of record
and beneficially by the Company or by a direct or indirect wholly owned
subsidiary of the Company, free and clear of all liens, pledges, security
interests, charges, claims, rights of third parties and other encumbrances of
any kind or nature ("Liens").
(c) Capital Structure. The authorized capital stock of the Company
consists of 40,000,000 shares of common stock, $.01 par value ("Company Common
Stock"), and 2,000,000 shares of preferred stock, $.01 par value ("Company
Preferred Stock"). At the date hereof, 10,252,844 Company Shares were issued
and outstanding and no shares of Company Preferred Stock were issued and
outstanding. In addition, at the date hereof, an aggregate of 1,114,930 shares
of Company Common Stock were reserved for issuance under various employee and
director plans and agreements of the Company all as accurately described in all
material respects in Section 3.1(c) of the Company Disclosure Letter. Except
as set forth above, no shares of capital stock or other equity or voting
securities of the Company are reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are, and all such shares
issuable upon the exercise of stock options will be,
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<PAGE> 116
validly issued, fully paid and nonassessable and not subject to preemptive
rights. No capital stock has been issued by the Company since July 14, 1998,
to the date hereof, other than shares of Company Common Stock issued pursuant
to options outstanding on or prior to such date in accordance with their terms
at such date. Except pursuant to stock option plans of the Company described
in Section 3.1(l) of the Company Disclosure Letter (collectively, the "Company
Stock Plans"), there are no outstanding or authorized securities, options,
warrants, calls, rights, commitments, preemptive rights, agreements,
arrangements or undertakings of any kind to which the Company or any of its
subsidiaries is a party, or by which any of them is bound, obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, any shares of capital stock or other equity or
voting securities of, or other ownership interests in, the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except as set forth in
Section 3.1(c) of the Company Disclosure Letter, all of which shall be
terminated without cost to the Company by the Effective Time of the Merger,
there are not as of the date hereof and there will not be at the Effective Time
any stockholder agreements, voting trusts or other agreements or understandings
to which the Company is a party or by which it is bound relating to the voting
of any shares of the capital stock of the Company. There are no restrictions
on the Company with respect to voting the stock of any of its subsidiaries.
(d) Authority; Non-contravention. The Board of Directors of the
Company has approved the Merger and this Agreement, by unanimous vote of the
directors, and declared the Merger and this Agreement to be in the best
interests of the stockholders of the Company. The directors of the Company
have advised the Company and TMW that they intend to vote or cause to be voted
all of the shares of the Company Common Stock for which they have voting power
in favor of approval of the Merger and this Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of the Merger and this Agreement by the holders of a
majority of the outstanding Company Shares as of the record date for the
Company Stockholders Meeting ("Company Stockholder Approval"), to consummate
the transactions contemplated hereby and to take such actions, if any, as shall
have been taken with respect to the matters referred to in Section 3.1(h). The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject to
Company Stockholder Approval. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally,
(ii) the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (iii) the enforceability of any
indemnification provision contained herein may be limited by applicable federal
or state securities laws. The execution and delivery of this Agreement by the
Company do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
or "put" right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien, upon any of the properties or
assets of the Company or any of its subsidiaries under, any provision of (i)
the Amended and Restated Articles of Incorporation or Amended and Restated
Bylaws of the Company or any provision of the comparable organizational
documents of its subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its subsidiaries or
their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation or arbitration award
applicable to the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not have a Material Adverse Effect on the Company and its
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subsidiaries taken as a whole and would not materially impair the ability of
the Company to perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign, including local authorities (a "Governmental Entity") or
other Person, is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) the filing by the Company of a pre-merger notification
and report form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the expiration or termination of the waiting
period thereunder, (ii) the filing with the SEC of (A) a proxy statement
relating to the Company Stockholder Approval (such proxy statement as amended
or supplemented from time to time, the "Proxy Statement") and (B) the
Registration Statement (as defined in Section 5.1(b)) and (C) such reports
under Section 13(a) of Exchange Act, as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) Company Stockholder
Approval and (iv) the filing of the Certificate of Merger with and approval by
the Georgia Secretary of State with respect to the Merger as provided in the
GBCC and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business and such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not have a Material Adverse
Effect on the Company and its subsidiaries, taken as a whole. Assuming that
the TMW Common Stock is listed on a "national securities exchange" within the
meaning of Section 14-2-1302 of the GBCC, the shareholders of the Company are
not entitled to dissenter's rights in connection with the Merger.
(e) SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1996 (such documents, together with all exhibits and schedules thereto and
documents incorporated by reference therein, collectively referred to herein as
the "Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of the
Company included in the Company SEC Documents complied in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and other adjustments described therein). Except as
set forth in the Company SEC Documents, since the date of filing of such
financial statements until the date hereof there has been no Material Adverse
Change with respect to the Company and its subsidiaries taken as a whole. The
preliminary consolidated statements of operations for the year ended January
31, 1999 and the consolidated balance sheet at January 31, 1999 of the Company
and its subsidiaries, in the form disclosed in Section 3.1(e) of the Company
Disclosure Letter, are true and correct in all material respects.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact
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required to be stated therein or necessary to make the statements therein not
misleading, and (ii) the Proxy Statement will, at the date the Proxy Statement
is first mailed to the Company's stockholders and at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement, as it relates to the Company
Stockholders Meeting, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by TMW for inclusion or incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in
Section 3.1(g) of the Company Disclosure Letter or the Company SEC Documents,
since January 30, 1998, the Company has conducted its business only in the
ordinary course consistent with past practice, and there has not been (i) as of
the date hereof, any material adverse change with respect to the Company, (ii)
any declaration, setting aside or payment of any dividend (whether in cash,
stock or property) with respect to any of the Company's capital stock, (iii)
(A) any granting by the Company or any of its subsidiaries to any executive
officer of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements described in Section
3.1(g) to the Disclosure Letter, (B) any granting by the Company or any of its
subsidiaries to any such executive officer of any increase in severance or
termination pay, except as was required under employment, severance or
termination agreements listed in Section 3.1(g) to the Company Disclosure
Letter, true copies of which have been provided to TMW, or (C) any entry by the
Company or any of its subsidiaries into any employment, severance or
termination agreement with any such executive officer, (iv) any amendment of
any material term of any outstanding equity security of the Company or any
subsidiary; (v) any repurchase, redemption or other acquisition by the Company
or any subsidiary of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, the Company or any subsidiary,
except as contemplated by Company Benefit Plans; (vi) any damage, destruction
or other property loss, whether or not covered by insurance, that has or
reasonably could be expected to have a Material Adverse Effect on the Company
and its subsidiaries, taken as a whole or (vii) any change in accounting
methods, principles or practices by the Company materially affecting its
assets, liabilities or business, except insofar as may have been required by a
change in generally accepted accounting principles.
(h) State Takeover Statutes; Absence of Supermajority Provision. The
Company has taken all action to assure that no state takeover statute or
similar statute or regulation, including, without limitation Sections 14-2-
1103, 14-2-1111 and 14-2-1132 of the GBCC, shall apply to the Merger or any of
the other transactions contemplated hereby. The Company has also taken such
other action with respect to any other anti-takeover provisions in its Bylaws
or Articles of Incorporation to the extent necessary to consummate the Merger
on the terms set forth in this Agreement.
(i) Brokers. Except for NationsBanc Montgomery Securities LLC (the
"Company Financial Advisor"), whose fees are to be paid by the Company, no
broker, investment banker or other Person is entitled to receive from the
Company or any of its subsidiaries any investment banking, broker's, finder's
or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby, including any fee for any opinion rendered by
any investment banker. The engagement letter dated February 22, 1999, between
the Company and the Company Financial Advisor provided to TMW prior to the date
of this Agreement constitutes the entire understanding of the Company and the
Company Financial Advisor with respect to the matters referred to therein, and
has not been amended or modified, nor will it be amended or modified prior to
the Effective Time of the Merger.
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(j) Litigation. Except as disclosed in Section 3.1(j) of the Company
Disclosure Letter or the Company SEC Documents, there is no claim, suit,
action, proceeding or investigation pending or, to the Company's knowledge,
threatened against or affecting the Company or any of its subsidiaries that
either individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries, taken as a whole,
or prevent or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries having, or which, insofar as
reasonably can be foreseen, in the future could have, any such effect.
(k) Accounting Matters. Neither the Company nor, to its knowledge,
any of its affiliates, has through the date of this Agreement taken or agreed
to take any action that (without giving effect to any action taken or agreed to
be taken by TMW or any of its affiliates) would prevent TMW from accounting for
the business combination to be effected by the Merger as a pooling of
interests. The books, records and accounts of the Company and its subsidiaries
(i) have been maintained in accordance with good business practices on a basis
consistent with prior years, (ii) are stated in reasonable detail and
accurately and fairly reflect in all material respects the transactions and
dispositions of the assets of the Company and its subsidiaries and (iii)
accurately and fairly reflect in all material respects the basis for the
Company's financial statements. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization and (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with generally accepted
accounting principles and (B) to maintain accountability for assets.
(l) Employee Benefits Matters.
(i) Benefit Plans. Section 3.1(l) of the Company Disclosure
Letter contains a true and complete list of (1) all employee welfare
benefit and employee pension benefit plans as defined in sections 3(1)
and 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), including, but not limited to, plans that provide
retirement income or result in a deferral of income by employees for
periods extending to termination of employment or beyond, and plans that
provide medical, surgical, or hospital care benefits or benefits in the
event of sickness, accident, disability, death or unemployment and (2)
all other employee benefit agreements or arrangements, including without
limitation deferred compensation plans, incentive plans, bonus plans or
arrangements, stock option plans, stock purchase plans, stock award
plans, golden parachute agreements, severance pay plans, dependent care
plans, cafeteria plans, employee assistance programs, scholarship
programs, employee discount programs, employment contracts, retention
incentive agreements, noncompetition agreements, consulting agreements,
confidentiality agreements, vacation policies, and other similar plans,
agreements and arrangements that are currently in effect as of the date
of this Agreement, or have been approved before this date but are not
yet effective, for the benefit of any director, officer, employee or
former employee (or any of their beneficiaries) of the Company or any of
its subsidiaries (collectively, a "Company Beneficiary"), or with
respect to which the Company or any of its subsidiaries may have any
liability ("Company Benefit Plans").
(ii) Disclosure of Documents. With respect to each Company
Benefit Plan, the Company has heretofore made available to TMW, as
applicable, complete and correct copies of each of the following
documents which the Company has prepared or has been required to
prepare:
(1) the Company Benefit Plan and any amendments thereto
(or if the Company Benefit Plan is not a written agreement, a
description thereof);
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(2) the three most recent annual Form 5500 reports
filed with the Internal Revenue Service (the "IRS");
(3) the most recent statement filed with the Department
of Labor (the "DOL") pursuant to 29 U.S.C. Section 2520.104-23;
(4) the three most recent annual Form 990 and 1041
reports filed with the IRS;
(5) the three most recent actuarial reports;
(6) the three most recent reports prepared in
accordance with Statement of Financial Accounting Standards No.
106;
(7) the most recent summary plan description and
summaries of material modifications thereto;
(8) the trust agreement, group annuity contract or
other funding agreement that provides for the funding of the
Company Benefit Plan;
(9) the most recent financial statement;
(10) the most recent determination letter received from
the IRS; and
(11) any agreement pursuant to which the Company or any
of its subsidiaries is obligated to indemnify any person.
(iii) Contributions and Payments. All contributions and other
payments required to have been made by the Company or any entity
(whether or not incorporated) that is treated as a single employer with
the Company under section 414 of the Code (a "Company ERISA Affiliate")
with respect to any Company Benefit Plan (or to any person pursuant to
the terms thereof) have been or will be timely made and all such amounts
properly accrued through the date of this Agreement have been reflected
in the financial statements of the Company included in the Company SEC
Documents.
(iv) Qualification; Compliance. The terms of all Company
Benefit Plans that are intended to be "qualified" within the meaning of
section 401(a) of the Code have been determined by the IRS to be so
qualified or the applicable remedial periods will not have ended prior
to the Effective Time. Except as disclosed in Section 3.1(l)(iii) of
the Company Disclosure Letter, no event or condition exists or has
occurred that could cause the IRS to disqualify any Company Benefit Plan
that is intended to be qualified under section 401(a) of the Code.
Except as disclosed in Section 3.1(l)(iii) of the Company Disclosure
Letter, with respect to each Company Benefit Plan, the Company and each
Company ERISA Affiliate are in compliance in all material respects with,
and each Company Benefit Plan and related source of benefit payment is
and has been operated in compliance with, its terms, all applicable
laws, rules and regulations governing such plan or source, including,
without limitation, ERISA, the Code and applicable local law. To the
knowledge of the Company, except as set forth in Section 3.1(l)(iii) of
the Company Disclosure Letter, no Company Benefit Plan is subject to any
ongoing audit, investigation, or other administrative proceeding of the
IRS, the DOL, or any other federal, state, or local governmental entity
or is scheduled to be subject to such an audit investigation or
proceeding.
(v) Liabilities. With respect to each Company Benefit Plan,
to the knowledge of the Company, there exists no condition or set of
circumstances that could subject the Company or any
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Company ERISA Affiliate to any liability arising under the Code, ERISA
or any other applicable law (including, without limitation, any
liability to or under any such plan or under any indemnity agreement to
which the Company or any Company ERISA Affiliate is a party), which
liability, excluding liability for benefit claims and funding
obligations, each payable in the ordinary course, could reasonably be
expected to have a Material Adverse Effect on the Company. No claim,
action or litigation has been made, commenced or, to the knowledge of
the Company, threatened, by or against and Company Benefit Plan or the
Company or any of its subsidiaries with respect to any Company Benefit
Plan (other than for benefits in the ordinary course) that could
reasonably be expected to have a Material Adverse Effect on the Company.
(vi) Retiree Welfare Plans. Except as disclosed in Section
3.1(l)(vi) of the Company Disclosure Letter, no Company Benefit Plan
that is a "welfare benefit plan" (within the meaning of section 3(1) of
ERISA) provides benefits for any retired or former employees (other than
as required under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, or other applicable state or local law that
specifically mandates continued health coverage).
(vii) Payments Resulting from Merger. Except as disclosed in
Section 3.1(l)(vii) of the Company Disclosure Letter, the consummation
or announcement of any transaction contemplated by this Agreement will
not (either alone or in conjunction with another event, including
termination of employment) result in (A) any payment (whether of
severance pay or otherwise) becoming due from the Company or any of its
subsidiaries to any Company Beneficiary or to the trustee under any
"rabbi trust" or similar arrangement, or (B) any benefit under any
Company Benefit Plan being established or increased, or becoming
accelerated, vested or payable.
(viii) Defined Benefit Pension Plans. Neither the Company nor
any entity that was at any time during the six-year period ending on the
date of this Agreement a Company ERISA Affiliate has ever maintained,
had an obligation to contribute to, contributed to, or had any liability
with respect to any plan that is or was a pension plan (as defined in
section 3(2) of ERISA) that is or was subject to Title IV of ERISA.
(m) Taxes. Each of the Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which the Company or any of its subsidiaries is or has been a
member, has timely filed all Tax Returns (as defined below) required to be
filed by it and has timely paid or deposited (or the Company has paid or
deposited on its behalf) all Taxes which are required to be paid or deposited
except where the failure to do so would not have a Material Adverse Effect on
the Company and its subsidiaries, taken as a whole. Each of the Tax Returns
filed by the Company or any of its subsidiaries is accurate and complete in all
material respects. The most recent consolidated financial statements of the
Company contained in the filed Company SEC Documents reflect an adequate
reserve for all Taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements whether or not shown as being due on any Tax Returns. No material
deficiencies for any Taxes have been proposed, asserted or assessed against the
Company or any of its subsidiaries; no requests for waivers of the time to
assess any such Taxes have been granted or are pending; and there are no tax
liens upon any assets of the Company or any of its subsidiaries. The
consolidated Federal income Tax Returns of the Company and its subsidiaries
consolidated in such Tax Returns have been examined by the IRS through the year
ended January 31, 1993. Except as set forth on Section 3.1(m) of the Company
Disclosure Letter, there are no current examinations of any Tax Return of the
Company or any of its subsidiaries being conducted and there are no settlements
or any prior examinations which could reasonably be expected to adversely
affect any taxable period for which the statute of limitations has not run.
The consummation of the transactions contemplated hereby will not accelerate or
otherwise cause to come due any Taxes or obligation with respect to Taxes
(including any indemnification of a third party for their Tax liability) of the
Company or any of its subsidiaries, other than any
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acceleration arising solely as a result of the Company being required to file a
Tax Return for a period ending before its normal taxable year. As used
herein, "Tax" or "Taxes" shall mean all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, estimated, excise, severance, stamp, occupation, premium, value
added, property or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Entity, domestic or foreign. As used herein, "Tax Return" shall
mean any return, report, statement or information required to be filed with any
Governmental Entity with respect to Taxes.
(n) No Excess Parachute Payments. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
any transaction contemplated by this Agreement, either alone or in conjunction
with another event, including termination of employment, by any employee,
officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Company Benefit Plan would be
characterized as an "excess parachute payment" (as such term is defined in
section 280G(b)(1) of the Code).
(o) Environmental Matters. Except as would not have a Material
Adverse Effect on the Company and its subsidiaries, taken as a whole, (i) the
business and operations of the Company and its subsidiaries are being conducted
in compliance with all limitations, restrictions, standards and requirements
established under all environmental laws, (ii) no facts or circumstances exist
that impose, or, to the Company's knowledge, with the passage of time, notice,
cessation of operations or otherwise will impose, on the Company or any of its
subsidiaries an obligation under environmental laws to conduct any removal,
remediation or similar response action, at present or in the future (iii) there
is no obligation, undertaking or liability arising out of or relating to
environmental laws that the Company or any of its subsidiaries has agreed to,
assumed or retained, by contract or otherwise, or that has been imposed on the
Company or any of its subsidiaries by any writ, injunction, decree, order or
judgment, and (iv) there are no actions, suits, claims, investigations,
inquiries or proceedings pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries that arise out of or relate to
environmental laws.
(p) Compliance with Laws. The Company and its subsidiaries hold all
required, necessary or applicable permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities, except where the
failure to so hold, in the aggregate, would not have a Material Adverse Effect
on the Company and its subsidiaries, taken as a whole (the "Company Permits").
The Company and its subsidiaries are in compliance with the terms of the
Company Permits except where the failure to so comply, in the aggregate, would
not have a Material Adverse Effect on the Company and its subsidiaries, taken
as a whole. Neither the Company nor any of its subsidiaries has violated or
failed to comply with, nor has it received any written notice of any alleged
violation of or failure to comply with, any statute, law, ordinance,
regulation, rule, permit or order of any Governmental Entity, any arbitration
award or any judgment, decree or order of any court or other Governmental
Entity, applicable to the Company or any of its subsidiaries or their
respective businesses, assets or operations, except for violations and failures
to comply that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company and its subsidiaries,
taken as a whole.
(q) Material Contracts and Agreements.
(i) All material contracts of the Company or its subsidiaries
have been included as exhibits or described in the Company
SEC Documents, except for those contracts not required to
be filed pursuant to the rules and regulations of the SEC.
(ii) Section 3.1(q) of the Company Disclosure Letter sets forth
a list of (1) all written or oral contracts, agreements or
arrangements to which the Company or any of its
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subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective assets is
bound which would be required to be filed as exhibits (not
previously filed in other Company SEC Documents) to the
Company's Annual Report on Form 10-K for the year ended
January 31, 1999, (2) all written contracts, agreements,
or arrangements, other than Company Benefit Plans, that
require payments which in the aggregate exceed $300,000 or
exceed $100,000 in any fiscal year and (3) any agreement
containing a covenant not to compete or a confidentiality
agreement.
(r) Title to and Conditions of Properties.
(i) Each of the Company and its subsidiaries has good title
to, or valid leasehold interests in, all its properties and assets
purported to be owned by it in the Company SEC Documents, except for
such as are no longer used or useful in the conduct of its businesses or
as have been disposed of in the ordinary course of business and except
for minor defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate, do not and will not
materially interfere with its ability to conduct its business as
currently conducted. Except as set forth on Section 3.1(r)(i) of the
Company Disclosure Letter, all such assets and properties, other than
assets and properties in which the Company or any of the subsidiaries
has leasehold interests, are free and clear of all Liens, other than
those set forth in the Company SEC Documents and except for minor Liens,
that, in the aggregate, do not and will not materially interfere with
the ability of the Company or any of its subsidiaries to conduct
business as currently conducted or as reasonably expected to be
conducted.
(ii) Except as would not have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole, each of the Company and
each of its subsidiaries has complied in all material respects with the
terms of all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect. Each of
the Company and each of its subsidiaries enjoys peaceful and undisturbed
possession under all such leases.
(iii) Except as set forth on Section 3.1(r)(iii) of the Company
Disclosure Letter, to the knowledge of the Company, the buildings and
premises of the Company and each of its subsidiaries that are used in
its business are in reasonably good operating condition and in a state
of reasonably good maintenance and repair, normal wear and tear
excepted, and are reasonably adequate and suitable for the purpose for
which they are currently being used, have access to adequate utility
services necessary for the conduct of the business. All items of
operating equipment of the Company and its subsidiaries are in
reasonably good operating condition and in a state of reasonable
maintenance and repair, ordinary wear and tear excepted. Except as set
forth in Section 3.1(r)(iii) of the Company Disclosure Letter, no
material tenant repairs are required with respect to any leased stores
other than normal and routine repairs consistent with past practice. To
the knowledge of the Company, there are no zoning law changes or similar
restrictions that would materially and adversely impact any of the
stores operated by the Company or any of its subsidiaries.
(s) Intellectual Property. The Company Disclosure Letter contains a
complete and accurate list of all trademarks, trade names, service marks or
other slogans, jingles, phrases, symbols or labels used in the business of the
Company or its subsidiaries (collectively, the "Identifying Marks"). The
Company and its subsidiaries own, or are licensed or otherwise have the right
to use, all the Identifying Marks and all other patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, copyrights, technology, know-how, processes and other
proprietary intellectual property rights and computer programs, (collectively,
the "Intellectual Property") which are material to the condition (financial or
otherwise) or conduct of the business and operations of the Company and its
subsidiaries taken as a whole. Other than computer software, the licensing of
which cost less than $5,000 per year, Section 3.1(s) of the Company Disclosure
Letter contains a complete and accurate list of all licenses and agreements
pursuant to
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which the Company has the right to use the Identifying Marks or the
Intellectual Property. To the Company's knowledge, the use of the Identifying
Marks and such patents, patent rights, trademarks, trademark rights, service
marks, service mark rights, trade names, copyrights, technology, know-how,
processes and other proprietary intellectual property rights and computer
programs by the Company and its subsidiaries does not infringe on the rights of
any Person. Neither the Company nor any of its subsidiaries have granted to
any person any license or right to use the Identifying Marks or the
Intellectual Property.
(t) Personnel Information; Labor Matters.
(i) List of Employees and Directors. Section 3.1(t)(i) of the
Company Disclosure Letter sets forth a complete and correct list of each
director and officer of the Company or any of its subsidiaries and each
other individual employed by the Company or any of its subsidiaries who
has aggregate total cash compensation from the Company and its
subsidiaries for the last calendar year ending prior to the Closing Date
in excess of $50,000, together with such individual's title and/or job
description and date of hire by the Company or its subsidiary, and, for
each such salaried individual, such individual's salary (with last date
of increase) and incentive compensation arrangements with the Company
and its subsidiaries. Except as and to the extent set forth on Section
3.1(t)(i) of the Company Disclosure Letter, as of the date prior to the
date hereof, the Company has not received written notification that any
of the current employees (excluding employees below the store manager
level) of the Company or any of its subsidiaries presently plans to
terminate his or her employment during the 1999 calendar year, whether
by reason of the transactions contemplated by this Agreement or
otherwise.
(ii) Labor Relations. Except as and to the extent set forth on
Section 3.1(t)(ii) of the Company Disclosure Letter (1) there is no
labor strike, work stoppage, lockout or material dispute or material
slowdown pending or, to the knowledge of the Company, threatened against
or involving the Company or any of its subsidiaries, and there has not
been any such action during the last three years; (2) neither the
Company nor any of its subsidiaries is a party to or bound by any
collective bargaining or similar agreement with any labor organization;
(3) no employee of the Company or any of its subsidiaries is represented
by any labor organization and, to the knowledge of the Company, there
are no current union organizing activities among the employees of the
Company or any of its subsidiaries; (4) there are no material written
personnel policies, rules or procedures applicable to employees of the
Company or any of its subsidiaries; (5) the Company and its subsidiaries
are and during the last three years have been, in material compliance
with all applicable laws in respect of employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and is not engaged in any unfair labor
practices as defined in the National Labor Relations Act; (6) there is
no unfair labor practice charge or complaint against the Company pending
or, to the knowledge of the Company, threatened before the National
Labor Relations Board or any similar state agency; (7) no charges with
respect to or relating to the Company or any of its subsidiaries are
pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices;
(8) neither the Company nor any of its subsidiaries has received notice
of the intent of any governmental authority responsible for the
enforcement of labor or employment laws to conduct an investigation with
respect to or relating to the Company or any of its subsidiaries and no
such investigation is in progress; (9) there are no complaints,
lawsuits or other proceedings pending or, to the knowledge of the
Company, threatened in any forum against the Company or any of its
subsidiaries by or on behalf of any present or former employee of the
Company or any of its subsidiaries, any applicant for employment or
classes of the foregoing, alleging breach of any express or implied
contract of employment, any law governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship; and (10) there is no
proceeding, claim, suit, action or governmental investigation pending
or, to the knowledge of the Company or any of its subsidiaries,
threatened, in respect to which any current or former director, officer,
employee or agent of the Company or any of its subsidiaries is or may be
entitled to claim
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indemnification from the Company or any of its subsidiaries (A) pursuant
to their respective charters or bylaws, (B) as provided in any
indemnification agreement to which the Company or any subsidiary of the
Company is a party or (C) pursuant to the applicable law.
(iii) WARN Matters. During the last four years, neither the
Company nor any of its subsidiaries has effectuated (1) a "plant closing" (as
defined in the Worker Adjustment Retraining Notification Act of 1988 (the "WARN
Act")) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of a the Company or any of its
subsidiaries; or (2) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company or any of its subsidiaries; nor
has the Company or any of its subsidiaries been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local law. Except as and to the extent set
forth on Section 3.1(t)(i) of the Company Disclosure Letter no employee of the
Company or any of its subsidiaries has suffered an "employment loss" (as
defined in the WARN Act) during the past six months.
(u) No Default. Neither the Company nor any of its subsidiaries is
in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any material
term, condition or provision of (i) in the case of the Company and its
subsidiaries, their respective charter and bylaws, (ii) except as disclosed in
the Company Disclosure Letter, any material note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which the Company or
any of its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries, except in the case of
(ii) and (iii) for defaults or violations which in the aggregate would not have
a Material Adverse Effect on the Company and its subsidiaries taken as a whole.
(v) Undisclosed Liabilities. Except as set forth in the Company SEC
Documents or Section 3.1(v) of the Company Disclosure Letter, at the date of
the most recent audited financial statements of the Company included in the
Company SEC Documents, neither the Company nor any of its subsidiaries had, and
since such date neither the Company nor any of such subsidiaries has incurred
(except in the ordinary course of business), any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise), required by
generally accepted accounting principles to be set forth on a financial
statement or in the notes thereto or which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Company
and its subsidiaries, taken as a whole.
(w) Insurance. The Company Disclosure Letter accurately lists in
reasonable detail all insurance policies maintained by the Company. The
Company maintains insurance coverage reasonably adequate for the operation of
the business of the Company and each of its subsidiaries, and the transactions
contemplated hereby will not materially adversely affect such coverage.
(x) Certain Additional Information. Section 3.1(x) of the Company
Disclosure Letter contains true, complete and correct lists of the following:
(i) each parcel of real property owned by the Company;
(ii) each parcel of real property leased, or subject to a lease
commitment, with a copy of the lease abstract maintained by the Company;
(iii) all promissory notes, installment contracts, loan
agreements, credit agreements, letters of credit, and financing and
operating leases not covered by clause (ii) above, with respect to which
the Company or any subsidiary is a debtor, obligor or lessee;
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(iv) all guaranties, suretyships, financial accommodations and
other arrangements whereby the Company or any subsidiary is contingently
liable, directly or indirectly, with regard to the obligations of any
other person;
(v) all persons to whom the Company or any subsidiary has
given a currently effective power of attorney;
(vi) the sales, retail gross margin percentage and lease
expenses for each store operated by the Company or any of its
subsidiaries for each of the past two complete fiscal years;
(vii) advertising expense by store for each of the past two
complete fiscal years; and
(viii) a copy of the Company's budget or plan for fiscal 1999.
(y) Credit Items. The aggregate of all credit slips, due bills, gift
certificates and other credit items of the Company and its subsidiaries
outstanding as of January 31, 1999 does not exceed $350,000.
(z) Inventory. The retail inventory of the Company and its
subsidiaries is of quality, style, condition and saleability consistent with
the ordinary past practices of the Company and is not damaged, obsolete or
unsaleable such that the Company and its subsidiaries would incur any Material
Adverse Effect as a result thereof. The inventory is fairly valued at cost in
the accounting records of the Company. Section 3.1(z) of the Company
Disclosure Letter accurately sets forth the inventory level by categories of
the inventory of the Company and its subsidiaries as of the end of each month
for the past two complete fiscal years from the Company's stock ledger. The
last physical inventory taken by the Company for purposes of financial
reporting was completed on February 3, 1999.
(aa) Y2K Readiness. The statements of the Company under the heading
"Liquidity and Capital Resources" in the Company's Quarterly Report on Form 10-
Q for the period ended November 1, 1998, relating to the Company's year 2000
readiness do not contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(bb) Opinion of Financial Advisor. The Company has received an oral
opinion from the Company Financial Advisor, to the effect that, as of the date
of this Agreement, the Exchange Ratio is fair to the holders of the Company
Shares from a financial point of view.
(cc) Pooling Opinion. The Company's board of directors has received a
written opinion from Arthur Andersen LLP ("AA") dated March 2, 1999, relating
to the eligibility of the Company to be a party to a Merger accounted for as a
"pooling interests" (the Company Pooling Opinion").
(dd) Third Party Standstill Agreements. Neither the Company nor any
of its subsidiaries is a party to any standstill or similar agreement.
SECTION 3.2. Representations and Warranties of TMW. TMW represents and
warrants to, and agrees with, the Company as follows, subject to any exceptions
specified in the Disclosure Letter of TMW previously provided to the Company on
the date hereof (the "TMW Disclosure Letter") and except as expressly
contemplated by this Agreement:
(a) Organization; Standing and Power. TMW is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has the requisite corporate power and authority to carry on its
business as now being conducted. TMW is duly qualified to do business and is
in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such
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qualification necessary, other than in such jurisdictions where the failure to
be so qualified to do business or in good standing (individually or in the
aggregate) would not have a Material Adverse Effect on TMW and its
subsidiaries, taken as a whole.
(b) Subsidiaries. Except as set forth in the exhibits to the TMW SEC
Documents (as defined in Section 3.2(e)), TMW does not own, directly or
indirectly, any capital stock or other ownership interest in any subsidiary
which would be required to be listed as a subsidiary of TMW under the rules of
the SEC with the filing by TMW of an Annual Report on Form 10-K. TMW's
subsidiaries that are corporations are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation and have the requisite corporate power and authority to carry
on their respective businesses as they are now being conducted and to own,
operate and lease the assets they now own, operate or hold under lease, except
where the failure to be so organized, existing or in good standing would not
have a Material Adverse Effect on TMW and its subsidiaries, taken as a whole.
TMW's subsidiaries are duly qualified to do business and are in good standing
in each jurisdiction in which the nature of their respective businesses or the
ownership or leasing of their respective properties makes such qualification
necessary, other than in jurisdictions where the failure to be so qualified or
in good standing would not have a Material Adverse Effect on TMW and its
subsidiaries, taken as a whole. All the outstanding shares of capital stock of
TMW's subsidiaries that are corporations and that are owned by TMW or its
subsidiaries have been duly authorized and validly issued and are fully paid
and non-assessable and were not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase of any Person other than
those that have been waived or otherwise cured or satisfied. All such stock
and ownership interests are owned of record and beneficially by TMW or by a
direct or indirect wholly owned subsidiary of TMW free and clear of all Liens.
(c) Capital Structure. The authorized capital stock of TMW consists
of 50,000,000 shares of TMW Common Stock and 2,000,000 shares of preferred
stock, $.01 par value ("TMW Preferred Stock"). At the date hereof, 34,894,251
shares of TMW Common Stock (excluding 71,384 shares of TMW Common Stock held in
treasury), were issued and outstanding, and one share of TMW Preferred Stock
was issued and outstanding. In addition, at the date hereof, an aggregate of
3,552,978 shares of TMW Common Stock were reserved for issuance pursuant to
various employee and director plans and agreements described in the TMW
Disclosure Letter and 2,478,121 shares of TMW Common Stock were reserved for
issuance upon the exchange of the Exchangeable Shares of Moores Retail Group
Inc., a subsidiary of the Company. Except as set forth above, no shares of
capital stock or other equity or voting securities of TMW are reserved for
issuance or outstanding. All outstanding shares of capital stock of TMW are,
and all such shares issuable upon the exercise of stock options will be,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 3.2(c) to the TMW Disclosure Letter, no
capital stock has been issued by TMW since October 31, 1998 to the date hereof,
other than TMW Common Stock issued pursuant to options outstanding on or prior
to such date in accordance with their terms at such date. Except as described
above, as of February 28, 1999, there were no outstanding or authorized
securities, options, warrants, calls, rights, commitments, preemptive rights,
agreements, arrangements or undertakings of any kind to which TMW or any of its
subsidiaries is a party, or by which any of them is bound, obligating TMW or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or other equity or voting
securities of, or other ownership interests in, TMW or any of its subsidiaries
or obligating TMW or any of its subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. The shares of TMW Common Stock to be issued
pursuant to the terms of this Agreement will, when issued, be validly issued,
fully paid and non-assessable and not subject to preemptive rights. Such
shares of TMW Common Stock will, when issued, be registered under the
Securities Act and the Exchange Act and will, when issued, be approved for
trading on NASDAQ NMS.
(d) Authority; Non-contravention. TMW has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by TMW and the consummation by TMW of the transactions contemplated hereby have
been
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duly authorized by all necessary corporate action on the part of TMW. This
Agreement has been duly executed and delivered by TMW and constitutes a valid
and binding obligation of TMW, enforceable against TMW in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally,
(ii) the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (iii) the enforceability of any
indemnification provision contained herein may be limited by applicable federal
and state securities laws. The execution, delivery and performance of this
Agreement by TMW do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of or "put" right with respect to any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of TMW or any of its subsidiaries, under any provision of
(i) the Restated Articles of Incorporation or By-laws of TMW or any provision
of any comparable organizational documents of its subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to TMW or any
of its subsidiaries or its respective properties or assets or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation or arbitration award applicable to TMW or any of its subsidiaries or
their respective properties or assets, other than, in the case of clause (ii),
any such conflicts, violations, defaults, rights or Liens that individually or
in the aggregate would not have a Material Adverse Effect on TMW and its
subsidiaries, taken as a whole, and would not materially impair the ability of
TMW to perform its obligations hereunder or prevent the consummation of any of
the transactions contemplated hereby. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to TMW or any of its subsidiaries in
connection with the execution and delivery of this Agreement by TMW or the
consummation by TMW of the transactions contemplated hereby, except for (i) the
filing by TMW of a pre-merger notification and report form under the HSR Act
and the expiration or termination of the waiting period thereunder, (ii) the
filing with the SEC of such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) the filing and effectiveness of the Registration
Statement under the Securities Act, and (iv) the filing of the Certificate of
Merger with and approval by the Georgia Secretary of State with respect to the
Merger as provided in the GBCC and appropriate documents with the relevant
authorities of other states in which TMW is qualified to do business and such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the "takeover" or "blue sky" laws of
various states and such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not have a Material Adverse Effect on TMW and its subsidiaries,
taken as a whole.
(e) SEC Documents. TMW has filed all required reports, schedules,
forms, statements and other documents with the SEC since January 30, 1998 (such
documents, together with all exhibits and schedules thereto and documents
incorporated by reference therein, collectively referred to herein as the "TMW
SEC Documents"). As of their respective dates, the TMW SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such TMW SEC Documents, and none of the
TMW SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The consolidated financial statements of TMW
included in the TMW SEC Documents complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of
the SEC) and fairly present the consolidated financial position of TMW and its
consolidated subsidiaries as of the dates thereof and the
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consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and other adjustments described therein). Except as set forth in
the TMW SEC Documents, since the date of filing of such financial statements
there has been no Material Adverse Change with respect to TMW and its
subsidiaries taken as a whole.
(f) Information Supplied. None of the information supplied or to be
supplied by TMW for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders and at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading in all material respects within the requirements of the Securities
Act and the rules and regulations thereunder. The preliminary consolidated
statements of operations for the year ended January 30, 1999 and the
consolidated balance sheet as of January 30, 1999 of TMW and its subsidiaries
in the form attached as Exhibit I to the TMW Disclosure Letter are true and
correct in all material respects.
(g) Absence of Certain Changes or Events. Except as disclosed in the
TMW SEC Documents or in Section 3.2(g) of the TMW Disclosure Letter, since
January 30, 1998, TMW has conducted its business only in the ordinary course
consistent with past practice, and there has not been (i) any material adverse
change with respect to TMW, (ii) any declaration, setting aside or payment of
any dividend (whether in cash, stock or property) with respect to any of TMW's
capital stock, (iii) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a Material Adverse
Effect on TMW and its subsidiaries, taken as a whole, or (iv) any change in
accounting methods, principles or practices by TMW materially affecting its
assets, liabilities or business, except insofar as may have been required by a
change in generally accepted accounting principles.
(h) Brokers. No broker, investment banker or other Person, is
entitled to receive from TMW or any of its subsidiaries any investment banking,
broker's, finder's or other similar fee or commission in connection with this
Agreement or the transactions contemplated by this Agreement, including any fee
for any opinion rendered by any investment banker.
(i) Litigation. Except as disclosed in the TMW SEC Documents, there
is no claim, suit, action, proceeding or investigation pending or, to TMW's
knowledge, threatened against or affecting TMW or any of its subsidiaries that
either individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect on TMW and its subsidiaries, taken as a whole, or
prevent, hinder or materially delay the ability of TMW and its subsidiaries,
taken as a whole, or prevent, hinder or materially delay the ability of TMW to
consummate the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against TMW or any of its subsidiaries having, or which,
insofar as reasonably can be foreseen, in the future could have, any such
effect.
(j) Accounting Matters. Neither TMW nor, to its knowledge, any of
its affiliates, has through the date of this Agreement taken or agreed to take
any action that (without giving effect to any action taken or agreed to be
taken by the Company or any of its affiliates) would prevent TMW from
accounting for the business combination to be effected by the Merger as a
pooling of interests.
(k) Taxes. Each of TMW and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
TMW or any of its subsidiaries is or has been a member, has timely filed all
Tax Returns required to be filed by it and has timely paid or deposited (or TMW
has paid or deposited on its behalf) all Taxes which are required to be paid or
deposited except where the failure to do so would not
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have a Material Adverse Effect on TMW and its subsidiaries, taken as a whole.
Each of the Tax Returns filed by TMW or any of its subsidiaries is accurate and
complete in all material respects. The most recent consolidated financial
statements of TMW contained in the filed TMW SEC Documents reflect an adequate
reserve for all Taxes payable by TMW and its subsidiaries for all taxable
periods and portions thereof through the date of such financial statements
whether or not shown as being due on any Tax Returns. No material deficiencies
for any Taxes have been proposed, asserted or assessed against TMW or any of
its subsidiaries; no requests for waivers of the time to assess any such Taxes
have been granted or are pending; and there are no tax liens upon any assets of
TMW or any of its subsidiaries. The Federal income Tax Returns of TMW and its
subsidiaries consolidated in such Tax Returns have been examined by the IRS
through the year ended February 1, 1997. Except as set forth in Section 3.2(k)
of the TMW Disclosure Letter there are no current examinations of any Tax
Return of TMW or any of its subsidiaries being conducted and there are no
settlements or any prior examinations which could reasonably be expected to
adversely affect any taxable period for which the statute of limitations has
not run.
(l) Environmental Matters. Except as would not have a Material
Adverse Effect on TMW and its subsidiaries, taken as a whole, (i) the business
and operations of TMW and its subsidiaries are being conducted in compliance
with all limitations, restrictions, standards and requirements established
under all environmental laws, (ii) no facts or circumstances exist that, to
TMW's knowledge, with the passage of time, notice, cessation of operations or
otherwise will impose on TMW or any of its subsidiaries an obligation under
environmental laws to conduct any removal, remediation or similar response
action at present or in the future, (iii) there is no obligation, undertaking
or liability arising out of or relating to environmental laws that TMW or any
of its subsidiaries has agreed to, assumed or retained, by contract or
otherwise, or that has been imposed on TMW or any of its subsidiaries by any
writ, injunction, decree, order or judgment, and (iv) there are no actions,
suits, claims, investigations, inquiries or proceedings pending, or to TMW's
knowledge, threatened against TMW or any of its subsidiaries that arise out of
or relate to environmental laws.
(m) Compliance with Laws. TMW and its subsidiaries hold all
required, necessary or applicable permits, licenses, variances, exemptions,
orders, franchises and approvals of all Governmental Entities, except where the
failure to so hold in the aggregate would not have a Material Adverse Effect on
TMW and its subsidiaries, taken as a whole (the "TMW Permits"). TMW and its
subsidiaries are in compliance with the terms of the TMW Permits except where
the failure to so comply in the aggregate would not have a Material Adverse
Effect on TMW and its subsidiaries, taken a whole. Neither TMW nor any of its
subsidiaries has violated or failed to comply with, nor has it received any
written notice of any alleged violation or failure to comply with, any statute,
law, ordinance, regulation, rule, permit or order of any Governmental Entity,
any arbitration award or any judgment, decree or order of any court or other
Governmental Entity, applicable to TMW or any of its subsidiaries or their
respective businesses, assets or operations, except for violations and failures
to comply that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on TMW and its subsidiaries, taken
as a whole.
(n) No Default. Neither TMW nor any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any material term,
condition or provision of (i) in the case of TMW and its subsidiaries, their
respective charter and bylaws, (ii) except as disclosed in the TMW Disclosure
Letter, any material note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which TMW or any of its subsidiaries is now a
party or by which TMW or any of its subsidiaries or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to TMW or any of its subsidiaries,
except in the case of (ii) and (iii) for defaults or violations which in the
aggregate would not have a Material Adverse Effect on TMW.
(o) Undisclosed Liabilities. Except as set forth in the TMW SEC
Documents, at the date of the most recent audited financial statements of TMW
included in the TMW SEC Documents, neither TMW nor any
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of its subsidiaries had, and since such date neither TMW nor any of such
subsidiaries has incurred (except in the ordinary course of business), any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), required by generally accepted accounting principles to be set
forth on a financial statement or in the notes thereto or which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on TMW and its subsidiaries, taken as a whole.
(p) Pooling Opinion. TMW's board of directors has received a written
opinion from Deloitte & Touche LLP ("D&T") dated February 10, 1999, relating to
the eligibility of TMW to be a party to a Merger accounted for as a "pooling of
interests" (the "TMW Pooling Opinion"). To the knowledge of TMW, it is eligible
to be a party to a merger accounted for as a "pooling of interests".
(q) Board Recommendation. The Board of Directors of TMW, at a
meeting duly called and held, has by vote of those directors present, without a
negative vote, determined that this Agreement and the transactions contemplated
hereby, including the Merger and the transactions contemplated thereby, are
fair to and in the best interests of the stockholders of TMW.
(r) Y2K Readiness. The statements of TMW under the heading "Year
2000" in TMW's Quarterly Report on Form 10-Q for the period ended October 31,
1998, relating to the Company's year 2000 readiness do not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(s) 1999 Financial Forecast. TMW has made available to the Company
for review a true, complete and correct copy of TMW's current 1999 financial
forecast.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1. Conduct of Business of the Company.
(a) Ordinary Course. During the period from the date of this
Agreement to the Effective Time of the Merger (except as otherwise specifically
contemplated by the terms of this Agreement), the Company shall and shall cause
its subsidiaries to carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and, to the extent consistent therewith, use all commercially reasonable
efforts to preserve intact their current business organizations, keep available
the services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them, in each case consistent with past
practice in the ordinary course of business. Without limiting the generality
of the foregoing, and except as otherwise expressly contemplated by this
Agreement, the Company shall not, and shall not permit any of its subsidiaries
of which it owns directly or indirectly more than 50% of the voting or equity
interests in to:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to the Company or a wholly owned subsidiary of
the Company and immaterial dividends, distributions and other similar
transactions involving the existing subsidiaries, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (C) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
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(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than, in the case of the Company, the issuance of shares of
Company Common Stock upon the exercise of stock options and similar
rights outstanding on the date of this Agreement in accordance with
their current terms);
(iii) amend the Company's Articles of Incorporation or By-laws;
(iv) acquire or agree to acquire any business, corporation,
partnership, association, joint venture, limited liability company or
other entity or division thereof;
(v) incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or
similar instrument, except for such borrowings under the Company
existing revolving credit facilities or letters of credit that would not
result in the total outstanding indebtedness of the Company and its
subsidiaries on a consolidated basis being in excess of $8,000,000 at
any one time;
(vi) sell, lease, mortgage, pledge or grant a Lien on or
otherwise encumber or dispose of any of its properties or assets, except
(A) sales of inventory in the ordinary course of business consistent
with past practice, (B) immaterial liens not relating to the borrowing
of money or the incurrence of any monetary obligation and (C) other
immaterial transactions not in excess of $500,000 in the aggregate;
(vii) make any material election relating to Taxes or settle or
compromise any material Tax liability;
(viii) adopt a plan of complete or partial liquidation of the
Company or any of its significant subsidiaries or resolutions providing
for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(ix) change any material accounting principle used by it,
except as required by regulations promulgated by the SEC; or
(x) conduct any unusual liquidation of inventory or going out
of business sale or any discount or other sale other than in the
ordinary course of business consistent with past practices, including
with respect to time of year, pricing, location and goods sold;
(xi) fail to advise TMW in writing of any contract, commitment
or series of related contracts or commitments, for the purchase of
inventory in excess of $250,000, and all such contracts and commitments
less than or equal to $250,000, to the extent they aggregate more than
$2,000,000, except for any contract or commitment disclosed in Section
4.1(a) of the Company Disclosure Letter;
(xii) fail to maintain insurance upon all its properties and
with respect to the conduct of its business of such kinds and in such
amounts as is current in effect;
(xiii) fail to provide to TMW copies of all financial statements
and reports provided to any creditor of the Company or any of its
subsidiary at the same time they are providing to such creditor; and
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
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(b) Changes in Employment Arrangements. Neither the Company nor any
of its subsidiaries shall (except as may be required in order to give effect to
the requirements of Section 2.3) adopt or amend (except as may be required by
law) any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement (including any Company Benefit
Plan) for the benefit or welfare of any employee, director or former director
or employee, increase the compensation or fringe benefits of any officer of the
Company or any of its subsidiaries, or, except as provided in an existing
Company Benefit Plan or in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of any employee or
former employee or pay any benefit not required by any existing plan,
arrangement or agreement.
(c) Severance Arrangements. Neither the Company nor any of its
subsidiaries shall grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its severance
or termination pay policies in effect on the date hereof.
(d) Other Actions. The Company shall not, and shall not permit any
of its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of the Company
set forth in this Agreement becoming untrue.
SECTION 4.2. Conduct of Business of TMW.
(a) Ordinary Course. During the period from the date of this
Agreement to the Effective Time of the Merger (except as otherwise specifically
contemplated by the terms of this Agreement), TMW shall and shall cause each of
its significant subsidiaries to carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them, in each case
consistent with past practice, to the end that their goodwill and ongoing
businesses shall be unimpaired to the fullest extent possible at the Effective
Time of the Merger. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by this Agreement, TMW shall not,
and shall not permit any of its subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect subsidiary of
TMW to TMW or a subsidiary of TMW and immaterial dividends,
distributions and other similar transactions involving existing
subsidiaries, (B) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of capital stock of TMW
or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities other than in connection with exercise of outstanding stock
options and satisfaction of withholding obligations under outstanding
stock options, purchase of shares of TMW Common Stock to fund current
requirements under employee benefit plans and except in connection with
the Exchangeable Shares of Moores Retail Group, Inc. ("MRG") and the
Subscription Agreement between MRG and Golden Moores Finance Company;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than, in the case of TMW, (A) the issuance of TMW Common Stock
upon the exercise of stock options outstanding on the date of this
Agreement in accordance with their current terms, (B) the issuance of a
number of shares of TMW Common Stock, not to exceed 10% of the number of
shares of TMW Common Stock currently outstanding, in connection with the
acquisition of assets or equity securities of other entities or
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businesses, (C) pursuant to the existing bank credit agreements of TMW
and its subsidiaries, or (D) in connection with the Exchangeable Shares
of MRG or the Subscription Agreement;
(iii) amend TMW's Restated Articles of Incorporation;
(iv) acquire or agree to acquire any business, corporation,
partnership, association, joint venture, limited liability company or
other entity or division thereof involving the payment of consideration,
in aggregate for all such acquisitions, in excess of $100 million
without the written consent of the Company, which consent shall not be
unreasonably withheld;
(v) adopt a plan of complete or partial liquidation of TMW or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(vi) change any material accounting principle used by it,
except as required by regulations promulgated by the SEC; or
(vii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. TMW shall not, and shall not permit any of its
subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of TMW set
forth in this Agreement becoming untrue.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Stockholder Approval; Preparation of Proxy Statement;
Preparation of Registration Statement.
(a) Each of the Company and TMW shall, as soon as practicable
following the execution and delivery of this Agreement on dates to be agreed
upon between TMW and the Company, which dates shall be set taking into account
the status of pending regulatory matters pertaining to the transactions
contemplated hereby, duly call, give notice of, convene and hold the Company
Stockholders Meeting for the purpose of approving the Merger, this Agreement
and the transactions contemplated hereby. Subject to the provisions of Section
8.2(b), including, without limitation, the Board of Directors' fiduciary
obligations, the Company will, through its Board of Directors, recommend to its
stockholders the approval and adoption of the Merger. The Company and TMW
shall coordinate and cooperate with respect to the timing of the Company
Stockholders Meeting and shall endeavor to hold such meeting as soon as
reasonably practical after the date hereof.
(b) Promptly following the date of this Agreement, the Company and
TMW shall prepare and file with the SEC the Proxy Statement, and TMW shall
prepare and file with the SEC a registration statement on Form S-4 (the
"Registration Statement"), in which the Proxy Statement will be included as a
prospectus. Each of the Company and TMW shall use its reasonable efforts as
promptly as practicable, subject to the setting of the date for the Company
Stockholders Meeting as provided in Section 5.1(a), to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. Each of the Company and TMW will use its
reasonable efforts to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. TMW shall also take such
reasonable actions (other than qualifying to do business in any jurisdiction in
which it is not now so qualified) as may be required to be taken under any
applicable state securities laws in connection with the issuance of TMW Common
Stock in the Merger, and the Company shall furnish all
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information concerning the Company and the holders of the Company Shares and
rights to acquire Company Shares pursuant to the Company Stock Plans as may be
reasonably requested in connection with any such action. The Company and TMW
will notify each other promptly of the receipt of any written or oral comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply each other with copies of all correspondence between the
Company or TMW, respectively, or any of its representatives, on the one hand,
and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. TMW will use its best efforts to cause the TMW Common
Stock to be issued in the Merger to be approved for trading on NASDAQ NMS.
(c) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
SECTION 5.2. Letter of the Company's Accountants. The Company shall
use its best efforts to cause to be delivered to TMW a letter of Arthur
Andersen LLP, the Company's independent public accountants, substantially in
the form of Exhibit C, dated a date within two business days before the date on
which the Registration Statement shall become effective and addressed to TMW
and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.
SECTION 5.3. Letter of TMW's Accountants. TMW shall use its best
efforts to cause to be delivered to the Company a letter of Deloitte & Touche
LLP, TMW's independent public accountants, substantially in the form of Exhibit
D and dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
SECTION 5.4. Access to Information. Upon reasonable notice, the
Company and TMW shall each (and shall cause each of their respective
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access during normal business
hours during the period from the date hereof to the Effective Time of the
Merger, to all of its properties, books, contracts, commitments and records,
and during such period, each of the Company and TMW shall (and shall cause each
of their respective subsidiaries to) furnish promptly to the other (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the Exchange
Act or the Securities Act (including all comment letters from the staff of the
SEC) and (ii) all other information concerning its business, properties and
personnel as such other party may reasonably request; provided, however, that
notwithstanding the foregoing provisions of this Section 5.4 or any other
provision of this Agreement, neither the Company nor TMW shall be required to
provide to the other party any information that is subject to a confidentiality
agreement and that relates primarily to a party other than the Company, TMW or
any subsidiary or former subsidiary of the Company or TMW. Each of the Company
and TMW agrees that it will not, and it will cause its respective
representatives not to, use any information obtained pursuant to this Section
5.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. The Confidentiality Agreement dated February
18, 1999 (the "Confidentiality Agreement"), by and between the Company and TMW,
shall apply with respect to information furnished by the Company, TMW and their
respective subsidiaries and representatives thereunder or hereunder and any
other activities contemplated thereby. The parties agree that this Agreement
and the transactions contemplated hereby shall not constitute a violation of
the Confidentiality Agreement and that the provisions hereof shall supersede
all provisions of the Confidentiality Agreement in the event of a conflict.
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SECTION 5.5. Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, except to the extent otherwise required by United States regulatory
considerations and otherwise provided in this Section 5.5, each of the parties
agrees to use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger, and the other transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and delivery of
any additional instruments (including any required supplemental indentures)
necessary to consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing, neither party shall be required to agree to any
consent, approval or waiver that would require such party to take an action
that would impair the value that such party reasonably attributes to the Merger
and the transactions contemplated thereby. In connection with and without
limiting the foregoing, each of the Company and TMW and its respective Board of
Directors shall (i) take all action reasonably necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes
applicable to the Merger and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger, take all action
reasonably necessary to ensure that the Merger may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger.
(b) The Company shall give prompt notice to TMW, and TMW shall give
prompt notice to the Company, of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; provided, however, that no such notification shall
affect the representations or warranties or covenants or agreements of the
parties or the conditions to the obligations of the parties hereunder.
(c) (i) Each of the parties hereto shall file a premerger
notification and report form under the HSR Act with respect to the
Merger as promptly as reasonably possible following execution and
delivery of this Agreement. Each of the parties agrees to use
reasonable efforts to promptly respond to any request for additional
information pursuant to Section (e)(1) of the HSR Act.
(ii) Except as otherwise required by United States regulatory
considerations, the Company will furnish to TMW copies of all
correspondence, filings or communications (or memoranda setting forth
the substance thereof (collectively, "Company HSR Documents")) between
the Company, or any of its respective representatives, on the one hand,
and any Governmental Entity, or members of the staff of such agency or
authority, on the other hand, with respect to this Agreement or the
Merger; provided, however, that (x) with respect to documents and other
materials filed by or on behalf of the Company with the Antitrust
Division of the Department of Justice, the Federal Trade Commission, or
any state attorneys general that are available for review by TMW, copies
will not be required to be provided to TMW and (y) with respect to any
Company HSR Documents (1) that contain any information which, in the
reasonable judgment of Hunton & Williams, should not be furnished to TMW
because of antitrust considerations or (2) relating to a request for
additional information pursuant to Section (e)(1) of the HSR Act, the
obligation of the Company to furnish any such Company HSR Documents to
TMW shall
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be satisfied by the delivery of such Company HSR Documents on a
confidential basis to Fulbright & Jaworski L.L.P. pursuant to a
confidentiality agreement in form and substance reasonably satisfactory
to TMW. Except as otherwise required by United States regulatory
considerations, TMW will furnish to the Company copies of all
correspondence, filings or communications (or memoranda setting forth
the substance thereof (collectively, "TMW HSR Documents")) between TMW
or any of its representatives, on the one hand, and any Governmental
Entity, or member of the staff of such agency or authority, on the other
hand, with respect to this Agreement or the Merger; provided, however,
that (x) with respect to documents and other materials filed by or on
behalf of TMW with the Antitrust Division of the Department of Justice,
the Federal Trade Commission, or any state attorneys general that are
available for review by the Company, copies will not be required to be
provided to the Company, and (y) with respect to any TMW HSR Documents
(1) that contain information which, in the reasonable judgment of
Fulbright & Jaworski L.L.P., should not be furnished to the Company
because of antitrust considerations or (2) relating to a request for
additional information pursuant to Section (e)(1) of the HSR Act, the
obligation of TMW to furnish any such TMW HSR Documents to the Company
shall be satisfied by the delivery of such TMW HSR Documents on a
confidential basis to Hunton & Williams pursuant to a confidentiality
agreement in form and substance reasonably satisfactory to the Company.
(iii) Nothing contained in this Agreement shall be construed so
as to require TMW or the Company, or any of their respective
subsidiaries or affiliates, to sell, license, dispose of, or hold
separate, or to operate in any specified manner, any material assets or
businesses of TMW, the Company or the Surviving Corporation (or to
require TMW, the Company or any of their respective subsidiaries or
affiliates to agree to any of the foregoing). The obligations of each
party under Section 5.5(a) to use reasonable efforts with respect to
antitrust matters shall be limited to compliance with the reporting
provisions of the HSR Act and with its obligations under this Section
5.5(c).
SECTION 5.6. Indemnification.
(a) TMW agrees that all rights to indemnification and exculpation for
acts or omissions occurring prior to the Effective Time of the Merger now
existing in favor of the current or former directors or officers of the Company
and its subsidiaries (the "Indemnified Parties") as provided in their
respective certificates of incorporation or by-laws and indemnity agreements
shall survive the Merger, and the Surviving Corporation shall continue such
indemnification rights in full force and effect in accordance with their terms
and be financially responsible therefor.
(b) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation, which shall be financially
responsible Persons or entities, assume the obligations set forth in this
Section 5.6.
(c) For six years after the Effective Time, the Surviving Corporation
shall maintain in effect the Company's current director and officer liability
insurance covering acts or omissions occurring prior to the Effective Time with
respect to those Persons who are currently covered by the Company's director
and officer liability insurance policy on terms with respect to such coverage
and amount no less favorable than those of such policy in effect on the date
hereof; provided, that the Surviving Corporation may substitute therefor
policies of the Surviving Corporation or its subsidiaries containing terms with
respect to coverage and amount no less favorable to such directors and
officers.
(d) All rights and obligations under this Section 5.6 shall be in
addition to any rights that an Indemnified Party may have under the Amended and
Restated Articles of Incorporation or Amended and Restated
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Bylaws of the Company as in effect on the date hereof, or pursuant to any other
agreement, arrangement or document in effect prior to the date hereof. The
provisions of this Section 5.6 are intended to be for the benefit of, and shall
be enforceable by, the parties hereto and each Indemnified Party, his heirs and
his representatives. This Section 5.6 shall be binding upon all successors and
assigns of the Company, TMW and the Surviving Corporation.
SECTION 5.7. Fees and Expenses. Except as provided in Article VIII,
all fees and expenses incurred in connection with the Merger, this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated; provided, that
TMW and the Company shall each be responsible for 50% of the registration fees
and printing costs incurred by the parties pursuant to Section 5.1. The
Company has delivered to TMW an estimate of the fees and expenses to be
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby.
SECTION 5.8. Public Announcements. TMW and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except that each party may respond to questions from
stockholders and may respond to inquiries from financial analysts and media
representatives in a manner consistent with its past practice and each party
may make such disclosure as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange without
prior consultation to the extent such consultation is not reasonably
practicable. The parties agree that the initial press release or releases to
be issued in connection with the execution of this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.9. Accounting Matters. Each of the Company and TMW shall not
take or agree to take, and each shall use its best efforts to cause their
respective affiliates not to take or agree to take, any action that would
prevent TMW from accounting for the business combination to be effected by the
Merger as a pooling of interests.
SECTION 5.10. Purchases of Common Stock of the Other Party. During the
period from the date hereof through the Effective Time of the Merger, neither
TMW nor any of its subsidiaries or other affiliates will purchase any shares of
Company Common Stock, and neither the Company nor any of its subsidiaries or
other affiliates will purchase any shares of TMW Common Stock.
SECTION 5.11. Agreement to Defend. In the event any claim, action,
suit, investigation or other proceeding by any governmental body or other
person or other legal or administrative proceeding is commenced that questions
the validity or legality of the transactions contemplated hereby or seeks
damages in connection therewith, the parties hereto agree to cooperate and use
their reasonable efforts to defend against and respond thereto.
SECTION 5.12. Accounting Matters. During the period from the date of
this Agreement through the Effective Time, unless the parties shall otherwise
agree in writing, neither TMW nor the Company or any of their respective
subsidiaries shall take or fail to take any reasonable action which action or
failure to act would knowingly jeopardize the treatment of the Company's
combination with Combination Company as a pooling of interests for accounting
purposes and each of the Company will take all reasonable steps to permit the
Merger to be treated as a pooling of interest for accounting purposes.
SECTION 5.13. Other Actions. Except as contemplated by this Agreement,
neither TMW nor the Company shall, and shall not permit any of its subsidiaries
to, take or agree or commit to take any action that is reasonably likely to
result in any of its respective representations or warranties hereunder being
untrue in any material respect or in any of the conditions to the Merger set
forth in Article VI not being satisfied.
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SECTION 5.14. TMW Board of Directors. Upon the Effectiveness of the
Merger, the Board of Directors of TMW shall increase the number of its
directors by one and shall elect Stephen Greenspan as a director to serve until
the next annual meeting of the shareholders of TMW. The Board of Directors
shall also include Stephen Greenspan in its nominees for election at the 1999
Annual Meeting of Shareholders of TMW.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall
have been obtained.
(b) NASDAQ. The shares of TMW Common Stock issuable to the Company's
stockholders pursuant to the Merger shall have been approved for trading on the
NASDAQ NMS, subject to official notice of issuance.
(c) HSR Act; Other Approvals. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired and all filings required to be made prior to the
Effective Time with, and all consents, approvals, permits and authorizations
required to be obtained prior to the Effective Time from, any governmental
entity in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been made or
obtained (as the case may be), except where the failure to obtain such
consents, approvals, permits and authorizations could not reasonably be
expected to have a Material Adverse Effect on TMW (assuming the Merger has
taken place) or to materially adversely affect the consummation of the Merger.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the
parties hereto shall, subject to Section 5.5, use reasonable efforts to have
any such injunction, order, restraint or prohibition vacated.
(e) Registration Statement Effectiveness. The Registration Statement
shall have become effective under the Securities Act, and all post-effective
amendments filed shall have been declared effective or shall have been
withdrawn; and no stop order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall have been initiated or,
to the knowledge of the parties, threatened by the SEC.
(f) Blue Sky Filings. There shall have been obtained any and all
material permits, approvals and consents of securities or "blue sky"
authorities of any jurisdiction that are necessary so that the consummation of
the Merger and the transactions contemplated thereby will be in compliance with
applicable laws, the failure to comply with which would have a Material Adverse
Effect on TMW and its subsidiaries, taken as a whole.
SECTION 6.2. Conditions of TMW. The obligation of TMW to consummate
the Merger is further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Compliance. The agreements and covenants of the Company to be
complied with or performed on or before the Closing Date pursuant to the terms
hereof shall have been duly complied with or performed in all material respects
and TMW shall have received a certificate dated the Closing Date and executed
on behalf of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
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(b) Certifications and Opinion. The Company shall have furnished TMW
with:
(i) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of the Company approving this
Agreement and consummation of the Merger and the transactions
contemplated hereby and directing the submission of the Merger to a vote
of the stockholders of the Company;
(ii) a certified copy of a resolution or resolutions duly
adopted by the holders of a majority of the outstanding Company Shares
approving the Merger and the transactions contemplated hereby;
(iii) an opinion, dated the Closing Date, in customary form and
substance and limitations, of Hunton & Williams, counsel for the
Company, dated the Closing Date to the effect that:
(A) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Georgia and has corporate power to own its properties and
assets and to carry on its business as presently conducted and as
described in the Registration Statement;
(B) The Company has the requisite corporate power to
effect the Merger as contemplated by this Agreement; the
execution and delivery of this Agreement did not, and the
consummation of the Merger will not, violate any provision of the
Company's Amended and Restated Articles of Incorporation or
Amended and Restated Bylaws; and upon the filing by the Surviving
Corporation of the Certificate of Merger, the Merger shall become
effective;
(C) Each of the Company's subsidiaries is a corporation
duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has corporate
power to own its properties and assets and to carry on its
business as presently conducted; and
(D) The Board of Directors of the Company has taken all
action required by its Amended and Restated Articles of
Incorporation or its Amended and Restated Bylaws to approve the
Merger and to authorize the execution and delivery of this
Agreement and the transactions contemplated hereby; the Board of
Directors and the stockholders of the Company have taken all
action required by the Company's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws to authorize the
Merger in accordance with the terms of this Agreement; and this
Agreement is a valid and binding agreement of the Company
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditor's
rights generally or governing the availability of equitable
relief.
(c) Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement (other than any
representations and warranties made as of a specific date) shall be true in all
material respects (except to the extent the representation or warranty is
already qualified by materiality, in which case it shall be true in all
respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except as
contemplated or permitted by this Agreement, and TMW shall have received a
certificate to that effect dated the Closing Date and executed on behalf of the
Company by the chief executive officer and the chief financial officer of the
Company.
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(d) Company Affiliate Letters. Within five business days of the
signing of this Agreement, TMW shall have received from the Company a list of
such Persons, if any, that TMW, after discussions with counsel for the Company,
believes may be "affiliates" of the Company, within the meaning of Rule 145 of
the SEC pursuant to the Securities Act ("Affiliates"). At or prior to the time
of filing of the Registration Statement, the Company shall deliver or cause to
be delivered to TMW an undertaking by each Affiliate in form satisfactory to
TMW that (i) such Affiliate has no current plan or intention to sell, exchange
or otherwise dispose of any Company Shares or options to acquire Company Shares
owned by such Affiliate or the shares of TMW Common Stock to be received by
such Affiliate pursuant to the Merger, (ii) no disposition will be made by such
Affiliate of any Company Shares or any options to acquire Company Shares owned
by the Affiliate or any shares of TMW Common Stock received or to be received
pursuant to the Merger nor will the Affiliate exercise any option to acquire
Company Shares or TMW Common Stock substituted therefor from any other
Affiliate until such time as final results of operations of the Surviving
Corporation covering at least 30 days of combined operations of TMW and the
Company have been published and (iii) no shares of TMW Common Stock received or
to be received by such Affiliate pursuant to the Merger will be sold or
disposed of except pursuant to an effective registration statement under the
Securities Act or in accordance with the provisions of paragraph (d) of Rule
145 under the Securities Act or another exemption from registration under the
Securities Act.
(e) Tax Opinion. TMW shall have received an opinion of Fulbright &
Jaworski L.L.P., in form and substance reasonably satisfactory to TMW, to the
effect that for Federal income tax purposes and conditioned upon certain
representations of the Company and TMW as to certain customary facts and
circumstances regarding the Merger: (i) the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code, (ii) each of
the Company and TMW are parties to the reorganization within the meaning of
Section 368(b) of the Code and (iii) no gain or loss will be recognized by the
Company or TMW as a result of the Merger.
(f) Pooling Accounting. TMW shall not have been advised by D&T or AA
that the Merger may not be accounted for as a pooling of interest and the SEC
shall not have advised or otherwise indicated to TMW that TMW may not account
for the transaction as a pooling of interest, and TMW shall have received an
opinion from D&T updating the TMW Pooling Opinion as of the Closing Date to the
effect that the transactions contemplated hereby are poolable and an opinion of
AA updating the Company Pooling Letter as of the Closing Date to the effect
that the Company is eligible to be a party to a merger accounted for as a
"pooling of interests".
(g) Consents, etc. TMW shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental
authorities and other third parties as are reasonably necessary in connection
with the transactions contemplated hereby have been obtained, except such
licenses, permits, consents, approvals, authorizations, qualifications and
orders which are not, individually or in the aggregate, material to the
Surviving Corporation and its subsidiaries, taken as a whole, or the failure of
which to have received would not (as compared to the situation in which such
license, permit, consent, approval, authorization, qualification or order had
been obtained) have a Material Adverse Effect on the Surviving Corporation and
its subsidiaries, taken as a whole, after giving effect to the Merger.
(h) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other Person any
pending suit, action or proceeding which has a reasonable likelihood of
success), (i) challenging or seeking to restrain or prohibit the consummation
of the Merger or any of the other transactions contemplated by this Agreement
or seeking to obtain from TMW or any of its subsidiaries any damages that are
material in relation to TMW and its subsidiaries taken as a whole, (ii) seeking
to prohibit or limit the ownership or operation by the Surviving Corporation or
any of its subsidiaries of any material portion of the business or assets of
the Company, TMW or any of their respective subsidiaries, to dispose of or hold
separate any material portion of the business or assets of the Company, TMW or
any of their
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respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement or (iii) seeking to prohibit the
Surviving Corporation or any of its subsidiaries from effectively controlling
in any material respect the business or operations of TMW, the Company or their
respective subsidiaries.
(i) Fairness Opinion. The Company Financial Advisor will not have
revoked or modified in a materially adverse manner its opinion referred to in
Section 3.1(bb).
(j) Employment Contracts; Covenants not to Compete. The existing
employment contract with Stephen Greenspan shall have been amended in the form
of Exhibit E attached hereto.
(k) Bank Accounts. TMW shall have received a true, complete and
correct list of all bank accounts and safety deposit arrangements of the
Company or any subsidiary.
(l) Resignations. TMW shall have received written resignations from
all officers and directors of the Company and its subsidiaries resigning as of
the Effective Time from all positions with the Company and its subsidiaries.
(m) Termination Agreement. John Dancu shall have entered into a
Termination Agreement in the form attached as Exhibit F.
SECTION 6.3. Conditions of the Company. The obligation of the Company
to consummate the Merger is further subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Compliance. The agreements and covenants of TMW to be complied
with or performed on or before the Closing Date pursuant to the terms hereof
shall have been duly complied with or performed in all material respects and
the Company shall have received a certificate dated the Closing Date on behalf
of TMW by the chief executive officer and the chief financial officer of TMW to
such effect.
(b) Certifications and Opinion. TMW shall have furnished the Company
with:
(i) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors or a duly authorized committee thereof
of TMW approving this Agreement and consummation of the Merger and the
transactions contemplated hereby, including the issuance, listing and
delivery of the shares of TMW Common Stock pursuant hereto;
(ii) [Intentionally Omitted];
(iii) a favorable opinion, dated the Closing Date, in customary
form and substance, of Fulbright & Jaworski L.L.P., counsel for TMW to
the effect that:
(A) TMW is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Texas and has corporate power to own its properties and assets
and to carry on its business as presently conducted and as
described in the Registration Statement; TMW has the requisite
corporate power to effect the Merger as contemplated by this
Agreement; the execution and delivery of this Agreement did not,
and the consummation of the Merger will not, violate any
provision of TMW's Restated Articles of Incorporation or By-Laws;
and upon the filing by the Surviving Corporation of the
Certificate of Merger, the Merger shall become effective;
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(B) The Board of Directors of TMW has taken all action
required under the TBCA, its Restated Articles of Incorporation
or its By-Laws to authorize the execution and delivery of this
Agreement and the transactions contemplated hereby; the Board of
Directors and the stockholders of TMW have taken all action
required by the TBCA and TMW's Restated Articles of Incorporation
and By-Laws to authorize the Merger in accordance with the terms
of this Agreement; and this Agreement is a valid and binding
agreement of TMW enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditor's
rights generally or governing the availability of equitable
relief; and
(C) Each of TMW's subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has corporate
power to own its properties and assets and to carry on its
business as presently conducted; and
(D) The shares of TMW Common Stock to be issued
pursuant to the Merger have been duly authorized and, when issued
and delivered as contemplated hereby, will have been legally and
validly issued and will be fully paid and non-assessable and no
stockholder of TMW will have any preemptive right of subscription
or purchase in respect thereof under Delaware law or TMW's
Articles of Incorporation or By-laws and such shares of TMW
Common Stock have been registered under the Securities Act of
1933.
(c) Representations and Warranties True. The representations and
warranties of TMW contained in this Agreement (other than any representations
and warranties made as of a specific date) shall be true in all material
respects (except to the extent the representation or warranty is already
qualified by materiality, in which case it shall be true in all respects) on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, except as contemplated or
permitted by this Agreement, and the Company shall have received a certificate
to that effect dated the Closing Date and executed on behalf of TMW by the
chief executive officer and the chief financial officer of TMW.
(d) Tax Opinion. The Company shall have received an opinion of
Hunton & Williams, in form and substance satisfactory to the Company, to the
effect that for Federal income tax purposes and conditioned upon certain
representations of the Company and TMW as to certain customary facts and
circumstances regarding the Merger: (i) the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code; (ii) each of
the Company and TMW are parties to the reorganization within the meaning of
Section 368(b) of the Code; and (iii) no gain or loss will be recognized by the
stockholders of the Company upon the receipt by them of shares of TMW Common
Stock in exchange for their Company Shares pursuant to the Merger.
(e) Consents, etc. The Company shall have received evidence, in form
and substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties as are necessary in connection with the
transactions contemplated hereby have been obtained, except such licenses,
permits, consents, approvals, authorizations, qualifications and orders which
are not, individually or in the aggregate, material to the Surviving
Corporation and its subsidiaries, taken as a whole, or the failure of which to
have received would not (as compared to the situation in which such license,
permit, consent, approval, authorization, qualification or order had been
obtained) have a Material Adverse Effect on the Surviving Corporation, after
giving effect to the Merger.
(f) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (i) challenging or seeking
to restrain or prohibit the consummation of the Merger or any of
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the other transactions contemplated by this Agreement or seeking to obtain from
the Company, the Surviving Corporation or any of their respective subsidiaries
any damages that are material in relation to the Company and its subsidiaries
taken as a whole, (ii) seeking to prohibit or limit the ownership or operation
by the Surviving Corporation or any of its subsidiaries of any material portion
of the business or assets of the Company, TMW or any of their respective
subsidiaries, to dispose of or hold separate any material portion of the
business or assets of the Company, TMW or any of their respective subsidiaries,
as a result of the Merger or any of the other transactions contemplated by this
Agreement or (iii) seeking to prohibit the Surviving Corporation or any of its
subsidiaries from effectively controlling in any material respect the business
or operations of the Company or its subsidiaries.
(g) Fairness Opinion. The Company Financial Advisor shall not have
revoked, modified or changed its opinion referred to in Section 3.1(bb) in any
manner adverse to the holders of the Company Shares.
(h) TMW Affiliate Letters. At or prior to the time of filing of the
Registration Statement, TMW shall deliver or cause to be delivered to TMW and
the Company an undertaking by each Affiliate in form satisfactory to TMW that
no disposition will be made by such Affiliate of any shares of TMW Common
Stock owned by the Affiliate until such time as final results of operations of
the Surviving Corporation covering at least 30 days of combined operations of
TMW and the Company have been published.
(i) Employment Contracts. TMW shall cause the Company to honor the
employment contracts identified on Section 6.3(i) of the Company Disclosure
Letter.
(j) Termination Agreement. TMW shall have entered into a Termination
Agreement in the form attached as Exhibit F.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time of the Merger, whether
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company;
(a) by mutual written consent of TMW, Combination Company and the
Company;
(b) by either TMW or the Company:
(i) if the stockholders of the Company fail to give any
required approval of the Merger and the transactions contemplated hereby
upon a vote at a duly held meeting of stockholders of the Company or at
any adjournment thereof;
(ii) if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger;
or
(iii) if the Merger shall not have been consummated on or before
August 31, 1999, unless the failure to consummate the Merger is the
result of a material breach of this Agreement by the party seeking to
terminate this Agreement.
(c) by TMW or the Company to the extent permitted under Section 8.2
or 8.3;
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(d) by TMW, if the Company breaches in any material respects any of
its representations or warranties herein or fails to perform in any material
respect any of its covenants, agreements or obligations under this Agreement,
which breach has not been cured within 30 days following receipt by the Company
of notice of breach or by the date specified in Section 7.1(b)(iii);
(e) by the Company, if TMW breaches in any material respects any of
its representations or warranties herein or fails to perform in any material
respect any of its covenants, agreements or obligations under this Agreement,
which breach has not been cured within 30 days following receipt by TMW of
notice of breach or by the date specified in Section 7.1(b)(iii); and
(f) by the Company, if the average of the closing prices of the TMW
Common Stock determined pursuant to Section 2.1(b) is less than $20.00;
provided, that the Company immediately pay to TMW $750,000.
SECTION 7.2. Effect of Termination. In the event of termination of
this Agreement by either the Company or TMW as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any current
or future liability or obligation on the part of TMW or the Company, other than
(i) the confidentiality provisions of Section 5.4 and the provisions of
Sections 5.8, 8.2, 8.3 and Article IX and (ii) such termination shall not
relieve any party hereto for any intentional breach prior to such termination
by a party hereto of any of its representations or warranties or any of its
covenants or agreements set forth in this Agreement.
SECTION 7.3. Amendment. This Agreement may be amended by the parties
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.4. Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties may, to the extent legally allowed, (a) extend
the time for the performance of any of the obligations or the other acts of the
other parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) subject to
the proviso of Section 7.3, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.5. Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of TMW or the Company,
action by its respective Board of Directors or the duly authorized designee of
such Board of Directors.
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS
SECTION 8.1. Takeover Defenses. The Company shall take such action
with respect to any anti-takeover provisions in its Articles of Incorporation
or Bylaws, or afforded it by statute, including Section 14-2-1103 of the GBCC,
to the extent necessary to consummate the Merger on the terms set forth in the
Agreement.
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SECTION 8.2. No Solicitation.
(a) The Company shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney or other advisor, agent or
representative of the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any takeover
proposal, (ii) enter into any agreement (other than confidentiality and
standstill agreements in accordance with the immediately following proviso)
with respect to any takeover proposal, or (iii) participate in any discussions
or negotiations regarding, or furnish to any Person any information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
takeover proposal; provided, however, in the case of this clause (iii), that
prior to the vote of stockholders of the Company for approval of the Merger
(and not thereafter if the Merger is approved thereby) to the extent required
by the fiduciary obligations of the Board of Directors of the Company,
determined in good faith by the Board of Directors based on the advice of
outside counsel, the Company may, in response to an unsolicited request
therefor, furnish information to any Person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) pursuant to a confidentiality agreement
on substantially the same terms as the Confidentiality Agreement, including the
standstill provisions thereof, and enter into discussions or negotiations with
regard to such other transaction. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor, agent or
representative of the Company, whether or not such Person is purporting to act
on behalf of the Company or otherwise, shall be deemed to be a material breach
of this Agreement by the Company. For purposes of this Agreement, "takeover
proposal" means (i) any proposal or offer, other than a proposal or offer by
TMW or any of its affiliates, for a merger, share exchange or other business
combination involving the Company (excluding an acquisition by the Company
otherwise permitted to be made by the Company under this Agreement and which
does not involve a direct merger with or into the Company), (ii) any proposal
or offer, other than a proposal or offer by TMW or any of its affiliates, to
acquire from the Company or any of its affiliates in any manner, directly or
indirectly, a greater than 10% voting or equity interest in the Company or the
acquisition of a material amount of the assets of the Company and its
subsidiaries, taken as a whole, including an investment in or acquisition of
securities of a subsidiary of the Company, to the extent so material, or (iii)
any proposal or offer, other than a proposal or offer by TMW or any of its
affiliates, to acquire from the stockholders of the Company by tender offer,
exchange offer or otherwise more than 10% of the Company Shares then
outstanding.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall, except in connection with the termination of this Agreement
pursuant to Section 7.1 (a), (b)(ii), (b)(iii) or (e), (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to TMW the approval or
recommendation by the Board of Directors of the Company or any such committee
of this Agreement or the Merger or take any action having such effect or (ii)
approve or recommend, or propose to approve or recommend, any takeover
proposal. Notwithstanding the foregoing, in the event the Board of Directors
of the Company receives a takeover proposal that, in the exercise of its
fiduciary obligations (as determined in good faith by the Board of Directors
based on the advice of outside counsel), it determines to be a superior
proposal, the Board of Directors may withdraw or modify its approval or
recommendation of this Agreement or the Merger and may (subject to the
following sentence) terminate this Agreement, in each case at any time after
midnight on the fifth business day following TMW's receipt of written notice (a
"Notice of Superior Proposal") advising TMW that the Board of Directors has
received a takeover proposal which it has determined to be a superior proposal,
specifying the material terms and conditions of such superior proposal
(including the proposed financing for such proposal and a copy of any documents
conveying such proposal) and identifying the Person making such superior
proposal. The Company may terminate this Agreement pursuant to the preceding
sentence only if the stockholders of the Company shall not yet have voted upon
the Merger and the Company shall have paid to TMW the Company Termination Fee
(as defined below). Any of the foregoing to the contrary notwithstanding, the
Company may engage in discussions with any Person or group that has made an
unsolicited takeover proposal for the limited
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purpose of determining whether such proposal (as opposed to any further
negotiated proposal) is a superior proposal. Nothing contained herein shall
prohibit the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) following TMW's receipt of a Notice of Superior
Proposal.
(c) In the event that the Board of Directors of the Company or any
committee thereof shall (i) withdraw or modify in a manner adverse to TMW the
approval or recommendation by the Board of Directors of the Company or any such
committee of this Agreement or the Merger or take any action having such effect
or (ii) approve or recommend, or propose to approve or recommend, any Superior
Proposal, TMW may terminate this Agreement subject to Section 7.2 hereof.
(d) For purposes of this Agreement, a "superior proposal" means any
bona fide takeover proposal to acquire, directly or indirectly, all of the
Company Shares then outstanding or all of the assets of the Company and its
subsidiaries, and otherwise on terms which the Board of Directors of the
Company determines in its good faith reasonable judgment (based on the written
advice of a financial advisor of nationally recognized reputation, a copy of
which shall be provided to TMW) to be more favorable to the Company's
stockholders than the Merger.
(e) In addition to the obligations of the Company set forth in
paragraph (b), the Company shall promptly advise TMW orally and in writing of
any takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal, the material terms and conditions of such inquiry or
takeover proposal (including the financing for such proposal and a copy of such
documents conveying such proposal), and the identity of the Person making any
such takeover proposal or inquiry. The Company will keep TMW fully informed of
the status and details of any such takeover proposal or inquiry.
SECTION 8.3. Fee and Expense Reimbursements.
(a) The Company agrees to pay TMW a fee in immediately available
funds of $3,000,000 (the "Company Termination Fee") promptly upon the
termination of the Agreement in the event this Agreement is terminated by the
Company pursuant to Section 8.2(b) or by TMW pursuant to Section 8.2(c).
(b) In the event this Agreement is terminated as a result of a
material breach by the Company or pursuant to Section 7.1(b)(i), the Company
also agrees to pay to TMW the Company Termination Fee if (i) after the date
hereof and before the termination of this Agreement, a takeover proposal shall
have been made and publicly announced by any Person or group of Persons (an
"Acquiring Person"), (ii) the stockholders of the Company shall not have
approved the Merger and (iii) after the date hereof and at or prior to 12
months after the date of termination of this Agreement, the Company shall have
effected an Alternative Transaction (as defined below) with such Acquiring
Person or an affiliate thereof. An Alternative Transaction shall mean (i) a
merger, share exchange or other business combination or other transaction in
which more than 10% of the voting securities of the Company or a material
amount of the assets of the Company and its subsidiaries, taken as a whole, is
acquired, including an investment in or acquisition of securities of a
subsidiary of the Company to the extent so material, or (ii) any acquisition
from the stockholders of the Company by tender offer, exchange offer or
otherwise of more than 10% of the outstanding Company Shares. The Company
Termination Fee payable under this Section 8.3(b) shall be payable as a
condition to the consummation of the Alternative Transaction.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Nonsurvival of Representations and Warranties. None of
the representations, warranties, covenants or agreements in this Agreement or
in any instrument delivered by the Company or TMW
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pursuant to this Agreement shall survive the Effective Time of the Merger,
except any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
SECTION 9.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile or sent by overnight courier to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to TMW, to
The Men's Wearhouse, Inc.
40650 Encyclopedia Circle
Fremont, California 94538
Attention: David Edwab
Facsimile: (510) 657-0872
The Men's Wearhouse, Inc.
5803 Glenmont
Houston, Texas 77081
Attention: Gary Ckodre
Facsimile: (713) 664-7140
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Michael W. Conlon
Facsimile: (713) 651-5246
(b) if to the Company, to
K&G Men's Center, Inc.
1225 Chattahoochee Avenue, N.W.
Atlanta, Georgia 30318
Attention: John C. Dancu
Telephone: (404) 351-7987
Facsimile: (404) 351-8038
with a copy to:
Hunton & Williams
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attention: David Carter
Telephone: (404) 888-4246
Facsimile: (404) 888-4190
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SECTION 9.3. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person;
(b) "knowledge" means, with respect to any matter stated herein to be
"to the Company's knowledge," or similar language, the actual knowledge of the
Chairman of the Board, the Chief Executive Officer, President, Senior Vice
President - Merchandising, Chief Financial Officer and Chief Accounting Officer
of the Company, and with respect to any matter stated herein to be "to TMW's
knowledge," or similar language, the actual knowledge of the Chairman of the
Board, the Chief Executive Officer, President, Chief Merchandising Officer,
Chief Financial Officer and Chief Accounting Officer of TMW.
(c) "Material Adverse Effect" or "material adverse change" means any
change or effect applicable to the business, properties, assets, condition
(financial or otherwise) or results of operations which could reasonably be
expected to result in a loss, damage, liabilities, cost or other expenses
aggregating on a cumulative basis $3,500,000 or more, in the case of the
Company and its subsidiaries taken as a whole or $20,000,000 or more in the
case of TMW and its subsidiaries taken as a whole, or could reasonably be
expected to result in a reduction of annual cash flow or annual net income for
each of the next two fiscal years of $750,000 and $450,000, respectively, in
the case of the Company and its subsidiaries and $5,000,000 and $3,000,000 or
more in the case of TMW and its subsidiaries; provided, however, a Material
Adverse Effect or material adverse change with respect to the Company or TMW
shall not include (i) changes in national economic conditions or industry
conditions generally, (ii) changes, or possible changes, in Federal, state or
local statutes and regulations applicable to the Company and TMW, as the case
may be, or (iii) the matters referred to in Section 9.3(c) of the TMW
Disclosure Letter.
(d) "Person" means an individual, corporation, partnership, joint
venture, limited liability company, association, trust, unincorporated
organization or other entity; and
(e) a "subsidiary" of a Person means any corporation, partnership or
other legal entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by such
first mentioned Person.
SECTION 9.4. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 9.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and (b) except for the provisions of
Sections 1.5, 5.6 and 5.7, are not intended to confer upon any Person other
than the parties any rights or remedies hereunder.
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SECTION 9.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. This Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 9.9. Enforcement of the Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States located in the State of Texas or in any other Texas state court,
this being in addition to any other remedy to which they are entitled at law or
in equity.
SECTION 9.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.11 Arbitration.
(a) Subject to the limitations set forth herein with respect to the
parties' rights to make claims hereunder, including, but not limited to, the
limitations set forth in Sections 7.2 and 9.1, any dispute, controversy, or
claim arising out of or relating to this Agreement, or the breach, termination
or invalidity hereof, including claims for tortious interference or other
tortious or statutory claims arising before, during or after termination,
providing only that such claim touches upon matters covered by this contract,
shall be finally settled by arbitration. The parties expressly agree that
nothing in this Agreement shall prevent the parties from applying to a court
that would otherwise have jurisdiction over the parties for provisional or
interim measures, including injunctive relief. After the arbitration panel is
empaneled, it shall have sole jurisdiction to hear such applications, except
that the parties agree that any measures ordered by arbitrators may be
immediately and specifically enforced by a court otherwise having jurisdiction
over the parties. The parties agree that judgment on the arbitration award may
be entered by any court having jurisdiction thereof.
(b) The parties agree that the federal courts located in Dallas,
Texas shall have exclusive jurisdiction over an action brought to enforce the
rights and obligations created in or arising from this agreement to arbitrate,
and each of the parties hereto irrevocably submits to the jurisdiction of said
courts. Notwithstanding the above, application may be made by a party to any
court of competent jurisdiction wherever situated for enforcement of any
judgment and the entry of whatever orders are necessary for such enforcement.
Process in any action arising out of or related to this Agreement may be served
on any party to the Agreement anywhere in the world by delivery in person
against receipt or by registered or certified mail, return receipt requested.
(c) The arbitration shall be conducted before a tribunal composed of
three arbitrators. If the panel is selected prior to Closing, the Company and
TMW shall each select an arbitrator. If the arbitration panel is selected
after Closing, TMW, on the one hand, and all parties adverse to TMW with
respect to the matter to be arbitrated, collectively, on the other, shall each
select an arbitrator. In either case, the two arbitrators so selected shall
select a third arbitrator within 10 days of selection of the two arbitrators.
If the two arbitrators are unable
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to agree on a third arbitrator, either party may petition the Chief Judge of
the United States District Court of the Northern District of Texas, Dallas
Division to appoint the third arbitrator. In addition, if any one of the
parties fails to appoint the arbitrator which it is responsible for appointing
within 10 days of the request of the other party, then such other party may
petition the Chief Judge of the United States District Court of the Northern
District of Texas, Dallas Division to appoint the first party's arbitrator.
Prior to his or her formal appointment, each arbitrator shall disclose to the
parties and to the other members of the tribunal, any financial, fiduciary,
kinship or other relationship between that arbitrator and any party or its
counsel, or between that arbitrator and any individual or entity with
financial, fiduciary, kinship or other relationship with any party. Any award
or portion thereof, whether preliminary or final, shall be in a written opinion
containing findings of fact and conclusions of law signed by each arbitrator.
The arbitrator dissenting from an award or portion thereof shall issue a
dissent from the award or portion thereof in writing, stating the reasons for
his dissent. The arbitrators shall hear and determine any preliminary issue of
law asserted by a party to be dispositive of any claim, in whole or in part, in
the manner of a court hearing a motion to dismiss for failure to state a claim
or for summary judgment, pursuant to such terms and procedures as the
arbitrators deem appropriate.
(d) It is the intent of the parties that, barring extraordinary
circumstances, any arbitration hearing shall be concluded within two months of
the date the third arbitrator is appointed. Unless the parties otherwise
agree, once commenced, hearings shall be held five days a week, with each
hearing day to begin at 9:00 A.M. and to conclude at 5:00 P.M. The parties may
upon agreement extend these time limits, or the chairman of the panel may
extend them if he determines that the interests of justice otherwise requires.
The arbitrators shall use their best efforts to issue the final award or awards
within a period of 30 days after closure of the proceedings. Failure to do so
shall not be a basis for challenging the award. The parties and arbitrators
shall treat all aspects of the arbitration proceedings, including without
limitation, discovery, testimony, and other evidence, briefs and the award as
strictly confidential. The place of arbitration shall be Dallas, Texas unless
otherwise agreed by the parties.
(e) The parties agree that discovery shall be limited and shall be
handled expeditiously. Discovery procedures available in litigation before the
courts shall not apply in an arbitration conducted pursuant to this Agreement.
However, each party shall produce relevant and non-privileged documents or
copies thereof requested by the other parties within the time limits set and to
the extent required by order to the arbitrators. All disputes regarding
discovery shall be promptly resolved by the arbitrators. No witness or party
may be required to waive any privilege recognized at law. The parties hereby
waive any claim to damages in the nature of punitive, exemplary, or statutory
damages in excess of compensatory damages, or any form of damages in excess of
compensatory damages, and the arbitration tribunal is specially divested of any
power to award any damages in the nature of punitive, exemplary, or statutory
damages in excess of compensatory damages, or any form of damages in excess of
compensatory damages. The party prevailing on substantially all of its claims
shall be entitled to recover its costs, including attorneys' fees, for the
arbitration proceedings, as well as for any ancillary proceeding, including a
proceeding to compel arbitration, to request interim measures, or to confirm or
set aside an award. Notwithstanding anything to the contrary contained in this
Agreement, the partied hereby waive any claim to damages in the nature of
consequential damages.
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IN WITNESS WHEREOF, TMW and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
THE MEN'S WEARHOUSE, INC.
By: /s/ DAVID H. EDWAB
-------------------------------------
Name: David H. Edwab
Title: President
TMW COMBINATION COMPANY
By: /s/ DAVID H. EDWAB
-------------------------------------
Name: David H. Edwab
Title: President
K&G MEN'S CENTER, INC.
By: /s/ STEPHEN H. GREENSPAN
-------------------------------------
Name: Stephen H. Greenspan
Title: Chairman of the Board, President
and Chief Executive Officer
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ANNEX B
NATIONSBANC MONTGOMERY SECURITIES LLC
March 3, 1999
Board of Directors
K&G Men's Center, Inc.
1225 Chattahoochee Avenue, N.W.
Atlanta, Georgia 30318
Gentlemen and Ladies:
We understand that K&G Men's Center, Inc., a Georgia corporation (the
"Company"), TMW Combination Company, a Georgia corporation ("Sub") and The
Men's Wearhouse, Inc., a Texas corporation ("Buyer"), have entered into an
Agreement and Plan of Merger dated March 3, 1999 (the "Merger Agreement"),
pursuant to which Sub will be merged with and into the Company (the "Merger"),
and the Company will become a wholly-owned subsidiary of Buyer. Pursuant to
the Merger Agreement, each outstanding share of the common stock, $0.01 par
value per share, of the Company ("Company Common Stock") will be converted into
and exchangeable for that number of shares of common stock, $0.01 par value per
share, of Buyer ("Buyer Common Stock") determined pursuant to the Merger
Agreement (from the average of the daily closing prices for the shares of Buyer
Common Stock for the fifteen consecutive trading days on which shares of Buyer
Common Stock are actually traded on the Nasdaq National Market ending on the
closing of trading on the third trading day immediately preceding the date of
consummation of the Merger (the "Base Period Trading Price")) as follows: (i)
if the Base Period Trading Price is equal to or greater than $32.50, the number
of shares of Buyer Common Stock to be received in the Merger for each share of
Company Common Stock shall equal 0.40, (ii) if the Base Period Trading Price is
less than or equal to $27.50, the number of shares of Buyer Common Stock to be
received in the Merger for each share of Company Common Stock shall equal 0.43,
and (iii) if the Base Period Common stock is between $27.50 and $32.50, the
number of shares of Buyer Common Stock to be received in the Merger for each
share of Company Common Stock shall be between 0.43 and 0.40, determined pro
rata as set forth in the Merger Agreement. The terms and conditions of the
Merger are set forth in more detail in the Merger Agreement.
You have asked us for our opinion as investment bankers as to whether
the Consideration to be received by the shareholders of the Company pursuant to
the Merger Agreement is fair to such shareholders from a financial point of
view, as of the date hereof. As you are aware, we were engaged solely for the
purpose of examining the fairness of the Merger from a financial point of view,
as set forth above. We were not engaged as the Company's financial advisor for
the Merger, and we were not requested to (nor did we) solicit or assist the
Company in soliciting indications of interest from third parties for the
Company or any part of it. Additionally, we were not retained to consider (nor
did we advise the Company with respect to) alternatives to the Merger or the
Company's underlying decision to proceed with or effect the Merger.
In connection with our opinion, we have, among other things: (i)
reviewed certain publicly available financial and other data with respect to
the Company and Buyer, including the consolidated financial statements of the
Company and Buyer for recent years, consolidated financial statements of the
Company for interim periods to November 1, 1998 and consolidated financial
statements of Buyer for interim periods to
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<PAGE> 154
October 31, 1998, and certain other relevant financial and operating data
relating to the Company and Buyer made available to us from published sources
and from the internal records of the Company and Buyer, (ii) reviewed the
financial terms and conditions of the Merger Agreement, (iii) reviewed certain
publicly available information concerning the trading of, and the trading
market for, Company Common Stock and Buyer Common Stock, (iv) compared the
Company and Buyer from a financial point of view with certain other companies
in the apparel industry which we deemed to be relevant, (v) considered the
financial terms, to the extent publicly available, of selected recent business
combinations involving companies in the retail industry which we deemed to be
comparable, in whole or in part, to the Merger, (vi) reviewed and discussed
with representatives of the management of the Company and Buyer certain
information of a business and financial nature regarding the Company and Buyer
furnished to us by them, including financial forecasts and related assumptions
of the Company and Buyer, (vii) made inquiries regarding and discussed the
Merger, the Merger Agreement and other matters related thereto with the
Company's counsel and (viii) performed such other analyses and examinations as
we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for the Company and Buyer provided to us by their respective
managements, upon their advice and with your consent we have assumed for
purposes of our opinion that the forecasts have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of their
respective managements as to the future financial performance of the Company
and Buyer and that they provide a reasonable basis upon which we can form our
opinion. We have also assumed that there have been no material changes in the
Company's or Buyer's assets, financial condition, results of operations,
business or prospects since the respective dates of their last financial
statements made available to us. We have relied on advice of the counsel and
the independent accountants to the Company as to all legal, tax and financial
reporting matters with respect to the Company, Buyer, the Merger and the Merger
Agreement. You have informed us, and we have assumed without verification and
with your consent, that the Merger will be treated as a pooling of interests
under Accounting Principles Board Opinion No. 16 and that the Merger will be
treated as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. We have assumed that the Merger will be consummated
in a manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and all other applicable federal and state
statutes, rules and regulations. In addition, we have not assumed
responsibility for making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise) of the
Company or Buyer, nor have we been furnished with any such appraisals.
Finally, our opinion is based on economic, monetary and market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Accordingly, although subsequent developments may affect this
opinion, we have not assumed any obligations to update, revise or reaffirm this
opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by the Company of
any of the conditions to its obligations thereunder.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
the Company pursuant to the Merger Agreement is fair to such shareholders from
a financial point of view, as of the date hereof.
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<PAGE> 155
We are not expressing (and cannot express) an opinion regarding the
price at which shares of Buyer Common Stock may trade at any future time. The
Consideration to be received by the shareholders of the Company pursuant to the
Merger Agreement is based upon an exchange ratio which becomes fixed if the
Base Period Trading Price (when determined three days prior to the consummation
of the Merger) has risen above $32.50 or has fallen below $27.50, and which
varies on a pro rata basis if the Base Period Trading Price falls between these
amounts. Accordingly, the market value of the Consideration received by
shareholders of the Company could vary significantly from what such
shareholders would receive if the Merger were completed today.
In the ordinary course of our business, we trade the equity securities of
the Company for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We have also acted as an underwriter in connection with offers of securities of
the Company. Additionally, our affiliate is currently a lender to Buyer, and
we may participate directly or indirectly in arranging, underwriting or
providing debt or equity financing to Buyer in connection with the Merger or in
connection with subsequent financing (or refinancing) transactions involving
Buyer.
This opinion is directed solely to the Board of Directors of the Company
in connection with its consideration of the Merger, and is not a recommendation
to any shareholder as to how shareholders should vote with respect to the
Merger. Shareholders of the Company are neither addressees nor intended
beneficiaries of our opinion or our underlying financial analysis (which was
prepared solely for the members of the Board of Directors of the Company for
their personal use as directors in connection with their review and evaluation
of the Merger), and no shareholder of the Company may rely or allege any
reliance on our opinion or analysis in connection with such shareholder's
consideration of the merits of the Merger or otherwise. Furthermore, this
opinion addresses only the fairness from a financial point of view of the
Consideration to the shareholders of the Company, as of the date hereof, and
does not address any other aspect of the Merger including, without limitation,
the relative merits of the Merger, any alternatives to the Merger or the
Company's underlying decision to proceed with or effect the Merger. This
opinion may not be used or referred to by the Company, or quoted or disclosed
to any person in any manner, without our prior written consent, which consent
is hereby given to the inclusion of this opinion in its entirety in any proxy
statement or prospectus filed by the Company with the Securities and Exchange
Commission in connection with the Merger that requires a description of the
factors considered by the Board of the Directors of the Company in connection
with its approval of the Merger. In furnishing this opinion, we do not admit
that we are experts within the meaning of the term "experts" as used in the
Securities Act and the rules and regulations promulgated thereunder, nor do we
admit that this opinion constitutes a report or evaluation within the meaning
of Section 11 of the Securities Act.
Very truly yours,
NationsBanc Montgomery
Securities LLC
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<PAGE> 156
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act provides that any
director or officer of a Texas corporation may be indemnified against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by him in connection with or in defending any action, suit or
proceeding in which he is a party by reason of his position. With respect to
any proceeding arising from actions taken in his official capacity as a
director or officer, he may be indemnified so long as it shall be determined
that he conducted himself in good faith and that he reasonably believed that
such conduct was in the corporation's best interests. In cases not concerning
conduct in his official capacity as a director or officer, a director may be
indemnified as long as he reasonably believed that his conduct was not opposed
to the corporation's best interests. In the case of any criminal proceeding, a
director or officer may be indemnified if he had no reasonable cause to believe
his conduct was unlawful. If a director or officer is wholly successful, on
the merits or otherwise, in connection with such a proceeding, such
indemnification is mandatory. The Registrant's Bylaws provide for
indemnification of its present and former directors and officers to the fullest
extent provided by Article 2.02-1.
The Registrant's Bylaws further provide for indemnification of officers
and directors against reasonable expenses incurred in connection with the
defense of any such action, suit or proceeding in advance of the final
disposition of the proceeding.
The Registrant's Articles of Incorporation were amended on September 6,
1991, to eliminate or limit liabilities of directors for breaches of their duty
of care. The amendment does not limit or eliminate the right of the Registrant
or any shareholder to pursue equitable remedies such as an action to enjoin or
rescind a transaction involving a breach of a director's duty of care, nor does
it affect director liability to parties other than the Registrant or its
shareholders. In addition, directors will continue to be liable for (i) breach
of their duty of loyalty, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law, (iii)
declaring an illegal dividend or stock repurchase, (iv) any transaction in
which the directors received an improper personal benefit, or (v) acts or
omissions for which the liability of directors is expressly provided by
statute. In addition, the amendment applies only to claims under Texas law
against a director arising out of his role as a director and not, if he is also
an officer, his role as an officer or in any other capacity and does not limit
a director's liability under any other law, such as federal securities law.
Texas corporations are also authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The
Registrant currently has in effect a director's and officer's liability
insurance policy, which provides coverage in the maximum amount of $15,000,000.
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<PAGE> 157
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
2.1* - Agreement and Plan of Merger dated as of March 3, 1999 among TMW,
Merger Sub and K&G (incorporated by reference from Exhibit 2.2 to
TMW's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999).
2.2* - Amendment No. 1 to Agreement and Plan of Merger dated as of
March 30, 1999 among TMW, Merger Sub and K&G (incorporated by
reference from Exhibit 2.3 to TMW's Annual Report on Form 10-K
for the fiscal year ended January 30, 1999).
3.1* - Restated Articles of Incorporation of TMW (incorporated by
reference from Exhibit 3.1 to TMW's Quarterly Report on Form 10-Q
for the quarter ended July 30, 1994).
3.2* - By-laws of TMW, as amended (incorporated by reference from
Exhibit 3.2 to TMW's Annual Report on From 10-K for the fiscal
year ended February 1, 1997).
3.3* - Certificate of Designation, Preferences, Limitations and Relative
Rights of the Series A Special Voting Preferred Stock
(incorporated by reference from Exhibit 3.3 to TMW's Annual
Report on Form 10-K for the fiscal year ended January 30, 1999).
4.1* - Restated Articles of Incorporation (included as Exhibit 3.1).
4.2* - By-laws (included as Exhibit 3.2)
4.3* - Form of Common Stock Certificate (incorporated by reference from
Exhibit 4.3 to TMW's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.4* - Employment Agreement dated as of January 31, 1991, by and between
the Company and David H. Edwab, including the First Amendment
thereto dated as of September 30, 1991 (incorporated by reference
from Exhibit 4.4 to the Company's Registration Statement on Form
S-1 (Registration No. 33-45949)).
4.5* - Second Amendment effective as of January 1, 1993, to Employment
Agreement dated as of January 31, 1991, by and between the
Company and David H. Edwab (incorporated by reference from
Exhibit 4.5 to the Company's Registration Statement on Form S-1
(Registration No. 33-60516)).
4.6* - Second [sic] Amendment dated as of April 12, 1994, to Employment
Agreement dated as of January 31, 1991 (incorporated by reference
to Exhibit 4.6 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 28, 1995).
4.7* - Option Issuance Agreement dated as of September 30, 1991, by and
between the Company and David H. Edwab (incorporated by reference
from Exhibit 4.5 to the Company's Registration Statement on Form
S-1 (Registration No. 33-45949)).
4.8* - First Amendment to Option Issuance Agreement dated April 22,
1992, but effective as of September 30, 1991 (incorporated by
reference from Exhibit 4.7 to the Company's Registration
Statement on Form S-8 (Registration No. 33-48109)).
4.9* - Second Amendment to Option Issuance Agreement dated effective as
of January 1, 1993 (incorporated by reference from Exhibit 4.8 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-60516)).
4.10* - First [sic] Amendment to Option Issuance Agreement dated as of
April 12, 1994 (incorporated by reference to Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 1995).
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<PAGE> 158
4.11* - 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 From S-3 (Registration No. 333-69979)).
4.12* - 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. (incorporated by reference from Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 333-
72549)).
4.13* - Revolving Credit Agreement dated as of February 5, 1999, by and
among the Company and NationsBank of Texas N.A. and the Banks
listed therein, including form of Revolving Note (incorporated
by reference from Exhibit 4.13 to TMW's Annual Report on Form 10-
K for the fiscal year ended January 30, 1999).
4.14* - Term Credit Agreement dated as of February 5, 1999, by and among
the Company and NationsBank of Texas N.A. and the Banks listed
therein, including form of Term Note (incorporated by reference
from Exhibit 4.14 to TMW's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999).
4.15* - Revolving Credit Agreement dated as of February 10, 1999, by and
among the Company and Bank of America Canada and the Banks listed
therein, including form of Revolving Note (incorporated by
reference from Exhibit 4.15 to TMW's Annual Report on Form 10-K
for the fiscal year ended January 30, 1999).
4.16* - Certificate of Designation, Preferences, Limitations and Relative
Rights of the Series A Special Voting Preferred Stock (included
as Exhibit 3.3).
5.1 - Opinion of Fulbright & Jaworski L.L.P., regarding legality of
securities.
8.1** - Opinion of Fulbright & Jaworski L.L.P., regarding certain tax
matters.
8.2** - Opinion of Hunton & Williams, regarding certain tax matters.
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
(incorporated by reference from Exhibit 9.1 to the Company's
Current Report on Form 8-K (Registration No. 333-72579)).
23.1 - Consent of Deloitte & Touche LLP, with respect to the financial
statements of TMW.
23.2 - Consent of Arthur Andersen LLP, with respect to the financial
statements of K&G.
23.3 - Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
23.4** - Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 8.1).
23.5** - Consent of Hunton & Williams (included in Exhibit 8.2).
24.1 - Powers of Attorney from certain members of the Board of Directors
of the Company (contained on page II-6 of this Registration
Statement).
99.1 - Proxy card for use at Annual Meeting of K&G.
99.2** - Consent of NationsBanc Montgomery Securities LLC.
* Incorporated by reference.
** To be filed by amendment.
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<PAGE> 159
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it
became effective.
(3) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(4) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 160
(5) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on April 1, 1999.
THE MEN'S WEARHOUSE, INC.
By: /s/ GEORGE ZIMMER
-----------------------------------------
George Zimmer
Chairman of the Board and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints George Zimmer, David Edwab and Gary G.
Ckodre, or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
and all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and any of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney- in-fact and agent, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on April 1,
1999 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ GEORGE ZIMMER Chairman of the Board, Chief
-------------------------------------- Executive Officer and Director
George Zimmer (Principal Executive Officer)
/s/ DAVID EDWAB President and Director
--------------------------------------
David Edwab
/s/ GARY G. CKODRE Vice President - Finance and
-------------------------------------- Principal Financial and Accounting
Gary G. Ckodre Officer
/s/ RICHARD E. GOLDMAN Executive Vice President and Director
--------------------------------------
Richard E. Goldman
</TABLE>
II-6
<PAGE> 162
<TABLE>
<S> <C>
/s/ ROBERT E. ZIMMER Senior Vice President - Real Estate
-------------------------------------- and Director
Robert E. Zimmer
/s/ JAMES E. ZIMMER Senior Vice President - Merchandising
-------------------------------------- and Director
James E. Zimmer
/s/ HARRY M. LEVY Executive Vice President - Planning
-------------------------------------- and Systems and Director
Harry M. Levy
/s/ RINALDO BRUTOCO Director
--------------------------------------
Rinaldo Brutoco
/s/ MICHAEL L. RAY Director
--------------------------------------
Michael L. Ray
/s/ SHELDON I. STEIN Director
--------------------------------------
Sheldon I. Stein
</TABLE>
II-7
<PAGE> 163
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
2.1* - Agreement and Plan of Merger dated as of March 3, 1999 among TMW,
Merger Sub and K&G (incorporated by reference from Exhibit 2.2 to
TMW's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999).
2.2* - Amendment No. 1 to Agreement and Plan of Merger dated as of
March 30, 1999 among TMW, Merger Sub and K&G (incorporated by
reference from Exhibit 2.3 to TMW's Annual Report on Form 10-K
for the fiscal year ended January 30, 1999).
3.1* - Restated Articles of Incorporation of TMW (incorporated by
reference from Exhibit 3.1 to TMW's Quarterly Report on Form 10-Q
for the quarter ended July 30, 1994).
3.2* - By-laws of TMW, as amended (incorporated by reference from
Exhibit 3.2 to TMW's Annual Report on From 10-K for the fiscal
year ended February 1, 1997).
3.3* - Certificate of Designation, Preferences, Limitations and Relative
Rights of the Series A Special Voting Preferred Stock
(incorporated by reference from Exhibit 3.3 to TMW's Annual
Report on Form 10-K for the fiscal year ended January 30, 1999).
4.1* - Restated Articles of Incorporation (included as Exhibit 3.1).
4.2* - By-laws (included as Exhibit 3.2)
4.3* - Form of Common Stock Certificate (incorporated by reference from
Exhibit 4.3 to TMW's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.4* - Employment Agreement dated as of January 31, 1991, by and between
the Company and David H. Edwab, including the First Amendment
thereto dated as of September 30, 1991 (incorporated by reference
from Exhibit 4.4 to the Company's Registration Statement on Form
S-1 (Registration No. 33-45949)).
4.5* - Second Amendment effective as of January 1, 1993, to Employment
Agreement dated as of January 31, 1991, by and between the
Company and David H. Edwab (incorporated by reference from
Exhibit 4.5 to the Company's Registration Statement on Form S-1
(Registration No. 33-60516)).
4.6* - Second [sic] Amendment dated as of April 12, 1994, to Employment
Agreement dated as of January 31, 1991 (incorporated by reference
to Exhibit 4.6 to the Company's Annual Report on Form 10-K for
the fiscal year ended January 28, 1995).
4.7* - Option Issuance Agreement dated as of September 30, 1991, by and
between the Company and David H. Edwab (incorporated by reference
from Exhibit 4.5 to the Company's Registration Statement on Form
S-1 (Registration No. 33-45949)).
4.8* - First Amendment to Option Issuance Agreement dated April 22,
1992, but effective as of September 30, 1991 (incorporated by
reference from Exhibit 4.7 to the Company's Registration
Statement on Form S-8 (Registration No. 33-48109)).
4.9* - Second Amendment to Option Issuance Agreement dated effective as
of January 1, 1993 (incorporated by reference from Exhibit 4.8 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-60516)).
4.10* - First [sic] Amendment to Option Issuance Agreement dated as of
April 12, 1994 (incorporated by reference to Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 1995).
4.11* - 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 From S-3 (Registration No. 333-69979)).
</TABLE>
II-8
<PAGE> 164
<TABLE>
<S> <C> <C>
4.12* - 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. (incorporated by reference from Exhibit 4.2 to the
Company's Current Report on Form 8-K (Registration No. 333-
72549)).
4.13* - Revolving Credit Agreement dated as of February 5, 1999, by and
among the Company and NationsBank of Texas N.A. and the Banks
listed therein, including form of Revolving Note (incorporated
by reference from Exhibit 4.13 to TMW's Annual Report on Form 10-
K for the fiscal year ended January 30, 1999).
4.14* - Term Credit Agreement dated as of February 5, 1999, by and among
the Company and NationsBank of Texas N.A. and the Banks listed
therein, including form of Term Note (incorporated by reference
from Exhibit 4.14 to TMW's Annual Report on Form 10-K for the
fiscal year ended January 30, 1999).
4.15* - Revolving Credit Agreement dated as of February 10, 1999, by and
among the Company and Bank of America Canada and the Banks listed
therein, including form of Revolving Note (incorporated by
reference from Exhibit 4.15 to TMW's Annual Report on Form 10-K
for the fiscal year ended January 30, 1999).
4.16* - Certificate of Designation, Preferences, Limitations and Relative
Rights of the Series A Special Voting Preferred Stock (included
as Exhibit 3.3).
5.1 - Opinion of Fulbright & Jaworski L.L.P., regarding legality of
securities.
8.1** - Opinion of Fulbright & Jaworski L.L.P., regarding certain tax
matters.
8.2** - Opinion of Hunton & Williams, regarding certain tax matters.
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
(incorporated by reference from Exhibit 9.1 to the Company's
Current Report on Form 8-K (Registration No. 333-72579)).
23.1 - Consent of Deloitte & Touche LLP, with respect to the financial
statements of TMW.
23.2 - Consent of Arthur Andersen LLP, with respect to the financial
statements of K&G.
23.3 - Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
23.4** - Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 8.1).
23.5** - Consent of Hunton & Williams (included in Exhibit 8.2).
24.1 - Powers of Attorney from certain members of the Board of Directors
of the Company (contained on page II-6 of this Registration
Statement).
99.1 - Proxy card for use at Annual Meeting of K&G.
99.2** - Consent of NationsBanc Montgomery Securities LLC.
</TABLE>
* Incorporated by reference.
** To be filed by amendment.
II-9
<PAGE> 1
EXHIBIT 5.1
[FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD]
April 1, 1999
The Men's Wearhouse, Inc.
5803 Glenmont Drive
Houston, Texas 77081
Gentlemen:
We have acted as counsel for The Men's Wearhouse, Inc., a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 of 4,650,000 shares of the Company's common stock, $.01
par value (the "Shares"), to be offered upon the terms and subject to the
conditions set forth in an Agreement and Plan of Merger dated March 3, 1999
(the "Merger Agreement"), by and between the Company, TMW Combination Company
and K&G Men's Center, Inc.
In connection therewith, we have examined the Company's Registration
Statement on Form S-4 covering the Shares (the "Registration Statement") filed
with the Securities and Exchange Commission, originals or copies certified or
otherwise identified to our satisfaction of the Restated Articles of
Incorporation of the Company, the amended By-laws of the Company, the corporate
proceedings with respect to the offering of the Shares and such other documents
and instruments as we have deemed necessary or appropriate for the expression
of the opinions contained herein.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to us as copies, the authenticity and completeness of the originals
of those records, certificates and other instruments submitted to us as copies
and the correctness of all statements of fact contained in all records,
certificates and other instruments that we have examined.
Based on the foregoing, and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that the 4,650,000 shares of
Common Stock proposed to be offered by the Company have been duly and validly
authorized for issuance and when issued in accordance with the terms of the
Merger Agreement will be duly and validly issued, fully paid and nonassessable.
The opinions expressed herein relate solely to, are based solely upon and
are limited exclusively to the laws of the State of Texas and the federal laws
of the United States of America, to the extent applicable.
<PAGE> 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included as part of the Registration Statement.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
Fulbright & Jaworski L.L.P.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of The Men's Wearhouse, Inc. on Form S-4 of our report dated March 9,
1999, appearing in the Annual Report on Form 10-K of The Men's Wearhouse, Inc.
for the year ended January 30, 1999, and to the references to us under the
headings "Experts" and "The Men's Wearhouse, Inc. and Subsidiaries Selected
Consolidated Financial Information" in this Proxy Statement/Prospectus, which
is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
April 1, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of The Men's Wearhouse, Inc. on
Form S-4 of our report dated March 17, 1999 appearing on page F-2 of K&G Men's
Center, Inc.'s Form 10-K for the year ended January 31, 1999. We consent to the
references to our firm under the headings "Experts" and "K&G Men's Center, Inc.
Selected Consolidated Financial Data" in this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 5, 1999
<PAGE> 1
EXHIBIT 99.1
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF K&G MEN'S CENTER, INC.
The undersigned shareholder(s) of K&G Men's Center, Inc. a Georgia
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement/Prospectus, each dated April
___, 1999, and hereby appoints Stephen H. Greenspan and John C. Dancu, or
either of them, proxies and attorneys-in-fact, with full power of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the 1999 Annual Meeting of Shareholders of the Company to be held at __ a.m.
local time on ___________ at the Company's headquarters located at 1225
Chattahoochee Avenue, N.W., Atlanta, Georgia 30318, and at any adjournment(s)
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below:
(1) To consider and vote upon a proposal to approve an Agreement and Plan of
Merger dated March 3, 1999, by and among The Men's Wearhouse, Inc.
("TMW"), TMW Combination Company, a newly formed wholly owned subsidiary
of TMW ("Merger Sub"), and K&G. Under the merger agreement, TMW will
acquire K&G through a merger of Merger Sub with and into K&G. The merger
agreement provides that, upon completion of the merger, K&G shareholders
will receive a fraction of a share of TWM common stock in exchange for
each outstanding share of K&G common stock.
[ ] FOR the approval [ ] WITHHOLD authority to vote [ ] ABSTAIN
for approval
(2) To elect K&G's Class I directors to serve a three-year term expiring in
2002 in accordance with K&G's Articles of Incorporation;
[ ] FOR the approval [ ] WITHHOLD authority to vote [ ] ABSTAIN
for approval
INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, MARK "FOR"
ABOVE, AND WRITE THE NAME OF THE NOMINEE AS TO WHOM YOU WISH TO WITHHOLD
AUTHORITY IN THE SPACE BELOW:
(3) To ratify the appointment of Arthur Andersen LLP by the board of directors
of K&G as the independent public accountants of K&G; and
[ ] FOR the approval [ ] WITHHOLD authority to vote [ ] ABSTAIN
for approval
(4) To transact such other business as may properly come before the meeting.
<PAGE> 2
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, IT WILL BE VOTED TO
WITHHOLD THE APPROVAL OF AN AMENDMENT AND PLAN OF MERGER AS SET FORTH IN (1)
ABOVE, FOR DIRECTOR NOMINEES NAMED IN ITEM (2) ABOVE, FOR THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS AS
SET FORTH IN ITEM (3) ABOVE, AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THIS MEETING.
Dated: , 1999
----------------------
----------------------------------
Signature
----------------------------------
Signature (if held jointly)
Title or Authority (if applicable)
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. IF SHARES ARE
REGISTERED IN MORE THAN ONE NAME,
THE SIGNATURES OF ALL SUCH PERSONS
ARE REQUIRED. A CORPORATION SHOULD
SIGN IN ITS FULL CORPORATE NAME BY
A DULY AUTHORIZED OFFICER, STATING
HIS OR HER TITLE. TRUSTEES,
GUARDIANS, EXECUTORS AND
ADMINISTRATORS SHOULD SIGN IN
THEIR OFFICIAL CAPACITY, GIVING
THEIR FULL TITLE AS SUCH. IF A
PARTNERSHIP, PLEASE SIGN IN THE
FULL PARTNERSHIP NAME BY AN
AUTHORIZED PERSON.
